In the
United States Court of Appeals
For the Seventh Circuit
No. 09-4008
S IERRA C LUB,
Plaintiff-Appellee,
v.
K HANJEE H OLDING (US) INCORPORATED ,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Illinois.
No. 4:05-cv-04095— J. Phil Gilbert, Judge.
A RGUED D ECEMBER 14, 2010—D ECIDED A UGUST 24, 2011
Before B AUER, R IPPLE, and W ILLIAMS, Circuit Judges.
W ILLIAMS, Circuit Judge. This matter comes to us as a
successive appeal. The original defendants wanted to
build a power plant in southern Illinois. In the first
appeal, we concluded that the defendants’ Prevention of
Significant Deterioration (“PSD”) permit, which they
needed in order to build the power plant, see 42 U.S.C.
§ 7475(a), had expired. We therefore held that it was
2 No. 09-4008
proper for the district court to grant summary judgment
in favor of plaintiff Sierra Club and to enjoin the defen-
dants from engaging in further construction activities
until they obtained a new permit.
After our ruling, the district court assessed a penalty
of $100,000 on all of the defendants, jointly and severally,
and awarded attorneys’ fees to Sierra Club. Defendant
Khanjee Holding appeals that decision.
In this appeal, Khanjee contends that the district court
lacked subject matter jurisdiction. But we already deter-
mined in the previous appeal that the district court
had subject matter jurisdiction, and there is no reason
to revisit that ruling.
Khanjee also argues that the district court assessed
penalties and fees in violation of Khanjee’s constitutional
rights. We find, however, that Khanjee waived its con-
stitutional arguments by not raising them before the
district court.
Lastly, Khanjee contends that the district court commit-
ted error when it weighed the requisite statutory fac-
tors. But we conclude that the district court did not abuse
its discretion. The court considered all of the relevant
statutory factors and did not make any clearly erroneous
findings of fact in assessing a penalty and awarding fees.
We affirm.
No. 09-4008 3
I. BACKGROUND
Franklin County Power (“FCP”), EnviroPower1 , and
Khanjee are experienced developers of electric power
plants in the United States and in other countries, having
successfully built about a dozen plants currently in opera-
tion. All three participated in the first appeal, but only
Khanjee is a party to this appeal.
In 2000, FCP applied to the Illinois Environmental
Protection Agency (“Illinois EPA”) for a PSD permit in
order to build a coal power plant in southern Illinois. In
2001, the Illinois EPA issued the permit, which would
become invalid if construction was not commenced
within 18 months after receipt of approval, was discon-
tinued for a period of 18 months or more, or was not
commenced within a reasonable time.
In mid-2002, Khanjee began to serve as the lead devel-
oper for the project. Excavation on the site began in
early 2003, but was abandoned shortly after due to an
unrelated dispute. In March 2003, Khanjee and
EnviroPower entered into a Development and Purchase
Agreement, and in August of that year, Khanjee issued
an offering memorandum seeking financial support for
the project.
In the meantime, FCP’s landlord had the site refilled
because FCP did not make a payment on its lease. In
1
FCP is a wholly owned subsidiary of EnviroPower. The
two entities share the same chief executive officer, Mr. Frank
Rotondi.
4 No. 09-4008
September 2004, an investigator from the Illinois EPA
visited the site and found that construction had com-
menced, but on November 19, 2004, the Illinois EPA
notified FCP that it had “made a preliminary finding” that
the PSD permit had expired.
On May 20, 2005, Sierra Club filed suit, alleging that the
defendants’ PSD permit had expired. Khanjee filed a
motion to dismiss arguing that it was not a real party in
interest in the lawsuit because it was not a party to the
permit at issue and was a separate corporate entity
from FCP and EnviroPower. The district court found
that Sierra Club had alleged enough to state a claim
against Khanjee, and added, “Whether the allegations
of the underlying Clean Air Act violation prove true
and whether the corporate relationship between
Khanjee and the other defendants is sufficient to war-
rant imposing liability on Khanjee are matters to be
determined later in the case.”
