John P. Vidiksis v. EPA

09-12544Court of Appeals for the Eleventh Circuit28 juil. 2010

Texte intégral

FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
JULY 28, 2010
JOHN LEY
CLERK
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
No. 09-12544
Agency No. TSCA NO. 07-02
JOHN P. VIDIKSIS,
Petitioner,
versus
ENVIRONMENTAL PROTECTION AGENCY,
Respondent.
Petition for Review of a Decision
of the Environmental Appeals Board
(July 28, 2010)
Before EDMONDSON and CARNES, Circuit Judges, and GOLDBERG, Judge.*
* Honorable Richard W. Goldberg, Judge. United States Court of International Trade, sitting by
designation.

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GOLDBERG, Judge:
In 2005, the United States Environmental Protection Agency (“EPA”) filed
an administrative complaint against Petitioner John P. Vidiksis. The complaint
alleged 69 violations of the Toxic Substances Control Act section 409, 15 U.S.C. §
2689; the Residential Lead-Based Paint Hazard Reduction Act of 1992, 42 U.S.C.
§§ 4851-4856; and the federal regulations promulgated thereunder. An
Administrative Law Judge for the EPA (“ALJ”) found Vidiksis liable on each of
the 69 counts and assessed a civil penalty of $97,545. On appeal, the
Environmental Appeals Board (“EAB”) affirmed the decision of the ALJ as to the
liability finding and the penalty amount. Vidiksis has now appealed to this court.
As explained further below, we AFFIRM the EAB’s ruling on liability and on the
penalty amount.
BACKGROUND
Recognizing the dangers of lead-based paint, Congress passed the
Residential Lead-Based Paint Hazard Reduction Act of 1992 (“Lead Hazard Act”).
Pub. L. No. 102-550, Title X, 106 Stat. 3672 (1992) (codified at 42 U.S.C. §§
4851-4856 (2006)). The Lead Hazard Act authorized the EPA to promulgate
regulations regarding the “disclosure of lead-based paint hazards in target housing
which is offered for sale or lease.” Lead Hazard Act § 1018(a); 42 U.S.C. §
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4852d(a)(1). Accordingly, the EPA promulgated the Real Estate Notification and
Disclosure Rule (“Disclosure Rule”) in 1996. Lead; Requirements for Disclosure
of Known Lead-Based Paint and/or Lead-Based Paint Hazards in Housing: Final
Rule, 61 Fed. Reg. 9064 (Mar. 6, 1996) (codified at 40 C.F.R. Pt. 745, Subpart F
and 24 C.F.R. Pt. 35, Subpart A). Under the Disclosure Rule, lessors and sellers
are required to provide lessees and purchasers of “target housing” with certain
information. See 40 C.F.R. §§ 745.107, 745.113. “Target housing” is defined as
“any housing constructed prior to 1978....” 40 C.F.R. § 745.103. The Lead1
Hazard Act provides that a violation of the Disclosure Rule is considered a
prohibited act under section 409 of the Toxic Substances Control Act (“TSCA”).
42 U.S.C. § 4852d(b)(5). Under TSCA, the EPA has the authority to seek civil
penalties for failure to comply with the Disclosure Rule. Id.2
Vidiksis, a resident of Georgia, owns multiple residential properties in3
York, Pennsylvania. The violations on appeal relate to leases entered into for
sixteen of these properties. The leases used by Vidiksis contained the following
It is not disputed that the housing in question was “target housing.”1
42 U.S.C. § 4852d(b)(5) limits the penalty for each violation to $10,000. This was2
increased to $11,000 for any violation occurring after July 28, 1997. 40 C.F.R. § 19.4.
Because Vidiksis is a resident of Georgia, this court has jurisdiction over the dispute3
pursuant to 15 U.S.C. § 2615(a)(3) (2006).
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notice:
Lead Paint Notice. Tenant acknowledges that the leased premises may
have been constructed before 1978, and may contain lead-based paint.
Ingestion of paint particles containing lead may result in lead poisoning
which can cause major health problems, especially in children under 7 years
of age. In the event the Tenant or any family members or guests should
develop lead poisoning, and it is determined that corrective measures are
required to remedy the source of the lead poisoning, the cost of such remedy
shall be at the sole expense of the Tenant. In the event that Tenant is either
unwilling or unable to perform corrective measures, Tenant shall have the
option at the discretion of the Landlord to terminate the lease with a written
30 day notice and providing Landlord with written verification of source of
lead.
