The Ninth Circuit Court of Appeals in Chubb Custom Insurance Co. v. Space Systems/Loral, Inc., 710 F.3d 946 (9^th Cir. 2013), affirmed the dismissal of a CERCLA (Comprehensive Environmental Response, Compensation and Liability Act) cost recovery action by an insurer against parties alleged to be responsible for the contamination. The insurer brought its claim under both §107 and §112 of CERCLA, which address cost recovery and subrogation claims.  The court explained that there was no right of subrogation because the insured was not a “claimant” as that term is used in CERCLA and §112 permits subrogation claims only on behalf of persons who have stated a CERCLA claim.  The court further held that an insurer is limited to bringing a subrogation claim pursuant to §112 and cannot use §107 to avoid the requirements of §112.

In discussing how the CERCLA subrogation provision works and how the provision relates to common law rules of subrogation, the court provided guidance to future insurers regarding how to avoid the problem that resulted in dismissal of this claim.  In response to plaintiff’s argument that allowing the claim to go forward would be consistent with the purposes of CERCLA, particularly, the goal of requiring responsible parties to pay for the cleanup, the court argued that the insured is in a better position to enforce such claims and insurers should require insureds to pursue claims against responsible parties. 

In Menasha Corp. v United States Department of Justice (7th Cir. 2013), the court held that the work product privilege protects Department of Justice memoanda from discovery, even if Depatment of Justice lawyers appear to be adverse to each other. The suit arose out of a Superfund site in Wisconsin at which the United States filed an action against a number of entities that were alleged to have contributed to the contamination. In a consent decree with several defendants, the United States agreed to contribute $4.5 million dollars toward the remediation because of waste sent to the site by federal agencies. The consent decree was submmited to the court for approval and Menasha opposed the consent decree.

Menasha claimed that the consent decree was not fair because the United States was not paying its fair share. Menasha also counterclaimed against the United States. To support its claim, Menasha sought discovery (through a freedom of information request) of Justice Department memoranda regarding the negotiations within the Justice Department that led to the payment by the United States.

The court held that the work product privilege protected the memoranda. The court viewed the Justice Department as one law firm and explained that it was important for Justice Department attorneys to be able to be open with each other. The court said this was analogous to a debate within a corporate law department in which attorneys express opposing views. The expression of opposing views does not make the attorneys adverse to each other for discovery purposes.

The Court’s analogy to debate within a corporate law department seems way off point. A corporation cannot sue itself. The United States, on the other hand, is often on both sides of environmental litigation, both as envorcing agency and as a responsible party. In such cases, the govenment as law enforecment agency and the government as responsible party are adverse to each other and should not work together to the detriment of the other responsible parties. The court noted that the settling agencies were not parties to the litigation. If they were that should have created real adversity between the government lawyers and the outcome should in that case be differernt.

In Appleton Papers, Inc. v Environmental Protection Agency (7th Cir. Dec. 26, 2012), the Seventh Circuit Court of Appeals held that a defendant in an enforcement action could not obtain government expert reports under the Freedom of Information Law.  After the government alleged taht seven companies were responsible for contamination in the Fox River, near Green Bay, Wisconsin, the government hired an expert to prepare a report on the companies’ responsibility for the contamination. Appleton sought the report as part of a challenge to a consent decree between the government and another party.

The Freedom of Informatin Act makes most government documents publicly available, but exempts nine categories of documents from disclosure.  The government claimed the report at issue was exempt from disclosure based on the exemption for “inter-agency and intra-agency memorandums or letters which would not be available by law to a party in litigation.”  The government’s claim was that the document would not be available to a party in litigation because of the work product doctrine, which protects from disclosure, documents produced in anticipation of litigation or for trial.  Appleton argued that work product should protect theories, opinions and analysis, but not facts.  The court held, however, that the entire report was protected.  There is an exception to the work product doctrine for a party that has a special need for the information, but the court concluded that Appleton had made no showing of special need.

In most environmental matters, the facts are gathered by the potentially responsible parties and the basic information about the contamination is publicly available.   This decision does not change that general rule of procedure.  In this case, however, the governement report at issue was not an investigation report that sampled soil or groudwater and identified the contamination.  Instead, it was a report on which parties are responsible for how much.  Such reports are much more likely to include the governments opinions and theories prepared for litigation (as opposed to being prepared for remediation) and are therefore much more likely to be protected from disclosure.

