Thermal Reduction Company, Inc.

Plain-English summary

Thermal Reduction Company, Inc. appealed a Default Order imposing a $34,000 civil penalty for alleged violations of the Emergency Planning and Community Right-to-Know Act. The company argued that it was not the entity intended to receive the complaint and that it did not commit the reported violations. The Environmental Appeals Board held that service of process was properly made on the named New Jersey corporation and that the company had not timely answered the complaint or opposed the motion for default. The Board declined to consider the company's factual defenses for the first time on appeal and affirmed the Default Order and penalty.

Decision snapshot

• Cited authorities: 42 U.S.C. §§ 11023 and 11045(c); 40 C.F.R. §§ 22.7, 22.16, 22.17, 22.30, 22.31, and 372.30
• Outcome: The Default Order was affirmed, including the $34,000 civil penalty.
• Key point: A respondent that does not answer the complaint or oppose a motion for default generally cannot raise its factual defenses for the first time on appeal.

Full text (EPA EAB public release)

128 ENVIRONMENTAL ADMINISTRATIVE DECISIONS
IN THE MATTER OF THERMAL REDUCTION
COMPANY, INC.
EPCRA Appeal No. 91-2
FINAL DECISION
Decided July 27, 1992
Syllabus

Respondent appealed from a Default Order imposing penalties for violations of
the Emergency Planning and Community Right-to-Know Act of 1986. The Default
Order was issued after Respondent failed to file an answer to the Complaint served
upon it. Respondent maintained the Default Order should be set aside on the grounds
it was not the entity intended to be served with the Complaint and it did not commit
the alleged violations.

Held: Service of process was properly effected upon Respondent. Under the facts
and circumstances of this case, the Default Order should not be set aside. Accordingly,
the Default Order is affirmed.

Before Environmental Appeals Judges Ronald L. McCallum
and Edward E. Reich.

Opinion of the Board by Judge Reich:

Respondent, Thermal Reduction Company, Inc., appeals a Default
Order issued by the Regional Administrator of the U.S. Environ-
mental Protection Agency’s Region II. The Regional Administrator
concluded that Respondent violated Section 313 of the Emergency
Planning and Community Right-to-Know Act of 1986 (EPCRA), 42
U.S.C. §11023 et seq., and 40 CFR §372.30 of the implementing
regulations. The Regional Administrator ordered payment of a civil

1Respondent failed to file an answer to the Complaint. A party may be found
in default after motion, upon failure to file a timely answer to the complaint. 40
CFR §22.17(a). Default by respondent constitutes, for purposes of the pending action
only, an admission of all facts alleged in the complaint and a waiver of respondent’s
right to a hearing on such factual allegations. Id. In the Default Order, the Regional
Administrator concluded Respondent was in default and consequently admitted all
facts alleged in the Complaint.

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THERMAL REDUCTION COMPANY, INC. 129
penalty under Section 325(c) of EPCRA, 42 U.S.C. §11045(c), in the
amount of $34,000.00.

The order issued by the Regional Administrator constitutes an
initial decision of the Agency under 40 CFR §22.17(b). An initial
decision may be appealed to the Environmental Appeals Board under
40 CFR §22.30 (57 Fed. Reg. 5325, February 13, 1992).

I. BACKGROUND

In 1987 and 1988, a business entity known as “Thermal Reduc-
tion Company” was doing business at One Pavilion Avenue in River-
side, New Jersey. In November 1989, representatives of the Environ-
mental Protection Agency inspected “Thermal Reduction Company”
at the Riverside address to determine compliance with Section 313
of EPCRA.2

On March 25, 1991, Region II filed a Complaint alleging viola-
tions of Section 313 of EPCRA in 1987 and 1988 by “Thermal Reduc-
tion Company, Inc.,” a New Jersey corporation doing business at
One Pavilion Avenue in Riverside, New Jersey. The president of
Thermal Reduction Company, Inc., Martin Kraemer, was served with
the Complaint.3 In May 1991, counsel for Region II directed two
letters to Mr. Kraemer, as president of Thermal Reduction Company,
Inc., regarding the Complaint.4 Mr. Kraemer acknowledged receipt of
each letter in a telephone call following each letter. In one tele-
phone conversation, Mr. Kraemer represented that an answer would
be filed. When no answer was filed, Region II filed a Motion for
Default Order, pursuant to 40 CFR §22.17(a), on June 13, 1991.

2Section 313 of EPCRA requires the owner or operator of a facility with more
than ten employees and falling within the coverage of the Standard Industrial Clas-
sification Codes 20 through 39 to complete a toxic chemical release form for certain
toxic chemicals which the facility manufactured, processed, or otherwise used in quan-
tities exceeding specified thresholds during the preceding calendar year. 42 U.S.C.
§ 11023(a) and (b).

3 Respondent has claimed that it is not the same entity as the corporation that
allegedly committed the violations. In this regard, Respondent acknowledges receipt
of the Complaint and subsequent documents by stating “service of the complaint
and other documents in this matter was not effected upon the intended respondent
[Thermal Reduction Company] but only upon the purported respondent [Thermal Re-
duction Company, Inc.] with a name similar to that of the intended respondent.”
See pages 1 and 2 of Respondent’s Appellate Brief.

4The Motion for Default Order refers to the written and oral communications
between Region II and Mr. Kraemer in May 1991. Respondent has not disputed
either the authenticity of the two letters attached to the Motion for Default Order
or Region II’s description of statements attributed to Mr. Kraemer in such communica-
tions.

