SC Administrative Law Court Decisions

This matter is before me pursuant to the request of the Petitioners Paris Mountain Utilities, Inc. (PMU), Joe W. Hiller and David N. Hiller (Hillers) for a contested case hearing appealing Administrative Order 01-223-W issued by the Respondent South Carolina Department of Health and Environmental Control (DHEC or Department). The Department's Administrative Order alleges that the Petitioners violated the Pollution Control Act, S.C. Code Ann. § 48-1-10 et seq. (1987 & Supp. 2000), Water Pollution Control Permits regulation, 24 S.C. Code Ann. Regs. 61-9 (Supp. 2000), National Pollutant Discharge Elimination System (NPDES) Permit No. SC0034398, and the Environmental Protection Fund Act, § 48-2-10 et seq. (1987 & Supp. 2000) in that they:

a. Failed to conduct monitoring and reporting of results to the Department, failed to properly operate and maintain the wastewater treatment facility (WWTF);

b. Failed to provide a certified operator, failed to comply with effluent discharge limits; and

c. Failed to pay annual operating fees.

For those violations, the Department imposed civil penalties against the Petitioners in the amount of $1,129,786.01. The Petitioners contend that the Administrative Order was improperly issued and ask that it be set aside in its entirety. A hearing on the merits in the above-captioned case was held before me on April 11, 2002 at the offices of the Division in Columbia, South Carolina. Subsequently, the Petitioner made a Motion for Reconsideration requesting that this Court reconsider various aspects of the Decision in this case. After reviewing the parties' arguments, I issue this Amended Final Order and Decision.

The Department has assessed a penalty for violations of NPDES Permit No. SC0034398, the Pollution Control Act and its regulations, and the Environmental Protection Fund Act. Basic principles of administrative law establish that an agency bears the burden of proof in establishing the penalty amount is justified. See Peabody Coal Co. v. Raltson, 578 N.E. 2d 751 (Ind. Ct. App. 1991). Therefore, though the Department is captioned as the Respondent in this case, the Department ultimately bears the burden of proof.

The Department moved for partial summary judgment asserting that the Hillers were collaterally estopped from disputing their personal liability based upon the existence of a Circuit Court Order (Order for Contempt, 97-CP-23-1579, issued by the Honorable Alison Renee Lee on February 23, 2000) which pierced the corporate veil of PMU to hold the Hillers personally liable as officers of PMU for a civil penalty which arose out of PMU's violations of the Pollution Control Act and NPDES Permit No. SC0034298. By consent of the parties, the "Record on Appeal" from this previous litigation was submitted to me. The Record on Appeal establishes the following facts.

On December 9, 1996, the Department issued Administrative Order 96-110-WP citing PMU for violations which occurred from March 1994 until the date of the issuance of the Order. The Administrative Order further required that PMU pay a fine of $39,750.00 and bring its system into compliance with the Pollution Control Act and the NPDES permit. PMU did not appeal the Administrative Order. The Department then brought an action against PMU in Greenville County Circuit Court seeking compliance with the unappealed Administrative Order. After PMU did not answer or plead, a default was entered against PMU on August 24, 1999. The Default Order required PMU to comply with the Administrative Order and pay the civil penalty of $39,750.00 to the Department.

PMU did not comply with the Order of Default and the Department filed a Motion for Criminal and Civil Contempt. In its Motion for Contempt, the Department asked the Circuit Court to hold the officers associated with PMU in criminal and civil contempt for disregarding the Order of Default. At the contempt hearing, the court considered the issue of piercing the corporate veil and, in particular, the individual liability of the Hillers. In that regard, the Department presented testimony and exhibits which identified the officers and shareholders of the corporation and described the conduct of these individuals with respect to the wastewater treatment facility. Additionally, the Memorandum submitted in support of the Department's motion expressly stated, among other things, that the Department was seeking to hold David Hiller and Joe Hiller individually liable for contempt. On February 23, 2000, the Circuit Court issued an Order for Contempt piercing the corporate veil and holding the Hillers personally responsible for PMU's monetary obligations to the Department.

The Hillers argue that they were not in privity with PMU and, that therefore, collateral estoppel would apply. They contend that they were not individually named, served or otherwise participated in the proceedings leading to the Order for Contempt filed by Judge Lee on February 23, 2000. The Hillers argue that their lack of privity was even found in South Carolina Department of Health and Environmental Control v. Paris Mountain Utilities (Unpublished) when the Court of Appeals held that their interests were not sufficiently identical to allow an appeal of the issues related to the Hillers by Paris Mountain Utilities. The Petitioners contend that if their legal interests are sufficiently different, that the Court of Appeals will not allow Paris Mountain Utilities to raise those issues on appeal on behalf of the Hillers, and that they cannot be said to be of such similar interest that offensive collateral estoppel would apply.