The lease documents and disclosures were prepared by professional real
estate agents in Pennsylvania hired by the Petitioner. Accompanying each lease4
was a pamphlet published by the EPA that went into further detail regarding the
dangers of lead poisoning.
The administrative complaint filed by the EPA alleged 30 violations of 40
C.F.R. § 745.113(b)(1)–requiring a “Lead Warning Statement” with language
regarding potential lead paint related health problems. Section 745.113(b)(1)
specifically requires a Lead Warning Statement with the following language:
Housing built before 1978 may contain lead-based paint. Lead from paint,
paint chips, and dust can pose health hazards if not managed properly. Lead
A complaint was also brought against the real estate agents for these transactions. The4
EPA settled the complaint for a civil penalty of $5,000.
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exposure is especially harmful to young children and pregnant women.
Before renting pre–1978 housing, lessors must disclose the presence of
lead-based paint and/or lead-based paint hazards in the dwelling. Lessees
must also receive a federally approved pamphlet on lead poisoning
prevention.
It was found that Vidiksis’s notice did not contain this exact language, and
therefore, violated the regulatory requirement. The penalty assessed in relation to
these violations was $36,264.
The complaint also alleged that 34 transactions utilizing leases with this5
Notice violated 40 C.F.R. § 745.113(b)(2)–requiring “[a] statement by the lessor
disclosing the presence of known lead-based paint and/or lead-based paint hazards
in the target housing being leased or indicating no knowledge of the presence of
lead-based paint and/or lead-based paint hazards.” The ALJ found, and the EAB
confirmed, that Vidiksis’s notice did not effectively disclose his knowledge or
lack of knowledge of lead-based paint. Rather, Vidiksis merely stated that there
may be lead-based paint on the premises. The penalty assessed in relation to these
particular violations totaled $57,024.6
The transactions included each new lease, as well as any time the tenant was informed of5
an increase in rent.
Vidiksis was also found to have violated three additional provisions of the Disclosure6
Rule and was assessed a civil penalty of $4,254 for those violations. Vidiksis does not challenge
those liability findings. He does, however, challenge the total penalty amount, which includes
the penalties imposed for those violations.
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STANDARD OF REVIEW
In reviewing an agency action, the court must set aside any findings or
conclusions if they are “arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law.” 5 U.S.C. § 706(2)(A); Legal Envtl. Assistance
Found. v. EPA, 118 F.3d 1467, 1473 (11th Cir. 1997). In making this
determination, “the court must consider whether the decision was based on a
consideration of the relevant factors and whether there has been a clear error of
judgment.” Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416
(1971).
Additionally, an agency’s interpretation of its own regulations is
“controlling unless plainly erroneous or inconsistent with the regulation.” Sierra
Club v. Johnson, 436 F.3d 1269, 1274 (11th Cir. 2006) (quoting Auer v. Robbins,
519 U.S. 452, 461 (1997)). The interpretation will be upheld “so long as it is
reasonable, that is, so long as the interpretation sensibly conforms to the purpose
and wording of the regulations.” Id. (quoting Legal Envtl. Assistance Found., 276
F.3d at 1262.). This deference is applied “even if [the agency’s] interpretation is
not the best or most natural one by grammatical or other standards.” Id.
Regarding a penalty assessment, an agency’s determination is considered to
be particularly within the agency’s competence. Butz v. Glover Livestock
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Comm’n Co., 411 U.S. 182, 185 (1973); Lowe v. F.D.I.C., 958 F.2d 1526, 1534
n.30 (11th Cir. 1992). “Only if the remedy chosen is unwarranted in law or is
without justification in fact should a court attempt to intervene in the matter.” Am.
Power & Light Co. v. SEC, 329 U.S. 90, 112-13 (1946).
Vidiksis’s challenge to the validity of the regulations themselves is assessed
under the framework established by the Supreme Court in Chevron, USA, Inc. v.
