Posted on May 15, 2013
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.
Posted on March 22, 2013
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.
Posted on March 7, 2013
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.
Posted on January 25, 2013
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.
Posted on January 15, 2013
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.
Posted on November 29, 2012
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.
Posted on November 26, 2012
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?
Posted on November 21, 2012
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.
Posted on October 8, 2012
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.
Posted on August 20, 2012
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.
Posted on August 2, 2012
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.
Posted on July 13, 2012
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.
Posted on June 29, 2012
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.
Posted on June 7, 2012
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.
Posted on May 1, 2012
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).
Posted on April 6, 2012
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?
Posted on January 3, 2012
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.
Posted on July 13, 2011
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.
Posted on July 7, 2011
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.” 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. 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.). 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). Another is whether contribution claims arising in the environmental context are dischargeable. See e.g., In re Lyondell andIn re Chemtura.
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.
 11 U.S.C. § 101(5)(B) (emphasis added).
 944 F.2d 997 (2d Cir. 1991).
 438 B.R. 775 (Bankr. S.D.N.Y. 2010).
 In re Lyondell Chem. Co., No. 09-10023 (REG), 2011 WL 11413 (Bankr. S.D.N.Y. Jan. 4, 2011).
 In re Chemtura Corp., No. 09-11233 (REG), 2011 WL 109081 (Bankr. S.D.N.Y. Jan. 13, 2011).
Posted on June 3, 2011
By: Bob Wyman and Aron Potash, Latham & Watkins LLP
A San Francisco Superior Court ruling on May 20, 2011, enjoins California from undertaking any further work to implement a greenhouse gas (GHG) cap and trade program until the California Air Resources Board (CARB) comes into compliance with the California Environmental Quality Act (CEQA) by more fully analyzing alternatives to cap and trade. While a setback to CARB, which had been planning to conduct spring workshops and summer rulemaking to finalize important unresolved aspects of its planned cap and trade program, the ruling in Association of Irritated Residents v. California Air Resources Board is less damaging than it could have been to CARB’s efforts to achieve the GHG emission reductions required by the Global Warming Solutions Act of 2006 (AB 32). The court’s earlier March 18 statement of decision threatened to put the brakes on not just the cap and trade program but also CARB’s entire suite of GHG reduction measures, including the low carbon fuel standard, the renewable electricity standard and other initiatives. So the court’s final order is significantly narrower in scope. Nonetheless, the cap and trade scheme is the centerpiece of the first economy-wide program in the United States to limit GHG emissions, and it is unclear whether that part of CARB’s program can commence as originally planned on January 1, 2012. While it works to complete a new CEQA alternatives analysis, CARB will almost certainly also appeal the judgment and seek a stay to keep cap and trade implementation on track.
This roadblock to California’s cap and trade plan was brought about when the Association of Irritated Residents (AIR) and others filed a petition for a writ of mandate alleging that CARB substantively and procedurally failed to comply with CEQA in approving the Scoping Plan, CARB’s detailed roadmap for reducing GHG emissions under AB 32. AB 32 was enacted in 2006 and requires the state to reduce GHG emissions to 1990 levels by 2020. CARB was charged with implementing AB 32 and approved the Scoping Plan in December 2008. Since that time, CARB approved a number of regulations contemplated by the Scoping Plan, including the GHG cap and trade program in December 2010. Many significant aspects of the cap and trade program remain unresolved, however, and CARB workshops and rulemakings were planned for this spring and summer with the intention of finalizing such critical program components matters as the allocation of free GHG allowances, the use of auction revenue, the generation and use of offsets, and the designation of GHG intensity benchmarks for regulated sectors.
In its March 18 statement of decision, the court found that CARB violated CEQA by failing fully to evaluate possible alternatives to the measures described in the Scoping Plan. Focusing on the cap and trade program, the court wrote: “ARB’s extensive evaluation of the proposed cap and trade program…provides the public with information about cap and trade only. CEQA requires that ARB undertake a similar analysis of the impacts of each alternative so that the public may know not only why cap and trade was chosen, but also why the alternatives were not.” The March 18 decision specifically criticized the Scoping Plan CEQA analysis for failing to discuss in detail a carbon fee alternative to cap and trade. Cap and trade is not a “fait accompli,” the court wrote.