"Under the doctrine of collateral estoppel, once a final judgment on the merits has been reached in a prior claim, the relitigation of those issues actually and necessarily litigated and determined in the first suit are precluded as to the parties and their privies in any subsequent action based upon a different claim." Richburg v. Baughman, 290 S.C. 431, 351 S.E.2d 164, 166 (1986). See also Carman v. South Carolina Alcoholic Beverage Control Comm'n, 317 S.C. 1, 451 S.E.2d 383, 386 (1994)(applying collateral estoppel in administrative proceedings). The party asserting collateral estoppel must also show that "the matter or fact directly in issue was necessary to support the first judgment." Beall v. Doe, 281 S.C. 363, 315 S.E.2d 186, 191 (Ct. App.1984). "Only a party to a prior action or one in privity with a party to a prior action can be precluded from relitigating an issue on the basis of offensive collateral estoppel." Carrigg v. Cannon, 347 S.C. 75, 552 S. E. 2d 767, 770 (Ct. App. 2001). "[T]he term 'privity,' when applied to a judgment or decree, means one so identified in interest with another that he represents the same legal right." Roberts v. Recovery Bureau, Inc., 316 S.C. 492, 450 S.E.2d 616, 619 (Ct. App.1994). In Carrigg, the Court held that:

Privity deals with a person's relationship to the subject matter of the previous litigation, not to the relationships between entities. To be in privity, a party's legal interests must have been litigated in the prior proceeding. Having an interest in the same question or in proving or disproving the same set of facts does not establish privity. Nor is privity found when the litigated question might affect a person's liability as a judicial precedent in a subsequent action.

552 S. E. 2d at 770 (quoting Wade v. Berkeley County, 330 S.C. 311, 498 S.E.2d 684, 687 (Ct. App.1998)).

Here, the issue of piercing the corporate veil and holding David Hiller and Joe Hiller individually liable as officers of PMU for the actions of PMU was actually litigated and directly determined by Judge Lee. Moreover, the determination that the Hillers were individually liable for the actions of PMU was necessary to support the Circuit Court's Order for Contempt. Furthermore, the Hillers were given notice prior to the contempt hearing that their personal legal interests would be litigated at that hearing. Additionally, privity existed between the Hillers and PMU because the Hillers, though not named as parties individually in the previous proceeding, in fact controlled the prior litigation on behalf of the corporation in their capacities as the principal shareholder and officers. Department of Social Services v. Winyah Nursing Homes, Inc., 282 S.C. 556, 320 S.E.2d 464 (Ct. App. 1984) (A non-party may be bound by a judgment because the non-party controlled the litigation).

The Petitioners also contend that even if collateral estoppel does apply in this case, it would not support the Department's determination to hold the Hillers individually liable in this case. The only factual finding by the Court was that the Hillers were officers. The Petitioners contend that an officer or director cannot be individually liable pursuant to the legal cause of action for piercing the corporate veil. In other words, to pierce the corporate veil, there must be a specific factual finding that an individual was a shareholder of the corporation, not just that the individual was an officer in the corporation. However, that issue was not appealed by the parties and is therefore not subject to review in this proceeding. Eichman v. Eichman, 285 S.C. 378, 329 S.E.2d 764 (1985); Bennett v. South Carolina Department of Corrections, 305 S.C. 310, 408 S.E.2d 230 (1991) (Litigants failure to appeal the Committee's decision barred his subsequent suit concerning those issues.). ⁽¹⁾ Furthermore, "[u]nder circumstances indicating that the corporation is only the 'alter ego' of an officer or director, he may be held individually liable for acts of the corporation." Am. Jur. 2d Corporations. § 1829 (2000).

Therefore, I conclude that there is no genuine issue of material fact regarding the issue of piercing the corporate veil, and individual liability of Joe W. Hiller and David N. Hiller for any civil penalty imposed herein. The Department is entitled to partial summary judgment as a matter of law on the issue concerning the Hillers' personal liability.

Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, taking into account the burden of persuasion by the parties, I make the following Findings of Fact by a preponderance of the evidence:

1. Notice of the date, time, place and nature of the hearing was timely given to all parties.

2. PMU is a private utility company which owns and is responsible for the operation of the Altamont Forest wastewater treatment facility in Greenville County, South Carolina. The Department issued NPDES Permit SC0034398 to PMU on February 23, 1988, allowing the discharge of treated wastewater in compliance with the terms, conditions and requirements of the permit, which expired on March 31, 1993. However, on September 27, 1993, Joe W. Hiller, on behalf of PMU, signed Consent Order 93-053-W, which requires PMU to continue operating the Altamont Forest facility under the expired NPDES permit. Nevertheless, PMU has not paid any permit operating fees since March 13, 1989.

