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EPA Administrative Law Reporter A Monthly JournAl of EnvironMEntAl AppEAls BoArd, AlJ, fEdErAl And stAtE dEcisions

(continued on page 4)

Contents Page

Washington, D.C. December 2015Volume 46, Number 6

RCRA EditorMichael W. Steinberg, Esq.

HIGHLIGHTS

PublisherNeil J. Cohen, Esq.

Water EditorColburn T. Cherney, Esq.

Recent Decision inDex .......................6

Decision summaRies .............................10

Documents

ALJ OPINIONS

Opinion, In re Polo Development, Inc.

FEDERAL COURT OPINIONS

Opinion, Dalton Trucking, Inc. v. EPA

Opinion, In re McCarthy

Opinion, United States v. Dico, Inc.

Opinion, Alaska Wilderness League v. Jewell

Opinion, Ohio Valley Environmental Coal v. McCarthy

Opinion, White Earth Nation, v. Kerry

Opinion, LAJIM, LLC v. General Electric Co.

The most noteworthy decisions this month are the following: • In In re Polo Development, Inc., CWA-05-2013-0003 (EPA ALJ Dec. 1, 2015), the EPA filed a Complaint charging Respondents with using mechanized clearing and earth-moving equipment to discharge dredged or fill material into waters of the United States, including wetlands, without a permit required by Section 404 of the Clean Water Act (CWA). The Administrative Law Judge con-cluded that Complainant was entitled to judgment as a matter of law with respect to liability. At issue in this proceeding was the penalty assessment. The ALJ found that several aspects of the nature and circumstances of the violation weighed in favor of a higher penalty, but that the area of impact was rela-tively small. The ALJ decided that it was appropriate to consider each of the five proven illegal discharge events a separate day of violation, and under the “top down” method, found the maximum allowable penalty under the CWA was $70,000. Considering the nature, circumstances, extent and gravity of the violations, the ALJ determined that a reduction of 70 percent from the statutory maximum reflected, on balance, the appropriate level for a gravity com-ponent. However, the ALJ found that Respondents had a very high level of culpability, warranting an increase of 55 percent of the gravity based penalty, resulting in a total penalty of$32,550.• In Dalton Trucking, Inc. v. EPA, No. 13-1281 (D.C. Cir. Dec. 18, 2015), at issue in this case is whether the Court of Appeals for the D.C. Circuit is the proper venue for an action seeking review of a final EPA action involving off-road emissions. The petitioners were members of a trucking association that oppose the EPA’s decision to authorize and waive federal preemption challenges to emissions standards passed by California’s regulatory agency, thereby paving the way for other states to adopt identical

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3

EPA Administrative Law Reporter1611 Connecticut Avenue, N.W., 5th Floor, Washington, D.C. 20009 • 202-462-5755 • Fax 202-328-2430

____________________________________________________________________________________

PublisherNeil J. Cohen, Esq.

RCRA EditorMichael W. Steinberg, Esq.

Morgan, Lewis & Bockius LLPWashington, DC

Water EditorColburn T. Cherney, Esq.

Ropes & GrayWashington, DC

BoaRD of aDvisoRs

Robert F. Lawrence, Esq.Orrick, Herrington & SutcliffeSan Francisco

Angus Macbeth, Esq.Sidley & AustinWashington, DC

Barry S. Neuman, Esq.Whiteford Taylor Preston LLPWashington, DC

Daniel Riesel, Esq.Sive, Paget & RieselNew York, NY

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Richard G. Stoll, Esq.Foley & LardnerWashington, DC

David B. Weinberg, Esq.Wiley Rein LLPWashington, DC

4

standards without further agency review. Judicial review of these matters are governed by section 307(b)(1) of the Clean Air Act (CAA), which grants the Court of Appeals for the D.C. Circuit exclusive jurisdiction over challenges to final EPA actions that are either “nationally applicable” or based on a determination of “nationwide scope or effect.” The petitioners contended that the D.C. Circuit is not the proper venue on the grounds that the EPA action does not meet this standard. They asked the court to dismiss the case, which would effectively allow them to proceed with the matter in the Ninth Circuit. The Court of Appeals for the D.C. Circuit dismissed the case, finding no evidence in the record or legal precedent to support a finding that the EPA’s decision was either “nationally applicable” or “based on a determination of nationwide scope.”

• In In re McCarthy, No. 15-2390 (4th Cir. Dec. 9, 2015), in a Clean Air Act (CAA) citizen suit in which the plaintiffs sought to depose the EPA Administrator, the Fourth Circuit granted EPA’s writ of mandamus precluding the deposition. The court did not find the extraordinary circumstances generally required to depose a high-ranking government official, found alternatives to deposing the Administrator, and found no suggestion of EPA wrongdoing to justify the deposition.

• In United States v. Dico, Inc., No. 14-2762 (8th Cir. Dec. 10, 2015), Senior Judge Bye, writing for the United States Court of Appeals for the Eighth Circuit, vacated the trial court’s summary judgment with respect to defendant’s arranger liability under CERCLA. Following the Supreme Court’s guidance in Burlington N. & Santa Fe Ry. Co. v. U.S., 556 U.S. 599 (2009), the court held that arranger liability following the sale of a product de-pends upon the seller’s intent, not the usefulness of the product or the seller’s knowledge that part of the product will be disposed of. In this case, unresolved questions—including the usefulness of the product to the buyer and the amount saved by the seller by not dispos-ing of the product itself—precluded a finding of arranger liability at the summary judgment stage.

• In Alaska Wilderness League v. Jewell, No. 13-35866 (9th Cir. Dec. 29, 2015), the Ninth Circuit has reaffirmed the district court’s summary judgment in favor of federal defendants and Shell Gulf of Mexico, Inc. and Shell Offshore Inc. in an action brought by environmental groups alleging that the Bureau of Safety and Environmental Enforcement acted unlawfully in approving two of Shell’s oil spill response plans for its oil leases in the Beaufort and Chukchi Seas on Alaska’s Arctic coast.

• In United States v. Citgo Petroleum Corp., No. 2:08-cv-00893 (W.D. La. Dec. 23, 2015), following an appeal, the Fifth Circuit remanded a case to the Western District Court

5

of Louisiana, vacating the civil penalty award and ordering a reassessment of the “eco-nomic benefit” factor to determine the civil penalty for an oil spill of 54,000 gallons from storage tanks that Citgo knew were inadequate and failed to supplement. The District Court revised its penalty against Citgo Petroleum Corporation from $6 million to $81 million, and also found the defendant grossly negligent on remand.

• In Ohio Valley Environmental Coal v. McCarthy, No. 3:15-cv-00271 (S.D. W.Va. Dec. 14, 2015), the federal district court of the Southern District of West Virginia denied a mo-tion to intervene filed by the West Virginia Coal Association (WVCA) but granted it amic-us curiae status in an administrative review action against the EPA. Various environmental organizations challenged the EPA’s approval of the West Virginia Department of Environ-mental Protection’s decision to not develop Total Maximum Daily Loads (TMDLs) for cer-tain West Virginia streams, and sought an order declaring the EPA’s approval in violation of law and requiring the EPA to develop TMDLs for ionic toxicity for the identified streams. The WVCA sought Rule 24 intervention on the grounds that if the EPA was required to develop TMDLs, it might impact WVCA members’ pollution discharge permits, and might also impact the value of coal reserves and property held by WVCA members. The plain-tiffs opposed WVCA’s intervention but the defendants took no position on the matter.

• In White Earth Nation, v. Kerry, Civil No. 14-4726 (MJD/LIB) (D. Minn. Dec. 9, 2015), in a case where a Native American tribe and environmental advocacy groups sought to set aside the State Department’s approval of projects to maintain and expand two petroleum pipelines traversing the U.S. and Canada, and to enjoin use of these improvements pending the completion of requirements under the National Environmental Policy Act (NEPA) and National Historic Preservation Act (NHPA), a federal district court dismissed Plaintiffs’ NEPA and NHPA claims pursuant to the Administrative Procedures Act (APA).

6

CLEAN WATER ACT; ADMINISTRATIVE HEARING; CULPABILITY;

CIVIL PENALTY CALCULATION

In re Polo Development, Inc., CWA-05-2013-0003 (EPA ALJ Dec. 1, 2015)

EPA Administrative Law Judge Imposes $32,550 Penalty for Violation of Clean Water Act; Amount Reflects a 70% Discount for Gravity and a 55% Increase for Culpability ...........................................10

civiL PRoceDuRe, venue, cLean aiR act,

enviRonmentaL PRotection aGencY (ePa)

Dalton Trucking, Inc. v. EPA, No. 13-1281 (D.C. Cir. Dec. 18, 2015)

Court of Appeals for the DC Circuit Holds Venue Improper for Review of EPA Action Because Agency’s Ruling Was Not “Nationally Applicable” ..................16

CLEAN AIR ACT; MERCURY AND

AIR TOXIC STANDARDS

White Stallion Energy Center LLC v. EPA, No. 12-1100 (D.C. Cir. Dec. 15, 2015)

The Mercury Rule Lives To Fight Another Day: Vacatur Is Very Much Out of Fashion ..........................................................................54

CLEAN AIR ACT; WRIT OF MANDAMUS;

DEPOSITIONS OF HIGH-RANKING GOVERNMENT OFFICIALS

In re McCarthy, No. 15-2390 (4th Cir. Dec. 9, 2015)

Deposition of EPA Administrator Precluded Based on Lack of Extraordinary Circumstance, Alternative Ways of Obtaining Information, and Failure To Establish Agency Wrongdoing ...............................................................................18

Recent Decisions inDex

ePa couRts

u.s. couRts of aPPeaLs

7

CERCLA; COST RECOVERY; ARRANGER LIABILITY;

CIVIL PENALTIES; PUNITIVE DAMAGES

United States v. Dico, Inc., No. 14-2762 (8th Cir. Dec. 10, 2015)

Arranger Liability Under CERCLA Following the Sale of a Product Depends Upon the Intent of the Seller, Not the Usefulness of the Product or the Seller’s Knowledge That Part of the Product Will Be Disposed of ..........................................21

OIL SPILL RESPONSE PLANS; CHEVRON DEFERENCE;

ENDANGERED SPECIES ACT; NATIONAL ENVIRONMENTAL POLICY ACT

Alaska Wilderness League v. Jewell, No. 13-35866 (9th Cir. Dec. 29, 2015)

Despite Vigorous Dissents, Ninth Circuit Denies Rehearing En Banc and Reaffirms That Oil Spill Response Plans Are Not Subject to Interagency Consultation Under the Endangered Species Act or NEPA .........................................26

CWA; CIVIL PENALTY; ECONOMIC BENEFIT; NEGLIGENCE; GROSS NEGLIGENCE

United States v. Citgo Petroleum Corp., No. 2:08-cv-00893 (W.D. La. Dec. 23, 2015)

On Remand, Court Imposes $81 Million Civil Penalty Against Citgo for Grossly Negligent Oil Spill .............................................................28

EPA; INTERVENTION; AMICUS STATUS; ADMINISTRATIVE REVIEW

Ohio Valley Environmental Coal v. McCarthy, No. 3:15-cv-00271 (S.D. W.Va. Dec. 14, 2015)

West Virginia Coal Association Denied Intervention in Administrative Review Action Against EPA ...............................................................30

ADMINISTRATIVE PROCEDURES ACT; PRESIDENTIAL PERMITS; FINAL AGENCY ACTION

White Earth Nation, v. Kerry, Civil No. 14-4726 (MJD/LIB) (D. Minn. Dec. 9, 2015)

District of Minnesota Holds That Trans-Border Petroleum Pipeline Construction Projects Pursuant to Presidential Permit Are Not “Final Agency Actions” Under Administrative Procedures Act and Not Subject to Judicial Review .............................................................................33

u.s. DistRict couRts

8

CERCLA; COST RECOVERY; NECESSARY RESPONSE COSTS; CONSISTENCY WITH THE

NCP; DECLARATORY JUDGMENT

Valbruna Slater Steel Corp. v. Joslyn Manufacturing Co., No. 1:10-CV-044-JD (N.D. Ind.

Dec. 4, 2015)

Cleanup Costs That Help Avert a Health or Environmental Threat

Are Recoverable Under CERCLA § 107 Regardless

of the Plaintiff’s Motivation for the Cleanup ...............................................................35

CERCLA; RCRA; NUISANCE; TRESPASS; NEGLIGENCE; CITIZEN SUITS; IMMINENT AND

SUBSTANTIAL ENDANGERMENT; DILIGENT PROSECUTION; STATUTE OF LIMITATIONS;

CONTINUING TORT DOCTRINE; EQUITABLE ESTOPPEL

LAJIM, LLC v. General Electric Co., No. 13 CV 50348 (N.D. Ill. Dec. 18, 2015)

RCRA’s “Diligent Prosecution” Bar to Citizen Suits for Imminent and Substantial

Endangerment Applies Only When a State Has Brought an Action

Under RCRA § 7002(a)(1)(B) Itself ............................................................................39

PIPELINE SAFETY ACT; MULTIPLICITY OF CRIMINAL COUNTS

UnitedStatesv.PacificGasandElectricCo.,No. 14-cr-00175-TEH (N.D. Cal. Dec. 23,

2015)

Court Reduces Potential Fines Under Pipeline Safety Act Because

Statute Punishes Course of Conduct Rather Than Separate Violations .......................44

INDICTMENT; DISMISSAL; APPLICABLE STANDARD

UnitedStatesv.PacificGasandElectricCompany,No. 14-cr-00175-TEH (N.D. Cal. Dec.

23, 2015)

In Criminal Case Involving Rupture of Natural Gas Pipeline,

Corporation’s “Willful Violation” Can Be Proven

Through Collective Knowledge of Employees ............................................................49

9

case taBLe aRRanGeD BY statute

Administrative Procedure Act

White Earth Nation, v. Kerry .............................................................................................33

Clean Air Act

Dalton Trucking, Inc. v. EPA ..............................................................................................16

White Stallion Energy Center LLC v. EPA .........................................................................54

In re McCarthy ...................................................................................................................18

Clean Water Act

In re Polo Development, Inc. .............................................................................................10

United States v. Citgo Petroleum Corp. .............................................................................28

Comprehensive Environmental Response, Compensation, and Liability Act

United States v. Dico, Inc. ..................................................................................................21

Valbruna Slater Steel Corp. v. Joslyn Manufacturing Co. .................................................35

LAJIM, LLC v. General Electric Co. .................................................................................39

Endangered Species Act

Alaska Wilderness League v. Jewell ...................................................................................26

National Environmental Policy Act

Alaska Wilderness League v. Jewell ...................................................................................26

Pipeline Safety Act

UnitedStatesv.PacificGasandElectricCo .....................................................................44

Resource Conservation and Recovery Act

LAJIM, LLC v. General Electric Co. .................................................................................39

10

Recent Decisions

CLEAN WATER ACT; ADMINISTRATIVE HEARING; CULPABILITY; CIVIL PENALTY

CALCULATION

In re Polo Development, Inc., CWA-05-2013-0003 (EPA ALJ Dec. 1, 2015)

EPA Administrative Law Judge Imposes $32,550 Penalty for Violation of Clean Water Act; Amount Reflects a 70% Discount

for Gravity and a 55% Increase for Culpability

Emily Bloomenthal

The EPA filed a Complaint charging Respondents with using mechanized clearing and earth-moving equipment to discharge dredged or fill material into waters of the United States, including wetlands, without a permit required by Section 404 of the Clean Water Act (CWA). The Administrative Law Judge concluded that Complainant was entitled to judgment as a matter of law with respect to liability. At issue in this proceeding was the penalty assessment. The ALJ found that several aspects of the nature and circumstances of the violation weighed in favor of a higher penalty, but that the area of impact was relatively small. The ALJ decided that it was appropriate to consider each of the five proven illegal discharge events a separate day of violation, and under the “top down” method, found the maximum allowable penalty under the CWA was $70,000. Considering the nature, circumstances, extent and gravity of the violations, the ALJ determined that a reduction of 70 percent from the statutory maximum reflected, on balance, the appropriate level for a gravity component. However, the ALJ found that Respondents had a very high level of culpability, warranting an increase of 55 percent of the gravity based penalty, resulting in a total penalty of$32,550.

Background

Respondent Joseph Zdrilich, the director and manager of the other two Respondents, was a real estate developer who developed a property in Ohio called Polo Development. Polo Development included Lot 1, a 2.66 acre parcel bisected by a stream called Burgess Run and an unnamed tributary. Burgess Run was designated by the Ohio Environmental Protection Agency (“OEPA”) as a warm water habitat. It flows into the Mahoning River, which is listed on the USACE’s public list of “traditionally navigable waters” under Section 10 of the 1899 Rivers and Harbors Act and Section 404 of the CWA.

In response to Respondents’ development activities on Lot 1, in January 2013 the EPA Director of the Water Division, Region 5 (“Complainant”), pursuant to Section 309(g) of

11

the Clean Water Act, filed a Complaint charging Respondents with using mechanized clear-ing and earth-moving equipment to discharge dredged or fill material into waters of the United States, including wetlands, without a permit required by Section 404 of the CWA. The Complaint stated that EPA issued an administrative order requiring Respondents to de-velop and implement a plan to restore the filled area to wetlands. Respondents submitted a wetlands restoration plan, but after EPA approved it, Respondent Joseph Zdrilich informed EPA that he would not conduct restoration work in accordance with the plan and would not restore certain areas. The Complaint proposed that Respondents be assessed a civil penalty in the amount of $30,500 for discharging pollutants into navigable waters in violation of Sections 301 and 404 of the CWA.

After motions and a hearing, the Administrative Law Judge issued an Accelerated Decision concluding that Complainant was entitled to judgment as a matter of law with respect to liability of the three Respondents for the dredging and filling of Burgess Run, the unnamed tributary and the eastern wetlands, in violation of Section 301(a) of the Clean Water Act. In addition, the ALJ dismissed the Respondents’ defense of inability to pay for having waived or abandoned the defense, and granted Complainant’s request for judgment as a matter of law that Respondents had the ability to pay the proposed penalty.

Penalty Assessment

At issue in this proceeding was the penalty assessment. The ALJ explained:

Section 309(g)(1)(A) of the CWA authorizes EPA, upon a finding that a person has violated Section

301 of the Act, to assess a civil administrative penalty. Section 309(g)(2)(B) sets the maximum penalty

amounts “per day for each day during which the violation continues,” and a total maximum penalty, for

Class II civil administrative penalties. The Civil Monetary Penalty Inflation Adjustment Rule, 40 C.F.R.

Part 19, adjusts these maximum levels as follows: for violations occurring from March 15, 2004 to

January 12, 2009, the maximum penalty is $11,000 per day per violation, up to a total of $157,500. For

violations occurring after January 12, 2009, the maximum penalty is $16,000 per day per violation, up

to a total maximum penalty of$177,500…

Section 309(g)(3) of the Act specifies the following factors that must be taken into account in determin-

ing the amount of any penalty assessed:

the nature, circumstances, extent and gravity of the violation, or violations, and, with respect to

the violator, ability to pay, any prior history of such violations, the degree of culpability, economic

benefit or savings (if any) resulting from the violation, and such other matters as justice may require.

… Complainant has the burdens of presentation and persuasion that the relief sought, that is, the pro-

posed penalty, is appropriate, and matters of controversy are decided by the presiding administrative law

judge upon a preponderance of the evidence.

12

… In addition, two general enforcement penalty policy documents have been accepted as appropri-

ate guidance: EPA General Enforcement Policy# GM-21, Policy on Civil Penalties (“GM-21 “), and

EPA General Enforcement Policy# GM-22, A Framework for Statute-Specific Approaches to Penalty

Assessments: Implementing EPA’s Policy on Civil Penalties (“GM-22”)... Two main goals of penalty as-

sessment as set out in GM-21 (at 3) are, first, deterrence, ensuring the penalties are large enough to deter

noncompliance by the violator and by others similarly situated; and second, fair and equitable treatment

of the regulated community. These policies instruct that a preliminary deterrence figure should first be

calculated based upon any economic benefit of the noncompliance and the gravity of the violation, and

then that figure is increased or decreased based upon the other statutory factors.

… Absent a penalty policy for cases litigated under the CWA, guidance from the Federal courts is in-

structive. The Supreme Court has stated that “highly discretionary calculations that take into account

multiple factors are necessary” to determine CWA penalties. Tull v. United States, 481, 427 (1987). In

calculating civil penalties under CWA section 309(d), which identifies penalty calculation factors similar

to those for administrative penalties listed in section 309(g), Federal courts have generally used either

a “bottom up” or “top down” method. The “bottom up” method starts with the economic benefit of

noncompliance and then adjusts upwards based on the other statutory factors, whereas the “top down”

approach starts with the statutory maximum and subtracts for any mitigating statutory factors.

Because Complainant did not present evidence of an economic benefit of noncompli-ance, the ALJ concluded that the “top down” method of calculating a penalty was a more useful approach in this case. Given that there was no evidence of economic benefit or sav-ings resulting from the violation, and that the ALJ previously concluded as a matter of law that Respondents had the ability to pay the proposed penalty, the ALJ determined that the relevant statutory factors to consider were the nature, circumstances, extent and gravity of the violation, any prior history of such violations, the degree of culpability, and such other matters as justice may require.

Nature, Circumstances, Extent, and Gravity of the Violations

Turning first to the nature, circumstances, extent and gravity of the violation, the ALJ noted:

GM-22 lists as factors for the gravity component the importance to the regulatory scheme and the actual

or possible harm from the violation, which in turn includes considerations of the amount of pollutant,

toxicity of the pollutant, sensitivity of the environment, and length of time a violation continues. …the

size of the violator is a basis to increase the penalty if the gravity figure would otherwise have little im-

pact on the violator in light of the risk of harm posed by the violation…

As to the general nature of the violations, a significant penalty is appropriate for violations that disrupt

the important absorption and filtration functions that wetlands provide for improving water quality. …

13

failure to obtain necessary permits before filling jurisdictional wetlands may cause significant harm to

the CWA Section 404 regulatory program.

Looking specifically at the circumstances in this case, the ALJ found:

the evidence shows that the eastern wetland was a relatively high quality forested riparian wetland,

providing habitat for wildlife, and the unnamed tributary was a moderate to high quality headwater

stream… The fact that there are relatively few wetlands in the area increases the impact and the signifi-

cance of the violations…In addition, the fact that Burgess Run is an impaired resource water is a basis to

increase the penalty, because an impaired water is more sensitive to impacts than a non-impaired water…

Furthermore, the Site is a relatively short distance to the Mahoning River… These facts weigh in favor

of a higher penalty…

The ALJ also noted that the evidence suggested that Respondents’ actions increased the likelihood of flooding. On the other hand, the ALJ found that the area of impact was relatively small—200 linear feet of stream and 0.67 acre of wetland being impacted-- with fill material up to three feet deep, warranting a significant reduction from the maximum penalties allowed under the CWA.

Although Courts have found that the CWA allows assessment of a separate penalty for each day that unpermitted fill remains in a wetland, the ALJ concluded that this would result in a disproportionally large penalty for the violations in this case. Instead, the ALJ considered each of the five proven illegal discharge events a separate day of violation. Under the “top down” method, the ALJ found the maximum allowable penalty under the CWA was $11,000 for each of the two violations in 2008 and $16,000 each for three later violations, for a total maximum allowable penalty of $70,000.

Degree of Culpability

Turning to Respondents’ degree of culpability, the ALJ explained:

Culpability is analogous to OM-22’s factor or the degree of willfulness or negligence of the violator,

which includes consideration of how much control the violator had over events constituting the viola-

tion, the foreseeability of the events, whether the violator took reasonable precautions against the events,

whether the violator knew or should have known of the hazards associated with the conduct, the level

of sophistication within the industry in dealing with compliance issues, and whether the violator in fact

knew of the legal requirement which was violated.

Here, the ALJ found that Mr. Zdrilich, an experienced real estate developer, was solely responsible for the activities on Lot 1, and as director and manager of the other Respondents.

14

The ALJ concluded that Mr. Zdrilich could have foreseen that he was required to have a Section 404 permit before conducting the clearing, dredging and filling activities on Lot 1, from the time in 1999 that he hired ESC, an environmental engineering, firm to apply for a permit under Section 404 of the CWA. In addition, the ALJ commented “Mr. Zdrilich was notified repeatedly and consistently of the requirements for a Section 404 permit and for restoration of the Site.”

Nevertheless, the ALJ pointed out, there was no evidence that Mr. Zdrilich took any precaution of consulting with ESC, the engineers he hired, or with a lawyer or other envi-ronmental engineer, before directing the clearing, dredging and filling activities on Lot 1. Mr. Zdrilich suggested that he relied on representations from Mr. Pozzuto of the USACE in December 2006, but the ALJ found that Mr. Zdrilich’s interpretation of Mr. Pozzuto’s notes was not reasonable and that Mr. Zdrillich’s remaining testimony regarding Mr. Pozzuto’s instructions was not credible. The ALJ also found that Mr. Zdrilich did not take the precau-tion of reading a 1999 permit, which applied only to 0.14 acre of wetland. The ALJ found that his assertions that this permit authorized him to clear, dredge and fill the eastern wet-lands were not based on any good faith belief, simple negligence or misunderstanding on his part. Furthermore, while OEPA and Mahoning County Planning Commission approved his blueprint, the blueprint did not include much of the construction, clearing, grading, dredging or filling activities conducted on Lot 1. The ALJ also rejected Mr. Zdrilich’s as-sertion that he could grade and fill land within 22.5 feet of the road as unreasonable, as the evidence supported only an easement extending 10 feet from the curb.

In sum, the ALJ wrote:

Despite the many instructions, meetings, conversations, notices and letters from EPA, USACE, OEPA,

county representatives, and Respondents’ own contractors, warning him repeatedly over the years of the

violations and CWA Section 404 permit requirements regarding Lot 1, Mr. Zdrilich took the position that

he was not in violation of the CWA, testifying that he did nothing that he did not have a permit for…

Nothing in the record supports such a position or any good faith belief that he was not in violation of the

CWA. Considering his testimony and overall lack of credibility, it is concluded that Mr. Zdrilich inten-

tionally disregarded the Section 404 permit requirements, willfully violated Section 30l(a) of the CWA

from 2006 through April2012, and acted in defiance of US ACE and EPA orders in grading, dredging and

filling the wetland in 2008, 2009 and 2012.

Though Mr. Zdrilich testified that he “tried to cooperate with them [EPA] as much as humanly possible,” the ALJ concluded that his degree of cooperation went only as far as meeting and speaking with government representatives while they were visiting the Site. Furthermore, the ALJ found that his communications with these representatives were in

15

his interest to prevent or delay enforcement action, and did not merit any decrease in the penalty.

The ALJ therefore determined that the Respondents had a very high level of culpability for the violations, weighing in favor of a high penalty.

Prior History of Violations

The evidence did not show that Respondents had any prior violations of Section 404 the CWA other than the violations at issue in this proceeding, so the ALJ found no need to increase the penalty further for a prior history of violations.

Such Other Matters as Justice May Require

The final question was whether there were any reasons that the penalty should be ad-justed to achieve justice. Mr. Zdrilich testified that almost two years before the hearing, he paid to have restoration work done, but the ALJ concluded that these efforts to attain compliance after the complaint was filed did not merit any decrease in the penalty, plus Respondents did not provide any evidence of wetland restoration work done or that the eastern wetlands were ever restored. As to efforts prior to the Complaint, the ALJ found that any attempts he made for site restoration were only in response to orders from the US ACE and EPA, to delay or avoid enforcement action. In addition, while Mr. Zdrillich testi-fied that he could not afford the $50,000 the consultants he hired would have charged him to implement the Restoration plan, the ALJ found that he was not a credible witness, no ev-idence was presented to corroborate his testimony as to the amount of the fee, Respondents refused to submit financial information as to any inability to pay, and Respondents gener-ated total revenue of$420,500 in property sales between July 2011 and October 2014. The ALJ therefore concluded that there was no evidence to support an adjustment of the penalty “as justice may require.”

Penalty Calculation and Ultimate Conclusion

As noted above, the total maximum allowable penalty under the CWA was $70,000. Considering the nature, circumstances, extent and gravity of the violations in this case, the ALJ determined that a reduction of 70 percent from the statutory maximum reflected, on balance, the appropriate level for a gravity component, yielding a gravity-based penalty of $21,000. The ALJ further concluded:

This figure must be adjusted upward by a significant amount to reflect the high level of Respondents’

culpability, including intentional disregard for legal authority over several years, willful violations, and

defiance of the EPA Restoration Order and USACE’s cease and desist letter, as noted above. Guidance in

GM-22 provides for an increase of up to 30 percent of the gravity based penalty for unusual circumstances

16

of willfulness, plus an increase of up to 20 percent for unusual circumstances of noncooperation. GM-22

at 18, 19. The level of Respondents’ culpability, willfulness, and noncooperation, and their attitude and

lack of diligence in fixing problems warrant an increase of more than 50 percent of the gravity-based

penalty. An increase of 55 percent of the gravity based penalty, or $11,550, is appropriate. This adjust-

ment results in a total penalty of$32,550 for the Respondents’ violations.

The ALJ therefore ordered Respondents to pay a civil penalty of $32,550.

* * *

civiL PRoceDuRe, venue, cLean aiR act, enviRonmentaL PRotection aGencY

(ePa)

Dalton Trucking, Inc. v. EPA, No. 13-1281 (D.C. Cir. Dec. 18, 2015)

Court of Appeals for the DC Circuit Holds Venue Improper for Review of EPA Action Because Agency’s Ruling Was Not “Nationally Applicable”

Adetokunbo Falade

At issue in this case is whether the Court of Appeals for the D.C. Circuit is the proper venue for an action seeking review of a final EPA action involving off-road emissions. The petitioners were members of a trucking association that oppose the EPA’s decision to authorize and waive federal preemption challenges to emissions standards passed by California’s regulatory agency, thereby paving the way for other states to adopt identical standards without further agency review. Judicial review of these matters are governed by section 307(b)(1) of the Clean Air Act (CAA), which grants the Court of Appeals for the D.C. Circuit exclusive jurisdiction over challenges to final EPA actions that are either “nationally applicable” or based on a determination of “nationwide scope or effect.” The petitioners contended that the D.C. Circuit is not the proper venue on the grounds that the EPA action does not meet this standard. They asked the court to dismiss the case, which would effectively allow them to proceed with the matter in the Ninth Circuit. The Court of Appeals for the D.C. Circuit dismissed the case, finding no evidence in the record or legal precedent to support a finding that the EPA’s decision was either “nationally applicable” or “based on a determination of nationwide scope.”

Background

The CAA generally preempts states from adopting standards relating to the control of emissions from off-road diesel engines. However under the statute, California may adopt emissions standards subject to authorization and a waiver of federal preemption from the

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EPA. Once the EPA authorizes California’s regulatory standards, other states may adopt and enforce identical regulations without further approval from the EPA. In 2007, the California Air Resources Board approved regulations to reduce particulate matter and ox-ides of nitrogen emissions from off-road diesel engines. These regulations were approved by the EPA in 2012. The petitioners sought review of the EPA’s decision in both the Court of Appeals for the Ninth and D.C. Circuits, on the grounds that the ruling was arbitrary and capricious. The EPA subsequently filed a motion to have the case before the Ninth Circuit dismissed and transferred to the D.C. Circuit. The proceedings in the Ninth Circuit were held in abeyance pending the ruling in the D.C. Circuit. The petitioners contended that the D.C. Circuit was not the appropriate venue and sought to have the case dismissed.

Section 307(b)(1) of the CAA permits judicial review of final agency actions. In gen-eral, the provision confers jurisdiction on the court of appeals to adjudicate these matters, and specifies which types of challenges can be filed within certain federal courts. Relying primarily on the Supreme Court’s decision in Harrison v. PPG Industries, 446, U.S. 578 (1980), the court held that under section 307(b)(1), exclusive jurisdiction for review of “nationally applicable” agency actions lies with the Court of Appeals for the District of Columbia. Judicial review of “locally or regionally applicable” rulings may be filed in the Court of Appeals for the appropriate Circuit. However, challenges to locally or regionally applicable agency regulations must be filed with the D.C. Circuit if the action is based on a “determination of nationwide scope or effect.” At issue is whether the EPA’s ruling on California’s emissions standards satisfies either standard for judicial review in the D.C. Circuit.

The EPA argued that its decision was “nationally applicable” because other states may automatically adopt California’s off-road standards without further review by the EPA. However, the court found this argument unpersuasive, noting that there was no statutory or regulatory requirement compelling other states to adopt California’s standards, nor did the EPA provide evidence demonstrating that it is common practice for other states to do so.

Additionally, the EPA asserted that its ruling was nationally applicable because the practical effect of California’s emissions regulations would be the regulation of off-road diesel engines based outside of California, primarily in neighboring states. The court dis-missed this argument as inapposite, stating that “to determine whether a final action is nationally applicable, the court need only look on the face of the rulemaking and not its practical effects.” The court summarily determined that on its face, California’s emissions standard would regulate only those off-road vehicles based in California, and therefore held that it was not nationally applicable.

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Moreover, the EPA argued that the D.C. Circuit was the proper venue because the court had “consistently treated similar petitions for review as nationally applicable.” The court also dismissed this contention, finding that the cases cited by the EPA neither addressed venue or examined the “nationally applicable” standard.

Finally, the court held that the EPA’s decision was not based on a determination of “nationwide scope of effect.” Essentially, the EPA argued that it’s declaration of national applicability in its published ruling should be treated as a “per se” finding of national scope or effect. The court refused to do so, reasoning that the section 307(b)(1) makes it clear that the two standards are not one in the same.

For these reasons, the D.C. Circuit dismissed the case, thereby allowing the case to proceed in the Ninth Circuit.

* * *

CLEAN AIR ACT; WRIT OF MANDAMUS; DEPOSITIONS OF HIGH-RANKING GOVERNMENT

OFFICIALS

In re McCarthy, No. 15-2390 (4th Cir. Dec. 9, 2015)

Deposition of EPA Administrator Precluded Based on Lack of Extraordinary Circumstance, Alternative Ways of Obtaining Information, and Failure To Establish Agency Wrongdoing

Janis Kirkland

Assistant Director, Legal Analysis, Research & Writing Program, Regent University School of Law

In a Clean Air Act (CAA) citizen suit in which the plaintiffs sought to depose the EPA Administrator, the Fourth Circuit granted EPA’s writ of mandamus precluding the deposi-tion. The court did not find the extraordinary circumstances generally required to depose a high-ranking government official, found alternatives to deposing the Administrator, and found no suggestion of EPA wrongdoing to justify the deposition.

Background

On March 24, 2014, Murray Energy Corp. and a number of its subsidiaries or affili-ates filed a citizen suit alleging that EPA failed to comply with Section 321(a) of the Clean Air Act (CAA), which provides that “[t]he Administrator shall conduct continuing evalu-ations of potential loss or shifts of employment which may result from the administra-tion or enforcement of the [CAA] and applicable implementation plans, including where

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appropriate, investigating threatened plant closures or reductions in employment allegedly resulting from such administration or enforcement.” EPA moved to dismiss the suit, claim-ing that section 321(a) was discretionary, but the United States District Court, Northern District of West Virginia, denied EPA’s motion, ruling that section 321(a) creates a non-discretionary duty.

EPA then moved for summary judgment, relying on a large set of documents includ-ing Regulatory Impact Analyses, Economic Impact Assessments, and other reports. These documents had been prepared initially for other purposes, and EPA conceded that it had no other evaluations of potential employment impacts of the CAA. The court granted plain-tiffs’ motion to hold the EPA motion in abeyance pending completion of discovery.

On October 7, 2015, plaintiffs filed a notice of deposition, announcing a deposition for EPA Administrator Gina McCarthy scheduled during November. On November 12, 2015, the district court denied EPA’s request for a protective order, and EPA petitioned the United States Court of Appeals for the Fourth Circuit for a writ of mandamus precluding deposi-tion of the EPA Administrator. On December 9, 2015, the Fourth Circuit granted this writ due to lack of extraordinary circumstances justifying a need to depose this high-ranking governmental official, the availability of other alternatives, and lack of EPA wrongdoing.

Depositions of High-Ranking Government Officials Rarely Are Permitted

Deposition of a high-ranking governmental official generally is not permitted unless the party requesting the deposition can demonstrate that “extraordinary circumstances” show a need for the deposition and that the information is not available from an alternative source. Also, the deposition cannot delve into the deponent’s deliberative processes with-out a showing of misconduct or wrongdoing.

No Extraordinary Circumstances Justified Deposition of the EPA Administrator

The district court found extraordinary circumstances based on what it characterized as a conflict between EPA’s position articulated in a number of past communications with Congress and its position adopted in its motion for summary judgment in the CAA citizen suit. In various communications with Congress, EPA had commented repeatedly that it viewed section 321(a) as a discretionary provision providing EPA authority to investigate employment impacts of the CAA should such issues be raised by employees or a company in a specific circumstance. EPA had not interpreted section 321(a) as a mandatory require-ment to conduct employment investigations pursuant to all CAA regulatory actions. The district court interpreted these EPA communications to Congress as an admission that the Agency had never conducted any section 321(a) investigations and viewed this inferred admission of no section 321(a) investigations as contradictory to EPA’s position in the

20

motion for summary judgment claiming that the supporting documents should satisfy sec-tion 321(a).

The Fourth Circuit, however, disagreed with the district court’s characterization of the EPA positions as a contradiction. EPA explicitly acknowledged that the documents sup-porting its summary judgment motion had not been prepared pursuant to section 321(a). Even though the documents had been prepared for a different purpose, EPA could reason-ably assert that the documents might satisfy any section 321(a) obligation, particularly given that no court has yet explained what this section requires.

Other Alternatives Were Available, Making Deposition of the EPA Administrator Unnecessary, and

There Was No Suggestion of EPA Wrongdoing To Justify Deposing the Administrator

Furthermore, the Fourth Circuit was unpersuaded with the district court’s ruling that there was no alternative to deposing the EPA administrator. Plaintiffs had been granted au-thority to depose EPA under Federal Procedure of Civil Procedure Rule 30(b)(6).

Finally, the Fourth Circuit disagreed with the district court’s finding that EPA’s “ap-parent refusal” to comply with section 321(a) was evidence of agency wrongdoing. The view that section 321(a) creates a non-discretionary duty was not articulated prior to the district court’s ruling in this case, so the agency’s prior conduct could not be construed as wrongdoing.

After considering and rejecting all rationales expressed by the district court in its denial of EPA’s requested protective order, the Fourth Circuit granted EPA’s petition for a writ of mandamus precluding deposition of EPA Administrator Gina McCarthy.

* * *

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CERCLA; COST RECOVERY; ARRANGER LIABILITY; CIVIL PENALTIES; PUNITIVE

DAMAGES

United States v. Dico, Inc., No. 14-2762 (8th Cir. Dec. 10, 2015)

Arranger Liability Under CERCLA Following the Sale of a Product Depends Upon the Intent of the Seller, Not the Usefulness of the Product or the Seller’s

Knowledge That Part of the Product Will Be Disposed of

Eric Degroff

On December 10, 2015, Senior Judge Bye, writing for the United States Court of Appeals for the Eighth Circuit, vacated the trial court’s summary judgment with respect to defendant’s arranger liability under CERCLA. Following the Supreme Court’s guidance in Burlington N. & Santa Fe Ry. Co. v. U.S., 556 U.S. 599 (2009), the court held that arranger liability following the sale of a product depends upon the seller’s intent, not the usefulness of the product or the seller’s knowledge that part of the product will be disposed of. In this case, unresolved questions—including the usefulness of the product to the buyer and the amount saved by the seller by not disposing of the product itself—precluded a finding of arranger liability at the summary judgment stage.

This litigation stemmed from the sale and demolition of contaminated buildings in violation of certain use restrictions and reporting requirements. The Court of Appeals affirmed an award of more than $1.6 million in civil penalties based upon a 162-day con-tinuing violation for failure to comply with the reporting requirement. However, the trial court’s award of almost $1.5 million in punitive damages was vacated because defendant Dico had not been linked to any environmental cleanup necessitated by its sale and demoli-tion of the structures.

Background

Defendant Dico, Inc. (Dico) owned a manufacturing facility consisting of several buildings in Des Moines, Iowa. In the mid-1970s, EPA learned of the presence of trichlo-roethylene (TCE) contamination in the groundwater around the facility and ordered Dico to implement groundwater treatment and monitoring. Later, EPA also discovered pesticide and herbicide contamination in the soils adjacent to the buildings, and found PCBs in the insulation of all the buildings except building #1.

Dico was ordered to remove some of the PCB contamination and encapsulate all re-maining insulation to prevent any further release. EPA also ordered Dico to implement an operation and maintenance (O&M) plan consisting of scheduled inspection and mainte-nance activities for those buildings in which PCBs had been discovered. The O&M plan

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was later discontinued, upon the condition that Dico provide annual reports on whether those buildings were again in use.

In 2007, Dico sold a number of the buildings without EPA’s knowledge— including some that contained PCBs and were subject to EPA’s order. The buyer, Southern Iowa Mechanical (SIM), dismantled the buildings and stored parts of the structures in an open field exposed to the elements. EPA learned about the sale in late 2007, discovered PCBs in the soils around the SIM storage pile, and initiated cleanup activity at that location.

The United States then sued Dico to recover its cleanup costs, alleging that Defendant had violated CERCLA by “arranging for disposal” of the PCBs in the buildings, and that Dico had also violated EPA’s order regulating the use of the buildings. The district court granted the government’s summary judgment motion with respect to both claims and awarded response costs, civil penalties and punitive damages. Dico appealed the decision, arguing that material issues of fact should have precluded summary judgment with respect to both alleged violations, and that the district court erred in treating the alleged violation of EPA’s use restriction order as a continuing violation. For the reasons explained below, the Eighth Circuit reversed the district court’s summary judgment order with respect to “ar-ranger” liability and punitive damages, but affirmed its summary judgment order as to the violation of EPA’s use restriction and the imposition of civil penalties.

“Arranger” Liability Under CERCLA

The primary issue in this appeal was whether Dico’s sale to SIM constituted an ar-rangement for disposal of a hazardous substance. CERCLA does not define the term “ar-range,” but the Supreme Court, in Burlington N. & Santa Fe Ry. Co. v. U.S., found that the term “implies action directed to a specific purpose” (556 U.S. 599, 611 (2009)). In Burlington, the Court explained that there are three possible scenarios: (1) a party enter-ing into a transaction for the sole purpose of discarding a hazardous substance that is used and no longer useful is clearly liable under CERCLA as an “arranger”; (2) a party selling a new and useful product that happens to contain a hazardous substance is clearly not liable under CERCLA; and (3) a party whose motives for the sale of a hazardous substance are less clear, and who has some knowledge of the buyer’s planned disposal, may or may not be liable as an “arranger.” The third scenario requires a “fact-intensive inquiry that looks beyond the parties’ characterization of the transaction as a ‘disposal’ or a ‘sale’ and seeks to discern whether the arrangement was one Congress intended to fall within the scope of CERCLA’s strict-liability provisions” (Id. at 610-11).

In this case, Dico challenged the district court’s grant of summary judgment on the issue of whether it had “arranged for” the disposal of PCBs in the guise of the sale of its

23

buildings to SIM. Dico suggested that the buildings had at least sufficient commercial value for a fact-finder reasonably to conclude that it did not intend to dispose of the PCBs by selling the buildings and that summary judgment was therefore inappropriate.

The Court of Appeals agreed with Dico, noting that, in reaching its decision, the district court had relied primarily on two “battery cracking” cases and a case involving the sale of scrap copper wire to a scrap metal company. In the battery cases, defendants understood that the buyers were interested only in the lead, and knew that the contaminated cases would necessarily have to be disposed of. In the copper wire case, defendant likewise understood that the buyer was interested only in the scrap value of the copper and would have to dispose of all of the insulation. In all three cases, the sales were held to constitute “arrangements” for the disposal of hazardous substances.

Based on those three cases, the district court apparently concluded that, if a seller knows the buyer will use only part of the contaminated goods and discard the remainder, the seller, as a matter of law, has arranged for disposal. But as the Court of Appeals noted in this decision, “under the Supreme Court’s definition of ‘arrange,’ a seller’s knowledge of eventual disposal alone is insufficient to find liability as a matter of law.” The relevant question is not the seller’s knowledge of eventual disposal, but rather the seller’s intent with respect to the transaction. “In the battery-cracking cases, the sale product was ‘junk.’ . . . [T]he seller was not selling a product but was intending to rid itself of a hazardous sub-stance by transferring a useless product, where it knew disposal of a hazardous substance was certain.” But where a product has some commercial value and is part of a legitimate sale, the seller is not liable as an “arranger” under CERCLA even if he knows that disposal of a portion of the product will ultimately result.

Even the usefulness of the product— though a factor in the liability equation -- is not dispositive of arranger liability. The useful product doctrine may serve as a substitute, or “proxy,” for the intent element, but it is the intent of the seller in entering into the transac-tion, not the usefulness of the product itself, that ultimately matters.

The court noted that other circuits have identified a number of relevant factors to con-sider in determining whether a transaction is a sale or an arrangement for disposal. Those factors include (1) the intent of the parties as to whether the materials would be reused entirely or reclaimed and then reused, (2) the value of the materials sold, (3) the usefulness of the materials in the condition in which they were sold, (4) the condition of the product at the time of transfer, (5) whether the seller was intending merely to dispose of a matter at the time of transfer, (6) whether the seller made the decision to place hazardous substances into particular hands, (7) whether the seller had knowledge of the disposal, (8) whether the

24

seller owned the hazardous substances, and (9) the balance of the value received by the seller compared to the cost of disposal avoided.

In this case, the Court of Appeals found that many of these factors were left unresolved at trial. First, the cost of remediating the buildings was “not clear from the record.” The district court suggested that Dico “may have ‘eliminated a $2.87 million liability’” by sell-ing the structures rather than disposing of the contaminated insulation. But Dico argued, at trial, that that figure was greatly inflated because it failed to account for the remediation already completed and ignored the fact that much of the remaining remediation cost was related to the eventual removal of the concrete foundations and not the buildings them-selves. Second, the trial court did not fully resolve the issue of how useful the buildings actually were, noting that SIM had previously purchased another building from Dico and was able to re-use it. Accordingly, the Court of Appeals held that the question of arranger liability should not have been decided at summary judgment. In a two-to-one decision, the court vacated both the district court’s order regarding Dico’s arranger liability and its order regarding response costs specifically associated with the issue of arranger liability.

Imposition of Civil Penalties

The Court of Appeals affirmed the trial court’s award of civil penalties totaling more than $1.6 million, based upon a calculation of 162 days of violation. The 162 days rep-resented the length of time required for the demolition of the structures. At the time of the sale, Dico was under an order to submit an O&M plan to EPA for approval in order to ensure the “long-term maintenance [and integrity] of all interior surface sealing, encap-sulation of all building insulation,” and submission of an annual report. By allowing the disassembly of buildings containing encapsulated PCB-laden insulation, Dico violated the terms of that order.

The order also required Dico to “immediately notify” EPA in the event of any “change in site condition,” which disassembly of the buildings clearly would have constituted. Dico was therefore in violation of an EPA order, both by allowing actions to be taken that adversely affected the integrity of the encapsulation and by failing to report the sale and disassembly of the structures to EPA.

The Court of Appeals rejected Dico’s arguments that it “reasonably believed” that no PCBs remained in the buildings and that its obligation to maintain the integrity of the en-capsulated insulation were no longer binding. The fact that surface wipes of the structures revealed no PCB contamination only confirmed the effectiveness of the encapsulation, not that all PCBs had been removed from the buildings. And EPA had reminded Dico, in

25

writing on multiple occasions, that its obligation to maintain the structures and report any changes to EPA were still binding.

Dico also argued that, even if it did violate the EPA order, its failure to notify the agency of the sale was a one-time violation, not a continuing one. The Court of Appeals rejected this argument, as well. Even if Dico’s failure to notify was a one-time violation, “its failure to maintain the protection and integrity of the encapsulation continued through-out the disassembly process and constituted a continuing violation.” The Court of Appeals therefore affirmed the trial court’s award of civil damages totaling more than $1.6 million.

Punitive Damages

The Court of Appeals reversed the trial court’s award of punitive damages of almost $1.5 million. CERCLA § 107(c)(3) authorizes a court to award punitive damages against a party that “fails without sufficient cause to properly provide removal or remedial action” in response to an EPA order. The award must equal three times the cost to the Fund caused by defendant’s failure to take appropriate cleanup action. As this court explained, how-ever, punitive damages “are available only if the Fund incurs costs cleaning up the damage caused by a release or threat of release of hazardous substance.”

In this case, the government incurred cleanup costs due to the release of PCBs from the demolished building materials, but the cleanup was undertaken at the site where SIM had stored the materials, not at the Dico site where the buildings were demolished. Because the trial court’s finding of arranger liability for Dico was erroneous, Dico had not yet been linked to the SIM site and was not liable for cleanup costs incurred at that location. While Dico’s failure to report the sale and disassembly of its structures as required by EPA made it liable for substantial civil penalties, it was SIM’s decision to store the building materi-als in a way that left them exposed to the elements that led to the government’s cleanup. Given that the Fund had not incurred any cleanup costs at the tear-down site itself, punitive damages against Dico would not be appropriate unless or until arranger liability was estab-lished with respect to the SIM site.