NRDC, Inc., 467 U.S. 837, 842-45 (1984). First, the court considers “whether
Congress has directly spoken to the precise question at issue.” Id. at 842. If so, the
plain terms of the statute must be applied by the agency. Id. at 842-43. If
Congress was ambiguous in its statement, the court must determine whether the
agency based its interpretation “on a permissible construction of the statute.” Id. at
843. The resulting regulations promulgated by an agency “are given controlling
weight unless they are arbitrary, capricious, or manifestly contrary to the statute.”
Id. at 844. In making this determination, “[t]he court need not conclude that the
agency construction was the only one it permissibly could have adopted to uphold
the construction, or even the reading the court would have reached if the question
initially had arisen in a judicial proceeding.” Id. at 843 n.11.
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DISCUSSION
I. Challenge to the Validity of the Regulations
As a preliminary matter, Vidiksis challenges the regulations at issue
promulgated by the EPA, 40 C.F.R. §§ 745.113(b)(1) and (2), as arbitrary and7
capricious. He claims that Congress’s statutory mandates were not ambiguous,
and that the agency failed to follow the plain language of the statute in creating the
regulations at issue. He states that the purpose of the Lead Hazard Act was to
disclose the existence of lead-based paint and to warn of the dangers of that paint.
See 42 U.S.C. § 4852d. According to the argument, the regulations promulgated
by the EPA did not fulfill this purpose. The EPA responds by arguing that
Vidiksis is not permitted to make this argument because it has been either time-
40 C.F.R. § 745.113(b) reads:7
(b) Lessor requirements. Each contract to lease target housing shall include, as an attachment or
within the contract, the following elements, in the language of the contract (e.g., English,
Spanish):
(1) A Lead Warning Statement with the following language:
Housing built before 1978 may contain lead-based paint. Lead from paint, paint
chips, and dust can pose health hazards if not managed properly. Lead exposure is
especially harmful to young children and pregnant women. Before renting
pre–1978 housing, lessors must disclose the presence of lead-based paint and/or
lead-based paint hazards in the dwelling. Lessees must also receive a federally
approved pamphlet on lead poisoning prevention.
(2) A statement by the lessor disclosing the presence of known lead-based paint and/or
lead-based paint hazards in the target housing being leased or indicating no knowledge of
the presence of lead-based paint and/or lead-based paint hazards. The lessor shall also
disclose any additional information available concerning the known lead-based paint
and/or lead-based paint hazards, such as the basis for the determination that lead-based
paint and/or lead-based paint hazards exist, the location of the lead-based paint and/or
lead-based paint hazards, and the condition of the painted surfaces.
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barred or waived. The EPA attempts to portray the regulations as a rule
promulgated under the TSCA, which limits challenges to regulations to be brought
“not later than 60 days after the date of promulgation.” 15 U.S.C. § 2618(a)(1)(A).
As an alternative, the EPA claims that the six-year statute of limitations under the
Federal Tort Claims Act applies. See 28 U.S.C. § 2401(a). The EPA also believes
that the challenge to the regulations is waived because Vidiksis did not raise the
argument in the administrative proceedings below.
Even should Vidiksis’s challenge to the regulations be permitted at this
time, it has no merit. With respect to § 745.113(b)(1), Vidiksis seems to argue that
the EPA did not have the authority to craft a regulation requiring specific language
in the lease. However, the Lead Hazard Act contained specific language to be
provided in sales transactions. 42 U.S.C. § 4852d(a)(3). The EPA and the
Department of Housing and Urban Development (“HUD”) concluded that such
language was “necessary to include…in leases as well” 61 Fed. Reg. 9064, 9071.
Given that the stated purposes of the Lead Hazard Act include “ensur[ing] that the
existence of lead-based paint hazards is taken into account in the development of
Government housing policies and in the sale, rental, and renovation of homes and
apartments,” as well as “educat[ing] the public concerning the hazards and sources
of lead-based paint poisoning,” it is not arbitrary or capricious for the EPA to have
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crafted regulations requiring a lead warning statement applicable to rental
housing. 42 U.S.C. § 4851a(4), (7).
