Legal Updates - 2009
CLIMATE CHANGE
Native Village of Kivaline v. ExxonMobil Corporation, 663 F. Supp. 2d (2009) U.S. District Court, Northern District of California
The issue of whether emission of greenhouse gases from defendants' conduct contributed to global warming was not relegated exclusively to the executive branch for purposes of determining whether the issue raised non-justiciable political questions but presented a lack of judicially discoverable and manageable standards.
Eskimo village and city brought action against oil, energy and utility companies for federal common law nuisance based on emission of greenhouses gases that contributed to global warming and caused erosion of Arctic sea ice. Defendants filed motions to dismiss for lack of standing and subject matter jurisdiction.
The District Court held that the issue of whether emission of greenhouse gases from defendants' conduct contributed to global warming was not relegated exclusively to the executive branch for purposes of determining whether the issue raised non-justiciable political questions. The Court noted that there was no express provision in the Constitution or elsewhere indicating that the power to make final determination regarding air pollution or global warming had been vested in either the executive or legislative branch of government. However, the court found that plaintiffs lacked standing and that the claim presented a lack of judicially discoverable and manageable standards that would guide the court in rendering a decision that was principled, rational, and based on reasoned distinctions. Thus, the suit was subject to dismissal under the political question doctrine, because the court would have to weigh energy-producing alternatives that were available in the past along with safety considerations and the impact of different alternatives on consumers and businesses at every level, then weigh the benefits derived from those choices against the risk that increasing greenhouse gases would in turn increase the risk of flooding along the coast. The court further noted the plaintiffs’ admission that global warming resulted from common pollutants from innumerable sources that are mixed together in the atmosphere and cannot be geographically circumscribed. <Back to Top>
Connecticut v. American Electric Power Co., Inc., 582 F.3d 309 (2009) U.S. Court of Appeals, Second Circuit
Plaintiff states, city and land trusts had standing to sue electric power corporations operating fossil fuel power plants under federal common law of nuisance to abate emissions contributing to global warming. The action did not present nonjusticiable political questions and could effectively be dealt with by courts.
Eight states, including California, one city, and three land trusts separately sued the same six electric power corporations that owned and operated fossil-fuel-fired power plants in twenty states, seeking abatement of defendants' ongoing contributions to the public nuisance of global warming. The states with ocean coastlines charged that a rise in sea level induced by global warming would cause more frequent and severe flooding, harm coastal infrastructure, and cause hundreds of billions of dollars of damage. The states bordering the Great Lakes alleged substantial injury due to lowered water levels of the Great Lakes, which would disrupt hydropower production. The land trusts alleged that global warming would diminish or destroy the particular ecological and aesthetic values that caused them to acquire and maintain the properties they held in trust and would undermine their objectives by interfering with their efforts to preserve ecologically significant and sensitive land for scientific and educational purposes and for human use and enjoyment. The District Court dismissed plaintiffs' federal common law nuisance claims as non-justiciable under the political question doctrine, finding that the case required “identification and balancing of economic, environmental, foreign policy, and national security interests” of a “transcendently legislative nature.”
The Second Circuit reversed the lower court’s decision, holding that the actions did not present non-justiciable political questions and that the parties had standing. The Court held that well-settled principles of tort and public nuisance law provided appropriate guidance to the district court in assessing plaintiffs' claims and that the federal courts were competent to deal with those issues. The Court also found that the plaintiffs sufficiently alleged that their current and future injuries were “fairly traceable” to the owners' conduct, as plaintiffs alleged that the owners were the five largest emitters of carbon dioxide in the United States and that their emissions directly and proximately contributed to the claimed and threatened injuries. The Court found that the plaintiffs alleged future injury sufficient to constitute injury-in-fact for purposes of establishing standing to sue, since the injuries that they alleged were certain to occur based on documented increase in carbon dioxide in the atmosphere. In addition, the court found that the fact that global warming would continue despite a reduction in power plant owners' carbon dioxide emissions did not preclude a determination that a favorable decision would satisfy the redressability requirement for standing. <Back to Top>
Resource Conservation and Recovery Act (“RCRA”)
United States v. Apex Oil Company 579 F.3d 734 (2009) U.S. Court of Appeals, Seventh Circuit
Government's claim to injunction requiring successor company to clean up contaminated site under RCRA was not a monetary claim dischargeable in bankruptcy.
