ARE YOU SURE YOUR CLIENT IS A BFPP?

Posted on March 22, 2011 by Linda C. Martin

We all know that the bona fide prospective purchaser (BFPP) provision provides a defense to CERCLA liability for contaminated sites and allows a knowing purchase of contaminated property. It encourages brownfields and voluntary cleanup programs across the country.

Judicial interpretations of the BFPP defense are scarce. In October 2010, a federal district court in South Carolina issued its opinion which was a nasty turn of events for BFPP’s. (Ashley II of Charleston, LLC v. PCS Nitrogen, Inc. (“Ashley II”), Case No. 2:05-cv-02782-MBS). The case was for recovery of cleanup costs associated with a former fertilizer manufacturing plant in Charleston, South Carolina.

The court decided that Ashley was not a BFPP, as it claimed, and was responsible for five percent of the clean-up costs based on the following facts: (1) Ashley had torn down some structures in 2008, which allowed rainwater to contact cracked sumps containing hazardous substances. As a result, disposal of hazardous substances had occurred after Ashley took possession of the property; (2) Ashley was “affiliated” with other PRPs because Ashley had indemnified them and, more significantly, attempted “to discourage EPA from recovering response costs covered by the indemnification”; and (3) Ashley had not exercised appropriate care because it failed to address recognized environmental conditions (RECs) that were identified in the environmental site assessment as well as other potential site hazards.

The lesson here is that Purchasers should consider the effect of indemnity provisions and any interactions they may have with government agencies regarding other PRPs. In addition, because “disposal” may be defined very broadly, purchasers should thoroughly evaluate construction, demolition, and other site activities to determine if such activities could cause a release of hazardous substances. Finally, it is critical that all RECs be addressed, beginning no later than the time the purchaser acquires the property and continuing for the duration of its ownership.

Oklahoma v. Texas--Water Wars

Posted on August 24, 2010 by Linda C. Martin

Tarrant Regional Water District (“TRWD”) provides water to more than 1.7 million Texans in an 11-county area, and wants to buy water from Oklahoma. However, Oklahoma isn’t selling. Oklahoma has enacted statutes that impose restrictions on water sales across state lines which, as a practical matter, preclude the interstate sale of Oklahoma water to the TRWD. In 2007, TRWD sued to have those restrictions lifted, arguing that under the Commerce Clause of the US Constitution, state laws that discriminate against other states regarding water, an alleged article of commerce, are unconstitutional.

TRWD also argued that the Red River Compact (“Compact”) supersedes Oklahoma’s laws and would permit the sale of water to TRWD. This Compact was signed by Texas, Oklahoma, Louisiana and Arkansas in 1978 and approved by the U.S. Congress in 1980. The Compact essentially “divided” the water from the Red River and its tributaries between the states involved. In November, the U.S. District Court for the Western District of Oklahoma granted partial summary judgment rejecting TRWD’s claims based upon the Commerce Clause. The Court determined that, in fact, protection of Oklahoma water for use in Oklahoma was one of the purposes of the Compact, although the judge noted that this case presented a close question.

TRWD amended its complaint, and argued that the law in Oklahoma would not preclude the sale of groundwater to TRWD. Although the judge agreed, he determined that this claim was not yet ripe for consideration, as TRWD had not yet filed an application with Oklahoma to obtain groundwater. In addition, another new claim was added--- that the purchase of water from the Apache Tribe of Oklahoma was not covered by the Compact. This claim was dismissed as not providing the basis for a justiciable claim, since the arrangement with the Tribe had too many contingencies and uncertainties.

The judge entered judgment in the TRWD case on July 16, 2010, and TRWD filed its appeal with the Tenth Circuit on August 12, 2010. Stay tuned, the water wars between Oklahoma and Texas are far from over.

UPDATE ON THE POULTRY LITIGATION IN OKLAHOMA Poultry litter is not a solid waste under RCRA

Posted on February 26, 2010 by Linda C. Martin

The Oklahoma State Attorney General sued several poultry companies for polluting the Illinois River and its watershed in Eastern Oklahoma as a result of the application and disposal of poultry litter in the watershed. State of Oklahoma v. Tyson Foods, Inc. et. al. Case No. 05-CV-329-GFK(PJC). The suit alleged claims under CERCLA, RCRA, and nuisance among other things. You are referred to the articles posted March 9, 2009 an September 3, 2009 for particulars regarding the claims. 