Vidiksis also challenges the EPA’s authority to promulgate § 745.113(b)(2),
which requires leases to include “[a] statement by the lessor disclosing the
presence of known lead-based paint . . . in the target housing being leased or
indicating no knowledge of the presence of lead-based paint. . . .” 40 C.F.R. §
745.113(b)(2) (emphasis added). The Lead Hazard Act authorizes the EPA and
HUD to promulgate regulations requiring sellers and lessors to “disclose to the
purchaser or lessee the presence of any known lead-based paint . . . in such
housing.” 42 U.S.C. § 4852d(a)(1)(B). Vidiksis contends that the EPA exceeded
its authority by obligating lessors to make a “no knowledge” declaration because §
4852d(a)(1)(B) expressly requires only that the promulgated regulations require
lessors to disclose to lessees “the presence of any known lead-based paint.” We
believe that it was reasonable for the EPA to require that lessors also make a “no
knowledge” declaration if they did not know whether there was lead-based paint.
The declaration provides lessees with more information than they would otherwise
have. Without the requirement, when the lessor made no declaration, the lessee
would not know whether the lessor knew there was no lead-based paint or lacked
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knowledge as to whether there was any. The requirement prevents the silence of
the lessor from being ambiguous.
Contrary to Vidiksis’s arguments, these regulations are not arbitrary or
capricious.
II. Violations
As outlined above, there are two basic categories of violations for the
purposes of this appeal: 1) violations of 40 C.F.R. § 745.113(b)(1)—failure to
include the specific regulatory language warning tenants of potential lead paint
health problems, and 2) violations of 40 C.F.R. § 745.113(b)(2)—failure to state
either that lead hazards exist at the site or that the owner has no knowledge of any
lead hazards.
A. Failure to Warn Tenants of Potential Lead Paint Health Problems
The EAB interpreted § 745.113(b)(1) to require lessors to use the exact
language of the Lead Warning Statement provided in the regulatory text.
Although the leases used by Vidiksis did not contain the exact language stated in
40 C.F.R. § 745.113(b)(1), Vidiksis contends that he complied with the
requirement because his leases communicated all of the same elements outlined in
the language of § 745.113(b)(1).
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The text of the regulation is clear. Section 745.113(b)(1) plainly states that
“[e]ach contract to lease target housing shall include…[a] Lead Warning
Statement with the following language….” (emphasis added). Vidiksis simply did
not have that precise language in his leases, as required by the regulation.
Vidiksis argues that the EPA-issued pamphlet was provided to the lessees,
and that it contained the required language from § 745.113(b)(1). However, as the
EAB found, and as the language of the regulation dictates, providing the “federally
approved pamphlet” is a separate requirement. The regulation specifically states
that “[l]essees must also receive a federally approved pamphlet on lead poisoning
prevention.” (emphasis added). The required Lead Warning Statement cannot be
satisfied through the additional requirement of providing the pamphlet. See also
Final Rule: Lead; Requirements for Disclosure of Known Lead-Based Paint and/or
Lead-Based Paint Hazards in Housing, 61 Fed. Reg. 9064, 9071-73 (describing the
lead hazard information pamphlet as a separate component of disclosure).
The EAB’s ruling in this regard was not clearly erroneous or inconsistent
with the regulation.
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B. Failure to State Knowledge of Lead Hazards Present at the
Property
The bulk of the violations were based on Vidiksis’s breach of §
745.113(b)(2), requiring the lessor to state either that lead paint is present at the
property, or that the lessor has “no knowledge” of the presence of any lead paint at
the property. The EAB interpreted this provision to require the lessor to make
“one of two affirmative statements”—to either disclose what the lessor knows
about lead-based paint in the housing or to affirmatively state that the lessor has
no knowledge of the presence of lead-based paint and/or hazards in the housing.
Vidiksis argues that his lead paint notice fulfilled his obligations under §
745.113(b)(2). He also claims that the involvement of a property management
agent somehow obviates his own responsibility for compliance. See 42 U.S.C. §
4852d(a)(4) (“Whenever a seller or lessor has entered into a contract with an agent
for the purpose of selling or leasing a unit of target housing, the regulations
promulgated under this section shall require the agent, on behalf of the seller or
lessor, to ensure compliance with the requirements of this section.”).