The court set forth its remedy in the new May 20 ruling, ordering that its writ “shall specifically enjoin ARB from engaging in any cap and trade-related Project activity that could result in an adverse change to the physical environment until ARB has comes [sic] into complete compliance with ARB’s obligations under its certified regulatory program and CEQA, consistent with the Court’s Order. This includes any further rulemaking and implementation of cap and trade…” The Court also ordered CARB both to take no action in reliance upon the Scoping Plan as it relates to cap and trade and to set aside the executive order approving and certifying the CEQA analysis of the Scoping Plan. Although the intent of the ruling appears to be to halt work only on the cap and trade component of the AB32 program, this second portion of the court’s order potentially opens the court’s decision and the validity of the other Scoping Plan measures to attack on the ground that a court may only have the authority either to invalidate a CEQA approval in its entirety or not to invalidate any portion at all. The court’s path of partially invalidating a CEQA action remains an uncertain area of California law.
CARB will almost certainly appeal the decision and seek a stay of the judgment during the course of the appeal. The next battle in this case will likely involve CARB arguing that its appeal of the court’s writ automatically stays the judgment—allowing cap and trade rulemaking to continue apace—and AIR arguing that CARB will have to obtain a writ of supersedeas in order to stay the judgment. This battle will hinge in part on how the reviewing court characterizes the lower court’s writ (e.g., whether it is prohibitory or mandatory in nature) and on the whether the reviewing court sees the lower court order as overbroad in its limitations on CARB’s rulemaking activities.
Posted on May 5, 2011
People often ask me why I became an environmental lawyer in 1973 and why I am still practicing environmental law in 2011. I ask other environmental lawyers the same questions. Their answers provide useful information to resolve conflicts in our political and economic systems.
Environmental lawyers representing EPA, state agencies, NGOs and corporations have found ways to resolve environmental problems without the type of litigation and adversarial relationships that are present in other fields of law, such as labor law or personal injury. Environmental lawyers representing all sides regularly attend seminars together and are friends. Such camaraderie is not found in the U.S. Congress and in many state legislatures. How did this collegial atmosphere develop? What can we learn from it?
My discussions with other environmental lawyers resulted in the following conclusion. Environmental lawyers have an interest in the preservation of the planet. We may argue over how clean is clean and what is the best available technology for control of pollution. However, our shared belief that earth must be preserved creates a basis for reasoned debate, which results in reduction of pollution and a successful resolution of conflict.
Environmental lawyers meet and negotiate. They don’t hide data or take positions that avoid addressing the real issues in conflict. Environmental lawyers seek a win/win, knowing that the consequences of not achieving a solution may be a loss for both sides.
Environmental lawyers are also translators and problem solvers for clients. We are called upon to explain complex laws in lay terms and to seek solutions rather than stake out positions that lead to protracted litigation. We may fight vigorously over the provisions of a Consent Decree, but it is still a “consent” document in which both sides must give and take.
Environmental lawyers form groups of potentially responsible parties (“PRPs”) to address contamination caused by insolvent operators. In forming a PRP group, we are creating a vehicle for consensus despite individual differences among the parties.
Why is this status relevant for the current challenges America faces? I suggest environmental lawyers have found a way to get over partisanship and posturing. We have found a way to get beyond emotion to focus on what is relevant and how to solve a common problem. We recognized the concept of sustainability long before it became a trite phrase. If businesses could not comply with the environmental laws and still make money, the economy would fail. Saving the earth appeals to consumers who pay more for products that are made from recycled material or from sustainable practices. Coalitions of environmental interest groups, government and business can accomplish far more working together than fighting in courts or legislatures.
What actions would be appropriate for our current adversarial process? One would be meetings in which everyone has an opportunity to express their views and everyone is treated the same. Rather than having two sides, a group with all stakeholders would be a better way to solve many of our political and economic problems. Coming into a meeting with the idea that you have to negotiate a consent agreement with give and take would be a useful solution for many political and economic leaders. Seeking a win/win is a much better alternative than a filibuster. Focusing on solving the problem might avoid some of the needless expenditure of money to vilify the other side. Going to seminars together and drinking a beer at a reception would be a useful exercise for politicians from different parties. Having to produce all of the information to a governmental regulatory agency might prevent a trader from defrauding an investor in some “black box” investment.