3. PMU receives wastewater from twenty-four (24) homes in the Altamont Forest subdivision in the Paris Mountain area of Greenville County. Pursuant to the NPDES permit, PMU is authorized to discharge treated wastewater into Mountain Creek. Mountain Creek flows to Enoree River through Paris Mountain State Park. The waters of Paris Mountain State Park are used by park guests for recreational purposes such as swimming.

4. The plant is an extended aeration activated sludge facility which was designed to provide aerobic treatment of wastes. The system has two aeration basins with motorized electrical blowers which mix air with the waste allowing the solids to settle. The system is designed to provide disinfection and de-chlorination to the wastewater before it is discharged. The system also includes a weir box which is used to measure flow.

5. The plant does not appear to be receiving any type of maintenance. Though the plant is dependent upon electricity to operate, the plant has not been receiving any electrical power since April 21, 1999. In fact, the power meter has been removed by Duke Power. Moreover, one of the two blowers is missing and the motors that serve the blowers are not operable.

6. The NPDES permit issued to PMU has several requirements at issue in this case:

a. The permit limits the effluent discharge for fecal coliform to two hundred (200) milligrams per one hundred (100) milliliters of sample, for Total Residual Chlorine at less than 0.1 mg/l, for Biochemical Oxygen Demand at 30 mg/l, Dissolved Oxygen at a minimum of 2 mg/l, and for flow at 12,400 gallons per day;

b. The permit requires PMU to monitor the facility by measuring flow and analyzing effluent pollutants. The permit requires that monitoring be conducted on a daily and monthly basis;

c. The permit requires PMU to submit monthly Discharge Monitoring Reports (DMRs)to the Department;

d. The permit requires PMU to properly operate and maintain the facility at all times; and

e. The permit requires PMU to provide for an operator certified by the South Carolina Board of Certification for Environmental Systems Operators.

7. Since the Petitioners were not maintaining or operating the plant, the Department filed a motion in the Greenville County Circuit Court requesting that a receiver be appointed for the Altamont Forest facility. A hearing was held before Circuit Court Judge Alison Renee Lee concerning the appointment of a receiver on January 5, 2000. On February 23, 2000, Judge Lee issued an "Order Appointing Receiver" appointing Western Carolina Regional Sewer Authority to serve as a temporary receiver for the Altamont Forest treatment facility for a period not to exceed one year. However, there are no provisions within Judge Lee's Order which release the Petitioners from their obligations under the Pollution Control Act or Clean Water Act as the NPDES permittee.

8. The Petitioners have not submitted the required DMRs to the Department since March 1994. The Petitioners also have not conducted monitoring of the WWTF as required by the terms of the NPDES permit.

9. On October 23, 1997, Randolph Cook, an Environmental Manager for DHEC's Appalachian II District, conducted an operation and maintenance (O&M) inspection of the facility. The inspection revealed that the facility was being operated unsatisfactorily in that influent waste was leaking directly onto the ground.

10. On December 5, 1997, Mr. Cook conducted another O&M inspection of the facility. The inspection revealed that the facility was being operated unsatisfactorily in the following manners: an analysis of a sample of the plant's effluent revealed that the Total Residual Chlorine level was 2.20 mg/l which is in excess of the permitted limit and there was debris in the system's weir box.

11. On January 12, 1999, Reginald Massey, an Environmental Manager for DHEC's Appalachian II District, conducted an O&M inspection of the facility. The inspection revealed that the facility was being operated unsatisfactorily in that the aeration system was inoperable, there was no chlorine or de-chlorination chemicals in the feeders, and the effluent contained levels of fecal coliform at 160,000 colonies per 100 milliliters of water, in excess of the permitted limits.

12. On January 19, 1999, Mickey Corbett, an Environmental Manager for DHEC's Appalachian II District, conducted an O&M inspection of the facility. The inspection revealed that the facility was being operated unsatisfactorily in that the effluent from the facility contained concentrations of fecal coliform at 90,000 colonies per 100 milliliters in violation of the permitted level.

13. On April 21, 1999, Mr. Corbett conducted another O&M inspection of the facility. This inspection revealed that the facility was being operated unsatisfactorily in the following manners: the access road was inaccessible; the aeration system was inoperable; there was no chlorine or de-chlorination in the feeders; debris was present in the weir box; and the facility was in a general state of disrepair.

14. On August 30, 1999, Mr. Corbett conducted another O&M inspection of the facility. The inspection revealed that the facility was being operated unsatisfactorily in the following manners: the access road was inaccessible; the aeration system was inoperable; no chlorine or de-chlorination was present in the feeders; debris was present in the weir box; and the facility was in a general state of disrepair.

