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Recycling, Inc. v. Commissioner of Energy and Environmental Protection

Court of Appeals of Connecticut

January 9, 2018

RECYCLING, INC.
v.
COMMISSIONER OF ENERGY AND ENVIRONMENTAL PROTECTION

          Argued October 10, 2017

          Alan M. Kosloff, for the appellant (plaintiff).

          David H. Wrinn, assistant attorney general, with whom, on the brief, were George Jepsen, attorney general, and Kirsten S. P. Rigney, assistant attorney general, for the appellee (defendant).

          David A. Slossberg, with whom was Amy E. Sou-chuns, for the appellee (intervenor city of Milford).

          Alvord, Keller and Pellegrino, Js.

          OPINION

          ALVORD, J.

         The plaintiff, Recycling, Inc. (RCI), appeals from the judgment of the trial court dismissing its administrative appeal from the decision of the defendant[1] Commissioner of Energy and Environmental Protection (commissioner), [2] denying its application for an individual permit to construct and operate a volume reduction facility (individual permit) and revoking its general permit to construct and operate certain recycling facilities (general permit). On appeal, RCI claims that the trial court erred in dismissing its appeal because: (1) the denial and revocation was not warranted under the circumstances of this case; (2) the hearing officer violated its rights to a fair hearing by applying an erroneous standard of review; (3) the hearing officer erroneously excluded relevant evidence; and (4) the commissioner engaged in improper conduct during the proceedings. We affirm the judgment of the trial court.[3]

         The following facts and procedural history are relevant to RCI's appeal. In 2008, RCI held a general permit registration to operate a limited recycling facility at 990 Naugatuck Avenue in Milford. In February of that year, RCI submitted an application to the Connecticut Department of Energy and Environmental Protection (department or DEEP) for an individual permit, which would allow RCI to increase the volume and breadth of its recycling operations. At the time, RCI was purportedly owned by Darlene Chapdelaine. Chapdelaine corresponded with the department on numerous occasions regarding the application for an individual permit, and represented herself as the sole owner of RCI. On February 10, 2012, nearly four years after RCI submitted its application, the department issued a tentative determination to approve RCI's application for an individual permit.

         In April, 2012, before the department had made a final determination on the individual permit application, department staff learned of a lawsuit between Chapdelaine and Gus Curcio, Sr. over ownership of RCI. The pleadings in that lawsuit alleged that Curcio disguised his true ownership of RCI from the department to keep his past criminal convictions from tainting the permitting process. Documents attached to the complaint undermined RCI's representations to the department that Chapdelaine was the sole owner of RCI. On October 23, 2012, the court rendered judgment concluding that Curcio was the beneficial owner of 100 percent of RCI.

         Consequently, in November, 2012, the department issued a tentative determination to withdraw its approval and deny RCI's application for an individual permit. The department also notified RCI that it intended to revoke its general permit registration. The department explained that the basis for its denial and revocation was RCI's failure to disclose Curcio's extensive ownership interests and its false or misleading representations as to the control of RCI. On January 24, 2013, the department issued a revised and amended notice of intent to revoke RCI's general permit registration, adding, as a basis for revocation, RCI's and Curcio's inability or unwillingness to comply with permit requirements. The notice also relied on a June 11, 2012 notice of violation (NOV) issued to RCI by the department.

         On February 27, 2013, the department provided RCI with a compliance conference in accordance with General Statutes § 4-182 (c), [4] at which it was afforded the opportunity to demonstrate to department staff that it had met all of the requirements for lawful retention of its general permit. On May 17, 2013, the department notified RCI that it had not changed its position as a result of the compliance conference and that justification remained to deny RCI's application for an individual permit and revoke its general permit registration.

         On November 12, 2013, a five day hearing commenced before a department hearing officer.[5] On August 25, 2014, the hearing officer issued a proposed final decision concluding that RCI had submitted false, incomplete, and incorrect information regarding its ownership and control in its application to the department for an individual permit, and that it had demonstrated a pattern or practice of inability or unwillingness to comply with the department's permit requirements. The hearing officer found, inter alia, that Curcio tightly controlled RCI's financing, expenditures, and daily operations. In the proposed final decision, the hearing officer recommended that the department deny RCI's application for an individual permit and revoke RCI's general permit registration.

