Virgin Petroleum Product Quandary in Rhode Island

Posted on May 22, 2014 by Richard Sherman

A case working its way through the Rhode Island state court system, Power Test Realty Co. Ltd. Partnership v. Sullivan, No. PC 10-0404 (R.I. Super. Ct. Feb. 19, 2013), poses a dilemma regarding the obligation to remediate releases of virgin petroleum product.

Under the Rhode Island equivalent of CERCLA, virgin petroleum product is exempt from the definition of hazardous substances. R.I.G.L. 23-19.14-3(c), (i). Releases of virgin petroleum product are therefore not subject to the imposition of joint, several, strict and retroactive liability. One would accordingly expect that any obligation to remediate virgin petroleum product releases would be based on causation. Rhode Island oil pollution statutes and regulations appear to impose liability based on causation only.

Nevertheless, the Rhode Island Department of Environmental Management and the Rhode Island Superior Court have taken the position that (1) the obligation of a current landowner to remediate a release of virgin petroleum product that occurred before acquisition of title arises on the theory that the term “discharge” under the state oil pollution statute includes “leaching” and (2) leaching of pre-acquisition petroleum product into the groundwater constitutes a passive and continuing discharge for which the current landowner is liable to remediate.

The Superior Court held that causation is irrelevant under the state oil pollution control statute and regulations. This ruling clearly contradicts the intent of the legislature to carve out virgin petroleum product from a no-fault liability scheme.

This case of first impression is now before the Rhode Island Supreme Court on a writ of certiorari, Docket No. SU-13-0076. Practitioners await with interest how the Court will work its way through this issue. Stand by for some tortured reasoning if the Superior Court ruling is upheld.

New Hampshire's Great Bay, Nitrogen, and the Limits of Technology

Posted on December 26, 2012 by Gregory H. Smith

As the Clean Water Act celebrates its 40th anniversary, it has ignited a controversy in New Hampshire with potentially hundreds of millions of dollars at stake.  In the law’s early days,  publicly owned treatment works (“POTWs”), mandated and financed in large part with federal funds, were viewed as the “good guys” in the national effort to restore quality in receiving water bodies into which raw sewage was being discharged.  That view of POTWs seems to have changed in New Hampshire, at least as relates to the State’s largest saltwater estuary; the Great Bay.  Faced with the potential need to finance significant POTW upgrades or reconstruction, New Hampshire POTWs are challenging EPA’s permitting decisions in the courts, through administrative channels and in the press.

As we know, POTWs are regulated through National Pollutant Discharge Elimination System (“NPDES”) permits that monitor and control a variety of effluent criteria.  Interestingly, however, New Hampshire was and remains one of the few states that has not obtained authority to issue new and renewed NPDES permits.  Because of this status as a non-delegated state, dischargers in New Hampshire with expiring permits must apply to the federal government for renewal.  As environmental regulation has progressed, however, and as federal funds have diminished or disappeared, POTWs and the towns and sewer districts that operate them have found themselves opposed to the EPA’s efforts to impose stricter standards  to address pollutants that were not of primary concern when the POTWs were constructed and initially permitted.

In New Hampshire, this is seen vividly in NPDES renewal efforts EPA is undertaking for several POTWs that discharge under expired and expiring permits, directly or indirectly, into the Great Bay estuary located on the State’s coast.  Once a rich habitat for oysters, eel grass and other sea life, Great Bay is now stressed by a variety of factors including both point and non-point discharges as well as other environmental factors.   At the heart of the controversy  in New Hampshire is EPA’s intention to reduce effluent limitations for nitrogen to as low as three parts per million (the limits of technology) in order to ameliorate nitrogen related problems in Great Bay.  From the municipalities and POTWs perspective, the costs to comply with these new lower limits are exorbitant.  One widely cited study estimates that, for the Great Bay estuary POTWs to comply with the new nitrogen limit, it will cost in excess of one half billion dollars in capital,operation and maintenance expenses.  Those costs will, of course, be passed along to a relatively small population of ratepayers. 

A coalition of communities with affected POTWs has joined forces in response, proposing “adaptive management programs” combining somewhat lower discharge limits with comprehensive non-point controls aimed together at achieving EPA’s stated goals.  It is unclear at this time whether those efforts will be successful.  The coalition communities certainly have in mind the experiences in Chesapeake Bay, or closer to home in neighboring and similarly non-delegated Massachusetts, where EPA is using its  Residual Designation Authority (“RDA”) to require permits in the Charles River watershed.  EPA has been public with its view that the Charles River RDA program may become a model for watersheds elsewhere in New England and nationwide.  It is thought that an adaptive management program as proposed by New Hampshire’s coalition communities would obviate the need to utilize RDA for Great Bay, but that issue remains to be addressed in the future.

Should the U.S.Have Specialized Environmental Courts?

Posted on November 26, 2012 by Catherine R. McCabe

The creation of specialized environmental courts and tribunals around the world has exploded in recent years as countries grapple with the increasingly complex challenges of environmental problems and laws.  There are now over 360 environmental courts or tribunals in 42 countries (see George and Catherine Pring, “Greening Justice: Creating and Improving Environmental Courts and Tribunals”), and the Journal of Court Innovation, vol. 3, Winter 2010.  Is it time for us to consider this option in the U.S.?

The U.S. Judicial Conference noted in its 1990 Report that specialized courts are considered “exotic in the American legal culture” and that “most American lawyers find the idea of specialized courts repugnant.”  However, the U.S. uses specialized courts to deal with other complex and specialized fields of law (e.g., U.S. Tax Court, Bankruptcy Courts, U.S. Court of Federal Claims).  A few specialized environmental courts and tribunals have operated successfully in the U.S. since the early 1990’s, including the Vermont Superior Court Environmental Division (1990), local courts such as the Shelby County, Tennessee Environmental Court (1991), and administrative tribunals such as the U.S. EPA’s Environmental Appeals Board (1992).

Specialized courts arguably offer several advantages for judges, parties and practitioners, including greater judicial expertise in complex legal, scientific and technical areas, more efficient adjudication, reduced litigation costs, and more predictable decision-making.  Potential disadvantages and challenges include the costs to set up and maintain a separate system, organize and locate the court(s) to assure convenient access for parties, potentially inefficient caseloads due to inadequate or unevenly distributed cases, and the risk of court “capture” by either environmental activists or industry.  See U.S. Judicial Conference 1990 Report at 18-20.

ACOEL members are uniquely qualified and situated to offer valuable insight into this important question for the future of environmental law and litigation in the U.S.  Should we consider creating more specialized environmental courts or tribunals in the U.S.? 

What do you think?

Judicial Activism and Judicial Restraint: The 5th Circuit Vacates EPA's Disapproval of Texas SIP Revisions Concerning Minor Sources

Posted on August 14, 2012 by Seth Jaffe

On Friday, in Texas v. EPA, the 5th Circuit Court of Appeals vacated EPA’s decision rejecting Texas’s SIP revisions that would have implemented (and did implement, for 16 years) a Flexible Permit Program for minor NSR sources. While genuflecting at the altar of deference to agency decisionmaking, the Court concluded that EPA’s rejection was not based on either EPA factual determinations or on its interpretation of federal, as opposed to state, law.  The Court also concluded that EPA had not in fact relied on the reasons given in its briefs, and refused to defer to EPA’s “post hoc rationalizations.” The Court thus gave essentially no deference to EPA’s decision.

The interesting part of the decision was the dissent by Judge Patrick Higginbotham, a Reagan appointee. Judge Higginbotham took the majority to task for “not faithfully applying the deferential arbitrary and capricious standard.” He then persuasively demonstrated why the Texas program, as written, did violate the Clean Air Act.

After dismantling the majority’s logic, he then addressed the practical heart of the case – EPA’s 16-year delay in rejecting the SIP revisions. While criticizing EPA for the delay, Judge Higginbotham pointed out that there is a statutory remedy for EPA’s failure to rule on the revisions – a suit under section 7604(a)(2) of the CAA – a remedy never pursued by Texas.

