Law and the Environment : Environmental Lawyer & Attorney : Foley Hoag Law Firm : Boston, Washington D.C.

EPA may have had problems in court in recent years defending its regulations, but it has generally fared much better in its enforcement cases. Earlier this week, however, EPA suffered what will be, if it is affirmed, a devastating defeat in its PSD/NSR enforcement initiative. In United States v. EME Homer City Generation, Judge Terrence McVerry concluded that the government could get no relief against either the former owners of the facility or the current owners or operator. No penalties. No injunctive relief. No relief under state law. Nothing. Nada.

The facts here were typical of NSR enforcement cases. The facility, in Homer City, Pennsylvania, had implemented a number of projects from 1991 through 1996 which, EPA alleged, required PSD permits. No permits were sought. The owners at the time of the changes sold the plant in 1999. It was sold again in 2001 and is currently operated by one entity and owned by a group of LLCs. 

The court’s analysis was thorough, yet straightforward. According to the court, PSD requirements are one-time, pre-construction requirements. With respect to civil penalties, the United States acknowledged that the five-year statute of limitations precluded claims against the former owners. The court gave the claim against the current owners and operator short shrift. The court concluded that

The alleged PSD violations constitute singular, separate failures by the Former Owners to obtain pre-construction permits, rather than ongoing failures to comply with whatever hyupothetical conditions might have been imposed during the PSD permittingprocess. Thus, the United States was required to file suit to recover civil penalties for an alleged PSD program violation within five years of the construction project.

The big news from the decision is the court’s refusal to grant injunctive relief. While Judge McVerry described the statute as complex and ambiguous, he did not find the decision before him difficult. With respect to the current owners/operator, injunctive relief could not be imposed on them, because no remedy can be imposed without a liability finding. Because the failure to obtain PSD permits was solely attributable to the former owners, the current owners/operator are not liable for the violation. No liability; no injunction. 

The court found the question somewhat more difficult with respect to former owners. They would be liable for the original violation, if proved, and the five-year statute of limitations does not apply to injunctive relief. The court punted on whether it had authority to issue an injunction against former owners, resting its decision instead on the court’s broad discretion to grant or deny equitable relief. Describing injunctive relief as “a rare and extraordinary remedy,” the court concluded that it would be inappropriate to grant relief against former owners where, since they no longer own the facility, injunctive relief against the former owners is not necessary to prevent future violations by the former owners. 

Finally, the court concluded that the current owners/operator did not violate their Title V permit, because the permit does not include any requirement to meet BACT. The court flat-out rejected the idea that the Title V permit could somehow be found to “incorporate” BACT requirements that should have been included in the Title V permit because they should have been included in PSD permits, because the former owners should have applied for them. 

In short, the government was too late to bring claims against the former owners, and could not establish liability against the current owners. Thus, it could get no relief against anyone.

It is difficult to square this opinion with the general rule interpreting police power statutes broadly to effectuate their purposes, because this decision means that there will be some circumstances in which there is a violation with no remedy, even where the impacts of that violation are still being felt, or seen, or inhaled, today. However, the decision is careful and thoughtful and I wouldn’t automatically assume that it will be reversed on appeal. Not a good day for EPA.

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Last month, in discussing the Administration’s brief in the American Electric Power case, I praised the nuanced and persuasive approach that the Administration took in seeking reversal of the 2^nd Circuit opinion allowing the states' public nuisance climate litigation to go forward. The states seeking to prosecute the law suit have now filed their brief and it turns out that they also do nuance. I still think that the Supreme Court will reverse, however.

I’m not going to get into the standing issue. I don't believe that the states should have standing, but it’s not obvious, given the result in Massachusetts v. EPA, that the Supreme Court will agree.

I find the displacement issue more interesting. The 2^nd Circuit held that the Clean Air Act had not displaced federal common law, because EPA wasn’t actually regulating GHG. Of course, EPA has reversed course and, at least until the GOP in the House has its way, it does now regulate GHG under the CAA. As a result, as the Administration put it in its brief:

Although EPA has not yet done precisely what plaintiffs demand here…, that is not the relevant test. … The question is whether the field has been occupied, not whether it has been occupied in a particular manner.

