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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Yesterday, the Supreme Court announced its decision in American Electric Power v. Connecticut, holding that EPA’s authority to regulate greenhouse gases under the Clean Air Act displaced federal common law nuisance claims. I have always thought that the displacement argument was correct, so the decision is not really a surprise (and the 8-0 decision and crisp opinion only confirm that view). The decision is nonetheless important and, notwithstanding a few limitations, rather sweeping.

The Court’s analysis was straightforward. The creation of federal common law by courts is “unusual” and

[W]hen Congress addresses a question previously governed by a decision rested on federal common law,” the “need for such an unusual exercise of law-making by federal courts disappears.”

Next, displacement of federal common law is not the same as preemption of state law, because there are no federalism issues. Thus, the test for displacement is “simply whether the statute ‘speak[s] directly to [the] question’ at issue.” Therefore, what EPA does in response to the congressional mandate is irrelevant to displacement. It is the CAA that matters. As the court noted, if EPA does not set emission limits, the CAA allows the plaintiffs to petition EPA to do so and EPA’s response to that petition is subject to judicial review. In short,

the relevant question for purposes of displacement is “whether the field has been occupied, not whether it has been occupied in a particular manner.”

The Court also provided a forceful argument for judicial restraint in these kinds of cases:

            It is altogether fitting that Congress designated an expert agency, here, EPA, as best suited to serve as primary regulator of greenhouse gas emissions. The expert agency is surely better equipped to do the job than individual district judges issuing ad hoc, case-by-case injunctions. Federal judges lack the scientific, economic, and technological resources an agency can utilize in coping with issues of this order.

The decision did not address whether these or other plaintiffs could bring actions under state nuisance law, but I would not put a lot of money on those cases succeeding. The decision also does not address cases such as Kivilina v. ExxonMobil, in which the plaintiffs do not seek regulation, but only damages. However, I’m skeptical about the survival of those cases as well.

The real question following yesterday’s decision is whether Republicans in Congress will read it carefully. Will they continue to press to eliminate EPA’s authority to regulate greenhouse gases? Doing so would revive public nuisance suits, unless the legislation also barred federal courts from hearing such cases.

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I have previously expressed my distaste for public nuisance litigation to require reductions in GHG emissions. It cannot be more than a tactic in a war to the plaintiffs, because the chaos resulting from regulation of a global problem through a series of individual law suits has to be obvious to everyone. Now, apparently, that chaos is also obvious to the Obama administration, because it has filed a brief with the Supreme Court, asking the Court to accept a certiorari petition filed by the defendants in American Electric Power v. Connecticut, the 2^nd Circuit case in which the Court of Appeals held that the nuisance claims could proceed. 

The United States cited two reasons why the government should take the case and vacate the appellate decision. First, the brief states that the petitioners failed to demonstrate “prudential standing.” In other words, while they may have Article III standing, federal courts should “refrain from adjudicating ‘generalized grievances more appropriately addressed in the representative branches.’” As the brief notes:

The problem is not simply that many plaintiffs could bring such claims and that many defendants could be sued. Rather, it is that essentially any potential plaintiff could claim to have been injured by any (or all) of the potential defendants. The medium that transmits injury to potential plaintiffs is literally the Earth’s entire atmosphere – making it impossible to consider the sort of focused and more geographically limited effects characteristic of traditional nuisance suits….

Second, and perhaps more importantly, the administration has argued that EPA’s recent regulatory efforts with respect to GHG, including the mobile source rule and the PSD / Title V rules for stationary sources – which occurred after the 2^nd Circuit decision – have “displaced” federal nuisance law. Since the Second Circuit specifically addressed the displacement argument and found for the plaintiffs in part precisely because EPA had not yet regulated GHG, EPA’s intervening regulatory actions certainly would seem to provide a basis for remanding the 2^nd Circuit decision. I think that’s an easy call for the Supreme Court to make.

Perhaps not surprisingly, the plaintiffs’ attorneys were dismayed by the filing of the brief.  According to GreenWire, Matt Pawa, one of the plaintiffs’ attorneys, said that:

We feel stabbed in the back. This was really a dastardly move by an administration that said it was a friend of the environment. With friends like this, who needs enemies?"

My take is a little different. Why don’t the plaintiffs’ attorneys thank the administration for promulgating the various GHG regulations, admit that the nuisance cases were a tactic to move Congress and the administration, claim a partial victory, because they at least got EPA moving, fold up their tents, and go home.

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My apologies if this post is a mash note to Judge Wilkinson. Sometimes a decision is written with such clarity and simplicity that you have to sit up and take notice. Such is the case with yesterday’s decision in North Carolina v. TVA, reversing the District Court decision imposing an injunction against four TVA plants that would have required installation of additional controls for NO_x and SO₂ , notwithstanding the absence of any allegation that the plants were violating their permits under the Clean Air Act. My apologies also to my friends in the environmental community and the Massachusetts AG’s office, who supported the District Court decision, but I have a hard time seeing this decision as anything other than the death knell for this kind of public nuisance litigation.