Dissenting Opinions

Judge Kelly concurred in the court’s affirmation of liability for the reporting violation, but dissented from its reversal of summary judgment for arranger liability. Her dissent stemmed from a broader application of the Supreme Court’s Burlington Northern opinion and from a differing interpretation of the evidence of record. Judge Kelly read Burlington Northern as mandating arranger liability whenever a seller “enter[s] into [a] sale of [a product] with the intention that at least a portion of the product be disposed of during the transfer process.” Based on this interpretation, and focusing on evidence that the building

26

materials were of limited use following the sale and that SIM was unaware of the PCB contamination at the time of the sale, Judge Kelly read the record to suggest that Dico’s real intent in entering into the transaction was the disposal of a PCB-containing waste.

Judge Loken, also writing separately, suggested that the reporting violation should have been considered a one-time violation punishable by a maximum civil penalty of only $32,000. EPA had notified Dico as early as 2003 that it had no objection to demolition of the buildings as long as Dico coordinated the process with the agency. While the demoli-tion process took 162 days to complete, there was no evidence of a release of PCBs or any other hazardous substance at the demolition site, making a continuing violation of 162 days “unsupportable” in Judge Loken’s view:

The dominant purposes of CERCLA, and therefore the administrative order in question, are to prevent

the release of hazardous substances and to take appropriate remedial action when releases have occurred.

. . . Thus, Dico’s failure to give timely notice of a change in site conditions that threatened a release of

the encapsulated insulation was clearly at least a one-day violation. But disassembling the buildings at

the site for 162 days was not even arguably a 162-day violation if there was no actual release of hazard-

ous substances during that activity. [To assess a civil penalty of more than $1.6 million for the reporting

violation in question] was an erroneous interpretation of [CERCLA § 109(a)(3)] and therefore an abuse

of the court’s discretion in determining the amount of civil penalties.

* * *

OIL SPILL RESPONSE PLANS; CHEVRON DEFERENCE; ENDANGERED SPECIES ACT;

NATIONAL ENVIRONMENTAL POLICY ACT

Alaska Wilderness League v. Jewell, No. 13-35866 (9th Cir. Dec. 29, 2015)

Despite Vigorous Dissents, Ninth Circuit Denies Rehearing En Banc and Reaffirms That Oil Spill Response Plans Are Not Subject to Interagency

Consultation Under the Endangered Species Act or NEPA

Neil Cohen

The Ninth Circuit has reaffirmed the district court’s summary judgment in favor of federal defendants and Shell Gulf of Mexico, Inc. and Shell Offshore Inc. in an action brought by environmental groups alleging that the Bureau of Safety and Environmental Enforcement acted unlawfully in approving two of Shell’s oil spill response plans for its oil leases in the Beaufort and Chukchi Seas on Alaska’s Arctic coast.

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In an earlier decision on June 11, 2015 the panel held that the Bureau’s approval of Shell’s oil spill response plans was not arbitrary, capricious, or invalid under the Administrative Procedures Act. Concerning the plaintiffs’ contention that the Bureau should have engaged in Endangered Species Act consultation before approving the plans, the panel applied Chevron analysis to the Clean Water Act provisions.

At Chevron Step One, the panel held that the relevant portions of the Clean Water Act were ambiguous; and at Chevron Step Two, the panel held that the Bureau’s interpretation of the provisions was reasonable. The Bureau interpreted the provisions to conclude that Congress limited the Bureau’s discretion to only reviewing an oil spill response plan to determine if it met the six enumerated requirements of 33 U.S.C. § 1321(j)(5)(D), and the implementing regulations.

According deference to the Bureau’s interpretation of the Clean Water Act and its own regulations, the panel held that the Bureau lacked discretion to deny approval once it de-termined that the oil spill response plans satisfied the statutory requirements. The panel concluded that the Bureau’s approval of the plans was a nondiscretionary act that did not trigger a requirement for interagency consultation under the Endangered Species Act.

The panel rejected plaintiffs’ contention that the Bureau violated the National Environmental Policy Act by failing to prepare an Environmental Impact Statement before approving the plans. The panel held that the Bureau reasonably concluded that it must approve any plan that met the statutory requirements of the Clean Water Act. The panel concluded that the Bureau’s approval of Shell’s plans was not subject to the requirements of the National Environmental Policy Act. Judge D.W. Nelson dissented. Judge Nelson concurred with the majority that the Bureau did not act in an arbitrary or capricious man-ner in approving the plans, but dissented from the remainder of the majority opinion. Judge Nelson would hold that the Bureau was required to engage in Endangered Species Act consultation, and conduct analysis pursuant to the National Environmental Policy Act, and she would reverse the summary judgment accordingly.

Action on Petition for Rehearing En Banc

In the current decision, the panel denied the petition for panel rehearing, and denied the petition for rehearing en banc. Judge Nelson voted to grant the petition for panel rehear-ing, and recommended granting the petition for rehearing en banc. Judge Gould, joined by Judges W. Fletcher and Callahan, also dissented from the denial of rehearing en banc.

Judge Gould wrote that the majority wrongly interpreted the statute that governs oil spill response plans, the 1990 amendments to the Clean Water Act, as imposing nondiscretion-ary duties based on a perceived statutory ambiguity; and in granting the Bureau of Safety

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and Environmental Enforcement Chevron deference on the issue. Judge Gould wrote that this resulted in the majority wrongly narrowing the application of both the Endangered Species Act and the National Environmental Policy Act.

Editor’s Note: The above summary is based on the Ninth Circuit’s summaries of the two decisions.

* * *

CWA; CIVIL PENALTY; ECONOMIC BENEFIT; NEGLIGENCE; GROSS NEGLIGENCE

United States v. Citgo Petroleum Corp., No. 2:08-cv-00893 (W.D. La. Dec. 23, 2015)

On Remand, Court Imposes $81 Million Civil Penalty Against Citgo for Grossly Negligent Oil Spill

Sana Hamelin

Following an appeal, the Fifth Circuit remanded a case to the Western District Court of Louisiana, vacating the civil penalty award and ordering a reassessment of the “economic benefit” factor to determine the civil penalty for an oil spill of 54,000 gallons from storage tanks that Citgo knew were inadequate and failed to supplement. The District Court revised its penalty against Citgo Petroleum Corporation from $6 million to $81 million, and also found the defendant grossly negligent on remand.

The full amount of economic benefit realized by Citgo as a result of the avoidance and delays was $91.7 million. Noting that the Clean Water Act (CWA) authorizes a penalty en-hancement of up to $4,300 per barrel discharged, as compared to the strict liability amount of $1,100 per barrel, the court settled on $1,500 per barrel for 54,000 barrels, for a total penalty of $81 million. All injunctive relief previously ordered remained in place.

“Economic Benefit”

Under the CWA, a number of factors must be considered when determining a civil pen-alty, including the “economic benefit” to the violator resulting from the violation. Here, Citgo benefitted from avoiding and delaying costs for equipment and maintenance, which, if timely undertaken, may have prevented the oil spill from occurring. In its original judg-ment, the court declined to make a finding of economic benefit to Citgo because of the difficulty of making such an estimate, especially in light of the extreme variance in the position of both sides. The plaintiff argued Citgo had an economic benefit of $83 million, while Citgo argued its benefit was $719.00.

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Citgo, as evidenced by its own internal documents, was guilty of multiple “avoid and delay” tactics that ultimately led to the oil spill, including:

• failure to remove oily sludge from wastewater storage tanks (avoiding $2.7 million in yearly costs from 2000 to 2007);

• failure to dispose of waste (saving $2.5 million in avoided waste disposal costs for each year between 2002 through June of 2007);

• failure to install two wastewater storage tanks (cost of $15.65 million each);

• failure to install an API separator (cost of $1.726 million);

• failure to install an aeration tank (cost of $5 million).

The court also had to pinpoint the time period during which the benefit was incurred. The government argued the period began from May 31, 1994, when operations began, or at the latest October 31 1996, when Citgo’s managers formally requested more tank stor-age capacity for rain events, and Citgo provided only half as many as requested in order to cut costs. Citgo argued the period began in 2005, one year before the oil spill. Citgo also argued that the government’s calculations did not use the “least cost alternative” which would have been a $719 repair of skimmers and seal of a junction box. The court dis-missed this argument as “absurd and unworthy of discussion.” Citgo further pleaded with the court to take into account all the costs it had incurred, including a $13 million criminal fine, $3 million paid to the State of Louisiana, $7 million to comply with the Compliance Plan, and $30–$40 million needed to satisfy the injunctive relief, but the court disagreed that even a substantial civil penalty would impact a multi-billion dollar international cor-poration like Citgo.

The court used the “avoided and delayed cost” method and held that the economic benefit began in October of 1996. Evidence supported the finding that the least costly al-ternative would have been to install adequate equipment and take necessary maintenance measures to prevent the spill. Citgo knew when it built the facility in 1994, or at least by 1996 when its managers called attention to it, that the storage capacity was inadequate, but Citgo consciously took no action, choosing instead to focus on profits. The court adopted the rate of return recommended by the plaintiff’s expert, at 10.04, based on the expert’s approximation of Citgo’s weighted average cost of capital.

Gross Negligence Found

The court also revised its finding of ordinary negligence and held that Citgo was gross-ly negligent because it failed to heed warnings and chose to disregard requests for removal of excess oils and solids from tanks that had inadequate capacity, and delayed for three

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years implementing the recommendation of environmental consultants in 2002 that a third storage tank be constructed.

A finding of gross negligence was warranted because:

• Citgo made unauthorized discharges of over 30 million gallons of untreated wastewater into an unpermitted surge pond;

• Citgo’s wastewater treatment facility was inadequate to handle stormwater, a fact iden-tified by the 2002 study;

• Citgo did not have a procedure in place to monitor the amount of waste oil accumulat-ing in the tanks;

• Citgo failed to remove waste oil and sludge from the tanks on a regular basis, allowing the tanks to fill with over four million gallons of sludge and waste for five years before the spill.

Citgo’s chronic failures and delays resulted in spillage of over two million gallons of oil, severely impacting businesses and recreational activities in the area, and causing mas-sive damage to the environment. In a state like Louisiana where heavy rain is a common occurrence, failing to take adequate measures with the knowledge Citgo had, raised its culpability to the level of gross negligence.

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EPA; INTERVENTION; AMICUS STATUS; ADMINISTRATIVE REVIEW

Ohio Valley Environmental Coal v. McCarthy, No. 3:15-cv-00271 (S.D. W.Va. Dec. 14, 2015)

West Virginia Coal Association Denied Intervention in Administrative Review Action Against EPA

Sana Hamelin

The federal district court of the Southern District of West Virginia denied a motion to intervene filed by the West Virginia Coal Association (WVCA) but granted it amicus curiae status in an administrative review action against the EPA. Various environmental organi-zations challenged the EPA’s approval of the West Virginia Department of Environmental Protection’s decision to not develop Total Maximum Daily Loads (TMDLs) for certain West Virginia streams, and sought an order declaring the EPA’s approval in violation of law and requiring the EPA to develop TMDLs for ionic toxicity for the identified streams. The

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WVCA sought Rule 24 intervention on the grounds that if the EPA was required to develop TMDLs, it might impact WVCA members’ pollution discharge permits, and might also impact the value of coal reserves and property held by WVCA members. The plaintiffs opposed WVCA’s intervention but the defendants took no position on the matter.

The court held that WVCA failed to meet the standard to intervene as a matter of right because WVCA members did not have a significantly protectable interest in the matter, the members’ ability to protect their purported interest would not be impaired by disposition of the action, and WVCA failed to meet its burden to show that an existing party—the EPA—did not adequately represent WVCA’s claimed interest. Permissive intervention was also denied because it would have delayed and complicated the proceedings while adding no offsetting benefit that could not be attained as well through amicus participation, which was granted.

WVCA Did Not Meet Rule 24 Standard for Intervention

To have a right to intervene under Rule 24(a)(2), a would-be intervenor must fulfill four requirements. The first requirement is timeliness, which was met. The second requires the applicant to have “an interest relating to the property or transaction which is the subject of the action.” An applicant has a significantly protectable interest if it stands to gain or lose by the direct legal operation of a judgment in the action. The advisory committee for the federal rules intended for courts to use the criteria for joinder of necessary parties in decid-ing whether a party has a significantly protectable interest—in other words, an applicant should be permitted intervention as of right only in those situations where the applicant would be a necessary party under Rule 19(a)(1)(B)(i).

WVCA claimed it had a significantly protectable interest in avoiding an order requiring promulgation of TMDLs, but the court determined WVCA’s interest to be too attenuated to be significantly protectable under Rule 24. Even if the suit yields WVCA’s feared out-come, federal and state agencies would have to take multiple interim steps before WVCA members’ permits or their property values, coal worth, or treatment obligations will be affected. The mere possibility that a suit could lead to more stringent regulations does not warrant a right to intervene. Nor did WVCA have the sort of contingent economic interest recognized by the Fourth Circuit as sufficient for intervention as of right, since WVCA’s interest was dependent upon several steps of multiple agencies’ decision-making, and cer-tain harm to WVCA would not necessarily follow even if the plaintiffs got the relief they sought.

WVCA also failed to satisfy the remaining two requirements of Rule 24—impair-ment of the ability to protect its interest, and inadequate representation by existing parties.

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WVCA’s ability to protect its interest would not be impaired if it was denied intervention because even if the EPA promulgates TMDLs, WVCA could seek judicial review of EPA’s decision under the Administrative Procedure Act. Finally, the EPA, an existing party, could adequately represent WVCA’s interest because the EPA shares WVCA’s ultimate objec-tive: to have the court affirm the EPA’s decision not to develop TMDLs for ionic toxic-ity. The court noted that even where the would-be intervenor’s interest is more specific (here, avoiding effluent limits on permits) than the existing party’s interest (here, affirming EPA’s challenged decision), this does not rebut the presumption of adequate representation, which may be rebutted by evidence of adverse interests, collusion or nonfeasance, none of which were present here.

Permissive intervention under Rule 24(b) was also denied because it would have caused undue delay in the resolution of the action and imposed a burden on judicial resources by complicating discovery and any possible settlement negotiations. The court also anticipat-ed petitions from individual WVCA permit holding members seeking intervention, dealing with which would cost substantial judicial resources.

Amicus Status Sufficient for WVCA’s Purposes

WVCA had argued that intervention was proper because it could offer the court the coal industry’s perspective on the issue of whether EPA’s decision was in compliance with the Clean Water Act. A court does not abuse its discretion in denying permissive interven-tion when participation as an amicus satisfies the asserted need for intervention. Granting WVCA amicus status would allow it to present the coal industry’s perspective without complicating and delaying the proceedings. Thus, WVCA was invited to file a memoran-dum as amicus curiae on any motion in the case, on the same deadline schedule as the party whose position it supports.

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ADMINISTRATIVE PROCEDURES ACT; PRESIDENTIAL PERMITS; FINAL AGENCY ACTION

White Earth Nation, v. Kerry, Civil No. 14-4726 (MJD/LIB) (D. Minn. Dec. 9, 2015)

District of Minnesota Holds That Trans-Border Petroleum Pipeline Construction Projects Pursuant to Presidential Permit Are Not “Final Agency Actions” Under Administrative Procedures Act and Not Subject to Judicial Review

Sharon Siegel

In a case where a Native American tribe and environmental advocacy groups sought to set aside the State Department’s approval of projects to maintain and expand two petroleum pipelines traversing the U.S. and Canada, and to enjoin use of these improvements pending the completion of requirements under the National Environmental Policy Act (NEPA) and National Historic Preservation Act (NHPA), a federal district court dismissed Plaintiffs’ NEPA and NHPA claims pursuant to the Administrative Procedures Act (APA) because:

• The State Department acted under authority of a Presidential Permit that was issued pursuant to an Executive Order, and, as a result, the Department’s determinations were Presidential actions which are not “agency actions” and therefore not reviewable under the APA;

• Although the President delegated his inherent constitutional authority concerning in-ternational borders to the Secretary of State, the resulting action remained that of the President;

• Judicial review is inappropriate where, as here, the President has complete discretion over the permitting process and there is no governing statutory framework; and

• The State Department’s interpretation of a Presidential Permit is akin to a determina-tion on an initial permit application in that both are Presidential in nature and neither is subject to judicial review.

Background

Defendant/Intervenor Enbridge Energy owned and operated oil pipelines. The two pipelines at issue—Line 3 and Line 67—were each 1,000 miles long and followed the same route stretching from Alberta, Canada, to Superior, Wisconsin. Line 3 was constructed in the late 1960s, and construction for Line 67 began in August 2009. Construction of each of these lines required a Presidential Permit since they both cross the Canadian border.

A Presidential Permit for Line 3 issued in January 1968, and in August of that year, President Johnson delegated to his Secretary of State the authority to grant and deny per-mits for trans-boundary oil pipelines. Pursuant to this authority, the State Department

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issued a new Presidential Permit for Line 3 in 1991 when the pipeline transferred to new owners.

In 2004, Executive Order 13337 revised the permitting process by authorizing expe-dited State Department review. This order also affirmed that the State Department is em-powered to receive applications for Presidential permits for trans-boundary pipelines.

The Presidential Permit for Line 67 issued in 2009. Prior to this issuance, the State Department prepared a final environmental impact statement pursuant to NEPA and NHPA.

On February 5, 2014, Enbridge notified the State Department that Line 3 required main-tenance, including replacement of a 16-mile segment extending from the U.S.-Canadian border to the first mainline valve in the U.S. On March 17, 2014, Enbridge informed the State Department that it intended to install wider piping for segments beyond the first main-line valve and that this project would substantially increase the overall pipeline’s capacity. On April 24, 2014, the State Department confirmed that the 16-mile replacement project was consistent with the 1991 Presidential Permit and that the Permit does not restrict the width of piping beyond the first mainline valve.

In November 2012, Enbridge applied for an amendment to the August 2009 Presidential Permit to authorize an increase to the volume of oil transported across the U.S.-Canadian border in Line 67. In March 2013, the State Department initiated the process for a supple-mental environmental impact statement; this review is ongoing.

In June 2014, Enbridge notified the State Department that it intended to construct in-terconnections between Lines 3 and 67, one on the Canadian side and the other beyond the first valve on the U.S. side. This move would likewise increase pipeline volume. On June 24, 2014, the State Department determined that these proposed interconnections did not re-quire State Department authorization since they fall outside the pipeline’s border segments.

Plaintiffs alleged that the State Department violated NEPA, NHPA, and the APA by determining that the 16-mile replacement project was consistent with the 1991 Presidential Permit and that the inter-connections did not require State Department authorization. Plaintiffs requested that the court declare these violations, set aside the Department’s ap-proval of the pipeline projects, and permanently enjoin these projects absent completion of the NEPA and NHPA process. All parties filed for partial summary judgment.

The Challenged State Department Determinations Are Not Final Agency Actions

The court granted summary judgment for Defendants, holding that Plaintiffs’ claims fail because they are not based on “agency actions” as required for APA applicability. It is well-settled that Presidential actions are not agency actions and, therefore, not reviewable

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under the APA. The U.S. Supreme Court has carved Presidential actions out of the APA since the statute does not mention the President explicitly.

With respect to trans-boundary pipelines, the court held that the State Department’s issuance of a Presidential Permit pursuant to Executive Order 13337 is a Presidential ac-tion and, therefore, not subject to judicial review under the APA. Even when the President delegates his inherent constitutional authority regarding international borders to the State Department, the Department’s actions remain “fundamentally Presidential.” In particular, the President retains absolute discretion in the permitting process. Since the President’s permitting authority is not even bound by statutory restrictions, subjecting his permitting decisions to judicial review would violate separation of powers.

While this case involves the interpretation of a Presidential permit, rather than an initial application for this type of permit (as in other cases), the court found that both determina-tions are “Presidential in nature” and not subject to judicial review. Enbridge requested that the State Department confirm that the 16-mile replacement project on Line 3 was con-sistent with the 1991 Presidential Permit and that the proposed inter-connections fell out-side the scope of existing permits. By responding to these requests, the State Department “was carrying out the directives of the President” as articulated in Executive Order 13337.

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CERCLA; COST RECOVERY; NECESSARY RESPONSE COSTS; CONSISTENCY WITH THE

NCP; DECLARATORY JUDGMENT

Valbruna Slater Steel Corp. v. Joslyn Manufacturing Co., No. 1:10-CV-044-JD (N.D. Ind. Dec. 4, 2015)

Cleanup Costs That Help Avert a Health or Environmental Threat Are Recoverable Under CERCLA § 107 Regardless of the Plaintiff’s Motivation for the Cleanup

Eric DeGroff

On December 4, 2015, the federal district court for the Northern District of Indiana held that plaintiff’s cleanup costs were both necessary and consistent with the National Contingency Plan (NCP) and were therefore recoverable under CERCLA § 107(a). Though cleanup may have been motivated more by pursuit of a business opportunity than by plain-tiff’s concern about the environment, the fact that a health or environmental threat existed made the cleanup “necessary” for purposes of CERCLA.

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Despite the fact that plaintiff failed to comply with the NCP’s requirements for pub-lic participation, the extensive oversight of its cleanup by the state environmental agency served as a substitute for public participation in accordance with Seventh Circuit prec-edent. The Seventh Circuit has also held that the NCP does not require compliance with public participation with respect to preliminary investigation and monitoring activities. Because all elements of a prima facie case for cost recovery under CERCLA § 107(a) were met, the court was mandated, under CERCLA § 113(g)(2), to grant plaintiff’s motion for a declaratory judgment concerning defendant’s liability for future response costs.

Background

Plaintiffs Valbruna Slater Steel Corporation and Fort Wayne Steel Corporation (col-lectively, Valbruna) own a steel manufacturing facility in Fort Wayne, Indiana. Valbruna alleged that Joslyn Manufacturing Company (Joslyn), one of the former owners of the site, contaminated the facility with chlorinated solvents, metals and other pollutants. Valbruna sued Joslyn for cost recovery under CERCLA § 107(a) and under the Indiana Environmental Legal Action statute (ELA) for costs Valbruna incurred in cleaning up the site. Joslyn filed a counterclaim. The district court had previously granted Joslyn summary judgment as to Valbruna’s ELA claim, so the CERCLA claim was the sole claim at issue in this decision.

Necessity of Expenses

To establish liability under CERCLA § 107(a), a plaintiff must prove that the costs it seeks to recovery were both necessary and incurred in a manner consistent with the NCP. With respect to the requirement of “necessity,” the court explained that “costs are ‘neces-sary’ [under CERCLA] if they are incurred in response to a threat to human health or the environment and they are necessary to address that threat.” A determination of “necessity” is “a mixed question of law and fact.” To recover any costs under CERCLA § 107(a), it is only essential that some of the costs plaintiff incurred be necessary, not all of its costs.

Joslyn argued that none of Valbruna’s costs were necessary because they “were incurred for a ‘purpose other than responding to an actual and real public health threat.’” Though Valbruna incurred more than $1 million in removing asbestos, lead paint, transformer oil, and other hazardous wastes from the site, Joslyn suggested that the plaintiff did so in order to facilitate new construction, not to remediate an environmental threat. Joslyn pointed to G.J. Leasing Co. v. Union Elec. Co., 854 F. Supp. 539 (S.D. Ill. 1994), to support its con-tention that environmental cleanup motivated by pursuit of a business opportunity rather than a threat to public health or the environment are not “necessary,” and are therefore not recoverable under CERCLA.

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The court explained that a party’s motivation is actually irrelevant in determining whether its cleanup costs are recoverable. While a party may be motivated primarily by a desire to pursue a business opportunity, the costs it incurs in cleanup are still necessary under CERCLA to the extent its actions also addressed a threat to public health or the environment. The court found G.J. Leasing distinguishable from the facts in this case, in that the G.J. Leasing court found no evidence of any public health threat. Though the court in G.J. Leasing did mention the plaintiff’s business motivation, that factor merely underscored the absence of any public health concern in that case. This court found that a threat did exist to public health or the environment, and thus rejected Joslyn’s argument and its reliance on G.J. Leasing. The court explained, however, that Valbruna would still have to establish, at trial, the full extent to which its costs “were related to remediating a public health threat.”

Consistency With the NCP

Joslyn also asserted that Valbruna failed to comply with the NCP’s public participation requirement and thus should not be allowed to recover the expenses it claimed. Valbruna responded that government involvement in a cleanup may suffice to meet the NCP’s public participation requirement, and pointed out that it had carried out its cleanup “under the close supervision and oversight of the Indiana Department of Environmental Management (IDEM).” Joslyn argued that government oversight cannot fully substitute for public par-ticipation because it does not fulfill the same functions. Public participation serves two purposes: (1) to ensure that citizens affected by cleanup decisions can effectively represent their interests; and (2) to guarantee that cleanups are executed in an environmentally sound manner. While government oversight may satisfy the second purpose, Joslyn suggested that it does not necessarily fulfill the first.

This court found the Seventh Circuit’s decision in NutraSweet Co. v. X-L Eng’g Co,, 227 F.3d 776 (7th Cir. 2000) to be controlling on this issue. In NutraSweet, the Seventh Circuit suggested that involvement in a cleanup by a government agency could fulfill the NCP’s public participation requirement if the involvement was sufficient to ensure the cleanup was done “in an environmentally sound manner.” If the responsible agency “gives comprehensive input, and the private parties involved act pursuant to those instructions,” then agency involvement may be considered “substantial” and may substitute for the pub-lic participation otherwise required by the NCP (quoting BedfordAffiliatesv.Sills, 156 F.3d 416, 428 (2d Cir. 1998)).

In this case, Valbruna purchased the site under an agreement with IDEM for site reme-diation. IDEM reviewed Valbruna’s remediation work plan and reviewed and approved

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individual invoices for the work performed in conducting the cleanup. Then, when Valbruna completed the steps required in the approved work plan, it entered into a further voluntary remediation program with IDEM to address the contamination that remained following completion of the initial plan. The fact that IDEM did not charge Valbruna for oversight costs, and that the work plan approved by IDEM did not consider potential alternatives as is typically required by the NCP, did not lessen IDEM’s involvement in the cleanup. The court therefore concluded that IDEM’s involvement in Valbruna’s remediation was “sub-stantial,” and was therefore sufficient to satisfy the NCP’s public participation requirement.

The parties also disagreed as to whether Valbruna’s preliminary investigation and mon-itoring costs were recoverable under CERCLA. Joslyn argued that those costs, like any other expenses, had to comply with the NCP. Valbruna suggested that they did not. Again, the court found that the Seventh Circuit had already addressed this issue, in PMC, Inc. v. Sherwin-Williams Co., 151 F.3d 610, 617 (7th Cir. 1998), when it held that site-assessment costs “are not subject to the requirement of submission for public comment.” Without reaching the question, at this stage of litigation, of how much Valbruna could actually re-cover, the court held that Valbruna had “incurred necessary and NCP-compliant expenses” in the form of preliminary investigation costs.

Declaratory Judgment

Because Valbruna had proven that some necessary costs of response had been incurred consistent with the NCP, and all other elements of a prima facie case for cost recovery were undisputed, the court found that Valbruna had established Joslyn’s liability under § 107. Though the court deferred a decision about how much would actually be recoverable by Valbruna, it held that the plaintiff was entitled to a declaratory judgment as to future costs pursuant to § 113(g)(2). That provision of CERCLA requires a court to grant a declaratory judgment with respect to future costs if the plaintiff establishes defendant’s liability for past response costs.

Based on the reasoning described above, the court granted Valbruna’s motion for sum-mary judgment with respect to Joslyn’s liability for some past response costs, and also granted Valbruna’s request for a declaratory judgment concerning future response costs. The court denied Joslyn’s motions for summary judgment, noting that Joslyn’s motions were “successive summary judgment motions” and had been filed without first seeking leave from the court to do so, in “flagrant[]” violation of a previous order by the court.

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CERCLA; RCRA; NUISANCE; TRESPASS; NEGLIGENCE; CITIZEN SUITS; IMMINENT AND

SUBSTANTIAL ENDANGERMENT; DILIGENT PROSECUTION; STATUTE OF LIMITATIONS;

CONTINUING TORT DOCTRINE; EQUITABLE ESTOPPEL

LAJIM, LLC v. General Electric Co., No. 13 CV 50348 (N.D. Ill. Dec. 18, 2015)

RCRA’s “Diligent Prosecution” Bar to Citizen Suits for Imminent and Substantial Endangerment Applies Only When a State Has Brought

an Action Under RCRA § 7002(a)(1)(B) Itself

Eric DeGroff

On November 30, 2015, Magistrate Judge Johnston, writing for the federal district court for the Northern District of Illinois, held that RCRA’s “diligent prosecution” bar to citizen suits claiming imminent and substantial endangerment applies only when the state has sued defendant under RCRA § 7002(a)(1)(B) itself. This is true even if the state’s previous enforcement action pertained to a state program that was authorized by EPA to operate in lieu of RCRA. While citizen suits under § 7002(a)(1)(A), alleging violation of a RCRA standard, permit, or provision, may be precluded by a broad range of state civil or criminal actions, the bar to citizen suits under subsection (a)(1)(B) is much more narrow.

The fact that pathways of human exposure to the soil and groundwater contamination at issue had been eliminated by the closure of public drinking water wells and restricted use of private wells for irrigation only, did not prevent the court from finding an “imminent and substantial endangerment.” The contamination had not been remediated, was still migrat-ing toward populated areas, and had been detected at levels thousands of time the MCL for drinking water.

Plaintiffs’ state law claims were filed untimely under the state’s statute of limitations, and neither the continuing tort doctrine nor the theory of equitable estoppel justified an extension of the statute. Though contamination continued to migrate from defendant’s facility, defendant had stopped using the contaminants long ago and there were no identi-fied ongoing leaks at defendant’s facility. As to equitable estoppel, plaintiffs had not es-tablished that defendant knowingly misrepresented the truth or that plaintiffs had relied on defendant’s representations in any way.

Background

From 1949 through 2010, defendant General Electric Company (GE) operated a manu-facturing plant in Morrison, Illinois. From at least the early 1970s through 1994, GE used chlorinated organic solvents to remove oil from parts. The solvents GE used during vari-ous periods of operation contained trichloroethylene (TCE), perchloroethene (PCE), and

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1,1,1-trichloroethane (TCA)—all of which are classified as hazardous or toxic substances under federal environmental laws.

Chlorinated solvents were detected in soil and groundwater downgradient from the plant as early as 1986, and GE was required by the Illinois Environmental Protection Agency (IEPA) to investigate the extent of contamination. In February 2004, the state of Illinois sued GE, seeking both cost recovery and an injunction requiring GE to further in-vestigate and remediate the contamination; but as recently as April 2013 GE had done little more than install monitoring wells, collect data, and present a proposed work plan.

In 2007, plaintiff Lowell Beggs purchased a then-closed golf course near, and downgra-dient from, the former GE plant, and moved into a home next to the golf course. Though plaintiff knew that there was some contamination of groundwater on the course at the time of the purchase, the full extent of that contamination was not apparent until after the pur-chase was complete.

Plaintiff filed suit against GE on September 1, 2013, seeking injunctive relief un-der RCRA § 7002(a)(1)(B), cost recovery and a declaratory judgment under CERCLA § 107(a), and further relief under state law claims of nuisance, trespass, and negligence. This decision addressed

a motion by GE for summary judgment on the RCRA claim, contending that the claim was barred be-

cause IEPA had commenced, and was diligently prosecuting, its own enforcement action under state law;

a motion by plaintiffs for summary judgment as to liability under RCRA; and

a motion by GE for summary judgment on plaintiffs’ state law claims, alleging that they were barred by

the statute of limitations.

For the reasons explained below, the court denied GE’s motion and granted plaintiffs’ motion with respect to GE’s liability under RCRA, while granting GE’s summary judg-ment motion with respect to plaintiffs’ state law claims.

RCRA Citizen Suits

Plaintiffs sued under RCRA’s citizen suit provision, § 7002(a)(1)(B), alleging that the spread of chlorinated solvents from GE’s former plant site to the soil and groundwater underneath plaintiffs’ property created an imminent and substantial endangerment. RCRA authorizes citizens to seek injunctive relief under such circumstances; but § 7002(b)(2)(C)(i) prohibits citizens’ suits if the State has already “commenced and is diligently prosecut-ing an action under subsection (a)(1)(B).” GE alleged that, because IEPA had already insti-tuted a suit in state court in 2004, and was diligently prosecuting that claim, plaintiffs were barred from bringing a parallel action in federal court. Plaintiffs argued that § 7002(b)(2)

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(C)(i) prohibits citizen suits only if the state has filed an action under RCRA itself, and they further argued that the state was not diligently prosecuting its action, given that virtually no cleanup had occurred despite the passage of 29 years since the contamination was discov-ered and 11 years since the state had filed its suit.

The court agreed that plaintiffs’ claim was not foreclosed by the state’s previous suit. First, the court suggested that the plain language of § 7002(b)(2)(C)(i) bars citizen suits only if the state has commenced an action under § 7002(a)(1)(B). “[O]nly a suit brought by the State under the [imminent and substantial endangerment] provision of RCRA can serve to bar a citizen suit [under that provision].” The court rejected GE’s argument that a state suit brought under a parallel state program that had been authorized to operate in lieu of RCRA is the functional equivalent of a suit brought under RCRA itself. The court noted that GE had cited no authority—and the court had found none itself—“directly holding that a suit brought under a State program operated in lieu of RCRA triggers the bar under [§ 7002(b)(2)(C)(i)] for citizen suits brought under subsection [7002(a)(1)(B)].”

The court distinguished §§ 7002(a)(1)(A) and 7002(a)(a)(B) with respect to what con-stitutes a bar to a citizen suit under each provision, and concluded that, under RCRA’s stat-utory scheme, “[t]he circumstances under which a [§ 7002(a)(1)(A)] citizen suit is barred is far broader than for a [§ 7002(a)(1)(B) citizen suit.” Citizen suits under § 7002(a)(1)(A), for alleged violations of RCRA, are barred under § 7002(b)(1)(B) whenever a state is “diligently prosecuting” any civil or criminal action designed to enforce compliance with RCRA. By contrast, a citizen suit under § 7002(a)(1)(B), for an alleged imminent and sub-stantial endangerment, is foreclosed by § 7002(a)(2)(C)(i) only if the state has brought an action specifically under subsection (a)(1)(B) itself. As the court stated:

The clear language of RCRA evidences Congress’ belief that multiple enforcers of RCRA should exist:

the U.S. EPA, the States, and private citizens. But in expressing its belief, Congress carefully balanced

how, when and under what circumstances citizens can enter the fray and avail themselves of the equi-

table power of the federal courts. When those Congressional mandates are satisfied [as in this case],

citizens can file suit even when a state court has already undertaken the matter. The clear language of

RCRA establishes the intentional Congressional policy decision that this Court cannot ignore.

“Imminent and Substantial Endangerment” Under RCRA

To prevail in a citizen suit under RCRA § 7002(a)(1)(B), plaintiffs must establish that: (1) the defendant generated solid or hazardous waste, (2) the defendant contributed to, or is presently contributing to, the handling of such waste, and (3) the waste may present an imminent and substantial danger to health or the environment. GE acknowledged that

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plaintiffs could establish the first two elements but disputed that plaintiffs could establish the third.

Courts that have construed the phrase “may present” have interpreted and applied it lib-erally. They have found support for a liberal construction in the 1980 RCRA amendments, in which Congress substituted the words “may present” for the phrase “is presenting.” Plaintiffs, therefore, need only show that there is potential for an imminent and substantial endangerment. “[A] threat is imminent if the endangerment exists now, even though the harm may not be felt until later.” Plaintiffs must, prove, however, that the danger is “more than merely possible.” And they must show that contamination is not only present, but that “its presence may present an imminent and substantial endangerment.”

GE emphasized that the “mere presence” of contamination does not constitute an immi-nent and substantial endangerment, and that plaintiffs’ evidence did not establish that such a threat existed. First, GE noted that all pathways to human exposure had been eliminated through (1) the closure of drinking water wells by the City of Morrison, (2) the placement of “Do Not Drink” signs at the wellheads on the golf course, and (3) the provision of a filtration system for residential water in a home near the plaintiffs. The court rejected this reasoning, however, noting that plaintiffs had established that the contamination had not been remediated, and was still migrating toward populated areas, where contamination had been detected at levels thousands of times the maximum contaminant level for safe consumption.

The court also noted that GE’s response addressed only the impact of its contamination on human health, while the statute permits citizen suits to prevent or abate threats to the environment as well. Plaintiffs had not yet established whether or how the contamination constituted an environmental threat, but they had sufficiently proven a threat to human health for the court to award summary judgment as to liability, and the possibility re-mained that, at trial, plaintiffs might also adduce evidence of an environmental threat. The court also determined that plaintiffs’ failure to establish a direct connection between GE’s contamination and the presence of air pollution inside plaintiffs’ home did not preclude summary judgment with respect to the soil and groundwater contamination plaintiffs had proven.

Finally, the court addressed GE’s argument that the injunctive relief plaintiffs sought was “moot” because of the consent order the state court entered in 2010, stemming from IEPA’s previous suit. That order required GE to “perform investigation and remediation activities necessary to address the onsite and offsite soil and groundwater contamina-tion.” However, the court explained that the consent order required remediation only after

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the adoption of a Remedial Action Plan, which would occur only after the adoption of a Remedial Objectives Report, both of which were actions that had not yet occurred. The court noted that plaintiffs had moved for summary judgment only with respect to GE’s li-ability, and that the parties would have an opportunity at later stages of trial to address the nature and extent of any injunctive relief the court might actually provide.

Because the plaintiffs have sought summary judgment only as to liability under RCRA, and because

the parties have confined their presentation of evidence and argument to issues of liability rather than

whether injunctive relief is available and, if so, its scope, this Court will defer until later the parameters

of any injunctive relief as to [the plaintiffs’ RCRA claim].

Statute of Limitations on Plaintiffs’ State Law Claims

GE sought summary judgment on plaintiffs’ state law claims of nuisance, trespass and negligence on the basis that the claims were filed more than five years after plaintiff Beggs was informed of contamination on the golf course, and thus were barred by the statute of limitations. Plaintiffs argued that (1) the claims were not untimely because they were based on continuing torts on which the statute had not run; and (2) even they were other-wise barred by the statute, GE was equitably estopped from asserting the statute because it had allegedly concealed the extent and nature of the contamination.

Under Illinois law, actions for damage to property must be brought within five years after the cause of action accrues. The cause of action in tort claims accrues when the injury occurs. However, under Illinois’ “continuing tort doctrine,” where a tort involves continu-ing or repeated injury, the limitations period does not begin to run until the date of the last injury or the date the tortious conduct ceases. Illinois law in this respect is mirrored in the laws of a number of other states.

GE suggested that the continuing violation argument did not apply because it had stopped using chlorinated solvents in 1994. Plaintiffs emphasized, however, that the con-tamination was continuing to migrate, and contended that GE’s failure to remediate the contamination was a continuing violation. Citing numerous cases in support of its deci-sion, the court held for GE, noting that “the failure to remediate contamination left over from prior conduct is not a continuing tort.” Cases that have appeared to hold to the con-trary are distinguishable, in that they have typically involved sites from which contamina-tion was still leaking into the environment.

With regard to plaintiffs’ claims of equitable estoppel, the court found that GE had made no specific representations to plaintiffs that GE knew at the time to be untrue. Under Illinois law, equitable estoppel tolls the statute of limitations for the time during which de-fendant “took active steps to prevent the plaintiff from suing.” A party claiming equitable

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estoppel must prove that (1) defendant misrepresented or concealed material facts; (2) defendant knew at the time that its statements were untrue, (3) defendant intended plaintiff to rely on its misrepresentations or reasonably expected that it would do so, (4) plaintiff did not know at the time that the misrepresentations were untrue, (5) plaintiff reasonably relied on the misrepresentations to its detriment, and (6) plaintiff would be prejudiced by its reli-ance on the misrepresentations if defendant were allowed to deny their truth. Plaintiff must also show that it was diligent to obtain information to determine whether it had a claim.

Here, the court noted that plaintiffs had not relied on GE’s representations about the level of contamination or the feasibility of natural attenuation, and, in fact, never inquired about the contamination beyond the statements made by the seller. Plaintiffs presented no evidence that GE knew at the time that its representations were untrue or that test results it had filed with IEPA were erroneous. Accordingly, plaintiffs’ state law claims accrued in 2007 when they bought the golf course and first learned of the contamination, and neither the continuing tort doctrine nor the theory of equitable estoppel provided any basis for ex-tending the state’s five-year statute of limitations.

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PIPELINE SAFETY ACT; MULTIPLICITY OF CRIMINAL COUNTS

UnitedStatesv.PacificGasandElectricCo.,No. 14-cr-00175-TEH (N.D. Cal. Dec. 23, 2015)

Court Reduces Potential Fines Under Pipeline Safety Act Because Statute Punishes Course of Conduct Rather Than Separate Violations

Greg Lee

In the aftermath of a fire that caused eight deaths, an indictment that alleged a pipeline operator’s failure to comply with five Integrity Management regulations—promulgated under the Pipeline Safety Act (PSA) to establish how an operator identified threats to a pipeline and used the identification in its integrity program, and regulated what needed to be in the baseline assessment plan for a pipeline—alleged only a single course of conduct for each of the five regulations. Accordingly, the allegation was enough to sustain only five counts, not 20.

Agreeing with the defendant that the counts were multiplicitous, District Judge Henderson granted, without prejudice, the defendant’s motion to dismiss 15 counts. Congress had not stated in clear and definite language that the defendant should face

45

separate criminal penalties for each pipeline that violated the IM regulations, and therefore the court said it had no choice but to limit the indictment to one count per IM regulation.

Interpreting Sections 60123 and 60109 of the PSA, the court determined that a unit of prosecution was not defined by the Act. The court was unpersuaded by the government’s argument that it should look to the IM regulations for the unit of prosecution, since it was only the regulations that actually defined the defendant’s unlawful conduct. This silence on the unit of prosecution compelled the adoption of a more lenient reading of the unit of prosecution, which led to the conclusion that the Act criminalized a course of conduct.

Addressing the proper remedy, the court agreed with the defendant that dismissal of all but one count per regulation was appropriate. But the court said it was irrelevant which of the multiplicitous counts were dismissed, as the government was free to present evidence on all alleged pipelines to prove violations of the five IM regulations. Thus, the court would grant the defendant’s motion to retain only the first listed count for each alleged regulatory violation. The court directed the parties to confer on whether it was necessary for the gov-ernment to amend the indictment.

Background

On September 9, 2010, a gas line owned by the defendant ruptured, causing a fire that killed 8 and injured 58. The fire damaged 108 homes, 38 of which were completely destroyed. The defendant was charged with 27 counts of violating the minimum federal safety standards for the transportation of natural gas by pipeline.

Section 60123(a) of the PSA criminalized violations of the Integrity Management (IM) regulations that Congress called for in Section 60109. The Department of Transportation is-sued the IM regulations in 2003. The regulations applied to all “covered pipeline segments.”

The defendant moved to dismiss 15 of the indictment’s IM regulation counts as multi-plicitous. The 15 counts stemmed from five IM regulations, 49 C.F.R. §§ 192.917(a), (b), (e)(3), and (e)(4); and 49 C.F.R. § 192.919.

Multiplicity of Counts

The defendant contended the indictment’s pipeline-level charging was multiplicitous because each course of conduct alleged to have violated a regulation gave rise to one, single crime. The government countered that each unique count differed because it re-quired the government to prove, for each segment, a separate act, and when separate counts charged separate acts, but were part of a single scheme or purpose, the counts were not multiplicitous.

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In United States v. Universal C.I.T. Credit Corp., 344 U.S. 218 (1952), the Supreme Court stated that the proper inquiry was “[w]hat Congress has made the allowable unit of prosecution.” Thus, courts had to determine whether Congress mean to punish each in-stance of a violation as a separate crime, or punish once per violation of a single provision of law. The Court also indicated that when such a “choice has to be made between two readings of what conduct Congress has made a crime, it is appropriate, before we choose the harsher alternative, to require that Congress should have spoken in language that is clear and definite.

In Brown v. United States, 623 F.2d 54 (9th Cir. 1980), the Ninth Circuit affirmed that the rule of lenity animated the inquiry. Courts had to limit their search for what Congress deemed the unit of prosecution to materials that directly informed congressional intent.

In C.I.T., the corporate defendant had been charged with 32 counts for violating the minimum-wage, overtime, and recordkeeping provisions of the Fair Labor Standards Act (FLSA). The Court concluded that Congress was not “decisively clear” in defining a small-er unit of prosecution, and therefore the punishable offense under the FLSA was a “course of conduct.” Accordingly, the Court said it would treat “as one offense all violations that arise from that singleness of thought, purpose or action.” The Court affirmed the dismissal of all but one count for each FLSA provision, “without prejudice to amendment of the information.”

Unit Of Prosecution Not Defined for Criminal Violations of Pipeline Safety Act

The question was whether Congress intended for violations of the IM regulations on separate pipelines to constitute separate “units of prosecution” under Section 60123. It was a question of statutory construction.

Section 60123(a), the statute that criminalized violations of the IM regulations, con-tained no mention of a unit of prosecution, let alone a clear indication that the proper unit of prosecution was the “pipeline.” Indeed, the statute did not even define the conduct it outlawed.

Section 60109, the PSA provision that called for the IM regulations, was of no help to the government either. It spoke only of a single integrity management program, and gave no indication of what Congress deemed the proper unit of prosecution for a violation of the then unwritten regulations.

The government argued that the court should look to the IM regulations for the unit of prosecution because the regulations defined the defendant’s unlawful conduct. While the

47

argument had a logical appeal—Congress could not have defined a unit of prosecution in a criminal statute that did not define the unlawful conduct—it ultimately was unpersuasive.

First, it was not clear that by requiring action on “each” covered segment, Congress intended to create a separate punishment for each covered segment. Indeed, the minimum wage statute at issue in C.I.T. likewise required an employer to pay “each” of its employees the minimum wage, yet the Supreme Court declined to punish employers on an employee-by-employee basis.

Second, the IM regulations were of uncertain value in determining Congress’s clearly expressed intent, given that Congress did not author them. Indeed, the regulations were is-sued nearly 25 years after Congress added criminal penalties to the PSA in 1979, making it difficult to even conclude that Congress impliedly intended to adopt the unit of prosecution defined in the regulations, whatever that may be.

Finally, even if the court were to look to the regulations and were to determine that they defined “each covered pipeline segment” as the unit of prosecution, that still would not save the multiple counts because the indictment did not charge on a segment-by-segment basis. Though the government argued it planned to prove each count with segment-specific evidence, the indictment only charged on a pipeline-by-pipeline basis.

The legislative history was not helpful, according to both the government and the de-fendant. Therefore, it did nothing to inform whether Congress intended that the unit for prosecution for violations of the IM regulations be the segment, the pipeline, or anything else.

Pipeline Safety Act Criminalized a Course of Conduct

Given the language of Sections 60123 and 60109 and the relevant legislative history, it could not be said that Congress clearly expressed an intent to impose cumulative pun-ishments on the defendant for each pipeline that violated the IM regulations. All relevant materials were silent on cumulative punishments and unit of prosecution, compelling the conclusion to adopt the more lenient reading of the unit of prosecution. Accordingly, the Act criminalized a “course of conduct,” as stated n C.I.T.

Thus, charging the defendant with a separate crime for each pipeline that violated the IM regulations would be inappropriate unless the violation on each pipeline stemmed from a separate course of conduct. Indeed, C.I.T. expressly left open the possibility that multiple counts for violating the same provision would be appropriate when the indictment alleged multiple courses of conduct. For the government to uphold all 20 IM regulation counts, it would have to prove that the failure to follow IM regulations constituted a different

48

“managerial decision” on each separate pipeline, rather than a single “course of action” under C.I.T.

To that end, the government argued that each unique count differed because it required proof of a separate act for each segment. The government also asserted that, because it “has carefully charged only certain exceedances on particular dates of particular lines,” there had to be different counts.

While different facts would be necessary to prove the pipeline-level counts, this did not mandate the conclusion that each count stemmed from a different course of conduct or managerial decision. If different evidence were the standard, the Supreme Court would not have rejected the employee-level counts in C.I.T., as proving each employee-level count would have required employee-specific evidence.

The varied degree of charging across IM regulations—with various regulations charged on as many as six pipelines and as few as two pipelines—likewise did not require the con-clusion that each count stemmed from a different course of conduct. As in C.I.T., the gov-ernment could not create multiple courses of conduct simply by identifying the specifics of the allegedly unlawful conduct.

Ultimately, the government did not contest that the IM regulation counts all stemmed from the fact that the defendant adopted two unlawful practices and created one allegedly incomplete report. Indeed, the government admitted that it had alleged an overall scheme. It tied every count in the scheme to a single date, January 22, 2010, the date the Baseline Assessment Plan was due in 2010.

All 20 counts of the scheme alleged a “failure” to follow one of five IM regulations, which together stated how a pipeline operator identified threats to a pipeline and used the threat identification in its integrity program, and regulated what needed to be in the base-line assessment plan for a pipeline. The defendant’s failure to follow the regulations, even many times, no more required the conclusion that multiple counts per regulation were ap-propriate than the failure in C.I.T. to comply with the FLSA provisions.