         RCI subsequently raised exceptions to the proposed final decision. On November 12, 2014, Deputy Commissioner Susan K. Whalen[6] heard argument on the exceptions. On February 5, 2015, the deputy commissioner adopted the proposed final decision and denied RCI's individual permit application and revoked its general permit registration.

         In March, 2015, RCI appealed to the Superior Court, challenging the department's decision. The trial court heard oral argument on January 7, 2016. On January 20, the court dismissed the appeal. This appeal followed.

         I

         RCI first claims that the court erred in upholding the deputy commissioner's decision because the department's denial of its application and revocation of its general permit registration was ‘‘arbitrary and capricious and an abuse of discretion . . . .'' Specifically, it argues that department ‘‘[s]taff failed to demonstrate a pattern or practice of noncompliance sufficient to warrant revocation of the general permit or denial of the individual permit, '' and ‘‘[e]ven if RCI's compliance history demonstrated a pattern of noncompliance, revocation and denial is not warranted.'' We disagree.

         The following additional facts, which are based on the hearing officer's findings, are relevant to this claim. The hearing officer concluded that RCI provided false and incomplete information regarding its ownership in violation of section 6 of the general permit, [7] which demonstrated a pattern or practice of noncompliance with the terms and conditions of the general permit. James Barrett, who was nominated by Curcio as RCI's first president in 2008, testified that he owned all of RCI's stock at the time of the general permit application. That application requires, in relevant part, that the applicant or permittee (1) identify the owner and operator of the facility; (2) sign the application certifying that it is ‘‘true, accurate and complete''; and (3) report any changes in information provided. Barrett testified that he did not remember signing the general permit application. The signature on the registration certificate of the application read ‘‘Barret, '' with one ‘‘t'' rather than two. Additionally, a letter concerning RCI's use of its property for recycling operations accompanied the application. The letter purported to be from and signed by Barrett, but Barrett testified that he did not write or sign the letter. Barrett testified that the signature on the application was not his, and that he did not know who signed the letter in his name.[8]

         As the hearing officer found, ‘‘Curcio considered himself to be the owner of RCI and controlled RCI through Barrett.'' Barrett's testimony supported this conclusion. He testified, in relevant part, that: (1) he did not know where the books and records for RCI were kept and maintained; (2) he could not recall signing more than one check on behalf of RCI; (3) checks were ‘‘signed'' by a rubber stamp of his signature, which he thought was kept by Chapdelaine; (4) he knew that Curcio was ‘‘financing the [department] application process, '' but did not know whether he was the sole source of money; (5) he was unaware of whether RCI paid any taxes while he was president; (6) he was unaware of whether operations were ongoing at the 900 Naugatuck site; and (7) when he filed for bankruptcy in December, 2008, he did not list RCI as a business in which he was an officer or director or in which he owned 5 percent or more of the voting securities within the past six years.

         In October, 2009, Chapdelaine replaced Barrett as the president of RCI. Despite the requirement that a registrant or permittee report any changes provided on the general permit application to the department, RCI did not correct the registration information as required until February, 2010, when Chapdelaine signed the registration renewal application as president of RCI. Despite Chapdelaine's representations to the department that she owned and controlled the operations of RCI, the hearing officer found that ‘‘Chapdelaine's claim that she [was] the owner of RCI and the exclusive holder of 100 percent of RCI's stock is not supported by the record and the logical conclusions that can be drawn from it.'' She based this conclusion, in relevant part, on the facts that: (1) there was no evidence that shares of RCI's stock were registered in Chapdelaine's name; (2) Chapdelaine executed a document shortly after her nomination as president providing that she is the owner of record of RCI ‘‘ ‘in name only' '' and referencing other documents that show that she could be dispossessed of this ownership at any time by Curcio; (3) a shareholder's agreement signed by Chapdelaine in 2011 explicitly stated that she owned 10 percent or ten shares of RCI's stock and was required to offer it to RCI and the other stockholders before selling them to a third party; and (4) evidence received regarding the 2012 litigation between Curcio and Chapdelaine over the control of RCI revealed that Curcio nominated Chapdelaine to be the sole officer and director of RCI to facilitate the filing of RCI's permit application. The hearing officer further found that ‘‘[Chapdelaine] was not able to independently operate RCI. She did not decide how RCI would spend its money. She even lacked the power to maintain her own position with RCI; the ‘beneficial paperwork' she signed could cause her to be removed from RCI at any time.''

