Archives for category: Uncategorized

A recent decision of the United States Court of Appeals for the District of Columbia addresses important issues regarding challenges to regulatory action.  The case, Center for Regulatory Reasonableness v EPA, 2017 WL 763916, arose out of certain policy letters issued by EPA in 2011 that explained and arguably changed two EPA policies regarding publicly owned water treatment facilities.  The policy letters were challenged and the challengers prevailed in the Eighth Circuit Court of Appeals.  See, Iowa League of Cities v EPA, 711 F3d 844 (2013).   EPA then stated that it would not acquiesce to the Eighth Circuit’s decision outside of the Eighth Circuit and the Center for Regulatory Action challenged EPA’s non-acquiescence statements.

The court held that it did not have jurisdiction to hear the case because the Clean Water Act only gives courts of appeals jurisdiction to hear challenges to EPA-promulgated effluent or discharge standards and the non-acquiescence statements were not a “promulgation” because they did not announce a new standard.  Interestingly, the 2011 policy letters were a “promulgation.”  The Eighth Circuit’s decision had explained that whether an act is a “promulgation” depends on whether it has a binding effect on regulated parties.  Apparently, the court concluded that the 2011 letters had a binding effect, while the acquiescence letters merely explained the effect of the 2011 letters.

Next the court explained that to the extent that the Center for Regulatory Reasonableness was really challenging the 2011 letters, its challenge was untimely.  Challenge had to be within 120 days, as it was in the Eighth Circuit.

The result is that (1) the Eighth Circuit vacated the 2011 letters because they were the promulgation of effluent standards without notice and comment as required by the Administrative Procedure Act; (2) EPA accepts that decision as binding only in Eighth Circuit and treats the 2011 letters as binding in the rest of the country; and (3) the time to challenge the letters for violating the Administrative Procedure Act outside the Eighth Circuit has passed.

The Center for Regulatory Reasonableness may still find a way out of this unreasonable result, but the lesson learned is that when challenging regulatory action, you need to move quickly and you may not be able to rely on challenges in other jurisdictions.

 

The New York State Department of Environmental Conservation recently published proposed amendments to the Part 617 environmental review regulations.  The text of the amendments as well as the generic environmental impact statement assessing the impact of the proposed amendments can be found on the NYSDEC website.  Public comments on the regulations are being accepted until May 19, 2017.

The basic thrust of the regulations is to “streamline the process without sacrificing meaningful environmental review.”  Anyone with experience in the area knows that the process needs streamlining.  Among the areas addressed are additional categories of Type II actions (actions that do not require an impact statement) and new provisions regarding deadlines.

Interested parties should review the proposal  let their voice be heard.   Anything that can streamline the process should be welcome.  It is possible, however, that the regulations are not the primary reason that the process needs to be streamlined.  Local government officials who oppose projects use the SEQRA process to delay and add to the cost of projects.  Therefore, in all likelihood, well intended regulatory change is likely to have little real impact on the process.

In Asarco, LLC v Noranda Mining, Inc., 2017 WL 24609 (10th Cir. 2017), the court held that Asarco could proceed with a contribution claim against Noranda, in part because  there was no necessary inconsistency between (1) Asarco’s representations to the bankruptcy court that its settlement with EPA was fair and equitable and (2) Asarco’s claim in the contribution action that in its settlement with EPA, it paid more than its fair share of the remediation costs.

Asarco is a mining company is a mining company that filed for Chapter 11 bankruptcy in 2005.   Approximately $6.5 billion dollars worth of environmental claims were brought against it and, after years of negotiation, a comprehensive settlement was reached, whereby, Asarco agreed to pay approximately $1.79 billion dollars to resolve environmental claims.  In seeking court approval of the settlement, Asarco produced evidence that the settlement was fair and equitable.

