Enforcement of TSCA and the federal five-year statute of limitations for penalty actions.

• Author: Holderer, Teresa A.
• Position: Toxic Substances Control Act of 1976

INTRODUCTION

Congress enacted the Toxic Substances Control Act of 1976(1) (TSCA) to tackle the known and unknown dangers many chemicals pose to human health.(2) In TSCA, Congress granted the Environmental Protection Agency (EPA or "the Agency") broad authority to promulgate and enforce regulations specifying testing, reporting, and record keeping requirements for manufacturers and processors of chemical substances.(3) Congress also granted EPA the power to restrict, regulate, and prohibit the manufacture, handling, processing, and distribution of substances that present an unreasonable risk of injury to human health or the environment.(4) The Agency can bring an action in federal court for specific enforcement and for seizure of chemicals manufactured, processed, or distributed in violation of TSCA,(5) but its primary enforcement tool is the assessment of administrative penalties under section 16 of the Act.(6)

Although TSCA prescribes various tools for effective enforcement, neither the statute nor the regulations contain any statute of limitations specifying how quickly EPA must initiate such enforcement activities. The lack of an express statute of limitations leaves entities regulated by the Act unable to experience repose and unsure of when they can discard voluminous records which they might need someday in litigation. Further, in the absence of a statute of limitations, EPA has less incentive to prosecute suspected TSCA violations promptly. In fact, because penalties can reach $25,000 for each violation, and each day counts as a separate violation for some violations,(7) the Agency has an incentive to delay enforcement in order to recover higher penalty amounts.

Many years prior to TSCA, Congress enacted a general five-year statute of limitations for actions for the enforcement of civil penalties, fines, and forfeitures,(8) which, if applicable, would alleviate these problems. Although the Agency claims that no statute of limitations applies, this Note argues that the general five-year statute of limitations, found in section 2462 of title 28, should apply to EPA's administrative proceedings to assess penalties as well as to later collection actions in federal courts. Part I details TSCA's enforcement procedures, which create special difficulties when applying section 2462's statute of limitations. Part I also examines how EPA, industry, and agency judges have interpreted section 2462 as applied to TSCA enforcement. It concludes by summarizing the considerations that a court must address when faced with the issue. Part II analyzes general principles of statutory construction, congressional discussions of section 2462, court decisions in related administrative areas, and general purposes of statutes of limitations. It argues that applying section 2462 to EPA's assessment of penalties as well as to district court proceedings is consistent with established principles and appropriately resolves the issue. Part III asserts that separate five-year periods should apply to the Agency's assessment of penalties and to collection actions in federal court. Part III also discusses when each of these actions should accrue. This Note concludes that applying section 2462 separately to administrative penalty proceedings and to federal court collection actions best promotes the public's interest in enforcing TSCA while protecting industry's right to be free from stale claims.

1. TSCA's ENFORCEMENT FRAMEWORK FOR CIVIL PENALTIES AND THE GENERAL FIVE-YEAR STATUTE OF LIMITATIO

To decide whether section 2462 applies to TSCA enforcement, a court must understand both the Act's enforcement mechanism and the language of section 2462. Section I.A describes the Act's enforcement framework for the assessment of penalties. Section I.B examines the federal statute of limitations for enforcement of penalties and the debate over its application to TSCA. This Part concludes by identifying the key issues which a court must address to resolve the controversy regarding section 2462's application to TSCA.

1. TSCA's Enforcement Framework

   Courts often describe enforcement of civil penalties under TSCA as a two-tier process -- an administrative penalty assessment and a collection action in district court.(9) Section 16(a) of TSCA provides that EPA "shall" assess civil penalties for violations of the Act.(10) Unlike under other environmental statutes, the Agency's administrative action to assess penalties under TSCA is a mandatory prerequisite to an EPA penalty action in federal court.(11) In this first, mandatory stage, EPA retains wide discretion in assessing the amount of the penalties and in enforcing payment of the penalty. It must take into account various factors in assessing the penalty, including the nature, circumstances, extent, and gravity of the violation, the violator's ability to pay, and the violator's prior compliance record.(12) TSCA does not, however, require that EPA weigh these factors in any particular manner.(13) Moreover, the Agency has direction to modify or compromise any civil penalty assessment with or without conditions.(14)

