Fourth Circuit Rules CERCLA Preempts State Statute of Repose

Posted on July 22, 2013 by Daniel Riesel

On July 10, 2013, a divided Fourth Circuit Court of Appeals held the Comprehensive Environmental Response, Compensation and Liability Act’s (“CERCLA’s”) federally-mandated commencement date preempts not only state statutes of limitations but also statutes of repose, an issue that has split federal courts and left considerable uncertainty about the timeliness of claims arising under CERCLA and environmental common law.

One of the unique aspects of CERCLA is that it imposes a universal statute of limitations on toxic torts and other state law claims for damages “caused or contributed to by exposure to any hazardous substance or pollutant or contaminant.”  42 U.S.C. § 9658(b)(4).  This statute of limitations runs from the time the plaintiff discovers, or reasonably should have discovered, the cause of the injury or damages.  CERCLA expressly preempts state statutes of limitations that set an earlier commencement date, such as the date of the tortious conduct or the date of the injury.       

CERCLA’s “federally required commencement date” has generated considerable commentary and confusion, with federal courts split over the scope of CERCLA’s preemptive effect.  One particularly divisive issue involves whether CERCLA preempts state statutes of repose, which are separate from statutes of limitations.  Statutes of repose generally provide a longer period in which to file a claim, but they cannot be tolled and often begin to run earlier as well.  Noting that the federally required commencement date under CERCLA refers only to “statutes of limitations,” the Fifth Circuit has held “the plain language of [CERCLA] does not extend to statutes of repose.”  Burlington N. & Santa Fe Ry. Co. v. Poole Chem. Co., 419 F.3d 355, 362 (5th Cir. 2005).

In Waldburger v. CTS Corporation, 2013 WL 3455775 (4th Cir. July 10, 2013), the Fourth Circuit adopted the contrary position, finding the relevant text of CERCLA to be ambiguous and interpreting it to preempt a North Carolina statute of repose.  Reversing the United States District Court for the Western District of North Carolina, the Fourth Circuit held that courts and lawmakers have often used the terms “statute of repose” and “statute of limitations” interchangeably, and that the application of CERCLA’s federal discovery rule was more consistent with the statute’s remedial purpose.  It therefore held a state repose period that required real property claims to be filed within 10 years of the tortious action did not apply to a nuisance claim alleging the discovery of groundwater contamination several years after the final alleged discharge.  In dissent, Judge Stephanie Thacker argued that, “the plain and unambiguous language of § 9658 indicates only statutes of limitations were intended to be preempted.” 

The Waldburger ruling will benefit plaintiffs harmed by the latent effects of environmental contamination, who may not become aware of their injuries until after a state statute of repose has run.  Such plaintiffs must exercise reasonable diligence, however, to establish they did not have reason to know of the harm at an earlier date. 

New Water Wars in Oregon’s Klamath Basin

Posted on July 9, 2013 by Martha Pagel

These are sad times in Oregon’s Klamath Basin.  The state is making national headlines again over water wars pitting farmers and ranchers irrigating lands above Upper Klamath Lake against the Klamath Indian Tribes.

The Klamath area first made front page national news in 2001, when farmers and ranchers protested the removal of water from irrigation in order to protect threatened sucker fish under the federal Endangered Species Act (ESA).  This time, the headlines stem from an unprecedented “call” for water to serve a time immemorial water right granted to the Klamath Tribes.  Under principles of the prior appropriation doctrine in place in Oregon and most western states, seniority matters, and time immemorial is the ultimate priority date. 

The current problem was a long time in the making. After more than 38 years of administrative proceedings, the Klamath Basin General Stream Adjudication finally reached a critical legal juncture in March, 2013 that allowed historic water use claims to be enforced for the first time.  At that time, the Oregon Water Resources Department (OWRD) issued its long-awaited “Findings of Fact and Final Order of Determination” (FFOD) summarizing the state’s proposed disposition of more than 730 claims.

The FFOD included the state’s quantification of treaty-based reserved water rights for the Klamath Tribes to ‎support fishing and gathering activities in Upper Klamath Lake and its tributaries.  Although the instream flow and lake level amounts claimed by the ‎Tribes and approved by OWRD are still subject to further judicial review, the state is obligated ‎to respond to the Tribes’ call unless and until a court stays the action. ‎

As a result of the call, OWRD has already begun the process of shutting off water diversions for all other upper basin water right holders to the extent needed to fully satisfy the Tribes’ approved claims.  This means a loss of water for thousands of acres of irrigated farmland and other junior uses including domestic water for homes, stock water, and even the lodge at Crater Lake National Park.  The regulation system is based strictly on priority dates; however, OWRD has taken emergency action to allow continued water deliveries for human consumption and stock water.

At this point, a coalition of upper basin water users has petitioned for a judicial stay of the FFOD’s enforcement.  A hearing was held on July 3, and a decision is expected soon.  If the stay is not approved, the upper basin lands will remain dry and the economic losses will be substantial.  With nearly 40 years to prepare, it is sad that the affected interests were not able to reach some level of negotiated agreement before the battle lines were drawn.  Although both Tribal and non-Tribal water users have expressed interest in a negotiated solution, ‎there is no settlement process currently underway, and the war rages on.‎

Enough Is Enough!

Posted on July 3, 2013 by Michael McCauley

On June 13, 2013, U.S. EPA announced its enforcement priorities for the next three years. Among other things, the Agency decided to continue its ill-fated, 15-year old "New Source Review (NSR) Enforcement Initiative."  This effort has targeted coal-fired power plants and other large manufacturing facilities for alleged violations of the Clean Air Act.  The allegations often pertain to projects which were implemented over twenty and thirty years ago.

Not surprisingly, EPA has not fared very well in the courts with cases like this.  The Agency has run into problems, including:  1) statute of limitations concerning projects completed more than five years before legal action has been commenced; 2) successor liability issues when the current owner/operator of a facility did not own or operate the facility when a targeted project was undertaken; and 3) serious evidentiary questions as to whether a decades-old project caused the requisite actual air emissions increase which triggers the requirements for NSR review under the Clean Air Act.  See generally "EPA's Utility Enforcement Initiative: The MetED Decision May Pose Problems for Plaintiffs," BNA Daily Environment Report, June 13, 2013; U.S. v. Midwest Generation, LLC, 694 F. Supp. 2d 999 (N.D. Ill. 2010), appeal pending in 7th Circuit Court of Appeals.

A recent notice of violation illustrates some of the unfairness and waste of resources connected with EPA's NSR Enforcement Initiative.  EPA issued the notice in 2012.  It alleged a number of NSR violations against the owner/operator of a manufacturing facility (not a utility).  One of the allegations pertained to a change made at that facility in 1982.  Since 1982, the ownership of the facility has changed four times.  The current owner has been targeted in EPA's enforcement action.  Records regarding the 1982 project are scant, and the personnel involved in the work in 1982 are all either long-retired or deceased.

To make matters worse, EPA had received the available information about the 1982 project in 1999 from the party who owned the facility at that time.  This was done in response to a Section 114 Information Request issued by EPA.  That owner heard nothing further from EPA about any of the projects covered in the 1999 inquiry.