The United States brought action under RCRA seeking injunctive relief requiring Apex Oil Company (“Apex”), a successor to the owner of an oil refinery, to clean up a contaminated site. After a bench trial, the District Court entered judgment in favor of the United States. The judge deemed it Apex's legal responsibility to abate the contamination, because it was created by an oil refinery owned by a corporate predecessor of Apex.
On appeal, Apex argued that the injunction requiring cleanup of contamination was a “debt” discharged in bankruptcy proceedings and that the cost of complying with such an equitable decree should be deemed a dischargeable money claim. The Seventh Circuit noted the sparsity of case law on the subject, and rejected Apex’ arguments. The court noted that almost every equitable decree imposes a cost on the defendant and that virtually all enforcement actions impose some cost on the violator. The court held that discharge must be limited to cases in which the claim gives rise to a right to payment in the event that the equitable decree cannot be executed, rather than merely imposing a cost on the defendant, as virtually all equitable decrees do. <Back to Top>
California Environmental Quality Act (“CEQA”)
Committee for Green Foothills v. Santa Clara Board of Supervisors, 48 Cal. 4th 32 (2010) California Supreme Court
Where a Notice of Determination has been filed, but an action alleges that no environmental review was undertaken, the 30 day statute of limitations under California Public Resources Code section 21167 applies to actions challenging decisions announced in the Notice.
Environmental nonprofit corporation brought petition for writ of mandamus against County to enforce CEQA. The nonprofit’s petition concerned the County’s approval of an agreement with Stanford University regarding trail easements intended to lessen impacts on public access to recreational facilities caused by construction of new university buildings. The nonprofit filed its CEQA petition 171 days after the County posted a Notice of Determination (“NOD”). The petition alleged that the County violated CEQA when it failed to conduct environmental review of the trail easement agreement. The County demurred on the grounds that the petition was untimely under the 30 day statute of limitations in California Public Resources Code section 21167, subdivisions (b), (c) and (e) pertaining to determinations announced in NODs. The nonprofit argued that the 180 day statute of limitations for actions based on agency approval of projects without determining the potential environmental effects under California Public Resources Code section 21167, subdivision (a) should apply. The Superior Court sustained the County's demurrer and dismissed the petition.
The Court of Appeal reversed and directed the trial court to grant the nonprofit an opportunity to amend the petition. The Court of Appeal concluded there was “a reasonable possibility” the nonprofit could allege facts sufficient to bring its case within the 180 day statute of limitations for actions based on approval of projects without environmental review.
The California Supreme Court reversed the Court of Appeal’s decision. The Court found that the determinative question, for purposes of defining the statute of limitations, is not what type of violation the plaintiff has alleged, but whether the action complained of was disclosed in a public notice. The Court noted that, when an agency does not give the statutorily required notice, and the public is held to constructive notice based on the start of the project, the Legislature has determined that a longer, 180 day limitations period should apply. The Court further found that, where an NOD has been filed, the Legislature intended the shorter, 30 day statute of limitations to apply, regardless of the type of violation alleged. Accordingly, the Court held that the filing of an NOD triggers a 30 day statute of limitations for all CEQA challenges to the decisions announced in the notice. <Back to Top>
Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”)
Burlington Northern and Santa Fe Railway v. U.S., 129 S.Ct. 1870 (2009) United States Supreme Court
Under CERCLA, joint and several liability will not be imposed if costs can be apportioned between the responsible parties. To be held liable for cleanup costs as an “arranger” under CERCLA, the party must have intended for the hazardous waste to be disposed.
Federal and state agency (“Governments”) brought CERCLA cost recovery action against landowner and supplier of industrial chemicals to recover past and future costs associated with the clean up of a contaminated facility.
The District Court held that both landowner and supplier were potentially responsible parties (PRPs) under CERCLA. The court reasoned that the supplier had “arranged for” the disposal of hazardous substances through its sale and delivery of a chemical that contaminated the site.