The indictment’s allegation of a single course of conduct for each of the five relevant IM regulations was enough to sustain only five counts. Congress has not stated in clear and definite language that the defendant should face separate criminal penalties for each pipe-line that violated the IM regulations.

Limiting Counts to One Per IM Regulation Introduced No Duplicity or Proof Problems

The government argued that if all acts on all of the numerous pipelines were com-bined in a single charge, there would be a duplicity issue. But duplicity analysis considered

49

whether acts that may constitute separate offenses had to be brought as separate offenses. But the IM regulations criminalized a course of conduct—the defendant’s failure to follow each IM regulation—meaning the failure on each pipeline could not be brought as separate counts. Hence, the indictment would not be charging more than one offense in each charge if all acts on each pipeline were combined into a single charge.

The government also argued that if no pipeline was alleged or proven, but rather a course of conduct, it would be unable to prove the defendant willfully failed to follow the IM regulations because the regulations criminalized on a pipeline-by-pipeline basis. The government was free, however, to introduce pipeline-specific and segment-specific evi-dence to prove the course of conducted required by each regulation.

Remedy for Multiplicitous Counts

The defendant was correct that, since the indictment alleged only five distinct crimes, allowing the government to proceed to trial on 20 crimes would unfairly prejudice the defendant in the eyes of the jury. Hence, consistent with how other courts dealt with multi-plicitous counts, dismissal of all but one count per regulation was the appropriate remedy.

Accordingly, each count would be based on the defendant’s alleged course of conduct, rather than its actions as to particular pipelines. Thus, it was irrelevant which of the mul-tiplicitous counts were dismissed, as the government was free to present evidence on all alleged pipelines to prove the defendant violated the five IM regulations at issue.

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INDICTMENT; DISMISSAL; APPLICABLE STANDARD

UnitedStatesv.PacificGasandElectricCompany,No. 14-cr-00175-TEH (N.D. Cal. Dec. 23, 2015)

In Criminal Case Involving Rupture of Natural Gas Pipeline, Corporation’s “Willful Violation” Can Be Proven Through Collective Knowledge of Employees

Greg Lee

A defendant was not entitled to dismissal of 27 counts of an indictment on the ground that the prosecutor gave the grand jury erroneous legal instructions on the intent require-ment of Section 192 of the Pipeline Safety Act. Noting that the Supreme Court has set a high standard for dismissal of an indictment, District Judge Henderson held that the gov-ernment could rely on a collective knowledge theory of intent to establish both the know-ing and the willful prongs of Section 192’s intent requirement.

50

The court stated that the defendant understandably focused on the willful prong, since it was well accepted that the knowing prong could be satisfied through a collective knowl-edge theory. Although the defendant argued against adoption of that theory for satisfying the willful prong, the court found the reasoning of the government’s cited precedent per-suasive. Here, the prosecutor did not ask the grand jury to aggregate innocent pieces of information from various of the defendant’s employees to construct a single “knowing and willful” transaction. Instead, the prosecutor invited the grand jury to consider whether the employees’ individual knowledge and disregard of the defendant’s Section 192 duties ren-dered the company liable for knowingly and willfully violating those duties. Accordingly, the challenged legal instructions were correct.

The court also was unpersuaded by the defendant’s challenge to the legal instructions given on the Alternative Fines Act. Although the defendant claimed the prosecutor could not state what “we think is appropriate,” even assuming the defendant was correct, it failed to meet the high standard for dismissal of an indictment. While the challenged statement was “ill-advised,” it was not so flagrant that it deceived the grand jury in a significant way.

Background

On September 9, 2010, a gas line owned by the defendant ruptured, causing a fire that killed 8 and injured 58. The fire damaged 108 homes, 38 of which were completely destroyed. The defendant was charged with 27 counts of violating the minimum federal safety standards for the transportation of natural gas by pipeline.

On July 30, 2014, a grand jury returned a superseding indictment charging the defen-dant with 28 counts, including 27 counts of violating the minimum federal safety standards for the transportation of natural gas by pipeline under the Pipeline Safety Act, as set forth in 49 C.F.R. § 192. Knowing and willful violations of these standards were criminalized under 49 U.S.C. § 60123. The government sought a fine exceeding the statutory maximum for these offenses under the Alternative Fines Act, 18 U.S.C. § 3571(d).

The defendant moved to dismiss 27 counts and the Alternative Fines Act allegation. It contended that because the prosecutor gave the grand jury erroneous legal instructions on both the intent requirement for violations of Section 192 and the Alternative Fines Act, it could not be concluded that the grand jury found probable cause the defendant committed a crime under U.S. law.

High Standard for Dismissal of an Indictment

Under Bank of Nova Scotia v. United States, 487 U.S. 250 (1988), a court may not dismiss an indictment for errors in grand jury proceedings unless such errors prejudiced

51

the defendant. Dismissal was appropriate only if it was established that the violation sub-stantially influenced the grand jury’s decision to indict or if there was grave doubt that the decision to indict was free from the substantial influence of such violations.

The Ninth Circuit has held that the Bank of Nova Scotia standard set a high bar for dismissal. It had to be shown that the conduct of the prosecutor was flagrant such that the grand jury was deceived in a significant way. Hence, erroneous grand jury instructions did not automatically invalidate an otherwise proper grand jury indictment. Rather, dismissal for improper instructions was warranted only when the conduct of the prosecutor was so flagrant it deceived the grand jury in a significant way infringing on their ability to exercise independent judgment.

Intent Instructions Were Not in Error

The defendant argued that the government repeatedly told the grand jury that it could charge the defendant for the regulatory violations based on a collective knowledge theory of intent, and that such instruction was erroneous because such a theory of criminal liability never has been applied in the Ninth Circuit.

Section 60123 criminalized violations of Section 192 only if they were both knowing and willful; the defendant quite rightly focused on the latter. There was ample precedent and acceptance of the “collective knowledge” theory to prove a corporate defendant acted knowingly. But the Ninth Circuit has not addressed the question of whether a collective intent theory could be used to prove that a corporate defendant acted willfully.

The closest the Ninth Circuit has come to addressing the issue was in United States v. Shortt Accountancy Corp., 785 F.2d 1448 (9th Cir. 1986), in which the defendant was convicted for willfully submitting a false income tax return. The defendant argued that the employee who actually submitted the return did not know it was false; rather, it was the defendant’s chief operating officer who knowingly had provided false information to the employee. But the Ninth Circuit—under the heading “collective intent”—held the corpora-tion was criminally liable for making and subscribing the false return based on the willful intent of the COO, even if the COO did not sign the return.

The defendant pointed out, however, that the Ninth Circuit based its decision on the guilty mens rea of at least one agent of the defendant—the COO—leaving unanswered the question of whether courts truly could “collect” intent across employees to meet the requirement that a defendant acted willfully.

To that end, the government cited United States v. T.I.M.E.-D.C., Inc., 381 F.Supp. 730 (W.D.Va. 1974), in which the court approved a collective corporate knowledge theory to

52

prove both the knowing and willful prongs of a criminal statute. Upholding first the gov-ernment’s use of the collective corporate knowledge to prove the knowing prong, the court said “knowledge acquired by employees within the scope of their employment is imputed to the corporation … the corporation is considered to have acquired the collective knowl-edge of its employees and is held responsible for their failure to act accordingly.” As for the willful prong, the court explained that the very fact that the corporate defendant had corporate knowledge, but declined to act on that knowledge, was sufficient evidence that the corporation acted willfully.

The defendant argued T.I.M.E. should be rejected in favor of a long line of cases since Bank of England holding that collective knowledge could not be used to prove a corpora-tion’s specific intent—the “willful” prong. But the two cases it cited were distinguishable. In both cases, the plaintiffs attempted to establish a collective state of mind by piecing together knowledge of individual employees.

By contrast, the prosecutor here did not ask the grand jury to aggregate innocent pieces of information from various employees across the defendant to construct a single “knowing and willful” transaction. Instead, the prosecutor invited the grand jury to consider whether the defendant’s employees’ individual knowledge and disregard of the company’s Section 192 duties rendered the company liable for knowingly and willfully violating those duties.

The Ninth Circuit recognized a distinction between these two kinds of reasoning in KernOil&RefiningCo. v.TennecoOilCo.,792 F.2d 1380 (9th Cir. 1986). The court impliedly agreed that when a corporation had a legal duty to prevent violations, and the knowledge of its employees collectively demonstrated a failure to discharge that duty, the corporation could be said to have willfully disregarded that duty.

Here, as in T.I.M.E., the defendant was legally obligated to follow safety regulations. That was the closed factual and legal comparison either party offered for consideration in understanding the mens rea requirement of Section 60123. Based on the T.I.M.E. reason-ing, adopted here, the legal instructions were correct.

Instruction on Alternative Fines Act Was Not Error

Contending the instruction on the Alternative Fines Act was flawed, the defendant pointed out that the prosecutor did not give a causation instruction; the prosecutor did not instruct that the pecuniary gain or loss (the Act provided for fines of as much as twice the gain derived from the offense, or twice the loss suffered as a result of the offense) had to be limited to the charged counts; the prosecutor did not instruct that only pecuniary damages may be counted toward gain or loss; and the prosecutor inserted a personal opinion into the legal instruction.

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Even assuming the defendant was correct on all four assertions, it failed to meet the high standard for dismissal of an indictment. The Ninth Circuit has found even extensive prosecutorial misconduct before the grand jury was insufficient for dismissal of an indict-ment. Here, the prosecutor’s passing suggestion that his or her opinion was relevant to the Act was not enough to warrant dismissal. Though the challenged statement may have been ill-advised, it was not so flagrant that it deceived the grand jury in a significant way.

Moreover, the prosecutor need not provide legal instructions to the grand jury at all. An indictment was sound as long as the grand jury discharged its obligation to find probable cause. The challenged statement did not raise grave doubt that the probable cause deter-mination was made with anything other than independent judgment under Bank of Nova Scotia.

Neither Apprendi v. New Jersey, 530 U.S. 466 (2000) nor Southern Union v. United States, 132 S.Ct. 2344 (2012) altered the role of the grand jury under the Fifth Amendment’s Grand Jury Clause. Apprendi required that “any fact (other than prior conviction) that in-creases the maximum penalty for a crime must be charged in an indictment, submitted to a jury, and proven beyond a reasonable doubt.” Southern Union applies this rule to the imposition of criminal fines. Neither decision increased the grand jury standard beyond probable cause.

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54

Best of the Blogs

CLEAN AIR ACT; MERCURY AND AIR TOXIC STANDARDS

White Stallion Energy Center LLC v. EPA, No. 12-1100 (D.C. Cir. Dec. 15, 2015)

The Mercury Rule Lives To Fight Another Day: Vacatur Is Very Much Out of Fashion

Seth Jaffe

Foley Hoag LLP

Law and the Environment (www.lawandenvironment.com)

Yesterday, the D.C. Circuit Court of Appeals refused to vacate EPA’s Mercury and Air Toxics Standards. The decision was not a surprise. As I noted earlier this fall, there is a definite trend towards refusing to vacate complex EPA rules. Where the rule is suffi-ciently complicated and EPA can tell any kind of credible story that maintaining a slightly tarnished rule is better than no rule at all, or leaving an outdated rule in place, I think that vacatur is now more the exception than the norm.

What will happen in the long run remains uncertain. Judge Kavanaugh joined the deci-sion, but he’s hardly a safe bet to affirm the MATS rule on the merits after EPA has finished addressing the cost/benefit concerns raised by the Supreme Court. Nonetheless, I still think that EPA should win.

* * *

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

In the Matter of:

Polo Development, Inc., AIM Georgia, LLC, and Joseph Zdrilich,

Respondent.

BEFORE THE ADMINISTRATOR

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Docket No. CWA-05-2013-0003

Dated: December 1, 2015

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INITIAL DECISION AND ORDER

PRESIDING OFFICER: M. Lisa Busclunann, Administrative Law Judge

APPEARANCES:

For Complainant:

Richard J. Clarizio, Esq. Robert M. Peachey, Esq. U.S. Environmental Protection Agency Region 5 77 West Jackson Boulevard Chicago, Illinois 60604

I. Procedural History

For Respondents:

Dennis A. DiMartino 839 Southwestern Run Youngstown, Ohio 445 14

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This proceeding was initiated by a Complaint filed on January 2, 2013, by the United States Environmental Protection Agency (44EP A") Director of the Water Division, Region 5 ("Complainant"), pursuant to Section 309(g) of the Clean Water Act ("CWA" or "Act"), 33 U.S.C. § 1319(g). The Complaint charged Respondents with using mechanized clearing and earth-moving equipment to discharge dredged or fill material into waters of the United States, including wetlands, without a permit required by Section 404 of the CW A. The Complaint stated that EPA issued an administrative order requiring Respondents to develop and implement a plan to restore the filled area to wetlands, and Respondents submitted a wetlands restoration plan, but after EPA approved it, Respondent Joseph Zdrilich informed EPA that he would not conduct restoration work in accordance with the plan and would not restore certain areas. The

1

Complaint proposed that Respondents be assessed a civil penalty in the amount of $30,500 for discharging pollutants into navigable waters in violation of Sections 301 and 404 of the CW A. Respondents, through counsel, each filed an answer to the Complaint, denying the alleged violations and asserting affirmative defenses.

Complainant filed a prehearing exchange on May 9, 2013, but Respondents failed to file a prehearing exchange even after their deadline to file was extended several times. Consequently, an order to show cause was issued, in response to which Respondents sought another extension, on the basis that they anticipated completing a wetlands restoration report and resolving "all outstanding wetlands restoration issues" within 60 days. Respondents were granted a one~ month extension of time, after which Complainant moved for issuance of a default order against Respondents. An order denying the motion was issued on August 6, 2014.

On October 17, 2014, Complainant filed a motion for accelerated decision as to Respondents' liability for alleged violations and as to their ability to pay the proposed penalty, and a motion to dismiss their affirmative defenses. The motion sought judgment as to liability for discharges into a wetland, referenced as the "eastern wetland," and other water bodies referenced in the Complaint, but not for discharges into another wetland referenced therein. By order dated February 6, 2015 (2015 EPA ALJ LEXIS 4)("Accelerated Decision"), Complainant's motions were granted.

A hearing in this matter was held on February 24 through 26, 2015, in Youngsto'Wll, Ohio, on the remaining issues as to the assessment of a civil penalty for the violations found in the Accelerated Decision. Complainant presented the testimony of seven witnesses. Respondents, appearing through counsel, presented testimony of one witness, Respondent Joseph Zdrilich. Complainant's exhibits marked as CX 1-3,6-14, 16-18,20-22,24-32,34-41,43,45,49 (pages 467, 468), 50, 53,56-58,60 (pages 556-567), 61 (pages 571, 572), 64-93, 100-107, 110, lllA~G, and 112~115, were admitted into evidence. Respondents' exhibits marked as RX 1, lA and 2 were admitted into evidence. The record was held open after the hearing for Respondent to produce copies ofRX 1A and submit it to Complainant's counseL By order issued on April 27,2015, the evidentiary record was closed. Complainant filed a post-hearing brief with proposed fmdings of fact on May 7, 2015, but no post-hearing brief was received from Respondents.

II. Findings of Fact

1. Respondent Joseph Zdrilich, the director and manager of the other two Respondents, has been a real estate developer for 20 years, and developed three properties in Mahoning

County, Ohio, subdivided into a total of 170 lots, for residential housing. Transcript (Tr.") 48, 470-471,537-539, 542-543; Complainant's Exhibit ("CX") 59, 114.

2. One of the properties, Polo Development, consists of30 lots on approximately 26 acres located along Polo Boulevard in Section 11 ofPo1and Township. CX 105; Respondents' Exhibit ("RX") !A;; Tr. 567-568. On the western end of the property and north of Polo Boulevard, is Lot 1 ("the Site"), a 2.66 acre parcel which is bisected by a stream called Burgess

2

Run, and through which an unnamed tributary flows into Burgess Run. CX 53 (pp. 522, 524); eX67.

3. Burgess Run flows north into Yellow Creek, which flows into the Mahoning River, which is listed on the USACE's public list of "traditionally navigable waters" under Section 10 of the 1899 Rivers and Harbors Act and Section 404 of the ew A. Tr. 339-340, 431-432; ex 70, ex 101 Cn 14, 15, 30). The Mahoning River is approximately 4.251inear miles and 8.5 riparian miles from the Site. ex 101 (~ 15).

4. Burgess Run was designated by the Ohio Environmental Protection Agency ("OEPA") as a wann water habitat, supporting fish and other organisms in the ecosystem. Tr. 106-107. It is a perennial stream that is approximately 20 to 75 feet wide on Lot 1. CX 29, 53 (pp. 535, 536), 64-69, 101 (~~ 17, 31). The unnamed tributary was a moderate to high quality headwater stream. Tr. 401.

5. Burgess Run is an impaired resource under CWA 303(d) for siltation and nutrients. Tr. 403, 458-459.

6. East of Burgess Run on Lot 1 is an area referenced as the "eastern wetlands" bounded on the west by Burgess Run, and on the north by the northern property line for Lot 1, and extending south toward the Lot 1 property line which borders the 10 foot wide county road easement along Polo Boulevard. ex 1 (p. 2), 35, 64, 71, 101 (pp. 1192, 1199-1205, 1215, 1260-1277); Tr. 324-325. The eastern wetlands were at least 0.67 acre in size prior to 2006. Tr. 165,325-326, 436; ex 8, 22, 53 (p. 522), 61 (pp. 570-572), 64.

7. The eastern wetlands generally are located within a I 00-year floodplain designated as Zone A by the Federal Emergency Management Agency (FEMA). Tr. 44, 191; ex 22 (p. 112), 102. Mahoning County has had problems with flooding. Tr. 69. Lot 1 also includes a floodway area, adjacent to Burgess Run. Tr. 44; ex 53 (p. 524).

8. Prior to and around 2004, there were hydrophytic trees and saturated soil on the eastern wetlands. ex 61 (pp. 571-572); ex 64; Tr. 325,329-331,374-375. The Site contained palustrine forested wetland and scrub-shrub wetlands, which are higher quality than most emergent wetlands. Tr. 112, 374-375; ex 53 (p. 522). The adjacent property north of the Site was forested wetland in its natural state. Tr. 104-105, 145,325-326,336-337. There are relatively few wetlands in the area. Tr. 403. The area armmd the Site contains abundant wildlife. Tr. 67-68, 524, 525; ex 102 cr 11).

9. Wetlands provide absorption and filtration functions, by slowing the velocity of runoff, retaining water and thus controlling floods, and by absorbing any contaminants and excess nutrients, which improves the water quality of the adjacent streams. Tr. 109, 402. Wetlands also provide habitat for amphibians and other wildlife. Tr. 109-110, 402. Forested wetlands provide shade and thus cool adjacent waterways, and provide carbon storage. Tr. 402. Riparian wetlands provide spawning areas for fish. Id

3

10. In 1999, Mr. Zdrilich hired Engineering Services and Consultants, Inc. ("ESC") to design a bridge, road and utilities for the subdivision, and to apply for a permit to do so. Tr. 471-472, 579-580. ESC prepared an application to the U.S. Army Corps of Engineers ("USACE") for a permit to install a concrete box culvert for a bridge crossing Burgess Run, and sanitary sewer and water lines crossing Burgess Run. Tr. 471-473; CX 1, 2, 3.

11. In ESC's application, a wetland area was identified on Lot 1, described as approximately 12,500 square feet, or 0.287 acre, and depicted on a map as covering an area from the southern edge of the unnamed tributary to the northern edge of Polo Boulevard, and east of Burgess Run. ex 1.

12. ESC's application estimated that the maximum wetland area that would be affected by bridge construction was 6,000 square feet, or 0.14 acre, primarily in the wetland areas south of Polo Boulevard, which are not on Lot 1. ex 1.

13. ESC's wetland evaluation report in the permit application recommended that " ... care should be exercised in developing lots # 1, # 11 and # 12 in order to avoid wetland impacts," that "[i]fpossible, lot #1 should remain undeveloped," and that "[i]flot #1 is removed from the development plan, the wetland area affected by the proposed project would not exceed the limit of 0.33 acres" for which a Section 404 permit would be required. CX 1.

14. On August 18, 1999, the USAeE issued a letter authorizing and setting conditions for the project under Nationwide Permits ("NWP") 12 and 14 for purposes of Section 404 of the CW A CX 3. One of the conditions is that any discharge of temporary fill material into waters of the U.S. "must be removed in their entirety and the affected areas returned to their preexisting elevation." ex 3 (p. 14). The letter stated that "The proposed bridge would impact a 0.14 acre wetland area in the vicinity." ex 3 (p. 8). The project verification expired on August 18, 2001. ex 3, I04 c~ 9); Tr. 215.

15. Construction of the box culvert and bridge was completed in 2000 or 2001, and sanitary and sewer lines were completed prior to November 2006. Tr. 475-476, 576; CX 102 (~ 17).

16. In 2004, Mr. Zdrilich signed a Mahoning County Planning Commission plat of survey for Polo Development, which stipulated that Lot 1 was a non-buildable lot as a FEMA designated Zone A 100 year floodplain. CX 6, 102 (~ 15); Tr. 43.

17. On or about November 2, 2006, Mr. Zdrilich directed the dredging and filling of the eastern wetlands up to and including the eastern shoreline of Burgess Run. Tr. 101, 103-104, 112-115, 483; CX 8, 9, 64, 65, 66, 101 (~ 9). He directed the removal of vegetation, dewatering of the soil, and leveling and grading of the eastern wetland area with earth-moving equipment. Jd ; Tr. 42, 327-328. As a result, its contours were changed and elevations in areas on the eastern wetland were significantly increased. CX 71, 72; Tr. 341-342, 449-450, 460-461.

18. On or about November 2, 2006, Mr. Zdrilich directed the removal of over 200 linear feet of the unnamed tributary approximately 50 feet away from its original location flowing southwest near the middle of the Site, to a location flowing west along the northern border of the

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Site. ex 9 (p. 34), 22 (p. 109), 35 (p. 179), 104 (p. 1399), 65-67, 71, n, 101 (~ 7, 8); Tr. 42, 101-103, 114-115, 329, 342, 434. He or persons under his direction filled in the original tributary with soil and dug a new channel, sidecasting the material onto the wetland, with earth­moving equipment. Tr. 104-106, 113-115; eX 9 (p. 34).

19. In its new location, the unnamed tributary was channelized and straightened, which causes it to convey the water faster, providing less habitat and fewer functions to benefit the ecosystem. Tr. 33 7. It no longer had a sand and gravel substrate necessary to support macro­invertebrates, which are a food source for fish, but instead had a silt or sediment substrate. T r. 105-109,435.

20. On or about November 2, 2006, under Mr. Zdrilich's direction, fill material including soil and wood debris was placed in Burgess Run, increasing turbidity, and covering vegetation. Tr. 101, 108, 116; ex 9 (pp. 38, 39).

21. Mr. Zdrilich directed the clearing and filling of the wetland for the purpose of building a house on Lot 1. Tr. 477-478, 486-487; ex 8, 16, 102 (~ 28). To determine whether he could build a house on Lot 1, Mr. Zdrilich hired Allen Surveying to survey Lot 1. Tr. 477-478.

22. Sarah Gartland, floodplain manager of the Mahoning County Planning Commission ("MCPC") sent Mr. Zdrilich a letter dated November 3, 2006, and had many discussions with him, regarding the floodplain requirements for Lot 1, the possibility of building on the Lot, and requirement for permits, including a Section 404 permit, to place soil on the property. Tr. 34, 48-50, 56; ex 7, 102.

23. In November 2006, Ms. Gartland notified other government agencies that she had observed clearing of vegetation on the Site. Tr. 40, 39, 42, 44-45.

24. On November 21,2006, Edward Wilk, wetland stream impacts coordinator for OEPA, took photographs at the Site in response to information from Donald Garver ofthe Soil and Water Conservation District ofMahoning County ("SWCD") of the wetland being filled on Lot 1. Tr. 88, 95-97, 110, 118; ex 8, 9, 74 (p. 661). Mr. Wi1k informed Mr. Zdri1ich that the disturbance in the wetland requires a permit from the OEPA or the USACE, and Mr. Zdrilich responded that he had a permit. Tr. 121-122.

25. Respondents did not have a permit to place fill into the eastern wetland, the unnamed tributary or Burgess Run. Tr. 134, 194-195; ex 104 <n 10, 12).

26. On November 28, 2006, Sarah Gartland sent Mr. Zdrilich a letter by certified mail, stating that she found that extensive development occurred on the Site in violation of county flood damage prevention regulations, and requiring him to stop all activities immediately and to contact her office. CX 1 0; Tr. 56-57.

27. On or about December 11, 2006, Fred Pozzuto and Jeff Cornelius of the USACE inspected the Site and informed Mr. Zdrilich that he must restore an area on Lot 1 to wetland condition. RX 1; ex 11; Tr. 209-210, 552-553,556. Mr. Pozzuto marked on a map of Lot 1

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the words "remove and restore back to wetland condition ([plus or minus] 3 ')." RX 1; ex 113; Tr. 209-210.

28. Mr. Zdrilich received a cease and desist letter from the USACE, dated January 11, 2007, notifying him that a determination was made that jurisdictional wetlands on the property were disturbed by clearing, filling and excavating activities, in violation of Section 301 of the eWA. Tr. 127, 190, 566-567; ex 11. The letter requested him to restore the one-half acre wetland area within 90 days to its original grade, provide erosion control, reseed it with hydrophytic vegetation, replace trees with wetland tree species, and not to place any fill on Lot 1 until he can demonstrate in writing that it is not in a flood plain. ex 11. The letter stated that immediate legal action would ensue if the area is not restored as requested. !d.

29. In early 2008, a realty for-sale sign was posted at Lot 1. ex 12; Tr. 64.

30. On or before August 28, 2008, Mr. Zdrilich directed the placement of a pile of gravel and subsoil, about 64 to 80 square feet in size and four feet high, in the eastern wetland approximately 25 to 30 feet from the curb. ex 79, 82, 83, 103 (~ 8), 107; Tr. 266-267,495.

31. John Woolard, the envirorunental administrator of the Storm Water Management Program of the Mahoning County Engineer's Office, and Sean McGuire, an urban conservationist of the Mahoning County Soil and Water Conservation District ("SWCD") observed the pile in their monthly inspections of the Site. Tr. 220,259,278, 281; ex 103 (U 7, 15), 107. During his inspections, Mr. McGuire instructed Mr. Zdrilich to remove the fill and not to place any more fill in the wetland, and sent a letter dated August 28, 2008 to Mr. Zdrilich advising him that jurisdictional wetlands exist on Lot 1 and that any clearing, placement of fill or excavation activities would violate Section 301 of the ew A. Tr. 261-265CX 84, 103 (~ 8).

32. The pile remained on the Site, and between November 17 and December 16, 2008, Mr. Zdrilich had three additional piles placed around the other pile, on the southwestern area of the eastern wetlands. ex 79, 85-89, !03 (~~ 9-12), 107; Tr. 267-270, 288. One pile was composed of subsoil, gravel and cinder block pieces, and the other two appeared to be topped with sod and top soil. ex 89, 103 (~ !2); Tr. 268-269.

33. Mr. McGuire notified Ms. Gartland of the additional piles, and she sent a letter by certified mail, dated December 23, 2008, to Respondent AIM Georgia LLC ("AIM") and Mr. Zdrilich, stating that fill was recently placed on Lot 1 in a Special Hazard Flood Area without a permit, and directing that it be removed by February !3, 2009. Tr. 83, 270; ex !3.

34. On January 2, 2009, piles of fill material in the eastern wetlands also included concrete slabs, as observed by Mr. Wilk. ex 106 (f 18); Tr. 124-127; ex 14, 75.

35. Mr. Zdrilich told Mr. Wilk that he had a permit from the USAeE to place fill in the wetland, and Mr. Wilk responded that the USACE requested in 2007 that the wetland be restored. ex 14 (p. 51); Tr. 125.

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36. On May 21,2009, Mr. Wilk, Jeff Cornelius, Sarah Gartland and another representative of the MCPC, an attorney with the Mahoning County prosecutor's office, Sean McGuire, John Woolard, and a representative of Poland Township zoning, met with three representatives of Allen Surveying and Mr. Zdrilich at the Site. Tr. 72, 127-130; ex 16, 17, 104 (~ 11 ). Mr. Cornelius explained to Mr. Zdrilch that he is required to have a Section 404 permit for placing fill material in a wetland. Id In response, Mr. Zdrilich stated that he had a permit. Tr. 130; CX 16.

37. Between May 19 and June 16,2009, the four piles observed by Mr. McGuire and Mr. Woolard were leveled under Respondents' direction, and additional fill and gravel was spread by heavy mechanized equipment about one foot to two feet deep extending at least 100 feet from the Polo Boulevard curb into the eastern wetlands. ex 18, 80, 81, 103 (~ 16), 107 (~ 12); Tr. 274-275.

38. Between June 16,2009 and July 13,2009, Mr. Zdrilich directed the spreading of fill material by heavy equipment in the eastern wetlands in an area extending to Burgess Run, about one to two feet deep and extending approximately 130 to 150 feet from the curb of Polo Boulevard into the eastern wetlands. ex 20, 90, 91, 103 (~ 17), 107 (~ 13); Tr. 275-278.

39. A for-sale sign was posted on Lot 1 in July 2009. Tr. 276; ex 90 (p. 702), ex 103 (~ 17).

40. Ms. Gartland sent Respondents AIM and Zdrilich a letter dated July 29, 2009, notifYing them of the failure to resolve the fill placed on Lot 1 without a permit for development on a flood hazard area and referring the matter to the county prosecutor's office. CX 21; Tr. 60.

41. On September 18, 2009, Nancy Mullen, supervisor of Mr. Cornelius and Section Chief of the Northern Section of the Regulatory Branch of the USACE for the Pittsburgh District, referred to the EPA through her supervisor the matter of unauthorized fill of wetlands at the Site, on the basis that Respondents were repeat and flagrant violators. Tr. 175-176, 179-181, 187-194, 212; ex 22. 104.

42. On or about November 3, 2009, Mr. Zdrilich applied for a floodplain permit to build a house and fill a building area on Lot 1, but it was denied by letter dated November 17, 2009 from Ms. Gartland, on grounds that the application was incomplete, and did not include proof of all required permits. Tr. 51-54, 61; ex 24, 25.

43. Melanie Burdick (formerly Melanie Haveman), a hydrologist, enforcement agent and environmental scientist in the EPA Region 5 Water Division, sent Request for Information letters to Respondents by certified mail on or about December 10,2009 and February 23,2011. Tr. 298-299, 308·312; CX 27, 50. Respondents received them but did not answer the questions in the letters. Tr. 310-317,431, 604-605; ex 30-32.

44. Further pursuing the floodplain permit, Mr. Zdrilich provided Ms. Gartland another copy of maps, a lot survey by Allen Surveying, and the 1999 letter authorizing bridge culvert work under the NWP Permit 14, and in response she sent him letter dated February 23, 2010,

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confirming that such documents had been previously reviewed with the incomplete application. ex 28; Tr. 63.

45. Ms. Burdick inspected the Site on April15, 2010, and photographed the fill, grading and stream relocation on Lot 1. Tr. 331-338; ex 29, 101 (1i1: 1, 17). Ms. Mullen, Mr. Wilk, Mr. McGuire, Ms. Gartland and Mr. Zdrilich were present during the inspection. CX 29. Thereafter, Ms. Burdick notified Mr. Zdrilich in a telephone discussion that EPA would issue him a letter instructing him to restore the wetlands on the Site. CX 29.

46. In early 2011, Mr. Zdrilich denied Ms. Burdick access to the Site when she telephoned him to obtain his permission, and only granted it after she sent him a letter explaining EPA's authority under Section 308 of the CWA to access the Site. Tr. 343, 450-451; CX 34. Mr. Zdrilich did not allow Mr. Wilk to enter the Site. Tr. 148-149, 173, 343.

47. On April 18, 2011, Ms. Burdick took soil samples, identified vegetation and hydrology indicators, and delineated the areas of the wetlands on Lot 1 that were impacted by fill material on the Site and the extent of the fill. Tr. 345-347, 351, 437-438; CX 35. She determined that the depth of the fill varied from 6 inches to three feet throughout the eastern wetlands. Tr. 357-358; eX67.

48. Mr. Zdrilich telephoned Ms. Burdick on September 30, 2011, informing her that he had added fill within 50 feet of the road, and that he needs to backfill behind the curb, and she responded that he could fill by hand within 12 inches of the curb, and would need a permit for any additional fill. ex 36.

49. After April18 and on or before September 30,2011, Mr. Zdrilich directed the placement of fill material consisting of dirt and asphalt along areas extending several feet beyond the north and south curbs of Polo Boulevard, either in or near wetlands. Tr. 185-186; CX 36, 37 (pp. 313, 316-319), 38, 53 (p. 525), 73, 104 (~ 16, pp. 1418-1421, 1438). On November 16, 2011, Mr. Zdrilich was granted permission by EPA to add fill within 10 feet from the curb of Polo Boulevard to comply with Mahoning County Planning Commission standards. Tr. 379-381, 446; eX92.

50. On October 17, 2011, Mr. Zdrilich received a Notice of Intent to File Civil Administrative Complaint ("pre-filing notice letter") against Respondents for the discharges into wetlands and the unnamed tributary, in violation of Section 30l(a) of the CWA, informing him that EPA plans to propose a penalty of $30,500 for the violations, and providing an opportunity to submit information prior to EPA filing a complaint. CX 39, 40; Tr. 367. No response to the Notice was received from Respondents. Tr. 367.

51. On October 26, 2011, EPA issued an administrative compliance order ("Restoration Order") to Respondents, finding them in violation of Section 301 of the CWA and requiring them to develop and implement a plan to restore to wetlands the areas on the Site which had been filled with dredge or fill material. CX 43; Tr. 372-373. The Restoration Order required respondents to commence restoration activities in accordance with the plan within 30 days of its approval by EPA, and to submit to EPA written certification of the restoration, with an as-built drawing,

8

·within 30 days of completing restoration activities. ex 43. The Restoration Order stated that violation of its terms may result in civil penalties and/or criminal sanctions. !d.

52. On November 7, 2011, Respondents certified that they would comply with the Restoration Order and hired a consultant, Wallace and Pancher, in 2011 to develop a Wetlands Restoration Plan for compliance with the Restoration Order. Tr. 136, 493; ex 49, 53.

53. Wallace and Pancher prepared and submitted in January 2012 a Wetlands Restoration Plan, and revised it in February 2012 ("Restoration Plan"), and Ms. Burdick approved the revised plan. Tr. 381-382; ex 53.

54. A total of0.67 acre of the eastern wetlands had been cleared, filled and graded by Respondents. ex 53 (pp. 522-523).

55. During rain events, sediment-laden water ran off the disturbed areas and entered Burgess Run. Tr. 279, 284.

56. Wetland restorations require the area to be rough graded and planted with wetland plants, to facilitate wetland function, and for the area to be monitored afterward. Tr. 373-375; ex 53. The Restoration Plan provided that the eastern wetlands would be rough graded, and planted with wetland trees and shrubs in a certain number and density, and monitored thereafter for three years. ex 53; Tr. 383-386, 456.

57. Mr. Zdrilich did not allow Wallace and Pancher to implement the Restoration Plan. Tr. 494. However, he told Ms. Burdick in a telephone discussion on April25, 2012 that the grading and planting was done based on the new blueprints. Tr. 389, 463; ex 57.

58. Ms. Burdick informed Mr. Wilk of her discussion, so he visited the Site on April26, 2012 to review any restoration, and met Mr. Zdrilich. Tr. 136-139. The Site had not been restored, the fill material had not been removed, the eastern wetlands contained exposed soils, some sparsely planted trees and scattered seed, and it had not been rough graded but instead, under Mr. Zdrilich's direction, it was evenly graded to a slope so water runs off the Site. Tr. 136-146, 391-392, 496-499, 594-595; ex 60, 106, 110 (pp. 1718-1723). Mr. Zdri1ich and a laborer had planted the trees. Tr. 596. No wetland vegetation was planted. Tr. 498.

59. A month later at the Site, there was mowed grass, bare earth and upland vegetation, and no plantings. ex 60; Tr. 393-396. On May 26,2012, Ms. Burdick gave Mr. Zdrilich a checklist of basic requirements of the Restoration Plan, and explained the requirements to him. The requirements included certain restoration activities to be completed by June 30, 2012, providing EPA with as-built survey plans documenting the newly created topography by July 31, 2012, and placing a deed restriction or conservation easement on the property. Tr. 396-398; ex 60 (pp. 567)

60. TheSitehadnotbeenrestoredtowetlands. Tr. 71,197,403,417-418,425-427. As of the dates of hearing, EPA did not receive any as-built survey documentation to show that any restoration was completed. Tr. 455.

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III. Relevant Law under the Clean Water Act

In 1972 Congress substantially amended the Federal Water Pollution Control Act, now commonly known as the Clean Water Act, Pub. L. No. 92-500, 86 Stat. 816 (codified as amended at 33 U.S.C. §§ 1251-1387), "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters." 33 U.S. C.§ 125l(a). Section 30l(a) of the Act provides that, except as in compliance with a permit under Section 404 of the Act, and certain other permits, limitations and standards not applicable in this case, "the discharge of any pollutant by any person shall be unlawfuL" 33 U.S.C. § l311(a). A "discharge of a pollutant" is defined in the Act as "any addition of any pollutant to navigable waters from any point source .. . . " 33 U.S.C. § 1362(12), (16). Rock, sand, and dredged or other fill material are each a "pollutant" when discharged into navigable waters. 33 U.S.C. § 1362(6); United States v. Akers, 785 P.2d 814,818 (91

" Cir. 1986), cert. denied, 479 U.S. 828 (1986). A "point source" includes bulldozers, backhoes and other heavy mechanized earthmoving equipment. 33 U.S.C. § 1362(14); Avoyelles Sportsmen's League, Inc. v. Marsh, 715 F.2d 897, 922 (5th Cir. 1983). "Navigable waters," or "waters of the United States," include tributaries, and wetlands adjacent to tributaries, of "waters such as intrastate lakes, rivers [and] streams (including intermittent streams) ... the use, degradation or destruction of which would or could affect interstate or foreign commerce .... " 33 U.S.C. § 1362(7); 40 C.P.R. § 232.2; 33 C.P.R. § 328.3(a). Wetlands are a vital natural resource, as they "play an integral role in maintaining the quality of life through material contributions to our national economy, food supply, water supply and quality, flood control, and fish, wildlife, and plant resources, and thus to the health, safety, recreation, and economic well-being of all our citizens of the Nation." 16 U.S.C. § 390l(a)(1). In order to protect such waters, the Act authorizes the Secretary of the Army, through the United States Corps of Engineers, to issue permits under Section 404 of the Act, regulating discharges of dredge or fill material into waters of the United States. 33 U.S.C. § 1344.

The U.S. Supreme Court's seminal decision Rapanos v. United States, 547 U.S. 715 (2006) ('"'Rapanos") established standards to determine whether wetlands are "adjacent to" waters of the United States and thus subject to jurisdiction under the Clean Water Act.

IV. Accelerated Decision

In the Accelerated Decision, I concluded that Complainant was entitled to judgment as a matter of law with respect to liability of the three Respondents for the dredging and filling of Burgess Run, the unnamed tributary and the eastern wetlands, in violation of Section 301(a) of the Clean Water Act. Specifically, I found that Respondent Polo Development, Inc. ("Polo") and Respondent AIM were owners of the property during relevant periods of time and were in control of the property and activities on-site. Mr. Zdrilich and his wife Donna Zdtilich were the only officers, representatives and/or employees of these two companies, and controlled the activities, including directing the dredging and filling activities, on the Site. I concluded that materials that were placed as fill in the eastern wetlands, Burgess Run and the unnamed tributary were "pollutants," and that the heavy equipment, such as backhoes, dump trucks and bulldozers, used for land-clearing and moving these materials in the Site, were "point sources." 33 U.S.C. § 1362(6), (14). I also concluded that the eastern wetlands, Burgess Run and the unnamed

10

tributary were "waters of the United States," and therefore are "navigable waters" under the CWA, in accordance with standards set forth in Rapanos. 33 U.S.C. § 1362(7). Therefore, I concluded that Complainant demonstrated that the placement of the materials into the eastern wetlands, Burgess Run and the unnamed tributary from the heavy equipment constituted the "addition of any pollutant to navigable waters from any point source" and thus was a "discharge of a pollutant" within the meaning of the CWA. 33 U.S. C. § 1362(12), (16). I further concluded that the discharges referenced in the Complaint were not authorized by the USACE under Nationwide Permits issued on August 18, 1999.

Finally, I dismissed the Respondents' defense of inability to pay for having waived or abandoned the defense, and granted Complainant's request for judgment as a matter of law that Respondents have the ability to pay the proposed penalty.

V. Legal Principles and Guidance for Penalty Assessment

Section 309(g)(1)(A) of the CWA authorizes EPA, upon a finding that a person has violated Section 301 of the Act, to assess a civil administrative penalty. Section 309(g)(2)(B) sets the maximum penalty amounts "per day for each day during which the violation continues," and a total maximum penalty, for Class II civil administrative penalties. The Civil Monetary Penalty Inflation Adjustment Rule, 40 C.F.R. Part 19, adjusts these maximum levels as follows: for violations occurring from March 15, 2004 to January 12, 2009, the maximum penalty is $11,000 per day per violation, up to a total of $157,500. For violations occurring after January 12, 2009, the maximum penalty is $16,000 per day per violation, up to a total maximum penalty of$177,500. 40 C.F.R. §§ 19.2, 19.4.

Section 309(g)(3) of the Act specifies the following factors that must be taken into account in determining the amount of any penalty assessed:

the nature, circumstances, extent and gravity of the violation, or violations, and, with respect to the violator, ability to pay, any prior history of such violations, the degree of culpability, economic benefit or savings (if any) resulting from the violation, and such other matters as justice may require.

33 U.S. C.§ 1319(g)(3).

The Rules of Practice require that the civil penalty be determined based on the evidence in the record and in accordance with any penalty criteria set forth in the applicable statute, and that any civil penalty guidelines issued under the statute be considered in such determination. 40 C.F.R. § 22.27(b). The Rules provide that if the administrative law judge decides to assess a penalty different in amount from the proposed penalty, she shall set forth in the decision the specific reasons for the increase or decrease. I d. Complainant has the burdens of presentation and persuasion that the relief sought, that is, the proposed penalty, is appropriate, and matters of controversy are decided by the presiding administrative law judge upon a preponderance ofthe evidence. 40 C.F.R. § 22.24; see, New Waterbury, Ltd., 5 E.A.D. 529 (EAB 1994)(complainant

11

must show it has taken into account each statutory penalty factor and that the proposed penalty is supported by its analysis, but there is no specific burden of proof as to any particular factor).

EPA has not developed any penalty policy or guidelines for cases litigated under the CW A. In such circumstances, it is appropriate to calculate a penalty examining each of the statutory factors directly. Phoenix Construction Services, Inc., 11 E.A.D. 379, 395 (EAB 2004). In addition, two general enforcement penalty policy documents have been accepted as appropriate guidance: EPA General Enforcement Policy# GM-21, Policy on Civil Penalties ("GM-21 "), and EPA General Enforcement Policy# GM-22, A Framework for Statute-Specific Approaches to Penalty Assessments: Implementing EPA's Policy on Civil Penalties ("GM-22"); both documents are dated February 16, 1984. Two main goals of penalty assessment as set out in GM-21 (at 3) are, first, deterrence, ensuring the penalties are large enough to deter noncompliance by the violator and by others similarly situated; and second, fair and equitable treatment of the regulated community. These policies instruct that a preliminary deterrence figure should first be calculated based upon any economic benefit of the noncompliance and the gravity of the violation, and then that figure is increased or decreased based upon the other statutory factors.

EPA has developed a "Clean Water Act Section 404 Settlement Penalty Policy" ("Settlement Penalty Policy" or "SPP"), dated December 21,2001, which states that it "is not intended for use ... in determining penalties at hearing or trial." SPP at 4. The Environmental Appeals Board ("EAB" or "Board") has opined that "[a]lthough settlement policies as a general rule should not be used outside the settlement context, ... there is nothing to prevent [judges from] looking to relevant portions thereof when logic and common sense so indicate." Britton Constr. Co., 8 E.A.D. 261,287 n.l6 (EAB 1999). Nevertheless, the Board has strongly cautioned that reliance on the Settlement Penalty Policy in the litigation context may detract from the requisite consideration of the statutorily mandated penalty factors and the Agency's general litigation penalty policies. Henry Stevenson and Parkwood Land Co., CW A Appeal No. 13-01,2013 EPA App. LEXIS 36, *46-47, *58-59, *68 (EAB, Oct. 24, 2013). The Board also has cautioned against using penalties assessed in other similar cases as guidance, maintaining that "penalty assessments are sufficiently fact- and circumstance- dependent that the resolution of one case cannot determine the fate of another." Newell Recycling Co., 8 E.A.D. 598, 642 (EAB 1999), aff'd, 231 F.3d 204 (5"' Cir. 2000), cert. denied, 534 U.S. 813 (2001); accord, Phoenix Construction Services, Inc., 11 E.A.D. at 420 (penalty assessment under the CWA).

Absent a penalty policy for cases litigated under the CW A, guidance from the Federal courts is instructive. The Supreme Court has stated that "highly discretionary calculations that take into account multiple factors are necessary" to determine CW A penalties. Tull v. United States, 481, 427 (1987). In calculating civil penalties under CW A section 309(d), which identifies penalty calculation factors similar to those for administrative penalties listed in section 309(g), Federal courts have generally used either a "bottom up" or "top down" method. The "bottom up" method starts with the economic benefit of noncompliance and then adjusts upwards based on the other statutory factors, whereas the "top do\¥tl" approach starts with the statutory maximum and subtracts for any mitigating statutory factors.

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VI. Complainant's Proposed Penalty

Ms. Burdick calculated the $30,500 proposed penalty based on the Settlement Penalty Policy, and notified Mr. Zdrilich of the proposed penalty in a Notice of Intent to File Civil Administrative Complaint, dated October 14, 2011, sent to Mr. Zdrilich. Finding of Fact 50; CX 39; Tr. 362-366, 399-400. According to the Settlement Penalty Policy, 1 the "minimum penalty amount that the government will accept in settlement of the case" is calculated by the formula of adding an "economic benefit of noncompliance" figure to a "preliminary gravity amount," adjusted for various "gravity adjustment factors," and then subtracting "litigation considerations" and other factors not relevant to a penalty assessment in this case. SPP at 8. The Settlement Penalty Policy explains that this formula is also used for calculating a proposed penalty for an administrative complaint, except that the adjustment factors are not applied to reduce the penalty. SPP at 7. The "preliminary gravity amount" is composed of"environmental significance" factors and "compliance significance" factors, each of which are assigned a value up to 20, and then the sum of the values is multiplied by $500, $ 1,500, or $3,000 to $10,000 to account for violations with minor, moderate and major overall environmental and compliance significance, respectively. Id at 10.

Ms. Burdick calculated a figure of $15,500 to represent the environmental significance of Respondents' violations, considering factors of potential for human harm, severity of the impacts, significance of the impacts, the extent or size of the impact on waters of the United States, the sensitivity of the resource impacted, and the duration of the violation. Tr. 400,404. These factors generally reflect those in the Settlement Penalty Policy (SPP at 1 0-12). She gave a low weight to potential for human harm, gave about medium weight to severity of the impact and sensitivity of the resource, and gave slightly less weight to the extent or size of impact, on the basis of the relatively smaller size of the wetland but 200 linear feet of stream impact. Tr. 454, 456-457.

Complainant asse1ts that the duration of the violation can be assessed using either of two methods in accordance with court precedent. The first method counts the number of discrete fill events, under which Complainant points to evidence of six dredge and fill events: on or about August 2008, December 2008, June 2009, July 2009, September 2011, and April2012, considering only the events occurring within the five-year statute of limitations period under 28 U.S.C. § 2862. Brief at 40. The second method considers the number of days pollutants remain in a wetland without a permit, under which Complainant points to the duration of over six years that pollutants remained in the wetland from August 2008 through the last day ofthe hearing, February 2015. Brief at 41.

Next, Ms. Burdick calculated a figure of$15,000 to represent the compliance significance of the violations, considering factors of: (1) culpability, which accounted for about half of that figure, (2) the absence of prior violations of section 404 of the CWA, and (3) deterrence, all of which reflect the factors in the Settlement Penalty Policy. Tr. 405,410-411, 443; SPP at 13-14. She considered the level of compliance significance to be in the mid-range.

1 Official notice is hereby taken of the Settlement Penalty Policy, available on EPA's public website at http://www2.epa.gov/sites/production!files/documents/404pen.pdf.

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Tr. 457. The sum of the environmental significance and compliance significance figures yields the total proposed penalty of $30,500.

Although Ms. Burdick at some point had prepared a written penalty calculation, Complainant did not offer it into evidence. Tr. 416-417. She explained at the hearing that in developing the proposed penalty, she also considered the statutory factors of the nature, circumstances, extent and gravity of the violation, prior history of such violations, and degree of culpability. Tr. 366-367,399-400,405,410.