Sierra Club filed a motion for summary judgment
against all defendants and requested an injunction to
prevent construction of the plant until the defendants
obtained a new PSD permit. The defendants, including
Khanjee, filed a joint response and countered with their
own motion for summary judgment. The defendants
also filed a second motion to dismiss arguing that
Sierra Club lacked standing to sue. Khanjee did not
renew the arguments it made in its first motion to
dismiss in any of these filings.
The district court granted Sierra Club’s motion for
summary judgment and enjoined further construction of
No. 09-4008 5
the power plant. The court also denied the defendants’
motions. The defendants appealed, and the court stayed
the case pending resolution of the appeal.
In Sierra Club v. Franklin County Power of Illinois, LLC, 546
F.3d 918 (7th Cir. 2008), (hereafter “Sierra Club I”), we
found that Sierra Club had standing to sue, and that the
defendants had not commenced construction of the
plant within 18 months, causing their PSD permit to
expire. We affirmed the district court’s grant of summary
judgment and of an injunction in favor of Sierra Club.
Back before the district court, Sierra Club moved for
penalties and attorneys’ fees. The court imposed a civil
penalty of $100,000 on all defendants, jointly and severally,
under 42 U.S.C. § 7604(a). The penalty was to be paid to
various local chapters of the non-profit organization
Habitat for Humanity. The court also awarded Sierra
Club $375,985.70 in attorneys’ fees and costs. Khanjee
appeals the imposition of penalties and fees.
II. ANALYSIS
A. Subject Matter Jurisdiction
Khanjee argues that the district court lacked subject
matter jurisdiction to impose civil penalties under
§ 7604(a), relying on CleanCOALition v. TXU Power, 536
F.3d 469, 479 (5th Cir. 2008), which held that § 7604(a)(3)
“does not authorize preconstruction citizen suits against
facilities that have either obtained a permit or are in
the process of doing so.” Khanjee contends that § 7604(a)(3)
“cannot be read to penalize intent [to construct a
6 No. 09-4008
power plant] when the relevant parties actually have
a permit.”
We already decided the jurisdictional question in Sierra
Club I. We held that the district court had jurisdiction
because Sierra Club had alleged that the defendants
(including Khanjee) were “in violation of [a] condition
of a [PSD] permit” and § 7604(a)(3) expressly permits
lawsuits against “any person . . . who is alleged . . . to be
in violation of any condition of a [PSD] permit.” Sierra
Club I, 546 F.3d at 928. Moreover, we explained that,
“even if having an expired permit were akin to having
no permit at all, Sierra Club would still be able to sue
under section 7604(a)(3), which enables citizens to sue
entities . . . that ‘propose to construct . . . new or modified
major emitting facilit[ies] without a [PSD] permit.’ ” 2 Id.
at 929.
Matters decided on appeal become the law of a case to
be followed on a second appeal, unless there is plain
error of law in the original decision. Creek v. Vill. of
Westhaven, 144 F.3d 441, 446 (7th Cir. 1998). Khanjee
admits that we already decided the jurisdictional ques-
tion in Sierra Club I, but insists, citing Christianson v. Colt
Industries Operating Corp., 798 F.2d 1051 (7th Cir. 1986),
that our duty to determine subject matter jurisdiction
is not constrained by the law of the case.
2
We also found that Sierra Club could seek an injunction:
“[W]e agree that ‘a plain reading of the statute’ implies ‘that the
[injunctive remedies provision] applies to actions under [sec-
tion 7604](a)(3).’ ” Id. at 935.
No. 09-4008 7
In Christianson, we explained that “there [was] authority
for the proposition that the issue of subject matter juris-
diction is not constrained by law of the case principles,”
citing the District of Columbia Circuit and the Fifth
Circuit. 798 F.2d at 1056 (citing Potomac Passengers Ass’n v.
Chesapeake C & O Ry. Co., 520 F.2d 91, 95 (D.C. Cir. 1975);
Harcon Barge Co. Inc. v. D & G Boat Rentals, Inc., 746 F.2d
278, 283 n.2 (5th Cir. 1984)). Since that decision, both the
District of Columbia Circuit and Fifth Circuit have held
that the law of the case does apply to subject matter
jurisdiction. See Free v. Abbott Labs., Inc., 164 F.3d 270, 272-
73 (5th Cir. 1999) (joining other circuits in refusing to
recognize a jurisdictional exception to the law of the
case doctrine and explaining that although a federal
court must examine each case to determine the basis for
subject matter jurisdiction, “perpetual re-examination of
precisely the same issue of subject matter jurisdiction” is
not required); LaShawn A. v. Barry, 87 F.3d 1389, 1394 (D.C.