 

Two weeks before trial, the Cherokee Nation moved to intervene in the case as a necessary party, but the Judge wouldn’t allow it. The Court decided that the damages claims would not be tried, but that the injunctive claims as well as the state penalty claims could be tried with the absence of the Cherokee Nation in the suit. The reasoning was, among other things, that the Cherokee Nation would be potentially prejudiced if the remaining damage claims went forward without it, but that would not be the case if the remaining injunctive claims and state law penalty claims were tried. Although the Cherokee Nation filed an immediate appeal with the Tenth Circuit, it did not ask that the case be stayed pending the outcome of the appeal.

 

The case has now been tried to the Court. It began on September 24, 2009 and only this month concluded with closing arguments. However, during the trial the Court ruled, in response to a Rule 52(c) motion, among other things, that:

  • Poultry litter is an agricultural commodity for which there is both a market and a market value in the watershed.
  • Poultry litter has market value because it can be beneficially used as a fertilizer and soil amendment.
  • The State did not produce sufficient evidence to convince the Court that farmers, ranchers or other applicators of poultry litter in the Illinois River Watershed land-applied poultry litter within the watershed solely to discard it.
  • Under the applicable law and the evidence produced at trial, poultry litter is not a “solid waste” under RCRA, and therefore the State’s RCRA claim was dismissed. 

This ruling is very important because of the focus on nutrient issues under the Clean Water Act Nonpoint Source Pollution. EPA states on its website that “States report that nonpoint source pollution is the leading remaining cause of water quality problems.”  Indeed, EPA has a “National Nutrient Strategy” and is focusing more on these issues than ever before. 

UPDATE ON THE POULTRY LITIGATION IN OKLAHOMA Poultry litter is not a solid waste under RCRA

Posted on February 26, 2010 by Linda C. Martin

The Oklahoma State Attorney General sued several poultry companies for polluting the Illinois River and its watershed in Eastern Oklahoma as a result of the application and disposal of poultry litter in the watershed. State of Oklahoma v. Tyson Foods, Inc. et. al. Case No. 05-CV-329-GFK(PJC). The suit alleged claims under CERCLA, RCRA, and nuisance among other things. You are referred to the articles posted March 9, 2009 an September 3, 2009 for particulars regarding the claims. 

 

Two weeks before trial, the Cherokee Nation moved to intervene in the case as a necessary party, but the Judge wouldn’t allow it. The Court decided that the damages claims would not be tried, but that the injunctive claims as well as the state penalty claims could be tried with the absence of the Cherokee Nation in the suit. The reasoning was, among other things, that the Cherokee Nation would be potentially prejudiced if the remaining damage claims went forward without it, but that would not be the case if the remaining injunctive claims and state law penalty claims were tried. Although the Cherokee Nation filed an immediate appeal with the Tenth Circuit, it did not ask that the case be stayed pending the outcome of the appeal.

 

The case has now been tried to the Court. It began on September 24, 2009 and only this month concluded with closing arguments. However, during the trial the Court ruled, in response to a Rule 52(c) motion, among other things, that:

  • Poultry litter is an agricultural commodity for which there is both a market and a market value in the watershed.
  • Poultry litter has market value because it can be beneficially used as a fertilizer and soil amendment.
  • The State did not produce sufficient evidence to convince the Court that farmers, ranchers or other applicators of poultry litter in the Illinois River Watershed land-applied poultry litter within the watershed solely to discard it.
  • Under the applicable law and the evidence produced at trial, poultry litter is not a “solid waste” under RCRA, and therefore the State’s RCRA claim was dismissed. 

This ruling is very important because of the focus on nutrient issues under the Clean Water Act Nonpoint Source Pollution. EPA states on its website that “States report that nonpoint source pollution is the leading remaining cause of water quality problems.”  Indeed, EPA has a “National Nutrient Strategy” and is focusing more on these issues than ever before. 