In 2011, EPA issued a new Section 114 Information Request to the current owner who had acquired the facility in 2006.  The request covered projects that occurred after 1999, but it also covered projects which were done prior to 1999, including the 1982 project discussed above.

A reasonable person could ask:  1) Why did EPA wait for 13 years to allege a NSR violation regarding the 1982 project when the Agency was given information about it in 1999?  2) Why is EPA taking action now on a change made at the facility over thirty years ago?  3)  Why is EPA targeting the owner who acquired the facility in 2006 -- some seven years after EPA was first given information about the 1982 project?  4)  Has EPA considered that the current owner/operator of the facility is four times removed from the owner/operator who implemented the change in 1982?

Substantial amounts of money and countless hours of valuable employee time have been expended by the current owner in dealing with EPA on this case.  Both the money and the time could have been better utilized in helping to keep the facility competitive in a very challenging global marketplace.

EPA should consider whether the continuation of the NSR Enforcement Initiative is justified with respect to projects that occurred decades ago.  With most of these cases, fair-minded decision-makers at EPA will find that "Enough is Enough!"

Offers of Judgment Permitted in RCRA Citizen Suit Attorney Fees Disputes

Posted on June 28, 2013 by John A. McKinney Jr

A Third Circuit decision this month determined that offers of judgment pursuant to Fed.R.Civ.P. 68 may be made in attorney fee disputes in RCRA citizen suits (42 USC § 7002).  In Interfaith Community Organization v. Honeywell International, Inc., 2013 WL 2397338 (C.A.3 (N.J.)  Honeywell International (“Honeywell”) agreed to pay certain fees and costs in connection with Appellees Interfaith Community Organization and Hackensack River keeper’s monitoring costs in connection with Honeywell’s remediation of certain sites.  A dispute arose as to Appellees’ counsel’s fee filings, and Honeywell served offers of judgment as to the disputed fees.  Appellees contended that the offers were null and void in a RCRA citizen suit and prevailed on the issue below.  The Third Circuit overturned the decision below.

The Third Circuit first addressed the argument that Rule 68 is incompatible with Congressional intent allowing RCRA  citizen suits and is forbidden by the Rules Enabling Act, 28 US § 2072.  That act prohibits the Supreme Court from adopting general rules of practice and procedure for cases in the US courts that abridge, enlarge or modify a substantive right.  The Third Circuit found that Rule 68, in facilitating settlements, does not affect a litigant’s substantive rights even though a litigant may be faced with a hard choice.  Being forced to make that choice does not abridge, enlarge or modify its substantive rights.  The court found unpersuasive the appellees’ arguments attempting to distinguish a Supreme Court case that allowed Rule 68 in civil rights litigation involving fee shifting.

In the case below, the District Court had entered a judgment ordering Honeywell to remediate one area and Honeywell had entered into consent decrees agreeing to remediate additional areas.  Appellees contended that Rule 68 cannot apply after a judgment has been rendered on liability.  The Third Circuit disagreed and found that liability also included fees and costs, and they had not been determined in this case.

Given this decision (which also addresses issues other than Rule 68), it is likely RCRA citizen suit defense counsel will utilize the offer of judgment rule more often.  However, there are numerous cases and articles detailing the perils of using the rule in the wrong case or in the wrong way.  Counsel should pay close attention to those.

Taking the Fifth on the Fifth’s Taking Clause

Posted on June 26, 2013 by Robert M Olian

…nor shall private property be taken for public use, without just compensation.

Everyone understands the Fifth Amendment’s takings clause to mean, at a minimum, the government cannot force the transfer of private property to the government even for a manifestly governmental purpose (e.g. a highway right of way, or a new airport runway), without compensating the property owner.

Tuesday’s Supreme Court decision in Koontz v. St. John’s River Water Management District is the latest in a series of Supreme Court rulings to extend the protections of the Takings Clause beyond the obvious governmental requisitioning of private property. That’s “latest,” not “last”.

Nollan v. California Coastal Commission (1987) and Dolan v. City of Tigard (1994), combine to set forth the Court’s requirements for an “essential nexus” and “rough proportionality” between conditions on land use development and the government’s underlying objectives in the permit scheme to which the property owner is subjected. Absent either nexus or proportionality, a taking has occurred, and the Takings Clause requires that the property owner get “just compensation.” So far, so good.

The facts in Koontz are to some extent irrelevant; indeed the Court’s opinion expressly disowned any determination of the merits of his particular claim for compensation. Depending on whose brief you read, Koontz wanted to develop some wetlands property but the Water Management District refused to approve his project as proposed and put forth some mitigation options that were either “extortionate demands” or “helpful suggestions”, one of which consisted of Koontz spending money to improve public lands remote from his own property. Koontz took umbrage and sued under Florida state law.  The trial court found for Koontz on the basis of Nollan-Dolan, and the intermediate state appellate court affirmed.

The Florida Supreme Court reversed for two reasons: first, it held the Nollan-Dolan standard does not apply to denial of a permit; and second, it held the standard does not apply to a requirement for the payment of money, as opposed to the impairment of a specific piece of property.

Every Justice agreed that the Florida Supreme Court got the first part wrong; that is, they all agreed the Takings Clause applies to permit denials as well as permit approvals. The majority and dissent parted ways with respect to the second question, however, with the majority again holding that Florida got it wrong and that excluding monetary exactions would allow permitting agencies to improperly circumvent the Nollan-Dolan requirements.

Now, one can agree or disagree with the majority, but the decision hardly shocks the conscience. What the decision holds is far less important than what remains to be decided in future cases:

1.    How concrete and specific must a demanded concession be to give rise to liability under Nollan and Dolan?
2.    What happens if a permitting authority merely says, “Denied, come back with something better,” and makes no other demand?
3.    Where will the line be drawn to prevent countless local land use decisions from becoming federal cases?

On these points, the majority took the Fifth.

Surprise, Surprise, Surprise: An Agency Cannot Revise Regulations In a Consent Decree

Posted on May 22, 2013 by Seth Jaffe

In a decision that should not have come as a surprise to anyone, the 9th Circuit Court of Appeals ruled late last month, in Conservation Northwest v. Sherman, that the Bureau of Land Management and other agencies implementing the Northwest Forest Plan could not amend the NFP without complying with the procedural requirements of the Federal Land Policy Management Act.  The rationale of the decision should apply far more broadly than just the FLPMA, however.  It should apply to any action by any agency purporting to amend agency regulations that would otherwise be subject to procedural requirements, such as notice-and-comment rulemaking, without complying with those procedural protections.

The history of the case itself it tortuous and not really relevant here.  The short version is that the agency defendants sought to resolve citizen litigation regarding the “Survey and Manage” provisions of the NFP by entering into a consent decree that would amend certain elements of Survey and Manage.  It was uncontested that, if the agencies had sought to do so outside the context of litigation, they would have had to follow FLPMA requirements.  The agencies – and the District Court which upheld entry of the consent decree – argued that, because approval of a consent decree is a “judicial act”, it is not subject to the FLPMA procedures.

I’ve got to say, that argument just seems like a non sequitur to me.  In any case, the 9th Circuit rejected it, concluding that:

"a district court abuses its discretion when it enters a consent decree that permanently and substantially amends an agency rule that would have otherwise been subject to statutory rulemaking procedures."

