July 20, 2011

Permit as Shield Against Environmental Claims Under State Tort Law – At Least in the Fourth Circuit

Posted on July 20, 2011 by Allan Gates

In the 1980s a group of Vermont landowners challenged the legality of a New York paper mill’s wastewater discharges into Lake Champlain. The Vermonters argued that the paper mill’s discharges in New York constituted a nuisance because of the injuries they caused in Vermont. They sought monetary damages and injunctive relief under Vermont tort law. The paper company argued that the discharges from its mill were authorized by its NPDES permit, and the company contended that the Clean Water Act preempted state tort claims of this sort – at least when the tort claims challenged conduct authorized by a permit issued pursuant to the Act. The U.S. Supreme Court sided with the Vermont landowners, but with a twist. The Court held that the Clean Water Act preempted tort claims based on Vermont law against a source permitted in New York, but it did not preempt tort claims based on New York law, the law of the state where the source was permitted. The Court rejected the notion that the paper mill’s permit was a complete shield against all state law tort claims. The Court reasoned that the savings provision of the Clean Water Act left New York free to impose legal restrictions under state law –including state tort law— that were more stringent than the requirements of the Clean Water Act. International Paper Co. v. Ouellette, 479 U.S. 481 (1987).

For more than twenty years following the Supreme Court’s decision in Ouellette, the law on this question seemed well-settled: federal environmental statutes do not preempt the state tort law of the “source” state; and permits issued under federal environmental programs do not provide a shield against tort claims based on the law of the source state. The recent decisions in the Second Circuit and the Supreme Court in American Electric Power v. Connecticut did not disturb this view of the law because the tort claims in AEP were based on federal common law, not state law of the source state.

A recent decision in the Fourth Circuit has turned the seemingly well-settled view of the law on its head. The Fourth Circuit’s decision arose out of a suit by the State of North Carolina against TVA. North Carolina claimed that NOx and SOx emissions from TVA coal-fired electric generating stations located in Tennessee and Alabama were causing health problems and other environmental damage in North Carolina. The state alleged that TVA’s emissions constituted a public nuisance under the tort law of the states where the facilities were located; and North Carolina sought injunctive relief requiring the prompt installation of more advanced emissions controls than required by the facilities’ air permits. The district court ultimately found TVA liable and ordered injunctive relief with respect to the four TVA facilities closest to North Carolina. In a remarkably strident decision, the Fourth Circuit reversed the district court and remanded with instructions to dismiss the case. North Carolina v. TVA, 615 F.3d 291 (4th Cir. 2010).

The Fourth Circuit’s opinion examined at length the regulatory structure created by the Clean Air Act and concluded that Congress intended to preempt state tort law claims of the sort asserted by North Carolina, even when those claims were based on tort law of the source state. In so holding, the Fourth Circuit made no attempt to distinguish Ouellette. Nor did it suggest that the Clean Air Act differed in any material respect on this point from the statute involved in Ouellette, the Clean Water Act. Indeed, the Fourth Circuit repeatedly cited those portions of the majority opinion in Ouellette which found that Vermont law was preempted, but the Fourth Circuit largely ignored the portion of Ouellette which held New York tort law to be intact and available.

The Fourth Circuit also concluded, ostensibly as an independent ground for its decision, that the district court erroneously applied North Carolina law rather than the law of the source states. One cannot help but question the strength of the court’s conviction in this conclusion, however, because the proper remedy for application of the wrong state’s law would be to remand the matter for further consideration based on the correct state law, not to direct dismissal of the action as ordered by the Fourth Circuit.

The Fourth Circuit also found that even if the district court did apply the correct state law, it reached the wrong conclusion. According to the Fourth Circuit, it was inconceivable that the source states would have concluded that the TVA facilities in question constituted a nuisance since those states had issued permits allowing TVA to operate in the manner challenged by North Carolina. The Fourth Circuit’s opinion on this point relied on Alabama and Tennessee cases which held that conduct expressly authorized by law would not constitute a nuisance; but the Fourth Circuit did not address the savings clauses in the Alabama and Tennessee environmental statutes, nor did it discuss decisions in those states which held that environmental permits did not block nuisance claims under their respective state’s laws.

North Carolina filed a petition for certiorari. Amici briefs in support of the petition were filed by the American Lung Association, the American Thoracic Society, Defenders of Wildlife, National Parks Association, Parks Conservation Association, Natural Resources Defense Council, Sierra Club, a group of environmental and administrative law professors, and the states of Maryland, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, and Vermont. Among other things, the petition argued that the Fourth Circuit’s decision was contrary to Ouellette and conflicted with decisions in the Second and Sixth Circuits. Not surprisingly, North Carolina’s cert. petition attracted significant attention from those who follow the Supreme Court docket. In the end, however, the Supreme Court will never have a chance to act on North Carolina’s petition for certiorari. After repeated extensions of the time for it to respond to the cert petition, TVA entered into a settlement with North Carolina and other parties that resolved the merits of North Carolina’s claims. As part of the settlement, North Carolina agreed to withdraw its petition for certiorari.

The net result for Ouellette is that the Fourth Circuit’s opinion North Carolina v. TVA is left standing as a significant obstacle to any environmental tort claim that challenges activities authorized by an environmental permit, even if the tort claim is based on the law of the source state. Stated differently, environmental permits may now serve as shields against all tort claims, including claims based on the law of the source state, despite the presence of any savings provisions in the state and federal environmental statutes in question.

As a minor footnote, the Fourth Circuit’s revisionist treatment of Ouellette is particularly ironic because the author of the Fourth Circuit opinion, Judge J. Harvie Wilkinson, once served as a law clerk to Justice Lewis Powell, the author of the majority opinion in Ouellette, and even wrote a flattering memoir of his clerkship entitled Serving Justice.

Tags: Water


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