Similar to the analysis for § 745.113(b)(1), § 745.113(b)(2) is also precise in
its requirements for lessors—either disclosure of the presence of lead paint or a
statement of “no knowledge.” In the notice included in his leases, Vidiksis stated
only that the premises “may contain lead-based paint,” and therefore did not
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comply with § 745.113(b)(2). A statement that the premises “may contain” lead-
based paint is insufficient because it does not indicate to the lessee whether the
lessor has knowledge of the presence of lead-based paint or does not know one
way or the other.
While the regulations do place an onus on agents, this does not remove any
responsibility from the lessor. The statutory language of 42 U.S.C. § 4852d(a)(4)
does not state that the agent’s responsibilities replace the seller or lessor’s
obligations. In addition, the corresponding regulations include provisions
specifically entitled “Lessor requirements.” 40 C.F.R. § 745.113(b). Under these
regulations, agents are required to inform the lessor of the obligations of 42 U.S.C.
§ 4852d. 40 C.F.R. § 745.113(b)(5). This requirement would be unnecessary
should the agent’s responsibility supplant that of the lessor. Furthermore, the
EAB has held that a “passive owner” defense is inconsistent with the purpose of
the Disclosure Rule. See In re Harpoon P’ship, 12 E.A.D. 182, 194-95 (EAB)
2005). “Permitting an owner to transfer its reporting obligations to an agent
would largely defeat the purpose of the statute. Because the statute requires
disclosure of known hazards, . . . allowing a knowledgeable owner to transfer its
responsibilities to a less knowledgeable agent could allow informed owners to
avoid disclosure altogether, thereby undermining the purpose of the statute, and
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denying purchasers and lessees the very protection that Congress intended the
statute to provide.” Id.
Again, the EAB’s ruling in this regard was not clearly erroneous or
inconsistent with the regulation.
III. Penalty Assessment
After determining that he was liable for all violations brought against him in
the EPA’s administrative complaint, Vidiksis was assessed a $97,545 civil
penalty. The EPA’s calculation of the penalty was based on the U.S.
Environmental Protection Agency, Office of Regulatory Enforcement, Section
1018 - Disclosure Rule Enforcement Response Policy for the Lead Paint
Disclosure Rule (Feb. 2000) (“ERP”). The ERP establishes a two-step process to
calculate the appropriate penalty. First, a “gravity-based penalty” is determined
based on the nature of the violation, the circumstances of the violation, and the
extent of harm that may result from the violation. Second, the gravity-based
penalty is adjusted based on various factors, including the ability to pay, history of
prior violations, and degree of culpability.
On appeal, Vidiksis raises various arguments with respect to the penalty
calculation. Essentially, he claims that the EPA did not consider all of the
required statutory factors in assessing the penalty. These factors include “the
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nature, circumstances, extent, and gravity of the violation or violations and, with
respect to the violator, ability to pay, effect on ability to continue to do business,
any history of prior such violations, the degree of culpability, and such other
matters as justice may require.” 15 U.S.C. § 2615(a)(2)(B).
A. Factor – gravity
In completing the first step of the penalty analysis, the ERP employs a
matrix to establish the penalty’s gravity component that takes into account the
violations’ “extent.” The matrix considers the ages of any children that were
affected by the violations. Since children under the age of six are most vulnerable
to lead-paint hazards, the presence of children under the age of six is considered a
“major” extent factor. For the presence of children between the ages of six and
seventeen, the EPA assigned the violations a “significant” extent factor. And
where there were no children present, the violations were considered “minor” in
the extent category. Vidiksis argues that the age consideration and its role in the
extent calculation, and its impact on the gravity calculation, is improper because
only adults were parties to the lease, and because he had no knowledge of which
tenants had children nor of the children’s ages.
Vidiksis did not raise this argument below, and therefore it is waived.
“Under ordinary principles of administrative law, a reviewing court will not
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consider arguments that a party failed to raise in timely fashion before an
administrative agency.” Mahon v. U.S. Dep’t of Agric., 485 F.3d 1247, 1254-55
(11th Cir. 2007) (quoting Sims v. Apfel, 530 U.S. 103, 114 (2000) (Breyer, J.,
dissenting)). “[C]ourts should not topple over administrative decisions unless the
administrative body not only has erred but has erred against objection made at the
time appropriate under its practice.” U.S. v. L.A. Tucker Truck Lines, Inc., 344
U.S. 33, 37 (1952). We cannot disregard the importance of permitting the agency
to exercise its expertise in the subject matter or ignore the administrative process
that has been established below. See Johnson v. Meadows, 418 F.3d 1152, 1156
(11th Cir. 2005). This rationale is particularly pertinent when the below8
proceeding maintained an adversarial nature, as it did here, because the parties are
given the opportunity to fully develop their arguments at the agency level. See
Mahon, 485 F.3d at 1255.