What’s important about this case is that is an excellent example of why judicial restraint is so often “more honor’d in the breach than the observance.” (It’s been a while since I’ve quoted Shakespeare.) When a federal agency unwinds state policy after a sixteen-year delay, it’s very tempting for courts to engage in judicial activism, if that’s what it takes to go upside the agency’s head. The harder course, requiring more discipline, is to remain true the ideal of judicial restraint – that a court is not to substitute its judgment for an agency acting pursuant to an act of Congress. Therefore, Judge Higginbotham’s conclusion seemed worth note:

"As so often with political debate in search of a legal forum, its utility lies largely in pleasure of expression. Angst over perceived federal intrusion into state affairs ought be eased by the reality that laws enacted by Congress are laws of the States. Congress passed the Clean Air Act and made it enforceable by the EPA. The State was represented in that decision by two senators and its thirty-two other elected members of Congress. It also bears mentioning that its former governor was resident in the White House for eight of the years in passage here. The Clean Air Act is not foreign law. I dissent."

LIFE JUST KEEPS GETTING TOUGHER FOR CERCLA CONTRIBUTION SEEKERS

Posted on May 1, 2012 by William Session

One of the more recent and interesting decisions in the world of CERCLA litigation practice was rendered just a few days ago by a federal district court in Pakootas v. Teck Cominco Metals Ltd. The judge in that case articulated the legal underpinnings of the often confused notions of CERCLA-based divisibility of harm and apportionment of liability determinations. 

The judge explained that divisibility of harm does not defeat CERCLA liability itself but, instead, is a defense to joint and several liability citing with approval language from U.S. v. Monsanto Co. to the effect that “ . . . While it appears “divisibility” and “apportionment” are terms used interchangeably, what is potentially divisible is the harm, and if the harm is divisible, what is potentially apportioned is liability, assuming there is a reasonable factual basis for apportionment.”

Against this legal backdrop, the facts in Pakootas brought into sharp focus a commonly encountered situation for CERCLA litigants where multiple parties find themselves attempting to apportion response cost liability for different contaminants, released from different facilities that have become commingled, and are encompassed within what the EPA or state regulatory agency has deemed to be a single “site”.

In addressing an apportionment claim Judge Suko, sitting in the Eastern District of Washington, articulated the importance of the distinction between apportionment of liability in such situations and divisibility of harm.  Judge Suko stated that the first inquiry in the apportionment battle must always be to fix responsibility for the harm for which a party might seek to apportion liability.  The court appropriately held that a CERCLA liability determination is based upon the liability- imposing language of the statute itself:

. . . [L]iability attaches when three conditions are satisfied: (1) the site at which there is an actual or threatened release of hazardous substances is a “facility” under 42 U.S.C. Section 9601(9); (2) a “release” or “threatened release” of a hazardous substance from the facility has occurred, 42 U.S.C. Section 9607(a)(4); and (3) the party is within one of the four classes of persons subject to liability under §9607(a). Pakootas I, 452 F.3d at 1073-74.

In Pakootas the party seeking apportionment (Teck) was clearly a liable person under CERCLA and was undeniably associated with the release of contaminants that could be traced only to the facility it operated.  Teck argued as an affirmative defense to a liability claim that the “harm” at the site should be “apportioned” since the contaminants released by Teck could be discretely indentified even though they had become “commingled” with those released by many others. Teck reasoned that it could defend itself against a joint and several liability claim by way of such “apportionment”.  In so many words, Teck sought to apportion liability based upon divisibility of the contaminants associated with its releases.

Judge Suko observed that:

The fact for liability purposes the . . .  Plaintiffs need to, and intend to, establish that Teck’s slag and/or liquid effluent released or threatens to release hazardous substances (certain metals) from the UCR Site does not, however, limit the scope of the releases or threatened releases from the Site for which Teck can be held liable and, in turn, does not limit the scope of the relevant harm for divisibility/apportionment purposes.

After a thorough examination of many of the more recent contribution/apportionment appellate decisions from around the country, Judge Suko ultimately determined that Teck failed to prove that contamination at the site involved was divisible and, as a result, would be subject to CERCLA 107 joint and several liability with other potentially responsible parties at the site. 

If you find yourself representing a party in an apportionment dispute, this case seems to stand for the proposition that if you cannot determine everything that everyone may have done to create a contaminated site; you may be in trouble in pursuing an apportionment or contribution action.  Additionally, and it is just my personal opinion, the decision represents one of the better anthologies of apportionment/divisibility jurisprudence I have seen in recent cases (and that includes some of the work of the Supreme Court). 

Nevertheless, the high burden of technical or scientific proof Judge Suko would impose upon a party seeking apportionment/contribution could well hearken back to the days before post-BNSF days of “reason based” rules for apportioned liability. (See, e.g. J. Barkett, The Burlington Northern Decision, American College of Environmental Lawyers Blog (May 19, 2009).

Don’t Mess With Texas – EPA Loses Battle With TCEQ

Posted on April 2, 2012 by Eva O'Brien

If you live in Texas or have driven through the state, you know that our popular anti-litter campaign slogan is “Don’t Mess With Texas.”  This slogan may have also been appropriate for the 5th Circuit’s recent decision in Luminant Generation Company, et al. v. U.S. Environmental Protection Agency, No. 10-60891, slip op. (5th Cir. Mar. 26, 2012), where the court came down hard on the U.S. Environmental Protection Agency (“EPA”) for its very late disapproval of revisions to Texas’s State Implementation Plan (“SIP”) pertaining to standard permits for  pollution control projects (“PCPs”).   

In Luminant, the 5th Circuit noted that the federal Clean Air Act (“CAA”) “prescribes only the barest of requirements” for New Source Review (“NSR”) of minor new sources of air pollutant emissions.  It found that EPA had not identified a single violation of the CAA or EPA’s regulations and thus had no legal basis for its disapproval of the PCP Standard Permit provisions, striking down as arbitrary and capricious the “three extra-statutory standards that the EPA created out of whole cloth.”  Id. at 21.  Two of those standards referenced Texas law and a third was based on too much agency discretion in permit issuance.

Noting that EPA failed to act until three years after the 18 month statutory deadline for EPA action had passed, the court ordered EPA to expeditiously reconsider the SIP revision submission made by the Texas Commission on Environmental Quality (“TCEQ”), and compared the “sweeping discretion” given to the states in developing their SIPS to EPA’s “narrow task” of “ensuring” that the Texas regulations “meet the minimal CAA requirements that govern SIP revisions to minor NSR, as set forth in 42 U.S.C. § 7410 (a)(2)(C) and § 7310(l).”  Id.  The court then stated that this limited review “is the full extent of EPA’s authority in the SIP-approval process because that is all the authority that the CAA confers.”  Id. at 21-22.

For the past several years, the TCEQ and EPA have butted heads over various aspects of Texas’s SIP.  This was the third of three cases heard by the 5th Circuit on SIP reviews, albeit the first in which a decision has been rendered.  Oral arguments were held in the other two pending cases last fall – the first relating to Texas’ Qualified Facilities program, Texas Oil & Gas Association, et al. v. U.S. EPA, No. 10-60459 (5th Cir. filed Jun. 11, 2010), and the second relating to Texas’s Flexible Permit Program, Texas v. U.S. EPA, No. 10-10614 (5th Cir. filed Jul. 26, 2010). 

Of these three cases, the EPA’s disapproval of Texas’s Flexible Permit Program has caused the most tension between the agencies.  That program provides facilities with flexibility to reduce emissions by the most cost-effective means through allocation of emissions on a facility-wide basis rather than by source point, and has been a basic tenet of permitting in Texas since 1994.  The end result of the Flexible Permit Program—which Texas considers akin to the federal Plantwide Applicability Limit (“PAL”) under the New Source Review program—not only gave facilities greater flexibility and control, but actually reduced emissions and provided for compliance with all state health standards, as well as all applicable federal Clean Air Act requirements. 

