it acted in good faith and therefore that any penalty assessed should take this factor into consideration. Respondent further argues that, if a penalty is imposed, I should reduce it to a "minimal amount" in accordance with FIFRA Section 14(a)(4), which directs me to consider, inter alia, "the effect [of a civil penalty] on the person's ability to continue in business * Respondent claims that the company is under severe financial stress and that the proposed penalty will jeopardize its ability to remain in operation. Pursuant to FIFRA and its implementing regulations, I am exercising my discretion to decrease the recommended civil penalty from $30,000 to $1,200.8 In accordance with the civil penalty guidelines, complainant did not consider respondent's financial condition at the time it issued its complaint.9 The guidelines further provide that after a complaint has been issued, the complainant may reduce the amount of a proposed penalty "insofar as is necessary to permit the person charge to continue in business." 10 Such an adjustment may be made at respondent's request and shall be based on “a showing by respondent that the proposed penalty will have a significant adverse effect upon his ability to continue in business." 11 Respondent requested that the penalty be reduced to $1,200, and submitted certified financial statements in support of its request. However, complainant refused to make any reduction in the penalty. 12 After a hearing, the presiding officer upheld the full penalty assessment, stating that: [Elven if Respondent demonstrates that paying of 8 Agency regulations give me the discretion to increase or decrease a civil penalty recommended by the presiding officer after an adjudicatory hearing. 40 C.F.R. § 22.31(a). 9 Testimony of Judith Sturgess, Case Preparation and Technical Assistance Chief, Region VII (Tr. at 25). The guidelines provide that "[i]t shall be presumed initially that assessment of a civil penalty will not affect the ability of the person charged to continue in business." 30 Fed. Reg. at 27712. 10 39 Fed. Reg. at 27712. 11Id. The guidelines provide that the complainant shall determine the anticipated adverse effect of the proposed penalty "only upon an analysis by complainant of certified financial records of all business operations of respondent 12 Tr. at 27-30. onstrated that the payment of the proposed penalty Initial Decision at p. 6. He said that the guidelines do not require the elimination of a penalty merely because it would cause an adverse financial impact. Id. at 7.13 Respondent appealed, claiming that the Presiding Officer "appears to have given no weight" to the evidence it submitted as to its financial condition, and in particular, to evidence that it would be required to obtain a loan to pay "a penalty of this magnitude." Respondent's Brief on Appeal at p. 5. EPA regulations impose the burden of persuasion on the complainant in a civil penalty proceeding, both with regard to the occurrence of the violation and the magnitude of the penalty. They provide that: The complainant has the burden of * 40 C.F.R. §22.24. The regulation does not specify the criteria by which the presiding officer shall evaluate the appropriateness of a penalty. However, FIFRA Section 14(a)(4) expressly provides that one element that the Agency shall take into account in determining whether a penalty is appropriate is the anticipated effect on the respondent's ability to continue in business. I do not interpret Section 14(a)(4) as imposing a burden on the complainant of proving that the respondent will be able to remain in business notwithstanding the penalty.14 However, the statute and regulations do require the complainant to convince me that the proposed penalty is reasonable, 13 Although the guidelines are not binding on the presiding officer, Agency regulations require that he "consider" them in determining the amount of a recommended penalty. 40 C.F.R. § 22.31(a), 33.35(c). 14 In upholding the proposed penalty, the presiding officer stated that "Respondent has not demonstrated that the payment of the proposed penalty would put it out of business." Initial Decision at p. 6. The presiding officer's imposition of the burden of persuasion on this issue on the respondent rather than the complainant is inconsistent with 40 C.F.R. §22.24. Moreover, I do not think that the statutory test of the appropriateness of a proposed penalty is whether or not it will cause respondent to "close its doors." Initial Decision at p. 7. Rather, as the guidelines state, the test is whether the proposed penalty will have "a significant adverse effect upon his ability to continue in business." 39 Fed. Reg. at 27712. (Emphasis added.) taking into account any evidence in the record of its likely financial impact on the respondent. 