NATIVE AMERICAN WATER RIGHTS IN OKLAHOMA - CHAPTER 2

Posted on September 3, 2009 by Linda C. Martin

On March 9, 2009, we posted an article regarding issues raised in the United States District Court for the Northern District of Oklahoma, State of Oklahoma v. Tyson Foods, Inc., et al., Case No. 05-CV-329-GFK regarding the Cherokee Nation ownership interests in the Illinois River and its watershed. In this case, the Attorney General for the State of Oklahoma sued several poultry companies for polluting the Illinois River and its watershed in eastern Oklahoma as the result of the disposal of poultry litter in the watershed. The suit alleges claims under CERCLA, RCRA, trespass and nuisance, among other things. The State of Oklahoma sought money damages and injunctive relief against the poultry companies.

The Poultry Defendants filed a Motion to Dismiss for Failure to Join the Cherokee Nation as a Required Party under Rule 19, or in the Alternative, Motion for Judgment on the Pleadings alleging the State lacks standing to prosecute the case. The Poultry Defendants alleged the Cherokee Nation possessed significant, legally protected interests in the Illinois River and it’s Watershed that would be impaired or impeded by its absence from the litigation, and further that the Court should grant judgment as a matter of law to the defendants because the State did not have standing to bring the suit.

 

In an apparent response to the Motion, the State of Oklahoma filed a “Notice of Filing of Document” to which was attached an agreement between the Cherokee Nation and the State of Oklahoma (Agreement). The Agreement, dated May 19, 2009, acknowledged, among other things, that the Cherokee Nation “has substantial interests in . . . water and other natural resources located within the Illinois River Watershed though the extent of those interests has not been fully adjudicated.”

The Agreement stated that the Cherokee Nation “to the extent of its interests in lands, water and other natural resources in the Illinois River . . . delegates and assigns to the State of Oklahoma any and all claims it has or may have against Defendants named in the [Tyson litigation] for their alleged pollution of the lands, water and other natural resources of the Illinois River Watershed resulting from poultry waste.” The Agreement purported to have a retroactive effective date of June 13, 2005, and was signed by the Attorneys General of the Cherokee Nation and the State of Oklahoma. 

The Poultry Defendants immediately challenged the Agreement by filing a “Counter-Notice” the following day, raising several issues as to the procedural and substantive validity of the Notice and Agreement under Oklahoma Law. The Court did not allow further briefing on the issues. 

Instead, the Court ruled on the Defendants’ Motions in a recent Opinion and Order. ___F.R.D.___ 2009 WL 2176337 (N.D. Okla. July 22, 2009)  The Court held that Oklahoma law explicitly sets forth the requirements the State must follow when entering into agreements such as the purported Agreement with the Cherokee Nation, which procedures were not followed in this instance. After examining other issues negating the validity of the Agreement, the Court concluded that that the Agreement was invalid and does not resolve or moot the Rule 19 Motion to Dismiss raised by the Poultry Defendants.  Id. at **3-4.

The Court undertook a Rule 19 analysis to determine if the Cherokee Nation is a required party to the action. Under Rule 19(a)(1), the Court analyzed (1) whether the Cherokee Nation claims an interest relating to the subject of the action, and (2) is so situated that disposing of the action in the Cherokee Nation’s absence may impair or impede its ability to protect the interest or leave an existing party subject to a substantial risk of incurring double, multiple or otherwise inconsistent obligations. 

The Court stated that Rule 19 does not require an absent party to possess an interest; it only requires that it claim an interest in the subject matter of the action. Id. at *4. Thus, the Court did not actually rule on the Cherokee Nation’s rights in the Illinois River watershed. It did, however, determine that the Cherokee Nation claims rights to the Illinois River and its watershed. The Court also noted that the Agreement operates as an admission by Oklahoma of the Cherokee Nation’s interest in the action. Id. at *5.

In addition, the Court examined portions of the Cherokee Nation Code, and noted that it evidences the Cherokee Nation’s interest in protecting the Illinois River and in vindicating its rights for pollution of the Illinois River watershed. It further claims an interest in recovering for itself civil remedies, including damages, for the same injuries to the watershed which are claimed in this action. The Court noted other provisions of the Cherokee Nation Code which evidence the Cherokee Nation’s substantial interest in the subject matter of the instant action. 