Well, yeah.

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Still Unclear Whether Twiqbal is Game Changer for Pleading Environmental Claims

Posted on May 15, 2013 by Richard Horder

What lessons can environmental litigators take from the Supreme Court’s recent jurisprudence on pleadings?  As most of the legal community is aware, the Court retired the “no set of facts” standard for a motion to dismiss under Rule 12(b)(6) and installed a “new” plausibility pleading standard in its 2007 decision, Bell Atlantic Corp. v. Twombly and 2009 decision, Ashcroft v. Iqbal.  Together, these cases are often affectionately called “Twiqbal” and have caused both the courts and plaintiffs a great deal of angst over the years since their pronouncement.  Yet, in the midst of the confusion, the greater question remains whether these decisions, as a practical matter, actually represent a game changer for pleading.

According to the latest Report to the Judicial Conference Advisory Committee on Civil Rules, there has been no increase in the rate of courts granting motions to dismiss following Twiqbal.  However, a recent study from the University of California Hastings College of Law disputes this conclusion and finds that dismissal rates of all claims have, in fact, increased since Twiqbal.  More importantly, the Hastings study finds a greater likelihood that a claim will be dismissed for factual insufficiency following the Supreme Court’s decisions.

Such studies raise the question of what impact, if any, Twiqbal has today on pleading environmental claims.  Thus far, although several courts have addressed environmental claims under the Twiqbal plausibility standard, the results have not been consistent.  Like the antitrust and civil rights claims addressed in Twombly and Iqbal, courts have often elevated the pleading standard for environmental claims due to their complexity, which often requires expensive discovery to flesh out the facts after filing the complaint.  An early dismissal in such circumstances stands to avoid substantial litigation costs.  Thus, if a court believes Twiqbal indeed represents a heightened pleading requirement, it is likely to require more specific facts to support the relevant environmental claims.

Accordingly, the environmental plaintiff should hedge its bets and take care in crafting its complaint if it is filing in federal court.  Specifically, the plaintiff may want to take more time to investigate prior to filing to better describe the defendant, it’s link to the site, the types of hazardous substances released, and how specifically the defendant’s actions caused the release and the damages incurred.  Depending on the circumstances, the plaintiff may want to avoid federal court altogether and rely on state claims as most states have yet to adopt the Twiqbal plausibility pleading standard.  On the other side of the field, the environmental defendant should more carefully consider the value of filing a motion to dismiss for factual insufficiency and attack any gaps between the facts alleged and the formulaic recitations of the elements of the claim.

Logging Road Runoff Does Not Require an NPDES Permit: The Supreme Court (For Now) Defers to EPA’s Interpretation of Its Own Regulations

Posted on March 22, 2013 by Seth Jaffe

On Wednesday, in Decker v. Northwest Environmental Defense Center, the Supreme Court ruled that runoff from logging roads does not constitute a discharge from a point source that requires an NPDES permit.  The decision upholds EPA’s interpretation of its own regulations and overturns – what a surprise! – a 9th Circuit decision which had held that permits were necessary for logging runoff.

While EPA got the result that it wanted here, the decision may come back to haunt it in the long run.  The decision was largely based on what is commonly known as Auer deference, the rule that courts will defer to an agency’s interpretation of its own regulations unless that interpretation is “plainly erroneous or inconsistent with the regulation.” After a thorough review of the various relevant regulations and a dip or two into the Oxford American Dictionary, and after noting that the agency’s interpretation need not be “the best one”, the Court found EPA’s interpretation “permissible.”

So, why should EPA be concerned?  Justice Scalia, at his most curmudgeonly, dissented on the ground that Auer should be overturned because it grants too much authority to agencies.  Justice Scalia rejected out of hand what I would have thought would be the simplest and most obvious defense of Auer:  that if courts defer to agency interpretation of statutes under Chevron, shouldn’t they, a fortiori, defer to agency interpretation of the agency’s own rules?  Apparently not.  To Justice Scalia, Chevron deference merely allocates to agencies, rather than courts, the primary duty of interpreting statutes, but allowing agencies to interpret their own regulations has the dangerous result of concentrating both the writing and interpretation function in one branch of government.

I don’t buy it, but it’s important to note that, while Justice Scalia was the sole dissenter, Justice Roberts wrote a concurring opinion, joined by Justice Alito, stating that, while Decker was not the proper case to reassess Auer (a cynic might say that Justice Roberts reached that conclusion because EPA was aligned with industrial interests, rather than the environmental NGOs, in Decker), they were both open to reviewing Auer in the proper case.

Sounds like three votes to me.  Somewhat surprisingly, Justice Thomas joined neither the concurrence nor the dissent.  Justice Kennedy wrote the majority opinion, so he clearly still believes in Auer.  Without Kennedy and with Thomas a cypher at this point, the votes to revisit Auer may not be there.  In any case, it is worth noting that Justice Breyer, who is Justice Scalia’s frequent sparring partner on administrative law issues, took no part in the decision.  I look forward to his spirited defense of Auer when the time comes.

Hydraulic Fracturing Fluid Balancing Act: Disclosure Versus Protection of Trade Secrets

Posted on March 7, 2013 by Linda Bullen

One of the many controversies surrounding hydraulic fracturing involves the protection of trade secrets in an evolving regulatory environment hungry for more information about every aspect of operations.  Regulators, litigants and the public press for disclosure of the composition of hydraulic fracturing fluids while manufacturers and operators resist full disclosure to protect proprietary formulas believed to be valuable secrets.  
 
In a pre-rulemaking decision draft of hydraulic fracturing regulations released on December 18, 2012, California addressed the tension between protecting trade secrets and the public's right to obtain information under California's Public Records Act ("Act").   Under the draft regulations, operators are not required to disclose the chemical composition of hydraulic fracturing fluid prior to drilling.  After fracking, operators must disclose the chemicals in their fracturing fluid by chemical family and by percent of the fluid.  Disclosure of precise chemicals and formulas is not required.  Operators must also provide contact information for the person or entity that possesses the information withheld as a trade secret.
 
The California draft regulations reflect a national trend.  Alaska, however, bucks this trend with draft regulations released in December which require full disclosure of each fluid additive type by chemical name, CAS registry number and concentration.  The issue is far from resolved and we can certainly expect more regulation and litigation.

Seventh Circuit Allows Cost Recovery Action for AOC Response Costs

Posted on January 25, 2013 by John Barkett

In Bernstein v. Bankert, the Seventh Circuit follows the Second, Third, Eighth, and Eleventh Circuits in holding a CERCLA plaintiff with a contribution claim under Section 113(f) does not have a cost recovery claim under Section 107.  But when does a signatory to an administrative order on consent (AOC) have a contribution claim?

Plaintiffs incurred response costs arising out of two administrative orders on consent (AOC).  The first AOC resulted in an engineering evaluation and cost analysis of removal options.  The second AOC resulted in implementation of the selected removal action.

The first AOC was carried out to its completion.  Completion of the second AOC was conditioned, however, upon the “complete and satisfactory performance by Respondents of their obligations under this Order” and issuance of a Notice of Completion by EPA, and neither condition had occurred at the time of the summary judgment.