My only complaint with the opinion is that second paragraph of the decision is such a cogent summary that it’s not obvious to me that the decision needed to go on for another 30 pages. That paragraph states:

This ruling was flawed for several reasons. If allowed to stand, the injunction would encourage courts to use vague public nuisance standards to scuttle the nation’s carefully created system for accommodating the need for energy production and the need for clean air. The result would be a balkanization of clean air regulations and a confused patchwork of standards, to the detriment of industry and the environment alike. Moreover, the injunction improperly applied home state law extraterritorially, in direct contradiction to the Supreme Court’s decision in International Paper Co. v. Ouellette, 479 U.S. 481 (1987). Finally, even if it could be assumed that the North Carolina district court did apply Alabama and Tennessee law, it is difficult to understand how an activity expressly permitted and extensively regulated by both federal and state government could somehow constitute a public nuisance. For these reasons, the judgment must be reversed.

While I will thus leave the bulk of the opinion to readers particularly interested in the subject, one other paragraph stands out for me. After discussing the contours of public nuisance litigation, Judge Wilkinson noted that:

while public nuisance law doubtless encompasses environmental concerns, it does so at such a level of generality as to provide almost no standard of application. If we are to regulate smokestack emissions by the same principles we use to regulate prostitution, obstacles in highways, and bullfights, see Keeton, supra, at 643-45, we will be hard pressed to derive any manageable criteria. As Justice Blackmun commented, "one searches in vain . . . for anything resembling a principle in the common law of nuisance."

There’s no question in my mind that this decision is the end of public nuisance litigation as a viable cause of action for traditional pollutants, where those pollutants are comprehensively regulated under a federal statute. Moreover, it certainly provides a roadmap for dismissal of public nuisance claims concerning GHG emissions. As I noted last year in discussion Connecticut v. AEP, even though the 2^nd Circuit allowed GHG nuisance claims to proceed, part of its argument was that there is no comprehensive federal regulatory scheme with respect to GHG. Its argument clearly suggested that, once such regulations are in place, public nuisance defendants might have better luck. The promulgation of the Tailoring Rule now means that public nuisance defendants can point to North Carolina v. EPA and say that the federal rules have displaced the common law of nuisance. I think that they will probably win that argument. They certainly should.

Thank you Judge Wilkinson.

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Last Friday, the Court of Appeals for the 5^th Circuit issued an order – boggling the minds of lawyers and non-lawyers alike – dismissing the plaintiffs' appeal in Comer v. Murphy Oil, one of the climate change nuisance cases. As the order and dissents make clear, it’s quite a set of circumstances. The District Court dismissed the case. A panel of the 5^th Circuit reversed. A request to rehear the case en banc was made. Seven out of 16 judges recused themselves. Of the nine remaining judges, six voted to rehear the case en banc. 

Three months later, one of the nine judges who voted on the en banc petition recused herself, leaving only eight – or half – of the judges. After requesting and receiving letter briefs from the parties, five of the remaining eight judges concluded that the last recusal deprived the Court of Appeals of a quorum, which means that the Court cannot hear or decide the appeal. Since the Court had already determined that, pursuant to its rules, the original panel decision was vacated when the decision to hear the case en banc was made, there is now no Court of Appeals decision; nor will there ever be one. The District Court decision dismissing the case, which had been reversed by the panel, is now in effect again, and the plaintiffs’ only remedy is a Supreme Court appeal.

As readers of this blog know, I’m not a believer in climate change nuisance litigation. As a formal matter, I think plaintiffs probably lack standing in these cases. As a practical matter, nuisance litigation is not the right way to regulate GHG emissions. However, I have to admit that I find the order breathtaking. The plaintiffs have a formal statutory right of appeal. As Judge Dennis pointed out in a scathing dissent,

federal courts lack the authority to abstain from the exercise of jurisdiction that has been conferred…. Just as courts have an “absolute duty … to hear and decide cases within their jurisdiction, [] litigants have a corresponding due process right to have their cases decided when they are properly before the federal courts.”

I’ll spare you the details, but Judge Dennis provided several different practical solutions that the Court could have utilized to hear the case.

My initial reaction is that this will slow Supreme Court review of this issue. The 5^th Circuit was likely to affirm the District Court decision, which would have created a split with the Second Circuit. The order issued last week means that there is no circuit split at this point. While the plaintiffs can appeal the order to the Supreme Court. even if the Supreme Court were to reverse the order, it would only be to order the 5^th Circuit to hear the appeal on the merits. If the 5^th Circuit is to hear the case, it’s years away at this point. 

Jarndyce v. Jarndyce, anyone?

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To date, the only circuit courts that have reviewed public nuisance claims related to climate change, the Second Circuit, in American Electric Power, and the Fifth Circuit, in Comer v. Murphy Oil, have ruled that such suits can proceed. However, last week the Court of Appeals for the Fifth Circuit decided to hear Comer v. Murphy Oil en banc, which certainly has to give the plaintiffs pause. While I am not fully versed in this issue, a quick glance at the web indicates that statistical analysis confirms one’s naïve assumption, i.e., that a full appellate court often decides to hear a case en banc because a majority thinks that the panel got it wrong.