In 2013, the reorganized Asarco brought a contribution claim against Noranda alleging that in settling environmental claims arising out of the Lower Silver Creek/Richardson Flat site, it paid more than its fair share of the remediation costs.  Noranda moved for summary judgment in part based on the doctrine of judicial estoppel – arguing Asarco could not tell one court that the amount paid was fair and equitable and then tell another court that the amount was more than its fair share.  The district court granted the motion and the 10th Circuit reversed.

The court’s reasoning was based in part on the uncertainty inherent in environmental cleanup costs.  Due to that uncertainty, it is not unusual for a party to settle for an amount that it believes is more than its fair share and then seek contribution from others alleging that it paid more than its fair share.

The result does not necessarily mean that the same settlement figure can be fair and equitable in one context and more than their fair share in another.  It does mean, however, that because estimates of future cleanup costs can vary so greatly, Asarco will have the opportunity to prove that it paid more than its fair share in a settlement that it asserted to be fair.

The relationship between 42 USC section 107(a) (the cost recovery provision) and 42 USC section 113 (the contribution provision) has been the subject of two Supreme Court decisions and much debate.  The decision of the United States District Court of Nevada in Diamond X Ranch v Atlantic Richfield Company (Arco), 2016 WL 4498211 (August 26, 2016) adds a new twist to the debate as the court allowed a cost recovery defendant to bring a cost recovery counterclaim.

Diamond X brought a section 107(a) cost recovery claim against Arco alleging that contamination at the ranch was caused by drainage from the Leviathan Mine site, a site at which Arco is a responsible party.  Arco asserted counterclaims under both sections 107(a) and 113 and Diamond X moved to dismiss the section 107(a) claim on the ground that cost recovery plaintiffs are limited contribution clams under section 113.    The court denied the motion to dismiss reasoning that while ordinarily, a cost recovery defendant is limited to a contribution counterclaim (because the counterclaim is for a portion of the costs that are the subject of the cost recovery action), here a cost recovery counterclaim is appropriate because Arco is seeking to recover costs in the counterclaim that are not the subject of Diamond X’s cost recovery claim.  Arco’s theory is that Diamond X’s maintenance of its property and its irrigation caused the disposal of hazardous waste on the Diamond X property.  EPA had issued unilateral orders under section 106 requiring Arco to address contamination and the Arco counterclaim addressed those costs.

Nearly all courts limit a cost recovery defendant to a contribution counterclaim.  There are, however, significant advantages to being a cost recovery plaintiff.  Key among them are joint and several liability and a longer statute of limitations.  Thus, if the Diamond X decision is not reversed on appeal, we may see many cost recovery defendants working to make counterclaim allegations similar to Arco’s.

 

 

The United States Court of Appeals for the Eighth Circuit recently decided that personal information about applicants for environmental permits is exempt from disclosure under the Freedom of Information Law (FOIA). American Farm Bureau Federation v USEPA, 2016 WL 4709117 (8th Cir. 2016).

The case arose out of a challenge by the American Farm Bureau Federation and the National Pork Producers Council to the disclosure of certain personal information about their members. The Clean Water Act prohibits the discharge of pollutants into waters of the United States, except as authorized under the Act. Members of the plaintiff associations own or operate concentrated animal feeding operations (CAFOs)that had discharge permits issued by USEPA. When applying for a permit, owners and operators are required to submit permit applications that include some personal information (e.g. names, addresses, email addresses and phone numbers). EPA obtained information about other CAFOs from states. While EPA was gathering information about CAFOs, several environmental organizations file Freedom of Information Requests about CAFOs. After disclosure of the information, the plaintiffs raised concerns and EPA took the position that the disclosure was required by FOIA.

The plaintiffs based their claim on the 6th exemption to FOIA, which exempts from disclosure “personnel and medical files and similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.” EPA took the position that disclosure was required because the information was publicly available from other sources and the public interest in the information meant that the request was not “unwarranted.” The Court rejected that argument, finding that the disclosure could be a substantial invasion of privacy because it could facilitate harassment of the owners. The Court also rejected the claim that the privacy interests were reduced by the fact that the information was publicly available from other sources.