         The hearing officer concluded that Curcio controlled the major decisions of RCI. Curcio directed that RCI be formed, negotiated the purchase of the business' property, decided to open a recycling facility at the property, nominated RCI's presidents, and controlled RCI with and through them. In his civil action against Chapdelaine, Curcio set out to prove his ownership and control of RCI. A copy of Curcio's sworn complaint was admitted into evidence at the hearing, along with a transcript of the trial in that case. On the basis of this evidence, the hearing officer found that Curcio ‘‘nominated Chapdelaine to be the sole officer and director of RCI for the purpose of facilitating the filing of RCI's permit application. She has, at all times, been required and directed to operate the business of the corporation at his direction and with his express approval.'' During the hearing, Curcio ‘‘tried to repudiate his prior sworn statements that he owned or was the owner of RCI, even when they were read to him during this proceeding, through evasive or vague answers to questions or outright denials of his prior statements.'' Curcio claimed that he was always the ‘‘beneficial owner'' of RCI, with Barrett and Chapdelaine acting as his ‘‘nominees.''

         The hearing officer also found that RCI misrepresented or omitted pertinent information from its application for an individual permit. The individual permit application requires that a corporation identify its owners, operator, officers, directors, and certain shareholders. The application must include agreements between all parties involved in the project for ownership and control of the facility. It also must include information that illustrates the relationship between parties involved in the ownership and control of the facility. The department expects an application to list all shareholders holding 20 percent or more of a corporation's stock, including stockholders holding stock only as a nominee for another person or entity or someone holding a beneficial interest in the stock. The application also requires an applicant to include all sources of funding and mortgages.

         Despite these requirements, RCI's application for an individual permit did not disclose Curcio's involvement with RCI. Curcio, who testified that he ‘‘chose to stay as a beneficial owner'' and did not want his name associated with the application, was not listed on the application. Curcio was not listed as having an ownership interest in RCI, being closely involved with its operations, nor being its sole source of funds. Additionally, neither the ‘‘ ‘beneficial paperwork' '' that Chapdelaine signed, allowing her to be removed from RCI at any time, or the shareholder agreement that stated she owned 10 percent of RCI stock, was disclosed on the application.

         On the basis of this evidence, the hearing officer recommended that RCI's general permit registration be revoked because (1) RCI failed to disclose who owned and controlled the company, in violation of section 6 of the general permit; (2) the certifying signature was false, in violation of § 22a-3a-5 (a) (2) of the Regulations of Connecticut State Agencies;[9] and (3) RCI demonstrated a ‘‘pattern or practice of noncompliance which demonstrates the applicant's unwillingness or inability to achieve and maintain compliance with the terms and conditions of the permit, ''[10] as evidenced by its consistent failure to submit required quarterly reports on time or at all, and accurately or completely, [11] as well as the misrepresentations in its permit application and submittal of false, incomplete, and inaccurate information.

         Citing regulations that permit the commissioner to revoke a permit or deny an application where misrepresentations by the applicant are discovered, the hearing officer further recommended that RCI's application for the individual permit be denied because RCI (1) misrepresented[12] its stock ownership interests on its application; (2) misrepresented information as to who owns and controls RCI on its application; and (3) did not provide complete or accurate information about its finances or funding sources. As noted, the deputy commissioner adopted the proposed final decision and denied RCI's individual permit application and revoked its general permit registration. The trial court, in dis- missing RCI's appeal, concluded that it failed to disclose to the department ‘‘all required information.''[13]

         We begin with the applicable standard of review and principles of law that guide our analysis. ‘‘[J]udicial review of an administrative agency's action is governed by the Uniform Administrative Procedure Act (UAPA), General Statutes § 4-166 et seq., and the scope of that review is limited. . . . When reviewing the trial court's decision, we seek to determine whether it comports with the [UAPA]. . . . [R]eview of an administrative agency decision requires a court to determine whether there is substantial evidence in the administrative record to support the agency's findings of basic fact and whether the conclusions drawn from those facts are reasonable. . . . Neither this court nor the trial court may retry the case or substitute its own judgment for that of the administrative agency on the weight of the evidence or questions of fact. . . . Conclusions of law reached by the administrative agency must stand if . . . they resulted from a correct application of the law to the facts found and could reasonably and logically follow from such facts. . . . The court's ultimate duty is only to decide whether, in light of the evidence, the [agency] has acted unreasonably, arbitrarily, illegally, or in abuse of [its] discretion.'' (Internal quotation marks omitted.) AFSCME, AFL-CIO, Council 4, Local 2405 v. Norwalk, 156 Conn.App. 79, 85-86, 113 A.3d 430 (2015).