Cir. 1996) (en banc) (“[T]his court and other courts of
appeals routinely apply law-of-the-case preclusion to
questions of jurisdiction . . . and do so even when the
first decision regarding jurisdiction is less than explicit.”).
Moreover, in Christianson, we simply relied upon the
established rule that the law of the case does not bar
reconsideration and reversal of “even nonjurisdictional
rulings that are manifestly incorrect.” 798 F.3d at 1057.
Because we found that our previous jurisdictional ruling
was “clearly wrong,” we revised that ruling. Subsequently,
in Christianson v. Colt Industries Operating Corp., 486 U.S.
800, 816 n.5 (1988), in deciding the related question of
whether the law of the case (or law of the circuit) doctrine
8 No. 09-4008
applied when a case was transferred from a coordinate
court, the Supreme Court, answering that question af-
firmatively, noted that “perpetual litigation of any
issue—jurisdictional or nonjurisdictional—delays and
therefore threatens to deny, justice.” That principle
applies with significant force here, since the parties
already vigorously litigated the question of jurisdiction
in their previous appeal. And while Khanjee is correct
that in Shakman v. Dunne, 829 F.2d 1387, 1393 (7th Cir.
1987), we stated that “courts are significantly less con-
strained by the law of the case doctrine with respect to
jurisdictional questions,” we re-examined our jurisdic-
tion in that case because “we [were] confronted with a
significantly different legal landscape than the one that
confronted the district court at the time the complaint
was originally filed . . . .”
Here, there are no “significant differences” in the
legal landscape that warrant re-examination of our juris-
dictional ruling in Sierra Club I. CleanCOALition, cited
by Khanjee, is distinguishable. In that case, the plaintiffs
had challenged the defendants’ PSD permit application.
CleanCOALition, 536 F.3d at 470-71. By the time the
Fifth Circuit issued its decision, the defendants had “not
only applied for a permit, but [had] since successfully
obtained one, though still subject to state judicial review.”
Id. at 479. The court held that § 7604(a)(3) did not
authorize suits against facilities with permits or against
facilities that were “in the process of [obtaining a permit].”
CleanCOALition did not address whether § 7604(a)(3)
authorizes citizen suits against defendants who propose
to construct a facility with an expired permit or who
No. 09-4008 9
violate the terms of a permit by failing to timely com-
mence construction, causing the permit to expire, as
was the case here. Therefore, we see no reason to disturb
our holding in Sierra Club I that subject matter jurisdic-
tion is present. See also In re Memorial Estates, Inc., 950 F.2d
1364, 1367 (7th Cir. 1991) (applying law of the case
to subject matter jurisdiction determination).
B. Constitutional Violation Claims
Khanjee contends that the district court’s imposition of
civil penalties violates the separation of powers doctrine,
the Appointments Clause, and the Excessive Fines
Clause of the Eighth Amendment. But Khanjee did not
develop its separation of powers or Appointments Clause
arguments before the district court,3 and it has therefore
3
The defendants briefly noted in their response to Sierra
Club’s motion for fees that the imposition of fines allegedly
requires constitutional scrutiny, citing to Justice Kennedy’s
concurrence in Friends of the Earth, Inc. v. Laidlaw Envtl. Servs.
(TOC), Inc., 528 U.S. 167, 197 (2000) (Kennedy, J., concurring).
But Justice Kennedy’s concurrence in Laidlaw merely stated
that neither the litigants nor the court of appeals had con-
sidered whether “exactions of public fines by private litigants,
and the delegation of Executive power which might be
inferable from the authorization, are permissible in view of the
responsibilities committed to the Executive by Article II of the
Constitution of the United States.” Id. As a result, Justice
Kennedy believed that “these matters [were] best reserved for
(continued...)
10 No. 09-4008
waived them. Taubenfeld v. Aon Corp, 415 F.3d 597, 599
(7th Cir. 2005).