Given that EPA’s delay in disapproving these last two aspects of the Texas SIP was even more egregious (effectively up to sixteen years), it is likely that the 5th Circuit will view the EPA’s actions in those cases with a similarly critical eye.  We in Texas hope that the court continues to call EPA to task for its past unpopular and unwarranted decisions with respect to Texas’s SIP.

SIXTH CIRCUIT RULES THAT TWOMBLY AND IQBAL MUST BE STRICTLY APPLIED

Posted on July 13, 2011 by Jack Shumate

On June 21, the U.S. Court of Appeals for the Sixth Circuit held, in New Albany Tractor, Inc. v. Louisville Tractor, Inc. that the Supreme Court's rulings in Twombly and Iqbal must be strictly applied, mandating dismissal of a case in which the complaint failed to contain sufficient allegations of operative fact. What makes this decision significant is that the court recognized that the facts necessary to support the adequate allegations were probably only available from the files of the defendant; therefore, strict application of Twombly and Iqbal, denying the plaintiff access to the files in discovery, effectively denied the plaintiff any opportunity to bring the case. For this reason, the court also denied, as pointless, the plaintiff's alternative request for leave to amend its complaint.

For further information contact Jack Shumate or Sheldon Klein at 248.258.1616.
 

Treatment of Environmental Claims Liability in Bankruptcy

Posted on July 7, 2011 by Robert L. Falk

When a company saddled with potential environmental liabilities seeks bankruptcy protection, the goals of Chapter 11—giving the reorganized debtor a “fresh start” and fairly treating similarly situated creditors—can conflict with the goals of environmental laws, such as ensuring that the “polluter pays.” Courts have long struggled to reconcile this tension. 

Environmental obligations arise in various forms and under numerous federal and state statutes. They include obligations to stop or contain ongoing pollution, to remediate contaminated sites, to reimburse other parties for remediation costs, and to pay fines and penalties. A number of factors, including the type of liability, the status of the contamination, and the statute under which the obligation arises, may have an impact on whether Chapter 11 provides protection to the post-petition entity, or whether the reorganized entity remains liable.

In order to resolve this issue in the Chapter 11 context, it must first be determined whether a particular environmental obligation is a “claim” under the Bankruptcy Code. Under the Bankruptcy Code, a claim includes “a right to an equitable remedy for breach of performance if such breach also gives rise to a right to payment.”[1] In the environmental context, the fundamental question is whether the breach of an environmental obligation “gives rise to a right to payment.” 

The only U.S. Supreme Court decision offering guidance on this issue is Ohio v. Kovacs decided in 1985.[2] In Kovacs, the State of Ohio obtained an injunction requiring a polluter to clean up a site. When the polluter failed to comply, the state appointed a receiver who took possession of the site and the polluter’s assets in order to implement the remediation. Before the cleanup was complete, the polluter filed for bankruptcy. In holding that the cleanup obligation was a claim dischargeable in bankruptcy, the Court observed that by dispossessing the debtor and removing his control over the site, the State prevented the debtor from conducting the cleanup himself. As a result, it held that the State was effectively seeking a money judgment, which is a “claim” subject to discharge under the Bankruptcy Code. 

Another leading case addressing this issue is United States v. LTV Corp. (In re Chateaugay Corp.).[3] In this decision, the Second Circuit distinguished between orders to clean up accumulated waste and orders to stop ongoing pollution. It held that when an order requires cleanup of contamination and the applicable government agency has the option of conducting the cleanup itself and seeking reimbursement, the obligation is a “claim” subject to discharge under Chapter 11 because its breach gives rise to a right to payment. On the other hand, the Second Circuit observed that an order to stop polluting does not create a claim subject to discharge in bankruptcy, because the enforcing agency may not accept payment and allow the party to continue polluting. Hence, such an order remains enforceable against the reorganized entity.

The two leading cases discussed above have not provided sufficient guidance to resolve all potential issues that arise concerning whether environmental liabilities are dischargeable in bankruptcy. For example, one issue with which bankruptcy judges have grappled is how to determine whether pollution is ongoing. See e.g., In re Oldco M Corp. (finding that debtor’s obligation to operate groundwater remediation system was not dischargeable because plume would otherwise continue to migrate).[4] Another is whether contribution claims arising in the environmental context are dischargeable. See e.g., In re Lyondell[5] andIn re Chemtura.[6] 

Conclusion

Entities considering bankruptcy as a means of averting environmental liabilities should pay close attention to emerging case law decisions when seeking to determine whether their environmental liabilities are dischargeable claims under the Bankruptcy Code. Debtors facing the risk that such potential claims may be disallowed may want also to consider the potential alternative of pursuing a sale of assets under section 363 of the Bankruptcy Code. 



[1] 11 U.S.C. § 101(5)(B) (emphasis added).

[2] 469 U.S. 274 (1985).

[3] 944 F.2d 997 (2d Cir. 1991).

[4] 438 B.R. 775 (Bankr. S.D.N.Y. 2010).

[5] In re Lyondell Chem. Co., No. 09-10023 (REG), 2011 WL 11413 (Bankr. S.D.N.Y. Jan. 4, 2011).

[6] In re Chemtura Corp., No. 09-11233 (REG), 2011 WL 109081 (Bankr. S.D.N.Y. Jan. 13, 2011).

Iqbal and Twombly Revisited

Posted on June 3, 2011 by John Barkett

By: Bob Wyman and Aron Potash, Latham & Watkins LLP


A San Francisco Superior Court ruling on May 20, 2011, enjoins California from undertaking any further work to implement a greenhouse gas (GHG) cap and trade program until the California Air Resources Board (CARB) comes into compliance with the California Environmental Quality Act (CEQA) by more fully analyzing alternatives to cap and trade. While a setback to CARB, which had been planning to conduct spring workshops and summer rulemaking to finalize important unresolved aspects of its planned cap and trade program, the ruling in Association of Irritated Residents v. California Air Resources Board is less damaging than it could have been to CARB’s efforts to achieve the GHG emission reductions required by the Global Warming Solutions Act of 2006 (AB 32). The court’s earlier March 18 statement of decision threatened to put the brakes on not just the cap and trade program but also CARB’s entire suite of GHG reduction measures, including the low carbon fuel standard, the renewable electricity standard and other initiatives. So the court’s final order is significantly narrower in scope. Nonetheless, the cap and trade scheme is the centerpiece of the first economy-wide program in the United States to limit GHG emissions, and it is unclear whether that part of CARB’s program can commence as originally planned on January 1, 2012. While it works to complete a new CEQA alternatives analysis, CARB will almost certainly also appeal the judgment and seek a stay to keep cap and trade implementation on track.


This roadblock to California’s cap and trade plan was brought about when the Association of Irritated Residents (AIR) and others filed a petition for a writ of mandate alleging that CARB substantively and procedurally failed to comply with CEQA in approving the Scoping Plan, CARB’s detailed roadmap for reducing GHG emissions under AB 32. AB 32 was enacted in 2006 and requires the state to reduce GHG emissions to 1990 levels by 2020. CARB was charged with implementing AB 32 and approved the Scoping Plan in December 2008. Since that time, CARB approved a number of regulations contemplated by the Scoping Plan, including the GHG cap and trade program in December 2010. Many significant aspects of the cap and trade program remain unresolved, however, and CARB workshops and rulemakings were planned for this spring and summer with the intention of finalizing such critical program components matters as the allocation of free GHG allowances, the use of auction revenue, the generation and use of offsets, and the designation of GHG intensity benchmarks for regulated sectors.


In its March 18 statement of decision, the court found that CARB violated CEQA by failing fully to evaluate possible alternatives to the measures described in the Scoping Plan. Focusing on the cap and trade program, the court wrote: “ARB’s extensive evaluation of the proposed cap and trade program…provides the public with information about cap and trade only. CEQA requires that ARB undertake a similar analysis of the impacts of each alternative so that the public may know not only why cap and trade was chosen, but also why the alternatives were not.” The March 18 decision specifically criticized the Scoping Plan CEQA analysis for failing to discuss in detail a carbon fee alternative to cap and trade. Cap and trade is not a “fait accompli,” the court wrote.


