40.17.450 Adjustment Factors and Effect of Settlement

(a) Adjustment Factors. Background: As mentioned in Section VI of this document, the seriousness of the violation is considered in determining the gravity-based penalty component. The reasons the violation was committed, the intent of the violator, and other factors related to the violator are not considered in choosing the appropriate cell from the matrix. However, any systems for calculating penalties must have enough flexibility to make adjustments that reflect legitimate differences between separate violations of the same provision. In assessing penalties, the TMBCI/EPA must take into account any good faith efforts to comply with the applicable requirements. There are several such adjustment factors to consider. These include the degree of willfulness and/or negligence, history of noncompliance, ability to pay, and other unique factors. This adjustment may also include an additional adjustment factor for environmental projects undertaken by the violator, and that are not to the direct benefit to the violator.

(b) Recalculation of Penalty Amount: If new information becomes available after the issuance of the proposed penalty which makes it clear that the initial calculation of the penalty is in error, enforcement personnel should adjust this figure. Enforcement personnel should document on the Penalty Computation Worksheet the basis for recalculating the gravity- based or economic benefit component of the penalty. For example, if after the issuance of the proposed penalty, information is presented which indicates that less waste is involved than was believed when the proposed penalty was issued, it may be appropriate to recalculate the gravity-based penalty component. Thus, if enforcement personnel had originally believed that the violator had improperly stored ten barrels of hazardous wastes but it was later determined that only a single container of hazardous waste was improperly stored, it may be appropriate to recalculate the "potential for harm" component of the gravity-based penalty from "major" to "moderate" or "minor." On the other hand, if enforcement personnel initially believed a violator had fully complied with a specified requirement but subsequently determine that this is not the case, it would be appropriate to amend the complaint as necessary to add a new count, and revise the total penalty amount upward to account for this previously undiscovered violation. Likewise, if new information shows that a previously known violation is more serious than initially thought, an upward revision of the penalty amount may be required. Furthermore, if the violator presented new information which established that the work performed was technically inadequate or useless (e.g., the violator drilled wells in the wrong spot or did not dig deep enough), it may be more appropriate to keep the gravity-based penalty as originally calculated an evaluate whether it would be appropriate to mitigate the penalty based on the "good faith efforts" adjustment factor. When information is presented which makes it clear that the gravity-based or economic benefit penalty component is in error, enforcement personnel may, of course, choose to formally amend the complaint to correct the original penalty component. In all instances, any recalculation of the penalty should be carefully documented on the Penalty Computation Worksheet and include a summary in the enforcement file.

(c) Application of Adjustment Factors: The adjustment factors can increase, decrease or have no effect on the penalty amount sought from the violator. Adjustments should generally be applied to the sum of the gravity-based and multi-day components of the penalty for a given violation. All supportable upward adjustments of the penalty amount of which the TMBCI/EPA is aware ordinarily should be made prior to issuance of the proposed penalty, while downward adjustments (with the exception of those reflecting good faith efforts to comply) should generally not be made until after the proposed should be placed on the violator. Enforcement personnel should use whatever reliable information on the violator and violation is readily available at the time of assessment.

However, if a penalty is to achieve deterrence, both the violator and the general public must be convinced that the penalty places the violator in a worse position than those who have complied in a timely fashion. Moreover, allowing a violator to benefit from noncompliance punishes those who have complied.

(1) Good Faith Efforts to Comply/Lack of Good Faith.

Good faith efforts to comply with applicable requirements must be considered in assessing a penalty. The violator can manifest good faith by promptly identifying and reporting noncompliance or instituting measures to remedy the violation before the TMBCI/EPA detects the violation. Assuming self-reporting is not required by law and the violations are expeditiously corrected, a violator's admission or correction of a violation prior to detection may provide a basis for mitigation of the penalty, particularly where the violator institutes significant new measures to prevent recurrence. Lack of good faith, on the other hand, can result in an increased penalty. Likewise, claims by a violator that "it was not told" by the Tribe, the TMBCI/EPA or the Compliance Officer that it was out of compliance should not be cause for any downward adjustment of the penalty.

(2) Degree of Willfulness and/or Negligence.

In cases where civil penalties are sought for "knowing" violations of the Tribal Laws/Code(s), the penalty may be adjusted upward for willfulness and/or negligence.

In assessing the degree of willfulness, and/or negligence, the following factors should be considered, as well as any others deemed appropriate:

(A) how much control the violator had over the events constituting the violation;

(B) the foreseeability of the events constituting a violation;

(D) whether the violator knew or should have known of the hazards associated with the conduct; and

(E) whether the violator knew or should have known of the requirement which was violated.

It should be noted that this last factor, lack of knowledge of the requirement, should never be used as a basis to reduce the penalty. To do so would encourage ignorance of the law. Rather, knowledge of the Tribal law/code(s) should serve only to enhance the penalty. The amount of control which the violator had over how quickly the violation was remedied also is relevant in certain circumstances. Specifically, if correction of the environmental problem was delayed by factors which the violator can clearly show were not reasonably foreseeable and were out of his or her control and the control of his or her agents, the penalty may be reduced.

(d) History of Noncompliance (upward adjustment only) where a party previously has violated Tribal environmental laws/code(s)at the same time or a different site, this is usually clear evidence that the party was not deterred by the previous enforcement response. Unless the current or previous violation was caused by factors entirely out of the control of the violator, this is an indication that the penalty should be adjusted upwards.