Only Khanjee’s Excessive Fines argument warrants
additional discussion. Khanjee admits in its reply that “this
is the first time Khanjee has cited the Excessive Fines
Clause,” but states that there “was no clear indication
that the Clause would be relevant until the district court
issued its decision.” There is authority for the proposi-
tion that an Excessive Fines challenge is not ripe “until
the imposition, or immediately impending imposition, of
a challenged punishment or fine.” See Cheffer v. Reno, 55
F.3d 1517, 1523-24 (11th Cir. 1995). However, we are
still unpersuaded by Khanjee’s contention that it could
not have presented its Excessive Fines challenge to the
district court. As Khanjee admits later in its reply, its
argument is that “a fine of any size [against Khanjee] is
excessive.” Khanjee could have, but did not, make that
argument to the district court, in response to Sierra
Club’s motion for civil penalties. At that time, the im-
position of the penalty was “immediately impending,” and
Khanjee’s claim was ripe.
3
(...continued)
a later case.” Id. Here, Khanjee also failed to develop its con-
stitutional arguments before the district court and therefore
waived them. See Kunz v. DeFelice, 538 F.3d 667, 681 (7th
Cir. 2008) (failure to adequately present an issue to the district
court waives the issue on appeal).
No. 09-4008 11
C. Penalties and Fees
Khanjee contends that its relationship to the other
defendants in the first appeal, FCP and EnviroPower, is too
tenuous to warrant imposing penalties and fees on
Khanjee. But Khanjee did not renew this argument on
summary judgment after the district court rejected it in
denying Khanjee’s motion to dismiss. And we already
affirmed the district court’s grant of summary judgment
against all of the defendants in Sierra Club I. See Creek, 144
F.3d at 446 (7th Cir. 1998) (matters decided on appeal
become the law of the case to be followed on a second
appeal unless the prior decision is plainly erroneous).
In any event, even if we were to consider Khanjee’s
contention, it would fail. The citizen suit provision of
the Clean Air Act allows any person to bring an action
“against any person who proposes to construct or con-
structs any new or modified major emitting facility
without a permit.” § 7604(a)(3). Khanjee argues that
liability can only be imposed on owners or operators.
See United Steelworkers of Am. v. Or. Steel Mills, Inc., 322
F.3d 1222, 1229 n.4 (10th Cir. 2003) (“While the citizen
suit provision does not use the words ‘owner or operator,’
the Clean Air Act has been interpreted to impose
‘strict liability upon owners and operators’ of polluting
facilities that violate the Act.”) (citing United States v. B &
W Inv. Props., 38 F.3d 362, 367 (7th Cir. 1994) (discussing
asbestos National Emission Standards for Hazardous
Air Pollutants, which “extends liability beyond nominal
owners of a property to all those who lease, operate,
control, or supervise” a stationary source)). Sierra Club,
12 No. 09-4008
however, contends that § 7604(a)(3) is not restricted to
owners or operators.
We need not resolve the dispute. As the district court
found, the evidence reflects that Khanjee effectively
controlled and led the efforts to build the power plant
after the PSD permit expired in early 2003. Khanjee
began to serve as the lead developer for the plant’s con-
struction in mid 2002. And in March 2003, Khanjee
entered into a Development and Purchase Agreement with
EnviroPower, which provided that, “In consideration of
receiving the Development Funding . . . [EnviroPower]
agrees to cede control over Development of the Projects . . . to
[Khanjee].” (emphasis added). The agreement further
provided for the creation of a Management Committee of
three members nominated by Khanjee, which was “re-
sponsible for . . . assignment and management of man-
power resources, contract negotiations and execution,
funding procedures, budget compliance, status reports,
schedule compliance and development, [and] imple-
mentation and adherence to the Financing Plan.” This
agreement, which gave Khanjee control over the develop-
ment of the plant, belies Khanjee’s claim that it was a
mere financier. The district court also concluded, and
we agree, that Khanjee and the other defendants, who
are all sophisticated parties, had an intimate working
relationship. Khanjee therefore exercised enough control
over the project such that it can be held liable as an
“owner or operator,” even if that were the test, along with
the other defendants. See B & W Inv. Props., 38 F.3d at 367
(finding that because defendant’s name appeared on a
No. 09-4008 13
lease and on several legal papers, there was “no debate”
that defendant exercised control over the parcel at issue
sufficient to bring it within the scope of the “owner or
operator” designation).
