When is a Preliminary Injunction Inappropriate? When the Judge Prejudges the Merits

In an interesting case, the Court of Appeals for the First Circuit this week vacated most of a preliminary injunction issued by a federal judge in Puerto Rico, because, the Court concluded, the lower court had wrongly, and without doing so explicitly, converted a PI hearing into a hearing on the merits.

In Sanchez v. Esso, a gasoline station operator brought RCRA citizen suit claims against Esso, which supplied gasoline to the station, and which actually was the owner of the USTs in which the gasoline was stored. Plaintiffs requested a PI requiring Esso both to assess and to remediate the contamination resulting from leaks in the tanks. After the District Court issued the PI, Esso sought interlocutory relief.  The Court of Appeals vacated most of the injunction.

As the Court of Appeals noted:

[w]hen a trial court ‘disposes of a case on the merits after a preliminary-injunction hearing … it is likely that one or more of the parties will not present their entire case….  Therefore, it is ordinarily improper to decide a case solely on such a basis. 

Reviewing the District Court proceedings, the Court of Appeals pointed to District Court’s statement that the Esso “appear[ed] to be in continuous violation” of the applicable regulations.  Moreover, following issuance of the injunction, Esso had asked the District Court to require the plaintiffs to post a bond.  The District Court denied the request on the ground that:

"’the grant of the preliminary injunction carried[d] no risk of monetary loss" for Esso in the face of the "documented" contamination resulting from Esso’s "violation of regulatory safeguards."

The District Court also made statements to the effect that the only issue going forward was the “extent” of Esso’s liability.

The Court of Appeals concluded that it was “inescapable” that the District Court pre-judged Esso’s ultimate liability.  Aside from the District Court’s conclusory statements about liability, the District Court also failed to address the traditional factors required for issuance of a PI.  This was “a clear error of law.”

It is unclear what impact this case will have. However, RCRA, like most environmental statutes, has an element of strict liability.  The strict liability nature of these statutes often makes it too easy for courts – and perhaps regulators at times? – simply to assume that a defendant is liable, without worrying about the sometimes messy process of discovery and the taking of evidence.  Sanchez v. Esso thus serves as a welcome reminder that even in a world of strict liability, a defendant remains entitled to his day in court.

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