The plaintiff states disagree. In what is probably a shrewd concession, the states acknowledge that, were EPA to issue new source performance standards for GHG, such standards would displace federal common law, because, while they would not directly subject existing facilities to controls, they would lead to follow-on regulation by EPA requiring states to impose GHG standards on existing plants. Until existing plants are regulated, according to the states, common law has not been displaced. Thus, the states argue, the Supreme Court should either affirm the 2^nd Circuit or simply dismiss the appeal – the states further acknowledge that, on remand, the District Court could reasonably stay the nuisance case to see if EPA in fact issues NSPS for GHG.

Shrewd and nuanced, but I’m still not buying it. I think that once EPA’s GHG regulatory program came into effect, federal common law was displaced. Of course, I don’t get a vote, so we’ll have to wait for the Supreme Court to decide the case.

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Two more decisions were released last week concerning whether nuisance claims could be brought with respect to harm alleged to have resulted from private conduct contributing to climate change. First, in Village of Kivalina v. ExxonMobil Corporation, the District Court dismissed nuisance claims. Second, in Comer v. Murphy Oil, the Fifth Circuit Court of Appeals reversed a District Court dismissal of nuisance claims related to damage resulting from Hurricane Katrina.

Village of Kivalina first. In this case, an Inupiat Eskimo village claimed that global climate change traceable to the defendants has essentially made their village uninhabitable. Notably and, I think, shrewdly, they did not seek injunctive relief, but sought only damages related to the cost of relocating the village. The District Court concluded both that the law suit raised non-justiciable political questions and that the plaintiffs did not have standing, because their harm was not fairly traceable to the defendants’ conduct.

The Fifth Circuit wasn’t buying either of these arguments in Comer v. Murphy Oil. To the Fifth Circuit, like the Second, in the American Electric Power case, the complexity of the underlying proof is not sufficient to render these types of cases non-justiciable. The cases involve tort claims; courts resolve tort claims – pretty much, end of story. I’ve got to say, from my lowly perch, that I think that the Second and Fifth Circuits got it right here. It’s easy to say that it would be better for Congress to deal with climate change than state legislatures or, as here, courts. However, that’s not that same as courts declining to exercise jurisdiction. I’d be surprised if the political question argument  has any real legs.

Standing is a different matter. I still think that both the traceability and redressability elements of standing are problematic. Plaintiffs in both Village of Kivalina and Comer v. Murphy Oil solved the redressability issue by seeking only damages, and not injunctive relief. Both the Second and Fifth Circuits noted that traceability, as a standing issue, necessitates only that the plaintiffs allege that the defendants’ conduct “contributes to” the plaintiffs’ injuries. This is not a stringent test. However, in light of the recent Supreme Court decision in Ashcroft v. Iqbal, I could imagine some courts looking askance at the types of allegations made in these complaints, even at a pleading stage.

On balance, what these cases tell me is that some of these cases are actually likely to be litigated all the way through to trial. Notwithstanding the potentially huge recoveries, it seems here that the cost to the defendants of paying out anything more than nominal damages would be high, and the prospects of successful defense of these claims are still reasonably good. That’s a recipe for trial, as far as I can tell.

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On Monday, the Court of Appeals for the 2^nd Circuit finally issued a decision in Connecticut v. American Electric Power Company, reversing the District Court decision which had dismissed this public nuisance law suit against six large generating companies. The decision is notable in a number of different respects and may have far-reaching implications

·  Standing. Following Massachusetts v. EPA, it is not really surprising that the plaintiffs were able to establish that they have suffered injuries sufficient to provide standing. The more questionable point is redressability. The Court acknowledged that it must be “likely” that the injury will be redressed by a favorable decision. The Court’s response to this issue was that the plaintiffs need not demonstrate that a favorable decision will eliminate the injury, only that it will provide some measure of relief. Even so, could plaintiffs really prove that even elimination of all CO₂ emissions by the defendants would have any impact on climate change? I’m extremely skeptical. The Court did note that there is a “lowered bar for standing” at the pleading stage, so we may see more of this issue as the case proceeds.

·  Displacement. Connecticut v. American Electric Power, unlike the North Carolina v. TVA case decided in January, is basically premised on federal common law of public nuisance. However, federal common law only exists in the absence of legislation addressing the same issues and is subject to “displacement” by such legislation. Following Massachusetts v. EPA, there is no doubt that the CAA provides authority to regulate GHG. What, therefore, is the role of federal public nuisance claims at this point? The Court’s ruling here left defendants alive to argue this issue another day. The Court noted that EPA has not yet issued a final endangerment finding and certainly has not issued regulations limiting GHG emissions from stationary sources. Thus, the problem complained of by plaintiffs “has not been thoroughly addressed by the CAA.” In other words, if either Waxman-Markey passes or EPA moves forward with regulations on its own, defendants may have another crack at dismissing Connecticut v. American Electric Power. 