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130 ENVIRONMENTAL ADMINISTRATIVE DECISIONS
Thermal Reduction Company, Inc. was served with a copy of this
Motion on the same day. Thermal Reduction Company, Inc. failed
to file a reply in opposition to the Motion and a Default Order
was issued by the Regional Administrator, pursuant to 40 CFR
§22.17(b), on July 29, 1991.6

II. DISCUSSION

Respondent raises both procedural and substantive issues. First,
Respondent maintains it was not the entity intended to be served
with process by Region II. It maintains that Region II intended to
serve process upon another entity with a similar name, “Thermal
Reduction Company.” Consequently, it argues service of process upon
it was invalid.

In fact, the record reveals Region II did intend to serve process
on the entity who was named and identified in the Complaint, “Ther-
mal Reduction Company, Inc.” As alleged in the Complaint, Region II
believed the Respondent to be a New Jersey corporation located at
One Pavilion Avenue, Riverside, New Jersey. Respondent acknowl-
edges it is a New Jersey corporation located at such address. In
fact, it distinguishes itself from the other entity known as “Thermal
Reduction Company” on the basis that such other entity is believed
to be either a Delaware corporation or Pennsylvania limited partner-
ship. The Complaint, two letters concerning Respondent’s failure to
answer the Complaint, and the Motion for Default Order were mailed
by Region II to the president of Respondent at the address of Re-
spondent. Clearly, Region II intended to effect service of process on
Respondent. As previously noted, Respondent admits receipt of the
Complaint. Therefore, service of process was not invalid as alleged
by Respondent.

Second, Respondent raises a substantive issue by denying certain
material issues of fact alleged in the Complaint. Respondent main-
tains the Default Order should be set aside because it was not the
entity which is alleged in the Complaint to have violated EPCRA
in 1987 and 1988.

6The Motion for Default Order was mailed to Thermal Reduction Company, Inc.
on June 18, 1991. Service of all pleadings and documents other than the complaint
is complete upon mailing. 40 CFR §22.7(c).

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THERMAL REDUCTION COMPANY, INC. 131

When fairness and a balance of the equities so dictate, a default
order will be set aside. In the Matter of Midwest Bank & Trust
Co., Inc., RCRA (3008) Appeal No. 90-4, at 6 (Oct. 23, 1991). As
a general principle, default orders are not favored and doubts are
usually resolved in favor of the defaulting party. See 10 Wright,
Miller & Kane, Federal Practice and Procedure 2d, §2681, at 402-
403 (1983). When making such a determination, the Environmental
Appeals Board will consider the totality of the circumstances pre-
sented. See Midwest Bank & Trust, at 6-7.

It should be noted that Respondent failed to file a reply opposing
the Motion for Default Order.7 If no reply is filed to a motion within
the designated period, the parties may be deemed to have waived
any objection to the granting of such motion. 40 CFR §22.16(c).
Other than its rather belated contention that it was not the party
intended to be served with process and that it did not commit the
violations alleged in the Complaint, Respondent offers no explanation
for its failure to reply to the Motion for Default Order. Respondent
offers no additional reason why it should not be deemed to have
waived its objections to the granting of the Motion.

In its appeal of the Default Order, Respondent denies it is the
owner of the facility which was inspected by EPA on or about Novem-
ber 3, 1989. It denies it manufactured, imported, processed or other-
wise used any chemical or chemical category subject to Section 313
of EPCRA during 1987 and 1988. It denies it was a facility with ten
full-time employees during 1987 and 1988. It denies it was a facility
falling within Codes 20 through 39 of the Standard Industrial
Classification Code during 1987 and 1988. It maintains the “Thermal
Reduction Company” which operated at the very same address during
1987 and 1988 ceased to do business prior to service of the complaint
on “Thermal Reduction Company, Inc.”

While making these assertions, Respondent also acknowledges in an
ambiguously phrased statement that it does share some form of legal
relationship with “Thermal Reduction Company.” It states that in the
1990 transaction wherein it changed its name from N & P Corporation
to “Thermal Reduction Company, Inc.,” it acquired certain assets and
certain employees of the “Thermal Reduction Company.”8 It also states
that as a result of this transaction, it has

7A party may be found to be in default for failure to file a timely answer to
the complaint only after a motion is made and such party is afforded an opportunity
to reply. 40 CFR §22.17(a).

8 See page 3, paragraph 4, of the Notice of Appeal.

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132 ENVIRONMENTAL ADMINISTRATIVE DECISIONS
authority to “compel [(Thermal Reduction Company’] to accept service
of the complaint.”9

It is not necessary for us to decide whether Respondent could
have successfully defended against the Complaint had it chosen to
do so. All the assertions it now makes should have been made in an
answer to the Complaint. No answer was filed. All the assertions
could have been included in a reply to the Motion for Default Order.
No reply was filed. We decline to accept these assertions, raised
for the first time on appeal, as a basis for overturning a properly
issued Default Order.

Viewing all of the circumstances of this case together, we find
Respondent has failed to make a sufficient equitable argument to
warrant setting aside the Default Order. The Default Order of the
Regional Administrator of Region II is therefore affirmed. Respondent
shall pay a total civil penalty of $34,000.00. In accordance with 40
CFR §22.31(b), payment must be made within 60 days after receipt
of this Order by sending a certified or cashier’s check, payable to
the Treasurer, United States of America, to:

U.S. EPA—Region II
Regional Hearing Clerk
P.O. Box 360188M
Pittsburgh, PA 15251
So ordered.
9 Id.
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