Posted on March 1, 2011
Previously, I discussed EPA’s efforts to “muddle through” on climate change in the absence of comprehensive legislation. This week, I think it’s the Clean Water Act’s turn. If there were any regulatory situation which required some serious muddling through at the moment, interpretation of the Supreme Court’s Rapanos decision almost is a match for the current climate mess. As most of my readers know, Rapanos was a 4-1-4 decision which left EPA, the Corps, developers and environmentalists fairly equally perplexed
Most stakeholders have assumed that Kennedy’s concurring opinion, requiring a “significant nexus” between wetlands and traditional navigable waters before those wetlands are subject to jurisdiction under the CWA, is the law of the land at this point. That is the approach adopted in the Rapanos Guidance issued by EPA and the Corps in 2007.
A recent decision by the 4th Circuit Court of Appeals, in Precon Development Corporation v. Army Corps of Engineers, illustrates just how muddled post-Rapanos interpretation has become. The decision in Precon – reversing the District Court – found that the Corps had not built a record sufficient to establish that the wetlands which Precon sought to develop were jurisdictional under the CWA.
There were two technical issues in Precon. Precon lost what one might have thought would be the more significant issue – the Corps’ finding that, although only 4.8 acres were really at issue in this case, and Precon’s entire development includes 166 acres of wetlands, 448 acres of “similarly situated” wetlands would be examined for a substantial nexus to navigable waters. Precon ultimately won, however, because the Court concluded that the Corps’ record did not contain enough physical evidence to support its determination that a significant nexus exists between the 448 wetland acres and the downstream navigable water.
The Court’s conclusion raised two issues of broad concern to stakeholders. First, the Court granted little deference to EPA’s conclusion on the significant nexus issue. The Corps argued that its conclusion that there was a significant nexus between the site wetlands and the downstream navigable waters was a factual conclusion. However, the Court concluded that the significant nexus determination was not factual. The Court stated that:
The question is instead whether the Corps’ findings were adequate to support the ultimate conclusion that a significant nexus exists. This legal determination is essentially now a matter of statutory construction, as Justice Kennedy established that a “significant nexus” is a statutory requirement for bringing wetlands adjacent to non-navigable tributaries within the CWA’s definition of “navigable waters.”
Well, this is certainly a nice question of administrative law. The significant nexus issue may now be the ultimate legal question. Nonetheless, I would guess that most wetlands scientists and hydrologists would say that this is largely a factual question. Even if the agency is applying its judgment to answer that question, it’s the type of judgment that requires technical expertise – expertise to which courts have traditionally deferred.
The second of the Court’s important pronouncements was that it would not give the EPA/Corps Rapanos Guidance deference under Chevron. Why not?
Because – although it could – the Corps has not adopted an interpretation of “navigable waters” that incorporates this concept through notice-and-comment rulemaking, but instead has interpreted the term only in a non-binding guidance document.”
Isn’t it timely, then, that EPA and the Corps sent a draft new Rapanos guidance to OMB in December, and GOP leadership in the House is proposing language in a continuing resolution that would preclude EPA from using any funds “to implement, administer, or enforce a change to a rule or guidance document pertaining to the definition of waters under the jurisdiction of the Federal Water Pollution Control Act (33 U.S.C. 1251).” Perhaps EPA and the Corps should take half a loaf. Why not agree to shelve the guidance and instead proceed with notice-and-comment rulemaking to clarify Rapanos? At least then the Courts might grant EPA and the Corps more deference in implementation. It’s already been almost five years since Rapanos was issued. EPA and the Corps can hardly argue that it’s necessary to go the guidance route because they don’t have the time to proceed through the full regulatory process.
Enough muddling through. Take the time to do it right and issue regulations. Then, maybe the muddle will abate. (Can one abate a muddle?)
Posted on February 7, 2011
In the world of environmental claims, there are numerous ways that a duty to preserve documents and particularly e-documents can arise before litigation is filed.
The Problem Becomes a Sanction
E-discovery sanctions have reached an all-time high after three decades of litigation over alleged discovery wrongdoing. “Sanctions motions and sanction awards for e-discovery violations have been trending every-upward for the last 10 years and have now reached historic highs,” according to a King & Spalding study published at 60 Duke Law Journal 789 (2010).