The court set forth its remedy in the new May 20 ruling, ordering that its writ “shall specifically enjoin ARB from engaging in any cap and trade-related Project activity that could result in an adverse change to the physical environment until ARB has comes [sic] into complete compliance with ARB’s obligations under its certified regulatory program and CEQA, consistent with the Court’s Order. This includes any further rulemaking and implementation of cap and trade…” The Court also ordered CARB both to take no action in reliance upon the Scoping Plan as it relates to cap and trade and to set aside the executive order approving and certifying the CEQA analysis of the Scoping Plan. Although the intent of the ruling appears to be to halt work only on the cap and trade component of the AB32 program, this second portion of the court’s order potentially opens the court’s decision and the validity of the other Scoping Plan measures to attack on the ground that a court may only have the authority either to invalidate a CEQA approval in its entirety or not to invalidate any portion at all. The court’s path of partially invalidating a CEQA action remains an uncertain area of California law.


CARB will almost certainly appeal the decision and seek a stay of the judgment during the course of the appeal. The next battle in this case will likely involve CARB arguing that its appeal of the court’s writ automatically stays the judgment—allowing cap and trade rulemaking to continue apace—and AIR arguing that CARB will have to obtain a writ of supersedeas in order to stay the judgment. This battle will hinge in part on how the reviewing court characterizes the lower court’s writ (e.g., whether it is prohibitory or mandatory in nature) and on the whether the reviewing court sees the lower court order as overbroad in its limitations on CARB’s rulemaking activities.

Conflict Resolution: Lessons from Environmental Lawyers

Posted on May 5, 2011 by Charles Tisdale

People often ask me why I became an environmental lawyer in 1973 and why I am still practicing environmental law in 2011. I ask other environmental lawyers the same questions. Their answers provide useful information to resolve conflicts in our political and economic systems.

Environmental lawyers representing EPA, state agencies, NGOs and corporations have found ways to resolve environmental problems without the type of litigation and adversarial relationships that are present in other fields of law, such as labor law or personal injury. Environmental lawyers representing all sides regularly attend seminars together and are friends. Such camaraderie is not found in the U.S. Congress and in many state legislatures. How did this collegial atmosphere develop? What can we learn from it?

My discussions with other environmental lawyers resulted in the following conclusion. Environmental lawyers have an interest in the preservation of the planet. We may argue over how clean is clean and what is the best available technology for control of pollution. However, our shared belief that earth must be preserved creates a basis for reasoned debate, which results in reduction of pollution and a successful resolution of conflict.

 

Environmental lawyers meet and negotiate. They don’t hide data or take positions that avoid addressing the real issues in conflict. Environmental lawyers seek a win/win, knowing that the consequences of not achieving a solution may be a loss for both sides.

Environmental lawyers are also translators and problem solvers for clients. We are called upon to explain complex laws in lay terms and to seek solutions rather than stake out positions that lead to protracted litigation. We may fight vigorously over the provisions of a Consent Decree, but it is still a “consent” document in which both sides must give and take.

Environmental lawyers form groups of potentially responsible parties (“PRPs”) to address contamination caused by insolvent operators. In forming a PRP group, we are creating a vehicle for consensus despite individual differences among the parties.

Why is this status relevant for the current challenges America faces? I suggest environmental lawyers have found a way to get over partisanship and posturing. We have found a way to get beyond emotion to focus on what is relevant and how to solve a common problem. We recognized the concept of sustainability long before it became a trite phrase. If businesses could not comply with the environmental laws and still make money, the economy would fail. Saving the earth appeals to consumers who pay more for products that are made from recycled material or from sustainable practices. Coalitions of environmental interest groups, government and business can accomplish far more working together than fighting in courts or legislatures.

What actions would be appropriate for our current adversarial process? One would be meetings in which everyone has an opportunity to express their views and everyone is treated the same. Rather than having two sides, a group with all stakeholders would be a better way to solve many of our political and economic problems. Coming into a meeting with the idea that you have to negotiate a consent agreement with give and take would be a useful solution for many political and economic leaders. Seeking a win/win is a much better alternative than a filibuster. Focusing on solving the problem might avoid some of the needless expenditure of money to vilify the other side. Going to seminars together and drinking a beer at a reception would be a useful exercise for politicians from different parties. Having to produce all of the information to a governmental regulatory agency might prevent a trader from defrauding an investor in some “black box” investment.

 

Muddling Through: Clean Water Act Edition

Posted on March 1, 2011 by Seth Jaffe

Previously, I discussed EPA’s efforts to “muddle through” on climate change in the absence of comprehensive legislation. This week, I think it’s the Clean Water Act’s turn. If there were any regulatory situation which required some serious muddling through at the moment, interpretation of the Supreme Court’s Rapanos decision almost is a match for the current climate mess. As most of my readers know, Rapanos was a 4-1-4 decision which left EPA, the Corps, developers and environmentalists fairly equally perplexed

Most stakeholders have assumed that Kennedy’s concurring opinion, requiring a “significant nexus” between wetlands and traditional navigable waters before those wetlands are subject to jurisdiction under the CWA, is the law of the land at this point. That is the approach adopted in the Rapanos Guidance issued by EPA and the Corps in 2007. 

A recent decision by the 4th Circuit Court of Appeals, in Precon Development Corporation v. Army Corps of Engineers, illustrates just how muddled post-Rapanos interpretation has become. The decision in Precon – reversing the District Court – found that the Corps had not built a record sufficient to establish that the wetlands which Precon sought to develop were jurisdictional under the CWA. 

There were two technical issues in Precon. Precon lost what one might have thought would be the more significant issue – the Corps’ finding that, although only 4.8 acres were really at issue in this case, and Precon’s entire development includes 166 acres of wetlands, 448 acres of “similarly situated” wetlands would be examined for a substantial nexus to navigable waters. Precon ultimately won, however, because the Court concluded that the Corps’ record did not contain enough physical evidence to support its determination that a significant nexus exists between the 448 wetland acres and the downstream navigable water. 

The Court’s conclusion raised two issues of broad concern to stakeholders. First, the Court granted little deference to EPA’s conclusion on the significant nexus issue. The Corps argued that its conclusion that there was a significant nexus between the site wetlands and the downstream navigable waters was a factual conclusion. However, the Court concluded that the significant nexus determination was not factual. The Court stated that:

The question is instead whether the Corps’ findings were adequate to support the ultimate conclusion that a significant nexus exists. This legal determination is essentially now a matter of statutory construction, as Justice Kennedy established that a “significant nexus” is a statutory requirement for bringing wetlands adjacent to non-navigable tributaries within the CWA’s definition of “navigable waters.”

Well, this is certainly a nice question of administrative law. The significant nexus issue may now be the ultimate legal question. Nonetheless, I would guess that most wetlands scientists and hydrologists would say that this is largely a factual question. Even if the agency is applying its judgment to answer that question, it’s the type of judgment that requires technical expertise – expertise to which courts have traditionally deferred.

The second of the Court’s important pronouncements was that it would not give the EPA/Corps Rapanos Guidance deference under Chevron. Why not?

Because – although it could – the Corps has not adopted an interpretation of “navigable waters” that incorporates this concept through notice-and-comment rulemaking, but instead has interpreted the term only in a non-binding guidance document.”

Isn’t it timely, then, that EPA and the Corps sent a draft new Rapanos guidance to OMB in December, and GOP leadership in the House is proposing language in a continuing resolution that would preclude EPA from using any funds “to implement, administer, or enforce a change to a rule or guidance document pertaining to the definition of waters under the jurisdiction of the Federal Water Pollution Control Act (33 U.S.C. 1251).” Perhaps EPA and the Corps should take half a loaf. Why not agree to shelve the guidance and instead proceed with notice-and-comment rulemaking to clarify Rapanos? At least then the Courts might grant EPA and the Corps more deference in implementation.  It’s already been almost five years since Rapanos was issued. EPA and the Corps can hardly argue that it’s necessary to go the guidance route because they don’t have the time to proceed through the full regulatory process.