The district court held plaintiffs could only sue in contribution and the limitations period had run on claims under both AOCs.

The court of appeals agreed on the claim arising out of the first AOC since that AOC had been completed and too much time had passed before suit was filed.  It disagreed on the claim arising out of the costs incurred under the second AOC, however, because Section 113(f)(3)(B) of CERCLA gives a contribution action to a person “who has resolved its liability to the United States … in an administratively … approved settlement,” and the second AOC had not yet been completed.  Thus, plaintiffs had not “resolved their liability” to the United States and could only bring a claim under Section 107 for which the limitations period had not yet run.  The court of appeals also held that whether costs are incurred voluntarily or involuntarily is irrelevant since 113(f)(3)(B) focuses only on whether liability had been “resolved.” 

There was no discussion of what might happen if the second AOC was completed during the course of the litigation so all CERCLA lawyers should stay tuned.

States Investigate EPA's "Sue-and-Settle" Practice

Posted on January 15, 2013 by Mark Walker

The Attorney Generals of thirteen states (Alabama, Arizona, Georgia, Kansas, Michigan, Nebraska, North Dakota, Oklahoma, South Carolina, South Dakota, Texas, Utah and Wyoming) are investigating EPA's sue-and-settle practice.  At issue is the EPA's practice of entering into voluntary settlements of lawsuits brought by environmental groups, through consent decrees, in which the EPA commits itself to promulgate environmental rules and regulations, often under strict time schedules, without input from other stakeholders and impacted parties, including the states.  Often-times the EPA also reimburses the environmental group for its attorney fees.  Although the stakeholders may have input in the subsequent rulemaking process, the concern is that the effectiveness of such input may be limited because certain results are prescribed by the voluntary settlement or because the agreed schedule effectively limits meaningful input and consideration.

These same concerns were also recently discussed in the June 28, 2012, hearing before the Oversight and Government Reform Committee of the U.S. House of Representatives.  Hearing statements and testimony provided good descriptions of (i) how sue-and-settle settlements are a form of "off ramp" rulemaking bypassing the traditional rulemaking concepts of transparency, public participation and judicial review; (ii) how billions of dollars in added costs and millions of lost jobs have resulted from these off ramp settlements and why these added regulatory burdens may not have resulted had the traditional rulemaking process been followed; and (iii) the specific impact of EPA's sue-and-settle settlement upon the Regional Haze rules.

On August 10, 2012, the thirteen Attorney Generals submitted a Freedom of Information Act (FOIA) request to EPA.  Among other things, the request seeks communications between EPA and 80 identified "interested organizations", and specifically identifies 33 sue-and-settle settlements entered into by EPA in the last three years.  After noting in a press release that EPA entered into one consent decree on the same day the lawsuit was filed, the states seek to determine whether there was collusion to advance a common agenda between the environmental groups and EPA.  The FOIA request’s stated purpose is to provide a report to be furnished to the states and Congress outlining EPA's practice.  So far, the EPA has done little but object to producing documents, seeking to impose fees upon the states even though the request should be exempt from fees.  No meaningful production of documents has occurred.

Certainly there are some good arguments to be made regarding the benefits of allowing citizen groups to file lawsuits to hold EPA accountable. Similarly, there are articles refuting the suggestion of collusion concerning certain prior EPA settlements.  Nevertheless, where important environmental policy issues are at stake with far reaching economic consequences, there should never be any question about collusion or secrecy.  Transparency should always be the watchword.  EPA’s production of the requested documents would do much to advance the goal of transparency.  If the settlements were in the best interest of the public, they should be able to withstand the glare of public scrutiny.

Reflections on 35 Years as an "Air-Head"

Posted on November 29, 2012 by Michael McCauley

Author's Note: I wrote this piece at the request of my firm earlier this year.  It appeared in the "Diversity Blog" on our firm's website around "earth Day" in April, 2012.  After attending the ACOEL Annual Meeting in Washington, D.C. this past week, I know that many other College Fellows share my sentiments about the field we have been fortunate enough to practice law in during our careers.

I have been practicing environmental law at Quarles & Brady (in Milwaukee WI), in one form or another, since I joined the firm as a brand new attorney in 1977. Charlie Kamps was kind enough to be my mentor in the early days, and he gave me many opportunities to work with him on Clean Air Act issues. Over the years, I have been heavily involved in virtually all aspects of environmental law, but my work under the federal Clean Air Act became a real specialty. Among colleagues around the country who specialize in this area of the law, we often (somewhat sarcastically) refer to ourselves as "Air-Heads."

Working in environmental law has been very exciting. When I started out, Charlie and I were really the only two attorneys in the firm who devoted most of our practice time to environmental law. [There were many others in the firm who handled environmental litigation cases, such as the important Illinois v. Milwaukee Clean Water Act case which Quarles & Brady won in the U.S. Supreme Court in 1981. But those lawyers did not normally do environmental work on a day-to-day basis for a large number of firm clients.] In the early 1980's, the environmental practice area exploded with the passage of the federal Superfund Law and its eventual impact on virtually all corporate transactions, lending work and real estate ventures. Quarles & Brady's Environmental Practice Group grew to nearly thirty lawyers (in seven offices and four states) by the late 1990's.

For most of those years (from 1986 to 2007), I rode the wild, environmental-law-growth "roller coaster" as Chair of the firm's Environmental Law Group. At the same time, I was involved in many high stakes cases and transactions. Most of my work centered on air permitting and in defending Clean Air Act enforcement cases. I grew accustomed to living my professional life going at 100 mph on a regular basis. The issues were complex and novel, and I derived immense satisfaction from helping to steer difficult matters to a successful resolution.

The real stakes in environmental law could not be more important -- the protection of human health and welfare and the safeguarding of our natural resources for future generations. Many people think that it should be relatively easy to do all that -- just "follow the law." However, our environmental laws do not give precise directions on how this is to be accomplished. The laws set overall goals and prescribe processes by which those goals are to be achieved. But most often, the real requirements of our environmental statutes must be worked out on a case-by-case basis. This requires a complicated balancing of scientific, economic, engineering, legal and political factors. It is this balancing process which I have found exhilarating to be involved in throughout my career.

I am grateful for the opportunity to be involved in this important work. It has given meaning and a sense of real accomplishment to my professional life.

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?

U.S. SUPREME COURT REFUSES TO WEIGH IN ON CONTINUING CERCLA COST RECOVERY VS. CONTRIBUTION SAGA

Posted on November 21, 2012 by William Hyatt

On October 9, 2012, the Supreme Court denied a petition for certiorari in Solutia, Inc v. McWane, Inc., declining to further clarify the question raised and expressly left unanswered in footnote six of the Court’s opinion in United States v. Atlantic Research Corp., 551 U.S. 128 (2007).  The issue is what section of CERCLA provides private parties with the authority to recover their costs at Superfund sites from other “covered persons” liable under the statute — Section 107(a) or Section 113(f).  The choice is important because different rules of liability and different statutes of limitation apply to contribution and cost recovery claims.  In Solutia, the Eleventh Circuit ruled that a party subject to a consent decree is limited to a claim for contribution under Section 113(f) and does not also have a claim for cost recovery under Section 107(a).

In Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004), the Court held that contribution under Section 113(f) is available to a private party only “during or following” a suit under Sections 106 or 107.   In Atlantic Research, the question was whether a “covered person” under CERCLA could obtain cost recovery under Section 107(a)(4) in circumstances in which contribution was not available under the holding in Cooper Industries.  In Atlantic Research, the Court explained that Sections 107(a) and 113(f) provide “clearly distinct” remedies available in different circumstances.  Contribution under Section 113(f) is available “when a party pays to satisfy a settlement agreement or a court judgment,” because, then, the party “does not incur its own costs of response.  Rather, it reimburses other parties for costs that those parties incurred.”  “By contrast, § 107(a) permits recovery of cleanup costs but does not create a right to contribution.  A private party may recover under § 107(a) without any establishment of liability to a third party.  Moreover, § 107(a) permits a PRP to recover only the costs it has ‘incurred’ in cleaning up a site.”

That explanation left unanswered the question of what section of the statute applies in the common situation in which parties enter into settlements or sign consent decrees, agreeing to perform work.  Those parties have a right to contribution under Section 113(f), but they also incur their own cost in cleaning up a site.  In footnote 6 in the Atlantic Research opinion, the Court expressly declined to decide that question (“We do not decide whether these compelled costs of response are recoverable under §113(f), §107(a), or both.”).

Litigation of that unanswered question followed in the lower courts.  The Eleventh Circuit in Solutia referenced decisions in the Second (Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112 (2d Cir. 2010)), Third (Agere Sys., Inc. v. Advanced Envtl. Tech. Corp., 602 F.3d 204 (3d Cir. 2010)) and Eighth (Morrison Enter., LLC v. Dravo Corp., 638 F.3d 594 (8th Cir. 2011)) Circuit Courts of Appeals to decide that parties settling their CERCLA liability with government agencies are limited to Section 113(f) contribution claims, even though they incur their own costs of response in complying with the settlement (“[w]e agree with our sister circuits that we must deny the availability of a §107(a) remedy under these circumstances in order [ ] ‘[t]o ensure the continued vitality of the precise and limited right to contribution”). 

The Supreme Court’s denial of petition for certiorari in Solutia is not necessarily the final word on the long running saga of the interplay between Sections 107(a) and 113(f).  For example, it may be appropriate to limit a potentially responsible party to Section 113(f) contribution claims when it is subject to a consent decree, because a consent decree would generally be filed with the court accompanied by a complaint, be subject to public comment, resolve a party’s CERCLA liability to the government, and provide the party with contribution protection.  The Third Circuit in Agere found that the contribution protection granted to plaintiffs under a consent decree would allow plaintiffs complete recovery under §107(a), while at the same time shielding those plaintiffs from a contribution counterclaim.  This would be a “perverse result,” as the plaintiffs had stipulated that they were responsible for a significant portion of contamination at the site.  However, a different conclusion may be warranted under different facts.  Indeed, the Court in Agere noted that it “need not decide the contours of the overlap postulated in Atlantic Research because, regardless of whether §107(a) and §113(f) remedies overlap at all, they cannot properly be seen to overlap here.”  Thus, “the contours of the overlap” may be an issue to be decided another day.

GHG Nuisance Damages – now or later?

Posted on October 8, 2012 by Thomas Lavender

The full import of the pivotal American Electric Power Co., Inc. v. Connecticut, 131 S. Ct. 2527 (2011), decision holding that federal common law claims for injunctive relief were displaced by federal regulation of GHGs under the CAA remain to be decided.  The Ninth Circuit Court of Appeals has now upheld the dismissal of a federal nuisance action filed in 2008 against Exxon Mobil et al., seeking damages for flooding attributable to climate change.  Native Village of Kivalina v. Exxon-Mobil Corp., No. 09-17490 (Sept. 21, 2012).  Damage estimates approached $400 million.  The suit was dismissed by the District Court in 2009 on the grounds the regulation of greenhouse gases was a legislative matter rather than a judicial controversy and for lack of standing.

The Supreme Court in AEP held only that the plaintiff was not entitled to injunctive relief.  Relying on AEP, the Ninth Circuit held that the federal Clean Air Act displaces climate change-related federal common law public nuisance claims for both injunctive relief and damages.  In a concurring opinion, Judge Pro wrote that he would have dismissed for lack of standing as the plaintiff had failed to prove its injuries were directly attributable to the defendants.

In AEP, the Supreme Court held that the CAA would bar state common law nuisance claims if such claims were preempted, but the Court did not decide if the CAA in fact preempted state common law nuisance claims.   In Kivalina, the district court dismissed the state common law nuisance claims without prejudice.  The Ninth Circuit did not rule on the validity of these claims.  Since the plaintiff’s state common law claims are undisturbed by this decision, it remains to be seen whether Kivalina or other will pursue such claims.

Defining Additionality: Why the Challenge to California’s Cap-and-Trade Program Fails

Posted on August 20, 2012 by Patrick Dennis

Co-Authored by: Beth A. Coombs, Gibson Dunn & Crutcher LLP

California’s recently approved regulations establishing a Cap-and-Trade Program for the reduction of greenhouse gas (“GHG”) emissions are already under attack in California court.  In March 2012, two citizen groups filed a petition challenging the California Air Resources Board’s (“CARB’s”) regulations that allow entities to quantify GHG emission reductions and take credit for those reductions while, at the same time, making such reductions available to other GHG emitters to purchase as an “offset” to their own greenhouse gas emissions.  The case, Citizens Climate Lobby and Our Children’s Earth Foundation v. California Air Resources Board, Case No. CGC-12-519554, filed in San Francisco County Superior Court, represents the first major legal challenge to California’s landmark Cap-and-Trade Program.

The Cap-and-Trade program is part of the Global Warming Solutions Act of 2006, which the California legislature adopted in 2006 under Assembly Bill 32.  The bill required statewide GHG emissions to be reduced to their prior 1990 levels by 2020.  Cal. Health & Saf. Code § 38550.  As part of its overall statutory scheme, AB 32 vested the CARB with the discretion to decide whether to adopt regulations employing “market based compliance mechanisms.”  Health & Safety Code §38570.  Exercising that discretion,  CARB, through a multi-year process involving extensive public comment, promulgated regulations establishing offset credits through protocols specific to certain industries or business operations.  It is these offset protocols that are now under attack.

Petitioners claim that the protocols adopted by the CARB allow GHG emission reductions that are not “additional.” This, they say, violates AB 32’s mandate that offsets must be “in addition to any greenhouse gas emission reduction otherwise required by law or regulation, and any other greenhouse gas emission reduction that otherwise would occur.”  Cal. Health & Saf. Code § 38562(d)(emphasis supplied).  However, Petitioners’ interpretation of “additionality” is inappropriately and prohibitively narrow.  For example, under Petitioners’ view of AB 32’s requirements, the offset protocol for the use of anaerobic digesters that reduce GHG emissions (primarily methane) by treating manure at dairies and hog farms allows in “non-additional” projects because some farms within the United States already use digesters—despite the fact that (1) farms currently using digesters would not be credited under the program, (2) the use of digesters on farms is still rare, and (3) most digesters currently in use were installed under grants for increasing energy efficiency.  As another example, Petitioners argue that the offset protocol for the destruction of ozone depleting substances (“ODS”) allows crediting for projects that otherwise would occur because while less than 1.5% of recoverable U.S. sourced ODS is currently being destroyed, there are still ‘business reasons” aside from offset incentives for destroying ODS.  And they point to the General Electric Company as an example of a company that gains “goodwill” with the consumer public by voluntarily destroying ODS.