15. On September 24, 1999, Mr. Massey conducted an O&M inspection of the facility. This inspection revealed that the facility was being operated unsatisfactorily in that the access road was inaccessible, the aeration system was inoperable, no chlorine or de-chlorination chemicals were in the system's feeders, the weir box was filled with debris; and the facility was in a general state of disrepair.

16. On October 12, 1999, Mr. Massey conducted an O&M inspection of the facility. Again, this inspection revealed that the facility was being operated unsatisfactorily in that the access road was inaccessible, the aeration system was inoperable, no chlorine or de-chlorination chemicals were present in the feeders, debris was in the weir box, and the facility was in a general state of disrepair.

17. On November 18, 1999, Mr. Massey conducted an O&M inspection of the facility. The inspection revealed that the facility was being operated unsatisfactorily in that no operation and maintenance was being provided, the facility was in a general state of disrepair, and samples revealed fecal coliform levels of 90,000 colonies per 100 milliliters which exceeded the permitted limits.

18. On February 16, 2000, Mr. Massey conducted another O&M inspection of the facility. The inspection revealed that the facility was being operated unsatisfactorily in that no operation and maintenance was being provided, the facility was in a general state of disrepair, and trees had been cut to block access.

19. On April 17, 2000, Mr. Massey conducted another O&M inspection of the facility. This inspection revealed that the facility was being operated unsatisfactorily in that no operation and maintenance was being provided and the facility was in a general state of disrepair.

20. On June 6, 2000, Mr. Massey conducted an O&M inspection of the facility that also revealed that the facility was being operated unsatisfactorily in that no operation and maintenance was being provided and the facility was in a general state of disrepair.

21. On August 4, 2000, Mr. Massey conducted an O&M inspection of the facility. The inspection revealed that the facility was being operated unsatisfactorily in that no operation and maintenance was being provided, the facility was in a general state of disrepair, and the electrical meter had been removed.

22. On September 14, 2000, Mr. Corbett conducted an O&M inspection of the facility. The inspection revealed that the facility was being operated unsatisfactorily in the following manners: the access road was inaccessible; the aeration system was inoperable; no chlorine or de-chlorination chemicals were present in the feeders; debris was present in the weir box; the facility was in a general state of disrepair; and the electrical meter had been removed.

23. On February 20, 2001, Mr. Corbett conducted an O&M inspection of the facility. The inspection revealed that the facility was being operated unsatisfactorily in the following manners: no operation and maintenance was being provided; the facility was in a general state of disrepair; samples revealed that fecal coliform was above the permitted limit at 70,000 colonies per 100 milliliters of water, biochemical oxygen demand was above the limit at 81 mg/l, and that the dissolved oxygen level of 1.4 was in violation of permitted level.

24. On April 18, 2001, Mr. Corbett conducted an O&M inspection of the facility. The inspection revealed that the facility was being operated unsatisfactorily in the following manners: no operation and maintenance was being provided; the facility was in a general state of disrepair; the electrical meter had been removed; and debris was present in the weir box.

25. On June 11, 2001, Mr. Corbett conducted a Compliance Evaluation Inspection of the facility. Mr. Corbett noted on his inspection report that the facility had been abandoned. The inspection revealed that the facility was not being operated satisfactorily in the following manners: that PMU had failed to maintain records and reports as required by its NPDES permit; the gate to the facility was unlocked and open; small trees and brambles had grown inside and outside the fenced enclosure surrounding the facility; obsolete plant equipment, blower housings, piping, and other debris littered the plant site; the effluent from the facility appeared to be grey, almost black in color with trace foam and yielded strong anaerobic odors; the weir box remained obstructed by debris; the extended aeration facilities were badly rusting and appeared to be structurally compromised; paint was peeling and steel was eroding from the tanks; one of the two blowers was missing and neither blower was operable; the power meter had been removed and the facility was not using power; neither chlorinator unit had been serviced; the chlorinator was filled with debris and the chlorinator cover had been removed; the chlorine contact chamber was crumbling; and the facility did not have a certified environmental systems operator as required by its permit.

26. An Administrative Order was issued citing the Petitioners with violations of the Pollution Control Act, Water Pollution Control Permits regulations, NPDES Permit No. SC0034398, and the Environmental Protection Fund Act. The Order assessed the Petitioners a fine of $1,129,786.01.

27. The Department has three policy reasons behind assessing fines. The first is to penalize a facility for the violations that were committed; the second is to deter that facility from committing further violations; and the third is to deter other regulated facilities from disregarding DHEC's regulations and statutory requirements. Additionally, the Department uses a penalty calculation guidance document - "Bureau of Water Penalty Assessment Guide" - as a reference in calculating the amount of penalties. This guidance document considers two components in calculating the amount of a fine. The first component is the presence of any economic benefit that could be derived from not complying with the relevant law. The second component is the gravity of the violations, such as the potential for harm to the environment, the extent of deviation from the regulatory and permit requirements, and the past history of compliance or noncompliance of the facility.