Enough muddling through. Take the time to do it right and issue regulations. Then, maybe the muddle will abate. (Can one abate a muddle?)

I DON'T WANT TO SCARE YOU . . . BUT BE WARNED

Posted on February 7, 2011 by Stephen E. Herrmann

The Problem
In the world of environmental claims, there are numerous ways that a duty to preserve documents and particularly e-documents can arise before litigation is filed.


The Problem Becomes a Sanction
E-discovery sanctions have reached an all-time high after three decades of litigation over alleged discovery wrongdoing. “Sanctions motions and sanction awards for e-discovery violations have been trending every-upward for the last 10 years and have now reached historic highs,” according to a King & Spalding study published at 60 Duke Law Journal 789 (2010).


King & Spalding lawyers analyzed 401 cases before 2010 in which sanctions were sought and found 230 sanctions awarded, including often severe sanctions of case dismissal, adverse jury instructions and significant money awards. Sanctions of more than $5 million were ordered in five cases, and sanctions of $1 million or more were awarded in four others. Before 2009, the highest number of sanctions awarded against lawyers in a single year was five. However, 46 sanctions were awarded in 2009, the last year covered by the study.
 

Defendants and their lawyers were sanctioned for e-discovery violations nearly three times more often than plaintiffs. When sanctions were awarded, the most common misconduct was failure to preserve electronic evidence.


That is why prospective environmental litigants and their counsel must be aware of the issue. Even if the client does not realize that the duty to preserve has attached, and electronic information disappears, the client and its lawyers are subject to spoliation claims, and increasingly sanctions.
 

Pinpointing The Problem Is Not Easy
A duty to preserve represents a legal requirement to maintain relevant records for litigation. Hence, identifying the trigger of the duty to preserve is essential. The duty to preserve arises before a complaint is filed when a party reasonably should know that the evidence may be relevant to anticipated litigation. When that time occurs is anything but certain.


Unlike the paper world where documents are often maintained in central storage, in the electronic world, every employee is a file keeper. E-mails can disappear with the stroke of a key. A company’s records management system may provide for relatively short timeframes for e-mails in mailboxes to eliminate data clutter. Be aware that storage systems used for disaster recovery are periodically recycled.


So, when should environmental lawyers instruct their clients on preserving documents, and particularly e-documents, for litigation? It is not at all easy to pinpoint. But, the courts have made it increasingly clear through sanctions that lawyers must figure it out. Making it even tougher are the differing views among judges on such issues as:

 

  1. Can a prospective plaintiff or defendant have a duty to preserve if counsel has not been retained to explain the duty?
  2. Must a client’s lawyer have knowledge of a claim before a duty to preserve can be triggered?
  3. If an environmental agency is pursuing other entities in an industry but not your client, does that trigger a duty to preserve?
  4. Does a notice of violation sent by a regulatory agency represent “anticipation” of litigation.

Conclusion

I repeat -- In the world of environmental claims, there are numerous ways that a client’s duty to preserve documents, and particularly e-documents, can arise before litigation is actually filed.
 

Be careful out there!

Iqbal and Twombly Result in Dismissal of Pennsylvania DEP Lawsuit

Posted on November 22, 2010 by John Barkett

Recent Supreme Court opinions interpreting Rule 12(b)(6) have been applied in an environmental context. A state agency cost recovery action was dismissed for failure to plead facts sufficient to show a plausible claim for relief, resulting in unnecessary additional litigation costs.

 

 

WhenBell Atlantic v. Twombly, 550 U.S. 554 (2007) was decided, many lawyers lamented the loss of Conley v. Gibson, 355 U.S. 41 (1957) (in effect, if there is a claim somewhere within the four corners of a complaint, a motion to dismiss will be denied) as the governing case in Rule 12(b)(6) jurisprudence. Then Ashcroft v. Iqbal, 129 S.Ct. 1937 (May 18, 2009) came down. The laments became cries for action to restore Conley legislatively, and, indeed, such legislation was introduced in the Congress by Senator Specter who was not returned to office. For now, Iqbal and Twombly remain the law.

 

 

For those few lawyers who may not be familiar with Twombly or Iqbal, both cases dealt with the sufficiency of allegations in a complaint to state a cause of action. Twombly dealt with parallel conduct in an antitrust setting that was consistent with lawful behavior but was alleged conclusorily to represent a conspiracy in restraint of trade.  Without fact allegations to show why lawful parallel conduct was in fact unlawful anticompetitive behavior, the complaint did not survive. Iqbal dealt with claims against the Attorney General and the Director of the FBI for post-9/11 activities that restrained the liberty of the plaintiffs for a period of time. Other defendants remained in the case. The Supreme Court held that the complaint’s allegations against these two executives were not “plausible.” Hence, they were dismissed.

 

What is a “plausible” claim? The Supreme Court gave this answer in Iqbal: “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” This plausibility standard is not “akin to a probability requirement,’ but it asks for more than “a sheer possibility that the defendant has acted unlawfully.”

 

 

It has not taken long for Iqbal and Twombly to be applied in an environmental dispute. Just ask Pennsylvania’s Department of Environmental Protection (DEP). On November 3, 2010, Magistrate Judge Lenihan in the Western District of Pennsylvania, citing this Supreme Court precedent and the Third Circuit’s interpretation of it in Fowler v. UPMC Shadyside, 578 F.3d 203 (3rd Cir. 2009), dismissed a CERCLA amended complaint with prejudice. The 2009 action involved $3.7 million in costs incurred in a landfill response action that was completed in 2004. The DEP characterized the excavation, drum and soil removal, and restoration work it conducted as a remedial action for which it had six years within which to file suit under CERCLA. Three defendants argued that the DEP had engaged in a removal action for which it had only three years from the conclusion of the removal action within which to bring suit. The magistrate judge agreed with the defendants and because suit was brought beyond three years, the case was dismissed. The magistrate accepted the factual averments in the amended complaint as true but disregarded the DEP’s “legal conclusions.” Because the actions described in the complaint were “the equivalent of a CERCLA removal action,” she held, the DEP had failed “to set forth sufficient factual matter to show a plausible claim for relief.”

 

 

The magistrate judge was persuaded by the administrative record that “repeatedly and consistently” characterized the DEP’s response action as “interim.” The DEP was not helped by its 2002 “Analysis of Alternatives” under Pennsylvania’s Hazardous Sites Cleanup Act which stated that the interim response was warranted but that the response as then proposed “is not a final remedial response.” The magistrate judge rejected the DEP’s argument that a “prompt interim response” would be a removal action in CERCLA terms but that a “limited interim response” in fact was the same as a remedial action under CERCLA.

 

 

Under Conley, it is likely that the motion to dismiss would have been denied, discovery would have occurred, and the limitations question would have been decided under Rule 56’s summary judgment standards. Had the DEP filed suit before Twombly, it would have been able to so argue. Of course, if it had done that, it could have been within the three-year removal action window. Not having done so, it had to deal with Iqbal and Twombly’s preference for using the motion to dismiss as a way to address escalating discovery costs in federal court litigation where a claim is not “plausible.”

You Want to Preclude a Citizens' Suit? Pick Your Poison.

Posted on September 17, 2010 by Seth Jaffe

When clients are threatened with citizen suits – and particularly when the threatened litigation involves a matter where EPA or a state regulatory agency is heavily involved, the clients always want to know why they can’t somehow get rid of the citizen suit, given that EPA is on the case. The answer is that they can – but only in limited circumstances.

The recent decision in Little Hocking Water Association v. DuPont confirmed this answer in the context of RCRA. The Little Hocking Water Association provides public water to certain communities in Ohio, directly across the Ohio River from a DuPont plant which uses , also known as PFOA or C8 – also known as the contaminant du jour. According to the complaint, the Little Hocking wells have among the highest concentrations of C8 of water supply wells anywhere and its customers have among the highest C8 blood levels anywhere. Little Hocking Water Association thus sued DuPont under RCRA’s citizen suit provision, claiming that DuPont’s release of C8 had created an “imminent and substantial endangerment."