We live in a world in which the government is always gathering information about businesses. This decision informs business owners that their private information can be protected from public disclosure, even if it is publicly available from other sources.

At the end of May, the Supreme Court held, in United States Army Corps of Engineers v Hawkes, Co., that a mining company could challenge a decision by the Army Corps of Engineers as “final” even though the party had not exhausted its administrative remedies. The case represents a significant expansion of the rights of regulated parties to challenge agency actions.

The case arose out of Hawkes’ desire to engage in peat mining in an area that may affect federally protected wetlands. Determining whether federally protected waters are present can be difficult and the penalties for the discharge of pollutants into federally protected wetlands can be great, so Hawkes did what many parties would do in that circumstance – they asked the Army Corps of Engineers for a jurisdictional determination (JD). The Army Corps determined that “waters” were present. Hawkes applied for a permit for its activities, but found that the permit process would require them to prepare assessments that would cost in excess of $100,000, so Hawkes brought suit to challenge the JD.

The District Court dismissed the suit because one may only challenge “final agency action” and the JD was not a “final” action. Under existing case law, a determination is not “final” unless (1) it represents the conclusion of the agency’s decision making process and (2) it has legal consequences. See, Bennett v Spear, 520 U.S. 154 (1997). The government argued that the JD was not final because (1) the agency’s decision making process would not conclude until the end of the permit process and (2) the JD had no legal consequences because both before and after the JD, Hawkes had exactly the same choice: it could start mining, risk an enforcement action and defend the action by challenging the agency’s jurisdiction or it could pursue a permit and, at the end of that process, challenge the agency decision.

The Eighth Circuit Court of Appeals reversed, finding the agency action to be final (792 F3d 994 (8th Cir. 2015) and the Supreme Court affirmed. The parties agreed that the jurisdictional determination was the end of a process and the issue before the court was whether the JD had legal consequences. The Court noted a JD that concludes that “waters” are not present, has legal consequences because it serves as a shield against an enforcement action. The finding that “waters” are present, therefore, has legal consequences because it denies the availability of this shield.

Businesses dealing with regulatory agencies often find the “finality” requirement frustrating. They want to seek a judicial remedy as soon as they feel aggrieved. They don’t want to hear the one needs to exhaust available remedies within the agency before going to court. That path is often costly and time consuming. The Hawkes decision provides some relief from that, taking a more practical approach to what is final and making it possible to challenge agency action even if there are, at least in theory, other available means of redress within the agency.

In Ebert v General Mills, 2016 WL2943193, (8th Cir, May 20, 2016), residential neighbors brought a class action suit against General Mills alleging that it caused the release of TCE into the ground and that TCE has migrated under their homes in the form of vapor in shallow groundwater, causing them injury.   The specific injury alleged was risk to the health of the residents and diminution in value of their homes.

The District Court granted class certification and the Eighth Circuit Court of Appeals reversed.  In determining whether a claim may be certified as a class action under rule 23 of the Federal Rules of Civil Procedure, the court must first examine whether there are common issues of fact or law and if there are, then the court examines whether the common issues predominate.  The issue of predominance, the Court stated, is qualitative and not quantitative.  Here, there were numerous common issues related to the defendant’s conduct and to the effects of that conduct.  However, the Court concluded that issues of liability and damages would require an examination of the facts related to each individual residence.  Thus, the individual issues predominate.

The decision follows the reasoning of the Supreme Court in several recent decisions.  See, e.g. Wal-Mart Stores v Dukes, 564 U.S. 538 (2011) and Tyson Foods, Inc. v Bouaphakeo __ U.S. __, 136 S. Ct. 1036 (2016).  The fact that the Supreme Court has addressed class certification several times in recent years, shows the important role class certification plays in resolving matters that affect large groups.  The risk to a business in facing a large class claim and the difficulty individuals have in litigating against large corporate entities, combine to mean that the issue of class certification will continue to be important to both parties.  With regard to the use of class action by neighbors of a Superfund Site, the Eighth Circuit approach seems sound because the impacts can only be assessed on an individual basis.