   EPA initiates the administrative action under the Act by filing an administrative complaint. After the violator has had the opportunity for a hearing, an administrative law judge (ALJ) assesses a penalty on behalf of the Agency by issuing an order.(15) Either the Agency or the violator can appeal the order to the Environmental Appeals Board.(16) If an alleged violator still believes it has not committed a violation or that the penalty is excessive following the administrative appeal, it can contest the Agency's action by appealing to the U.S. Court of Appeals. (17) The penalty assessed becomes final if the alleged violator chooses not to appeal, or upon the Court of Appeal's issuance of its final judgment.(18) The violator thus becomes obligated to pay the civil penalty, and interest begins to accumulate.(19) At this point, the violator can gain no further advantage by delaying payment of the penalty, and therefore, most entities pay the order or judgment without further action by EPA.(20)

   The second stage of TSCA enforcement takes place only if the violator fails to pay the penalty. The Attorney General will file an action in district court on behalf of EPA to recover the amount assessed plus accumulated interest.(21) At this stage, the court cannot review the validity, amount, or appropriateness of the penalty.(22) Therefore, the district court action, if one does become necessary, is purely mechanical and only implements the Agency's enforcement activities.(23)

   Thus, TSCA enforcement consists of two distinct steps -- administrative assessment and collection through a district court. TSCA does not expressly prescribe a statute of limitations for either stage. As the next section describes, however, Congress has enacted a general statute of limitations which potentially applies to TSCA enforcement.

2. The General Five-Year Statute of Limitations and its Application to TSCA

   Section 2462 of Title 28 contains a general statute of limitations for actions for the enforcement of civil penalties: "Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued ..."(24)

   On its face, section 2462 appears to apply broadly to all proceedings by the government relating to civil penalties. However, sharp disagreement has arisen between EPA and industry regarding whether the Agency's administrative penalty assessment proceeding is an "action, suit or proceeding for the enforcement" of a civil penalty. EPA claims that its penalty assessment action is not such a proceeding, and thus no statute of limitations applies. It argues that courts must construe section 2462 narrowly because it is a derogation of sovereignty.(25) Under a strict construction, only the district court collection stage of TSCA enforcement is a "proceeding for the enforcement" of a civil penalty.(26) Industry, on the other hand, takes a more expansive view of enforcement proceedings and would include EPA'S administrative proceedings under TSCA.(27)

   EPA also asserts that section 2462's presence in a title of the United States Code regulating federal courts and the lack of direct legislative history linking section 2462 to administrative proceedings militate against its applicability to the Agency's initial assessment of TSCA penalties.(28) Industry counters that section 2462's codification in title 28 does not determine its application. It relies on several congressional pronouncements on section 2462's applicability and decisions by courts in other administrative areas to demonstrate that section 2462 should apply to administrative proceedings under TSCA.(29)

   Finally, EPA and industry dispute when a penalty action "accrues." Section 2462 offers no guidance on this issue. The Agency asserts that an action accrues under TSCA only upon EPA's issuance of a final order or the Court of Appeal's issuance of a final judgment, whichever occurs later.(30) Industry believes the action accrues at the time of the alleged violation.(31)

   Until recently, the issue of section 2462's application to TSCA actions remained unsettled even at the agency level. In 1983, the first ALJ to face the issue dismissed one count of EPA's administrative complaint because it related to a violation which had occurred more than five years before the filing of the administrative complaint.(32) The ALJ accepted, without discussion, the respondent's assertion that section 2462 barred the claim.(33) Almost six years later, in 1989, several ALJs ruled that no statute of limitations applies to administrative actions to assess penalties under TSCA.(34) In 1991, however, two ALJs in three separate matters took a different view and decided that section 2462 does apply...