Section 7002 of RCRA contains provisions precluding such citizen suits if either EPA or a state “has commenced and is diligently prosecuting” an action under RCRA to abate the endangerment. In the DuPont case, releases of C8 from the DuPont facility had been the subject of at least two administrative orders on consent entered into by DuPont and EPA. However, consent orders aren’t the same as “an action” under § 7002 or § 7003 of RCRA – and they thus do not preclude a citizen suit.

DuPont tried the next best argument – that EPA had primary jurisdiction over the regulation of C8 – and that the existence of EPA’s regulatory authority and the issuance of the consent orders meant that the courts should defer to EPA. DuPont’s argument was that a court could not fashion a remedy in the case without essentially establishing a new cleanup standard for C8 and that doing so is the job of EPA, not the courts.

The Court gave the primary jurisdiction argument short shrift. As the Court noted, using the doctrine of primary jurisdiction in citizen suits would dramatically reduce the scope of such suits. Since Congress provided a citizen suit mechanism – and provided very specific, discrete, circumstances in which citizen suits are precluded – it doesn’t make sense to use primary jurisdiction to establish another defense, particularly where the defense would almost eliminate the remedy. 

The bottom line? If you don’t want to face a citizen suit (and you’re not in compliance), get yourself sued by EPA or your state regulatory agency. The mere existence of EPA or state regulation, even if requirements are embodied in a consent order, is not enough.

The Deck is Still Stacked in the Government's Favor -- Is This A Good Thing?

Posted on July 22, 2010 by Seth Jaffe

Last week, in City of Pittsfield v. EPA, the First Circuit Court of Appeals affirmed denial of a petition by the City of Pittsfield seeking review of an NPDES permit issued by EPA. The case makes no new law and, by itself, is not particularly remarkable.  Cases on NPDES permit appeals have held for some time that a permittee appealing an NPDES permit must set forth in detail in its petition basically every conceivable claim or argument that they might want to assert. Pretty much no detail is too small. The City of Pittsfield failed to do this, instead relying on their prior comments on the draft permit. Not good enough, said the Court. 

For some reason, reading the decision brought to mind another recent appellate decision, General Electric v. Jackson, in which the D.C. Circuit laid to rest arguments that EPA’s unilateral order authority under § 106 of CERCLA is unconstitutional. As I noted in commenting on that decision, it too was unremarkable by itself and fully consistent with prior case law on the subject.

What do these two cases have in common? To me, they are evidence that, while the government can over-reach and does lose some cases, the deck remains stacked overwhelmingly in the government’s favor. The power of the government as regulator is awesome to behold. Looking at the GE case first, does anyone really deny that EPA’s § 106 order authority is extremely coercive? Looking at the Pittsfield case, doesn’t it seem odd that a party appealing a permit has to identify with particularity every single nit that they might want to pick with the permit? Even after the Supreme Court’s recent decisions tightening pleading standards, the pleading burden on a permit appellant remains much more substantial than on any other type of litigant.

Why should this be so? Why is it that the government doesn’t lose when it’s wrong, but only when it’s crazy wrong? 

Just askin’.

A Combined Superfund and Stormwater Rant

Posted on July 7, 2010 by Seth Jaffe

Sometimes, the practice of environmental law just takes my breath away. A decision issued earlier last month in United States v. Washington DOT was about as stunning as it gets. Ruling on cross-motions for summary judgment, Judge Robert Bryan held that the Washington State Department of Transportation had “arranged” for the disposal of hazardous substances within the meaning of CERCLA by designing state highways with stormwater collection and drainage structures, where those drainage structures ultimately deposited stormwater containing hazardous substances into Commencement Bay -- now, a Superfund site -- in Tacoma, Washington.  

I’m sorry, but if that doesn’t make you sit up and take notice, then you’re just too jaded. Under this logic, isn’t everyone who constructs a parking lot potentially liable for the hazardous substances that run off in stormwater sheet flow? 

For those who aren’t aware, phosphorus, the stormwater contaminant du jour, is a listed hazardous substance under Superfund. Maybe EPA doesn’t need to bother with new stormwater regulatory programs. Instead, it can just issue notices of responsibility to everyone whose discharge of phosphorus has contributed to contamination of a river or lake.

The Court denied both parties’ motions for summary judgment regarding whether the discharges of contaminated stormwater were federally permitted releases. Since the Washington DOT had an NPDES permit, it argued that it was not liable under § 107(j) of CERCLA. However, as the Court noted, even if the DOT might otherwise have a defense, if any of the releases occurred before the permit issued – almost certain, except in the case of newer roads – or if any discharges violated the permit, then the Washington DOT would still be liable and would have the burden of establishing a divisibility defense. 

If one were a conspiracy theorist, one might wonder if EPA were using this case to gently encourage the regulated community to support its recent efforts to expand its stormwater regulatory program. Certainly, few members of the regulated community would rather defend Superfund litigation than comply with a stormwater permit.

You can’t make this stuff up.

Supreme Court Gets Back to Basics in Declining to Hear Three Environmental Cases

Posted on March 2, 2010 by Eva Fromm O''Brien

The United States Supreme Court recently declined to hear three relatively high-profile environmental cases: Croplife America v. Baykeeper (a permitting clash between FIFRA and CWA); Texas Water Development Board v. Department of Interior (weighing the designation of a nature refuge under NEPA versus economic development); and Rose Acre Farms Inc. v. United States (regulatory taking claim as a result of agency action). After a 2008-2009 term where the Court seemed to take aim at the environmentalist cause, the Court may have put some wind back in the environmentalist’s sails by declining to consider these three separate industry challenges to federal environmental regulations.

 

 

EPA Rulemaking for CWA & FIFRA Permitting

 

 

In Croplife America v. Baykeeper, the Court decided not to review the Sixth Circuit’s year-old ruling in National Cotton Council v. EPA requiring farmers to secure Clean Water Act permits for the use of pesticides already permitted under FIFRA.  EPA had claimed that FIFRA approval incorporated compliance with the Clean Water Act, however, the Sixth Circuit ruled that the government was obligated to ensure that farmers using pesticides were subject to both regulations. The decision had been stayed until April 2011 while EPA reviews and revises its NPDES permitting process to comply with the ruling.

 

 

Two different groups—one representing environmental interest groups and the other representing industry interest groups—opposed the EPA’s new permitting rule as exceeding the EPA’s interpretive authority, and argued that it would create redundant bureaucracy and hamper agricultural production by forcing farmers to decide between not applying pesticides and risking legal and enforcement actions for discharging without a permit.

 

Environmental Conservation versus Future Development

 

Another case denied review was Texas Water Development Board v. DOI, which weighed prospective future development against environmental conservation.  The Supreme Court’s decision will disrupt any future plans by Dallas-area officials to build the proposed Lake Fastrill reservoir along the Neches River.

 

 

In Texas Water Development Board, the Fifth Circuit Court had unanimously upheld a lower court’s decision that the Fish and Wildlife Service did not violate the NEPA by designating 25,000 acres of east Texas wetlands as the Neches River National Wildlife Refuge. In opposing the designation, local governments asserted they would likely need to build the reservoir by 2050 in order to accommodate increased water demand. However, the Fifth Circuit found that this project may never take place or may occur at a different site. Importantly, the “effects of establishing the refuge, and thus precluding the reservoir, are highly speculative and cannot be shown to be the proximate cause of future water shortages in Dallas.” 

 

 

Regulatory Taking Claims for Enforcement of Regulations

 

 

Finally, the Court declined to review Rose Acre Farms Inc. v. United States, a suit brought by an egg farm against the federal government for damages after a crack-down on potential salmonella contamination. Following an outbreak that was traced back to the farm, the USDA destroyed some of the farm’s eggs and required the company to sell others on the less-lucrative market for liquid, pasteurized eggs.