1. Penalties
The Clean Air Act authorizes suits against entities who
construct or propose to construct facilities without a
permit. See § 7604(a)(3). When a party prevails under
§ 7604(a)(3), as Sierra Club did here, the district court is
authorized in its discretion to “apply any appropriate
civil penalty.” 4 See § 7604(a) (“The district courts shall
have jurisdiction . . . to apply any appropriate civil penal-
ties (except for actions under paragraph (2) [brought
against the Administrator])”). The penalty can be a fine
for each day defendants violate the Clean Air Act to be
deposited in the United States Treasury. § 7413(e). Alter-
natively, the district court may order a civil penalty of
up to $100,000 to be used for beneficial mitigation
projects that enhance the public health or environment
and are consistent with the Clean Air Act. § 7604(g)(2).
In determining the amount of a civil penalty, the
district court should consider, in addition to such other
factors as justice may require, the size of the violator’s
business, the economic impact of the penalty on the
4
We note that Khanjee and the other defendants argued in their
previous appeal that a civil penalty was the only proper remedy
in this case. See Sierra Club I, 546 F.3d 935-36. We confirmed that
indeed a civil penalty was an appropriate remedy. Id.
14 No. 09-4008
business, the violator’s full compliance history and good
faith efforts to comply, the duration of the violation as
established by any credible evidence, payment by the
violator of penalties previously assessed for the same
violation, the economic benefit of noncompliance, and
the seriousness of the violation. § 7413(e)(1). The district
court’s weighing of the statutory factors is reviewed
for abuse of discretion. B & W Inv. Props., 38 F.3d at 367-68.
Its findings of fact in support of a penalty are reviewed
for clear error. Pound v. Airosol Company, Inc., 498 F.3d
1089, 1094 (10th Cir. 2007).
Courts generally presume that the maximum penalty
under the Clean Air Act should be imposed, and then
consider the factors described in § 7413(e) to determine
what degree of mitigation, if any, is proper. B & W Inv.
Props., 38 F.3d at 368; Pound, 498 F.3d at 1095. The
district court concluded that the maximum penalty it
could award was $41,712,500 for the defendants’ con-
tinued attempts to build the power plant after the PSD
permit expired,5 but imposed a $100,000 penalty under
§ 7604(g)(2) after considering the statutory factors. Specifi-
cally, the court took into account that the defendants
did not profit from the violation and that the de-
fendants had no history of Clean Air Act violations.
Khanjee did not provide the court with evidence of the
size of its business, of its environmental record, or of the
5
Khanjee did not challenge this calculation before the
district court in response to Sierra Club’s motion seeking
penalties. See Kunz, 538 F.3d at 681 (failure to raise an issue
to the district court waives the issue on appeal).
No. 09-4008 15
potential economic impact of the proposed penalty.
However, the court noted that all of the defendants “must
be of some financial heft.” The court also explained
that it was not absolutely clear that the defendants
would not violate the Clean Air Act in the future, and
that a modest penalty was necessary to forestall future
violations.
Khanjee finds fault with the district court’s analysis
because, Khanjee argues, the court erroneously concluded
that Khanjee acted with bad faith and relied on that
conclusion in imposing a penalty. We agree with
Khanjee that in Sierra Club I we rejected Sierra Club’s
contention that the defendants engaged in “willful mis-
conduct” by persisting in their proposal to build the
plant because the defendants were “simply defending
the validity of [their] permit in court.” 546 F.3d 918, 935-36.
But we disagree that the district court disregarded
our findings. Rather, as it was required to do under
§ 7413(e)(1), the court considered as one of many
factors whether the defendants made “good faith efforts
to comply [with the Clean Air Act].” The court found
that they did not, stating that the defendants had contin-
ued their efforts to construct the power plant even after
recognizing that their permit would expire. The court’s
conclusion is not clearly erroneous. The record does not
otherwise reveal that Khanjee made any good faith
efforts to comply with the Clean Air Act once the permit
expired.
