The Arbitrary and Capricious Standard Remains in the Eye of the Beholder

In a very interesting – and extremely rare – case, Emhart Industries has successfully defended itself against a unilateral administrative order issued by EPA under CERCLA, on the ground that key decisions made by EPA were arbitrary and capricious.  The decision, concerning the Centredale Manor Restoration Project Superfund Site, is worth a read for CERCLA practitioners, even though it weighs in at 108 pages.

The decision’s length highlights the first important take-away:  the arbitrary and capricious standard is almost infinitely malleable.  Judges reach whatever decision seems reasonable and then justify it in one of two ways.  If a judge wants to support an agency, he recites the highly deferential standard required by arbitrary and capricious review.  If a judge wants to support the challenger, she recites the highly deferential standard, but then notes something along the lines of “deference is not abdication.”  In this case, Judge Smith chose the latter course.

While I’m sympathetic to Judge Smith’s responsibilities in assessing a large and complex record (and I’m always sympathetic to those challenging EPA’s often just plain silly remedial decisions), a 108-page decision is almost prima facie evidence that Judge Smith inquired more deeply into the record than the standard of review would generally warrant.

The second important take-away is on the merits.  Although Judge Smith affirmed many of EPA’s decisions, he rejected EPA’s conclusions on two related – and critically important – issues.  The basis for both decisions was his conclusion that the record did not provide adequate support for EPA’s conclusion that the source area at the site could be a drinking water supply.  That conclusion supported both EPA’s decision about groundwater cleanup standards and the need for a RCRC C cap of the source area.  Why did the Court disagree?  Because Judge Smith concluded that:

The evidence makes overwhelmingly clear that the Source Area groundwater is currently far too contaminated to provide a source of drinking water.

In other words, precisely because the operation of the site had led to so much contamination, EPA did not reasonably determine that the source area groundwater could be used as a drinking water supply.  I think that Judge Smith reached a fair conclusion, particularly since Superfund liability is general strict, i.e., without regard to fault, but it’s one that has to stick in EPA’s craw.  Moreover, given the precedential importance of this issue, I could see EPA appealing Judge Smith’s ruling – or at least I could have under any other administration.  Time will tell, in this case.

(Full disclosure:  Many years ago, Foley Hoag represented Centredale Manor in connection with the Site.  Centredale Manor settled early.  I can only say that our client is well out of it.  Judge Smith noted that the “Centredale Site is truly a litigation gift that keeps on giving.”!)

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