A recent decision by a federal district court in the District of  Columbia addresses whether CERCLA section 113(h), which bars certain challenges to CERCLA remediations, bars a challenge which would not be barred by the parallel RCRA provision.  Anacostia Riverkeeper v Washington Gas Light Company, 20012 WL 4336243 (September 24, 2012).  Plaintiff argued that while both CERCLA and RCRA contain provisions that bar certain challenges to CERCLA remediations, the only way to give effect to both is to permit plaintiffs to proceed with their challenges whenever the action would not be barred by RCRA.  The court, however, noted that the CERCLA bar to challenges is broader and a RCRA action that is barred by CERCLA, not by RCRA, is barred.  The court therefore dismissed the RCRA endangerment action pursuant to CERCLA 113(h). 

The decision is important because it protects regulated parties, who are working with a regulatory agency, but who could be subject to regulation under more than one regulatory program, from the claim that the remediation that the regulatory agency approved is not adequate.  There is a significant overlap between CERCLA and RCRA.  In theory they are distinct in that CERCLA deals with inactive hazardous waste sites and RCRA manages the ongoing handling and disposal of hazardsous wastes.  Nevertheless, at many sites that have ongoing activities that generate hazardous waste (and are therefore regulated by RCRA), there were historic releases covered by CERCLA.  Each statute has a bar to claims that, in short says certain remediations approved by the appropriate regulatory body cannot be challenged by third parties.  This encourages parties to work with the regulatory agencies.   The court decision clarifying the relationship between the statutes further encourages cooperation with agencies by protecting them from certain third party claims.

The Ninth Circuit Court of Appeals dismissed a common law nuisance claim that alleged that greenhouse gas emissions created a public nuisance.  The suit, Native Village of Kivalina v ExxonMobil Corp. (9th Cir. 2012), was brought by residents of a village near the Arctic Circle who were forced to abandon their homes because of rising sea level.  Claiming that the rising sea level was caused by global warming, the villagers sued twenty-two oil and energy companies alleging common law nuisance. 

The court affirmed the dismissal on the ground that Congress had, in the clean air act, displaced the common law in this area.  The theory is that if the companies emitted greenhouse gasses pursuant to a clean air act permit, then a court could not use the common law to enjoin or provide a damages remedy for such emissions.  Kivalina’s remedy would have to be through Congress.  A concurring opinion raised an interesting question.  Judge Pro issued a concurrung opinion raising the issue of whether the authorities relied on by the court, which were primarily suits seeking injunctive relief, were compelling in a case in which the plaintiff is seeking damages.  The injunction cases reason, in part that if Congress says you can do something, a court cannot use common law principles to say you cannot.   That does not necessarily imply, however, that a common law court could not provide damages for a party injured by the activity.

The decision reflects a trend in the courts to avoid the use of common law remedies in areas already addressed by Congress.  The irony is that Congress needed to get involved in environmental issues because common law principles did not effectively deal with the issues.  Now, however, plaintiffs are coming to court attempting to use common law principles to address these issues because, in their view, Congress has not effectively dealt with the issues.

A federal court in Connecticut has provided a very clear analysis of the difference between CERCLA allocation and CERCLA apportionment.  In Yankee Gas Services v. UGI Utilities, Inc. (D. Conn., 2012) the court addressed a suit between the current owner and the former owner and operator of a manufactured gas plant.  The court began its discussion by noting that both parties had already been found to have CERCLA joint and several liability and the remaining dispute was about who should pay how much.  In such cases, a court must allocate liability (or the costs) based on equitable principles. 

The court distinguished allocation from apportionment as follows.  Apportionment was the issue in the Supreme Court’s decision in Burlington Northern, 556 U.S. 599 (2009).  Apportionment is the process of deciding who should pay how much when the parties are not jointly and severally liable (when each is liable only for part).  Allocation, on the other hand, is an equitable doctrine, intended to determine who, among the jointly and severally liable parties, should pay how much.  Equitable considerations play no role in apportionment; but equitable considerations are central to allocation.  The court explained:  “To apportion is to request separate checks, with each party paying only for his own meal.  To allocate is to take an unitemized bill and ask everyone to pay what is fair.” 