 

 

Rose Acre sued to recoup lost revenue, arguing that the government response constituted a “regulatory taking” under the Fifth Amendment. The Court of Federal Claims awarded Rose Acre $5.4 million in damages, but that award was overturned by the U.S. Court of Appeals for the Federal Circuit.  In its petition for review, Rose Acre Farms argued that the government responded to contamination fears in a way that focused the economic impact “narrowly and devastatingly, upon egg producers generally and Rose Acre specifically.”

 

 

The Supreme Court’s decision to pass on the case leaves the Federal Circuit’s decision as the precedent for future takings cases involving federal agencies. As such, the government may have less to fear from regulatory takings claims when enforcing its public health and environmental regulations.

 

 

Declining to hear these cases, while generally viewed as favorable to environmentalists, may be reconciled with the Court’s overall trends in environmental cases over the past several terms. None of these declined cases originated in the Ninth Circuit, a jurisdiction that seems to garner heightened scrutiny from the Supreme Court, as the Court has repeatedly reined the Ninth Circuit’s high-profile, often pro-environment decisions.  The Court has shown that it will look to the plain language of an underlying statute and its overall structure in trying to interpret Congress’ intent. More importantly, when there is room for interpretation, the Court has emphasized giving deference to agency expertise and decision-making. Thus, the question is not whether the Court may be pro- or anti-environment in a given term—it is simply whether it is abiding by its core principles and themes.

Zubulake Revisited: Judge Scheindlin on Discovery Sanctions

Posted on January 20, 2010 by John Barkett

Every environmental litigator understands the duty to preserve documents. Before a complaint is filed, a plaintiff must preserve documents relevant to the claims about to be advanced. If a defendant reasonably anticipates litigation, the defendant must undertake reasonable efforts to preserve documents that are relevant to the impending lawsuit. Once a complaint is served, a defendant must preserve documents relevant to the claims alleged.

 

In the electronic world, especially on a prelitigation basis, it is doubly important to identify custodians with relevant documents (“key players”) since with a keystroke, they have the ability to delete responsive electronically stored information. Aluminum Corp. v. Alcoa, Inc., 2006 U.S. Dist. LEXIS 66642 (M.D. La. July 19, 2006) illustrates the risk. Alcoa sent a cost-recovery demand to Consolidated Aluminum in 2002 and promptly put a litigation hold on the electronic documents of four Alcoa employees involved with a remedial investigation and cleanup. In 2003, Consolidated filed a declaratory judgment action seeking to be absolved of liability. In 2005, Consolidated propounded discovery that prompted Alcoa to expand its key player list by eleven more names. It was not until this expansion that Alcoa suspended its janitorial email deletion policy and backup tape maintenance policy which at Alcoa meant that email older than about seven months was no longer available unless it had been archived by the individual user. The magistrate judge imposed a monetary sanction on Alcoa—in effect determining that Alcoa should have identified these additional individuals as key players in 2002. 2006 U.S. Dist. LEXIS 66642, *36.

 

If a duty to preserve is violated, and documents are lost as a result, sanctions may result. What sanction will depend upon the level of culpability of the “spoliating” party—negligence, gross negligence, or bad faith--and the amount of prejudice to the “innocent” party by the loss of information relevant to the innocent party’s claim or defense. But what is the difference between “negligence” and “gross negligence”? Who has the burden of proof in establishing the culpability of the conduct or the existence of prejudice? May a court presume prejudice depending upon the level of culpability? If so, is such a presumption rebuttable?

 

Much like she did in the five Zubulake v. UBS Warburg decisions, Judge Shira Scheindlin has written another blockbuster decision answering all of these questions. The Pension Committee of the University of Montreal Pension Plan et al. v. Banc of America Securities, LLC et al., Civ. 9016 (January 15, 2010). In her amended opinion and order, (the original opinion was issued January 11, 2010 and appears at 2010 WL 93124), Judge Scheindlin defined gross negligence by reference to misfeasance following the attachment of a duty to preserve. She held that a finding of gross negligence will accompany the failure to

 

  • issue “a written litigation hold,”
  • “identify key players” and to “ensure that their electronic and paper records are preserved,”
  • “cease the deletion of email” or “preserve the records of former employees that are in a party's possession, custody, or control,” and
  • preserve backup tapes “when they are the sole source of relevant information or when they relate to key players, if the relevant information maintained by those key players is not obtainable from readily accessible sources.”

In contrast, the failure to obtain records from all employees, as opposed to key players, or to take all appropriate measures to preserve electronically stored information in most cases “likely” will fall into the “negligence” category, unless the facts, on a case-by-case basis, demonstrate otherwise, she held.

 

The burden of proof, the court said, is on the innocent party to show that the spoliating party had (1) control over the evidence and an obligation to preserve it at the time of its loss and (2) acted with a culpable state of mind, and that (3) the missing evidence is relevant to the innocent party’s claim or defense. Relevance is presumed when bad faith exists. Some courts presume relevance when “gross negligence” has been found, but Judge Scheindlin held that this presumption is “not required.” If only negligence has been found, the innocent party must prove relevance and prejudice. Irrespective of the level of culpability, “any presumption is rebuttable.”

 

The slip opinion is 85 pages in length and rather than summarizing it further here, I urge readers to review it. In the end, Judge Scheindlin decided that relevant information was lost and the innocent party (here a defendant) was prejudiced. She decided to give an adverse inference instruction that itself represents two illuminating single-spaced pages of the opinion, along with monetary sanctions (including attorneys’ fees for deposing certain declarants and bringing the sanctions motion).

 

Pension Committee begins with the byline, “Zubulake Revisited: Six Years Later.” This time, there will be no debate over how to pronounce Pension Committee. And, in the years to come, Pension Committee is sure to be cited just as often as Zubulake has been.

EPA Issues a New Policy on Superfund Negotiations: Time For Another Rant?

Posted on October 19, 2009 by Seth Jaffe

Late last week, Elliott Gilberg, Acting Director of EPA’s Office of Site Remediation Enforcement (OSRE) issued an Interim Policy on Managing the Duration of Remedial Design/Remedial Action Negotiations. Members of the regulated community may not be surprised by the contents of the memo, but they certainly will not be pleased. In brief, the memorandum fundamentally makes two points:

EPA wants to shorten the duration of RD/RA negotiation

EPA is going to use the heavy hammer of unilateral administrative orders, or UAOs, to keep PRPs’ feet to the fire and ensure that negotiations move quickly.

PRPs will likely agree that shortening the duration of negotiations would be a good outcome in the abstract – but achieving it by greater use of UAOs? I don’t think so.

I can only wonder if EPA has even considered the impact of the Burlington Northern decision here. Is this a perverse reaction from EPA? A metaphorical throwing down the gauntlet to PRPs? It certainly feels that way.

I have a different suggestion, if EPA truly wants to shorten negotiations. First, acknowledge Burlington Northern and compromise on the merits in those great majority of cases where there are legitimate divisibility arguments. Second, stop acting like the last bastion of command and control regulation. Set cleanup standards and then, to the maximum extent permitted by existing law, let PRPs clean up to those standards, without micromanaging every detail of the cleanup process.

Stormwater Discharges From Construction Activity: What Next From EPA?

Posted on August 10, 2009 by Seth Jaffe

Construction and development companies praying for an economic recovery next year have something else to worry about: pending new EPA regulations regarding stormwater discharges from construction activities – and claims from environmental groups that EPA’s proposal isn’t stringent enough.

EPA issued a proposal on November 28, 2008. That proposal is complex, but the aspect of it that has received the most attention is the requirement that certain construction sites greater than 30 acres meet numerical turbidity limits (specifically, 13 nephelometric turbidity units (NTUs), which I had to include in this post just because it sounds so cool). Developers have opposed the numeric limits; the National Association of Home Builders estimates that the cost to comply would be $15,000 to $45,000 per acre.