Complainant states in its post-hearing brief that the proposed penalty "is the appropriate penalty for Respondents' failure to comply and is consistent with section 309(g) of the Act," yet also states that that the preponderance of the evidence supports Ms. Burdick's testimony that it is "a low amount" and that if she had considered all of the available facts, the penalty "could be much higher." Complainant's Post-Hearing Brief ("Brief') at 9, 34 and n. 13. Ms. Burdick testified that at the time she calculated the penalty, she was intending to promote restoration of the site, but that by the time of the hearing, restoration was not possible. Tr. 413. Complainant points to her testimony that she did not increase the penalty to reflect a prior stormwater CW A violation at the Site, and prior attempts by county, state and USACE to get Respondents to comply and restore the Site. Briefn. 13 (citing Tr. 408-409, 443). Complainant also points out that she did not increase the penalty to account for Respondents' failure to respond to requests for information and for Mr. Zdrilich's denial of Site access to EPA and OEPA on April13, 2011. Jd.; Tr. 409-410. Complainant argues that the penalty could be increased for Respondents' history of noncompliance on grounds of their failure to comply with the Corps' January 11, 2007 cease and desist order, EPA's October 26, 2011 Restoration Order and Wallace and Pancher's Restoration Plan, failure to provide information and propose a restoration plan in response to EPA's October 2011 pre-filing notice letter, and failure to respond to citations and warnings of county, state and federal officials concerning the wetland in 2006 through 2009. Brief at 55-57. Further, Complainant urges that the penalty should be increased for Respondents' recalcitrance. Jd. at 60-6!.

No reduction should be made for any activities claimed by Respondents as restoration, Complainant argues, because they failed to prove that the eastern wetlands were restored and failed to prove payment for any restoration attempts, and moreover, they occurred after Respondents were notified of the violations and directed to restore the wetlands. Brief at 24·25, 28-29, 58-59. Complainant urges that the penalty should be increased for such activities because Mr. Zdrilich increased the damage to the eastern wetlands in 2007 and 2012 by merely backfilling and grading the wetlands flat. Brief at 25-28, 59. Complainant argues that Respondents could afford proper restoration of the wetland, as evidenced by the $162,000 generated from sales of property in Polo Development from January 1, 2012 until October 30, 2012. Brief at 59; Tr. 652; CX 115.

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VII. Analysis and Conclusions

A. Methodology

Given that there is no formula in the CWA for weighing the statutory penalty factors and no penalty policy applicable to litigated CW A cases, the first consideration is an appropriate methodology for calculating a penalty. Complainant did not calculate or present evidence of an economic benefit of noncompliance, so the "bottom up" method will not be used to begin a penalty analysis. Brief n. 17. The "top down" method of calculating a penalty is a more useful approach in the circumstances of this case.

The GM-21 penalty policy and GM-22 penalty framework also are instructive in calculating the penalty. 2 Under this framework, absent an economic benefit component, the penalty analysis begins with a gravity component to reflect the seriousness of the violation, reflecting CWA penalty factors of the nature, circumstances, extent and gravity of the violation. GM-22 at 13-16. The gravity component is then increased or decreased to account for degree of the violator's culpability, phrased in terms of degree of willfulness or negligence and degree of cooperation or noncooperation, and for the history of noncompliance, ability to pay, and other unique factors. GM-22 at 16-24.

In this case, given that there is no evidence of economic benefit or savings resulting fTom the violation, and that I previously concluded as a matter of law that Respondents have the ability to pay the proposed penalty, the relevant statutory factors to consider are the nature, circumstances, extent and gravity of the violation, any prior history of such violations, the degree of culpability, and such other matters as justice may require.

The proposed penalty, while calculated using the Settlement Penalty Policy, was presented by Complainant as a reasoned quantification of an appropriate penalty considering the statutory penalty factors. Ms. Burdick has had significant training and experience in the subjects of wetlands, jurisdictional waters of the United States, and calculating penalties under Section 404 of the CWA. Tr. 299-302; CX 101 ~ 1. Her experience and training promotes consistency in quantifying penalties in various CW A cases relative to the statutory penalty factors. As the Board recognizes, "consistency in enforcement is a goal ofEPA's administrative penalty policy." Ronald H Hunt, 12 E.A.D. 774, 796 (EAB 2006) (quoting GM-21 at 4). Therefore, I take into account the proposed penalty, considering the context and time in which it was calculated, as explained by Complainant.

B. Nature. circumstances, extent and gravity of the violations

GM-22 lists as factors for the gravity component the importance to the regulatory scheme and the actual or possible harm from the violation, which in turn includes considerations of the amount of pollutant, toxicity of the pollutant, sensitivity of the environment, and length oftime a violation continues. GM-22 at 14-15. GM-22 instructs thatthe size of the violator is a basis to

2 Official notice is hereby taken ofGM-21 and GM-22, available to the public on EPA's website at www2.epa.gov/enforcement/policy-guidance-publications.

15

increase the penalty if the gravity figure would otherwise have little impact on the violator in light of the risk of harm posed by the violation. The Settlement Penalty Policy tailors the gravity factors to dredging and filling violations of the CWA, listing them as: harm to human health or welfare, extent of aquatic envirorunent impacted, severity of impacts to the aquatic envirorunent, uniqueness or sensitivity of the affected resource, secondary or off-site impacts, and duration of violation. SPP at 10~12. It also provides that the preliminary gravity component may be reduced where the wetland is restored. SPP at 12-13.

As to the general nature of the violations, a significant penalty is appropriate for violations that disrupt the important absorption and filtration functions that wetlands provide for improving water quality. Finding of Fact 9. The Board has maintained that failure to obtain necessary permits before filling jurisdictional wetlands may cause significant harm to the CW A Section 404 regulatory program. Phoenix Construction Services, Inc., 11 E.A.D. at 400; Stevenson, 2013 EPA App. LEX1S 36 '50; see, Buxton v. United States, 961 F. Supp. 6, 10 (D.D.C. 1997)("run-of-the-mill nature" of the act and only 0.89 acres of tilled wetland does not lessen the seriousness of the violation and need for deterrence, as "the accumulation of similar CW A violations, taken as a whole, point to a serious environmental problem in need of attention"). Wetlands clearly constitute a material part of the waters the CWA is intended to protect, and permits are critical to the program's basic purpose, as it is through the permit process that USACE prohibits or restricts discharges, or mandates certain management practices, to protect wetlands and others waters of the United States. Phoenix, 11 E.A.D. at 396-399. The Board points out that the poor example to others when a landowner flaunts the envirorunental requirements by filling wetlands encourages other similar violations. !d. at 399.

As to circumstances of the violation, with regard to the sensitivity of the watershed, the evidence shows that the eastern wetland was a relatively high quality forested riparian wetland, providing habitat for wildlife, and the unnamed tributary was a moderate to high quality head water stream. Findings of Fact 4, 8, 9. The fact that there are relatively few wetlands in the area increases the impact and the significance of the violations. Finding of Fact 8; Tr. 403. In addition, the fact that Burgess Run is an impaired resource water is a basis to increase the penalty, because an impaired water is more sensitive to impacts than a non-impaired water. Finding of Fact 5; Tr. 440, 458~459. Furthermore, the Site is a relatively short distance to the TNW, the Mahoning River. Finding of Fact 3. These facts weigh in favor of a higher penalty.

The circumstances of the violations may include consideration of whether the discharge of dredged or fill material is expected to result in flooding. SPP at 10. While there is no direct evidence of flooding resulting from the violations, the evidence suggests that Respondents' channelizing and straightening of the unnamed tributary and grading of the eastern wetland increased the likelihood of flooding, given that they are located in a floodplain and floodway and Mahoning County has had problems with flooding. Findings of Fact 7, 19, 55, 58.

The evidence shows that the extent of aquatic environment impacted by Respondents' violations is 200 linear feet of stream and 0.67 acre of wetland being impacted-- with fill material up to three feet deep-- and not restored. Findings of Fact 17, 18, 47, 54, 58, 60. This is a relatively small area of impact, warranting a significant reduction from the maximum penalties allowed under the CW A. The extent of the violations, and the actual or potential harm,

16

is also reflected in the number of instances that the jurisdictional waters were disturbed, and the duration oftime that fill remained in the wetlands. See, GM-22 at 14; SPP at 12. The evidence shows six separate disturbances of the eastern wetlands by Respondents: November 2006; on or before August 28, 2008; on or before December 16, 2008; on or before June 16, 2009; on or before July 13, 2009; and in or before April 2012. Findings of Fact 28, 30, 32, 37, 38, 58. ln addition, between April and September 30, 2011, Respondents directed the placement of dirt and asphalt along Polo Boulevard on Lot 1, but the evidence is not clear that it was placed in a wetland area, as it was not within the area that Ms. Burdick evaluated. Finding of Fact 49; CX 36, 37 (pp. 313, 316-319); 38, 73, 101. Ms. Mullen stated in her October 14, 2014 Declaration that "dirt and asphalt are placed in an area that is a wetland portion of Lot 1," yet her attached October 3, 2011 email admits, "There is also fill in the northeast side of the road. I am not sure where the wetland boundary lies .... " CX 104 (~ 16, p. 1417). At hearing, her testimony was ambiguous as to whether the fill was placed in wetlands on Lot I in September 2011, when she testified, "[w]e saw additional fill into wetlands on the south side of the road, in addition to Lot 1, which was still filled, was never restored." Tr. 185. Indeed, she acknowledged that EPA was responsible for delineation of wetlands, and suggested that she was not familiar with the details of such delineation. Tr. 215-216. Considering the number of discrete discharge events that occurred within the five-year statute of limitations, and that the CW A authorizes a separate penalty for each day of violation, five separate penalties may be assessed for the five events that occurred from August 2008 through April2012.

The extent of violation, or length oftirne a violation continues, is also reflected in the number of days that the fill remained in the eastern wetlands over several years, and the fact that restoration at the Site was not completed. Findings of Fact 28, 30, 32, 37, 38, 58, 60. The CWA allows assessment of a separate penalty for each day of violation, and courts have maintained that each day that unpermitted fill remains in a wetland may be assessed a separate penalty. Sasser v. Adm 'r, 990 F.2d. 127, 129 (4th Cir. 1993). This would result in a disproportionally large penalty for the violations in this case. Instead, each of the five proven illegal discharge events will be considered a separate day of violation ofthe CW A Under the "top down" method, the maximum allowable penalty under the CWA for each of the two violations in 2008 would be $11,000, and the maximum allowable penalty for each ofthethree violations in or around June and July 2009, and April2012, would be $16,000. For five separate days of discharges in violation of Section 301 of the CWA, the total maximum allowable penalty under the CW A is $70,000.

C. Degree of culpability

The penalty must be adjusted to consider the degree of Respondents' culpability, which generally means "blameworthiness." Phoenix, 11 E.A.D. n. 87. Culpability is analogous to OM-22's factor or the degree of willfulness or negligence of the violator, which includes consideration of how much control the violator had over events constituting the violation, the foreseeability of the events, whether the violator took reasonable precautions against the events, whether the violator knew or should have known of the hazards associated with the conduct, the level of sophistication within the industry in dealing with compliance issues, and whether the violator in fact knew of the legal requirement which was violated. GM-22 at 18; Stevenson,

17

2013 EPA App. LEXIS 36 * 61. In the context of culpability, the Board has also considered the violator's attitude, cooperativeness, and good faith and diligence in reporting violations or fixing problems. Phoenix, 11 E.A.D. at 418.

Mr. Zdrilich was solely responsible for the activities on Lot 1, and as director and manager of the other Respondents. Findings of Fact 1, 17, 18, 20, 21, 30, 32, 36, 37, 38, 49, 58; Tr. 542-543. He was an experienced real estate developer, responsible for hiring engineers, surveyors, and attorneys. Findings of Fact 1, 10, 21; Tr. 539-541.

Mr. Zdrilich could have foreseen that he was required to have a Section 404 permit before conducting the clearing, dredging and filling activities on Lot 1, from the time in 1999 that he hired his contractor, ESC, to apply for a permit under Section 404 ofthe CW A. Finding of Fact 10. His testimony that he hired ESC, an environmental engineering firm, "not to have any complaints from EPA" indicates that he was aware of potential environmental issues at the Site and a permit requirement. Tr. 473. Indeed, in the permit application, ESC identified the wetland areas on Lot 1, and advised that it should remain undeveloped and may require a Section 404 permit. Findings of Fact 11, 13. Mr. Zdrilich should have known from the text of the 1999 permit that it was limited by the conditions set forth therein, and that he was not authorized to conduct any dredging or filling activities beyond the 0.14 acre area of wetland impact specified, or beyond the installations authorized by the pern1it, which were completed prior to November 2006. Findings of Fact 14, 15. He also was warned in 2004 of potential floodplain violations for construction activities on Lot 1, when he signed the MCPC plat of survey for Polo Development. Finding of Fact 16. He was warned by Ms. Gartland specifically of the requirement for a Section 404 permit to fill in wetlands on Lot 1 in November 2006. Finding of Fact 22.

There is no evidence that Mr. Zdrilich took any precaution of consulting with ESC, the engineers he hired, or with a lawyer or other environmental engineer, before directing the clearing, dredging and filling activities on Lot 1. He suggested that he relied on representations from Mr. Pozzuto of the USACE in December 2006. Referring to the stormwater map with Mr. Pozzuto's notes on it, Mr. Zdrilich maintained that Mr. Pozzuto allowed him to grade a half acre of land on Lot 1 to within plus or minus three feet from the curb. Tr. 482. It is not reasonable, however, to interpret from the notes, which clearly state, "Remove and restore back to wetland condition ([plus or minus] 3 ')"that the wetland could be filled and graded. Finding of Fact 27. Mr. Zdrilich apparently attempts to bolster his understanding of Mr. Pozzuto's instructions by claiming that that Mr. Pozzuto was more lenient with him, that Mr. Pozzuto told him that the OEPA is harassing him, and that Mr. Pozzuto said "whatever I tell you just do that, and nobody is going to bother you as long as I'm alive." Tr. 480-482, 522-523, 587, 597-598, 603. This testimony is not credible, particularly considering that Mr. Pozzuto met with Mr. Zdrilich only one time, and in the presence of Mr. Cornelius. Finding of Fact 27; Tr. 480.

Mr. Zdrilich was notified repeatedly and consistently of the requirements for a Section 404 permit and for restoration of the Site. Specifically, he was required in late November 2006 by Ms. Gartland to stop activities on the Site; was notified in January 2007 of the CWA violation and ordered by the USACE not to place fill on the Site and to restore the wetlands; was notified in August 2008 by the Mahoning County SWCD that clearing, filling or excavating wetlands

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violates the CWA; was directed in 2008 by Ms. Gartland and Mr. McGuire to remove fill; was advised in a May 2009 meeting with county, state and federal authorities thai a Section 404 permit was required; was notified by Ms. Gartland in July 2009 of failure to remove the fill; was notified by EPA in 2010 that he would be required to restore the wetlands; was warned by EPA that he needed a permit to fill wetlands along the road; was ordered by EPA to restore the wetlands according to the Restoration Order issued in October 2011; was advised in Wallace and Panchet's Restoration Plan what was required for restoration; and was advised by EPA in May 2012 what was required for restoration. Findings of Fact 26, 28, 31, 33, 36, 40, 45, 48, 51, 53, 59. Nevertheless, Mr. Zdrilich continued his grading, dredging and filling activities in the eastern wetlands, and refused to restore it as required, repeatedly claiming to representatives of EPA, USACE, OEPA, and MCPC that he had a permit.

The evidence shows that Mr. Zdrilich did not take the precaution of reading the 1999 permit. The evidence also shows that his assertions that he had a permit authorizing him to clear, dredge and fill the eastern wetlands were not based on any good faith belief, simple negligence or misunderstanding on his part. He testified at the hearing that he recognized the permit application for building the culvert, but "not much" about the attached wetland evaluation report. Tr. 579. He testified that he was familiar only with the first page of the permit, which stated '"[ e]nclosed is a list of conditions which must be followed for the Nationwide Permits to be valid," but that he was not familiar with the following pages listing the conditions of his pe1mit to build the bridge culvert and sewer and water lines. Tr. 130, 582-587, 602; CX 3. He testified that he did not remember whether he had read the permit, and that he did not know whether the pages of the permit setting the conditions were part of the permit. Tr. 585-587. He recalled that the permit specified 0.14 acre of wetland, but it referred to 0.14 acre area of wetland impact from the project and required removal of temporary fill in wetlands. Findings of Fact 14; Tr. 473-474, 585-587; CX 3. It does not support any reasonable belief that the wetlands on Lot 1 only encompassed 0.14 acre.

Mr. Zdrilich pointed to the blueprint of the storm water pollution prevention plan as a basis for believing that he was allowed to clear the land 100 to 200 feet into Lot 1:

A: If you take a look at it [RX 1A], it shows you where retention pond is. It shows you how on the side, left side, of the lot 1 -on lot 1, how far I can work.

Q: Okay. And how far does that blueprint say?

A: Approximately 100 feet from between lot 1 and 2. It has to be clear, clear from the trees, clear from everything, silt fence, and it probably 40 feet from the curb approximately.

Q: Okay. So you say that because of that blueprint, you have the right to go 100 feet into the property.

A: Right.

Q: Okay.

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A: About 100, probably 200 feet, in lot 1.

Tr. 519-520. He explained that OEPA and Mahoning County Planning Commission approved the blueprint, and that he was required to follow the blueprints. Tr. 520, 525-526. The blueprint shows the stormwater control plan in connection with the installation of the culvert, utilities and storm, water and sewage line. RX lA. It includes a delineation of a "Const. limit" around the sediment basin (retention pond) to be constructed on the adjacent Lot 2, which delineation appears to extend into Lot 1 approximately 150 feet from its eastern boundary, and encloses silt fencing. Id. The sediment basin was for the purpose of controlling water runoff during the installation projects listed on the blueprint, which were completed prior to 2006. Finding of Fact 15; RX 1 A. There is no basis for Respondents to infer that the delineation of the construction limit on the blueprint was an authorization to conduct any other construction, clearing, grading, dredging or filling activities on Lot 1. Furthermore, his dredging and filling activities extended over the southwestern portion of the eastern wetlands as far as Burgess Run and included moving the unnamed tributary, which are far beyond the construction limit shown in the blueprint. Findings of Fact 17, 18, 20, 30, 32, 37, 38, 58; RX 1A. Therefore, Mr. Zdrilich's assettions to representatives of the USACE, EPA, and state and local authorities that he was allowed or required to conduct the clearing, dredging, filling and grading activities on Lot 1 were deliberately false, or made with contempt or conscious disregard for legal authority.

Mr. Zdrilich asserted at the hearing that he could grade and fill land within 22.5 feet of the road, on the basis that an easement measuring 12.5 feet wide exists beyond the curb along Polo Boulevard, and an additional easement for utility lines extends out an additional 10 feet along each side of Polo Boulevard. Tr. 4 74-4 75, 487A93, 500-501. His assertion is contrary to the evidence, which shows that from Polo Boulevard, including its curbing, the utility easement extended out 10 feet, forming the boundary of Lot 1. CX 101 (p. 1192), 103 (pp. 1358, 1364, 1368, 1386, 1387), 113; RX 1, lA; Tr. 487-488. Respondents' evidence does not support any claim that they could grade or fill land any farther than the 10 foot wide easement from the curb of Polo Boulevard, and therefore Mr. Zdrilich's assertion is not credible.

Mr. Zdrilich's credibility was diminished further in his testimony that the tributary moved naturally when trees fell due to a lot of rain, and in his testimony that "for last three years ... I cannot read," yet was able to read documents during his testimony. Tr. 505, 550-551, 564-566. The posting of for-sale signs in 2008 and 2009 is consistent with the Respondents' knowledge of the illegality of their activities and their disregard for legal authority. Findings of Fact 29, 39.

Despite the many instructions, meetings, conversations, notices and letters from EPA, USACE, OEPA, county representatives, and Respondents' own contractors, warning him repeatedly over the years of the violations and CWA Section 404 permit requirements regarding Lot 1, Mr. Zdrilich took the position that he was not in violation of the CW A, testifying that he did nothing that he did not have a permit for, and that "if I felt that I was guilty, that I did something wrong, it would be completely different." Tr. 474, 528; Findings of Fact 13, 22, 24, 27, 28, 31, 35, 36, 48-50. Nothing in the record supports such a position or any good faith belief that he was not in violation of the CW A. Considering his testimony and overall lack of

20

credibility, it is concluded that Mr. Zdrilich intentionally disregarded the Section 404 permit requirements, willfully violated Section 30l(a) of the CWA from 2006 through April2012, and acted in defiance of US ACE and EPA orders in grading, dredging and filling the wetland in 2008, 2009 and 2012.

Mr. Zdrilich testified that he "tried to cooperate with them [EPA] as much as humanly possible," but that Wallace and Pancher would charge him over $50,000 for the implementation of the Restoration Plan, and that he could not afford that fee. Tr. 493-494, 526-528,592-593. His degree of cooperation goes only as far as meeting and speaking with government representatives while they were visiting the Site, but he simply insisted that he had a permit for his activities. Findings of Fact 22, 24, 27, 35, 36, 45, 48. He also tried to prevent representatives of EPA and OEPA from entering the Site. Finding of Fact 46. These communications were in his interest to prevent or delay enforcement action, and do not merit any decrease in the penalty. He also refused to cooperate with EPA's requests for information. Finding of Fact 43. The fact that Respondents certified that they would comply with the Restoration Order and hired Wallace and Pancher for a site restoration plan also do not merit any decrease in the penalty where Mr. Zdrilich was merely responding to EPA's warnings of civil and criminal sanctions for any failure comply. Findings of Fact 50, 51, 52. His claim that he could not afford the restoration by Wallace and Pancher are addressed below, in the discussion of "other factors as justice may require."

Respondents have a very high level of culpability for the violations, weighing in favor of a high penalty. A Federal court even many years ago noted that it would "bring the full weight of the law to bear to punish"-- where the violation involves knowingly failing to stop grading and filling a wetland in defiance of a cease and desist order issued by the USACE. United States v. Cumberland Farms of Connecticut, Inc., 647 F. Supp. 1166, 1185 n. 12 (D. Mass. 1986).

D. Prior history of violations

The statute requires consideration of"any prior history of such violations." CWA 309(g)(3). This phrase means that any prior violations of the same or similar kind must be taken into account. The evidence does not show that Respondents had any prior violations of Section 404 the CWA other than the violations at issue in this proceeding. Tr. 410-411. The record does include evidence of a settlement with State of Ohio for alleged stormwater discharges in violation of state water pollution control laws at another subdivision Mr. Zdrilich developed. Complainant does not argue that this evidence should be considered as history of non­compliance. CX 114, Tr. 610-614; Brief at 55-57. In any event, it does not warrant any increase in the penalty in the circumstances of this case. Increasing a penalty for history of noncompliance reflects the increased need for deterrence and that the violator was alerted to a particular type of compliance problem, where there was a prior similar violation. GM-22 at 21. Both the fact that prior to dredging and filling the eastern wetlands, Mr. Zdrilich was aware of the Section 404 permit requirements and wetlands on Lot 1, and the fact that he was repeatedly warned he was in violation and directed to remove the fill from the wetland, have been taken into account in assessing the penalty as discussed above. Therefore there is no need to increase the penalty further for a prior history of violations.

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E. Such other matters as justice may require

The final question is whether there are any reasons that the penalty should be adjusted to achieve justice. Mr. Zdrilich testified that almost two years before the hearing, he paid Ecological Construction Services ('"ECS") to perform restoration work, including planting trees and shrubs and grass seeds, and placing fencing around the trees to prevent beavers from destroying them. Tr. 503-504, 521, 608. However, efforts to attain compliance after the complaint is filed does not merit any decrease in the penalty. Phoenix, 11 E.A.D. at 415 (post­complaint compliance was a case of"too little too late" warranting if anything an increase rather than a decrease in penalty). Furthermore, Respondents did not provide any evidence of wetland restoration work done or that the eastern wetlands were ever restored. See, Finding of Fact 60.

As to efforts prior to the Complaint, Mr. Zdrilich claimed that he "tried to work with" Mr. Wilk, and "would do whatever they tell me to do," including "backfill or take some dirt off or put the grass seeds or put trees ... many times over," spending "thousands of dollars." Tr. 522-523. The evidence shows that he merely backfilled and evenly graded soil on Lot 1 and planted some trees and seed, but did not remove the fill material from the wetland. Findings of Fact 58-60. He did not rough-grade the area or plant it with wetland shrubs and trees as required for wetland restoration. Findings of Fact 56, 58-60. Moreover, any attempts he made for site restoration were only in response to orders from the US ACE and EPA, to delay or avoid enforcement action. While he claimed at the hearing that Wallace and Pancher would charge him over $50,000 for the implementation of the Restoration Plan, and that he could not afford that fee, he was not a credible witness and no evidence was presented to corroborate his testimony as to the amount of the fee. Tr. 493-494, 526-528, 592-593. During the course of this proceeding, Respondents have refused to submit financial information as to any inability to pay. See, Accelerated Decision. Moreover, the evidence of record shows that Respondents generated total revenue of$420,500 in property sales between July 2011 and October 2014, including $162,000 from sales of property in Polo Development from January 1, 2012 until October 30, 2012, and $153,500 from sale of property in that development from January 1, 2013 to October 31,2014. Brief at 59; Tr. 650~652; CX 93, 115. I conclude that there is no evidence to suppmt an adjustment of the penalty "as justice may require."

F. Penalty Calculation and Ultimate Conclusion

As noted above, for five separate days of discharges in violation of Section 301 of the CWA, the total maximum allowable penalty under the CW A is $70,000. Considering the nature, circumstances, extent and gravity of the violations in this case as discussed above, a reduction of 70 percent from the statutory maximum reflects, on balance, the appropriate level for a gravity component, yielding a gravity-based penalty of $21,000.

This figure must be adjusted upward by a significant amount to reflect the high level of Respondents' culpability, including intentional disregard for legal authority over several years, willful violations, and defiance of the EPA Restoration Order and USACE's cease and desist letter, as noted above. Guidance in GM-22 provides for an increase of up to 30 percent of the gravity based penalty for unusual circumstances of willfulness, plus an increase of up to 20 percent for unusual circumstances of noncooperation. GM-22 at 18, 19. The level of

22

Respondents' culpability, willfulness, and noncooperation, and their attitude and lack of diligence in fixing problems warrant an increase of more than 50 percent of the gravity-based penalty. An increase of 55 percent of the gravity based penalty, or $11,550, is appropriate. This adjustment results in a total penalty of$32,550 for the Respondents' violations. No other adjustments are warranted. This penalty is comparable to the penalty proposed by Complainant, and is the appropriate penalty to assess against Respondents for using mechanized clearing and earth-moving equipment to discharge dredged or fill material into waters of the United States, including the eastern wetlands, without a permit required by Section 404 of the CW A, in violation of Section 301(a) ofthe CWA.

ORDER

1. Respondents Joseph Zdrilich, Polo Development, Inc., and AIM Georgia, LLC, are jointly and severally liable for the violations found herein, and are ordered to pay a civil penalty in the amount of $32,550 in the manner directed below.

2. Payment of the full amount of this civil penalty shall be made within thirty (30) days after this Initial Decision becomes a final order under 40 C.F.R. § 22.27(c), as provided below. Payment shall be made by submitting a certified or cashier's check(s) in the requisite amount, payable to the Treasurer, United States of America, and mailed to:

U.S. Environmental Protection Agency Fines and Penalties Cincinnati Finance Center P.O. Box 979077 St. Louis, MO 63197-9000

3. A transmittal letter identifying the subject case and EPA docket number, Docket No. CW A-05-2013-0003, as well as the Respondents' name(s) and address, must accompany the check.

4. If Respondents fail to pay the penalty within the prescribed statutory period after entry of this Initial Decision, interest on the penalty may be assessed. See, 31 U.S.C. § 3717; 40 C.F.R. § 13.11.

5. Pursuant to 40 C.F.R. § 22.27(c), this Initial Decision shall become a final order forty­five ( 45) days after its service upon the parties and without further proceedings unless: (1) a party moves to reopen the hearing within twenty (20) days after service of this Initial Decision, pursuant to 40 C.F.R. § 22.28(a); (2) an appeal to the Environmental Appeals Board is taken within thirty (30) days after this Initial Decision is served upon the parties pursuant to 40 C.F.R. § 22.30(a); or (3) the Environmental Appeals Board elects, upon its own initiative, to review this Initial Decision, under 40 C.F.R. § 22.30(b).

~~ [JU/1~--M. Lisa Buschmann Administrative Law Judge

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' In the Matter of Polo Development, Inc., AIM Georgia, LLC and Joseph Zdrilich, Respondents Docket No. RCRA-HQ-2009-0001

CERTIFICATE OF SERVICE

I hereby certify that the foregoing Initial Decision and Order dated December 1, 2015, was sent this day in following manner to the addresses listed below:

Dated : December 1, 2015

Original by Regular Mail to:

LaDawn Whitehead Management Analyst

~~~~~ Sybil nderson Office of Administrative Law Judges U.S. Environmental Protection Agency (202)564-6261

Office of Enforcement and Compliance Assurance U.S. EPA - Region 5 77 West Jackson Blvd Chicago, IL 60604

One Copy by Electronic and Regular Mail to:

Richard J. Clarizio Associate Regional Counsel U.S.EPA 77 West Jackson Boulevard, C-14J Chicago, IL 60604-3590 [email protected]

Dennis A. Dimartino, Esquire 839 Southwestern Run Youngstown, OH 44514-4688 [email protected]

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 9, 2015 Decided December 18, 2015

No. 13-1283

DALTON TRUCKING, INC., ET AL., PETITIONERS

v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY AND

GINA MCCARTHY, IN HER OFFICIAL CAPACITY AS

ADMINISTRATOR OF THE UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY, RESPONDENTS

CALIFORNIA AIR RESOURCES BOARD,

INTERVENOR

Consolidated with 13-1287

On Petitions for Review of Final Action of the United States Environmental Protection Agency

Theodore Hadzi-Antich argued the cause for petitioners. With him on the joint briefs were M. Reed Hopper and Lawrence J. Joseph.

Joshua M. Levin, Senior Trial Attorney, U.S. Department of Justice, argued the cause for respondents. With him on the

2

brief was John C. Cruden, Assistant Attorney General. Michael J. Horowitz, Attorney Advisor, U.S. Environmental Protection Agency, entered an appearance.

Ross H. Hirsch, Deputy Attorney General, Office of the Attorney General for the State of California, argued the cause for intervenor. With him on the brief were Kamala D. Harris, Attorney General, and Robert W. Byrne, Senior Assistant Attorney General.

Before: GARLAND, Chief Judge, and EDWARDS and SENTELLE, Senior Circuit Judges.

Opinion for the Court filed by Senior Circuit Judge EDWARDS.

EDWARDS, Senior Circuit Judge: This case involves consolidated petitions for review filed by Dalton Trucking, Inc., et al. (hereinafter “Dalton Trucking”) and American Road and Transportation Builders Association (“ARTBA”), challenging a final decision by the Environmental Protection Agency (“EPA”). EPA’s contested decision authorized California regulations intended to reduce emissions of particulate matter and oxides of nitrogen from in-use nonroad diesel engines. Simultaneous to filing its petition for review in this court, Dalton Trucking sought review of the same EPA decision in the United States Court of Appeals for the Ninth Circuit. ARTBA did not separately seek review in the Ninth Circuit, but instead sought and was granted leave to intervene on Dalton Trucking’s behalf.

Believing that the D.C. Circuit is the proper venue for

Petitioners’ challenges, EPA moved to dismiss or, alternatively, transfer Petitioners’ Ninth Circuit action to this court. The Ninth Circuit declined to rule on EPA’s motion,

3

holding it in abeyance pending a ruling by this court as to whether venue is proper in the D.C. Circuit. Before this court, Dalton Trucking and ARTBA argue that the Ninth Circuit is the proper venue for their challenges and seek dismissal or transfer of their petitions for review.

Venue in this case is governed by section 307(b)(1) of the

Clean Air Act (“CAA” or “Act”). See 42 U.S.C. § 7607(b)(1). Pursuant to section 307(b)(1), venue over the challenges to the EPA action at issue lies exclusively with this court only if (1) the final action taken by EPA is “nationally applicable” or (2) EPA found that its final action was based on a determination of “nationwide scope or effect” and it published this finding. See id.

Petitioners claim that because EPA’s decision does not

satisfy either of the statutory avenues for filing in the D.C. Circuit, venue is not proper in this court. We agree. We therefore dismiss the petitions for review.

I. BACKGROUND

Section 209(e) of the Clean Air Act generally preempts

states from adopting standards relating to the control of emissions from in-use nonroad diesel engines. See 42 U.S.C. § 7543(e)(1). California, however, may adopt emissions standards for in-use nonroad diesel engines if it applies for and receives a waiver of federal preemption from EPA. See 42 U.S.C. § 7543(e)(2)(A).

To receive a waiver of federal preemption, California is

required to determine that its standards “will be, in the aggregate, at least as protective of public health and welfare as applicable Federal Standards.” Id. Following such a determination, EPA must authorize a waiver application

4

unless EPA finds that (1) California’s determination was arbitrary and capricious, (2) “California does not need such California standards to meet compelling and extraordinary conditions,” or (3) “California standards and accompanying enforcement procedures are not consistent with [section 209 of the Act.]” Id. § 7543(e)(2)(A)(i)-(iii). Once EPA authorizes California standards, other states may adopt and enforce identical provisions as their own, subject to certain conditions. Id. § 7543(e)(2)(B); see also Am. Trucking Ass’ns v. EPA, 600 F.3d 624, 628 (D.C. Cir. 2010).

In July 2007, the California Air Resources Board,

California’s air pollution agency, approved regulations to reduce particulate matter and oxides of nitrogen emissions from in-use nonroad diesel engines (hereinafter “Nonroad Fleet Requirements”). As amended, the Nonroad Fleet Requirements apply to persons, businesses, or government agencies owning or operating in California in-use nonroad diesel engines with a maximum horsepower of 25 or greater.

On March 1, 2012, the California Air Resources Board

requested that EPA authorize California’s Nonroad Fleet Requirements pursuant to section 209(e) of the Act. EPA granted the request. See Decision Granting a Waiver of Clean Air Act Preemption (“Nonroad Waiver Decision”), 78 Fed. Reg. 58,090 (Sept. 20, 2013). In its Nonroad Waiver Decision, EPA concluded “that those opposing California’s request have not met the burden of demonstrating that authorization for California’s Fleet Requirements should be denied based on any of the statutory criteria of section 209(e)(2)(A).” Id. at 58,121.

Dalton Trucking filed a petition for review of EPA’s

Nonroad Waiver Decision in both this court and in the United States Court of Appeals for the Ninth Circuit. See Dalton

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Trucking Inc. v. EPA, No. 13-74019 (9th Cir. Nov. 19, 2013). ARTBA, a nonprofit trade organization that represents the collective interests of the U.S. transportation and construction industries, also filed a petition for review of EPA’s Nonroad Waiver Decision in this court. ARTBA additionally sought and was granted leave by the Ninth Circuit to intervene on Dalton Trucking’s behalf in the action before that court. In both courts, Petitioners assert that in authorizing California’s Nonroad Fleet Requirements, EPA misapplied the statutory requirements of section 209(e) and that EPA’s decision was arbitrary and capricious or otherwise not in accordance with law.

EPA filed a motion to have the case before the Ninth

Circuit dismissed or transferred to this court. The Ninth Circuit directed that the agency’s motion be held in abeyance pending a ruling by this court as to whether Petitioners’ challenges were “properly filed” in the D.C. Circuit. Petitioners now contend that venue is not proper in the D.C. Circuit.

II. ANALYSIS

Section 307(b)(1) of the Clean Air Act, titled

“Administrative proceedings and judicial review,” provides, in relevant part:

A petition for review of action of the Administrator in promulgating [certain enumerated nationally applicable actions] or any other nationally applicable regulations promulgated, or final action taken, by the Administrator under this chapter may be filed only in the United States Court of Appeals for the District of Columbia. A petition for review of [certain enumerated locally or regionally applicable actions]

6

or any other final action of the Administrator under this chapter . . . which is locally or regionally applicable may be filed only in the United States Court of Appeals for the appropriate circuit. Notwithstanding the preceding sentence a petition for review of any action referred to in such sentence may be filed only in the United States Court of Appeals for the District of Columbia if such action is based on a determination of nationwide scope or effect and if in taking such action the Administrator finds and publishes that such action is based on such a determination.

42 U.S.C. § 7607(b)(1).

Although section 307(b)(1) no where uses the phrase subject matter jurisdiction, in Harrison v. PPG Industries, Inc., 446 U.S. 578 (1980), the Supreme Court was clear that the provision confers jurisdiction on the courts of appeals. Once section 307(b)(1) is understood as a jurisdictional provision, it is apparent from its terms that the jurisdiction conferred extends both to “the United States Court of Appeals for the District of Columbia” and to the regional “United States Court of Appeals.” It is also apparent from its terms and legislative history, that in addition to conferring subject matter jurisdiction on the Courts of Appeals, section 307(b)(1) is a venue provision. See Tex. Mun. Power Agency v. EPA, 89 F.3d 858, 867 (D.C. Cir. 1996) (per curiam); see also Harrison, 446 U.S. at 590-91. And in specifying venue, section 307(b)(1) distinguishes between cases that may be filed only in the Court of Appeals for the D.C. Circuit and those that may be filed only in other U.S. Courts of Appeals. See Tex. Mun. Power Agency, 89 F.3d at 867. Thus, under section 307(b)(1), subject matter jurisdiction and venue are not coterminous.

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Our decisions have not always distinguished between

307(b)(1)’s dual functions. For example, some opinions suggest in dicta that section 307(b)(1) gives this court “exclusive jurisdiction over challenges to final EPA actions,” inadvertently suggesting that jurisdiction and venue under section 307(b)(1) are coterminous. See, e.g., Nat. Res. Def. Council v. EPA, 643 F.3d 311, 317 (D.C. Cir. 2011). Such opinions do not address, no doubt because the parties did not raise the issue, section 307(b)(1)’s undeniable vesting of subject matter jurisdiction in both “the United States Court of Appeals for the District of Columbia” and regional “United States Court of Appeals.” Indeed, there are a plethora of decisions from other circuits resolving section 307(b)(1) challenges to final agency actions having only local or regional impact. See, e.g., Nat. Res. Def. Council, Inc. v. EPA, 638 F.3d 1183 (9th Cir. 2011); New York v. EPA, 133 F.3d 987 (7th Cir. 1998).

In addition, past opinions asserting that section 307(b)(1)

confers exclusive jurisdiction on the D.C. Circuit are not easily squared with other decisions in which we have applied section 307(b)(1) as a venue provision. See, e.g., Am. Rd. & Transp. Builders Ass’n v. EPA, 705 F.3d 453, 455-56 (D.C. Cir. 2013) (dismissing a challenge to an EPA action taken under section 307(b)(1) because venue was not proper in the D.C. Circuit); Util. Air Regulatory Grp. v. EPA, No. 01-1064, 2001 WL 936362, at 1 (D.C. Cir. July 10, 2001) (same).

Lest there be any confusion going forward, we reiterate

what the Supreme Court made clear thirty-five years ago: Section 307(b)(1) is a “conferral of jurisdiction upon the courts of appeals.” Harrison, 446 U.S. at 593. We stress, however, that section 307(b)(1) is also a venue provision, specifying which types of section 307(b)(1) challenges can be

8

filed in which federal circuit courts. When a party challenges final actions reviewable under section 307(b)(1), venue is determined as follows:

Petitions for review of certain enumerated nationally

applicable actions and rules “or any other nationally applicable regulations promulgated, or . . . final action taken . . . may be filed only in the United States Court of Appeals for the District of Columbia.” 42 U.S.C. § 7607(b)(1).

Petitions for review of certain enumerated locally or

regionally applicable actions “or any other final action . . . which is locally or regionally applicable may be filed only in the United States Court of Appeals for the appropriate circuit.” Id.

Petitions for review of “locally or regionally applicable” final actions “may be filed only in the United States Court of Appeals for the District of Columbia if such action is based on a determination of nationwide scope or effect and if in taking such action [EPA] finds and publishes that such action is based on such a determination.” Id.

A brief procedural note: Parties normally may consent to

be sued in a court that would otherwise be an improper venue. See Tex. Mun. Power Agency, 89 F.3d at 867. And a party’s failure to object to venue may waive the issue. See id.; Nat’l Wildlife Fed’n v. Browner, 237 F.3d 670, 675 (D.C. Cir. 2001). Moreover, it is generally understood that courts of appeals have the “inherent power to transfer cases over which we have jurisdiction, but not venue.” Alexander v. Comm’r of Internal Revenue, 825 F.2d 499, 502 (D.C. Cir. 1987) (per curiam). Here, because Petitioners preserved their objection to

9

venue in this circuit (after protecting their right to review by filing in both our circuit and the Ninth Circuit) we need not decide whether this court may sua sponte dismiss a petition for review under section 307(b)(1) for lack of venue.

EPA contends that venue is proper in the D.C. Circuit

because its Nonroad Waiver Decision is nationally applicable. Alternatively, the agency argues that venue is proper because its decision was based on a determination of nationwide scope and effect, which it found and published. On the record before us, we find that EPA’s Nonroad Waiver Decision is not nationally applicable. We also find that EPA neither found that its Nonroad Waiver Decision was based on a determination of nationwide scope or effect nor published such a finding. Therefore, this court is not the proper venue for Petitioners’ challenges.

* * * * EPA makes three arguments in support of its principal

contention, which is that its Nonroad Waiver Decision has national applicability. None is persuasive. First, according to EPA, its decision “is a nationally-applicable final action because other States may automatically adopt California’s nonroad standards without further EPA review under 42 U.S.C. § 7543(e).” Br. for Respondents at 20; see also id. at 27-28. Although it is true that California’s Nonroad Fleet Requirements may be adopted and applied by other states, there is no statutory or regulatory requirement that other states follow California’s lead. And to date, no other state has. Indeed, EPA offers no compelling evidence to show that it is common practice for other states to adopt California standards following preemption waivers by the EPA.

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EPA attempts to paper over the fundamental weakness in its national applicability argument – the complete absence of evidence of any application of the Nonroad Fleet Requirements outside of California – by asserting that it “strains credulity to presume” that Congress would make California standards nationally available for adoption by other states, yet require that EPA decisions authorizing such standards be treated as regionally applicable actions reviewable in the Ninth Circuit and not in the D.C. Circuit. See Br. for Respondents at 30. We disagree. In section 307(b)(1), Congress required more than national availability to demonstrate that venue lies exclusively in the D.C. Circuit. It required national applicability. And that we simply do not have on this record.

Second, the agency argues that EPA’s Nonroad Waiver

Decision is a nationally applicable action because California’s Fleet Requirements will regulate off-road diesel engines and vehicles based outside of California. See Br. for Respondents at 20-21. In fact, according to EPA, the majority of affected fleets may be based in neighboring states. See id. at 32-33. This argument is inapposite. To determine whether a final action is nationally applicable, “this Court need look only to the face of the rulemaking, rather than to its practical effects.” Am. Rd. & Transp. Builders Ass’n, 705 F.3d at 456 (citing NRDC v. Thomas, 838 F.2d 1224, 1249 (D.C. Cir. 1988)). By their terms, the Nonroad Fleet Requirements authorized by EPA regulate only nonroad engines and vehicles that are owned or operated in California. And the Nonroad Waiver Decision, on its face, is not nationally applicable because it is limited to fleets operating in California.

EPA also suggests that the D.C. Circuit is the proper venue for Petitioners’ challenges because this court has “consistently treated similar petitions for review as nationally

11

significant actions reviewable in this court.” Br. for Respondents at 28. This is a puzzling argument as the cases cited by EPA neither address venue nor examine whether the final actions at issue were nationally or locally applicable. See, e.g., Motor & Equip. Mfrs. Ass’n v. Nichols, 142 F.3d 449 (D.C. Cir. 1998); Motor & Equip. Mfrs. Ass’n v. EPA, 627 F.2d 1095, 1106 (D.C. Cir. 1979). EPA’s alternative contention – that venue in this circuit is “compelled by [its] published determination that its action would have a nationwide scope or effect,” Br. for Respondents at 34 – is a transparent sleight of hand that does not persuade us.

Because, as demonstrated, EPA’s Nonroad Waiver Decision is not “nationally applicable,” it is, under section 307(b)(1), a “locally or regionally applicable” final action. Therefore, under section 307(b)(1), venue in the D.C. Circuit is improper unless EPA based its Nonroad Waiver Decision on a determination of “nationwide scope or effect” and EPA published its finding in that regard. See 42 U.S.C. § 7607(b)(1). Contrary to what it asserts, EPA did not make or publish such a finding. Instead, EPA found (and published) that its Nonroad Waiver Decision was a “final action of national applicability.” See Nonroad Waiver Decision, 78 Fed. Reg. at 58,121. Even if this were a valid finding, which it is not, nowhere does the text of section 307(b)(1) allow EPA to substitute a finding of “national applicability” for the required finding that a decision of local or regional applicability is based on a determination of “nationwide scope or effect.”

EPA nonetheless urges that its invalid “national

applicability” finding is, per se, a finding of “nationwide scope or effect.” Br. for Respondents at 34-35. But section

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307(b)(1)’s text makes plain that a “nationally applicable” final action and a final action with “nationwide scope or effect” are quite different. The first sentence of section 307(b)(1) provides that challenges to nationally applicable final action may be brought only in the United States Court of Appeals for the District of Columbia. The third sentence of section 307(b)(1) provides that “notwithstanding” the fact that a final action is “locally or regionally applicable,” a petition for review may be brought in the United States Court of Appeals for the District of Columbia “if such action is based on a determination of nationwide scope or effect” and EPA publishes a finding containing such determination. See 42 U.S.C. § 7607(b)(1). Congress left no doubt that a “nationally applicable” final action and a final action that is “local or regionally applicable” but based on a determination of “nationwide scope or effect” are not the same.

Although EPA did not make or publish a finding that its Nonroad Waiver Decision was based on a determination of nationwide scope or effect, nothing in this court’s opinion is meant to suggest that EPA could not have done so. We simply have no occasion to reach the question. EPA is well versed in how to make such a finding. See Alcoa, Inc. v. EPA, No. 04-1189, 2004 WL 2713116, at *1 (D.C. Cir. Nov. 24, 2004) (per curiam) (denying motion to transfer petition to the United States Court of Appeals for the Seventh Circuit under section 307(b)(1) because “the Administrator has unambiguously determined that the final action . . . has nationwide scope and effect”). EPA has even, on occasion, published findings that a final action was both “nationally applicable” and based on a determination of “nationwide scope or effect.” See, e.g., Decision Granting a Waiver of Clean Air Act Preemption, 79 Fed. Reg. 46,256, 46,265 (Aug. 7, 2014). In this case, EPA did not find that its Nonroad Waiver Decision is based on a

13

determination of “nationwide scope or effect.” There was consequently no such determination to publish.

III. CONCLUSION

For the foregoing reasons, we dismiss the petitions for

review.

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

____________ No. 12-1100

September Term, 2015

EPA-77FR9304

Filed On: December 15, 2015

White Stallion Energy Center, LLC,

Petitioner

v. Environmental Protection Agency,

Respondent ------------------------------ American Academy of Pediatrics, et al.,

Intervenors ------------------------------ Consolidated with 12-1101, 12-1102, 12-1147, 12-1172, 12-1173, 12-1174, 12-1175, 12-1176, 12-1177, 12-1178, 12-1180, 12-1181, 12-1182, 12-1183, 12-1184, 12-1185, 12-1186, 12-1187, 12-1188, 12-1189, 12-1190, 12-1191, 12-1192, 12-1193, 12-1194, 12-1195, 12-1196

BEFORE: Garland, Chief Judge; Rogers and Kavanaugh, Circuit Judges

O R D E R Upon consideration of the joint motion of Certain State and Industry petitioners to

govern further proceedings, the motion of Tri-State Generation and Transmission Association Inc. to govern proceedings on remand from the U.S. Supreme Court and supplement thereto, the joint motion of the State, Local Government, and Public Health respondent-intervenors for remand without vacatur, the motion of respondent EPA to govern future proceedings, the motion of Industry respondent-intervenors to govern future proceedings, the response of EPA to petitioners= motions to govern future proceedings, the response of Certain State and Industry petitioners to motions to govern further proceedings of respondent and respondent-intervenors, the response of Tri-State Generation and Transmission Association Inc. to motions to govern and the supplement

USCA Case #12-1100 Document #1588459 Filed: 12/15/2015 Page 1 of 2

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

____________

No. 12-1100 September Term, 2015

2

thereto, the joint response of the State, Local Government, and Public Health respondent-intervenors to State and Certain Industry petitioners= motions to govern, the consolidated response of Industry respondent-intervenors to petitioners= motions to govern future proceedings, the response of the Utility Air Regulatory Group (AUARG@) to federal respondent=s motion to govern future proceedings, the joint reply brief of the State, Local Government, and Public Health respondent-intervenors, the reply brief of Certain State and Industry petitioners in support of their joint motion to govern further proceedings, the reply of Tri-State Generation and Transmission Association Inc. and the supplement thereto, the reply of EPA in support of its motion to govern future proceedings, the reply of Industry respondent-intervenors in support of their motion to govern future proceedings, and the oral arguments of counsel, it is

ORDERED that the proceeding be remanded to EPA without vacatur of the Mercury and Air Toxics Standards final rule. See Allied-Signal, Inc. v. Nuclear Regulatory Commission, 988 F.2d 146, 150-51 (D.C. Cir. 1993). In so doing, we note that EPA has represented that it is on track to issue a final finding under 42 U.S.C. § 7412(n)(1)(A) by April 15, 2016.

Pursuant to D.C. Cir. Rule 36, this disposition will not be published. The Clerk is directed to withhold the issuance of the mandate herein until seven days after resolution of any timely petition for rehearing or petition for rehearing en banc. See Fed. R. App. P. 41(b); D.C. Cir. Rule 41.

Per Curiam

FOR THE COURT: Mark J. Langer, Clerk

BY: /s/

Ken Meadows Deputy Clerk

USCA Case #12-1100 Document #1588459 Filed: 12/15/2015 Page 2 of 2

December 9, 2015 UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 15-2390 (5:14-cv-000390JBP)

In re: GINA MCCARTHY, in her official capacity as Administrator of the United States Environmental Protection Agency Petitioner

___________________________________

CORRECTED ORDER GRANTING WRIT OF MANDAMUS ___________________________________

Before the Court is the U.S. Environmental Protection

Agency’s (EPA) petition for a writ of mandamus precluding the

deposition of EPA Administrator Gina McCarthy in the case Murray

Energy Corp. v. McCarthy, No. 5:14-cv-00039-JPB, in the Northern

District of West Virginia. On November 12, 2015, the district

court denied EPA’s motion for a protective order. For the reasons

set forth below, we grant EPA’s petition for mandamus.

Plaintiff energy companies brought this citizen suit alleging

that EPA had failed to comply with Section 321(a) of the Clean Air

Act (CAA), which provides: “[t]he Administrator shall conduct

continuing evaluations of potential loss or shifts of employment

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which may result from the administration or enforcement of the

provision of this chapter and applicable implementation plans,

including where appropriate, investigating threatened plant

closures or reductions in employment allegedly resulting from such

administration or enforcement.” 42 U.S.C. § 7621(a). EPA moved

to dismiss on the ground that Section 321(a) is discretionary and

thus the district court lacked jurisdiction. See 42 U.S.C. § 7604.

On September 16, 2014, the district court ruled, as a matter of

first impression, that Section 321(a) creates a non-discretionary

duty and denied EPA’s motion to dismiss.

EPA then moved for summary judgment, relying on a set of

fifty-three documents to demonstrate its compliance with any non-

discretionary duty imposed by Section 321(a). These documents

included Regulatory Impact Analyses, Economic Impact Assessments,

white papers, and other reports. EPA conceded that it had

“completed no other evaluations of potential employment impacts of

the [CAA] at this time,” [Doc. 77 at 2], and that “[s]hould this

Court conclude that the documents do not satisfy the duty [in

Section 321(a)], then summary judgment should be entered against

EPA.” [Doc. 76 at 18]. Plaintiffs opposed the motion, including

EPA’s proffer that Plaintiffs be granted summary judgment if the

documents were found not to satisfy Section 321(a). Instead,

Plaintiffs requested that EPA’s motion be held in abeyance pending

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the completion of discovery, which the district court granted. On

October 7, 2015, Plaintiffs noticed the deposition of McCarthy.

It is well established that high-ranking government officials

may not be deposed or called to testify about their reasons for

taking official actions absent “extraordinary circumstances.”

See, e.g., Franklin Sav. Ass’n v. Ryan, 922 F.2d 209, 211 (4th

Cir. 1991); Simplex Time Recorder Co. v. Sec’y of Labor, 766 F.2d

575, 586 (D.C. Cir. 1985); In re FDIC, 58 F.3d 1055, 1060 (5th

Cir. 1995). When such circumstances are not present, mandamus is

appropriate to prevent a district court from compelling an

official’s appearance. See, e.g., U.S. Bd. of Parole v. Merhige,

487 F.2d 25, 29 (4th Cir. 1973), cert. denied, 417 U.S. 918 (1974);

In re United States (Jackson), 624 F.3d 1368, 1372–73 (11th Cir.

2010); In re Cheney, 544 F.3d 311, 314 (D.C. Cir. 2008).

Here, the district court found extraordinary circumstances to

exist because of an apparent conflict between EPA’s position in

its summary judgment motion and its position before Congress.

Since 2009, McCarthy, on behalf of EPA, has responded to various

questions from members of Congress about Section 321(a).1 The

1 For example, in a letter dated June 22, 2011, McCarthy responded to a question posed by Congressman Darrell Issa regarding EPA’s Section 321(a) analysis of its greenhouse gas regulations, stating:

The EPA has provided detailed regulatory impact analyses for each of its major greenhouse gas

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district court inferred from these responses that “EPA has never

made any evaluations of job losses under § 321(a).” [Doc. 164 at

18]. The court found this to be “directly contrary to the position

of the EPA in this case,” id., namely, EPA’s statement that it “is

entitled to summary judgment because it has conducted ‘continuing

evaluations of potential loss or shifts of employment which may

result from the administration or enforcement of the provision of

regulations that provide extensive information about the economic impact of those rules. . . .

. . . . Section 321 was added in the 1977 amendments to the

Clean Air Act. Both the House and Senate Committee Reports for the 1977 amendments describe the purpose of section 321 as addressing situations where employers make allegations that environmental regulations will jeopardize employment, possibly in order to stimulate union or other public opposition to environmental regulations. . . . The committee reports do not describe the provision as applying broadly to all regulations or implementation plans under the Clean Air Act.

In keeping with congressional intent, the EPA has not interpreted section 321 to require the Agency to conduct employment investigations in taking regulatory actions. Conducting such investigations as part of rulemakings would have limited utility since section 321(d) expressly prohibits the EPA . . . from “modifying or withdrawing any requirement imposed or proposed to be imposed under the Act” on the basis of such investigations. As noted above, section 321 was instead intended to protect employees in individual companies by providing a mechanism for the EPA to investigate allegations - typically made by employers - that specific requirements, including enforcement actions, as applied to those individual companies, would result in layoffs. The EPA has not received any request for any such investigation with regard to its [Greenhouse Gas] regulations.

[Doc. 157, Ex. 10 at 7].

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this chapter and applicable implementation plans,’ as required by

Section 321(a) of the Clean Air Act.” [Doc. 76 at 1 (quoting 42

U.S.C. § 7621(a))].

Accepting arguendo the district court’s characterization of

McCarthy’s statements, we fail to see the contradiction.2 EPA did

not claim that the documents submitted with its summary judgment

motion were prepared “under” or “pursuant to” Section 321(a), or

for the purpose of complying with that section. Indeed, EPA

explicitly conceded that “none of the documents upon which it

relies to demonstrate its performance of the duty in Section 321(a)

were prepared explicitly for that purpose or labeled as Section

321(a) evaluations.” [Doc. 88 at 11]. It is not contradictory

for EPA to argue that the documents nevertheless satisfy whatever

obligation is imposed by Section 321(a). Such a position seems

eminently reasonable in light of the fact that no court, including

the district court here, has ever explicated what Section 321(a)

requires.3 Indeed, the district court may yet determine that EPA’s

documents satisfy Section 321(a).

In short, we see no contradiction in EPA’s positions that

would support the district court’s finding of an extraordinary

2 We express no view as to whether a contradiction, if present, would constitute an extraordinary circumstance.

3 The district court has reserved judgment on the scope of injunctive relief it may award.

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circumstance. We are similarly unpersuaded that there is no

alternative to deposing McCarthy because “only [she] can speak to

the dichotomy evidenced in her statements and EPA’s litigation

position.” [Pls.’ Resp. to Second Petition for Writ of Mandamus

23]. Plaintiffs have not demonstrated a need for McCarthy’s

testimony beyond what is already in the public record, particularly

since the district court has authorized Plaintiffs to take a Rule

30(b)(6) deposition of the agency.

Finally, the district court found EPA’s “apparent refusal” to

comply with Section 321(a) to constitute prima facie evidence of

wrongdoing. [Doc. 164 at 19]. See Franklin Sav. Ass’n, 922 F.2d

at 211 (“Only where there is a clear showing of misconduct or

wrongdoing is any departure from this rule [that the judiciary may

not probe the mental processes of an executive or administrative

officer] permitted.”). We disagree. We see no clear misconduct

in EPA’s alleged failure to perform a duty that was not declared

to be mandatory until the district court so declared in this case.4

Cf. Singer Sewing Machine Co. v. NLRB, 329 F.2d 200, 205, 208 (4th

Cir. 1964) (finding misconduct where there was prima facie evidence

that agency violated statute previously construed by multiple

4 Whether the district court properly found Section 321(a) to create a mandatory duty is not before us, and we express no view on that question.

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courts of appeals (citing Overnite Transp. Co. v. NLRB, 327 F.2d

36 (4th Cir. 1963))).

For these reasons, EPA’s petition for a writ of mandamus is

granted.

Entered at the direction of the panel: Judge Motz, Judge

Gregory and Judge Floyd.

For the Court

/s/ Patricia S. Connor, Clerk

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United States Court of AppealsFor the Eighth Circuit

___________________________

No. 14-2762___________________________

United States of America

lllllllllllllllllllll Plaintiff - Appellee

v.

Dico, Inc.; Titan Tire Corporation

lllllllllllllllllllll Defendants - Appellants____________

Appeal from United States District Court for the Southern District of Iowa - Des Moines

____________

Submitted: June 11, 2015 Filed: December 10, 2015

____________

Before LOKEN, BYE, and KELLY, Circuit Judges.____________

BYE, Circuit Judge.

Dico, Inc. ("Dico") owned several buildings in Des Moines, Iowa, that were

under an Environmental Protection Agency ("EPA") order regulating their use

because of hazardous substance contamination. Without informing the EPA, Dico,

through its corporate affiliate Titan Tire Corporation ("Titan Tire"), sold the buildings

to Southern Iowa Mechanical ("SIM"), which tore them down and stored them in an

open field where Polychlorinated Biphenyls ("PCBs") were later found. The

government brought this action against Dico to recover damages for its cleanup costs

and alleged that Dico violated the Comprehensive Environmental Response,

Compensation, and Liability Act of 1980 ("CERCLA") by "arrang[ing] for disposal"

of the PCBs in the buildings and also violated the EPA order governing use of the

buildings. The district court found Dico liable for both violations, awarded response

costs, civil penalties, and punitive damages. On appeal, Dico argues material issues

of fact precluded summary judgment on the issues of liability and damages for both

"arranger" liability under CERCLA and the EPA order violation. Dico also argues

the district court erred in treating any alleged violation of the EPA order as a

continuing offense. We reverse the district court's summary judgment order with

respect to "arranger" liability under CERCLA and punitive damages but affirm the

summary judgment order as to the EPA order violation and civil penalties.

I

In the mid-1970s, the EPA took interest in the Dico buildings at issue in this

case because of the presence of trichloroethylene ("TCE") contamination in the

groundwater around them. See generally United States v. Dico, Inc., 266 F.3d 864,

868 (8th Cir. 2001). The EPA required Dico to implement a groundwater extraction,

treatment, and monitoring system. Later, the EPA also discovered pesticide and

herbicide contamination in soils adjacent to several buildings in the area; specifically,

Buildings 1 through 5 and the Maintenance Building. During the investigation for

pesticides, the EPA discovered PCBs in the adhesive contained in the building

insulation of all of the buildings except Building 1. Consistent with the findings in

the environmental investigator's August 1992 report, the EPA issued an

administrative order on March 4, 1994 ("EPA Order"), requiring Dico to remove

some of the PCB contamination and to encapsulate all remaining insulation to prevent

any further release of PCBs.

-2-

Dico and the EPA then agreed on an operation and maintenance plan to address

the PCB contamination. Dico submitted a report in 1997 ("1997 Report"), indicating

it had completed the required removal. In its report, Dico did not assert that it had

removed all PCB contamination and the author of the report testified that he believed

some PCBs remained after the removal action. The EPA approved the 1997 Report

but reminded Dico of its continuing obligations under the EPA Order. The operation

and maintenance plan required Dico to inspect and maintain the encapsulated surfaces

inside the buildings covered by the EPA Order. By 2002, Dico no longer occupied

or used the buildings and did not want to continue the required testing under the EPA

Order and operation and maintenance plan. The EPA and Dico agreed to discontinue

the required testing with the provision that Dico provide annual reports on whether

the buildings were back in use, which would again trigger the responsibilities and

obligations under the operation and maintenance plan.

In 2007, Dico, through Titan Tire, entered into three separate transactions with

SIM: one for the disassembly and removal of the Maintenance Building; one for the

western portion of Building 3; and one for the purchase of Buildings 4 and 5 and a

northern portion of the Production Building. Dico paid $1.00 per square foot to

acquire these buildings. Dico's intent in selling the buildings—whether Dico1

intended to actually sell the buildings or merely wished to rid itself of the

responsibilities associated with the PCBs contained in the buildings—was heavily

disputed before the district court and is the central issue in this appeal. After

purchasing the buildings, SIM dismantled them and disposed of all materials except

for the steel beams.2

Dico also sold SIM a Weld Shop Building, which was disassembled, moved1

to SIM's property, and reassembled there. Neither the Weld Shop Building nor theProduction Building was subject to the EPA Order.

Building 1, Building 2, the original section of Building 3, and the southern2

portion of the Production Building remained on the Dico property.

-3-

During a five-year inspection of the Dico site in September 2007, EPA Project

Manager Mary Peterson observed that most of the buildings at issue were dismantled,

and the EPA for the first time learned the buildings had been sold. The EPA sent a

letter to Dico informing it that it will be responsible for any cleanup costs resulting

from contamination associated with the disassembly of the buildings. The EPA then

traced the steel beams to SIM's Ottumwa, Iowa, storage site, where it found them "in

piles in a large open area, many in direct contact with the ground . . . and not

protected from the elements," with visible insulation pieces attached. United States

v. Dico, Inc., 892 F. Supp. 2d 1138, 1145 (S.D. Ia. 2012). After taking samples from

the steel beam piles and the soil in the area, the EPA confirmed the presence of PCBs

in some of the beams, the soil, and the insulation attached to the beams. Although the

EPA was able to determine the steel beams came from the Dico buildings, it had no

way of tracing the specific origin of the PCBs and could not confirm whether the steel

beams came from Dico's buildings that were subject to the EPA Order. The EPA

eventually directed Dico to work with an environmental contractor to retrieve and

dispose of the insulation that had been removed from the Dico buildings, which

resulted in the removal of more than four tons of different types of insulation.

Testing of the material revealed the presence of PCBs.

II

We review a district court's grant of summary judgment de novo, viewing the

evidence in the light most favorable to the non-moving party and giving the

non-moving party the benefit of all reasonable inferences. Dowell v. Lincoln Cnty.,

Mo., 762 F.3d 770, 775 (8th Cir. 2014). Summary judgment is proper only if the

moving party satisfies its burden of demonstrating that no genuine issues of material

fact remain for trial. Fed. R. Civ. P. 56(a).

-4-

A

CERCLA imposes strict liability for environmental contamination on

any person who by contract, agreement, or otherwise arranged fordisposal or treatment, or arranged with a transporter for transport fordisposal or treatment, of hazardous substances owned or possessed bysuch person, by any other party or entity, at any facility or incinerationvessel owned or operated by another party or entity and containing suchhazardous substances . . . .

42 U.S.C. § 9607(a)(3) (emphasis added). "Arranger liability ensures that owners of

hazardous substances may not free themselves from liability by selling or otherwise

transferring a hazardous substance to another party for the purpose of disposal."

Team Enters., LLC v. W. Inv. Real Estate Trust, 647 F.3d 901, 907 (9th Cir. 2011).

The statute does not define the word "arranged." However, in interpreting this

statutory language, the Supreme Court has held the word "'arrange' implies action

directed to a specific purpose." Burlington N. & Santa Fe Ry. Co. v. United States,

556 U.S. 599, 611 (2009). Under this definition of the provision, the Supreme Court

identified three possible scenarios: (1) "an entity [who] enter[s] into a transaction for

the sole purpose of discarding a used and no longer useful hazardous substance"

would plainly be liable under CERCLA; (2) an entity who merely "sell[s] a new and

useful product" to a purchaser who "unbeknownst to the seller, [later] dispose[s] of

the product in a way that [leads] to contamination" would clearly not be liable; and

(3) an entity who has "some knowledge of the buyers' planned disposal or whose

motives for the 'sale' of a hazardous substance are less than clear" may or may not be

held liable. Id. at 610.

In the third type of case, "the determination whether an entity is an arranger

requires a fact-intensive inquiry that looks beyond the parties' characterization of the

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transaction as a 'disposal' or a 'sale' and seeks to discern whether the arrangement was

one Congress intended to fall within the scope of CERCLA's strict-liability

provisions." Id. In Burlington, the Court specifically rejected the government's

argument that "Congress intended to impose liability on entities not only when they

directly dispose of waste products but also when they engage in legitimate sales of

hazardous substances knowing that some disposal may occur as a collateral

consequence of the sale itself." Id. at 611-12 (internal footnote omitted).

Furthermore, the Court specifically rejected the notion that a seller's knowledge that

a buyer would dispose of a hazardous substance would alone be sufficient to

constitute arrangement for disposal:

While it is true that in some instances an entity's knowledge that itsproduct will be leaked, spilled, dumped, or otherwise discarded mayprovide evidence of the entity's intent to dispose of its hazardous wastes,knowledge alone is insufficient to prove that an entity "planned for" thedisposal, particularly when the disposal occurs as a peripheral result ofthe legitimate sale of an unused, useful product.

Id. at 612; see also Team Enters., 647 F.3d at 908 ("While actions taken with the

intent to dispose of a hazardous substance are sufficient for arranger liability, actions

taken with the mere knowledge of such future disposal are not."); Consol. Coal Co.

v. Ga. Power Co., 781 F.3d 129, 149 (4th Cir. 2015) ("Anytime an entity sells a

product that contains a hazardous substance, it also 'intends' to rid itself of that

hazardous substance in some metaphysical sense. But intent to sell a product that

happens to contain a hazardous substance is not equivalent to intent to dispose of a

hazardous substance under CERCLA. For arranger liability to attach, there must be

something more.").

The only element of the liability language quoted above Dico disputes on

appeal is that it "arranged" for disposal of the PCBs. It argues the buildings had at

-6-

least some commercial value based on which a fact finder may find Dico did not

intend to dispose of the PCBs by selling the buildings to SIM. We agree.

The district court noted the case "exemplifie[d] the practical difficulties in

deciding whether an arrangement is a sale or disposal" but nevertheless concluded

that no reasonable fact-finder could conclude Dico did not intend to dispose of the

remaining PCBs when it sold the buildings to SIM. See Dico, 892 F. Supp. 2d at

1153. In reaching its conclusion, the district court relied primarily on two "battery

cracking" cases in which the district courts found the sellers to have "arranged for

disposal" when they sold "junk" batteries to a scrap yard that was only interested in

the lead within the batteries and would inevitably have to dispose of the contaminated

battery casings. See United States v. Atlas Lederer Co., 282 F. Supp. 2d 687 (S.D.

Ohio 2001); Catellus Dev. Corp. v. United States, 34 F.3d 748 (9th Cir. 1994). The

district court also relied on another district court decision in which the court found

a seller "arranged for disposal" when it sold scrap copper wire to a scrap metal

company knowing that the sole remaining useful purpose of this copper wire was to

reclaim the copper, which required "removal and disposal of the insulation material

covering the copper wire." EPA v. TMG Enters., Inc., 979 F. Supp. 1110, 1124

(W.D. Ky. 1997). Despite Dico's assertions that SIM intended to reuse the buildings

after disassembly, the district court found Dico "presented no evidence that SIM was

interested in any of the building components except for the steel beams." Dico, 892

F. Supp. 2d at 1154. Accordingly, it reasoned that just like in the battery-cracking

cases and the copper wire case, where the purchaser was only interested in one

internal and valuable part of the sale which would subsequently and necessarily result

in the disposal of the remaining parts, the seller arranged for disposal of a hazardous

substance. Id. at 1154-55. In other words, the district court believed where the seller

knew the buyer would use only part of the contaminated goods and would discard

part of the contaminated goods, the seller, as a matter of law, arranged for disposal.

However, under the Supreme Court's definition of "arrange," a seller's knowledge of

eventual disposal alone is insufficient to find liability as a matter of law.

-7-

In relying on the above cases, the district court improperly focused too closely

on the factual similarity between this case and the battery-cracking cases regarding

what the buyer was interested in and how it would have to obtain the desired part

rather than on the relevant question of the seller's intent with respect to the

transaction. In the battery-cracking cases, the sale product was "junk." Accordingly,

the district courts in those cases could have concluded at summary judgment—

consistent with Burlington's directive that knowledge of inevitable disposal alone is

not enough—that the seller was not selling a product but was intending to rid itself

of a hazardous substance by transferring a useless product, where it knew disposal of

a hazardous substance was certain. Where, however, the sale product has some

commercial value and was part of a legitimate sale, even if the seller knows disposal

will result, it is more difficult to hold that no reasonable juror could find the seller did

not actually intend to sell the product but merely intended to discard the hazardous

substance. See, e.g., Schiavone v. Ne. Utils. Serv. Co., No. 3:08CV429, 2011 WL

1106228, at *6 (D. Conn. Mar. 22, 2011) (finding that seller of transformers to a

scrap metal yard for the "commercial value of the metal" did not arrange for disposal

of a hazardous substance because even if the transformers contained PCBs and even

if the seller knew the buyer would inevitably have to dispose of the hazardous

substance, there was no "evidence that could support a conclusion that the [seller] had

as a purpose in their dealings with [the buyer] disposing of [the hazardous

substance]"); United States v. B&D Elec., Inc., No. 1:05CV63, 2007 WL 1395468,

at *5-6 (E.D. Mo. May 9, 2007) (finding that seller of operable, intact, and

non-leaking transformers did not arrange for disposal of the hazardous substances

contained in the transformers).

The parties before us, and other courts, have framed the issue on what has

sometimes been referred to as the "useful product defense."

The defense prevents a seller of a useful product from being subject toarranger liability, even when the product itself is a hazardous substance

-8-

that requires future disposal. In other words, a person may be subject toarranger liability "only if the material in question constitutes 'waste'rather than a useful product." A plaintiff can overcome the defense byshowing that the substance involved in the transaction "has thecharacteristic of waste at the time it is delivered to another party."

The useful product doctrine serves as a convenient proxy for the intentelement because of the general presumption that persons selling usefulproducts do so for legitimate business purposes. It would be odd, forexample, to say that an auto parts store sells motor oil to car owners forthe purpose of disposing of hazardous waste. Conversely, personsselling or otherwise arranging for the transfer of hazardous waste (whichno longer serves any useful purpose) are more likely trying to avoidincurring liability that might attach were they to dispose of thehazardous waste themselves. In other words, the probable purpose forentering into such a transaction is to dispose of hazardous waste.

Team Enters., 647 F.3d at 908 (internal citations and footnote omitted). We have not

previously considered the defense, and its viability after Burlington is not entirely

clear. While there would be liability in the first scenario where "an entity [enters]

into a transaction for the sole purpose of discarding a used and no longer useful

hazardous substance" and no liability in the second scenario where the entity arranges

for the sale of "a new and useful product" without knowledge of an eventual disposal,

in the third scenario, the Court imposed the requirement of a "legitimate sale." See

Burlington, 556 U.S. at 610, 612 (knowledge of eventual disposal insufficient to find

liability "when the disposal occurs as a peripheral result of the legitimate sale of an

unused, useful product" (emphasis added)).

As noted above, under the Supreme Court's definition of "arrange," the central

question is the intent of the seller in the particular transaction. See Team Enters., 647

F.3d at 909 ("Absent a showing that Street intended for its sale of the Rescue 800 to

result in the disposal of PCE, we must conclude that Street lacks the requisite intent

for arranger liability."). Like knowledge of eventual disposal, we believe the

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usefulness of a product—however defined—is an important but not dispositive factor

to consider in determining the seller's intent. A party may sell a still "useful"3

product, i.e., fit either for its intended purpose or some other purpose useful to the

buyer, with the full intention to rid itself of environmental liability rather than a

legitimate sale, for example where the cost of disposal or contamination remediation

would greatly exceed its purchase price (e.g., selling a working and useful piece of

machinery for $10,000 that comes along with a $100,000 price tag for remediation

costs). It appears to us that a seller who knew about the contamination in such a sale,

if it can be shown the seller intended to arrange for its disposal because the seller

knew the buyer would eventually dispose of it, could fall within the scope of the

statute, even though the product may be considered "useful." Thus, the "usefulness"

of a product does not dispositively show the character of the transaction or the seller's

intent. Rather, the touchstone remains whether "the arrangement was one Congress

intended to fall within the scope of CERCLA's strict-liability provisions." Burlington

N., 556 U.S. at 610.

Other circuit courts have identified some factors to consider in determining if

a transaction was an arrangement for disposal or a sale. See, e.g., Consol. Coal, 781

F.3d at 148 ("[1 T]he intent of the parties to the contract as to whether the materials

were to be reused entirely or reclaimed and then reused, [2] the value of the materials

sold, [3] the usefulness of the materials in the condition in which they were sold, and

[4] the state of the product at the time of transferral (was the hazardous material

contained or leaking/ loose)."); Miami-Dade Cnty., Fla. v. United States, 179 F.

If "usefulness" is narrowly defined to include only the product's intended3

purpose, it is possible that no liability would attach even in the sale of a "useless"product. For example, an entity may sell a "useless" product that carries a differentpurpose to the buyer—either aesthetic or other functional purpose—such that theseller may receive substantial value for the product, even beyond its commercialvalue, which could make it a "legitimate sale" without an intention to arrange for itsdisposal.

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App'x 658, 661 (11th Cir. 2006) ("In determining whether a party arranged for the

disposal or treatment of hazardous substances, relevant factors include: (1) whether

a sale involved the transfer of a 'useful' or 'waste' product; (2) whether the party

intended to dispose of a substance at the time of the transaction; (3) whether the party

made the 'crucial decision' to place hazardous substances in the hands of a particular

facility; (4) whether the party had knowledge of the disposal; and (5) whether the

party owned the hazardous substances." (internal quotation marks omitted)). At least

one other circuit court has also considered the balance of the value received by the

seller compared to the cost avoided of having to address the proper disposal or

remediation cost. See United States v. Gen. Elec. Co., 670 F.3d 377, 390 (1st Cir.

2012) (finding liability where evidence showed the seller calculated its profits from

the sale in comparison to its avoided cost of proper disposal). We believe this to be

a valid and important consideration in discerning a seller's intent in a particular

transaction.

In this case, the considerations above are heavily disputed. First, the cost of

remediating the buildings is not clear from the record. The district court noted Dico

may have "eliminated a $2.87 million liability" but also noted Dico heavily disputed

the inflated figure. On appeal, Dico asserts the $2.87 million figure is a "wild

exaggeration" because it fails to take into account the remediation that was already

completed, that only some of the buildings were removed while others remained on

the property, and that most of the remediation cost would have been to remove any

concrete foundations which remained at the Dico property after the diassembly.

Since the district court did not make a finding as to how much it would have cost to

remove the contamination from the buildings, we cannot determine how much clean-

up-cost liability Dico potentially avoided by selling the buildings.4

Judge Kelly notes in her cost analysis that comparing the price for which Dico4

sold the buildings to a reasonable estimate of the cleanup costs compels theconclusion that Dico sold the buildings to avoid the cost of cleanup. While the recordcontains some evidence Dico may have avoided substantial cleanup costs by selling

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Second, we believe there exists an issue of fact regarding the usefulness of the

buildings. Indeed, the district court acknowledged there appeared to be an issue of

fact: "On the one hand, there is ample evidence supporting an inference that the

buildings were not commercially useful and that SIM purchased them only to extract

the valuable steel beams. . . . On the other hand, the record contains some evidence

suggesting that the entire structures were commercially useful." Dico, 892 F. Supp.

2d at 1158. Nevertheless, the district court reasoned that "there [did not] exist[] any

demand for used buildings of the type [Dico] sold to SIM" and that "even if the

buildings at issue were usable while erected on Dico's property, once sold, they lost

their usefulness because they had to be demolished and removed and could not be

disassembled in a way that preserved the integrity of their components for later use."

Id. at 1155.

In applying this analysis, the district court too narrowly focused on the value

of the buildings as a whole and what SIM specifically intended to do with them. The

fact that SIM planned to only use part of the buildings did not mean that other parties

could not use the buildings for other purposes. Similarly, the mere fact that some

portion of the buildings could not be reused did not necessarily render them entirely

commercially useless. The buildings at the heart of the sale were not hazardous

products themselves and the evidence in the record does not support a finding that

either Dico or SIM viewed the buildings as merely "waste." Indeed, SIM had reused

one of the buildings it previously purchased from Dico. Even the district court

acknowledged there was conflicting evidence on whether SIM intended to reuse the

buildings after it disassembled them. See Dico, 892 F. Supp. 2d at 1143-44.

the buildings, Dico continues to dispute this evidence and the district court did notmake a finding of the costs Dico actually avoided by selling the buildings rather thandisposing of them. This genuine dispute regarding a material fact precludes summaryjudgment.

-12-

Moreover, there is no evidence that Dico itself viewed the buildings as useless.

To the contrary, evidence in the record shows Dico continued to view them as

commercially useful. Additionally, Dico sold the buildings for more than $140,000

and additional consideration, which the district court stated made it "impossible to

calculate the true value of SIM's bid." Id. at 1143 n.6. The insulation appears to be

the only material the parties agree could not be reused after disassembly of the

buildings. But we have no clear indication from the record how much the value of

the insulation was in comparison to the rest of the building materials. As such, if the

insulation represented a relatively minor portion of the value of the buildings, the

buildings may still have been commercially useful. Furthermore, contrary to the

district court's finding that the buildings became useless after disassembly, we find

the ability to reuse the building components to be a disputed fact. The government

relies on several other facts, such as the "commercial reality" of the transaction and

Dico's failure to inform SIM of the contamination, to "suggest" Dico's intent, but such

a showing, while suggestive, is not sufficient to support summary judgment.

In summary, we believe the district court placed too much emphasis on how

SIM specifically intended to use, and actually used, the buildings. The fact that some

parts from the buildings were worthless after disassembly does not necessarily

transform a potentially legitimate sale of the buildings in which Dico would receive

some commercial value into a ploy to simply get rid of the buildings just to dispose

of the hazardous substance. Indeed, Dico solicited bids for the sale of the buildings

and there was interest beyond just SIM. Overall, unlike cases finding liability at

summary judgment, we do not believe the evidence of record demonstrates as a matter

of law that Dico was merely trying to get rid of a hazardous substance. Thus, under

the particular circumstances of this case and on the record before us, we believe the

issue of Dico's intent should not have been decided at summary judgment.

For these reasons, we reverse and vacate the district court's summary judgment

order holding Dico "arranged" for disposal of hazardous materials as a matter of law

-13-

under § 9607(a)(3). Accordingly, we also vacate the district court's order with respect

to any response costs specifically associated with the district court's finding on the

issue of "arranger" liability.

B

The district court awarded both civil penalties and punitive damages against

Dico after finding Dico violated Paragraphs 31 and 59 of the EPA Order.

Specifically, the district court found Dico had violated Paragraphs 31 and 59 of the

EPA Order for 162 days, and awarded $10,000 per day for a total civil penalty of

$1,620,000. The district court also awarded $1,477,787.73 in punitive damages, an

amount equal to the "response costs" the Fund incurred by cleaning up the SIM site.

We affirm the district court's award of civil penalties. However, punitive

damages are available only if the Fund incurs costs cleaning up the damage caused

by a release or threat of release of hazardous substance. 42 U.S.C. § 9607(c)(3).

Because the Fund incurred no costs to clean up the teardown site, the Fund did not

incur any costs as a result of Dico's violation of the EPA Order and therefore the

district court erred when it awarded punitive damages based on cleanup costs of the

SIM site. Accordingly, we reverse the district court's award of punitive damages.

1. Civil Penalties

Under CERCLA, "[a]ny person who, without sufficient cause, willfully

violates, or fails or refuses to comply with, any [EPA] order . . . may . . . be fined not

more than $25,000 for each day in which such violation occurs or such failure to5

comply continues." 42 U.S.C. § 9606(b)(1). Even if the district court finds a willful

Indexed for inflation, the penalty amount for the applicable period is $32,500. 5

See 40 C.F.R. § 19.4.

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violation, it has the discretion of whether to impose civil penalties. See Gen. Elec.

Co. v. Jackson, 610 F.3d 110, 119 (D.C. Cir. 2010). To demonstrate sufficient cause

for a violation or non-compliance as a defense, Dico must show it had "an objectively

reasonable basis for believing that the EPA's order was either invalid or inapplicable

to it." Solid State Circuits, Inc. v. EPA, 812 F.2d 383, 391 (8th Cir. 1987).

Dico asserts that four factual issues precluded the imposition of civil penalties.

We find no triable issues relevant to the civil penalties the district court imposed.

Paragraph 31 of the EPA Order required Dico to submit to the EPA for

approval an operation and maintenance plan "present[ing] the actions necessary to

ensure the protectiveness and integrity of the removal action, including long-term

maintenance of all interior surface sealing, encapsulation of all building insulation