King & Spalding lawyers analyzed 401 cases before 2010 in which sanctions were sought and found 230 sanctions awarded, including often severe sanctions of case dismissal, adverse jury instructions and significant money awards. Sanctions of more than $5 million were ordered in five cases, and sanctions of $1 million or more were awarded in four others. Before 2009, the highest number of sanctions awarded against lawyers in a single year was five. However, 46 sanctions were awarded in 2009, the last year covered by the study.
Defendants and their lawyers were sanctioned for e-discovery violations nearly three times more often than plaintiffs. When sanctions were awarded, the most common misconduct was failure to preserve electronic evidence.
That is why prospective environmental litigants and their counsel must be aware of the issue. Even if the client does not realize that the duty to preserve has attached, and electronic information disappears, the client and its lawyers are subject to spoliation claims, and increasingly sanctions.
Pinpointing The Problem Is Not Easy
A duty to preserve represents a legal requirement to maintain relevant records for litigation. Hence, identifying the trigger of the duty to preserve is essential. The duty to preserve arises before a complaint is filed when a party reasonably should know that the evidence may be relevant to anticipated litigation. When that time occurs is anything but certain.
Unlike the paper world where documents are often maintained in central storage, in the electronic world, every employee is a file keeper. E-mails can disappear with the stroke of a key. A company’s records management system may provide for relatively short timeframes for e-mails in mailboxes to eliminate data clutter. Be aware that storage systems used for disaster recovery are periodically recycled.
So, when should environmental lawyers instruct their clients on preserving documents, and particularly e-documents, for litigation? It is not at all easy to pinpoint. But, the courts have made it increasingly clear through sanctions that lawyers must figure it out. Making it even tougher are the differing views among judges on such issues as:
- Can a prospective plaintiff or defendant have a duty to preserve if counsel has not been retained to explain the duty?
- Must a client’s lawyer have knowledge of a claim before a duty to preserve can be triggered?
- If an environmental agency is pursuing other entities in an industry but not your client, does that trigger a duty to preserve?
- Does a notice of violation sent by a regulatory agency represent “anticipation” of litigation.
I repeat -- In the world of environmental claims, there are numerous ways that a client’s duty to preserve documents, and particularly e-documents, can arise before litigation is actually filed.
Be careful out there!
Posted on November 22, 2010
Recent Supreme Court opinions interpreting Rule 12(b)(6) have been applied in an environmental context. A state agency cost recovery action was dismissed for failure to plead facts sufficient to show a plausible claim for relief, resulting in unnecessary additional litigation costs.
WhenBell Atlantic v. Twombly, 550 U.S. 554 (2007) was decided, many lawyers lamented the loss of Conley v. Gibson, 355 U.S. 41 (1957) (in effect, if there is a claim somewhere within the four corners of a complaint, a motion to dismiss will be denied) as the governing case in Rule 12(b)(6) jurisprudence. Then Ashcroft v. Iqbal, 129 S.Ct. 1937 (May 18, 2009) came down. The laments became cries for action to restore Conley legislatively, and, indeed, such legislation was introduced in the Congress by Senator Specter who was not returned to office. For now, Iqbal and Twombly remain the law.
For those few lawyers who may not be familiar with Twombly or Iqbal, both cases dealt with the sufficiency of allegations in a complaint to state a cause of action. Twombly dealt with parallel conduct in an antitrust setting that was consistent with lawful behavior but was alleged conclusorily to represent a conspiracy in restraint of trade. Without fact allegations to show why lawful parallel conduct was in fact unlawful anticompetitive behavior, the complaint did not survive. Iqbal dealt with claims against the Attorney General and the Director of the FBI for post-9/11 activities that restrained the liberty of the plaintiffs for a period of time. Other defendants remained in the case. The Supreme Court held that the complaint’s allegations against these two executives were not “plausible.” Hence, they were dismissed.
What is a “plausible” claim? The Supreme Court gave this answer in Iqbal: “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” This plausibility standard is not “akin to a probability requirement,’ but it asks for more than “a sheer possibility that the defendant has acted unlawfully.”