28. In calculating the fine, the Department employed a standardized worksheet which sets forth the factors that are considered by the Department when calculating a fine:

a. Economic Benefit:

(1) The Petitioners have received an economic benefit by refusing to pay operating fees for the facility. PMU owes unpaid operating fees to the Department in the amount of $4,986.01.

(2) The Petitioners have received an economic benefit of $5,700.00 by failing to monitor and report monthly parameters from December 1996 through August 2001. This amount was calculated by multiplying the number of months that PMU has failed to monitor and report (57) with the approximate cost of conducting monthly monitoring and reporting ($100.00). The Department arrived at this monthly cost by gathering billing information from several laboratories across the state for comparable work and computing an average cost.

(3) The Petitioners have received an economic benefit of $34,200.00 by failing to monitor and report daily monitoring parameters during the time frame of December 1996 through August 2001. This was calculated using a cost of $20.00 per day. This daily cost was computed by collecting billing information from laboratories around the state and averaging the costs.

(4) The Petitioners have received an economic benefit of $39,900.00 by failing to provide a certified operator for the facility during the period from December 1996 through August 2001. This amount was calculated using a statewide average monthly operator fee of $700.00.

b. Gravity Component:

(1) Failure to Monitor and Report: The potential for harm was considered to be in the "moderate" category. The extent of deviation from regulatory requirements was considered to be in the "major" category. A penalty of $285,000.00 was assessed for these violations.

(2) Inspection Violations: The potential for harm to the environment and to human health for the violations noted during inspections by Department staff was considered to be "major." The violations were also considered to be a "major" deviation from regulatory requirements. A penalty of $190,000.00 was assessed for these violations.

(3) Daily Operation and Maintenance: The potential for harm was considered to be "major" since there was no operation or maintenance work being performed and this facility is discharging untreated wastewater. This was also considered to be a "major" deviation from regulatory requirements. A penalty of $570,000.00 was assessed for these violations.

Based upon the foregoing Findings of Fact, I conclude the following as a matter of law:

1. The Administrative Law Judge Division has jurisdiction over this matter pursuant to S.C. Code Ann. § 1-23-310 (1986 & Supp. 2001).

2. In weighing the evidence and deciding a contested case on the merits, the Administrative Law Judge must make findings of fact and conclusions of law by a preponderance of the evidence. Anonymous (M-156-90) v. State Board of Medical Examiners, 329 S.C. 371, 496 S.E.2d 17 (1998).

3. The Department is the state agency charged with the responsibility of issuing NPDES permits to allow treatment facilities to discharge treated wastewater. S.C. Code Ann. § 48-1-50(5) (1987 & Supp. 2000). Therefore, the Department has the authority and the duty to regulate the discharge of pollutants through the Pollution Control Act, S.C. Code Ann. §§ 48-1-10 et seq. (1987 & Supp. 2000).

4. The Pollution Control Act (the Act) governs the discharge of wastewater into the waters of South Carolina. Section 48-1-90(a) of the Act provides:

It shall be unlawful for any person, directly or indirectly, to throw, drain, run, allow to seep or otherwise discharge into the environment of the State organic or inorganic matter, including sewage, industrial wastes and other wastes, except as in compliance with a permit issued by the Department.

Moreover, it is unlawful for any person to operate a waste disposal facility in violation of the conditions of a discharge permit. S.C. Code Ann. § 48-1-110(d) (1987 & Supp. 2000).

5. 24 S.C. Code Ann. Regs. 61-9 (Supp. 2000) amplifies a permittee's duty to comply with water pollution control permits. Section 61-9.122.41(a), entitled "Duty to Comply," provides:

The permittee must comply with all conditions of the permit. Any permit noncompliance constitutes a violation of the Clean Water Act and Pollution Control Act and is grounds for enforcement action, for permit termination, revocation and reissuance, or modification; or denial of a permit renewal application.

24 S.C. Code Ann. Regs. 61-9.122.41(e) (Supp. 2000) further provides, in relevant part:

The permittee shall at all times properly operate and maintain in good working order and operate as efficiently as possible all facilities and systems of treatment and control (and related appurtenances) which are installed or used by the permittee to achieve compliance with the terms and conditions of this permit.

6. The Petitioner contends that this Division cannot enforce the Department's penalties because PMU's permit had expired. Indeed NPDES Permit SC0034398 expired on March 31, 1993. Nevertheless, on September 27, 1993, Joe W. Hiller, on behalf of PMU, signed Consent Order 93-053-W which requires PMU to continue operating the Altamont Forest facility under the expired NPDES permit. Therefore, the Petitioners had a continuing duty to comply with the expired NPDES permit. Furthermore, though the Circuit Court appointed Western Carolina Regional Sewer Authority as a receiver, it did not expressly release the Petitioners from their obligations as the permittee for the facility. As a result, the Petitioners are potentially liable for the violations which occurred during the term of Western Carolina Regional Sewer Authority's receivership.