·  Nuisance Claims in Other Contexts. In tandem with North Carolina v. TVA, this case certainly puts new life into nuisance as a potentially important arrow in the quiver for environmental plaintiffs. As we noted in January, the TVA decision left room for nuisance claims even where National Ambient Air Quality Standards have been attained. This leaves substantial room for nuisance claims in a variety of contexts, as long as underlying legislation hasn’t specifically preempted such claims

·  Prospects for Federal Climate Change Legislation. We have already discussed the choice between regulation by EPA and comprehensive federal cap-and-trade legislation. Now it appears that this dilemma has three horns, not just two. Which would generators prefer? Waxman-Markey or judicial injunctions following nuisance litigation?

It’s a lot to consider.

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Justice Potter Stewart famously said, with respect to obscenity, that “I know it when I see it.” I fear that the test for what constitutes an imminent and substantial endangerment under RCRA is no clearer than Justice Stewart’s subjective test regarding obscenity.

This week, in a decision that is good news for RCRA defendants, Judge Illlston, of the Northern District of California, ruled, in West Coast Home Builders v. Aventis Cropscience USA,  that risks posed by potential future vapor intrusion into buildings from a groundwater plume could not be “imminent and substantial” where no development has yet occurred on the property that is the subject of the litigation. The court was interpreting the Supreme Court’s statement in Meghrig v. KFC Western, to the effect that RCRA “implies that there must be a threat which is present now, although the impact of the threat may not be felt until later.”

Although Judge Illston’s interpretation of Meghrig seems right, other RCRA cases have been allowed to proceed, even though the relationship between the contamination and the exposure have often been equally attenuated. It seems that the court liked the simplicity of a black-letter rule that risks associated with conditions not yet in place can never be imminent.  I am not confident this case will provide much clarity, but even if it only establishes a bright line rule in one narrow corner of the "imminent and substantial endangerment" landscape, that's better than the prior morass.

A developer might reasonably respond to this decision by arguing that such a ruling means that the development will never happen, because no one will finance such a project without knowing that the potential vapor intrusion risk will be addressed. (And a court might respond by saying that that is a problem for Congress to solve, not the courts.)

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In 1992, in South Carolina Coastal Council v. Lucas, the Supreme Court held that a state statute or regulation that denies a property owner all economic use of her property requires payment of just compensation under the Takings Clause. The Court distinguished statutes and regulations from restrictions inherent in background principles of the common law of nuisance – the latter types of restrictions do not require just compensation.

The Supreme Court announced earlier this week that in the fall 2009 term it will hear another, similar, property rights case. The Court will hear an appeal of a decision by the Florida Supreme Court holding that a beach erosion control statute did not unconstitutionally deprive landowners of their property rights without just compensation. 

The facts in Stop the Beach Replenishment v. Florida Department of Environmental Protection are somewhat obscure and relate specifically to the consequences of beach replenishment in Florida. However, it again does raise the question of how the Supreme Court treats statutes. Prior to the 1960s, governments pretty much regulated nuisances pursuant to common law police power. Apparently, exercise of such power has the constitutional blessing of the Supreme Court.

On the other hand – to note the obvious – since the 1960s, across the gamut of environmental police power issues, use of statute and regulation has overtaken reliance on the common law. For some reason, however, constitutional jurisprudence has not caught up with reality on the ground. The whole idea of the common law is that it is flexible and changes over time. Is there any doubt that, had there not been an explosion of environmental statutes and regulations, there would have been an explosion in the development of the common law of nuisance? It seems near certain that courts would have identified numerous additional uses of property over the past 40 years that would now be considered nuisances.

Why should the same regulatory outcome require compensation if taken pursuant to statute or regulations, but not if it occurs as a result of judge-made common law?   

(In the interests of full disclosure, the broad question of how courts treat statutes, as opposed to the otherwise developing common law, was raised by my then-Professor Guido Calabresi in his 1982 book, A Common Law for the Age of Statutes.  Judge Calabresi, your student has not forgotten.)

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