         General Statutes § 22a-6m (a) provides in relevant part: ‘‘In exercising any authority to issue, renew, transfer, modify or revoke any permit, registration, certificate or other license under any of the provisions of this title, the Commissioner of Energy and Environmental Protection may consider the record of the applicant for, or holder of, such permit, registration, certificate or other license, the principals, and any parent company or subsidiary, of the applicant or holder, regarding compliance with environmental protection laws of this state, all other states and the federal government. If the commissioner finds that such record evidences a pattern or practice of noncompliance which demonstrates the applicant's unwillingness or inability to achieve and maintain compliance with the terms and conditions of the permit, registration, certificate or other license for which application is being made, or which is held, the commissioner, in accordance with the procedures for exercising any such authority under this title, may . . . deny any application for the issuance, renewal, modification or transfer of any such permit, registration, certificate or other license, or . . . revoke any such permit, registration, certificate or other license.'' Additionally, the department's rules of practice[14] provide, in relevant part, that the commissioner may revoke, suspend, or modify a license if ‘‘[t]he licensee or a person on his behalf failed to disclose all relevant and material facts in the application for the license or during any Department proceeding associated with the application . . . .'' Regs., Conn. State Agencies § 22a-3a-5 (d) (2) (B).

         A

         RCI first contends that ‘‘staff failed to demonstrate a pattern or practice of noncompliance, '' pursuant to § 22a-6m (a), ‘‘to warrant revocation of the general permit or denial of the individual permit.'' We disagree.

         ‘‘The substantial evidence rule governs judicial review of administrative fact-finding under the UAPA. . . . An administrative finding is supported by substantial evidence if the record affords a substantial basis of fact from which the fact in issue can be reasonably inferred. . . . The substantial evidence rule imposes an important limitation on the power of the courts to overturn a decision of an administrative agency . . . and to provide a more restrictive standard of review than standards embodying review of weight of the evidence or clearly erroneous action. . . . The United States Supreme Court, in defining substantial evidence in the directed verdict formulation, has said that it is something less than the weight of the evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence.'' (Citations omitted; internal quotation marks omitted.) Dolgner v. Alander, 237 Conn. 272, 281, 676 A.2d 865 (1996).

         We conclude that there is substantial evidence in the record to support the hearing officer's finding of a pattern or practice of noncompliance that demonstrates RCI's unwillingness or inability to achieve and maintain compliance with the terms and conditions of the permit. The record revealed that, over a period of five years, RCI made numerous material omissions in its representations to the department, in violation of department regulations that require disclosure of all relevant and material facts; see Regs., Conn. State Agencies § 22a-3a-5 (d) (2) (B) and (C); as well as general permit requirements that prohibit providing incomplete information. See footnote 6 of this opinion. The record supports the hearing officer's finding that Curcio, through Barrett and Chapdelaine, controlled RCI. Barrett's testimony revealed that he was not involved in, nor familiar with, RCI's operations. RCI's application for the general permit was signed by a ‘‘James Barret, '' and Barrett testified that he did not remember signing the application or the letter that accompanied the application. Although Chapdelaine was involved with RCI's operations, ample evidence, such as the document, signed by Chapdelaine, that proclaimed her the owner of RCI ‘‘in name only, '' and evidence regarding the 2012 litigation between Curcio and her, supports the conclusion that Curcio ultimately controlled RCI's operations.

         Applications for both a general and individual permit require the applicant to disclose information about the owners and operators of RCI. Despite these requirements, RCI's application for the individual permit did not disclose Curcio's relationship to RCI. RCI did not disclose that Curcio was involved in the formation, operations, and financing of RCI. RCI did not disclose the ‘‘beneficial documents'' that would allow Curcio to divest Chapdelaine of control of RCI at any time. Furthermore, evidence of the allegations in the civil suit between Curcio and Chapdelaine suggested a conscious effort to deceive the department throughout the permitting process.

         Plainly, we cannot say that there is not substantial evidence in the record to support the hearing officer's finding that RCI demonstrated a pattern or practice of noncompliance[15] to warrant revocation of its general permit registration and denial of its application for an individual permit. This court may not ‘‘retry the case or substitute its own judgment for that of the administrative agency on the weight of the evidence or questions of ...


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