7. The Petitioners argue that there was no evidence presented to this Court that either of the Hillers were shareholders of the corporation at any time, let alone at any time during the relevant period of time that the Department alleges the violations occurred. Therefore, even if the Hillers are collaterally estopped from disputing that they are officers or shareholders in PMU, Judge Lee's determination of that issue only applies to violations that occurred on or before the date of her Order. In other words, the Petitioners contend that all of the events for which the previous Order for Contempt applied occurred prior to the alleged violations of this action. Since an individual can be a shareholder one day and not be a shareholder the very next day, the Petitioners argue that Judge Lee's finding that the Hillers are officers or shareholders does not prevent the litigation of that issue in this proceeding.

Judge Lee's Order was based upon a set of facts which covers the time period from March 1994 to the date of the issuance of her Order for Contempt on February 23, 2000. In her Order, she clearly found that the Petitioners were officers of PMU. The present case involves violations which occurred from October 23, 1997 to June 11, 2001. Therefore, many of the violations found in this decision were within the time frame of Judge Lee's Order. Those facts are sufficient to support the penalties levied against the Petitioners by this Decision for failure to properly operate and maintain the facility, and failure to conduct monitoring and reporting of the results to the Department. Moreover, after the Department established that Judge Lee's Order found that they were officers of PMU and that their actions warranted the piercing of the corporate veil, the Petitioners presented no evidence to establish that any type of change in circumstances had occurred with respect to the corporate status, ownership, or managerial structure of PMU since the date of Judge Lee's ruling which would preclude her ruling from properly being applied prospectively in the instant matter. Therefore, I find that collateral estoppel applies to all violations found in this Decision.

8. The Department seeks to hold the Hillers individually liable for any penalties imposed upon PMU herein by piercing the corporate veil. The Petitioners argue that the issue of piercing the corporate veil is not properly before this Division because the Department lacks the authority to issue an Administrative Order which seeks to pierce the corporate veil and thus hold the Hillers individually liable for PMU's actions in this case. "An action to pierce the corporate veil is equitable in nature." Wilson v. Friedberg, 323 S.C. 248, 473 S.E.2d 854, 858-859 (1996). Therefore, the ALJD does not have jurisdiction to disregard the corporate entity. See also Roberts' Fish Farm v. Spencer, 153 So.2d 718 (1963) ("the legal existence of a corporation could be disregarded only in a court of law or equity," not by an administrative tribunal). However, once the Circuit Court pierced the corporate veil of PMU concerning the Hillers' failure to comply with the corporate structure, the ALJD can rely upon the Circuit Court's determinations to the extent that the party is bound by collateral estoppel.

In Sturkie v. Sifly, 280 S.C. 453, 313 S.E.2d 316, 318 (Ct. App.1984), the Court established a two-pronged test to determine whether to pierce the corporate veil. "The first prong is an eight factor analysis of the shareholder's relationship to the corporation and looks to the observance of the corporate formalities by the dominant shareholders." Id. at 318. The second prong requires that there be an "element of injustice or fundamental unfairness if the acts of the corporation be not regarded as the acts of the individuals." Id. at 318. "To prove fundamental unfairness the plaintiff must establish "(1) that the defendant was aware of the plaintiff's claim against the corporation, and (2) thereafter, the defendant acted in a self-serving manner with regard to the property of the corporation and in disregard of the plaintiff's claim in the property." Id. at 319.

The first prong of the Sturkie analysis examines the Hillers' behavior within the corporate structure. Since that same examination would occur under the facts of this case, the Hillers are estopped from disputing those facts here. The second prong is more difficult. It involves an analysis of the Hillers' behavior toward the defendant and thus is not a determination that would apply to any future litigation concerning whether to disregard the corporate structure of PMU. However, the defendant in the previous case was the Department and the factual issue was whether PMU through it officers "neglected to properly operate and maintain the treatment plant which continued to receive sewage from the Altamont Forest subdivision and discharge that untreated sewage into the waters of the State." Regarding the second prong, the Circuit Court held that PMU "knew of its obligation toward the Department and its duty to . . . bring the treatment plant into compliance with DHEC standards. Furthermore, the Court found that:

The Hillers caused the corporation to be administratively dissolved and then sought to hide behind the shield of corporate charter to avoid their obligations to DHEC. Untreated sewage from the Altamont Forest subdivision continues to be discharged into the waters of our State and the treatment plant itself is in need of serious repairs. It is clear that the Hillers acted in a self-serving manner and to allow them to walk away from the consequences of their actions would be unjust and fundamentally unfair.

