Iqbal and Twombly Result in Dismissal of Pennsylvania DEP Lawsuit

Posted on November 22, 2010 by John Barkett

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

 

 

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

 

 

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

 

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

 

 

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

 

 

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

 

 

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

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

Posted on September 17, 2010 by Seth Jaffe

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

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

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

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

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

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

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

Posted on July 22, 2010 by Seth Jaffe

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

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

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

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

Just askin’.

A Combined Superfund and Stormwater Rant

Posted on July 7, 2010 by Seth Jaffe

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

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

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

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

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

You can’t make this stuff up.

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

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

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

 

 

EPA Rulemaking for CWA & FIFRA Permitting

 

 

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

 

 

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

 

Environmental Conservation versus Future Development

 

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

 

 

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

 

 

Regulatory Taking Claims for Enforcement of Regulations

 

 

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

 

 

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

 

 

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

 

 

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

Zubulake Revisited: Judge Scheindlin on Discovery Sanctions

Posted on January 20, 2010 by John Barkett

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

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