15 I have concluded that the complainant has not satisfied its burden of persuasion. Respondent has provided certified financial statements to support its contention that its financial situation is precarious and that a $30,000 penalty would impair its ability to remain in business. Those statements reveal: -net losses of $163,123 in FY83 and $341,000 in -a negative net worth of $68,241 in FY84 (Respond- -the termination of its pension plan in FY83 be- -no contributions to its profit sharing plan in FY83 or FY84 (Respondent's Exhibit 4 at p. 11; Tr. at 57). Additionally, respondent's manager testified that "business has decreased drastically ***"; that "there have been no profits" in the last three years; that the situation has become "steadily worse"; and that consideration has been given to closing the operation" (Tr. at 15 The allocation of the initial burden of going forward with evidence of the likely financial effect of a proposed penalty raises difficult issues. EPA regulations impose the burden of going forward with evidence of the appropriateness of a penalty on the complainant. Moreover, the Ninth Circuit Court of Appeals has held in several cases arising under statutes similar to FIFRA that the complainant has the burden of producing evidence on the financial impact of a proposed civil penalty. See, e.g., Bosma v. U.S. Department of Agriculture, 754 F.2d 804 (8th Cir. 1985). However, imposing this burden on a complainant is inconsistent with the customary evidentiary rule that the party to an adjudicatory proceeding who is in possession of the facts has the responsibility to produce them. McCormick, Evidence § 337 (Cleary rev. 1984); 9 Wigmore, Evidence §2486 (Chadbourn rev. 1981). Moreover, EPA's civil penalty guidelines expressly provide that "[t]he burden of providing the information supporting the contention that the proposed penalty will have such adverse effect rests upon respondent." 39 Fed. Reg. at 27712. It is unclear whether we would follow the Bosma case in cases arising under FIFRA. However, that issue need not be resolved here since the record contains sufficient evidence on the financial status of the respondent to enable me to reach a decision. Once the respondent has presented his case, it is no longer relevant whether complainant established a prima facie case. See U.S. Postal Service Board of Governors v. Aikens, 460 U.S. 711 (1983). 43). He added that Kay Dee Feed's loan limit with the bank was already overextended to such an extent that the bank had asked him to consider closing Kay Dee Feed (Tr. at 56). He said that it would be necessary to borrow funds to pay a civil penalty (Tr. at 55-56). The Region has not contradicted respondent's financial data, either by means of cross-examination or by furnishing data of its own. A Regional employee testified that the Region "took into account the financial statement that was made available to us" (Tr. at 30). However, the record contains no analysis of the complainant's financial statements by Regional personnel. Thus, we have no basis for determining whether the Region disbelieved complainant's testimony or concluded that other factors bearing on the appropriateness of a civil penalty outweighed it. Looking at the record as a whole, I am persuaded that respondent is under severe financial stress; that a civil penalty of $30,000 would create a substantial risk that it could no longer continue in business; and therefore, that a reduction in the proposed penalty is appropriate. Since the Region has not refuted Complainant's financial data, and I am aware of no basis for rejecting it, I am reducing the penalty to $1,200, the amount proposed by respondent. I have reservations about whether respondent is truly unable to pay any penalty other than a relatively nominal one, particularly in light of its expenditure of nearly $800,000 per year for employee salaries. Moreover, as the guidelines recognize, the violation of a FIFRA cancellation order is one of the most serious statutory violations. However, complainant bears the burden of persuasion that the proposed penalty is appropriate and has failed to satisfy it.16 III. CONCLUSION A civil penalty of $1,200 is assessed against respondent Kay Dee Veterinary, Division of Kay Dee Feed Company, pursuant to 16 Respondent also claims that complainant did not offer evidence on, and that the presiding officer did not consider, each of the seven components of the "gravity" of a violation. Respondent's Brief at p. 4. Respondent did not explain whether it regards these alleged errors as a complete defense against the imposition of a penalty or a basis for reducing it. EPA was not required to introduce evidence on the seven gravity factors at the adjudicatory hearing. The guidelines classify each violation of FIFRA "by the risk that each violation poses to man and the environment, i.e., by the gravity of each violation * "39 Fed. Reg. 27711. Therefore, EPA need only offer evidence that particular violation occurred; further evidence of gravity is unnecessary. FIFRA Section 14(a)(4), for selling pesticides subsequent to a cancellation order in violation of FIFRA § 12(a)(3)(K). Payment shall be made within sixty days of this final order, or as otherwise agreed to by the parties. A cashier's or certified check for the full amount of the penalty, made payable to the Treasurer, United States of America, shall be sent to the Regional Hearing Clerk, EPA Region VII, P.O. Box 360748M, Pittsburgh, PA 15251. So ordered. |