However, joint and several liability was not imposed on the parties, since the harm was divisible and capable of apportionment. Instead, the court calculated that the landowner and supplier were accountable for 9% and 6% of the Governments’ costs, respectively.
The Court of Appeals affirmed that the landowner and supplier were both responsible for the cleanup costs. The court stated that the supplier could be held liable as an “arranger” if the “disposal of hazardous wastes was a foreseeable byproduct of” its deliveries of chemicals to the site. However, the court reversed the District Court’s apportionment of costs, claiming the record did not support such an apportionment, and held the parties jointly and severally liable for the Governments’ response costs.
The Supreme Court reversed the Court of Appeals decision, holding that the supplier was not an “arranger” under CERCLA and that an apportionment of the costs was appropriate. The Court held that party must have intended that at least a portion of the product be disposed of during the transfer process to qualify as an “arranger” under CERCLA. The supplier’s knowledge that leaks and spills occurred during the delivery of its chemicals to the site was not sufficient; the supplier had to intend for those spills to occur. The Court also held that joint and several liability will not be assigned if sufficient evidence exists for an apportionment of costs to be conducted. The Court approved the district court’s calculation of costs attributable to the landowner, which was based upon: the size of the landowners parcel, the length of time the parcel was leased by the tenant whose business contaminated the site, and the fact that two of the three contaminating chemicals were found on the landowner’s parcel and those chemicals accounted for two-thirds of the overall site contamination. The Court affirmed that the landowner was responsible for 9% of the Governments’ clean up costs. <Back to Top>
BNSF Railway Company v. California, 2009 WL 55911 U.S. District Court, Eastern District California
Private party’s attorneys’ fees were not a recoverable “necessary cost of response” under CERCLA.
Private party sued state government agency under CERCLA to recover attorneys’ fees incurred in identifying potentially responsible parties (PRPs). The plaintiff claimed attorneys’ fees were a “necessary cost of response” recoverable under 42 U.S.C. §9607(a)(4)(B) and were consistent with the U.S. Supreme Court’s statement in Key Tronic Corp. v. U.S, 511 U.S. 809 (1994), that a private party may be able to recover attorneys’ fees if the fees are closely tied to the actual cleanup of the contamination.
The District Court held that the plaintiff’s attorneys’ fees were not recoverable. The court determined that the costs incurred to identify other PRPs could not be separated from the costs expended in pursuing litigation. The court noted that plaintiff’s work in identifying PRPs did not arise during or benefit any cleanup process. Rather, the attorneys’ fees were incurred to avoid liability for the contamination and to protect the plaintiff’s interests. Thus, the court held that these fees were unrecoverable “litigation expenses” or costs incurred “in pursuing litigation” under CERCLA. <Back to Top>
Schamerhorn v. U.S. Department of the Army, 2009 WL 774964 U.S. District Court, Western District of Louisiana
A contractor filed suit against a government entity to recover damages for “response costs” under CERCLA. The contractor sought monetary damages for various personal injuries, property damages, loss of use of property and loss of income caused by the government’s failure to disclose the fact that asbestos was present in a government-owned building that the contractor dismantled and disposed of in his landfill. The government filed a motion to dismiss, claiming that the contractor failed to allege any response costs were actually incurred.
The District Court granted the government’s motion to dismiss, because the contractor could not show that any response costs had been paid. The court held that the contractor’s claimed diminution in the contractor’s property value could not be classified as a reimbursable “response” cost. <Back to Top>
W.R. Grace & Co. v. Zotos International, Inc., 559 F.3d 85 ( 2009) U.S. Court of Appeals, Second Circuit
A property owner entered into a consent order with a state agency to perform a remedial investigation, a feasibility study, and to remediate its contaminated property. Under CERCLA 42 U.S.C. §9613(f), the property owner then filed suit seeking contribution from a former owner of the property. The District Court held that the property owner was not entitled to recovery under 42 U.S.C. §9613(f), since the property owner had not been a party to any previous CERCLA civil action.