This prohibitively narrow view of AB 32’s offset requirements for “additionality” effectively nullifies the California legislature’s grant of regulatory authority to CARB to create an offset program, because no such program could comply with the strictures laid out by Petitioners.  Indeed, it is Petitioners’ philosophical disagreement with the legislature’s decision to allow an offset program that underlies this litigation.  Two members of one of the groups challenging the offsets long ago advised CARB that, “[i]t is critically important for ARB to resist the temptation to make offsets part of California’s cap-and-trade program.”  Laurie Williams & Allan Zabel, Comment on Proposed GHG Offset Protocols, 9, Dec. 13, 2010, Comment 521 for California Cap-and-Trade Program.  But this fundamental disagreement about whether offsets should be part of a government greenhouse gas reduction program is necessarily a policy decision – not one that should be decided by the courts – and the legislature clearly gave CARB the discretion to adopt the protocols.  

The legal problem with Petitioners’ attack is that they sidestep the critical definition of “additional” that CARB adopted as part of the same regulatory package that contains the offset protocols.  That definition provides that:

"in the context of offset credits, [GHG] emission reductions or removals that exceed any [GHG] reduction or removals otherwise required by law, regulation or legally binding mandate, and that exceed any [GHG] reductions or removals that would otherwise occur in a conservative business-as-usual scenario.”  Cal. Code of Regs. tit. 17, Section 95802(a)(3). 

The four protocols challenged by the litigation – livestock (digestors), ozone depleting substances, forests and urban forests – were all developed through a lengthy and thorough public process involving stakeholders from all perspectives on the political spectrum.  In each case, data and research were devoted to determining what “business as usual” meant with respect to GHG emissions reductions.  And where there were clear additional steps that very few, or almost none, of the industry was taking regarding GHG emissions reductions, then protocols were developed to recognize such steps as potentially qualifying for offsets.  There seems little doubt that the protocols easily meet the CARB definition of “additional” and that may be why Petitioners chose to avoid a challenge of the regulatory definition, and instead simply to claim that the protocols violate the statute.  But their failure to challenge the definition in the same regulatory package seems like a transparent attempt to avoid the more lenient “arbitrary and capricious” standard of review for the adoption of most regulatory programs in California, and to try for the more rigorous “de novo” standard of review.

All of these issues are laid out in the briefs that have been filed by Petitioners, CARB, and the interveners which include the Climate Action Registry (the original developer of the protocols), a business interveners group which includes many of the large utilities (Southern California Edison, for example, is a member), and the Environmental Defense Fund.  The Nature Conservancy has also submitted an amicus brief. It is certainly telling that a coalition of major utilities, the Environmental Defense Fund, and The Nature Conservancy have all lined up to take the same position of defending CARB’s adoption of the four offset protocols. 

The Court has scheduled November 6, 2012 as the date to hear the matter.

The Perils of Budget Balancing – or When to Let Sleeping Dogs Lie

Posted on August 2, 2012 by Susan Cooke

On June 14, the Washington Supreme Court heard oral arguments regarding the constitutionality of utilizing the proceeds from a state excise tax on motor vehicle fuel for non-highway related purposes.  The tax in question is the Hazardous Substances Tax which went into effect in its current form in 1989 as part of the Model Toxics Control Act and covers the first in-state possession of petroleum products, pesticides, and a number of chemicals, with “possession” defined as “control of”, and “control” as the power to sell or use, or to authorize sale or use. 

The tax is currently set at 0.7% of the fair market wholesale value of the substance in question, with 47.1% of the proceeds placed in the State Toxics Control Account and the remaining 52.9% in the Local Toxics Control Account.  Those accounts provide funding for contaminated site cleanup and a number of other state and local environmental programs, particularly those relating to waste and toxics controls.  The projected tax revenues for fiscal year 2013 are estimated to be $144 million, with more than 80% of those revenues attributable to payments made by in-state petroleum refineries.

According to the pleadings, the plaintiff Automobile United Trades Organization (“AUTO”) had some concerns about the legality of the Hazardous Substance Tax as adopted in 1989, but did not raise an objection at that time because AUTO also believed it was “good to clean up toxins in the environment”.  As a result, the pleadings reference an “uneasy peace” that continued in effect until the Washington State Legislature diverted $180 million of the 2009 tax proceeds to the state’s general fund to help balance the state budget, and  bills were introduced in both the state house and senate in 2010 to increase the tax rate from 0.7% to 2% and divert very substantial percentages of the additional revenues to the general fund for at least several years thereafter. 

In 2010 the AUTO and Tower Energy Group filed a declaratory judgment action with respect to the constitutionality of the Hazardous Substance Tax as applied to motor vehicle fuel, arguing that any proceeds from taxing motor vehicle fuel must be used for highway purposes under the 18th Amendment of the Washington State Constitution (see Article II, Section 40).  A lower court dismissed this argument, concluding that the Amendment did not require such use.  It also found that the claim was barred by the doctrine of laches.

The 18th Amendment was adopted in 1944 after the state legislature had used gas tax revenues to fund non-highway related projects.  It provides that motor vehicle license fees, as well as all excise taxes collected by the State of Washington on the sale, distribution, or use of motor vehicle fuel and all other state revenue intended to be used for highway purposes, must be placed in a special fund to be used exclusively for highway purposes.   It also includes a proviso that exempts certain taxes then in existence (vehicle operator license fees, excise taxes imposed on motor vehicles or their use in lieu of a property tax on such vehicles, or fees for certificates of motor vehicle ownership) from its purview, and it states that “this section shall not be construed to include revenue from general or special taxes or excises not levied primarily for highway purposes”. 

The Washington State Attorney General argues that the proviso language just quoted limits the scope of the 18th Amendment to the previously noted gas tax and any other motor vehicle fuel excise tax specifically levied for highway purposes.  Thus, the 18th Amendment would not apply to the Hazardous Substance Tax.  The plaintiffs disagree, noting the Amendment’s reference to “all excise taxes”, and that the State Attorney General’s interpretation would dismantle its anti-diversionary policy.  As made clear during oral argument, the plaintiffs interpret the quoted language as a catch-all provision intended to cover any tax levies in existence at the time of the Amendment’s passage that were similar to the two then existing taxes (a motor vehicle excise tax and a business and occupation tax) exempted from its purview. 

Given the questions raised during oral argument, it appears that the Washington Supreme Court’s decision will address the scope of the 18th Amendment and its relationship to the Model Toxics Control Act.  Regardless of the outcome, the sequence of events does bring to mind that old adage about sleeping dogs.