and appropriate reporting, including, at a minimum, submittal of a written report on

an annual basis." Thus, through the operation and maintenance plan, the EPA Order

required Dico to maintain and protect the integrity of the sealing and encapsulation

of the building insulation. By allowing for the disassembly of the buildings such that

"lots of little pieces of insulation fell to the ground and were blown around,"

(undisputed testimony of SIM's President regarding his observations of the

disassembly process) Dico necessarily violated the terms of the EPA Order. Its

argument that the government failed to show any explicit evidence of the actual

release of PCBs through the disassembly process is immaterial to the issue.6

Judge Loken argues the district court award erred by finding a 162-day6

violation when there was no actual release of hazardous substances. Paragraph 31 ofthe EPA Order, however, required Dico to ensure "long term maintenance of allinterior surface sealing" and "encapsulation of all building insulation." Dico violatedthis Order because it breached the interior surface sealing and failed to keep thebuilding insulation encapsulated during the entire 162-day building teardown. Therefore, Dico action violated the EPA Order, regardless of whether the EPA provedthis violation released hazardous substances.

-15-

We also agree with the district court that Dico violated Paragraph 59 of the

EPA Order, which required Dico to "immediately take all appropriate action" and to

"immediately notify" the EPA in the event of any "change in site conditions . . . [that]

causes or threatens to cause an additional release of hazardous substances from the

Dico Property." Since there is no genuine dispute the disassembly destroyed the

protection and integrity of the encapsulation, we find little difficulty in holding that

the disassembly constituted a change in site conditions that, at the very least,

threatened the release of hazardous substances from the Dico buildings. Indeed, in

the operation and maintenance plan, Dico itself provided that "any event that causes

significant damage to the structure of any of the six buildings" would constitute "an

emergency event" that had the "potential [for] exposure suddenly and in quantities

that may be harmful to human health and the environment."

Dico argues it should not be subject to penalties because it had "sufficient

cause" to violate the EPA Order on two grounds: it reasonably believed (1) no PCBs

actually remained in the buildings; and (2) it had been relieved of its obligations. We

disagree on both accounts.

First, we find meritless Dico's argument that it could reasonably believe no

PCBs actually remained in the buildings after its initial remediation work in the

1990s. The fact that no PCBs were detected in surface wipe samples of the buildings

—which merely tested the effectiveness of the encapsulation—in no way indicated

that no PCBs remained within the insulation. To the contrary, the author of Dico's

own 1997 Report, James Fechter, explicitly testified that PCBs remained in the

buildings after encapsulation. Moreover, the notion that Dico would agree to such

extensive and expensive remediation responsibilities for so many years if it believed

no PCBs remained in the buildings seriously belies its litigation position now,

particularly in the absence of any evidence it took such a position prior to this

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litigation. Thus, we find that if Dico believed no PCBs remained, its belief was7

unreasonable.

Second, we reject Dico's assertion that a September 2003 EPA letter released

it from its obligations under the operation and maintenance plan. We do not believe

the letter can reasonably be read in such a way. The letter on its face makes no such

representation whatsoever and the sentence Dico relies on specifically states that any

future demolition of the buildings would be "subject to certain requirements for

operation and maintenance." Furthermore, as the district court explained in its

summary judgment order finding a violation of the EPA Order, on at least two

occasions after the 2003 EPA letter but before the disassembly began, the EPA

reaffirmed to Dico that the obligations under the operation and maintenance plan

remained in effect. See United States v. Dico, No. 4:10-cv-00503, Dkt. No. 128, at

36-37 (S.D. Ia. Mar. 6, 2013). Moreover, in its April 17, 2003, letter, Dico expressly

stated that it will send the EPA "an annual report . . . verifying that the buildings have

remained unused" and "[i]f operations resume inside the buildings, Dico will resume

the O&M [(operation and maintenance plan)] requirements." There is simply no

credible evidence to support an assertion that the EPA released Dico from its

operation and maintenance plan responsibilities entirely or that Dico could reasonably

believe so.

Dico's final argument is that any violation of the EPA Order was merely a one-

time violation and not a continuing violation. We agree with the district court that

Dico's argument confuses the basis of its violations. Regardless of Dico's failure to

notify the EPA of the disassembly, its failure to maintain the protection and integrity

Dico also implicitly acknowledges it cannot make this showing when it states7

in its brief that "80 to 90 percent, and perhaps all, of the PCBs that once may haveexisted in the insulation of those buildings had been removed by 1997." (emphasisadded).

-17-

of the encapsulation continued throughout the disassembly process and constituted

a continuing violation. We therefore affirm the award of civil damages.

2. Punitive Damages

42 U.S.C. § 9607(c)(3) allows a court to award punitive damages against a

party who "fails without sufficient cause to properly provide removal or remedial

action" in response to an EPA order like the 1994 EPA Order. Under this subsection,

punitive damages must be "at least equal to, and not more than three times, the

amount of any costs incurred by the Fund as a result of such failure to take proper

action." 42 U.S.C. § 9607(c)(3). The statute gives the district court discretion to

award punitive damages within a range, which is based on a specific dollar amount:

the amount the Fund incurred in cleanup costs as a result of the liable party's failure

to comply with the EPA order.

In this case, the Fund incurred cleanup costs at the SIM site, but it did not incur

these costs "as a result of" Dico's violation of the EPA Order. As discussed in Part

II.B.1 above, Dico violated Paragraph 31 when it disassembled the buildings without

EPA approval and without protecting the integrity of the sealing and encapsulation

of the building, and it violated Paragraph 59 when it failed to notify the EPA of this

change in conditions. As a result of these violations, Dico scattered pieces of

insulation on the ground at the teardown site. But the Fund did not clean up the

pieces of insulation that Dico scattered across the teardown site as a result of these

violations. Nor did it perform any cleanup at the teardown site. Rather, the Fund

only incurred cleanup costs from "locating the Dico building debris [at the SIM site],

conducting sampling at the SIM site, overseeing the SIM cleanup, and enforcing this

action for cost recovery and penalties at the SIM site." Dico, 892 F. Supp. 2d at 1147

n.17 (internal quotation omitted). All of these cleanup costs arose after SIM

purchased the beams from Dico and transported them from the teardown site to the

SIM site, approximately 100 miles away. Therefore, all of these cleanup costs arose

-18-

as a result of Dico's sale of the beams to SIM. None of them arose "as a result of"

Dico's violation of the EPA Order.

As discussed in Part II.A, Dico might ultimately be found liable under a theory

of arranger liability for its sale of the beams to SIM, but at this point a fact question

remains that precludes summary judgment on arranger liability. So too with punitive

damages. The cleanup costs at the SIM site derive from Dico's sale of the beams to

SIM. Therefore, since we cannot say as a matter of law Dico is liable for arranging

for the disposal of the beams it sold to SIM, nor can we say as a matter of law it is

liable (through punitive damages) for the cleanup costs the Fund incurred at the SIM

site as a result of the sale of the beams to SIM. Our holding that the district court

improperly granted summary judgment on the issue of arranger liability necessarily

requires us to reverse the district court's award of punitive damages based on cleanup

costs at the SIM site.

In short, since the Fund did not perform any cleanup at the teardown site, it did

not incur any costs "as a result of" Dico's violation of the EPA Order, and without

cleanup costs Dico cannot be liable for punitive damages under § 9607(c)(3). The

district court's award of punitive damages is vacated and remanded for further

proceedings consistent with this opinion.

III

For these reasons, we reverse the district court's summary judgment orders with

respect to the issues of "arranger" liability and punitive damages and affirm its orders

with respect to the EPA Order violations and civil penalties.

-19-

LOKEN, Circuit Judge, concurring in part and dissenting in part.

I concur in Parts II.A. and II.B.2. of Judge Bye’s opinion. I also agree that

Dico is subject to an award of civil penalties for willful violation of an administrative

order but would remand for redetermination of the amount of the penalties and

therefore respectfully dissent in part from Part II.B.1.

A. Arranger Liability. I join Part II.A. of Judge Bye’s opinion but add the

following to clarify my interpretation of the Supreme Court’s controlling decision in

Burlington N. & Santa Fe Ry. v. United States, 556 U.S. 599, 608-13 (2009), where

the Court addressed the “fact-intensive” question of when 42 U.S.C. § 9607(a)(3)

arranger liability attaches.

In Burlington Northern, after a six-week bench trial, the district court

concluded that Shell Oil Company was liable as an arranger for selling hazardous

chemicals to a “sloppy” distributor, knowing there would be leaks and spills in the

delivery and storage process. Id. at 605. The Ninth Circuit affirmed, concluding that

an entity can “arrange for disposal” even if it did not intend to dispose of a hazardous

substance. The Supreme Court reversed, concluding “that Shell was not liable as an

arranger for the contamination that occurred at [the distributor’s] facility.” Id. at 613.

The Court explained that arranger liability is “less clear” in

cases in which the seller has some knowledge of the buyers’ planneddisposal or whose motives for the “sale” of a hazardous substance areless than clear. In such cases . . . determin[ing] whether an entity is anarranger requires a fact-intensive inquiry that looks beyond the parties’characterization as a “disposal” or a “sale” and seeks to discern whetherthe arrangement was one Congress intended to fall within the scope ofCERCLA’s strict-liability provisions.

-20-

Id. at 609-10 (citations omitted). The Court rejected the government’s contention that

“Congress intended to impose liability on entities . . . when they engage in legitimate

sales of hazardous substances knowing that some disposal may occur as a collateral

consequence of the sale itself.” Id. at 611-12. Instead, the Court ruled,

In order to qualify as an arranger, Shell must have entered into the saleof D-D with the intention that at least a portion of the product bedisposed of during the transfer process by one or more of the methodsdescribed in § 6903(3). . . . [T]he evidence does not support an inferencethat Shell intended such spills to occur. . . . Shell’s mere knowledge thatspills and leaks continued to occur is insufficient. Id. at 612-13(emphasis added).

This is not a case like Burlington Northern where there is no evidence that Dico

intended to dispose of a hazardous substance. But as the Fourth Circuit explained:

Anytime an entity sells a product that contains a hazardous substance,it also intends to rid itself of that hazardous substance in somemetaphysical sense. But intent to sell a product that happens to containa hazardous substance is not equivalent to intent to dispose of ahazardous substance under CERCLA. For arranger liability to attach[under Burlington Northern], there must be something more.

Consol. Coal Co v. Ga. Power Co., 781 F.3d 129, 149 (4th Cir. 2015). This is the

fact-intensive inquiry Burlington Northern requires.

Despite acknowledging numerous fact disputes, the district court granted

summary judgment for plaintiff United States because “no reasonable fact-finder

could conclude that . . . [Dico] did not intend to dispose of the remaining PCB when

they sold the buildings to SIM,” and “no reasonable fact-finder could conclude that

the buildings at issue were commercially useful.” United States v. Dico, Inc., 892 F.

Supp. 2d 1146, 1156-57 (S.D. Ia. 2012). I agree with Judge Bye the district court

-21-

placed too much emphasis on the value of the buildings and what SIM intended to do

with them, losing sight of the touchstone issue -- whether “the arrangement was one

Congress intended to fall within the scope of CERCLA’s strict-liability provisions.”

Burlington Northern, 556 U.S. at 610.

I am somewhat concerned that Judge Bye’s opinion places too much emphasis

on the analysis of arranger liability in pre-Burlington Northern cases. In my view, the

earlier “battery cracking” cases should be disregarded, not distinguished. Even if

those decisions were sound, the analysis was inconsistent with the Supreme Court’s

in Burlington Northern. Likewise, the pre-Burlington Northern “useful product”

doctrine, which the Ninth Circuit has continued to apply, was not adopted by the

Supreme Court in Burlington Northern. Rather, the Court expressly put in the middle

category of cases requiring fact-intensive inquiry those “in which the seller has some

knowledge of the buyers’ planned disposal or whose motives for the sale of a

hazardous substance are less than clear.”

Most of the cases in which our sister circuits developed what might be called

multi-factor tests involved appeals from the grant of summary judgment imposing or

denying arranger liability. See, e.g., Consol. Coal, 781 F.3d 129 (4th Cir. 2015)

(affirming summary judgment of no liability); NCR Corp. v. George A. Whiting

Paper Co., 768 F.3d 682 (7th Cir. 2014) (same); United States v. Gen. Elec. Co., 670

F.3d 377 (1st Cir. 2012) (affirming summary judgment imposing arranger liability);

Team Enters., LLC v. W. Inv. Real Estate Tr., 647 F.3d 901 (9th Cir. 2011) (affirming

no liability). Under Burlington Northern, comprehensive analysis is needed when a

court is entering final judgment on arranger liability, and these opinions contain a

great deal of useful analysis geared to the fact situations there at issue. But here, I

conclude there are genuine disputes as to facts that are material to the issue of

arranger liability under Burlington Northern. That is all we need decide. Therefore,

I agree we should vacate the grant of summary judgment imposing arranger liability,

-22-

the order assessing response costs for government expenses in remedying

contamination at the SIM site in Ottumwa, and the award of punitive damages.

B. Civil Penalties. A confusing aspect of this case is the fact that Dico’s

alleged arranger liability turns on contamination found at one CERCLA site, the SIM

property in Ottumwa, whereas the district court assessed civil penalties and punitive

damages for Dico’s alleged violation of the EPA’s 1994 administrative order

requiring remedial actions at a second CERCLA site that includes Dico’s property in

Des Moines. CERCLA provides that any person “who, without sufficient cause,

willfully violates, or fails or refuses to comply with” an administrative order issued

in connection with a CERCLA abatement action “may . . . be fined not more than

[$32,500] for each day in which such violation occurs or such failure to comply

continues.” § 9606(b)(1). I agree with the district court that the statutory standard

that governs the EPA in assessing administrative penalties governs a district court

exercising its discretion to determine the amount of a civil penalty:

In determining the amount of any penalty assessed . . . thePresident shall take into account the nature, circumstances, extent andgravity of the violation or violations and, with respect to the violator,ability to pay, any prior history of such violations, the degree ofculpability, economic benefit or savings (if any) resulting from theviolation, and such other matters as justice may require.

42 U.S.C. § 9609(a)(3); cf. 33 U.S.C. § 1319(d) (mandating nearly identical standards

when a court determines the amount of civil penalties to impose for violation of an

EPA compliance order issued under the Clean Water Act).

The district court concluded as a matter of law that Dico violated two

paragraphs of the 1994 administrative order for 162 days, the time it took to complete

disassembly of the buildings on the Dico property -- paragraph 31, which required

Dico to implement a Maintenance Plan that included “long term . . . encapsulation of

-23-

all building insulation,” and paragraph 59, which required Dico to “immediately

notify EPA’s designated Project Coordinator” if any “change in site conditions,

during the action conducted pursuant to this Order causes or threatens to cause an

additional release of hazardous substances from the Dico Property.” After a bench

trial to determine the amount of civil penalties and punitive damages, the court

assessed penalties of $10,000 per day for 162 days, a total of $1,622,000.00.

I agree with my colleagues that the record established at least a one-day

violation of paragraph 59 for Dico’s willful failure to notify EPA before it demolished

or disassembled the buildings in 2007. That was a change in site conditions that

threatened the release of any PCBs that remained in insulation that was not destroyed

during the primary site clean-up completed in 1997. See All Regions Chem. Labs,

Inc. v. EPA, 932 F.2d 73, 74-75 (1st Cir. 1991), where the EPA assessed, and the

court upheld, a one-day administrative penalty of $20,000 for the failure to give

immediate notice of a far more serious actual release of hazardous chemicals into the

atmosphere. But the finding of multiple violations of paragraph 31 is more

problematic. In September 2003, after Dico submitted a revised work plan advising

that it may demolish the buildings in question, EPA replied:

The EPA does not necessarily object to demolition of the buildings, buturges Dico to coordinate any plans for demolition of the buildings withEPA. Certain disposal requirements may apply for building debris, andthe EPA or state would want to oversee the demolition.

Demolition of the buildings would necessarily end permanent encapsulation of their

insulation. No doubt the failure to notify was at least a one-day violation of

paragraph 31, as well as paragraph 59, but the finding of 162 days is unsupported.

The dominant purposes of CERCLA, and therefore the administrative order in

question, are to prevent the release of hazardous substances and to take appropriate

-24-

remedial action when releases have occurred. See 42 U.S.C. §§ 9604, 9606(a). Thus,

Dico’s failure to give timely notice of a change in site conditions that threatened a

release of the encapsulated insulation was clearly at least a one-day violation. But

disassembling the buildings at the site for 162 days was not even arguably a 162-day

violation if there was no actual release of hazardous substances during that activity.

The district court granted summary judgment that a 162-day violation had occurred

because reports from the 1990’s established that “demolishing the buildings

necessarily resulted in a release of PCB.” Dico, 4 F. Supp. 3d at 1066 n.36. But there

was no proof of an actual release. An EPA report following discovery of the

demolition stated that “EPA is following up to determine whether PCB contaminated

insulation may have been disposed of improperly.” Yet the government asserted no

claim for response costs at the Dico site, and presented no evidence that hazardous

substances were in fact released by debris, including insulation, that was deposited

on the property during the disassembly process. Indeed, the district court expressly

found that “[t]here has been no evidence of actual harm to people and/or animals as

a result of the dismantling/demolition of the Dico Buildings.” Id. at 1055.

In determining the amount of civil penalties to assess, the district court stated

that “discussing the evidence concerning PCB concentration is unnecessary in this

case.” Id. at 1064 n.40. In my view, this was an erroneous interpretation of

§ 9609(a)(3) and therefore an abuse of the court’s discretion in determining the

amount of civil penalties. The court also observed that “Dico created another

Superfund site (the SIM site in Ottumwa, Iowa), thus causing the EPA to spend

Superfund money in investigating the PCB release at the SIM site.” Id. at 1064. I

agree that if, in fact, Dico’s actions in disassembling the buildings without notice to

EPA resulted in the transfer of PCB-contaminated steel beams that proximately

caused the release of hazardous substances at the SIM site, that would be highly

relevant in determining the amount of civil penalties to assess for Dico’s violation of

the 1994 administrative order. But that question turns on disputed issues of material

-25-

fact that have led us to reverse the grant of summary judgment holding Dico liable as

an arranger for response costs at the separate SIM CERCLA site.

A massive civil penalty may not be assessed unless it is warranted by the

“extent and gravity of the violation.” § 9609(a)(3). Accordingly, I would remand for

a redetermination of the amount of civil penalties that should be assessed.

KELLY, Circuit Judge, concurring in part and dissenting in part.

I agree with the court’s decision to affirm the summary judgment order with

respect to the EPA order violation and civil penalties. I disagree that the district court

erred in granting summary judgment on the question of arranger liability, and

therefore with this court’s decision to reverse the district court’s award of punitive

damages on that basis. Therefore, I respectfully dissent from Part II.A of the court’s

opinion and the portions of Part II.B that discuss punitive damages.

According to Burlington Northern, “[i]n order to qualify as an arranger, [Dico]

must have entered into the sale of [the buildings] with the intention that at least a

portion of the [hazardous] product be disposed of during the transfer process.”

Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 612 (2009). My

reading of the undisputed facts leads me to conclude that Dico had the requisite intent

to dispose of the PCB-laden insulation to support a finding of arranger liability.

As the court notes, other circuits have developed multi-factor tests that are

useful in determining whether a given transaction qualifies as an arrangement for

disposal. The Fourth Circuit has outlined the following four relevant, and helpful,

factors:

[1] the intent of the parties to the contract as to whether the materials

were to be reused entirely or reclaimed and then reused, [2] the value of

-26-

the materials sold, [3] the usefulness of the materials in the condition in

which they were sold, and [4] the state of the product at the time of

transferral (was the hazardous material contained or leaking/loose).

Consol. Coal Co. v. Ga. Power Co., 781 F.3d 129, 148 (4th Cir. 2015) (quotation

omitted). In my view, each of these factors weighs in favor of finding Dico liable as

an arranger.

The first factor is the “intent of the parties to the contract as to whether the

materials were to be reused entirely or reclaimed and then reused.” Id. According

to the testimony of Jim Hughes, president of SIM, SIM only ever intended to buy the

beams. And according to Hughes’s testimony, Dico was aware of SIM’s intent.

Hughes testified that prior to the sale he told Dico consultant and former employee

Don Brown “that SIM wanted to buy only the steel beams from the buildings” and

that they had discussed “the need to discard other building components.” Hughes

testified that during the dismantling process “lots of little pieces of insulation fell on

the ground and were blown around,” that the “insulation was being loaded into Waste

Management Inc. dumpsters for disposal,” and that Brown was on-site during these

activities. He also said he specifically told Brown “that debris including the8

insulation was going to be hauled to a landfill.” The president of Titan testified that

he himself visited the site “on a weekly basis” during the dismantling process.

Defendants’ own Statement of Additional Material Facts states that when he

sold the building to SIM, Titan Tire president Bill Campbell “believed that Titan Tire,

on behalf of Dico, was selling a commercially useful product—being the steel

beams—for a reasonable value, inasmuch as it was his understanding that SIM

Prior to the transaction presently at issue, SIM had bought a similar building8

from Dico—one not covered by the 1994 UAO—and this building had beendismantled and its insulation disposed of in the same fashion.

-27-

intended to reassemble the steel beams on its property in Ottumwa for use in its

business operations.” (Emphases added.) It was “the intent of the parties to the

contract” that the beams would be “reclaimed and then reused,” not that the buildings

would be reused in their “entirety.” In fact, there was testimony from defendants’

own witness that “it doesn’t make sense” to re-use insulation and that he had never

seen it done in forty years of demolition experience. The contract itself instructed

SIM to “demo” (demolish) the buildings. Cf. Pneumo Abex Corp. v. High Point,

Thomasville and Denton R.R. Co.,142 F.3d 769, 775 (4th Cir. 1998) (“The intent of

both parties to the transaction was that the wheel bearings would be reused in their

entirety in the creation of new wheel bearings.” (emphasis added)).

A second relevant factor is the “value of the material sold.” Consol. Coal, 781

F.3d at 148. The court acknowledges that a comparison of the price received by the

seller to the avoided cost of proper disposal is a relevant indication of a seller’s intent

in a transaction. See United States v. Gen. Elec. Co., 670 F.3d 377, 390 (1st Cir.

2012). Dico sold Building 2 for $5,000 and the Maintenance Building for $12,000.

SIM paid $143,200 for Buildings 4 and 5, as well as the Production Building, which

was not subject to the 1994 UAO. While the district court did not make a finding on

the exact amount of clean-up cost Dico avoided by selling the buildings, in 1996 the

EPA estimated that it would cost $2.87 million to properly remediate the Dico

buildings governed by the 1994 UAO—$4.39 million in today’s dollars. This court

properly notes that Dico disputes this number, arguing that the buildings sold to SIM

represent only four out of the six buildings included in the remediation estimate and

SIM was not responsible for the removal of the foundations. While their objection

is noted, there is nothing in the record to suggest that a building such as Building 2

could be properly remediated for less than $5,000, even leaving its foundation

untouched. Indeed, after the demolition was discovered, Dico hired an environmental

contractor to properly dispose of the insulation, employing a three-man crew over two

separate days to haul the insulation in a HAZMAT truck to an EPA-approved toxic

-28-

landfill in Nevada (the total cost of this endeavor is not in the record). The EPA

additionally spent $91,727.51 in the cleanup effort.

Most notably in this cost analysis, SIM was never informed that the buildings

contained PCBs, and SIM’s president testified that this information would have

affected his estimation of the value of the property. PCB-contaminated beams are

worth less than PCB-free beams, and SIM assumed it was purchasing the latter, not

the former. Dico presented no evidence even to suggest that it took any precautionary

steps to ensure any possible contamination was contained prior to or during the

dismantling process. Cf. Consol. Coal, 781 F.3d at 149–50 (ruling that defendant did

not have requisite intent to dispose of PCBs when it only sold transformers that

contained less than 50 ppm of PCBs and those that had higher contaminations were

destroyed in accordance with the Toxic Substances Control Act of 1964); Burlington

N., 556 U.S. at 613 (explaining that defendant had taken precautionary measures in

order to prevent leaks from occurring, including providing safety manuals to its

purchasers, and “providing discounts for those that took safety precautions”).

The third factor of the Fourth Circuit’s test is “the usefulness of the materials

in the condition in which they were sold.” Consol. Coal, 781 F.3d at 148. The beams

were useless with the insulation still attached, i.e., in the condition in which they were

sold. Dico’s own building demolition expert Daniel Hoffman admitted that it was

necessary to strip away the insulation to “get at the beams.” He also testified that in

his forty years of demolition experience he had never seen a commercial buyer reuse

the insulation from these kind of buildings and that it “doesn’t make sense to reuse

it.” The court speculates about whether other parties could have used other parts of

the buildings, but no evidence to this fact was presented to the district court. The9

The court distinguishes the “battery-cracking” cases and the copper wire case9

by saying the sale product in those circumstances was “junk.” Yet the buildings inthe present case had been left abandoned for years, one building was sold for a mere$5,000, most of its components were discarded on site, and its beams were hauled

-29-

only evidence presented was Campbell’s assertions that it was his intent to sell a

useful product. In determining arranger liability, however, courts must undergo a

“fact-intensive inquiry that looks beyond the parties’ characterization of the

transaction as a ‘disposal’ or a ‘sale’” to discern whether arranger liability is

appropriate. Burlington N., 556 U.S. 610. “Frequently, the most probative evidence

of intent will be objective evidence of what happened rather than evidence describing

the subjective mind of the actor.” United States v. Cello-Foil Prods., Inc., 100 F.3d

1227, 1233 (6th Cir. 1996) (quotation omitted).

The fourth factor is “the state of the product at the time of transferral (was the

hazardous material contained or leaking/loose).” Consol. Coal, 781 F.3d at 148. A

key fact that cannot be overlooked in this case is that the PCB-laden insulation was

discarded at the Dico site in the presence of Dico employees. At the time of

transferral the toxic product was not just “leaking” or “loose”—it was actively being

discarded as a part of the transfer. On this issue, there is no dispute.

Taken together, these factors support the conclusion that Dico intended to

dispose of the PCB-laden insulation contained within its buildings. Hughes testified

that he was told Dico “wanted the buildings torn down to accommodate” a “large

development project.” The fact that Dico was able to receive a sum of money for the

beams contained within the buildings does not negate the fact that they wanted the

buildings, and their PCB-contaminated insulation, gone. See Consol. Coal, 78110

away to an open field and left there among old motors and twisted pipes. One ofdefendants’ own experts, Dr. Remy Hennet, called the SIM site “a junk yard.” If thesale product in the battery-cracking cases was “junk,” the Dico buildings could beviewed in largely the same way.

I agree with the court’s conclusion in Part II.B that Dico could not have10

reasonably believed no PCBs remained in the buildings.

-30-

F.3d at 147 (stating that Burlington Northern does not “foreclose arranger liability as

a matter of law based on secondary intent” (emphasis added)).

Knowledge alone is insufficient to find that a party had the intent to arrange for

disposal. Burlington N., 556 U.S. at 612. But the evidence in this case supports

significantly more than Dico’s mere awareness that somewhere down the road some

amount of toxic material could be released by the purchaser of their otherwise useful

buildings. Dico cites to a Seventh Circuit decision finding that once a defendant sells

a useful product to a third party, the toxins contained in the product are “out of the

seller’s hands.” NCR Corp. v. George A. Whiting Paper Co., 768 F.3d 682, 706 (7th

Cir. 2014). The court ruled that this “lack of control is a good reason to find” that

defendants did not arrange for disposal. Id. However, the court added: “we do not

mean to suggest that an ostrich approach would work.” Id. And an ostrich approach

should not work here, either, where Dico hid the very fact of the buildings’

contamination from their purchaser. Dico presented no evidence at the district court,

beyond its own characterization of its intent, to create a genuine dispute of material

fact regarding whether it qualified as an arranger. The facts, viewed in the light most

favorable to Dico, still show that it intended “at least a portion of [the hazardous

product] be disposed of during the transfer process.” Burlington N., 556 U.S. at 612.

______________________________

-31-

FOR PUBLICATION

UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT

ALASKA WILDERNESS LEAGUE;CENTER FOR BIOLOGICAL

DIVERSITY, INC.; GREENPEACE, INC.;NATIONAL AUDOBON SOCIETY, INC.;NATURAL RESOURCES DEFENSE

COUNCIL, INC.; OCEAN

CONSERVANCY, INC.; OCEANA, INC.;PACIFIC ENVIRONMENT AND

RESOURCES CENTER; REDOIL, INC.;SIERRA CLUB,

Plaintiffs-Appellants,

v.

SALLY JEWELL, Secretary of theInterior; BRIAN SALERNO, Directorof Bureau of Safety andEnvironmental Enforcement; MARK

FESMIRE, Regional Director ofBureau of Safety and EnvironmentalEnforcement, Alaska Region,

Defendants-Appellees,

SHELL GULF OF MEXICO INC.; SHELL

OFFSHORE INC.,Intervenor-Defendants–Appellees.

No. 13-35866

D.C. Nos.3:12-cv-00048-

RRB1:12-cv-00010-

RRB

ORDER

ALASKA WILDERNESS LEAGUE V. JEWELL2

Filed December 29, 2015

Before: Jerome Farris, Dorothy W. Nelson,and Jacqueline H. Nguyen, Circuit Judges.

Order;Dissent by Judge Gould

SUMMARY*

Environmental Law

The panel denied the petition for panel rehearing, anddenied the petition for rehearing en banc on behalf of thecourt, concerning decisions by the Bureau of Safety andEnvironmental Enforcement not to engage in consultationpursuant to the Endangered Species Act, and not to preparean environmental impact statement pursuant to the NationalEnvironmental Policy Act, before approving Shell Gulf ofMexico Inc.’s oil spill response plan for offshore drilling inthe Beaufort and Chukchi Seas on Alaska’s Arctic coast.

Judge Nelson voted to grant the petition for panelrehearing, and recommended granting the petition forrehearing en banc.

Judge Gould, joined by Judges W. Fletcher and Callahan,dissented from the denial of rehearing en banc. Judge Gouldwrote that the majority wrongly interpreted the statute that

* This summary constitutes no part of the opinion of the court. It hasbeen prepared by court staff for the convenience of the reader.

ALASKA WILDERNESS LEAGUE V. JEWELL 3

governs oil spill response plans, the 1990 amendments to theClean Water Act, as imposing nondiscretionary duties basedon a perceived statutory ambiguity; and in granting theBureau of Safety and Environmental Enforcement Chevrondeference on the issue. Judge Gould wrote that this resultedin the majority wrongly narrowing the application of both theEndangered Species Act and the National EnvironmentalPolicy Act.

ORDER

Judges Farris and Nguyen voted to deny the petition forrehearing. Judge Nelson voted to grant the petition forrehearing. Judge Nguyen voted to deny the petition forrehearing en banc, and Judge Farris so recommended. JudgeNelson recommended granting the petition for rehearing enbanc.

The full court was advised of the petition for rehearing enbanc. A judge requested a vote on whether to rehear thematter en banc, and the matter failed to receive a majority ofthe votes of the nonrecused active judges in favor of en bancconsideration. Fed. R. App. P. 35.

The petition for panel rehearing and the petition forrehearing en banc are DENIED. No future petitions forrehearing or petitions for rehearing en banc will beentertained.

ALASKA WILDERNESS LEAGUE V. JEWELL4

GOULD, Circuit Judge, with whom W. FLETCHER andCALLAHAN, Circuit Judges, join, dissenting from the denialof rehearing en banc:

I respectfully dissent from denial of rehearing en banc inthis case, which concerns decisions by the Bureau of Safetyand Environmental Enforcement (BSEE) not to engage inconsultation pursuant to the Endangered Species Act (ESA),and not to prepare an environmental impact statement (EIS)pursuant to the National Environmental Policy Act (NEPA),before approving Shell’s oil spill response plans for offshoredrilling in the Beaufort and Chukchi Seas. The majority’sESA analysis rests first on an erroneous decision to grantBSEE Chevron deference, based on the majority’s finding anambiguity in the statute where none exists, and second on anincorrect analogy to National Association of Home Buildersv. Defenders of Wildlife, 551 U.S. 644 (2007). The majorityincorrectly interpreted the statute that governs oil spillresponse plans, the 1990 amendments to the Clean Water Act(CWA), as imposing nondiscretionary duties; it grantedChevron deference to BSEE on this issue based on aperceived statutory ambiguity. But the statute’s clearlanguage demonstrates without ambiguity that BSEEexercises discretion in reviewing and approving oil spillresponse plans. Both parts of the majority opinion lead to anunprecedented and unwise constraining of the powers of theESA and NEPA.

The majority’s decision in this case encourages federalagencies to abrogate their oversight by deciding that astatute’s requirements limit their discretion to the point oftaking the ESA and NEPA off the table. The majority invitesfederal agencies to ignore their ESA and NEPA obligations,await a challenge, and then defend their inaction under the

ALASKA WILDERNESS LEAGUE V. JEWELL 5

guise of Chevron deference. However, the federal courtsshould not be so eager to accept, under the guise of Chevron,an agency decision that violates existing case law interpretingthe ESA and NEPA, as well as the very logic of thosestatutes. Chevron was meant to prevent courts from imposingtheir own construction of a statute where Congress has not“directly addressed the precise question at issue.” Chevron,U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843(1984). Instead, courts should defer to an agency’s“permissible interpretation of a statute.” Id. Chevron was notmeant to force courts into deferring to an agency’s contentionthat it lacks discretion over statutorily mandatedrequirements. Such a ruling invites abrogation of statutoryresponsibilities.

I.

A central flaw in the majority’s decision is that it finds anambiguity in 33 U.S.C. § 1321(j)(5) where none exists. According to this statute, part of the 1990 amendments to theCWA passed after the Exxon Valdez disaster, an oilcompany’s oil spill response plan must show that thecompany is capable of “responding, to the maximum extentpracticable, to a worst case discharge, and to a substantialthreat of such a discharge, of oil or a hazardous substance.” 33 U.S.C. § 1321(j)(5)(A)(i). To comply, the proposed plansmust meet six specific requirements. 33 U.S.C.§ 1321(j)(5)(D). The statute then directs that the President“shall” take several actions after an oil company submits itsplan: “promptly review” it, “require amendments” to a planthat does not meet the statutory requirements, and “approveany plan” that does meet the requirements. 33 U.S.C.§ 1321(j)(5)(E). According to the majority, the “shall”language suggests that BSEE “must approve” any conforming

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plan, and thus has no discretion over the adequacy of theplans. Alaska Wilderness League v. Jewell, 788 F.3d 1212,1220 (9th Cir. 2015) (emphasis in original). This led themajority to find an ambiguity in the statute: “It is unclear howthe broad language of section 1321(j)(5)(A)(i), with itsreference to the ‘maximum extent practicable,’ interacts withthe finite statutory criteria of section 1321(j)(5)(D).” Id. “And that means we . . . face a statute whose halves do notcorrespond to each other—giving rise to an ambiguity thatcalls for Chevron deference.” Id. (quoting Scialabba v.Cuellar de Osorio, 134 S. Ct. 2191, 2210 (2014)).

However, there is no ambiguity in the statute thatwarrants Chevron deference. The CWA amendmentsunambiguously give BSEE discretion over oil spill responseplan approval. Section 1321(j)(5)(A)(i) requires an oil spillresponse plan to respond “to the maximum extent practicableto a worst case discharge, and to a substantial threat of sucha discharge, of oil or a hazardous substance.” According tothe majority, “the open-ended nature of [this] phrase . . .suggests agency discretion.” Alaska Wilderness, 788 F.3d at1220. The majority agreed with Judge Nelson, whodissented, that this portion of the statute could be read to“serve[] as an independent ‘standard’ that must be met inaddition to the list of enumerated requirements at§ 1321(j)(5)(D).” Id. at 1222, 1229 (Nelson, J., dissenting)(“[T]he phrase ‘maximum extent practicable’ . . . has asuperlative quality and therefore must refer to the greatestoption in a range of possibilities.”).

The majority is wrong that the statute’s “halves do notcorrespond to each other.” Id. at 1220. Like the broadlanguage in § 1321(j)(5)(A)(i), one of the six explicit criteriarequires removal of a worst case discharge “to the maximum

ALASKA WILDERNESS LEAGUE V. JEWELL 7

extent practicable.” 33 U.S.C. § 1321(j)(5)(D)(iii). Accepting the majority’s conclusion that this phrase“suggests agency discretion,” there is no ambiguity entitlingBSEE to Chevron deference on the issue of its discretion,because the phrase appears in both parts of the statute. SeeChevron, 467 U.S. at 842 (“If the intent of Congress is clear,that is the end of the matter . . . .”). The majority ignored thatthe statute’s specific requirements include the same phrase asthe statute’s introduction, which the majority and dissentagreed suggests agency discretion over response planapproval.

As explained more fully below, this case is unlike HomeBuilders because the statutory duty at issue does not restrictBSEE’s discretion over approval of oil spill response plans. The majority makes much of the statute’s requirement thatBSEE “shall” approve any plan that “meets the requirementsof this paragraph,” but it ignores the substance of thoserequirements. 33 U.S.C. §§ 1321(j)(5)(E)(i) & (iii). Therequirements do not constitute mere “triggering events,” as inHome Builders; they require a thorough evaluation of aresponse plan. Home Builders, 551 U.S. at 669.

First, one of statute’s explicit requirements is thatresponse plans must “be consistent with the requirements ofthe National Contingency Plan [NCP] and Area ContingencyPlans.” 33 U.S.C. § 1321(j)(5)(D)(i). The NCP containsnumerous phases of operational responses to a spill, includinga special response to worst case discharges, see 40 C.F.R.§§ 300.300–300.335, and includes several protections forendangered species. See, e.g., 40 C.F.R. § 300.135(k). TheNCP also requires that environmental evaluations “beperformed to assess threats to the environment, especiallysensitive habitats and critical habitats of species protected

ALASKA WILDERNESS LEAGUE V. JEWELL8

under the [ESA].” 40 C.F.R. § 300.430(e)(2)(i)(G). However, the majority does not explain how BSEE coulddetermine whether a response plan meets the NCP’snumerous independent requirements if BSEE’s oversight roleis truly just to check the boxes in a “checklist.” AlaskaWilderness, 788 F.3d at 1220. Whether an oil company’s oilspill response plan is “consistent with the requirements of the[NCP] and Area Contingency Plans” is far from a mechanicaldetermination or “triggering event[].” Home Builders, 551U.S. at 669.

Second, the CWA amendments require that a company’sresponse plan “remove . . . a worst case discharge,”specifically defining the term “remove” to mean“containment and removal of the oil . . . from the water andshorelines or . . . such other actions as may be necessary toprevent, minimize, or mitigate damage to the public health orwelfare, including . . . fish, shellfish, wildlife, and public andprivate property, shorelines, and beaches.” 33 U.S.C.§ 1321(a)(8). Whether an oil spill response plan provides themeans to “remove” a worst case discharge is also a questionthat requires evaluation of the plan—it is not simply a“triggering event[].” Home Builders, 551 U.S. at 669.

Third, other sections of the CWA governing the federalgovernment’s spill plans, 33 U.S.C. §§ 1321(d)(1)–(2) &(j)(4)(B)–(D), contain the same “shall” language as thesections governing oil spill response plans, yet areundisputedly subject to ESA consultation. The majorityasserts that “[t]hese provisions . . . are different,” but does notsay why. Alaska Wilderness, 788 F.3d at 1224. The majoritytries to distinguish § 1321(d)(1), which requires the Presidentto prepare and publish an NCP, by claiming that “[n]othingin the text prohibits such a plan from being prepared in light

ALASKA WILDERNESS LEAGUE V. JEWELL 9

of concerns that an ESA consultation might raise.” Id. Butthe majority does not explain why its analysis of the statuteat issue here looks for explicit mention of ESA consultationwhereas its analysis of a parallel provision looks for anexplicit prohibition on ESA consultation. It is the majority’sinconsistent textual analysis, not any meaningful distinctionin CWA provisions, that produces these contrary results.

Fourth, the majority attempts to distinguish response planapproval from the NCP, which according to the statute should“include, but not be limited to” a number of factors “thatmight be deemed necessary after an ESA consultationoccurs,” including “water pollution control and conservationand trusteeship of natural resources (including conservationof fish and wildlife).” 33 U.S.C. § 1321(d)(2); AlaskaWilderness, 788 F.3d at 1224. This argument by the majorityapparently is intended to bolster its conclusion that unlike theNCP, 33 U.S.C. § 1321(j)(5)(E) “leaves no room for theinclusion of additional factors.” Alaska Wilderness, 788 F.3dat 1224. But the majority does not mention that, as explainedabove, one of the very requirements BSEE must considerbefore approving an oil spill response plan is its“consisten[cy] with the requirements of the [NCP].” 33 U.S.C. § 1321(j)(5)(D)(i); Alaska Wilderness, 788 F.3d at1224. It is unavailing to distinguish response plan approvalfrom the supposedly more broad-based NCP, whenconsistency with the NCP is one of the factors to beconsidered in approving an oil spill response plan.

Fifth, as the dissent explained, BSEE’s implementingregulations make clear that the agency can exercise itsdiscretion to benefit protected species. Alaska Wilderness,788 F.3d at 1228 (Nelson, J., dissenting). For example, theregulations require operators to identify resources of

ALASKA WILDERNESS LEAGUE V. JEWELL10

“environmental importance” that could be harmed by a“worst case discharge scenario,” and to provide strategies toprotect them. 30 C.F.R. §§ 254.26(a), (c). The regulationsalso require operators to identify procedures to “protectbeaches, waterfowl, other marine and shoreline resources, andareas of special . . . environmental importance.” 30 C.F.R.§ 254.23(g)(4). The majority does not explain how BSEE’scursory review of an oil spill response plan could beconsistent with the agency’s own regulations. Theseregulations underscore that § 1321(j)(5)(D) is not just a“checklist statute.” Alaska Wilderness, 788 F.3d at 1220.

BSEE reasoned that its implementing regulations define“maximum extent practicable” as “within the limitations ofavailable technology, as well as the physical limitations ofpersonnel, when responding to a worst case discharge inadverse weather conditions.” 30 C.F.R. § 254.6; FederalDefendants’ Opposition to Rehearing En Banc at 12–13. According to BSEE, nothing in this language gives it thediscretion to consider a wide range of factors consistent withthe general meaning of the word “maximum.” Id. at 12. Thatargument persuaded the majority. But Judge Nelson’s dissentpersuasively explains the unreasonableness of this reasoning. See Alaska Wilderness, 788 F.3d at 1229 (Nelson, J.,dissenting). Even under BSEE’s definition of “maximumextent practicable,” BSEE must determine whether Shell’sresponse plans met the standard. And, as even the majorityreasoned, the term “maximum extent practicable” “suggestsagency discretion because of [its] open-ended nature . . . .” Id. at 1220.

Finally, further evidence that the CWA amendmentscontemplated active review comes from 33 U.S.C.§§ 1321(j)(5)(E)(ii) & (iii), which direct BSEE to “require

ALASKA WILDERNESS LEAGUE V. JEWELL 11

amendments to any plan that does not meet the requirementsof this paragraph,” or to approve a plan that does meet them. That Congress has given BSEE the responsibility to decidewhether an oil spill response plan meets the statutory criteria,and has directed the agency to require amendments tononconforming plans, is further evidence that the statuteimparts discretion. Nowhere does the majority explain whyCongress would task BSEE with requiring amendments to anonconforming plan if it truly sought to cabin the agency’sdiscretion or to make the requirements of the CWAamendments mere “triggering events.” Home Builders,551 U.S. at 669.

The approval process for oil spill response plans requiresagency discretion. It was wrong to grant BSEE Chevrondeference on this issue.

II.

Two flawed holdings flow from the majority’s erroneousChevron determination. Specifically, the majority narrowedthe application of both the ESA and NEPA. First, themajority’s approach sets a dangerous precedent for ignoringESA § 7. Undisputedly, ESA consultation is only requiredwhen an agency takes a “discretionary” action. 50 C.F.R.§ 402.03. As explained above, however, response planapproval pursuant to the requirements of 33 U.S.C.§ 1321(j)(5)(D) is discretionary because it requires BSEE toanalyze whether the requirements have been met. BSEEshould therefore be required to consult under the ESA. Themajority concluded otherwise based on its incorrect analogyto Home Builders. At issue in Home Builders was arequirement in CWA § 402(b) that the EnvironmentalProtection Agency (EPA) “shall approve” a transfer of CWA

ALASKA WILDERNESS LEAGUE V. JEWELL12

permitting authority from the federal government to a stateupon a showing that the state had met nine specified criteria.1 Home Builders, 551 U.S. at 650–51. The Supreme Courtdescribed the “shall approve” language in CWA § 402(b) as“mandatory” and held that EPA did not have discretion todeny a transfer application. Id. at 661. Because the ESArequired consultation for all discretionary agency actions, theCourt’s majority concluded that application of the ESA wouldimpermissibly “engraft[] a tenth criterion onto the CWA.” Id.at 663. Here, the majority claims that, like CWA § 402(b),the six requirements for response plan approval in 33 U.S.C.§ 1321(j)(5)(D) are mandatory, and the ESA is not applicable.

However, this case differs from Home Builders for at leastthree reasons. First, Home Builders hinged partially on thefact that the ESA was passed after the CWA, and did notexplicitly overrule CWA § 402(b). Home Builders, 551 U.S.

1 To become the permitting authority, the state must demonstrate that ithas the ability: (1) to issue fixed-term permits that apply and ensurecompliance with the CWA’s substantive requirements and which arerevocable for cause; (2) to inspect, monitor, and enter facilities and torequire reports to the extent required by the CWA; (3) to provide forpublic notice and public hearings; (4) to ensure that the EPA receivesnotice of each permit application; (5) to ensure that any other State whosewaters may be affected by the issuance of a permit may submit writtenrecommendations and that written reasons be provided if suchrecommendations are not accepted; (6) to ensure that no permit is issuedif the Army Corps of Engineers concludes that it would substantiallyimpair the anchoring and navigation of navigable waters; (7) to abateviolations of permits or the permit program, including through civil andcriminal penalties; (8) to ensure that any permit for a discharge from apublicly owned treatment works includes conditions requiring theidentification of the type and volume of certain pollutants; and (9) toensure that any industrial user of any publicly owned treatment works willcomply with certain of the CWA’s substantive provisions. 33 U.S.C.§§ 1342(b)(1)–(9).

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at 662. But here, 33 U.S.C. § 1321(j)(5) postdates the ESAby seventeen years. There is no concern here, as there was inHome Builders, that ESA consultation would implicitlyamend a prior statute.

The second distinction is that in Home Builders, theparties appeared to agree that the state had authority toperform each of the nine enumerated functions in CWA§ 402(b). Home Builders, 551 U.S. at 672 (“[T]here is nodispute that Arizona has satisfied each of those statutorycriteria”); see also Alaska Wilderness, 788 F.3d at 1229(Nelson, J., dissenting). The parties’ disagreement wasinstead about whether ESA consultation added an extra stepto transfer of permitting authority. Here, the question is notwhether the ESA adds an extra step to the approval process,but how much discretion there is in the existing steps of33 U.S.C. § 1321(j)(5)(D). On this the parties do not agree. This distinction means that although Home Builders iscontrolling precedent, its particular outcome does not bindthis case.

Third, the conditions in § 1321(j)(5)(D) that must be metfor response plan approval are substantively different than theconditions for state permitting authority in Home Builders. There, the Supreme Court characterized the conditions as“triggering events” with a mechanical cause and effect. Home Builders, 551 U.S. at 669. Arizona had to show that ithad the ability to perform nine specific tasks. Once it haddone so, the agency had no choice but to transfer CWApermitting authority. Id. at 669. This reading is consistentwith the Supreme Court’s conclusion that CWA § 402(b)imposed nondiscretionary requirements on EPA. Id. at 661. Here, as explained above, the requirements are not simpleenough to be considered mere “triggering events.” Id. at 669.

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They require evaluation of whether an oil spill response planactually meets, for example, the requirement that it beconsistent with the NCP, or the requirement that it ensure theavailability of personnel and equipment necessary to removea worst case discharge to the “maximum extent practicable.” 33 U.S.C. §§ 1321(j)(5)(D)(i), (iii).

By not correcting the majority’s holding through en bancrehearing, we have permitted a gross alteration of SupremeCourt precedent and given federal agencies unwarranted andunprecedented authority over whether their statutory dutiesare discretionary or not, which directly impacts whether ESAconsultation is required. ESA consultation is required for“any action authorized, funded, or carried out by” a federalagency—with the rare exception for cases such as HomeBuilders, where a statute’s requirements are clearly“triggering events” rather than independent requirements, andwhere there is no dispute that the requirements have beenmet. Neither is true of the statute at issue here, 33 U.S.C.§ 1321(j)(5). This is clear from the statute itself, and themajority was wrong to adopt the agency’s contraryinterpretation under the guise of Chevron.

The majority’s decision also misapplies NEPA precedent. NEPA requires federal agencies to prepare an EIS for all“major Federal actions significantly affecting the quality ofthe human environment.” 42 U.S.C. § 4332(2)(C). In anarrow exception, NEPA does not apply where an agencylacks the discretion to consider environmental values in itsdecision making process. See Dep’t of Transp. v. PublicCitizen, 541 U.S. 752, 767–69 (2004). Here, the majorityheld that BSEE reasonably concluded that it “must approveany [response plan] that meets the statutory requirements.” Alaska Wilderness, 788 F.3d at 1225. “Thus, even assuming,

ALASKA WILDERNESS LEAGUE V. JEWELL 15

without deciding, that BSEE’s approval of Shell’s [responseplans] constitutes a ‘major Federal action,’ its approval is notsubject to NEPA’s requirements.” Id. The majorityanalogized this case to Public Citizen, where the governingstatute required the Federal Motor Carrier SafetyAdministration (FMCSA) to register a person to providetransportation as a motor carrier if it found the person willingand able to comply with the statute’s requirements. PublicCitizen, 541 U.S. at 766. NEPA review was not required inPublic Citizen because the agency lacked the power toconsider environmental consequences outside its statutoryobligation. Id. at 768–70.

The majority’s analogy to Public Citizen isunsupported. As explained above, § 1321(j)(5)(D) imposesa discretionary duty on BSEE. In Public Citizen, theSupreme Court held that FMCSA did not have to account forcertain environmental effects in its environmental assessmentbecause it had “no ability to countermand” executive actionby the President, so its action did not have a “reasonablyclose causal relationship” to any negative environmentalimpacts. Public Citizen, 541 U.S. at 766–67. That is not thecase here, because BSEE does have the authority to considerenvironmental values in its decision-making process. BSEE’sapproval of response plans is discretionary, and it wouldprovide a “reasonably close causal relationship” between theagency action and environmental effects, including a “worstcase discharge,” stemming from a potential spill. See PublicCitizen, 541 U.S. at 767; 33 U.S.C. § 1321(j)(5)(A)(i).2

2 Deference to BSEE’s views may also be tempered here because we areassessing whether BSEE’s review and approval of an oil spill responseplan under the CWA is non-discretionary within the meaning of NEPA. As the D.C. Circuit has explained, “the court owes no deference to the

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In sum, the impact of the majority’s decision is to take theESA and NEPA off the table when considering oil spillresponse plans, which are a required component of offshoredrilling proposals. This violates the language of 33 U.S.C.§ 1321(j)(5), which by its terms requires discretionaryevaluation of oil spill response plans. The statute calls onBSEE to assess whether response plans give protection to the“maximum extent practicable.” 33 U.S.C. § 1321(j)(5)(A)(i). A federal agency cannot determine if protection is to the“maximum extent practicable” without exercising somediscretion in judgment. If discretion is needed, thenclaimants with standing, and the federal courts, must be partof the approval process until decisions are made in litigation.

III.

I agree with the majority that the ESA and NEPA do notrequire an agency to provide redundant analysis. NEPA andits implementing regulations accommodate this concern byallowing agencies to take a “tiered” approach toenvironmental review. See 40 C.F.R. § 1502.20 (encouragingtiering of NEPA review). We have also allowed for tiering ofESA review. See Gifford Pinchot Task Force v. U.S. Fish &Wildlife Serv., 378 F.3d 1059, 1067–68 (9th Cir. 2004). Thus, BSEE’s NEPA and ESA review of the proposed

[agency’s] interpretation of NEPA . . . because NEPA is addressed to allfederal agencies and Congress did not entrust administration of NEPA to[BSEE] alone.” Grand Canyon Trust v. Fed. Aviation Admin., 290 F.3d339, 342 (D.C. Cir. 2002). Moreover, Congress demonstrated in the CWAthat it knows how to exempt agency approvals from environmentalreview. See 33 U.S.C. § 1371(c) (exempting certain actions by EPA fromNEPA review). That Congress did not similarly exempt BSEE’s oil spillresponse plan approval, pursuant to the CWA, from NEPA or ESA reviewstrongly suggests that Congress intended the statutes to apply.

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approval of Shell’s oil spill response plans need not beburdensome or redundant if the foreseeable impacts ofapproving the plans, and reasonable alternatives, were alreadyaddressed in an EIS and biological opinion completed at anearlier stage of development. If this were the case, BSEEcould, for example, prepare a shorter environmentalassessment tiered to the earlier EIS to satisfy NEPA. See 40C.F.R. § 1508.9 (describing an environmental assessment). Here, the majority does not address whether BSEE satisfiedNEPA and the ESA through tiered environmental review. Rather, the majority rules that oil spill response plan approvalis exempt from the ESA and NEPA altogether.

It is true that BSEE reviewed Shell’s oil spill responseplans only after other higher-level planning activities,including preparing an EIS for each of its five-year leasingprograms and preparing a biological opinion evaluating thelikelihood that drilling will jeopardize species protected bythe ESA. See, e.g., NMFS, Beaufort and Chukchi SeasBiological Opinion, http://goo.gl/YECHFu. But an oil spillresponse plan may raise significant environmental risksbeyond those analyzed at a granular level at a previous stageof development. For example, alternative means ofcontaining an oil spill, such as the controversial use ofdispersants, may themselves significantly impact listedspecies, other environmental resources, and the safety of firstresponders and the public to varying degrees. Review ofthese risks and of alternative response actions would not beredundant or duplicative if they were not considered in aprevious EIS and biological opinion. Indeed, the higherplanning levels govern the whole gamut of offshore drillingoperations. Oil spill response plans—while nominally a“lower,” implementation-level action—are the firstcomponent to be deployed when a spill actually happens. It

ALASKA WILDERNESS LEAGUE V. JEWELL18

is ill-advised for the court to accept, under the guise ofChevron, BSEE’s refusal to complete NEPA and ESA reviewof these plans, especially since these plans may not be aseffective in redressing spills and preserving the environmentas they could be with environmental review of alternativesand input from federal wildlife agencies.