The court noted that regarding how to allocate among liable parties, the Second Circuit does not use a fixed list of equitable factors that may be considered, but that many courts use the so-called Gore Factors, which include:  “(1) The ability of the party to demonstrate that his contribution to the release can be distinguished; (2) The amount of hazardous substance involved.  Of course, a small quantity of highly toxic material, or above which releases or makes more dangerous another hazardous substance, would be a significant factor; (3) The degree of toxicity of the hazardous substance involved; (4)  The degree of involvement of the person in the manufacture, treatment, transport, or disposal of the hazardous substance; and (5) The degree of cooperation between the person and the Federal, State, or local government in preventing harm to public health or the environment from occurring from a release.  This includes efforts to mitigate damage after a release occurs.” Yankee Gas at *14 quoting Niagara Mohawk, 596 F.3d at 130 (quoting S. Rep. No. 96-848, at 345-46 (1980)). 

The court also noted that a second list of factors sometimes examined are referred to as the Torres Factors from Judge Torres’ opinion in United States v. Davis, 31 F. Supp. 2d 45, 63 (D.R.I. 1998).  They include:  (1) extent to which the costs are related to waste for which each party is responsible; (2) each party’s level of culpability; (3) degree to which the party benefitted from the disposal; and (4) ability to pay.

In the court’s detailed analysis of the facts and application of the equitable factors, the expert testimony regarding what happened during which time period was central to the court’s conclusions.  Thus, even though this was an allocation case, the reasoning and result were very much what one would expect in an apportionment case.  

It should not come as a surprise that allocation and apportionment, while conceptually distinct, often reach the same result.  Apportionment, the court said was like separate checks at the restaurant – each pays for what they ate.  Allocation, however, the court said, was about fairness.  Factors such as ability to pay, cooperation with the government, culpability and the degree to which a party benefitted from the disposal should be considered.    Sticking with the court’s analogy to the restaurant, whether the people at the table have separate checks or are looking for a fair means of dividing one bill should not make a significant difference because the most fair division will be based on who ate what.

In National Chicken Council v Environmental Protection Agency (EPA), 2012 WL 2948506 (D.C. Cir. 2012), the court addressed a petition by the meat industry to review final agency action of the EPA regarding the reduction of greenhouse gasses through ethanol production.  The Energy Independence and Security Act (EISA) encouraged the production of renewable fuel through a system of credits.  The EISA further provides that ethanol qualifies as a renewable fuel if it achieves a 20% reduction in greenhouse gas emissions, but older plants were grandfathered and did not need to meet the 20% reduction requirement.  The act was unclear regarding how long this grandfathering was to last and EPA, by rule published at 75 Fed. Reg. 14,688, concluded that the grandfathering was permanent. 

The meat industry challenged EPA’s interpretaton of the statute and the petition was dismissed for lack of standing.  The standing requirement provides that a person cannot bring a claim to challenge any action unless the challenger can show that the action is likely to injure him.  The meat industry argued that it would be harmed by EPA’s ethanol rule because the rule would make it cheaper to produce ethanol, which will increase the amount of ethanol produced, which will increase the demand for corn, which will cause an increase in the price of corn and thereby harm the meat producers who purchase corn to feed their animals.  The court  started its discussion by noting that petitioners needed to show a substantial probability that a ruling in their favor would reduce the production of ethanol.  Absent such a showing, the petitioners could not show that the rule would injure them.  Examining the evidence, the court found the evidence of how ethanol producers would react to the rule to be insufficient to show a substantial probability.

Environmental regulation always has business/economic impacts and businesses that track the regulatory process should follow the lead of the petitioners and comment on the business/economic impacts of regulations as well as commenting on the environmental impacts.  The decision demonstrates, however, how difficult it can be to establish the business/economic impact of a proposed regulation.  One lesson from this case is that it is never enough to show that the challenged rule will have negative effects; one must also show that absent the challenged rule, those negative effects will not occur.