While the case was on appeal, the U.S. Supreme Court rendered two decisions that clarified when a private party is entitled to cost reimbursement under CERCLA. In Cooper Industries Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004), the Court held that private parties who have not been sued in an administrative or cost recovery action may not bring a contribution suit under §9613. In U.S. v. Atlantic Research Corp., 127 S.Ct. 2331 (2007), the Court held that 42 U.S.C §9607(a) of CERCLA allows PRPs to recover necessary costs of response from other PRPs. Prior to this decision, lower courts had prohibited such a claim. The property owner in this case then asked the Court of Appeals for recovery under both §9607 and §9613.
The Court of Appeals held that the property owner was entitled to recovery under 42 U.S.C. §9607(a). The court affirmed that the property owner could not recover under §9613(f)(1), since it was not a party to a civil action, and the property owner could not recover under §9613(f)(3)(B), since the settlement agreement only resolved liability under state law. However, the court held that the property owner could recover costs under §9607(a), regardless of the fact that the property owner’s actions were taken in response to a consent order. The court noted that nothing in §9607(a) prohibits recovery of costs simply because a party is ordered by a state agency to perform remedial actions. <Back to Top>
Adobe Lumber, Inc. v. Hellman, 658 F.Supp. 2d 1188 ( 2009) U.S. District Court, Eastern District of California
Commercial property owner sought declaratory relief and cleanup costs under CERCLA and the Hazardous Substance Account Act (HSAA) for contamination of its property against multiple defendants, one of which was the City. The property owner owned a parcel of land that contained a shopping center. One of the units in the shopping center was a dry cleaner that disposed of percholoethylene (PCE) via a floor drain that connected to the sewer owned by the City. The property owner discovered PCE and other volatile organic chemicals in the soil and groundwater. The property owner alleged that the PCE spilled due to the poor quality of the City’s sewer system and the City’s lack of effective management and maintenance concerning the sewer system. The City filed for summary judgment regarding the property owner’s claims under CERCLA and HSAA, claiming the sewer line was not a “facility” as defined under CERCLA and that the city is not within one of the classes of persons subjected to liability.
The District Court denied the City’s motion for summary judgment. The court held that the City’s sewer treatment plant fell under the definition of “facility” in 42 U.S.C. §9601(9)(a). The court rejected the City’s argument that it was not liable under CERCLA or the HSAA, because it did not own the entire “facility” involved (i.e. the shopping center, pipes and sewer treatment plant). The court reasoned that it is possible to have multiple facilities involved in a CERCLA or HSAA claim and that the court does not have to view them as one site in order to determine the identity of a single owner. The court found that a genuine issue of material fact existed as to whether the City exercised due care and took appropriate precautions concerning the sewer treatment plant, as well as whether or not the drycleaner was the sole cause of the contamination. <Back to Top>
The Clean Water Act (“CWA”)
Saint John’s Organic Farm v. Gem County Mosquito Abatement District, 574 F.3d 1054 ( 2009) U.S. Court of Appeals, Ninth Circuit
A party to a settlement agreement may still be considered a “prevailing party” under the citizen suit provisions of the Clean Water Act and therefore entitled to recover the costs of litigation, unless “special circumstances” exist to deny such costs.
A landowner sought an injunction against a county and county mosquito abatement district (the “County”) alleging that the County was discharging pesticides into waters of the United States without a National Pollutant Discharge Elimination Permit (NPDES), in violation of the CWA. The parties reached a settlement, which called for the County to take certain actions, including decreasing the use of the pesticide, limiting spraying within a certain distance of a river and abstaining from aerial spraying except in health emergencies. Under the terms of the settlement agreement, an application could be filed in the District Court for “costs of litigation” (including attorneys’ fees) under 33 §U.S.C. §1365(d) (“CWA’s citizen suit provision”). Upon application by the landowner, the court denied the request for attorneys’ fees, stating that the landowner was not a “prevailing or substantially prevailing party” and that it was not “appropriate” to grant attorneys’ fees upon entry into a settlement agreement under CWA’s citizen suit provision.