I also emphasize this case’s importance notwithstandingShell’s recent suspension of its Arctic drilling program. Although the program is on hold, and the administration hasrecently canceled existing Arctic lease sales, oil markets arecyclical and it is all but certain that higher future oil prices, awarming Arctic, or both will once again make drilling in theArctic cost-effective. The Department of the Interior’s latestfive-year drilling plan still includes offshore lease sales inAlaska. Whenever Shell begins its Arctic drilling permittingprocess again, BSEE will give Shell’s oil spill response plansthe same cursory review it did here. If this case is notcorrected by Supreme Court review, it will have two severeconsequences. First, it will preclude judicial review of oilspill response plans when Shell’s Arctic drilling plansresume. In light of BSEE’s obvious reluctance to give theterm “maximum extent practicable” its natural meaning in33 U.S.C. §§ 1321(j)(5)(A)(i) & (j)(5)(D)(iii), it is undeniablethat Shell’s oil spill response plans will not be as responsiveto the needs of endangered and threatened species as theywould be with ESA consultation. And it is all but certain thatBSEE’s review of the response plans—the first line ofdefense in the event of a major oil spill—will be far morecursory than it would be if the public process, review offoreseeable impacts, and consideration of alternativesnecessary under NEPA were provided.

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Second, and equally important, our court now has chosento accept an agency’s own opinion about the scope of itsdiscretion in order to make this case fit into the narrowexceptions of Home Builders and Public Citizen. By ignoringour proper role in this litigation, we have enabled BSEE’sabrogation of its oversight role over response plan approval,and we have invited other federal agencies to do the same anytime a statutory duty could arguably be cast as “mandatory”or “nondiscretionary.” The message we send to agencies, andto oil companies, is “we trust you and will rely on yourjudgment without review by federal agency experts andpublic input.” This is not the role envisioned by Congresswhen it passed the 1990 CWA amendments, which require anoil spill response plan to demonstrate its ability to respond,“to the maximum extent practicable, to a worst casedischarge,” or when it passed the ESA, which requires“[e]ach Federal agency” to consult with federal wildlifeagencies to “insure that any action authorized, funded, orcarried out by such agency” is not likely to jeopardizeprotected species or adversely modify their critical habitat. 33 U.S.C. § 1321(j)(5)(A)(i); 16 U.S.C. § 1536(a)(2). It isnot the role envisioned by NEPA, which mandated that “allagencies” shall utilize a “systematic, interdisciplinaryapproach” in planning and decision making, and shall preparean EIS for all major federal actions significantly affecting thehuman environment, which include “any irreversible andirretrievable commitments of resources which would beinvolved in the proposed action should it be implemented.” 42 U.S.C. § 4332. It is not the role for the courts Chevronenvisioned by approving deference to an agency’s“permissible construction of the statute” only in response tostatutory ambiguity. Chevron, 467 U.S. at 843.

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Although this case deals with a complicated regulatoryframework, at bottom it turns on simple answers to simplequestions: If an oil company submits an oil spill responseplan to BSEE, does the federal government have discretion toconsider alternative response actions in order to ensure thatany approved plan responds to a worst case spill to themaximum extent practicable? Could alternative methods ofresponding to a spill themselves have varying impacts onlisted species that now thrive in the Beaufort and ChukchiSeas, such as the bowhead whale, the humpback whale, thebearded seal, and the Steller sea lion, as well as other aspectsof the human environment? See BOEM Biological Opinion,Lease Sale 193, http://goo.gl/YECHFu. If such dangers andalternative courses of action are present, is it the aim ofCongress to have the agency that oversees drilling performpublic environmental review of the proposed plan and consultwith federal agencies that oversee listed species? If Congresshas required that an oil spill response plan must respond tothe spill to the maximum extent practicable, will that notrequire a discretionary judgment of the regulating agency,here the Bureau of Safety and Environmental Enforcement? The answers to these questions are “yes.” Only if BSEEscrutinizes whether an oil spill response plan gives protectionto the maximum extent practicable will our treasured publictrust resources be protected to the maximum extentpracticable.

By not correcting the majority’s holding through en bancreview, we have let stand a decision that misapplies coreprinciples of administrative and environmental law, and haveset a dangerous precedent of deferring to a federal agency’sview of its own discretion, even when a statute is notambiguous. I respectfully dissent.

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IN THE UNITED STATES DISTRICT COURT FOR

THE SOUTHERN DISTRICT OF WEST VIRGINIA

HUNTINGTON DIVISION

OHIO VALLEY ENVIRONMENTAL

COALITION, INC.,

SIERRA CLUB,

WEST VIRGINIA HIGHLANDS

CONSERVANCY, INC. and

VIRGINIA RIVERS COALITION,

Plaintiffs,

v. CIVIL ACTION NO. 3:15-0271

GINA MCCARTHY, Administrator,

United States Environmental Protection Agency and

SHAWN M. GARVIN, Regional Administrator,

United States Environmental Protection Agency,

Region III,

Defendants.

MEMORANDUM OPINION AND ORDER

Pending is a Motion by West Virginia Coal Association (“WVCA”) to intervene as a

defendant in this administrative review action. ECF No. 20. In this case, the Ohio Valley

Environmental Coalition (“OVEC”) and others (collectively “Plaintiffs”) have challenged an

action of the United States Environmental Protection Agency (“EPA”). Specifically, Plaintiffs

challenge EPA’s approval of the West Virginia Department of Environmental Protection’s

(“WVDEP”) decision to not develop Total Maximum Daily Loads (“TMDLs”) for certain West

Virginia streams previously identified as “biologically impaired” due to “ionic stress.” Plaintiffs

seek an order that declares EPA’s approval in violation of law, and which requires EPA to develop

TMDLs for ionic toxicity for the identified streams. WVCA claims that its intervention in this case

is warranted as a matter of right under Federal Rule of Civil Procedure 24(a)(2), and alternatively,

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permissibly under Rule 24(b). Plaintiffs oppose WVCA’s intervention in this case, and EPA takes

no position on intervention. For the reasons offered below, the Court DENIES WVCA’s Motion

to Intervene but GRANTS WVCA amicus curiae status in this action.

I. Background

A. Clean Water Act

For the sake of deciding this motion, some background on the Clean Water Act (“CWA”)

is in order. The CWA is intended “to restore and maintain the chemical, physical, and biological

integrity of the Nation's waters” and to attain “water quality which provides for the protection and

propagation of fish, shellfish, and wildlife.” 33 U.S.C. § 1251(a). The CWA prohibits anyone from

discharging pollutants from “point sources” into bodies of water unless the discharging entity does

so in compliance with a National Pollution Discharge Elimination System (“NPDES”) permit. 33

U.S.C. § 1311(a); 1342(a); 1362(12), (14). An NPDES permit grants the holder a right to discharge

pollutants in amounts below thresholds set in the permit. 33 U.S.C. § 1311(b), 1342(a); 40 C.F.R.

§ 122.1 et seq. The State of West Virginia, through the WVDEP, administers NPDES permits for

point sources within its jurisdiction. W. Va. Code § 22-11-4.

The CWA also requires each state to establish water quality standards consistent with the

CWA’s requirements for bodies of water within the state's boundaries. 33 U.S.C. § 1313(a)(3)(A),

(b), (c). These standards include water quality criteria, in narrative form, numeric, or both, which

define the amounts of pollutants that may be discharged into specific water bodies. 33 U.S.C. §

1313(c)(2)(A); 40 C.F.R. § 131.10–12. The water quality criteria are set so that specified water

bodies may maintain their designated beneficial uses. 33 U.S.C. § 1313(c)(2)(A); 40 C.F.R. §§

130.2(d), 131.10–12. When existing pollution controls in a water body are not stringent enough to

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meet applicable water quality standards, that water body must be classified by the state as

“impaired.” 33 U.S.C § 1313(d)(1); 40 C.F.R. § 130.7.

In Section 303(d), the CWA requires that states establish a list of impaired water bodies

within their boundaries. 33 U.S.C § 1313(d)(1); 40 C.F.R. § 130.7. States must submit this “303(d)

list” to EPA every two years for approval, and within 30 days of the submission, EPA must

approve, disapprove, or partially disapprove the state's 303(d) list. 33 U.S.C. § 1313(d)(2); 40

C.F.R. § 130.7(d)(2). If EPA disapproves a state's 303(d) list, EPA must establish a list of waters

that should have been included in the state’s list, and it must populate this corrected list within 30

days of the date of disapproval. 33 U.S.C. § 1313(d)(2); 40 C.F.R. § 130.7(d)(2). In populating its

list, EPA must solicit and consider public comment on what waters should have been labeled

impaired. 40 C.F.R. § 130.7(d)(2).

For water bodies classified impaired in a state’s 303(d) list, the state must establish a total

maximum daily load (“TMDL”) for any pollutant “preventing or expected to prevent attainment

of water quality standards.” 33 U.S.C. § 1313(d)(1)(C); 40 C.F.R. § 130.7(c)(1)(ii). A TMDL sets

the maximum amount of a pollutant that may be discharged into an impaired water body from all

point sources combined without exceeding water quality standards. See 40 C.F.R. § 130.2(i)

(stating a TMDL is “[t]he sum of the individual [waste load allocations or “WLAs”] for point

sources and [load allocations or “LAs”] for nonpoint sources and natural background”); see also

Ctr. For Biological Diversity v. EPA, No. 13-1866, 2014 WL 636829, at *2 (W.D. Wash. Feb. 18,

2014) (citing Dioxin/Organochlorine Ctr. v. Clarke, 57 F.3d 1517, 1520 (9th Cir. 1995)). TMDLs

themselves do not regulate specific sources of pollutants, as in how much of a pollutant an

individual may discharge into a water body; but instead, TMDLs are used by states in designing

and implementing other pollution control measures, such as water quality management plans and

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the entire framework for granting or denying NPDES permits. See 33 U.S.C. § 1313(e) (describing

continuing planning process in which states must engage); 40 C.F.R. § 130.6 (water quality

management plans), 130.7 (explaining process for “incorporating the approved [TMDLs] into the

State's water quality management plans and NPDES permits”); see also Ctr. For Biological

Diversity, 2014 WL 636829, at *2 (citing Pronsolino v. Nastri, 291 F.3d 1123, 1129 (9th Cir.

2002).

After being calculated, the state’s TMDLs must be subject to public review. 40 C.F.R. §

130.7(c)(1)(ii). Following public review, the state must submit its TMDLs to EPA for review, and

EPA must either approve or disapprove the submission. 33 U.S.C. § 1313(d)(2). If the state fails

to establish a TMDL deemed necessary by EPA, EPA must calculate that TMDL, seek public

comment on EPA’s proposed TMDL, consider the comments received, and submit EPA’s final

TMDL to the state for incorporation into the state’s water quality management plan. 40 C.F.R. §

130.7(d)(2).

Based on the TMDL for a given water body, the state determines WLAs for that water

body, which establishes the maximum amount of a designated pollutant that a specific entity may

discharge through a point source into that water body. 40 C.F.R. § 130.2(h) (WLA is “[t]he portion

of a receiving water’s loading capacity that is allocated to one of its existing or future point sources

of pollution. WLAs constitute a type of water quality-based effluent limitation.”). Thus, a WLA is

a type of effluent limitation placed on specific discharging entities, and it is imposed by the

WVDEP through the NPDES permit. W. Va. Code § 22-11-4(a)(1); W. Va. Code R. § 47-10-3.1,

3.4.

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B. WVCA’s allegations1

WVCA is a trade association that represents coal producers and ancillary businesses.

Memo. of Law in Supp. of Mot. to Intervene 2, ECF No. 21 [Hereinafter WVCA’s Memo. in Supp.].

WVCA represents West Virginia’s coal industry, as well as the thousands of individuals who mine

and depend on coal in West Virginia, the nation’s second largest coal producing state. Id. A number

of WVCA members conduct mining operations in West Virginia and hold NPDES permits for

water discharges from those operations. Id. The NPDES permits allow WVCA permit holders to

discharge pollutants from point sources into specific West Virginia water bodies. Id

In the years 2009, 2012, and 2014, WVDEP submitted for EPA’s approval TMDLs set for

streams in certain regions of West Virginia. See Compl. ¶¶ 2, 64, 65. WVDEP’s submissions for

those years did not include any TMDL for water bodies that, according to Plaintiffs, are impaired

by “ionic stress.” Compl. ¶ 3. This omission was due to the fact that WVDEP has never before

instituted a TMDL for ionic stress, and EPA has never required WVDEP to do so. Compl. ¶ 5;

WVCA’s Memo. in Supp. 2. WVDEP has refused to develop TMDLs for ionic stress on the ground

that “[t]here is insufficient information available regarding the causative pollutants and their

associated impairment thresholds for biological TMDL development for ionic toxicity at this

time.” Compl. ¶ 28.

According to Plaintiffs, ionic stress occurs when certain pollutants are discharged into

water bodies. WVDEP determined that “ionic toxicity is a significant stressor,” and “a strong

presence of sulfates and other dissolved solids exists in those waters where ionic toxicity has been

determined to be a significant biological stressor.” Compl. ¶ 30. Plaintiffs allege that water bodies

1 For the sake of deciding this motion, the Court accepts as true the following facts alleged by

WVCA.

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in West Virginia’s submission to EPA have been identified by WVDEP as biologically impaired

due to ionic stress. Compl. ¶ 27, 35; see also ¶¶ 41, 45, 57. But the information about ionic stress’s

causative pollutants is limited, and thus, according to WVDEP, appropriate thresholds related to

ionic stress are also undefined at this time. Compl. ¶ 30. Regardless of this limited information,

Plaintiffs assert the CWA requires that WVDEP develop TMDLs even in the face of a “lack of

knowledge.” Compl. ¶ 20, 85, 89, 93, 97, 101, 106.

In bringing this action, Plaintiffs seek an order that (1) declares EPA’s approval of

WVDEP’s decision to not establish ionic stress TMDLs in violation of a nondiscretionary duty

that EPA has, specifically a duty to establish TMDLs for ionic stress in light of WVDEP’s failure

to do so, and (2) requires EPA to develop TMDLs for ionic stress for the identified streams.

WVCA claims the imposition of TMDLs sought in this action will necessarily result in

effluent limits being placed on WVCA members NPDES permits, and these effluent limits would

necessarily have a significant and pervasive effect on WVCA members’ businesses interests.

WVCA’s Memo. in Supp. 1–2. Specifically, WVCA believes TMDLs for ionic stress would

necessarily lead to WVDEP’s placing effluent limits on WVCA member NPDES permits, and

these limits would, in turn, necessarily diminish the value of coal reserves and property held by

WVCA members. Id. at 2. Additionally, these expected effluent limits would necessarily require

WVCA members to design and implement costly and complex water treatment technology in order

to comply with their NPDES permits. Id. Therefore, WVCA claims that if this Court grants

Plaintiffs the relief sought, the Court’s order would jeopardize WVCA members’ ability to

“maintain their businesses.” Id.

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II. Legal Standard

“[L]iberal intervention is desirable to dispose of as much of a controversy ‘involving as

many apparently concerned persons as is compatible with efficiency and due process.’” Feller v.

Brock, 802 F.2d 722, 729 (4th Cir. 1986) (citing Nuesse v. Camp, 385 F.2d 694, 700 (D.C. Cir.

1967)). Liberality does not, however, entail resolving every possible doubt in favor of intervention,

and Federal Rule of Civil Procedure 24 sets standards for intervention that must be observed and

applied thoughtfully by courts. 7C Charles Alan Wright & Arthur R. Miller, Federal Practice and

Procedure § 1904 (3d ed.), Westlaw (database updated April 2015).

Rule 24 provides two avenues for non-parties to timely intervene in an ongoing suit. Fed.

R. Civ. P. 24. Under Rule 24(a)(2), a non-party may intervene as a matter of right if it can

demonstrate “an interest in the subject matter of the action; [] that the protection of this interest

would be impaired because of the action; and [] that the applicant's interest is not adequately

represented by existing parties to the litigation.” Stuart v. Huff, 706 F.3d 345, 349 (4th Cir. 2013)

(quoting Teague v. Bakker, 931 F.2d 259, 260–61 (4th Cir. 1991)). When intervention of right is

not warranted, a court may nevertheless grant permissive intervention under Rule 24(b) if the non-

party has a claim or defense that shares a common question of law or fact with the main action.

Fed. R. Civ. P. 24(b).

III. Discussion

WVCA argues that it fulfills the criteria to intervene under both 24(a)(2) and (b). Plaintiffs

oppose intervention on both grounds, and EPA has not indicated whether it opposes or supports

WVCA’s intervention. After applying 24(a)(2) and (b) below, the Court concludes that WVCA’s

intervention in this case is not warranted. First, the Court deals with whether WVCA has a right to

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intervene under 24(a)(2). Then, the Court turns to whether it may permit WVCA to intervene

permissively under 24(b). Lastly, the Court considers granting WVCA amicus status in this action.

A. Intervention of right under 24(a)(2)

WVCA argues it should be granted intervention under Rule 24(a)(2) because it has satisfied

all requirements for intervention of right. Federal Rule of Civil Procedure 24(a)(2) entitles a non-

party to intervene as a matter of right if:

the applicant claims an interest relating to the property or transaction

which is the subject of the action and the applicant is so situated that

the disposition of the action may as a practical matter impair or

impede the applicant's ability to protect that interest, unless the

applicant's interest is adequately represented by existing parties.

Fed. R. Civ. P. 24(a)(2). The Fourth Circuit has held 24(a)(2) requires: (1) a timely motion to

intervene; (2) the applicant has an interest in the subject matter of the action; (3) the protection of

this interest would be impaired because of the action; and (4) the applicant's interest is not

adequately represented by existing parties to the litigation. Alt v. EPA, 758 F.3d 588, 591 (4th Cir.

2014) (motion to intervene must be timely in order to be granted); Stuart, 706 F.3d at 349; Teague,

931 F.2d at 261 (citing Virginia v. Westinghouse Elec. Corp., 542 F.2d 214, 216 (4th Cir. 1976)).

Based on the analysis below, this Court concludes that, although WVCA’s motion is

timely, WVCA members do not have a significantly protectable interest in this litigation; the

members’ ability to protect their purported interest will not be impaired by disposition of this

action; and WVCA has not met its burden to show an existing party—EPA, a government entity—

does not represent the interest WVCA claims to have in this litigation. For these reasons, the Court

concludes that WVCA does not have a right to intervene under 24(a)(2).

1. Timely Motion to Intervene

WVCA contends its Motion to Intervene is timely brought. The Court agrees. In

determining whether a motion to intervene is timely, district courts have wide discretion and must

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consider, at a minimum: (1) how far the suit has progressed prior to the motion; (2) the prejudice

which delay might cause other parties; and (3) the reason for any tardiness in moving to intervene.

Alt, 758 F.3d at 591; Gould v. Alleco, Inc., 883 F.2d 281, 285 (4th Cir. 1989) (citing NAACP v.

New York, 413 U.S. 345, 365–66 (1973). Ultimately, the purpose of the timeliness requirement is

to prevent a tardy non-party from derailing a lawsuit within sight of its terminus. Scardelletti v.

Debarr, 265 F.3d 195, 202 (4th Cir. 2001), rev'd on other grounds, Devlin v. Scardelletti, 536 U.S.

1 (2002).

In this case, WVCA’s Motion to Intervene is timely brought. First, other than filing the

Complaint, Amended Complaint, and Answer, no other action had taken place in this case before

WVCA filed its motion to intervene. No other person or entity moved to intervene prior to

WVCA’s motion. To this date, the Court has yet to issue a scheduling order, and discovery has not

commenced; no formal settlement negotiations have taken place; and no motion to dismiss has

been decided. Hence, prior to WVCA’s Motion to Intervene, the suit had not progressed beyond

the pleadings, and it certainly had not reached an “advanced stage,” see Alt, 758 F.3d at 591.

Second, because the proceeding is in its infancy, no existing party has been prejudiced by the time

it took for WVCA to file its motion to intervene. WVCA, having brought its motion approximately

four months after the Complaint was filed, see Compl., ECF No. 1; Mot. By W. Va. Coal Assoc.

to Intervene as Def., ECF No. 20, did not deliberately forebear filing its motion. Because the suit

was in its infancy when WVCA filed its motion to intervene, and because the existing parties were

not prejudiced in any way by the time it took for WVCA to file its motion to intervene, the Court

finds WCA’s Motion to Intervene is timely brought under Rule 24.

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2. Significantly Protectable Interest in the Subject Matter of this Litigation

WVCA argues its members have significantly protectable interests in the subject matter of

this administrative review action. This Court concludes otherwise below. In the following

paragraphs, the Court will explain the sort of interest Rule 24(a)(2) contemplates, consider whether

WVCA’s interest could constitute such an interest, and then decide whether WVCA has a

contingent economic interest under the Fourth Circuit’s previous decisions.

To have a right to intervene under Rule 24(a)(2), a would-be intervenor must have “an

interest relating to the property or transaction which is the subject of the action.” Fed. R. Civ. P.

24(a)(2). 2 While the Rule itself does not specify the nature of the “interest” required for

intervention of right, the Supreme Court has clarified that 24(a)(2) requires a “significantly

protectable interest.” Donaldson v. United States, 400 U.S. 517, 531 (1971).

The Fourth Circuit has not iterated a single standard for determining whether an interest is

significantly protectable, although it has provided guidance. An applicant has a significantly

protectable interest in an action if it “stand[s] to gain or lose by the direct legal operation” of a

judgment in that action. Teague, 931 F.2d at 261. And “an interest [in an action that is] contingent

upon the outcome of other pending litigation constitutes a ‘significantly protectable interest,’” even

though the interest may be destroyed by the result of that other litigation. See Morgantown Energy

Assoc.s v. Pub. Serv. Comm'n of W. Va., No. 12- 6327, 2013 WL 140235, at *3 (S.D.W. Va. Jan.

10, 2013) (citing Teague, 931 F.2d at 261). Standing to gain or lose by direct operation of a

judgment may not be a necessary condition for an interest to be significantly protectable, i.e., there

may be interests more remote that are nonetheless protectable under 24(a)(2), but this standard

2 Associations may intervene to assert their members’ interest. See, e.g., Sierra Club v. Hazardous

Waste Treatment Council, 945 F.2d 776 (4th Cir. 1991).

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provides guidance for determining whether an applicant has a significantly protectable interest in

a given action.

The Advisory Committee Notes elucidate further the Committee’s intended meaning of

“interest” in Rule 24. The Note states, “an applicant is entitled to intervene in an action when his

[or her] position is comparable to that of a person under 19(a)(2)(i).” Fed. R. Civ. P. 24, advisory

committee’s note to 1966 amendment. Looking to the 1966 version of Rule 19(a)(2)(i), that section

provided, “a person . . . shall be joined as a party . . . if . . . he claims an interest relating to the

subject of the action and is so situated that disposition of the action in his absence may impair or

impede his ability to protect that interest.” Fed. R. Civ. P 19(a)(2)(ii) (1966). Thus, the Advisory

Committee intended for courts to use criteria for joinder of necessary parties in deciding whether

a party has a significantly protectable interest in pending litigation. This suggests that an applicant

should be permitted intervention as of right under 24(a)(2) only in those situations when the

applicant would be a necessary party under today’s Rule 19(a)(1)(B)(i).3

WVCA asserts it has a significantly protectable interest in this litigation because TMDLs

developed as result of this litigation “would have a significant and pervasive effect on WVCA

members’ businesses.” Memo. in Supp. 4. WVCA’s rationale begins by noting that Plaintiffs seek

a ruling requiring EPA to promulgate TMDLs for “ionic toxicity,” which would be imposed on

streams in West Virginia identified as “biologically impaired.” WVCA speculates that imposition

3 The Fourth Circuit has indicated that Rule 19(a)(1)(B)(i) directs courts to consider the non-joined

party’s ability to protect its interests if not joined to the litigation in which the non-party asserts an

interest. Home Buyers Warranty Corp. v. Hanna, 750 F.3d 427, 434 (4th Cir. 2014); see also Ohio

Valley Envtl. Coal., Inc. v. Maple Coal Co., 808 F. Supp. 2d 868, 889 (S.D.W. Va. 2011); Ohio

Valley Envtl. Coal., Inc. v. Hobet Mining, LLC, 723 F. Supp. 2d 886, 915 (S.D.W. Va. 2010). Since

that analysis takes place under another prong of 24(a)(2), the Court does not consider under this

prong WVCA’s ability to protect its members’ interests outside of this litigation. See infra, Part

III.A.3.

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of these TMDLs will certainly result in effluent limits for conductivity, and furthermore, these

effluent limits will be placed on NPDES permits held by some of WVCA’s members. Conductivity

effluent limits placed on WVCA member permits will in turn, according to WVCA, necessarily

(1) diminish the value of coal reserves and property held by WVCA members, and (2) require

members to design and implement costly water treatment technology in order to comply with the

effluent limits. Thus, the business interests that WVCA claims to have in this action are interests

in the value of property and coal reserves, and an interest in avoiding costly water treatment

procedures that might be required by effluent limits. In sum, WVCA asserts that as a result of a

ruling favorable to Plaintiffs, its members will certainly be subject to stricter regulations and

thereby suffer reduced property values and increased costs of chemical treatment. On this basis,

WVCA claims it has a significantly protectable interest in avoiding an order requiring

promulgation of TMDLs.

Plaintiffs oppose intervention by WVCA and point out that WVCA’s asserted interest is

nearly identical to the interests rejected as insufficient by the United States District Court for the

Western District of Washington in Center for Biological Diversity v. EPA, No. 13-1866, 2014 WL

636829 (W.D. Wash. Feb. 18, 2014). In Center for Biological Diversity, the plaintiff brought an

action against EPA seeking a declaration that EPA’s approvals of Section 303(d) lists submitted

by Oregon and Washington were unlawful. For relief, the plaintiff sought an order compelling

EPA to identify additional waters to be placed on Washington and Oregon’s lists. Id. at *2. Two

industry groups attempted to intervene, asserting that if the plaintiff were to prevail, some of their

members would face stricter or additional regulation and would likely incur significant increased

capital and operating costs necessary to comply with these new regulatory requirements. Id. at *3.

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The Washington district court in Center for Biological Diversity decided the industry

groups’ claimed interest relating to TMDLs was too attenuated to be significantly protectable

under Rule 24(a)(2). Id. at *4. The court rejected the industry groups’ claim that new TMDLs

would necessarily result in stricter regulations in their members’ permits, observing that:

[a] TMDL does not, by itself, prohibit any conduct or require any

actions. Instead, each TMDL represents a goal that may be

implemented by adjusting pollutant discharge requirements in

individual NPDES permits or establishing nonpoint source controls.

. . Although NPDES permits must, as a whole, contain limitations

that are consistent with the wasteload allocations established in

TMDLs, the state retains discretion in determining how the pollutant

load is allocated among the various sources . . .

Id. (internal quotations and citations omitted). Consequently, the court concluded that too many

steps—“steps that involve nebulous ‘goals’ and the discretion of two public agencies”—lie

between a possible order requiring additional TMDLs and any potential new restrictions in permits

for the would-be intervenors’ interests to be direct enough to constitute a significantly protectable

interest. Id.

The court in Center for Biological Diversity went on to rule that the mere possibility that

a suit could lead to more stringent regulations imposed on NPDES permits does not constitute an

interest sufficient to warrant a right to intervene. Id. at 5. At best, a permit holder might have a

remote economic interest in the litigation, one shared by every entity that possesses a permit to

discharge into water bodies in the subject state. Id. The court agreed with other courts that, “an

undifferentiated, generalized interest in the outcome of an ongoing action is too porous a

foundation on which to premise intervention as of right.” Id. at 6 (citing S. California Edison Co.

v. Lynch, 307 F.3d 794, 803 (9th Cir. 2002) modified by, 307 F.3d 943 (9th Cir. 2002); ManaSota–

88, Inc. v. Tidwell, 896 F.2d 1318, 1322 (11th Cir. 1990)).

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Center for Biological Diversity also considered and rejected an argument that reversing

EPA’s decision would adversely affect permit holders’ real property values. Id. at 7. The industry

groups provided no explanation for their diminished property value theory other than alleging that

a ruling reversing EPA’s decision would adversely affect their property values. Id. The court

rejected the industry groups’ argument that they had sufficient interests in the litigation stemming

from expected diminished property values. Id First, the court noted the suit was not one where an

adverse ruling would impair or restrict the use of any permit holder’s real property, then it found

the groups failed to allege how the suit could negatively affect permit holders’ property. Id.

This Court finds Center for Biological Diversity instructive and its reasoning persuasive.

Relief for Plaintiffs in this case would not necessarily directly or indirectly affect any interest held

by WVCA members. 4 If Plaintiffs receive a favorable ruling, whether permit revisions are

required at all is a decision that will be made at the discretion of federal and state agencies after

several steps of administrative processes subject to public comment or review. For instance,

assume Plaintiffs get the relief they seek—an order requiring EPA to develop TMDLs for ionic

toxicity for certain West Virginia streams. In that event, the Court’s order would only mandate

that EPA begin the administrative process of promulgating TMDLs for conductivity.5 After EPA

4 The Court notes that having an existing NPDES permit at stake in an action can confer a

significantly protectable interest in that suit. See Sierra Club v. EPA, 995 F.2d 1478, 1486 (9th

Cir. 1993), abrogated on other grounds by, Wilderness Soc., 630 F.3d 1173. However, this case

does not directly challenge or directly affect any existing permit held by WVCA members, nor

would its disposition for or against Plaintiffs necessarily change conditions imposed by WVDEP

in existing permits or permit applications. 5 EPA would promulgate TMDLs by informal rulemaking, see 5 U.S.C. § 553(c) (mandating

formal rulemaking procedures if statute requires rulemaking after hearing on record); 33 U.S.C. §

1313(d)(2) (not requiring rulemaking or adjudication after hearing on record, i.e., formal

rulemaking or adjudication), and WVCA members would be entitled to at least participate in notice

and comment procedures required by EPA’s regulations, see 40 C.F.R. 130.7(d)(2) (“Regional

Administrator shall promptly issue a public notice seeking comment on such listing and

loadings.”).

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promulgates TMDLs, WVDEP would then be tasked with deciding whether the TMDLs

necessitate effluent limits on affected streams in West Virginia.6 On one hand, it is possible that

TMDLs crafted by EPA will require effluent limits, but at this stage, it is just as possible that

TMDLs would not necessitate any effluent limits. If effluent limits are required, WVDEP would

undergo the administrative process of deciding how to revise existing permits, if that is necessary

at all, and how to impose new effluent limits on new permit applications.7 In deciding how to

impose effluent limits for each stream, WVDEP will decide how to spread effluent limits across

multiple point sources discharging into the same water body.8 Thus, at a glance, this Court cannot

even begin to speculate on several matters that are pertinent to whether this Court’s ruling will

have any effect at all down the road on WVCA members’ permits, much less their property values

and treatment obligations.9 These unanswered questions are wholly outside the scope of this

litigation, making WVCA’s interests well outside the scope as well. Because WVCA members’

6 See 33 U.S.C. § 1313(d)(2) (“If the Administrator disapproves [state submitted TMDLs], [the

administrator] shall . . . establish such loads for such waters . . . and upon such . . . establishment

the State shall incorporate them into its current plan under subsection (e) of [§ 1313]”); 33 U.S.C.

§ 1313(e) (plans for navigable waters include effluent limitations); see also 40 C.F.R. § 130.5. 7 See W. Va. Code § 22-11-6 (“water quality standards themselves shall not be considered

‘effluent standards or limitation’ . . . and shall not be independently or directly enforced or

implemented except through the development of terms and conditions of a permit issued pursuant

to this article”). 8 See 33 U.S.C. § 1342(b) (state permit programs must issue permits in compliance with effluent

limitations standards set forth at 33 U.S.C. § 1311); 40 C.F.R. § 130.2(h) (providing that WLA, a

type of effluent limitation, is the portion of a TMDL allocated to a point source); W. Va. Code §

22-11-11 (stating permits will be issued if applicant seeking permit will not violate any effluent

limits); see generally 40 C.F.R. § 130.5 (state’s continuing planning process requires development

of TMDLs, effluent limits, and establishing priorities for NPDES permit issuance). 9 For instance, if TMDLs must be developed, what will their content be? Will TMDLs crafted as

result of this case necessitate any effluent limits for any West Virginia streams at all? If so, what

will be the substance of those effluent limits? How will WVDEP decide to impose effluent limits

in existing permits or permit applications? And the greatest question is: Will WVDEP’s decision

to institute effluent limits have any effect at all on WVCA members’ property interests or treatment

obligations?

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predicted permit changes will occur, if at all, not until after multiple interim steps have been taken

by federal and state administrative agencies, a judgment for Plaintiffs would not necessarily affect

WVCA members’ NPDES permits, much less their property values, coal worth, or treatment

obligations. Thus, WVCA members will not gain or lose directly by the disposition of this case.

See Teague, 931 F.2d at 261.

Furthermore, cases denying motions to intervene in circumstances similar to WVCA’s are

legion; the Court will briefly consider the applicability of four such cases here. First, in Oregon

Environmental Council v. Oregon Department of Environmental Quality, 775 F.Supp. 353 (D.Or.

1991) the district court concluded that industries holding permits from the Oregon environmental

protection agency were not entitled to intervene as a matter of right in a lawsuit against the agency

alleging that it had issued the permits in violation of the Clean Air Act. The industries did not have

a significantly protectable interest, according to the court, because in suits “brought to require

compliance with federal statutes . . . , the governmental bodies charged with compliance can be

the only defendants.” Or. Envtl. Council, 775 F.Supp. at 358 (internal quotations and citations

omitted). In this case, EPA is the governmental body charged with complying with the CWA. The

subject matter of this action is an agency decision. WVCA does not have an interest in defending

an agency decision—EPA’s approval of a decision to not effectuate TMDLs—because that

decision is an agency matter, and the decision does not pertain specifically to WVCA members’

permits. Nor is the substantive content of TMDLS the subject of this lawsuit. WVCA members’

business interests in the content of TMDLs therefore do not relate directly to the transactions that

are the subject of this action, a federal agency’s decision approving the decision of a state agency.

See Our Children's Earth Found. v. EPA, No. 05-05184, 2006 WL 1305223, at *3 (N.D. Cal. May

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11, 2006). Thus applying the reasoning of Oregon Environmental Council, WVCA cannot serve

as a defendant in an action where EPA is the defendant asserting its compliance with the CWA.

Second, the interest of the general business trade association held insufficient in United

States v. Metropolitan St. Louis Sewer District, 569 F.3d 829 (8th Cir. 2009) mirrors WVCA’s

interest in this action. In Metro. St. Louis Sewer District, a business trade association was not

entitled to intervene as of right in an enforcement action brought under the CWA by the United

States and the State of Missouri against an agency managing the City of St. Louis's sewer and

waste-water system. The Fifth Circuit ruled the association lacked a significantly protectable

interest because, although a ruling in the case could affect the association’s members' economic

interests, this interest was too tangential to the core issues of the enforcement case to establish the

association's right to intervene under Rule 24(a). Metro. St. Louis Sewer Dist., 569 F.3d at 839–

40. Here, WVCA asserts that a ruling in Plaintiffs’ favor in this administrative review action could

have an economic impact on their property, coal reserves, and water treatment obligations.

Looking to Metro St. Louis Sewer District for guidance, WVCA’s remote economic interest in this

administrative review case is tangential to the core issue of an enforcement action under the CWA.

Id.

Third, Upper Chattahoochee Riverkeeper Fund, Inc. v. City of Atlanta, 224 F.R.D. 694,

700 (N.D. Ga. 2004) rejected as insufficient an interest of taxpayers in a case under the CWA that

is very closely related to WVCA members’ interests in this action. In Upper Chattahoochee

Riverkeeper Fund, an association of taxpayers did not have a right to intervene in an action to

enforce the City of Atlanta's compliance with the CWA. The taxpayers alleged interests based on

the expected financial impact on them resulting from water improvement projects necessitated by

the consent decrees between the parties. The court held this interest was not significantly

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protectable. Although the members would be economically affected by the consent decrees, the

taxpayer’s interests, were “only peripherally related to the subject matter of the litigation.” Upper

Chattahoochee Riverkeeper Fund, 224 F.R.D. at 701. In this case, WVCA asserts that TWMDLs

could lead to effluent limits that could lead to NPDES permit revisions that could lead to an

economic impact on WVCA members’ businesses. This sort of interest in avoiding a far-off

possible economic impact is, applying the reasoning from Upper Chattahoochee Riverkeeper

Fund, a peripheral economic interest insufficient to constitute a significantly protectable interest

under 24(a)(2). Id.

Finally, Wildearth Guardians v. United States Forest Service, 573 F.3d 992 (10th Cir.

2009) clarifies what sort of economic interest is significantly protectable in an administrative

review action like this one, and WVCA members do not have such an interest in this litigation. In

Wildearth Guardians, a coal mine owner had an interest sufficient to intervene as of right in an

environmentalist organization's action challenging the U.S. Forest Service's (USFS) decision

approving the owner’s plans for expanding the mine and for venting methane gas from it. The

owner had a significantly protectable interest in the litigation challenging USFS’s decision

regarding his mine because the mine’s operations would be impaired, or even halted, if the

environmentalists obtained the relief they sought—a declaration that USFS’s approval violated

federal law and an injunction against expansion and venting. Wildearth Guardians, 573 F.3d at

995–96. In this case, Plaintiffs are not challenging EPA’s approval of plans submitted by any

WVCA member, an EPA decision regarding a WVCA member’s permit, or any EPA action that

otherwise bears directly or even closely on any WVCA member’s mine, property, or treatment

procedures. If Plaintiffs were challenging an EPA decision bearing directly on a WVCA member’s

permit, mine, property, or treatment procedures, most likely the mine owner, and maybe WVCA,

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would be entitled to intervene as of right. However, this case is different from Wildearth

Guardians; here, Plaintiffs challenge an EPA decision that may at some point in the distant future

tangentially affect some property, coal mines, or treatment processes of WVCA members. That

remote possibility of an interest affected by this Court’s decision is too speculative to find WVCA

has a significantly protectable interest in this litigation. See Ctr. for Biological Diversity, 2014 WL

636829, at *4; see also Teague, 931 F.2d at 261.

Next, the Court considers whether WVCA members have the sort of contingent economic

interest that the Fourth Circuit has previously held sufficient for intervention of right. WVCA

asserts that the Fourth Circuit has expressly recognized the sort of “contingent economic interests”

espoused by WVCA as sufficient to warrant intervention of right under 24(a)(2). WVCA supports

its proposition by citing JLS, Inc. v. Public Service Commission of West Virginia, 321 Fed. Appx.

286, 289-90 (4th Cir. 2009) (unpublished per curiam opinion) and Feller, 802 F.2d at 722.

Assuming the Fourth Circuit has recognized contingent economic interests as interests within the

meaning of 24(a)(2), see City of New Martinsville v. Pub. Serv. Comm. of W. Va., No. 12- 1809,

2012 WL 6694078, at *3 (S.D.W. Va. Dec. 21, 2012) (citing Teague, 931 F.2d at 259), WVCA’s

interests fall outside the scope of any contingent economic interest previously recognized by the

Fourth Circuit. Immediately below, the Court explains why it finds that WVCA’s interest in this

action is distinguishable from the contingent interests found sufficient in JLS, Feller, and Teague.

The interest the Fourth Circuit found sufficient in JLS is different from the interest asserted

by WVCA in this case because WVCA’s interest, unlike the interest in JLS, is contingent upon

several steps of multiple agencies’ decision making.10 The Fourth Circuit in JLS held that several

10 As an initial matter, this Court notes that JLS has little precedential value, since it is unpublished

and therefore is not binding authority to be applied in this case. Nonetheless, the Court will

consider the extent to which the interest found sufficient in JLS is comparable to any interest

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passenger transportation companies, all in competition with the plaintiff passenger carrier

company, had an economic interest sufficient for intervention of right in a suit brought against a

state public service commission to declare the plaintiff exempt from state regulations of the

passenger carrier industry. JLS, 321 Fed. Appx. at 290. The Fourth Circuit held the companies had

a significantly protectable interest because the suit would determine the level of competition the

companies would face, and thereby, the amount of income they could expect to earn. Id. The

economic injury directly threatened by one possible outcome of the litigation gives rise to a

significantly protectable interest. See id. (citing Utahns for Better Transp. v. U.S. Dep't of Transp.,

295 F.3d 1111, 1115 (10th Cir. 2002)). In the instant case, any potential harm to WVCA members

is much more speculative and more remote than the possible harm in JLS. Unlike the prospect of

harm to WVCA members in this case, the harm threatened to the JLS intervenors was certain to

follow if the court entered judgment in favor of the plaintiff. The certainty of the economic harm

in JLS was guaranteed by sound principles of business: an increase in competition results in a

decrease in wages for the intervenors. All other things being equal, that is a proven-to-be-true

principle of business. There is no such certainty of harm to WVCA members’ business interests in

this case. A ruling for Plaintiffs in this case would only require EPA to take an action, which one

can only speculate as to whether that action will, after a series of decisions by EPA and WVDEP,

even have any effect at all on WVCA members. On this basis, the Court finds JLS distinguishable

from the present action.

For similar reasons, the interest the Fourth Circuit found sufficient in Feller is different

from the interest asserted by WVCA in this action. In Feller, the Fourth Circuit held that three

categories of domestic apple pickers had a significantly protectable interest in a suit brought by

WVCA members have in this case.

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apple growers against the Department of Labor over its decision to deny certifications to the

growers. Feller, 802 F.2d at 729–30. The domestic pickers in the first group had a sufficient

economic interest in the litigation, the Fourth Circuit ruled, because if the action was decided in

the plaintiffs’ favor, the first group would have its wages directly affected by the court’s order. Id.

The second group had a sufficient economic interest because, as a result of a possible judgment

for the plaintiffs, they would lose wages due to increased competition that was certain to follow a

ruling in plaintiffs’ favor. Id. at 730. The third group had a sufficient interest, namely an interest

in preventing conflicting orders. Id. This case does not involve the sort of contingent economic

interest that Feller found sufficient for intervention of right. Any potential harm to WVCA

members is far more speculative and more remote than the harm threatened to the Feller

intervenors. Unlike the prospect of harm to WVCA members in this case, the economic harm

threatened to the first two groups of intervenors in Feller was certain to follow a judgment in the

plaintiffs’ favor. If the district court in Feller entered judgment for plaintiffs, and required DOL to

permit the growers to pay pickers at wages not set by DOL, the first group would have had their

wages directly affected by that order because their earnings were contingent upon the DOL-set

wage. Id at 729–30. The second group would have had their wages directly affected by the court’s

order because their wages were contingent upon foreign workers being either unavailable for work

or available only at a higher wage, which the court’s ultimate judgment would decide; notably, if

the court ruled in favor of the defendants, this necessarily would have resulted in a higher wage

for the intervenors. Id. Here, a ruling either way carries no certainty of harm or benefit to WVCA

members’ business interests. Granting Plaintiffs’ requested relief would only require EPA to take

an action—set TMDLs—which one can only speculate as to whether that action will, after a series

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of decisions by EPA and WVDEP, even have any effect at all on WVCA members. For this reason,

the Court finds Feller distinguishable from this case.

Lastly, the contingent economic interest found sufficient for intervention in Teague is

distinguishable from the interests asserted by WVCA here. In Teague, the Fourth Circuit found

the intervenors had a significantly protectable interest in the outcome of a case where a plaintiff-

insurance company sought a declaration that it was not liable to the intervenors under an insurance

policy for any claims asserted against it in a separate class action brought by the intervenors.

Teague, 931 F.2d at 261. In short, the Fourth Circuit ruled the plaintiff could not have its cake and

eat it too; the plaintiff could not seek a declaration finding it not liable to the intervenors, and then

argue the intervenors had an insufficient interest to oppose that declaration. Id. The Fourth Circuit

supported its holding by noting the intervenors stood to gain or lose directly from the district

court’s disposition of the coverage question placed before it by the plaintiff. See id. (“the Teague

Intervenors stand to gain or lose by the direct legal operation of the district court's judgment on

ERC's complaint”); see also id. (“If [the insurance company] prevails in this declaratory judgment

action, the [intervenors] would have to satisfy their judgment from other assets of the insureds and

the existence and amount of such assets are questionable.”).

Additionally, the Fourth Circuit in Teague noted the intervenors’ interest was subject to a

contingency, but nonetheless found the interest sufficient for intervention as of right. Id.

Specifically, the intervenor’s interest in the court’s declaratory judgment was contingent upon the

outcome of other pending litigation, namely the separate class action lawsuit brought by the

intervenors against the Teague plaintiff-insurance company. Id. If the intervenors were to lose that

other suit, they would have no interest in the declaration sought by the plaintiff in Teague. Id.

Thus, the contingency in Teague was that the intervenors had a merely provable, not-already-

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decided claim in another suit. See id. The Fourth Circuit decided such a contingency does not

prevent proposed intervenors from having a significantly protectable interest in litigation that

could extinguish that merely provable claim. Id. Notably, the Fourth Circuit was not concerned

about the contingent nature of the intervenor’s interest, mostly because the intervenors would be

affected by a declaration from the court in Teague that the plaintiff had no obligation under the

policy to the intervenors. See id. at 261-62. Thus, based on Teague, where a would-be intervenor

asserts an interest in a suit, the interest may be significantly protectable even though it is contingent

upon the outcome of another pending case.

In this case, the contingency present is entirely different from the contingency in Teague.

Even if this Court orders EPA to develop TMDLs, there can be no certainty that TMDLs will have

any effect on WVCA member’s property values, their coal reserve worth, or treatment costs. It

will take several steps by administrative agencies—developing TMDLs, promulgating effluent

limits, applying those limits to new and existing permits—before the intervenor’s business

interests could be affected down the causal chain by this Court’s order. WVCA stretches the

contingency approved in Teague beyond its breaking point. Teague approved a one-step away

contingency—if the intervenors lost their class action lawsuit, they would have had no interest in

the Teague litigation. Nonetheless, WVCA asks this Court to find one contingency (content of

TMDLs that possibly requires effluent limits) based on a second contingency (content of effluent

limits that possibly affects permits) based on a third contingency (WVDEP’s possible decision to

apply effluent limits in a manner that affects WVCA member permits, existing or non-existent)

based on a fourth contingency (WVDEP’s decision affecting WVCA member permits could

possibly adversely affect the members’ property values, coal reserve worth, or water treatment

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obligations) is a significantly protectable interest. The Court refuses to accept WVCA’s invitation

to dance the what-if.

Surely, nearly every decision of EPA related to water treatment could have some effect,

after several steps down the road, on WVCA members’ property values, coal reserve worth, or

treatment process obligations. But the Court cannot find a significantly protectable interest based

on that theory alone. There must be some limit to the contingencies that courts will accept for

purposes of finding an interest significantly protectable under 24(a)(2). Failure to place a limit on

the number of acceptable contingencies, accepting all contingencies in favor of intervenors, would

be tantamount to this Court’s approving intervention on the basis of the “Butterfly Effect.” See

Butterly Effect, WIKIPEDIA, https://en.wikipedia.org/wiki/Butterfly_effect (last visited Nov. 24,

2015) (“In chaos theory, the butterfly effect is sensitive dependence on initial conditions in which

a small change in one state of a deterministic nonlinear system can result in large differences in a

later state. The name of the effect . . . is derived from the [] example of the details of a hurricane

(exact time of formation, exact path taken) being influenced by minor perturbations such as the

flapping of the wings of a distant butterfly several weeks earlier.”). In ruling on motions for

intervention of right, courts could not function properly if they were required to find significantly

protectable interests based on multiple layers of contingency. This Court has no crystal ball. And

Teague neither equips courts with such, nor does it require courts to find interests are significantly

protectable when they are dependent upon multiple layers of contingency, such as WVCA

members’ purported interests in this case.11

11 Furthermore, the Court notes that finding WVCA has a significantly protectable interest in this

case would open the flood gates for WVCA’s intervention in almost any case challenging an EPA

decision pertaining to the CWA. If this Court were to find WVCA has a significantly protectable

interest in this action simply because the action has a remote possibility of affecting NPDES

permits held by WVCA members, the Court would be hard pressed to find any action reviewing

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Lastly, WVCA claims, in support of its argument that it has a sufficient interest in this

litigation to warrant intervention of right, the Fourth Circuit has “specifically recognized the right

of WVCA to intervene in regulatory challenges involving the mining industry,” and it cites Bragg

v. West Virginia Coal Ass’n, 248 F.3d 275 (4th Cir. 2001) to support this proposition. After

reviewing Bragg, this Court finds no support for WVCA’s claimed blessing from the Fourth

Circuit. In Bragg, the Fourth Circuit never even considered whether WVCA’s intervention was

proper or not. Instead, WVCA was already a party to the suit when the suit was appealed to the

Fourth Circuit. WVCA’s intervention in that case was the product of the district court’s

unchallenged ruling granting WVCA’s motion to intervene. On appeal, the Fourth Circuit was not

asked whether the district court properly permitted WVCA to intervene, instead the court of

appeals was deciding whether the district court properly granted summary judgment in plaintiffs’

favor. To claim that Bragg grants WVCA an ongoing right to intervene in regulatory challenges

involving the coal mining industry is at best an improper reading of Bragg, and at worst, a

disingenuous statement of the rule from Bragg. Whatever effect WVCA’s intervention had in

Bragg, intervention mattered not to the Fourth Circuit’s ruling in that case, and therefore, Bragg

does not support WVCA’s motion to intervene in this case.

For the above reasons, the Court finds that WVCA does not have a significantly protectable

interest in this administrative review action sufficient to warrant a right to intervene in it under

24(a)(2). There simply are too many steps—“steps that involve nebulous goals and the discretion

of two public agencies”—between a potential judgment in Plaintiffs’ favor and any possible

an EPA decision related to the CWA where WVCA would not have a significantly protectable

interest. In light of such a ruling, WVCA could gain intervention of right in any case where

reversing EPA’s decision could result in a later decision of EPA or WVDEP that is adverse to

WVCA’s business interests, no matter how remote the possibility of a later adverse action.

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adverse consequence to WVCA members’ interests in property, coal reserves, or water treatment

costs to find that WVCA has a significantly protectable interest in this litigation. Ctr. for Biological

Diversity, 2014 WL 636829, at *4; see also Teague, 931 F.2d at 261. Although this finding is

dispositive, in the next section the Court assume WVCA has a significantly protectable interest in

order to determine whether disposition of this action would impair WVCA’s purported interest.

3. Impairment of ability to protect interest

Next, WVCA contends that disposition of this action without it would impair or impede

WVCA’s ability to protect business interests its members allegedly have in this litigation. The

Court disagrees, and concludes below that any interest WVCA members have in avoiding new

restrictions imposed on their NPDES permits would not, as a practical matter, be impaired by

denying WVCA intervention in this case.

If an interest sufficient to satisfy Rule 24(a)(2) is presented, a court must then ask if the

would-be intervenor “is so situated that disposing of the action may as a practical matter impair or

impede the [applicant’s] ability to protect its interest.” Fed. R. Civ. P. 24(a)(2). The question

presented by 24(a)(2)’s impairment prong requires a practical analysis, rather than a legal one.

Wright & Miller supra, at § 1908.2. The impairment prong is satisfied where: (1) disposition of

the action would put the movant at a “practical disadvantage” in protecting its interest, or (2) the

stare decisis effect of a judgment would legally preclude the would-be intervenor from protecting

its interest later. Francis v. Chamber of Commerce of U. S., 481 F.2d 192, 195 n.8 (4th Cir. 1973)

(stare decisis is sufficient to satisfy impairment prong); Wright & Miller supra, at § 1908.2. The

practical disadvantage of filing a separate suit and perhaps duplicating efforts is not sufficient to

satisfy the impairment prong. Francis, 481 F.2d at 196 (finding impairment prong not met despite

would-be intervenor’s argument that filing a new action would be difficult to initiate); Wright &

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Miller supra, at § 1908.2. Additionally, the impairment prong is not met if the would-be intervenor

could adequately protect its interests in the action by participating as amicus curiae. See McHenry

v. Comm’r, 677 F.3d 214, 227 (4th Cir. 2012) (finding impairment prong not met because, in part,

would-be intervenor could easily express its views in case through amicus briefs).12

WVCA claims that its members’ interests in avoiding TMDLs for ionic toxicity will be

impaired in three ways if Plaintiffs obtain their requested relief.

First, WVCA contends that an order requiring TMDLS will necessarily result in WVCA

members facing reduced property values and being required to invest in expensive treatment

technology. WVCA Memo. in Supp. 6, ECF. No 24. WVCA points out that Plaintiffs in other suits

against WVCA members have sought orders compelling water treatment mechanisms that could

cost in excess of $100 million. Thus, according to WVCA, if TMDLs are promulgated, WVCA

members will almost certainly be forced to implement costly water treatment endeavors.

WVCA’s first argument on the impairment prong fails for at least two reasons. First, an

order requiring EPA to develop TMDLs would not necessarily result in reduced property values

or expensive treatment requirements for WVCA members because several administrative and

judicial steps lay between this Court granting Plaintiffs’ requested relief and any possible

subsequent revisions to WVCA members’ NPDES permits. Consider the following three events

necessary to establish effluent limits on streams where WVCA members discharge: (1) after an

order granting Plaintiffs relief, EPA would engage in an administrative process to establish the

12 See also Feller, 802 F.2d at 730 (finding impairment prong satisfied, in part, because

participating by intervenors as amicus curiae would not be sufficient to protect against identified

practical impairments); Newport News Shipbuilding & Drydock Co. v. Peninsula Shipbuilders'

Ass'n, 646 F.2d 117, 121 (4th Cir. 1981) (practical disadvantage imposed on intervenor by its

absence from suit was not significantly relieved by allowing intervenor to participate as amicus

curiae).

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content of TMDLs, during which WVCA and its members could advocate—by way of submitting

comments to EPA—for TMDLs high enough that no property value losses or expensive treatment

requirements would be incurred by WVCA members. 13 After EPA promulgates TMDLs, if

WVCA disagrees with their content, it could seek judicial review of EPA’s decision under the

Administrative Procedure Act, 5 U.S.C. § 702. Thus, participating in the administrative process of

developing TMDLs’ content and seeking judicial review of an EPA decision on their content is

the first way that WVCA can pursue its interest in avoiding TMDLs, even if intervention in this