Regardless, the Clean Air Act imposes strict liability
from the first day of the offense. See B & W Inv. Props., 38
F.3d at 364. We have, however, expressed discomfort
16 No. 09-4008
with the idea that a penalty may be imposed where a
defendant is unaware of a violation. See id. at 368 (ex-
plaining that it would seem unfair to charge a de-
fendant the maximum penalty permissible per day
“for events totally outside his knowledge,” because the
Clean Air Act’s penalty provisions must out of funda-
mental fairness contain an implied requirement of rea-
sonableness, but finding that the defendant had knowl-
edge of the circumstances surrounding the violation).
In this case, we are not confronted with a defendant
who lacked knowledge of the circumstances sur-
rounding the violation. The district court found that the
evidence reflected an “intimate working relationship
between the defendants . . . regarding the construction
of the Plant,” and that, “[i]t is inconceivable in light of
this evidence that Khanjee was not aware of the PSD
Permit’s expiration in early 2003.” As previously noted,
the evidence reflects that Khanjee exercised significant
control over the project. The court’s finding that Khanjee
was aware of what was happening with the PSD permit
is not clearly erroneous.
The district court considered all of the requisite
factors under § 7413(e)(1). In light of the size of the
project ($600 million) and of the potential maximum
penalty of $ 41.7 million, we agree with the district court
that a relatively small penalty of $100,000, imposed jointly
and severally on all three defendants, was reasonable.6
6
United States v. Cinergy Corp., 623 F.3d 455, 456 (7th Cir. 2010),
which held that the Clean Air Act does not authorize
(continued...)
No. 09-4008 17
2. Fees
The district court has discretion to award costs of
litigation, including reasonable attorneys’ fees, whenever
appropriate in a Clean Air Act case. § 7604(d). An award
is appropriate if the party seeking fees obtained some
success on the merits. See Ruckelshaus v. Sierra Club,
463 U.S. 680, 688 (1983). The court found, and we agree,
that Sierra Club prevailed and performed a public service
by forcing the defendants to stop construction of their
power plant until they have a PSD permit.
Khanjee contends that Sierra Club should not get its
fees because, it argues, fees should not be awarded to
well-funded parties that would bring cases regardless of
an award. But there is no support for this proposition
in the case law. “[Congress], when it called for citi-
zen-suits [to aid enforcement of the Clean Air Act], con-
sidered a fee recovery to be consonant with the public
interest.” Metro. Washington Coal. for Clean Air v. District
of Columbia, 639 F.2d 802, 804 (D.C. Cir. 1981). The attor-
neys’ fees provision allows fees to be awarded to “any
party” because Congress wanted to encourage meritorious
litigation while discouraging frivolous suits. See Natural
Res. Def. Council, Inc. v. E.P.A., 484 F.2d 1331, 1338 n.7
(1st Cir. 1973). And “Congress recognized that public
6
(...continued)
sanctions for conduct that complies with a State Implementa-
tion Plan and that the Environmental Protection Agency has
approved does not help Khanjee because Khanjee’s conduct
here did not comply with the Clean Air Act.
18 No. 09-4008
interest organizations would conduct a great deal of
litigation under the [Clean Air Act].” Id. As we ex-
plained, the district court did not abuse its discretion
in concluding that Sierra Club was successful on the
merits and performed a public service consistent with the
Clean Air Act’s goals. An award of fees was therefore
proper.
Western States Petroleum Ass’n v. E.P.A., 87 F.3d 280 (9th
Cir. 1996), cited by Khanjee, is distinguishable. In that
case, the Ninth Circuit described the party that was
denied fees as “a financially able, nongovernmental party
having no more than its own economic interests at
stake.” Id. at 286. The court also found that the litigation
had not served the public interest. Id. Here, Sierra Club
did not receive any direct financial benefit from the
lawsuit, and it served the public interest. Increased charita-
ble donations are collateral benefits not contemplated
by Western States. That Sierra Club may be a well-funded
organization does not preclude an award of fees. There
is nothing in the Clean Air Act that suggests that fees
can only be awarded to indigent parties.
III. CONCLUSION
The judgment of the district court is A FFIRMED.
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