Some of the factors that enforcement personnel should consider in making this determination are as follows:

(1) how similar the previous violation was;

(2) how recent the previous violation was;

(3) the number of previous violations; and

(4) violator's response to previous violation(s) in regard to correction of problem.

A violation generally should be considered "similar" if the TMBCI/EPA previous enforcement response should have alerted the party to a particular type of compliance problem. A previous violation of the same requirement would constitute a similar violation. Nevertheless, a history of noncompliance can be established even in the absence of similar violations, where there is a pattern of disregard of environmental requirements contained in Tribal or another federal environmental statute. Enforcement personnel should examine multimedia compliance by the respondent and, where there are indications of a history of noncompliance, the penalty should be adjusted accordingly. For the purpose of this section, a "previous violation" includes any act or omission for which a formal or informal enforcement response has occurred (e.g., Tribal, EPA or State notice of violation, warning letter, complaint, consent agreement, final order, or consent decree). The term also includes any act or omission for which the violator has previously been given written notification or warning, however informal, that the TMBCI/EPA believes a violation exists.

(e) Ability to Pay (downward adjustment only): The TMBCI/EPA generally will not assess penalties that are clearly beyond the means of the violator. Therefore, the enforcement personnel should consider the ability of a violator to pay a penalty. At the same time, it is important that the regulated community not see the violation of environmental requirements as a way of aiding a financially-troubled business.

Enforcement personnel should conduct a preliminary inquiry into the financial status of the party against whom a proposed penalty is being assessed. This inquiry may include a review of publicly-available information. The ability of a violator to pay a proposed penalty is not a factor that the TMBCI/EPA must consider in assessing a penalty. However, because this is a mitigating factor set forth in this Policy, enforcement personnel should be generally aware of the financial status of the violator in the event that this is raised as an issue in settlement or hearing.

The burden to demonstrate inability to pay rests on the violator, as it does with any mitigating circumstances. Thus, a person or party's inability to pay usually will be considered only if the issue is raised by the violator. If the violator fails to fully provide sufficient information, then enforcement personnel should disregard this factor in adjusting the penalty. When the TMBCI/EPA determines that a violator cannot afford the penalty as prescribed by this Policy or the cost of compliance or from carrying out remedial measures which the TMBCI/EPA deems to be more important than the deterrence effect of the penalty (e.g., payment of penalty would preclude proper clean up of a release), the following options should be considered in the order presented:

(1) consider an installment payment plan with interest;

(2) consider a delayed payment schedule with interest (for example, such a schedule might even be contingent upon an increase in sales or some other indicator of improved business); or

(3) consider straight penalty reductions; or

(4) consider other penalties provided for under the SHWMC.

As indicated above, the amount of any downward adjustment of the penalty is dependent on the individual facts of the case regarding the financial capability of the violator and the nature of the violations at issue.

(f) Environment Projects (downward adjustment only): Under certain circumstances the TMBCI/EPA may consider adjusting the penalty amount downward in return for an agreement by the violator to undertake an appropriate environmentally beneficial project. Such a project should not directly benefit the violator or be in response to another order or enforcement action by the Tribe, the State or a Federal agency.

(g) Other Unique Factors: This Policy allows an adjustment for factors which may arise on a case-by-case basis. When developing its settlement position, the TMBCI/EPA should evaluate every penalty with a view toward the potential for protracted litigation and attempt to ascertain the maximum civil penalty the tribal court is likely to award if the case, considering, for example, the probability of proving violations, the probability that the Tribe's legal arguments will be accepted, the opportunities which exist to establish a useful precedent or send a signal to the regulated community, the availability and potential effectiveness of the Tribe's evidence, including witnesses, and the potential strength of the violator's equitable and legal defenses. Where the TMBCI/EPA determines that significant litigative risks exist, it may also take into account any disproportionate resource outlay involved in litigating a case that it might avoid by entering into a settlement. Downward adjustments of the proposed penalty for settlement purposes may be warranted depending on the TMBCI/EPA assessment of these litigation considerations. The extent of the adjustments will depend, of course, on the specific litigation considerations presented in any particular case.

In addition to litigation risks, enforcement personnel can consider, for the purposes of an expedited settlement, the cooperation of the person or party throughout the compliance evaluation and enforcement process. Enforcement personnel may reduce the gravity-based portion of the penalty by as much as 10% considering the degree of cooperation and preparedness during the inspection, provision of access to records, responsiveness and expeditious provision of supporting documentation requested by the process. In addition to creating an incentive for cooperative behavior during the activities listed above, this adjustment factor further reinforces the concept that respondents face a significant risk of higher penalties in litigation than in settlement. This adjustment factor should only be considered in settlements agreed to in principle by the parties before the filing of the prehearing exchange of information.

It is important to note the difference between a penalty adjustment for cooperative attitude and for good faith efforts to comply. While self- reporting and correction of violations qualify as good faith efforts, the cooperation and attitude of the violator throughout the investigation and enforcement process should be the focus under this factor. For example, a violator may qualify for the adjustment if it voluntarily provides information prior to the TMBCI/EPA use of investigative tools such as information request well in advance of the due date and otherwise cooperates fully, a downward adjustment may be appropriate. By contrast, this factor should not be applied to those cases where the violator indicates an interest in settlement and enters into negotiations but does not demonstrate other indications of cooperation. Generally, this adjustment factor should apply to those violators who demonstrates and maintain a high degree of willingness to work with the TMBCI/EPA regarding the investigation and resolution of violations.