It has not taken long for Iqbal and Twombly to be applied in an environmental dispute. Just ask Pennsylvania’s Department of Environmental Protection (DEP). On November 3, 2010, Magistrate Judge Lenihan in the Western District of Pennsylvania, citing this Supreme Court precedent and the Third Circuit’s interpretation of it in Fowler v. UPMC Shadyside, 578 F.3d 203 (3rd Cir. 2009), dismissed a CERCLA amended complaint with prejudice. The 2009 action involved $3.7 million in costs incurred in a landfill response action that was completed in 2004. The DEP characterized the excavation, drum and soil removal, and restoration work it conducted as a remedial action for which it had six years within which to file suit under CERCLA. Three defendants argued that the DEP had engaged in a removal action for which it had only three years from the conclusion of the removal action within which to bring suit. The magistrate judge agreed with the defendants and because suit was brought beyond three years, the case was dismissed. The magistrate accepted the factual averments in the amended complaint as true but disregarded the DEP’s “legal conclusions.” Because the actions described in the complaint were “the equivalent of a CERCLA removal action,” she held, the DEP had failed “to set forth sufficient factual matter to show a plausible claim for relief.”
The magistrate judge was persuaded by the administrative record that “repeatedly and consistently” characterized the DEP’s response action as “interim.” The DEP was not helped by its 2002 “Analysis of Alternatives” under Pennsylvania’s Hazardous Sites Cleanup Act which stated that the interim response was warranted but that the response as then proposed “is not a final remedial response.” The magistrate judge rejected the DEP’s argument that a “prompt interim response” would be a removal action in CERCLA terms but that a “limited interim response” in fact was the same as a remedial action under CERCLA.
Under Conley, it is likely that the motion to dismiss would have been denied, discovery would have occurred, and the limitations question would have been decided under Rule 56’s summary judgment standards. Had the DEP filed suit before Twombly, it would have been able to so argue. Of course, if it had done that, it could have been within the three-year removal action window. Not having done so, it had to deal with Iqbal and Twombly’s preference for using the motion to dismiss as a way to address escalating discovery costs in federal court litigation where a claim is not “plausible.”
Posted on September 17, 2010
When clients are threatened with citizen suits – and particularly when the threatened litigation involves a matter where EPA or a state regulatory agency is heavily involved, the clients always want to know why they can’t somehow get rid of the citizen suit, given that EPA is on the case. The answer is that they can – but only in limited circumstances.
The recent decision in Little Hocking Water Association v. DuPont confirmed this answer in the context of RCRA. The Little Hocking Water Association provides public water to certain communities in Ohio, directly across the Ohio River from a DuPont plant which uses , also known as PFOA or C8 – also known as the contaminant du jour. According to the complaint, the Little Hocking wells have among the highest concentrations of C8 of water supply wells anywhere and its customers have among the highest C8 blood levels anywhere. Little Hocking Water Association thus sued DuPont under RCRA’s citizen suit provision, claiming that DuPont’s release of C8 had created an “imminent and substantial endangerment."
Section 7002 of RCRA contains provisions precluding such citizen suits if either EPA or a state “has commenced and is diligently prosecuting” an action under RCRA to abate the endangerment. In the DuPont case, releases of C8 from the DuPont facility had been the subject of at least two administrative orders on consent entered into by DuPont and EPA. However, consent orders aren’t the same as “an action” under § 7002 or § 7003 of RCRA – and they thus do not preclude a citizen suit.
DuPont tried the next best argument – that EPA had primary jurisdiction over the regulation of C8 – and that the existence of EPA’s regulatory authority and the issuance of the consent orders meant that the courts should defer to EPA. DuPont’s argument was that a court could not fashion a remedy in the case without essentially establishing a new cleanup standard for C8 and that doing so is the job of EPA, not the courts.
The Court gave the primary jurisdiction argument short shrift. As the Court noted, using the doctrine of primary jurisdiction in citizen suits would dramatically reduce the scope of such suits. Since Congress provided a citizen suit mechanism – and provided very specific, discrete, circumstances in which citizen suits are precluded – it doesn’t make sense to use primary jurisdiction to establish another defense, particularly where the defense would almost eliminate the remedy.
The bottom line? If you don’t want to face a citizen suit (and you’re not in compliance), get yourself sued by EPA or your state regulatory agency. The mere existence of EPA or state regulation, even if requirements are embodied in a consent order, is not enough.