The Court of Appeals reversed the District Court’s decision. The court stated that a party qualifies as a “prevailing party” if it has obtained judicially enforceable, actual relief on the merits of its claim that materially alters the legal relationship between the two parties. To receive actual relief, a party must achieve some of the benefit it sought in filing its lawsuit. The settlement agreement was judicially enforceable, since the terms of the agreement were to be enforced by the District Court. The settlement altered the legal relationship between the parties since the County altered its behavior to accommodate the requests of the landowner. Actual relief was received since the purpose of the injunction was to prevent the County from spraying the pesticide, which is exactly what the settlement agreement achieved. The Court stated that the awarding of the costs of litigation will be considered “appropriate” under the CWA citizen suit provision unless there are “special circumstances” as to why the costs should be denied. The case was remanded this case to determine if any “special circumstances” existed to deny the landowner’s request for attorneys fees. <Back to Top>
LIABILITY OF CORPORATE OFFICERS FOR ENVIRONMENTAL ISSUES
People v. Roscoe, 169 Cal. App. 4th 829 (2008) California Court of Appeals, Third District
The responsible corporate officer doctrine applies to the Health and Safety Code regulations for underground storage tanks and the regulations allow the corporate officers and the business to be jointly and severally liable.
County filed suit against a family run corporation and its officers alleging violation of California’s Health and Safety Code regulations for underground storage tanks (“UST regulations”) after gasoline leaked from the business’ tanks. The trial court, applying the responsible corporate officer doctrine, held two officers personally liable for civil damages. The two men were officers, directors, and shareholders of the company and had the overall authority to prevent or promptly remedy the violations, yet failed to do so. The corporation was also held jointly and severally liable.
The Court of Appeals affirmed the trial court’s decision. The court reasoned that the responsible corporate officer doctrine should extend to the UST regulations and that all of the elements of the doctrine had been met. The court further held that the definition of “person” under the UST regulations allowed the family business and its owners to be held jointly and severally liability for the contamination. Finally, the court held that the fines assessed against the officers were not excessive under the “proportionality test,” since the officers exerted significant control over the business and because the fines allowable under the UST regulations allowed for a greater amount than the trial court actually imposed. <Back to Top>
ENVIRONMENTAL INSURANCE
State of California v. Allstate Insurance, 45 Cal. 4th 1008 (2009) California Supreme Court
For a policy’s “sudden and accidental” release exception to apply, focus must be on the discharge that formed the basis for the insured liability. Insurance coverage will extend under a “sudden and accidental” release exception where covered activities cannot be separated from uncovered activities.
After liability insurers (“Insurers”) refused to indemnify State against any liability arising from underlying action, based on damage caused to third parties by discharge of pollutants from State's waste disposal site, State filed action against insurers, alleging claims for declaratory relief, breach of contract, and breach of implied covenant of good faith and fair dealing. The lower court granted the Insurers' motion for summary judgment based on their policies’ pollution exclusion provisions for waterways. The court also found that the “sudden and accidental” exception to the pollution exclusion provision did not apply. The court reasoned that the act of putting contaminants into a holding pond was not “sudden and accidental” and the fact that those ponds then gave way did not create a “sudden and accidental” event. The court also found that the State could not recover under the policy since the State could not allocate damages between covered and uncovered causes.
The Court of Appeals reversed the trial court’s decision. The court reasoned that the relevant contamination occurred when the holding pond gave way and polluted a nearby waterway, not when the State was putting contaminates into the pond. Thus, the event of the holding pond giving way was “sudden and accidental” and was coverable under the insurance policies. Even though the State was unable to separate out the cost to remediate the sudden and accidental releases from the costs attributable to the gradual seepage of pollutants from the holding pond into the groundwater, the court held that this indivisible damage was covered under the insurance policies.
The Supreme Court affirmed the Court of Appeals’ determination that the relevant discharge for determining when the “sudden and accidental” exception applied was when the contaminants were released from the holding ponds. The focus should be on the event that caused the basis of the liability, which in this case, occurred when the holding ponds gave way, not when the State put the contaminants into the pond. The court also affirmed the determination that, where indivisible property damage is caused by a covered “sudden and accidental” release and a concurrent release that is not covered, the policyholder will be covered for the total loss. In previous cases, lower courts have found that indivisible property damage would exclude a policyholder from coverage. In this case, the Supreme Court overruled those decisions and reasoned that whenever an insured risk is a proximate cause of an injury, coverage should extend even if an excluded risk was also a concurrent proximate cause. When such a situation arises, the policyholder does not have to prove the actual amount of property damage caused by the covered releases. <Back to Top>