On the other hand, the NRDC and Waterkeeper Alliance have threatened to sue EPA if EPA does not revise the propose rule to include post-construction controls as part of the rule. EPA has stated that it is not planning to do so. It’s not obvious that NRDC and Waterkeeper Alliance have the better of this specific debate, but the argument regarding post-construction controls is similar to the ongoing discussion in Massachusetts and elsewhere regarding the need for ongoing stormwater controls at properties other than industrial facilities that are already regulated.

The issue is not going to go away.  EPA is under a deadline to issue the rule by December 1, 2009.

A Rant Against Superfund

Posted on April 15, 2009 by Seth Jaffe

As some of my clients know all too well, I’ve been spending a lot of time on some Superfund matters recently. Although I can’t remember a period when I didn’t have at least one moderately active Superfund case, significant immersion in complex remedial decision-making and negotiations provides an unwelcome reminder just how flawed CERCLA is. Almost 20 years after the acid rain provisions of the Clean Air Act ushered in wide-spread acceptance of the use of market mechanisms to achieve environmental protection goals and the state of Massachusetts successfully privatized its state Superfund program, the federal Superfund program, like some obscure former Russian republic which remains devoted to Stalinism, is one of the last bastions of pure command and control regulation.

 

Can anyone tell me why the remedy selection process takes years and costs millions of dollars – before any cleanup has occurred or risk reduction been achieved? Can anyone tell me why, after the remedy has been selected, EPA has to spend millions of dollars – charged back to the PRPs, of course – to oversee the cleanup? Oversight costs can easily exceed 10% of cleanup costs, while oversight during the remedial design and feasibility study process sometimes seem to be barely less than the cost of actually performing the RI/FS.

While there are certainly a multiplicity of causes, there are two factors which greatly contribute to the problem. One was, coincidentally, highlighted in a post today by my friend Rob Stavins. As Rob noted, unlike the acid rain program, which was new at the time, the Superfund bureaucracy is well entrenched and there are a number of actors with a vested interest in maintaining the status quo

The second issue relates to the genesis of the Superfund program, as well as its continuing raison d’être. Whenever EPA has ranked relative risks from different environmental hazards, Superfund sites come in at the bottom. However, if you think back to Superfund’s origins, what comes to mind? Love Canal and the Valley of the Drums – and some concerned near-by residents who rallied around a cause to ensure that the problem would be addressed. As renowned risk communications expert Dr. Peter Sandman has noted, there is not necessarily a significant correlation between actual risk levels and public outrage, and it’s not possible to decrease outrage simply by providing accurate information about risks.

In short, the public is outraged by hazardous waste sites and does not trust PRPs to clean them properly. All of those EPA oversight costs are, in large part, intended not to decrease risk, but to lower outrage.  Outrage is understandable in some circumstances, and efforts to reduce it are laudable, but is it really an appropriate use of scarce environmental protection resources to spend the money that gets poured into Superfund sites?

There has to be a better way. Indeed, there is a better way. It’s called a privatized system in which PRPs have to meet well-defined cleanup standards, but are allowed to do so on their own, in whatever manner is most cost-effective, subject to audits by regulators. Privatized programs such as the one in Massachusetts are not perfect. However, their flaws – which largely stem from a failure to fully support privatization -- pale in comparison to the waste that is the federal program under CERCLA.

In other contexts, I’ve called on the Obama administration to embrace regulatory reform. Why not start with Superfund? Notwithstanding Rob Stavins’ point about the difficulty of overturning an entrenched status quo, if the states could do it, why not the federal government?

Besides, I have an entrenched personal reason for seeking Superfund reform. This stuff drives me nuts.

Another Loss For the Bush EPA; The D.C. Court of Appeals Remands the Fine Particulate Standard

Posted on February 27, 2009 by Seth Jaffe

The batting average of the Bush administration EPA in appeals of its regulatory proposals may now have dropped below the proverbial Mendoza line. This week, the Court of Appeals for the District of Columbia remanded a substantial part of EPA’s particulate rule. That the Bush administration could achieve results where the Mendoza line is even a close metaphor is a testament to just how low its stock has fallen in the courts.

 

The case itself is important for a number of reasons, but is too lengthy for detailed analysis here. Highlights include:

·                     First, the basic holding: the court remanded EPA’s primary annual standard for PM2.5, because EPA did not justify that the 15 ug/m3 standard was sufficient to protect public health with an adequate margin of safety. Second, the court also remanded EPA’s determination of the secondary, public welfare, standard for PM2.5.

·                     The court gave great weight to the role of the Clean Air Science Advisory Committee (CASAC) and staff recommendations in the regulatory process. After this decision, EPA is going to think twice about choosing a regulatory course difference than that recommended by CASAC and staff. On balance, I think that this is a bad thing and more evidence of the collateral damage from the extreme positions taken by the Bush administration. After all, while the Clean Air Act sets some boundaries, these are ultimately policy decisions that should be made by the President and his or her chosen staff, not by a committee no one’s heard of or low-level staff.

·                     Unlike the chaos created when the court vacated the CAIR regulations, the court appears to have learned its lesson. This time around, the court remanded the rule, but left the standard in place for now.

·                     The court’s decision to remand the public welfare standard will have implications for current efforts to implement the its Regional Haze Rule. The extent to which this decision throws Haze Rule implementation back to the drawing board may not be known for some time.

How many more cases can the Bush administration lose after it’s already out of office? At least one. Greenwire reports today about speculation that this decision means that the EPA rules regarding the nitrogen oxide NAAQS may also be in trouble.

The interesting question in all this is the extent to which the abysmal record of the Bush EPA in defending its decisions in the courts will damage EPA’s credibility and thus result in a long-term weakening of the deference given EPA by the courts. At this point, my assumption is that, in the long run, these cases will be seen as an aberration and courts will resume their prior practice of granting EPA substantial deference. Of course, whether that is a good thing or not is a separate question.

Another Loss For the Bush EPA; The D.C. Court of Appeals Remands the Fine Particulate Standard

Posted on February 27, 2009 by Seth Jaffe

The batting average of the Bush administration EPA in appeals of its regulatory proposals may now have dropped below the proverbial Mendoza line. This week, the Court of Appeals for the District of Columbia remanded a substantial part of EPA’s particulate rule. That the Bush administration could achieve results where the Mendoza line is even a close metaphor is a testament to just how low its stock has fallen in the courts.

 

The case itself is important for a number of reasons, but is too lengthy for detailed analysis here. Highlights include:

·                     First, the basic holding: the court remanded EPA’s primary annual standard for PM2.5, because EPA did not justify that the 15 ug/m3 standard was sufficient to protect public health with an adequate margin of safety. Second, the court also remanded EPA’s determination of the secondary, public welfare, standard for PM2.5.

·                     The court gave great weight to the role of the Clean Air Science Advisory Committee (CASAC) and staff recommendations in the regulatory process. After this decision, EPA is going to think twice about choosing a regulatory course difference than that recommended by CASAC and staff. On balance, I think that this is a bad thing and more evidence of the collateral damage from the extreme positions taken by the Bush administration. After all, while the Clean Air Act sets some boundaries, these are ultimately policy decisions that should be made by the President and his or her chosen staff, not by a committee no one’s heard of or low-level staff.

·                     Unlike the chaos created when the court vacated the CAIR regulations, the court appears to have learned its lesson. This time around, the court remanded the rule, but left the standard in place for now.

·                     The court’s decision to remand the public welfare standard will have implications for current efforts to implement the its Regional Haze Rule. The extent to which this decision throws Haze Rule implementation back to the drawing board may not be known for some time.

How many more cases can the Bush administration lose after it’s already out of office? At least one. Greenwire reports today about speculation that this decision means that the EPA rules regarding the nitrogen oxide NAAQS may also be in trouble.

The interesting question in all this is the extent to which the abysmal record of the Bush EPA in defending its decisions in the courts will damage EPA’s credibility and thus result in a long-term weakening of the deference given EPA by the courts. At this point, my assumption is that, in the long run, these cases will be seen as an aberration and courts will resume their prior practice of granting EPA substantial deference. Of course, whether that is a good thing or not is a separate question.