Taking vs. Tort: Supreme Court's Upcoming Review of Arkansas Flooding Case

Posted on July 13, 2012 by Stephen Bruckner

The United States Supreme Court recently granted certiorari to the first environmental case it will review during the 2012-2013 term.  The case, Arkansas Game & Fish Commission v. United States, raises the question of whether flooding caused by the Army Corps of Engineers temporary increase in releases from an upstream dam constitutes a taking under the Fifth Amendment or is a potential common law tort.  The Court will examine whether physical intrusions onto private property must be permanent in order to be a taking and whether the government's intent plays a role in the analysis under the Takings Clause.

The case arises from damage to oak trees in a wildlife refuge that the Arkansas Game and Fish Commission alleges occurred due to the Corps of Engineers temporary deviations from the Clearwater Dam's 1953 water management plan.  These deviations took place between 1993 and 2000.  The Arkansas Game and Fish Commission alleged that the deviations caused increased flooding which damaged the root systems of the oak trees and killed many of them.

The United States Court of Federal Claims found that the government had engaged in an unconstitutional taking and awarded $5 million in damages to the Game and Fish Commission. 

In a split decision, the United States Court of Appeals for the Federal Circuit reversed the decision of the Court of Claims.  The Federal Circuit ruled that the Corps of Engineers' increase in upstream releases could not constitute a taking because the deviation policy was only temporary.  The court reasoned that in order to be considered a taking, flooding would have to be the result of a permanent change in the Corps of Engineers' water management plan.  The court found that, at most, the flooding created possible tort liability. In dissent, Judge Newman observed that the flooding led to permanent damage to the timber and the property in the wildlife refuge and reasoned that such permanent loss constitutes a taking under the Fifth Amendment of the Constitution.

Arkansas Game and Fish Commission's petition for certiorari was granted by the Supreme Court in April of this year, and the case is set to be argued in the Court's 2012-2013 term. 
 

Update on Climate Change Tort Litigation

Posted on June 29, 2012 by David Buente

The body of caselaw rejecting climate change tort claims seeking judicially-imposed restrictions on greenhouse gas emissions, which I reviewed in a prior post on January 3, 2012, continues to grow.  That post predicted that (i) none of these suits were likely to succeed, given the U.S. Supreme Court’s holding last year in Connecticut et al. v. American Electric Power Co. et al. (“AEP”) that common law “nuisance” claims seeking such restrictions are displaced by the Clean Air Act, but nevertheless (ii) plaintiffs would continue to repackage and pursue the claims in different courts under different common law labels.  Both predications have proved accurate.

Two of the cases summarized in that post, Comer et al. v. Murphy Oil USA et al. and Alec L. et al. v. Jackson et al., have since been dismissed by the presiding district courts.  In Comer, where a group of Mississippi landowners sued scores of national electric utilities and other companies for damages caused by Hurricane Katrina, claiming that the defendants’ greenhouse gas emissions constituted a common law “nuisance,” the court held that the claims were preempted by the Clean Air Act and, further, that they presented non-justiciable political questions and plaintiffs lacked standing.  In Alec L., where a group of plaintiffs sued several federal agencies under the “public trust” doctrine, seeking an order mandating greenhouse gas regulations, the court likewise held that the claims could not be recognized as a matter of federal law and, in any event, would be displaced by the Clean Air Act.  A third case, Native Village of Kivalina v. ExxonMobil Corp. et al., remains pending before the Ninth Circuit, following the district court’s dismissal of the complaint on grounds that the “nuisance” claims were non-justiciable and plaintiffs lacked standing. 

In addition, “public trust” claims have now been filed in nearly all fifty states.  Some of these take the form, like Alec L., of common law tort litigation, with non-profit groups and individuals suing state officials and agencies in state courts, seeking injunctive orders directing the promulgation of greenhouse gas regulations.  Several of these cases have already been dismissed, including in Alaska and Oregon (both on political question and justiciability grounds); none has proceeded past the pleading stage.  Other claims take the form of administrative petitions, asking the relevant state agencies to issue greenhouse has regulations.  Many of these petitions, in more than 30 states so far, have already been denied; none has been granted.

The unanimous rejection of these claims should presumably, at some time, begin to deter the filing of further climate change litigation.  But that tipping point does not seem yet to have occurred.  At least for the immediate future, it appears likely that plaintiffs will continue to use – and, to many minds, distort – the common law tort system to pursue the political goal of greenhouse gas regulation. 

Two Strikes Against Common Law Approaches to Climate Change: The Atmosphere Is Not A Public Trust

Posted on June 7, 2012 by Seth Jaffe

Last week, the District Court for the District of Columbia dismissed the so-called “public trust” climate change law suit. I will certainly give the plaintiffs in these cases credit for both originality and persistence. Legal merit and good public policy are another matter.

In any case, the plaintiffs sued EPA and various other federal agencies, seeking a finding that the agencies have failed adequately to protect a public trust asset, also known as the atmosphere, from climate change. The plaintiffs requested an injunction requiring that the agencies take actions necessary to reduce CO2 emissions by 6% yearly, beginning in 2013.

It did not take the Court long to dismiss plaintiffs’ arguments – and the case. The Court’s opinion has two critical holdings. First, since there can be no diversity action against the United States, the plaintiffs do not have access to federal courts unless there is a federal question. However, as the Court noted, the public trust doctrine is a creature of state law; there is no federal public trust doctrine.

Secondly, the Court concluded that, even if there ever had been a federal public trust doctrine, any such doctrine has been displaced by the federal Clean Air Act. Here, the Court relied squarely on the Supreme Court’s recent decision in American Electric Power v. Connecticut. The plaintiffs here tried to limit AEP to displacement of public nuisance claims, but the Court was having none of it, pointing out that AEP clearly stated that it was not federal public nuisance claims that were displaced by the CAA, but federal common law claims generally that were displaced.

Moreover, notwithstanding the plaintiffs’ creativity, the Court noted that:

"The question at issue in the Amer. Elec. Power Co. case is not appreciably different from the question presented here—whether a federal court may make determinations regarding to what extent carbon-dioxide emissions should be reduced, and thereafter order federal agencies to effectuate a policy of its own making. The Amer. Elec. Power. Co. opinion expressed concern that the plaintiffs in that case were seeking to have federal courts, in the first instance, determine what amount of carbon-dioxide emissions is unreasonable and what level of reduction is practical, feasible and economically viable."

And that really is the issue. Even if one believes that the government should be taking more aggressive action on climate change – and I certainly am among those who think it should be doing so – having the courts decide what level of reductions are necessary, and by when, is nuts. It’s just not a way to make public policy on the most complex environmental issue of our time.

Back to the drawing board for citizen plaintiffs. I can’t wait to see what they come up with next.

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).

The Sackett Effect

Posted on April 6, 2012 by Paul Seals

On Friday, March 30, the United States Environmental Protection Agency (“EPA”) announced that the agency was withdrawing its December 7, 2010 Imminent and Substantial Endangerment Administrative Order (“AO ”) issued unilaterally to Range Resources Corporation and Range Resources Production Company (“Range”).  With much fanfare and national media attention, EPA issued the AO to address the contamination of two water wells in North Central Texas.  EPA alleged that the source of the contamination was from Range’s oil and gas activities, including hydraulic fracturing, in the Barnett Shale Formation.  Range has challenged EPA’s action with pending litigation in the Northern District of Texas and in the Fifth Circuit.  Was EPA’s decision to withdraw its AO an outgrowth of the recent unanimous Supreme Court decision in Sackett v. EPA?