Those facts are the same facts at issue in this case. Therefore, I conclude that under the facts and circumstances of this particular case, it was appropriate for the Department to name the Hillers in their individual capacity in the Administrative Order. Furthermore, the Petitioners were given ample notice by the Department that it would seek to hold the Hillers personally responsible for the violations cited in Administrative Order 01-223-W. The Department raised the issue of piercing the corporate veil in both its prehearing statement and in a pretrial brief which was filed with this Division and served upon the Petitioners' counsel.

9. Inherent in and fundamental to the powers of an Administrative Law Judge, as the trier of fact in contested cases under the Administrative Procedures Act, is the authority to decide the appropriate sanction when such is disputed. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E. 2d 633 (1991). However, the Administrative Law Judge, as fact-finder, must impose a penalty based on the facts presented at the contested case hearing. In particular, in assessing a penalty, "each fine must be analyzed individually to determine if it is appropriate under the circumstances." Midlands Utility, Inc., v. South Carolina Department of Health and Environmental Control, 313 S.C. 210, 212, 437 S.E.2d 120, 121 (1993). Furthermore, the fact-finder "should give effect to the major purpose of a civil penalty-deterrence." Id.

10. S.C. Code Ann. § 48-2-50 (1987 & Supp. 2000) of the Environmental Protection Fund Act authorizes the Department to assess annual fees for holders of NPDES permits. Furthermore, 24A S.C. Code Ann. Regs. 61-30G(1)(a)(i) (Supp. 2000), authorizes the Department to assess an annual fee of $400.00 for NPDES permit holders with a permitted flow at 0-49,999 gallons/day. Additionally, 24A S.C. Code Ann. Regs. 61-30D (Supp. 2000) allows the Department to assess a penalty of up to thirty-five (35) percent for fees that remain unpaid after ninety (90) days. Finally, S.C. Code Ann. § 48-1-330 (1987 & Supp. 2000) provides for a maximum penalty of up to $10,000.00 per day for violations of the Pollution Control Act.

In accessing the penalty in this case, the Department used a penalty calculation guidance document - "Bureau of Water Penalty Assessment Guide" - as a reference. The standards in that document are only guidelines and not regulations. Therefore, since the guidelines do not carry the force and effect of law, the guidelines are simply evidence to consider in making a determination. Nevertheless, I find the reasoning of the Department's penalty calculation guidelines in factoring the economic benefit received by the Petitioners in accessing a penalty to be persuasive. Here, the Petitioners' violations of the following provisions resulted in the economic benefits set forth below:

a. The Petitioners violated the Environmental Protection Fund Act, S.C. Code Ann. § 48-2-50 (1987 & Supp. 2000), and 24A S.C. Code Ann. Regs. 61-30 (Supp. 2000), by failing to pay the annual permitting fees to the Department. The Petitioners have not paid operating fees since March 13, 1989. As a result, the Petitioners escaped paying $4,986.01 in operating fees to the Department.

b. The Petitioners have not conducted monitoring of the WWTF and have not submitted DMRs as required by the terms of the NPDES permit since March 1994. Therefore, the Petitioners violated Section 48-1-110(d) of the Pollution Control Act and Regulation 61-9.122.41(a) of the Water Pollution Control Permits regulations. By failing to conduct the monitoring and reporting of the results, the Petitioners received an economic benefit in the amount of $39,900.00.

c. The Petitioners violated Section 48-1-110(d) of the Pollution Control Act and 24 S.C. Code Ann. Regs. 61-9.122.41(e) of the Water Pollution Control Permits regulations by failing to provide a certified operator for the wastewater treatment facility as required in Part IIC.1.b of NPDES Permit SC0034398. As a result, the Petitioners received an economic benefit in the amount of $39,900.00.

Therefore, I find that a fine of $84,786.01 for the economic benefit the Petitioners received is appropriate in this case.

11. As noted above, the Petitioners violated S.C. Code Ann. § 48-1-110(d) (1987 & Supp. 2000) of the Pollution Control Act, and 24 S.C. Code Ann. Regs. 61-9.122.41(a) (Supp. 2000) of the Water Pollution Control Permits regulations, when they failed to conduct monitoring and failed to report the results as required in Part IA and IC of NPDES Permit SC0034398. These monitoring and reporting requirements are central to the adequate administration and enforcement of limits on substantive discharges under the Pollution Control Act and federal Clean Water Act. Unless a permit holder monitors as required by the permit, it is difficult for state and federal officials charged with enforcement of the Clean Water Act to know whether or not the permit holder is discharging in excess of the permit's maximum levels. Therefore, as a result of this violation, the Petitioners not only received the economic benefit addressed above, but they also deterred the Department from accessing the extent of the damage caused by their malfeasance.