Because of these considerations, the court declines to analyze the Vidiksis’s
“This court has described seven policy reasons for favoring an exhaustion requirement:8
(1) to avoid premature interruption of the administrative process; (2) to let the agency develop
the necessary factual background upon which decisions should be based; (3) to permit the agency
to exercise its discretion or apply its expertise; (4) to improve the efficiency of the administrative
process; (5) to conserve scarce judicial resources, since the complaining party may be successful
in vindicating rights in the administrative process and the courts may never have to intervene; (6)
to give the agency a chance to discover and correct its own errors; and (7) to avoid the possibility
that frequent and deliberate flouting of the administrative processes could weaken the
effectiveness of an agency by encouraging people to ignore its procedures.” Johnson v.
Meadows, 418 F.3d 1152, 1156 (11th Cir. 2005) (quoting Alexander v. Hawk, 159 F.3d 1321,
1327 (11th Cir. 1998)).
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argument as to the gravity factor.
B. Factor – prior violations
Vidiksis argues that the EPA refused to consider his lack of prior violations
in determining his penalty because the penalty amount was not adjusted downward
for this consideration. However, there is no specific statutory requirement that the
EPA adjust downward for lack of prior history; it simply must be considered as a
factor. See 15 U.S.C. § 2615(a)(2)(B). The ERP provides for an upward
adjustment for prior history. As explained in the ERP, “[t]he need for such an
upward adjustment derives from the violator not having been sufficiently
motivated to comply with the Disclosure Rule by the penalty assessed for the
previous violation(s).” ERP at 15. Therefore, the EPA does consider “any history
of prior such violations,” as required under the statute. This particular
interpretation by the agency–considering the presence of prior violations in terms
of an upward adjustment, rather than discount for the lack of prior violations
through a downward adjustment–is its prerogative. Even should the court disagree
with the particular method chosen, it cannot say that this was “unwarranted in law
or . . . without justification in fact.” Am. Power & Light Co., 329 U.S. at 112-13.
C. Factor – culpability
The ERP also provides for upward adjustment of the gravity-based penalty
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based on the violator’s degree of culpability. According to the ERP, “[t]he two
principal criteria for assessing culpability are: (a) the violator’s knowledge of the
Disclosure Rule, and (b) the degree of the violator’s control over the violative
condition.” ERP at 15. The EPA did not recommend increasing Vidiksis’ penalty
based on the culpability factor. The ALJ, however, thought that the evidence
supported an upward adjustment based on culpability, because Vidiksis had
received notices as early as 1995 that some of the properties he owned contained
lead-based paint and, as the property owner, he had control over the leases’
contents. Nonetheless, the ALJ decided not to impose a culpability enhancement
because the EPA had not sought one, and the EAB confirmed the ALJ’s decision
about that.
Vidiksis contends that the real estate agent bore the responsibility for
compliance under 42 U.S.C. § 4852d(a)(4). Accordingly, he argues that his
penalty should have been reduced based on his lack of culpability. Vidiksis also
points to the disparity between the $97,545 penalty he was assessed and the
$5,000 that the real estate company was assessed.9
As explained above, any responsibility on behalf of the agent does not
obviate the lessor’s responsibility. Vidiksis’s culpability was not reduced despite
The real estate company was assessed a $5,000 penalty based on ability to pay.9
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the existence of any requirements on behalf of the agent.
The statute states that the degree of culpability should be a factor. The ERP
clearly takes it into consideration. Simply because Vidiksis disagrees with the
manner in which the agency has chosen to take it into consideration does not make
the agency’s interpretation arbitrary or capricious.
CONCLUSION
Because of the foregoing reasons, the decisions rendered by the EAB on the
issues at hand are AFFIRMED.
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