As I noted when the original decision was issued, even under liberal standing rules, which suggest that the plaintiffs’ harm can be “traced” to the defendant as long as the defendant’s conduct “contributed” to the harm, it’s going to be very difficult for plaintiffs, particularly under the Supreme Court’s new pleading rules, to argue that, for example, Murphy Oil “contributed” to the harm caused by Katrina. If the Fifth Circuit sitting en banc affirms the District Court dismissal in Murphy v. Comer, we could be headed back to the Supreme Court on climate change, since that would set up a conflict between the Second and Fifth Circuits.

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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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After a number of stories indicating that the prospects for climate change legislation were dimming for 2009, the convergence of a number of factors suggests that legislation may still be possible.

Yesterday, Senator Boxer and Senator Kerry released a draft of climate change legislation. This doesn’t mean that Senate passage is imminent. The bill has not been formally introduced and, like the early drafts of the Waxman-Markey bill, leaves some sections blank. Senator Boxer apparently intends to issue a mark-up of the bill sometime in October. One note for the politically-minded readers of this blog – just don’t call the bill “cap-and-trade” legislation. Senator Kerry stated that he does not know what “cap-and-trade” means and denied that this is “cap-and-trade” legislation – notwithstanding that it would cap emissions of CO₂ and allow regulated entities the right to trade allowances to emit CO₂.

Meanwhile, EPA continues to work on climate change regulations. Last week, OMB apparently completed its review of EPA’s proposal to apply PSD rules to sources of CO₂ greater than 25,000 tons per year. EPA apparently intends to issue the rules some time this week. 

Opposition to climate change legislation among the regulated community appears to be splintering. In the past week, three members of the U.S. Chamber of Commerce left the Chamber due to its intransigence on climate change. Perhaps even more tellingly, the Chamber yesterday issued a statement that it supports “strong federal” climate change legislation – though it still appears to oppose significant parts of the Waxman-Markey bill. The Chamber also stated that it prefers legislation to regulation by EPA. Finally, it is worth noting that the Chamber’s statement accused environmentalists of distorting its position, without addressing the withdrawal of three utility members.

The decision in Connecticut v. EPA allowing the public nuisance litigation against six generators to continue. If the threat of EPA regulation hasn’t been enough to tip the balance in favor of legislation, the threat of regulation by injunction may be enough to do so.

Whether these developments will be enough to push climate change legislation over the threshold remains to be seen. Certainly, they improve its prospects.

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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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In a decision that could have significant impact on states’ efforts to limit cross-border pollution, Judge Lacy Thornburg of the District Court for the Western District of North Carolina issued an affirmative injunction against the TVA this week, requiring it to install pollution control equipment at its facilities located nearest to North Carolina and imposing specific emissions limits from those facilities. The basis for the injunction was a finding, after trial, that the facilities created a public nuisance as a result of the air pollution transported from those facilities to North Carolina.

The decision is notable for a number of the findings and holdings.

• Generally speaking, compliance with regulations does not preclude a finding that air emissions constitute a nuisance. (The Court applied the nuisance law of the states in which the plants were located.)
• Ozone and PM_2.5 can create adverse health impacts at concentrations below the National Ambient Air Quality Standards (NAAQS). This suggests that facilities contributing to concentrations of air pollutants can be subject to an injunction requiring the facility to decrease emissions, even if the area is in attainment of the NAAQS.
• The Court looked to survey data indicating that Blue Ridge Parkway visitors would pay $328 in annual taxes in order to improve visibility. As many readers will know, this kind of survey research is extremely controversial and may lead to some extraordinary damages findings.
• The Court declined to impose an injunction against TVA facilities that were not proximate to North Carolina, essentially on the ground their impacts on North Carolina were de minimis. The court found that those plants against which an injunction was entered contributed to somewhere between 5% and 10% of ambient contaminant concentrations. The other plants contributed less 0.1% of ambient concentrations.
• The Court imposed a stringent schedule by when pollution control equipment must be installed. The Court gave the TVA 27 months to install scrubbers and 21 months to install SCRs. This time frame was substantially shorter than that proposed by the TVA.

The one piece of good news for generating plants was the court’s causation analysis with regard to more distant plants. That analysis, if followed, suggests it would be extremely hard for a public nuisance plaintiff to prevail in a global warming case, since the causative contribution of any facility or even group of facilities to the global warming problem is almost certain to be even more attenuated than for those TVA plants distant from North Carolina.

The decision undoubtedly gives downwind states a substantial hammer against upwind sources of contamination (and could be applied to water pollution cases as well as air pollution). Indeed, in the current set of Congressional negotiations, industrial interests could conceivably be tempted to accept more stringent emissions limits in return for preemption of state nuisance laws. It will be interesting to see how this plays out in Congress.

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