The Court noted: “The claimed interests of the Cherokee Nation in the water rights portion of the subject matter of this action are substantial and are neither fabricated nor frivolous.” (citation omitted) Id. at *6. Thus, the Court concluded that the Cherokee Nation claims an interest relating to the subject matter of the instant case for Rule 19 purposes. Id. at *7.

Under the second prong of Rule 19 analysis, the Court reviewed, among other things, whether the Cherokee Nation was so situated that disposing of the action in the Cherokee Nation’s absence might impair or impede its ability to protect its interest or leave an existing party subject to a substantial risk of incurring double, multiple or otherwise inconsistent obligations. After conducting its analysis of the foregoing factors, the Court concluded that proceeding with the case in the absence of the Cherokee Nation would subject the defendants to a substantial risk of incurring double, multiple or otherwise inconsistent obligations with respect to the claims for monetary damages, and would potentially cause prejudice to the Cherokee Nation’s sovereign interests, among other things. Id. at *9 (The parties had agreed that the joinder of the Cherokee Nation in the case was not feasible because of sovereign immunity. Id. at *9.

The Court also noted that the State had an adequate remedy if the damage claims were dismissed in that it could dismiss and refile the action after the State and the Cherokee Nation entered into a legally binding agreement under Oklahoma law authorizing the State to assert the Cherokee Nation’s CERCLA and other damage claims. Id. at *11.

The Court concluded that the State lacked standing to assert the claims of the Cherokee Nation, Id. at *12, and that the Cherokee Nation is a necessary party under Rule 19 with respect to the State’s claims for damages. Id. at *13. (The Poultry Defendants did not seek dismissal of the claims for injunctive relief.) The Court held that the Cherokee Nation is not a required party to the claims for violation of state environmental and agricultural regulations. Id.

On September 2, 2009, the Cherokee Nation filed its Motion to Intervene in the case, only two weeks prior to trial, and one day prior to the Pretrial Conference. 

Stay tuned, we’ll keep you updated.

Native American Water Rights in Oklahoma

Posted on March 9, 2009 by Linda C. Martin

The ownership of the Illinois River and its watershed in Oklahoma is currently at issue in Federal Court in the Northern District of Oklahoma in a case brought against the poultry industry. State of Oklahoma v. Tyson Foods, inc., et al., Case No. 05-CV-329-GFK (PJC). 

In this case, the Attorney General for the State of Oklahoma sued several poultry companies for polluting the Illinois River and its watershed in Eastern Oklahoma as a result of the disposal of  poultry litter in the watershed. The suit alleges claims under CERCLA, RCRA and nuisance, among other things. The poultry companies assert that the State has no standing to sue because, in this geographic area, under applicable treaties the natural resources (including the water in the Illinois River) are owned exclusively by the Cherokee Nation and not the State of Oklahoma. The defendants’ argument relies heavily on Choctaw Nation v. Oklahoma, 397 U.S. 620 (1970), which held that under various treaties, the Cherokee, Choctaw and Chickasaw Nations own fee title to the land, minerals, sand and gravel in and under the bed of the Arkansas River in Eastern Oklahoma. 

 

The Attorney General asserts that the State of Oklahoma is the exclusive owner of the stream water, not the Cherokee Nation, and relies on the laws and authorities which prescribe the rights and privileges of a new state. The State also claims under other cited authorities that even if it does not hold exclusive ownership of the water in the Illinois River, neither does the Cherokee Nation. The Cherokee Nation is not a party and has not filed a motion to intervene in the case.

 

Because of treaty similarities, a decision on this issue by the Tulsa Federal Court could well determine the ownership rights of all the Five Civilized Tribes, not just the Cherokees, as to water in any stream or river within or abutting the boundaries of the lands included within their original treaty grants. Thus, it could affect the ownership of stream water in approximately half of the State of Oklahoma. It could further have a significant impact on both development of the Oklahoma Comprehensive Water Plan now in progress, and the issue of who has the right to sell water to both in‑state and out‑of‑state purchasers (i.e., Texas).