In addition to ordering replacement water supplies to the recipients of water from the affected water well, the AO included the requirements that Range study a twenty-county aquifer, identify gas flow pathways anywhere within that aquifer regardless of their source, and prepare a plan to eliminate those flows and remediate any area of the aquifer that has been impacted by gas from any source.  Range was to identify and sample all private water wells within 3,000 feet of their two suspect gas wells, as well as all the water wells serving a subdivision in Parker County.  Range informed EPA that it disputed the validity of the AO and would not comply with some of its terms.

In addition to Range’s challenge to the AO, the Railroad Commission Texas, the state agency with sole jurisdiction and responsibility for the control and disposition of waste and the abatement and prevention of pollution of surface and subsurface water resulting from oil and gas activities, called a hearing to consider whether Range’s operations caused or contributed to the contamination of the water wells in question.  Based on the evidence presented at the hearing, conducted on January 19-20, 2011, the Railroad Commission found that the contamination of the water wells came from the shallower Strawn gas field, which begins about 200 to 400 feet below the surface.  Geochemical gas testing demonstrated that the natural gas seeping into the water wells did not match the gas produced by Range from the much deeper Barnett Shale field, which is more than 5.000 feet below the surface in that area of Parker County.  The evidence showed that hydraulic fracturing of gas wells in the area could not result in communication between the Barnett Shale gas field and the shallow aquifers from which water wells in the area produce.  EPA chose not to participate in the state hearing process.

EPA brought a civil enforcement action in the Northern District of Texas against Range on January 18, 2011, Case No. 3:11-cv-00116-F, seeking injunctive relief and civil penalties for Range’s failure to comply with the AO.  Range filed a petition for review on the AO with the 5th Circuit on January 20, 2011, Case No. 11-60040, challenging the AO and the constitutionality of the AO statutory scheme as interpreted and applied by EPA.

The district court in its Order Denying Without Prejudice Defendants’ Motion to Dismiss and Staying Case, 2011 WL 2469731 (N.D.Tex.), struggled with EPA’s claim that it only has to prove noncompliance with the AO and the Court has no jurisdiction to review the factual and legal basis of the AO. The Court found that the AO was a final agency action, but stayed the case pending the 5th Circuit decision.

The issues before the 5th Circuit included whether the AO was final agency action and, if so, has Range been provided due process. Oral argument was considered on October 3, 2011.

On March 21, 2012, a unanimous Supreme Court held in the Sackett case that AOs issued under the Clean Water Act constitute final agency action. Under the Administrative Procedure Act, Respondents, like Chantell and Michael Sackett, are afforded pre-enforcement review of the factual and legal basis of the AO and may bring a civil action under the APA to challenge the AO.

Given the opinion for a unanimous Supreme Court in the Sackett case, EPA must have felt less than enthusiastic about its prospects in the pending Range cases. On Friday afternoon, March 30 with no fanfare and limited media attention, EPA announced the withdrawal of the Range AO. In a letter to EPA on the same date, Range confirmed the withdrawal of the AO and a related joint stipulation to dismiss EPA’s enforcement action and committed to sample twenty private water wells located in southern Parker County on a quarterly basis for one year, a substantial reduction in the scope and magnitude of the terms in the AO.

EPA’s hasty dismissal of the Range case raises some interesting questions. Did EPA agree to withdraw the Range AO in order to minimize the litigation risk of establishing pre-enforcement review rights of respondents to unilateral AOs under the Safe Drinking Water Act?  How extensive will the Sackett case be applied to unilateral AOs authorized under other non-Clean Water Act statutes administered by EPA and other federal agencies? What are the implications to EPA’s ability to react quickly to bonified public health emergencies? Will Congress need to overhaul statutory AO provisions to avoid the problem confronted in Sackett?

Alec L. and the Tortious Development of Climate Change Litigation

Posted on January 3, 2012 by David Buente

For some advocates of greenhouse gas regulation, tort law has become the primary vehicle to achieve their goal.  Dissatisfied with their progress in the political branches, they’ve begun presenting their claims to courts as tort lawsuits.  When the claims are rejected, they repackage them in different common-law wrappings and sue again. 

The first of these suits was Connecticut et al. v. American Electric Power Co. et al. (“AEP”) (dismissed by the U.S. Supreme Court earlier this year), in which several States and land trusts sought to declare greenhouse gas emissions a common law “nuisance” and secure an injunction capping emissions from a small group of national electric utilities at levels the plaintiffs deemed “reasonable.”  Next came Comer et al. v. Murphy Oil USA et al., where a group of Mississippi landowners sued the same utilities, and scores of other companies, for damages caused by Hurricane Katrina, claiming that the defendants’ greenhouse gas emissions constituted a common law “nuisance,” a “trespass,” and “negligence.”  (After dismissal by the district court and Fifth Circuit, the plaintiffs simply refiled the case—motions to dismiss again are in briefing).  Next, in Native Village of Kivalina v. ExxonMobil Corp. et al., an Alaskan village relied on many of these same common law theories, with allegations of a “conspiracy” added for good measure, suing many of the same defendants for costs the village would purportedly incur protecting itself from storms and other risks they attributed to climate change.  (The district court’s dismissal was recently argued to the Ninth Circuit.)  While courts have thus far rejected all of these suits at the pleading stage, the complaints reflect a continuing trend towards regulation by litigation, in which individual groups of plaintiffs endeavor to advance policy goals through common law actions.

The most recent case is Alec L. et al. v. Jackson et al.  Casting aside even the pretense of a traditional tort case, where one party seeks relief for damages caused by another party’s conduct, the plaintiffs in Alec L. are suing five federal Executive Branch agencies (the Environmental Protection Agency, Department of Defense, Department of the Interior, Department of Commerce, and Department of Agriculture), and explicitly seek an order directing those agencies to promulgate regulations addressing greenhouse gas emissions.  Relying on the “public trust doctrine,” an archaic common law concept rarely cited in modern court decisions, the plaintiffs assert that the federal government holds the atmosphere “in trust” for the public, and that these agencies therefore have a fiduciary obligation to protect the atmosphere from greenhouse gas emissions.  In particular, they ask the court to order the agencies to impose immediate and drastic restrictions on greenhouse gas emissions in this country (6% annually), with the ultimate goal of virtually eliminating the use of conventional fuels by the end of the century.

There is no reason to think that the claims in Alec L. will fare any better than those in the other tort cases discussed above.  All of these claims seek to impose liability for global climatic conditions that are attributable (if at all) to greenhouse gas emissions from billions of sources around the planet over the course of centuries, not to any particular, small group of defendants.  Moreover, they would all put a federal court in the position of making fundamental policy determinations regarding the proper regulatory approach to issues of national and international importance, ordinarily reserved for the political branches.  Indeed, in this respect, the claims in Alec L. are even more difficult to rationalize than those in AEP, as Alec L. asks the court to commandeer and control agencies of the federal government in a manner directly contrary to pre-existing statutory mandates and executive directives.  However, what Alec L. does show is that advocates for greenhouse gas regulation, undiscouraged by their lack of reception at the Supreme Court earlier this year, will continue re-wrapping their claims to send them to more courts.

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).