Taking into account the extended duration of the Petitioners' failure to monitor and report as well the Petitioners' failure to testify at the hearing to offer any type of explanation regarding their failure to monitor and report, I find that the Petitioners' monitoring and reporting violations were flagrant violations of the above law. See McCowan v. Southerland, 253 S.C. 9, 168 S.E.2d 573 (1969); Griffith v. Griffith, 332 S.C. 630, 506 S.E.2d 526 (Ct. App. 1998) (holding that the fact finder may draw an adverse inference in a civil case against a party who refuses to testify.) Therefore, I find that the civil penalty of $285,000.00 imposed by the Department against the Petitioners for failure to monitor and report is appropriate.

12. The Petitioners violated the Pollution Control Act, S.C. Code Ann. § 48-1-110(d) (1987 & Supp. 2000) and the Water Pollution Control Permits regulations, 24 S.C. Code Ann. Regs. 61-9.122.41(e) (Supp. 2000), in that they failed to properly operate and maintain in good working order all waste treatment systems as required in Part IIC.1.a of NPDES Permit SC0034398. The Department assessed a penalty of $10,000.00 per month for each of the fifty-seven (57) months covered by the Administrative Order in which the facility was not properly operated and maintained. The testimony presented by the Department clearly established that the Petitioners are not properly operating and maintaining the facility. In fact, the Petitioners are not operating or maintaining the facility at all. The facility has not received any electrical power, which is necessary for it to operate properly, since as far back as April 1999. Additionally, the facility is not properly maintained: small trees and brush have grown inside the fenced enclosure surrounding the facility; obsolete plant equipment, blower housings, piping, and other debris are strewn about the plant site; the facility's weir box is obstructed by debris; extended aeration facilities are badly rusting and appear to be structurally compromised; the steel is eroding from the tanks; one of the two blowers is missing and neither blower is operable; and the chlorinator has become nonfunctional.

The consequence of the Petitioners' failure to properly operate and maintain the PMU facility is that the effluent discharged from the facility appeared to be grey, almost black in color, with trace foam and strong anaerobic odors, which indicates that the wastewater is not being treated before it is discharged. In other words, the Hillers' actions have resulted in raw sewage being dumped into the waters of Mountain Creek. The total lack of service and maintenance by the Petitioners justifies the imposition of a civil penalty of $570,000.00 for these violations.

13. The Petitioners also argue that any fine that is levied against them should be offset by the time period that Western Carolina Regional Sewer Authority was in control of the facility during the term of receivership. However, the economic advantages the Petitioners received as a result of their violations continued to accrue during the receivership. Furthermore, the penalties levied against the Petitioners for their failure to properly operate and maintain the PMU facility and for their failure to conduct monitoring and report the results as required, would be the same regardless of Western Carolina's responsibilities during the receivership.

14. Finally, the Petitioners violated the Pollution Control Act, S.C. Code Ann. § 48-1-110(d) (1987 & Supp. 2000) and the Water Pollution Control Permits regulations, 24 S.C. Code Ann. Regs. 61-9.122.41(a)(1) (Supp. 2000), because they failed to comply with effluent discharge standards as required in Part IA.1 of NPDES Permit SC0034398. Specifically, an analysis of effluent samples randomly taken by the Department during facility inspections revealed numerous violations of effluent discharge standards between December 5, 1997 and February 20, 2001. The Department assessed a penalty of $190,000.00 for "unsatisfactory" ratings assigned to the facility as a result of inspections made by the Department. However, the Department assessed that penalty based not only upon the effluent violations but also the operation and maintenance violations which were discovered by the Department during inspections. Moreover, I find that these violations are components of the above violations for which penalties have been sufficiently assessed. In other words, but for the Petitioners' failure to operate and maintain, the effluent violations would not have occurred. Therefore, accessing a penalty for these violations is redundant to the penalties assessed above.

IT IS THEREFORE ORDERED that within thirty (30) days from the execution date of this Order, the Petitioners pay to the Department a civil penalty in the amount of $939,786.01.

IT IS FURTHER ORDERED that Petitioners Joe W. Hiller and David N. Hiller shall be personally liable, jointly and severally, for the payment of the civil penalty.

AND IT IS SO ORDERED.

__________________________________

Ralph King Anderson, III

Administrative Law Judge

October 15, 2002

Columbia, South Carolina

1. They further contend that the Memorandum which was provided to the Court was not provided to counsel for Paris Mountain Utilities until the hearing had actually begun. Additionally, the Petitioners contend that there was no evidence presented that the Hillers were officers, directors or shareholders in 1999. These issues are also barred. Bennett, supra.