case is denied. 14 After TMDLs are promulgated and judicially reviewed, (2) WVCA may

adequately protect its members’ business interests by participating in WVDEP’s process of

translating EPA’s TMDLs into effluent limits specific to each discharging entity, also known as

WLAs imposed on point sources. 15 Lastly, (3) WVCA members may protect their business

interests at the permitting stage, both in forming the content of their permit applications and in

seeking administrative and judicial review of WVDEP’s decisions on their applications.16 Thus,

there are several discretionary administrative and judicial steps between this Court granting

13 See 40 C.F.R. § 130.7 (“If the Regional Administrator disapproves such listing and loadings, he

shall, not later than 30 days after the date of such disapproval, identify such waters in such State

and establish such loads for such waters as determined necessary to implement applicable [Water

Quality Standards]. The Regional Administrator shall promptly issue a public notice seeking

comment on such listing and loadings. After considering public comment and making any

revisions he deems appropriate, the Regional Administrator shall transmit the listing and loads to

the State, which shall incorporate them into its current [Water Quality Management] plan.”). 14 See Ctr. For Biological Diversity, 2014 WL 636829, at *8 (citing Our Children's Earth Found.,

2006 WL 1305223, at *3). 15 See 40 C.F.R. § 130.7(c)(1)(ii) (making TMDLs and individual water quality based effluent

limitations subject to public review consistent with the state's continuing planning process); see

also Ctr. for Biological Diversity, 2014 WL 636829, at *8. 16 See W. Va. Code R. § 47-30-10 (“All draft permits shall be . . . publicly noticed and available

for public comment . . .”); W. Va. Code R. § 47-30-3 (“Any denial of the WV/NPDES permit is

appealable to the West Virginia Environmental Quality Board in accordance with the procedures

and authority of W. Va. Code § 22-11-21”); 5 U.S.C. § 702 (person suffering legal wrong by

agency action is entitled to judicial review of the action).

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Plaintiffs’ relief and any possible effect on WVCA members’ business interests. And because

those discretionary administrative and judicial steps deal with the actual content of TMDLs and

effluent limits on WVCA member permits, WVCA members can better protect their business

interests at each of these later steps than they could in this litigation, which does not itself involve

the content of TMDLs.

Second, WVCA’s argument contains an even deeper flaw, though, because it goes against

the very essence of the analysis required under the impairment prong. That prong asks if

disposition of the instant action without WVCA would impair or impede WVCA members’ ability

to protect their interests. According to WVCA, it has an interest in this case because there are other

cases where Plaintiffs have sought an order compelling WVCA members to undertake expensive

treatment procedures. WVCA’s Memo. in Supp. 6, ECF No. 21. But in this case, Plaintiffs do not

seek any order that would, by its terms or direct effect, require WVCA members to undertake any

water treatment endeavors. Nor do Plaintiffs seek an order that would itself restrict or burden

WVCA members’ properties. Simply put, denying WVCA intervention in this case would not

impair WVCA’s ability to defend against an order in another case requiring WVCA members to

undertake water treatment endeavors. The best and only place to protect an interest in avoiding an

order in another case is to participate as a party in that other case, not to intervene in this case. For

these two reasons, the Court rejects WVCA’s first argument under the impairment prong.

WVCA’s second argument under the impairment prong also fails. WVCA asserts that if it

is not permitted intervention of right, its interest in avoiding TMDLs will be impaired because in

WVCA’s absence this Court will not benefit from WVCA’s unique understanding of the issues in

this case. Reply 6, ECF. No 24. To support WVCA’s proposition that this unique-understanding

argument is pertinent to the impairment prong analysis, WVCA cites Defenders of Wildlife v.

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North Carolina Department of Transportation, 281 F.R.D. 264, 268 (E.D.N.C. 2012). Notably,

the district court in Defenders of Wildlife cited no authority for the proposition that a non-party’s

unique understanding might be relevant to an analysis of whether a non-party’s ability to protect

its interest would be impaired by denying intervention. Nonetheless, in that case, the intervenors

claimed their knowledge of facts material to the litigation exceeded that of existing parties. WVCA

has made no such allegation here, only that it offers insight from the perspective of the regulated

community into the issues this case presents. However, to the extent that the regulated

community’s insight is pertinent to an administrative review action, one where EPA is tasked with

defending its understanding of its duties under the CWA and the Plaintiffs challenge that

understanding, any contribution WVCA could make to this Court’s understanding of the issues

can be gained by adding WVCA as amicus curiae in this case.

WVCA’s third impairment prong argument fails too. WVCA contends that if it is denied

intervention, its interest in avoiding TMDLs will be impaired because the interests of the existing

party-defendant, EPA, are not aligned with WVCA members’ interests. As an illustration of the

misalignment of these interests, WVCA warns EPA could settle this case in a manner that might

harm WVCA members’ business interests. Reply 6–7, ECF No. 24. The Fourth Circuit has

previously rejected the notion that the impairment prong can be satisfied by an existing party’s

ability to settle a case in a manner that might be adverse to interests of a would-be intervenor.

Westinghouse Elec. Corp., 542 F.2d at 217 (ruling impairment prong not met, even though would-

be intervenor argued that existing party could settle the case in a manner adverse to interests of

applicant). The Fourth Circuit did not find this argument availing in 1976, and neither does this

Court almost forty years later.17

17 Moreover, the substance of this argument is more attuned to 24(a)(2)’s adequate representation

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For the foregoing reasons, the Court finds that denying WVCA intervention would not, as

a practical matter, impair or impede WVCA’s ability to protect any interest WVCA or its members

arguably have in this litigation. Any interest WVCA members have in avoiding additional

restrictions in their NPDES permits would not be impaired by WVCA’s absence from this suit

because this suit does not involve the content of TMDLs or effluent limits. Future administrative

processes and judicial actions that deal with the content of TMDLs and effluent limits are available

and serve as better fora for advancing WVCA members’ interests in having lenient effluent

limitations in their NPDES permits. Furthermore, to the extent that WVCA’s absence would

impose any conceivable practical disadvantage on WVCA’s ability to protect its members’

interests, this impairment can be significantly alleviated by granting WVCA amicus curiae status

in this case. See McHenry, 677 F.3d at 227. Thus, the impairment prong of Rule 24(a)(2) is not

met here. Despite, the impairment prong not being met, the Court in the next section will address

the final prong for intervention of right.

4. Adequacy of representation by existing parties

WVCA asserts that its interest is not adequately represented by existing parties to this

litigation, namely EPA. Again, even if WVCA were able to meet the preceding requirements for

intervention of right, WVCA has failed to meet its burden under 24(a)(2)’s adequacy prong.

The fourth and final requirement for a right to intervene under 24(a)(2) requires the would-

be intervenor to show its interest is not adequately represented by existing parties to the litigation.

Fed. R. Civ. P. 24(a)(2); Stuart, 706 F.3d at 349 (citing Teague, 931 F.2d at 260–61). Where the

would-be intervenor shares the same ultimate objective as an existing governmental party, the

would-be intervenor must make a “strong showing” of inadequacy. Stuart, 706 F.3d at 352.

prong, not the impairment prong.

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Essentially, in such a case, the would-be intervenor must rebut a “presumption of adequate

representation.” Id. at 353. The presumption of adequate representation is not rebutted by simply

showing the would-be intervenor disagrees with the government’s “reasonable litigation tactics,”

or that the would-be intervenor has “stronger” or “more specific” interests than the government.

Id at 352. Rather, the presumption is rebuttable by showing the would-be intervenor has

identifiable adverse interests with the existing government party; the existing parties have engaged

in collusion; or the government has committed nonfeasance. See id. (discussing district court’s

analysis); Westinghouse Elec. Corp., 542 F.2d at 216 (“When the party seeking intervention has

the same ultimate objective as a party to the suit, a presumption arises that its interests are

adequately represented, against which the petitioner must demonstrate adversity of interest,

collusion, or nonfeasance.”).

In this case, WVCA must make a strong showing that its interests are not adequately

represented by EPA. EPA is a government entity. Furthermore, WVCA and EPA share the same

ultimate objective because both aim to have this Court affirm EPA’s decision to not require or

develop TMDLs for ionic toxicity. Therefore, WVCA must rebut the presumption that EPA

adequately represents WVCA members’ interests. Stuart, 706 F.3d at 352.

WVCA has not carried its burden of rebutting the presumption that EPA adequately

represents its interests. In its memorandum in support of intervention, WVCA alleges its interest

in this case is more specific than EPA’s interest. However, the Fourth Circuit has foreclosed this

argument by concluding that even where a would-be intervenor’s interest is more specific than the

government’s, this does not rebut the presumption of adequate representation. Stuart, 706 F.3d at

352–353. Although WVCA’s interest in avoiding NPDES effluent limits is more specific than

EPA’s interest in having this Court affirm EPA’s challenged decision, this allegation does not

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rebut the presumption of adequate representation, which may be rebutted by evidence of adverse

interests, collusion, or nonfeasance. Stuart, 706 F.3d at 352–353. Nor has WVCA rebutted the

presumption by alleging it, as a representative of the regulated community, contributes to this

Court’s understanding of the issues in this action. Even if the Government is incapable of

presenting the industry’s perspective for this Court’s consideration, such a limited view does not

constitute adversity of interests, collusion, or nonfeasance. Id.

In its reply brief, WVCA again fails to rebut the presumption of adequate representation.

WVCA replies that its interests are not “directly aligned” with EPA’s, and EPA’s interests are not

as narrowly defined as WVCA’s interests. Neither is sufficient to rebut the presumption because

having interests not aligned with or broader than a would-be intervenor’s simply does not

constitute adversity of interests, collision, or nonfeasance on the part of the governmental party.

Id. WVCA points out that EPA does not share the same economic stake in this action as WVCA

members, and for that reason EPA may not argue as vigorously as WVCA in opposing an order

requiring development of TMDLs. The mere allegation that a governmental party could argue less

vigorously than members of the regulated industry is at best an argument that the government

could commit nonfeasance, which is insufficient to rebut the presumption of adequate

representation. See Virginia Uranium, Inc. v. McAuliffe, No. 15-00031, 2015 WL 6143105, at *3

(W.D. Va. Oct. 19, 2015) (finding nonfeasance absent when government was already diligently

and zealously defending the suit). Lastly, WVCA returns to its now-familiar argument that if

intervention is denied, EPA could settle this case in a manner that could harm WVCA’s interests.

However, WVCA does not explain how EPA could settle a case where the only issue in contention

is whether or not EPA’s decision was unlawful. Moreover, even if EPA were to settle by agreeing

to develop TMDLs, developing TMDLs, as explained above, would not itself harm any WVCA

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member interests in property, coal, or treatment obligations. Without more, WVCA has not shown

how EPA’s ability to settle adversely to WVCA’s interests raises to the level of adverse interests,

collusion, or nonfeasance. That exhausts WVCA’s allegations regarding inadequate

representation.

For the foregoing reasons, the Court finds WVCA has failed to rebut the presumption that

EPA adequately represents WVCA’s interests in this case. Said differently, WVCA’s interests are

adequately represented by EPA, an existing government defendant, which shares the same ultimate

objective with WVCA—a decision from this Court affirming EPA’s decision to not require or

develop TMDLs for ionic toxicity.

To conclude, the Court holds that WVCA does not have a right to intervene in this case

under 24(a)(2). Other than the timeliness prong, WVCA fails to satisfy each of 24(a)(2)’s prongs

requiring a significantly protectable interest, threatened impairment of that interest if intervention

is denied, and inadequate representation by existing parties. For these reasons, the Court DENIES

WVCA intervention of right under 24(a)(2).

B. Permissive intervention under 24(b)

Next, WVCA asks this Court to grant it permissive intervention in this action under Rule

24(b). As explained below, the Court concludes permissive intervention by WVCA is not proper

in this case.

When intervention of right is not warranted under 24(a)(2), a court may nevertheless grant

permissive intervention under Rule 24(b) if the non-party files a timely motion for such and has a

claim or defense that shares a common question of law or fact with the main action. Fed. R. Civ.

P. 24(b). If the would-be intervenor has no claim or defense with a question of law or fact in

common with the main action, permissive intervention should be denied. See Brown v. Eckerd

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Drugs, Inc., 663 F.2d 1268, 1278 (4th Cir. 1981) vacated on other grounds by, 457 U.S. 1128

(1982) (citing Wright & Miller supra, at §§ 1911, 1916) (finding no abuse of discretion where

would-be intervenor’s claim presented issues of law and fact in common with those of the class);

see also Kootenai Tribe of Idaho v. Veneman, 313 F.3d 1094, 1111 (9th Cir. 2002) abrogated on

other grounds by, Wilderness Soc. v. U.S. Forest Serv., 630 F.3d 1173 (9th Cir. 2011). If the Court

finds a common question of law or fact, the minimal requirements of Rule 24(b) have been satisfied

and it is then within the court’s discretion whether to allow intervention. Wright & Miller supra,

§ 1911; Kootenai Tribe of Idaho, 313 F.3d at 1111.

In considering permissive intervention, the court must ask ‘whether the intervention will

unduly delay or prejudice the adjudication of the original parties' rights.’” Stuart, 706 F.3d at 349

(quoting Fed. R. Civ. P. 24(b)(3)). While concerns of judicial economy and need for guidance are

not considered under 24(a), these are pertinent to permissive intervention analysis. In re Sierra

Club, 945 F.2d 776, 779 (4th Cir. 1991). Adding parties to a case almost always results in some

delay, and so usually delay alone does not mean that intervention should be denied. Wright &

Miller supra, § 1913. Instead, Rule 24(b) requires undue delay. Id. In determining whether extra

time would be an undue delay, the court must balance the delay threatened by intervention against

the advantages promised by it. Id. If there is another adequate remedy available to protect the

would-be intervenor's rights, this weighs in favor of denying intervention. Id. A court does not err

in denying permissive intervention “when undue delay exists without a corresponding benefit to

the process, the litigants, or the court, especially where an existing party zealously pursues the

same ultimate objectives as a movant.” Lee v. Virginia Bd. of Elections, No. 15-357, 2015 WL

5178993, at *4 (E.D. Va. Sept. 4, 2015) (citing Stuart, 706 F.3d at 355).

Case 3:15-cv-00271 Document 32 Filed 12/14/15 Page 35 of 39 PageID #: 447

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In this case, although WVCA’s motion to intervene is timely brought, and the Court

assumes without deciding that WVCA has a claim or defense that shares a common question of

law or fact with this action, permissive intervention is not proper because it would unduly delay

resolution of this action and burden judicial resources. “Additional parties can complicate routine

scheduling orders, prolong and increase the burdens of discovery and motions practice, thwart

settlement, and delay trial.” Stuart, 706 F.3d at 350. Here, bringing WVCA into the suit by way of

permissive intervention would complicate discovery because WVCA would be entitled to

discovery from both Plaintiffs and EPA, requiring existing parties to duplicate their discovery

efforts. Furthermore, adding WVCA as a party would complicate for the existing parties other

aspects of this litigation, including motions practice and any possible settlement negotiations. As

for the Court’s resources, dealing with an extra party by its very nature requires additional court

resources. In fact, if the Court were to grant permissive intervention to WVCA, an association of

coal companies with NPDES permits, this would invite WVCA’s permit holding members to

individually petition for permissive intervention. If such were the case, the Court could not draw

a meaningful line that prevents all NPDES permit holders from gaining permissive intervention in

this case, since all would have an argument for intervention just as tenable as WVCA’s. Just

dealing with this flood of foreseeable motions for intervention would cost substantial judicial

resources. For these reasons, the Court finds that adding WVCA as a party would result in some

amount of delay and cost the court resources.

With regard to an offsetting benefit, the delay and resource consumption that would come

with granting permissive intervention are not offset by any corresponding benefit attainable only

by intervention rather than amicus participation. The offsetting benefit to existing parties, the

court, and this action promised by granting WVCA intervention consists of the Court learning the

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arguments of the coal industry in this administrative review action. See WVCA’s Reply in Supp. of

Mot. to Intervene 9, ECF No. 24. Specifically, WVCA seeks intervention in order to argue that

EPA has complied with the agency’s duties under the CWA. But EPA already zealously advances

this argument, and EPA—as an administrative agency possessing expertise in the field of

environmental science and being charged with enforcing the CWA—is in the best position to argue

its own compliance, see Ctr. For Biological Diversity, 2014 WL 636829, at *9. Even assuming

arguments contributed by WVCA would be useful in a case where EPA must present its own

rationale justifying its decision, see Motor Vehicle Mfrs. Ass'n. v. State Farm Mut. Auto. Ins. Co.,

463 U.S. 29, 50 (1983) (“It is well-established that an agency's action must be upheld, if at all, on

the basis articulated by the agency itself.”), the Court finds below that the coal industry’s

perspective could be gained by granting WVCA amicus status in this case. Thus, although WVCA

may offer the unique perspective of the coal industry, granting WVCA intervention as a party

instead of granting it amicus status will not benefit resolution of this action, or protect WVCA

members’ interests.18 Instead, WVCA’s intervention is “likely [only] to result in duplicative

briefing adding a layer of unwarranted procedural complexity.” Ctr. for Biological Diversity, 2014

WL 636829, at *9. As such, adding WVCA as a party would require expending additional court

resources without a corresponding benefit attainable only by intervention rather than amicus

participation. For these reasons, the Court concludes granting WVCA intervention would unduly

18 Additionally, as discussed above, this administrative review action is not an appropriate forum

for WVCA to protect its members’ interests in maintaining the existing effluent limits in their

NPDES permits. See In re Endangered Species Act Section 4 Deadline Litig., 270 F.R.D. 1, 6-7

(D.D.C. 2010). Should WVCA need to further those interests, it can best do so by participating in

the administrative process of setting TMDLs, effluent limits, and permit restrictions, and by filing

administrative review actions in response to any agency decisions adverse to its members’

interests.

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delay adjudication of this action. Stuart, 706 F.3d at 355; Ctr. for Biological Diversity, 2014 WL

636829, at *9.

To conclude, although WVCA’s motion for intervention is timely and the Court assumes

WVCA has a claim or defense that has a question of law or fact in common with this action, adding

WVCA would unduly delay adjudication of this dispute over EPA’s decision. Because granting

WVCA intervention would unduly delay and prejudice this litigation, the Court DENIES

WVCA’s request for permissive intervention under 24(b).

C. Amicus Curiae Status

Although WVCA is not entitled to intervene under 24(a)(2), and it is improper to grant

WVCA intervention under 24(b), it is proper to grant WVCA amicus curiae status in this case.

A non-party denied intervention may nonetheless present its views to the Court if it is

granted amicus status. See Stuart, 706 F.3d at 355 (“While a would-be intervenor may prefer party

status to that of [an amicus curiae], . . . amici often make useful contributions to litigation.”).

Granting amicus status and deciding to accept amicus briefs is within the discretion of district

courts, see Strasser v. Doorley, 432 F.2d 567, 569 (1st Cir. 1970), and “a court does not abuse its

discretion in denying permissive intervention when participation . . . as an amicus satisfies the

asserted need for intervention,” 4 Am. Jur. 2d Amicus Curiae § 5 (Westlaw database last updated

Nov. 2015) (citing United States v. State of Mich., 940 F.2d 143 (6th Cir. 1991); Bates v. Jones,

127 F.3d 870 (9th Cir. 1997)).

In this case, granting WVCA amicus status is proper in light of WVCA’s argument for

intervention. WVCA seeks intervention in order to offer for the Court’s consideration the

perspective of the coal industry on the issue of whether EPA’s decision is in compliance with the

CWA. But WVCA does not need party status to do this. WVCA can adequately offer its

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perspective on any issue presented by this litigation—from the most mundane to the ultimate CWA

compliance issue—by appearing and being heard as an amicus curiae. The Court assumes that

WVCA’s perspective would be useful to the existing parties and this Court, although this is an

administrative review action where EPA must defend its decision by offering the actual reasoning

behind that decision. For this reason, the Court GRANTS WVCA amicus curiae status in this

action subject to the conditions explained below.

IV. Conclusion

For the previously stated reasons, the Court DENIES WVCA’s Motion to Intervene. The

Court holds that WVCA does not have a right to intervene in this case under 24(a)(2), and

permissive intervention under 24(b) is not proper. However, the Court GRANTS WVCA amicus

curiae status pursuant to the Court’s order below.

The Court ORDERS:

1. WVCA may file a memorandum as amicus curiae on any motion in this case.

2. The deadline for any amicus memorandum is the same as the deadline for the

memorandum of the party whose position the amicus memorandum supports.

But when the amicus memorandum supports the moving party, the deadline for

the amicus memorandum in support is seven days after the filing of the principal

motion, with a three-day extension based on electronic service of the motion.

3. The page limit for an amicus memorandum is the same as the limit for a

memorandum of the party whose position the amicus memorandum supports.

The Court DIRECTS the Clerk to send a copy of this Order to counsel of record and any

unrepresented parties.

ENTER: December 14, 2015

Case 3:15-cv-00271 Document 32 Filed 12/14/15 Page 39 of 39 PageID #: 451

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

White Earth Nation, et al.,

Plaintiffs,

v. MEMORANDUM OPINION

AND ORDER

Civil No. 14‐4726 (MJD/LIB)

John Kerry, in his official capacity

as Secretary of State, and the United

States Department of State,

Defendants,

and

Enbridge Energy, Ltd Partnership,

Intervenor‐Defendant.

_____________________________________________________________________

Kenneth J. Rumelt, Environmental and Natural Resources Law Clinic

Vermont Law School, Marc D. Fink, Center for Biological Diversity, Douglas P.

Hayes, Sierra Club and James G. Murphy, National Wildlife Federation, Counsel

for Plaintiffs.

Craig R. Baune and Pamela Marantette, Assistant United States Attorneys,

John C. Cruden, Assistant Attorney General, Luther L. Hajek, Trial Attorney,

United States Department of Justice, Counsel for Defendants.

Todd Wind and Joseph J. Cassioppi, Fredrikson & Byron, P.A. and David

H. Coburn, Cynthia Taub and Joshua Runyan, Steptoe & Johnson LLP, Counsel

for Enbridge Energy, Ltd. Partnership.

_____________________________________________________________________

1

CASE 0:14-cv-04726-MJD-LIB Document 113 Filed 12/09/15 Page 1 of 25

This matter is before the Court on Plaintiffs’ motion for partial summary

judgment [Doc. No. 69], Defendants John Kerry, Secretary of State and the United

States Department of State’s (“State Department”) motion to strike pleadings

[Doc. No. 84], Intervenor Enbridge Energy, Limited Partnership’s (“Enbridge”)

motion for partial summary judgment [Doc. No. 88], the State Department’s

motion for summary judgment on counts one and two [Doc. No. 92], Plaintiffs’

motion for leave to file an opposition to Enbridge’s memorandum in support of

motion to strike [Doc. No. 99], and the State Department’s motion for leave to

submit additional authority [Doc. No. 110].

I. Summary of Decision

This case involves two oil pipelines owned and operated by Enbridge that

cross the United States/Canada border and the plans to maintain/replace a major

segment of one of the pipelines and to expand the capacity of the other.  With

respect to these projects, Enbridge has replaced the border segment on one line

and has installed interconnections between the two lines on both sides of the

border.  Plaintiffs claim that the State Department approved the border segment

replacement and the interconnections and that such approval violated the

requirements of the National Environmental Policy Act (“NEPA”) and the

2

CASE 0:14-cv-04726-MJD-LIB Document 113 Filed 12/09/15 Page 2 of 25

National Historic Preservation Act (“NHPA”).  Plaintiffs ask the Court for an

order prohibiting the use of the new border segment and the interconnections

until the State Department has complied with NEPA and NHPA.  As will be

discussed below, Plaintiffs are not entitled to such relief as the challenged actions

of the State Department are not subject to judicial review.  

II. Background

Enbridge owns and operates multiple pipeline facilities, two of which are

at issue in this case.  Line 3 and Line 67 (also known as the Alberta Clipper

Pipeline) follow the same route, are approximately 1,000 miles long and transport

crude oil from Alberta, Canada to Superior, Wisconsin.  Line 3 was constructed in

the late 60ʹs and construction for Line 67 began in August 2009.  Both lines cross

the border between Canada and the United States, and are thus subject to the

President’s inherent constitutional authority concerning foreign relations.  

Accordingly, before Line 3 could be constructed over the international border, it

was necessary to obtain a Presidential Permit.  

The Presidential Permit for Line 3 was issued in January 1968, and it

authorized the construction, operation and maintenance of facilities “at the

international boundary line between the United States and Canada in Pembina

3

CASE 0:14-cv-04726-MJD-LIB Document 113 Filed 12/09/15 Page 3 of 25

County, North Dakota, and to connect such facilities with like facilities in the

Province of Manitoba.”  (AR1 1‐5.)  The Permit describes a “34 inch pipeline for

crude oil and other liquid hydrocarbons manufactured and installed

substantially as described in the attached application.” (AR 1.)  The Permit

further required the pipeline facilities be maintained in a condition of good

repair, and that the “permittee take reasonable precautions to prevent and

suppress fires, explosions or leakage and to avert any conditions on the land

traversed or waters affected . . . which might endanger the safety of these

facilities.”  (AR 4.)  

In August 1968, President Johnson delegated to the Secretary of State his

authority to grant or deny permits for certain types of border crossing facilities,

including oil pipelines.  See Executive Order 11423 § 1(a), 33 Fed. Reg. 11,741

(Aug. 16, 1968).  Pursuant to this delegation, the State Department issued a new

Presidential Permit for Line 3 in 1991 when the pipeline facilities were transferred

to new owners.  (AR 6‐10.)  The 1991 Permit has substantially the same conditions

as the original permit.  (See Id.)

The permitting process was revised in 2004 in order to:

1AR refers to the Administrative Record.

4

CASE 0:14-cv-04726-MJD-LIB Document 113 Filed 12/09/15 Page 4 of 25

expedite reviews of permits as necessary to accelerate the completion

of energy production and transmission projects, and to provide a

systematic method for evaluating and permitting the construction

and maintenance of certain border crossings for land transportation,

including motor and rail vehicles, that do not require construction or

maintenance of facilities connecting the United States with a foreign

country, while maintaining safety, public health, and environmental

protections.  

Executive Order 13337, 69 Fed. Reg. 25299 (Apr. 30, 2004).  To achieve these goals,

the Order provides that “the Secretary of State is designated and empowered to

receive all applications for Presidential permits . . . for the construction,

connection, operation, or maintenance, at the borders of the United States, of

facilities for the exportation or importation of petroleum, petroleum products,

coal, or other fuels to or from a foreign country.”  Exec. Order 13337, § 1(a).  Once

an application is received, the Secretary shall request additional information if

needed, and then refer the application to other agencies such as the Secretary of

Defense, Attorney General, Secretary of the Interior, Secretary of Commerce, and

Secretary of Transportation for their views on the application.  Id. § 1(b).  After

considering all pertinent information and the views of other agency heads, the

State Department shall determine whether allowing a border crossing for

purposes of transporting petroleum products would “serve the national interest”

5

CASE 0:14-cv-04726-MJD-LIB Document 113 Filed 12/09/15 Page 5 of 25

and what conditions, if any, should apply.  Id. § 1(g)‐(h).  The determination

becomes final after other agency heads have had the opportunity to object, and if

necessary, to refer the matter to the President for final determination.  Id. § 1(h). 

The Order further provides that it does not create any rights that are “enforceable

at law or in equity by any party against the United States.”  Id. § 6.

Line 67 is subject to a Presidential Permit issued in 2009 that covers “a 36

inch diameter pipeline extending from the United States ‐ Canada border near

Neches, North Dakota, up to and including the first mainline shut‐off valve or

pumping station in the United States.”  (AR 72.)  Prior to the issuance of the Line

67 Permit, the State Department prepared a final environmental impact statement

(“FEIS”) pursuant to NEPA and NHPA.  (AR 73.)  The FEIS considered

construction impacts along the entire U.S. portion of the pipeline as well as

impacts from operating Line 67 at an annual average capacity of 450,000 barrels

per day (“bpd”).  (AR 280.)  

A. Line 3 Replacement

In 2014, Enbridge informed the State Department that Line 3 was in need

of maintenance, and that it was undertaking a “maintenance‐driven replacement

of Line 3 that includes the portion operated and maintained pursuant to the 1991

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Presidential Permit, namely the approximately 16‐mile section that extends from

the U.S.‐Canada border to the current first mainline valve in the United States”

(referred to herein as the “Line 3 Replacement ”).  (AR 22 (Letter from Enbridge

to Department dated February 5, 2014).)  Enbridge further informed the State

Department that for safety reasons, it was currently operating Line 3 at a reduced

average annual capacity.  (AR 23.)  Enbridge noted the maintenance activities

would be undertaken in accordance with the terms of the 1991 Presidential

Permit such that the replacement pipe in the border segment would be of the

same diameter as the original pipe, be placed in the same right of way and would

comply with all applicable Pipeline and Hazardous Materials Safety

Administration (“PHMSA”) design and safety standards.  (Id.)  Enbridge further

assured that the existing Line 3 border segment would be deactivated and

continuously maintained in place in accordance with relevant regulations.2  (Id.)  

In a follow‐up letter dated March 17, 2014, Enbridge provided additional

information in response to requests from the State Department, including that it

planned to replace the remainder of Line 3 outside of the border segment and

that the non‐border segments would be constructed with 36 inch diameter pipe. 

249 C.F.R. § 195.59 regulates the abandonment and deactivation of pipeline facilities.

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(AR 31‐33.)  Enbridge further indicated that the larger replacement project “has

an in‐service date of 2017, subject to obtaining certain permits and approvals

required in the U.S. and Canada.” (AR 32.)  Enbridge also indicated there may be

a route deviation for Line 3 beginning 120 miles from the border, which would

follow the proposed route of a planned new pipeline known as the Sandpiper

Pipeline to Superior, Wisconsin.  (AR 33.)  

Enbridge also provided background information as to the types of crude

oil that had been transported on Line 3, as well as the historical operating

capacity of that line.  (AR 32.)  It noted that when the line first went into service,

Line 3 transported only light crudes, but in the early 1980s, the line began to

transport light, medium and heavy crudes.  (Id.)  The average annual operating

capacity of Line 3 also varied and has ranged from 390,000 bpd for heavy crudes,

to a much higher bpd capacity, up to 960,000 bpd for light crude.  (AR 32‐33 n.2.)  

Enbridge also noted that once all segments of the line are replaced, the

average annual capacity would be 760,000 bpd, based on the assumption that the

line will transport a mixture of heavy and light crude oils. (AR 33.)  Because of

safety concerns of the older pipeline, Enbridge noted the capacity is currently

limited to 390,000 bpd.  (Id.)  Enbridge further indicated it would be “working

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with those agencies that have jurisdiction over the portions of Line 3 outside of

the border area to obtain required permits for construction in both the existing

Line 3 corridor and the proposed new corridor, including the Minnesota Public

Utilities Commission [“MPUC”].”  (AR 34.)  

In a letter dated April 24, 2014, the State Department informed Enbridge

that based on the information submitted, the proposed replacement of the Line 3

border segment ‐ that portion of Line 3 from the Canadian/United States border

to the mainline valve at approximately mile 16 ‐ is consistent with the

authorizations in the existing 1991 President Permit.  (AR 43)  The State

Department also confirmed for Enbridge that the 34‐inch pipe diameter

descriptor in the Permit only applies to that same 16‐mile segment. (AR 44.) 

B. Line 67 Expansion and Bypass Project

In November 2012, Enbridge submitted an application for an amendment

to the August 3, 2009 Presidential Permit to allow it to increase the volume of the

oil transported across the border on Line 67 up to an annual average of 800,000

bpd to meet the rising demands for additional transportation capacity for crude

oil from Western Canada (referred to herein as the “Expansion Project”).  (AR

105‐24.)  The Expansion Project would not require any physical changes to Line

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67ʹs pipe segments; instead Enbridge would use extremely high operating

pressures to increase the volume.  (AR 110.)  In March 2013, the State Department

initiated a process for preparing a supplemental environmental impact statement

(“SEIS”) in order to evaluate the request for expansion.  See 78 Fed. Reg. 16,565

(Mar. 15, 2013); 78 Fed. Reg. 26,101 (May 3, 2013).  The State Department has not

made a decision regarding the Expansion Project and the environmental review

is ongoing.

In June 2014, Enbridge informed the State Department that it planned to

construct interconnections between Lines 3 and 67 (referred to as the “Bypass

Project”).  (AR 128‐29.)  One set of interconnections would be placed on the

Canadian side of the border and the second set would be placed outside of the

border segment in the United States.  Id.  Enbridge desired to construct these

interconnections to provide it greater flexibility in using the pipelines while the

SEIS is pending.  (AR 129.)  For example, it would allow Enbridge to transfer oil

north of the border from Line 67 to Line 3, and then transfer it back to Line 67 at a

point in the United States after passing through the border segment.  (AR 128‐29.) 

Such a transfer would allow Enbridge to increase volume on Line 67 south of the

border segment, initially to 570,000 bpd, and later to 800,000 bpd assuming

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additional permissions are received from the MPUC and the U.S. Army Corps of

Engineers, while abiding by the requirement of the 2009 Presidential Permit to

keep the volume on Line 67 through the border segment below 500,000 bpd.  (AR

129.)

In a follow‐up letter to the State Department, Enbridge provided additional

information regarding the planned construction of the interconnections.  (AR

133.)  It explained that it had obtained all the necessary approvals, including

authorization from the MPUC, to transport up to 570,000 bpd on Line 67 south of

the border segment and that it planned to increase the flow up to 800,000 bpd by

mid‐2015.  (AR 135‐36.)  

By letter dated July 24, 2014, the State Department informed Enbridge of its

finding that the interconnections between Lines 67 and 3 do not require

authorization from the State Department, as they are located outside of the

border segments for both lines.  (AR 193‐94.)  The State Department further

indicated that it would take the information submitted regarding the

interconnections into account in its environmental analysis of the Expansion

Project.  (Id.)

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C. Plaintiffs’ Claims

In Counts One and Two of the First Amended Complaint, Plaintiffs allege

that the State Department’s July 24, 2014 decision, that it need not authorize the

Bypass Project, and its April 24, 2014 decision, that the Replacement Project was

consistent with the existing Line 3 Permit, violated NEPA, NHPA and the

Administrative Procedures Act (“APA”), 5 U.S.C § 701 et seq., by: 1) authorizing

new, high‐capacity pipelines without any NEPA or NHPA compliance; and 2)

short circuiting an ongoing NEPA and NHPA review of the Expansion Project. 

Plaintiffs assert these violations have silenced public participation and placed

resources at risk that are vitally important to Plaintiffs and their members.3

Plaintiffs request that the Court issue a declaration that the State

Department has violated NEPA, NHPA and the APA and set aside the State

Department’s approval and authorization of the Bypass, Replacement and

Expansion Projects.  Plaintiffs further request a permanent injunction prohibiting

the use of the new Border Segment to increase throughput on Line 67 beyond

3In Count Three, Plaintiffs Center for Biological Diversity and the Sierra Club allege that

the State Department has violated the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552

(a)(6)(A)(i), by failing to provide them records responsive to the FOIA requests.   This count is

not subject to the motions currently before the Court.

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450,000 bpd and prohibiting construction of the New Pipeline until the State

Department has complied with NEPA, NHPA and State Department regulations

by completing the SEIS for the Expansion and Bypass Project and the required

NEPA and NHPA review of the New Pipeline and issuing a record decision for

each.

III. Standard of Review

Plaintiffs’ claims of violations of the NEPA and NHPA are brought

pursuant to the APA which provides for a private right of action and a waiver of

sovereign immunity for claims challenging agency action.  5 U.S.C. § 702.  

Review of agency action is limited to “[a]gency action made reviewable by

statute and final agency action for which there is no other adequate remedy in a

court.”  5 U.S.C.A. § 704.  Such review is limited to the administrative record.  See

United States v. Massey, 380 F.3d 437, 440 (8th Cir. 2004).  

“To the extent necessary to decision and when presented, the reviewing

court shall decide all relevant questions of law, interpret constitutional and

statutory provisions, and determine the meaning or applicability of the terms of

an agency action” and shall “compel agency action that is unlawfully withheld”

and set aside agency action that is arbitrary, capricious, an abuse of discretion, or

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otherwise not in accordance with the law or without proper observance of

procedure as required by law.  5 U.S.C. § 706 (1), (2)(A) and (D).  5 U.S.C. § 706(1).

“While it is true that courts should not ‘rubber‐stamp * * * administrative

decisions that they deem inconsistent with a statutory mandate or that frustrate

the congressional policy underlying a statute’ it is equally well established that

great deference should be accorded an administrative agencyʹs interpretation of

its own regulations.”  Moore v. Custis, 736 F.2d 1260, 1262 (8th Cir. 1984)

(internal citations omitted). The “standard of review is a narrow one, and the

court is not permitted to substitute its judgment for that of the agency.”  Massey,

380 F.3d at 440.  The burden is on the party challenging agency action to prove

the agency action was arbitrary or capricious.  Id.  

IV. Discussion

A. NEPA

NEPA requires a thorough environmental review of all “major federal

actions significantly affecting the quality of the human environment.”  42 U.S.C. §

4332(2)(C).  This review must be timely and be taken objectively and in good

faith.  Metcalf v. Daley, 214 F.3d 1135, 1142 (9th Cir. 2000).  NEPA procedures

insure that environmental information is available to public officials and citizens

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before decisions are made and before actions are taken.  40 CFR § 1500.1(b). 

Assessments must be prepared early enough so that it can serve practically as an

important contribution to the decisionmaking process and will not be used to

rationalize or justify decisions already made.  Metcalf, 214 F.3d at 1142.  

Plaintiffs assert the State Department authorized the Bypass Project before

completing its ongoing SEIS for the Line 67 Expansion Project.  Initially, the State

Department committed itself to a thorough public review of the Expansion

Project’s environmental impacts.  Plaintiffs assert that when Enbridge grew tired

of the process, it devised the Bypass Project to circumvent NEPA.  Plaintiffs

assert the State Department turned what had been a public review of the

Expansion Project into a closed door discussion with Enbridge and authorized

the Bypass Project in its July 24, 2014 letter, substantially prejudicing the ongoing

SEIS.  

Plaintiffs further assert that the State Department violated NEPA by

approving the Line 3 Replacement.  Plaintiffs characterize the replacement as a

new pipeline; therefore, it is a major federal action that significantly affects the

quality of the human environment.  Plaintiffs argue this project is a new pipeline,

not a mere replacement of Line 3: it will operate at a higher capacity, it is larger in

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diameter for all but the 16 mile border segment, it has thicker walls and can

operate at high pressures and it will follow a different route for hundreds of

miles.  Such a project may significantly affect the environment, and similar

projects have triggered NEPA review. (See e.g., AR 222‐522.)  The PHMSA was

informed in March 2014 that the replacement of Line 3 “would likely require an

environmental review under NEPA.”  (AR 29.)  

B. NHPA

NHPA obligates federal agencies to “assume responsibility for the

preservation of historic properties” under their control and requires that federal

agencies having authority to license any undertaking, prior to the issuance of any

license, shall take into account the effect of the undertaking on historic properties. 

54 U.S.C. § 306108; 36 CFR § 800.1.  The timing requirement ensures the agency

considers a broad range of alternatives, including no action, and to avoid,

minimize or mitigate the undertaking’s adverse effects to historic properties.  See

36 CFR § 800.1(c); Pueblo of Sandia v. United States, 50 F.3d 856, 859‐62 (10th Cir.

1995).  

An undertaking includes “a project . . . under the direct or indirect

jurisdiction of a Federal agency , including . . . those requiring a Federal permit,

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license or approval.”  36 CFR § 800.16 (y).  NHPA consultation is necessary “as

long as a Federal agency has opportunity to exercise authority at any stage of an

undertaking where alterations might be made to modify its impact on historic

preservation goals.”  Vieux Carre Prop. Owners Residents & Assoc. v. Brown, 948

F.2d 1436, 1445 (5th Cir. 1991).

NHPA regulations carve out a detailed consultation process for Native

American Tribes.  36 CFR § 800.2(c)(2)(ii).  This requirement applies, even if the

location of the historic property is off tribal lands.  36 CFR § 800.2 (c)(2)(ii)(D). 

Agencies shall ensure the consultation process provides a tribe with a reasonable

opportunity to identify its concerns about historic properties, advise on the

identification and evaluation of historic properties, articulate its views on the

undertaking’s effects on such properties and participate in the resolution of

adverse effects.  36 CFR § 800.2 (c)(2)(ii)(A).  In this case, the White Earth Nation

attaches historic, cultural and spiritual significance to the areas affected by

Enbridge’s projects.

Plaintiffs assert the State Department acknowledged that the Expansion

Project is an undertaking and recognized its authority over the project by

initiating the Section 106 consultation process.  Notice of Intent, 78 Fed. Reg.

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16,565, 16,567 (Mar. 15, 2013).  Yet, it did not complete the consultation process

before authorizing the Bypass Project.  Plaintiffs assert the Bypass Project is also

an undertaking, which has the same effects as the Expansion Project.

Plaintiffs further assert the new pipeline is an undertaking because it is a

project under the direct or indirect jurisdiction of a Federal agency.  Here, at a

minimum, the State Department had an opportunity to exercise its authority over

the new pipeline.  Yet the State Department did not complete, or even initiate, the

Section 106 consultation process.

C. Agency Action

The State Department argues that Plaintiffs’ claims that it violated NEPA

and the NHPA fail because the claims are not based on an agency action or a final

agency action ‐ a required element of an APA claim.  Agency action is defined in

the APA to include “the whole or part of an agency rule, order, license, sanction,

relief, or the equivalent thereof, or failure to act.”  5 U.S.C. § 551(13).  The agency

action complained of must be a “final agency action.”  5 U.S.C. § 704.  Final

agency actions are those that “mark the consummation of the agency’s

decisionmaking process” and “by which rights or obligations have been

determined, or from which legal consequences will flow.”  Bennett v. Spear, 520

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U.S. 154, 178 (1997). 

Plaintiffs’ claims are based on the two letters from the State Department to

Enbridge regarding the Bypass Project and the Replacement Project. The State

Department argues that in making the determinations that the projects were

either consistent with or outside the scope of the relevant Permit, it was acting

pursuant to the President’s directives set forth in Executive Order 13337. 

Therefore, the letters at issue are not an agency action that is reviewable under

the APA.   

It is well‐settled that Presidential actions are not agency actions that are

reviewable under the APA.  Franklin v. Massachusetts, 505 U.S. 788, 800‐01

(1992); Dalton v. Specter, 511 U.S. 462, 476 (1994).  Noting that the President is not

explicitly excluded from or included within the APA’s purview, the Supreme

Court held that “[o]ut of respect for the separation of powers and the unique

constitutional position of the President, we find that textual silence is not enough

to subject the President to the provisions of the APA.”  Franklin, 505 U.S. at 800‐

01.  Even where the President delegates his inherent constitutional authority to

an agency head, the action remains the action of the President and such action is

not reviewable under the APA.  See Jensen v. Nat’l Marine Fisheries Serv., 512

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F.2d 1189, 1191 (9th Cir. 1975) (finding that actions of Secretary of State in

approving regulations concerning fishing were not reviewable under APA

because President delegated his power to approve such regulations to Secretary);

Tulare Cnty v. Bush, 185 F. Supp.2d 18, 29 (D. D.C. 2001) (finding that plaintiffs

failed to allege agency action as Forest Service was merely carrying out directives

of the President) aff’d on other grounds, 306 F.3d 1138 (D.C. Cir. 2002); Alaska v.

Carter, 462 F. Supp. 1155, 1160 (D. Alaska 1978) (finding that Presidential actions

under the Antiquities Act are not subject to the impact statement requirements of

NEPA because NEPA applies only to “federal agencies” and the President is not

a federal agency”); Ancient Coin Collectors Guild v. U.S. Customs and Border

Protection, 801 F. Supp.2d 383, 401‐05 (D. Md. 2011) (finding that because

President had delegated his responsibilities under the Convention on Cultural

Property Implementation Act to the State Department and Assistant Secretary,

actions taken on behalf of the President under this Act are not reviewable under

the APA) aff’d 698 F.3d 171 (4th Cir. 2012), cert. denied, 133 S. Ct. 1645 (2013).

In actions regarding different pipelines that crossed the international

borders of Canada and the United States, courts have held that the State

Department’s issuance of a Presidential Permit pursuant to Executive Order

20

CASE 0:14-cv-04726-MJD-LIB Document 113 Filed 12/09/15 Page 20 of 25

13337 was Presidential action and therefore not subject to review under the APA. 

See Sisseton Wahpeton Oyate v. U.S. Dep’t of State, 659 F. Supp.2d 1071, 1082

(D.S.D. 2009); Natural Res. Def. Council, Inc. v. U.S. Dep’t of State, 658 F. Supp.2d

105, 113 (D. D.C. 2009).  The courts found that the delegation of the President’s

constitutional authority concerning international borders to the Secretary of State

did not change the fundamentally Presidential nature of the action.  Sisseton, 659

F. Supp.2d at 1081; Natural Res. Def. Council, 658 F. Supp.2d at 112‐13.  In so

finding, one court recognized that given the fact that the President has “complete,

unfettered discretion over the permitting process” and that no statute curtails the

President’s authority to issue or deny a permit, exposing such permitting

decisions to judicial review would “run afoul of the separation of powers

concerns that underlie the Supreme Court’s decisions in Franklin and Dalton.” 

Natural Res. Def. Council, 658 F. Supp.2d at 111.  See also, Detroit Int’l Bridge Co.

v. Government of Canada et al., Civ. No. 10‐476, 2015 WL 5726601 *22 (D.D.C.

Sept. 30, 2015) (finding that the decision of the State Department to issue a

Presidential Permit pursuant to Executive Order 11423 regarding an international

bridge between Canada and Detroit, Michigan was a “Presidential” action that is

not subject to review under the APA).

21

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Plaintiffs argue the State Department’s decisions with respect to the Bypass

and Replacement Projects are subject to judicial review.  In support, Plaintiffs cite

to a decision from this District in which the court, in a footnote, disagreed with

the decisions in Sisseton‐Wahpeton and Natural Res. Def. Council “insofar as

they hold that any action taken by the State Department pursuant to an executive

order, and in particular the preparation of an EIS for a major federal action, is not

subject to judicial review.”  Sierra Club v. Clinton, 689 F. Supp.2d 1147, 1157 n. 3

(D. Minn. 2010); see also Protect Our Communities Foundation v. Chu, No.,

12CV3062, 2014 WL 1289444 (S. D. Cal. Mar. 27, 2014) (rejecting Presidential

action argument asserted by the Department of Energy).  

The Court must reject Plaintiffs’ argument.  First, the overwhelming

authority supports a finding that the State Department’s actions in this case are

Presidential in nature, and thus not subject to judicial review.  Second, the court

in Sierra Club did not decide the issue of whether the State Department’s actions

pursuant to the Presidential Permits at issue here are Presidential in nature,

therefore that case is not persuasive on the issue.

Although this case differs from Sisseton‐Wahpeton and Natural Res. Def.

Council in that it involves the State Department’s interpretation of a Presidential

22

CASE 0:14-cv-04726-MJD-LIB Document 113 Filed 12/09/15 Page 22 of 25

Permit rather than a determination on an initial application for a Presidential

Permit, the Court finds both types of determinations are Presidential in nature

and should not be subject to judicial review.  Here, Enbridge reached out to the

State Department to obtain confirmation that the Replacement Project for the

border segment was consistent with the 1991 Permit covering Line 3 and that the

Bypass Project was outside the scope of the Line 67 Permit, as the

interconnections were outside the border segment.  In responding to such

inquiries, the State Department was carrying out the directives of the President as

set forth in Executive Order 13337, which included maintenance issues on

existing pipelines, and which defined the scope of the Permit “at the borders of

the United States.”  See Exec. Order 13337 § 1(a) (“Secretary of State is designated

and empowered to receive all applications for Presidential permits [] for the

construction, connection, operation and maintenance, at the borders of the

United States, of facilities for the exportation or importation of petroleum,

petroleum products, coal, or other fuels to or from a foreign country.”) (emphasis

added).  

Accordingly, the Court finds that Plaintiffs’ claims under the APA must

23

CASE 0:14-cv-04726-MJD-LIB Document 113 Filed 12/09/15 Page 23 of 25

fail as they are not based on agency action.

IT IS HEREBY ORDERED that:

1. Plaintiffs’ Motion for Partial Summary Judgment [Doc. No. 69] is

DENIED;

2. Intervenor Enbridge Energy, Limited Partnership’s Motion for

Partial Summary Judgment [Doc. No. 88] is GRANTED;

3. Defendants’ Motion for Partial Summary Judgment [Doc. No. 92] is

GRANTED; 

4. Counts One and Two are dismissed with prejudice;

5. Defendants’ Motion to Strike Pleading [Doc. No. 84] is DENIED as

moot; 

6. Plaintiffs’ Motion to File Reply as to Motion to Strike [Doc. No. 99] is

DENIED as moot; and

24

CASE 0:14-cv-04726-MJD-LIB Document 113 Filed 12/09/15 Page 24 of 25

7. Defendants’ Motion for Leave to Submit Supplemental Authority

[Doc. No. 110] is GRANTED.

Date:   December 9, 2015

s/ Michael J. Davis                                                       

Michael J. Davis

United States District Court

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CASE 0:14-cv-04726-MJD-LIB Document 113 Filed 12/09/15 Page 25 of 25

1

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF INDIANA

FORT WAYNE DIVISION

VALBRUNA SLATER STEEL CORPORATION and FORT WAYNE STEEL CORPORATION, Plaintiffs, v. JOSLYN MANUFACTURING COMPANY, JOSLYN CORPORATION and JOSLYN MANUFACTURING COMPANY, LLC, Defendants.

)))))))))) ) ) ) )

Case No. 1:10-CV-044-JD

OPINION AND ORDER

I. Facts and Procedural History

This is a Superfund case about who should bear the cost of cleaning up contamination at

a steel processing site. The factual background of this litigation is lengthy and much of it has

been set forth in prior orders. So, this order will contain only a brief summary of relevant facts.

Plaintiffs Valbruna Slater Steel Corporation and Fort Wayne Steel Corporation

(collectively Valbruna) own property located at 2302 and 2400 Taylor Street in Fort Wayne,

Indiana (the Site). Valbruna claims that one of the Site’s previous owners, Joslyn Manufacturing

Company, contaminated it with chlorinated solvents, metals and other contaminants. So,

Valbruna filed suit under the Comprehensive Environmental Response, Compensation, and

Liability Act (CERCLA), 42 U.S.C. §9607(a), and Indiana’s Environmental Legal Action (ELA)

statute, Ind. Code §§ 13-30-9-1 et seq., to recover the money it has spent cleaning up the Site.

Joslyn responded with a CERCLA counterclaim.

More than five years have passed since this lawsuit began. The Court has since resolved

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two motions for summary judgment filed by Joslyn. One of these, which the Court denied,

argued that Valbruna’s suit should be barred by CERCLA’s statute of limitations. [DE 50]. The

other argued that Valbruna’s claims should be barred by claim preclusion due to prior state court

litigation between Joslyn and Slater Steels Corporation (which sold the Site to Valbruna Slater

Stainless Inc., Valbruna’s corporate parent, in a bankruptcy auction). The Court granted that

motion as to Valbruna’s state-law ELA claim but denied it as to Valbruna’s CERCLA claim.

[DE 39]. Now only Valbruna’s CERCLA claim (and accompanying request for a declaratory

judgment) and Joslyn’s CERCLA counterclaim remain. Discovery has closed and the parties

have filed and fully briefed a new round of motions for summary judgment.

II. Josyln’s Motions for Summary Judgment on Claim Preclusion and the Statute of Limitations

Joslyn filed two motions for summary judgment, which argue that Valbruna’s suit is

barred by claim preclusion and CERCLA’s statute of limitations. [DE 96; DE 99]. These issues

have already been thoroughly litigated in this case. As noted above, Joslyn first raised them in

prior motions for summary judgment. [DE 191; DE 42]. The Court held that the statute of

limitations did not bar Valbruna’s claim, and that the parties’ prior state court litigation barred

Valbruna’s state law claim, but not its federal CERCLA claim. [DE 35; DE 50]. Joslyn then

filed a motion to reconsider the claim preclusion issue. [DE 36]. The Court amended its

reasoning in response to that motion, but once more denied summary judgment. [DE 39]. Joslyn

subsequently sought leave from the magistrate judge to file an amended answer, which reiterated

Joslyn’s claim preclusion and statute of limitations defenses. [DE 52]. The magistrate judge

1 Joslyn’s claim preclusion argument was initially presented as a motion to dismiss, but the Court converted it to a motion for summary judgment.

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permitted Joslyn to file an amended answer, but struck the claim preclusion and statute of

limitations defenses, finding:

[T] he Court squarely addressed and explicitly rejected the claim preclusion and statute of limitations defenses in separate, lengthy opinions denying Joslyn’s motions for summary judgment. As such, striking them from the Amended Answer eliminates unnecessary clutter . . . More to the point, Joslyn gambled with its summary judgment motions that it could get out of the case early, perhaps a sound strategic move, but also one with consequences. Having elected to consume substantial judicial and litigant resources early on, Joslyn does not get another chance—presumably after even more extensive and expensive discovery—to assert defenses the Court has already rejected as a matter of law.

[DE 58 at 5] (citation omitted). Shortly thereafter, Joslyn filed a motion to reconsider that

decision [DE 60], contending that the magistrate judge overreached when he “went past the issue

that needed to be decided—whether Joslyn’s two failed affirmative defenses should be

stricken—and appeared to bar Joslyn from filing a successive motion for summary judgment on

these defenses.” [DE 64 at 4]. The magistrate judge denied that motion, explaining that while

the Court’s ruling struck Joslyn’s affirmative defenses, it did not absolutely bar successive

summary judgment motions. The magistrate judge informed Joslyn that, should it believe at a

later point in litigation that “‘good reasons’ exist, then it may seek leave of court to file a

successive motion for summary judgment.” Id. (emphasis added). Joslyn then filed the motions

for summary judgment currently before the Court, which attempt to rehash the claim preclusion

and statute of limitations issues. It did not seek leave to do so.

It is within this Court’s discretion to permit a party to file a renewed motion for summary

judgment. Whitford v. Boglino, 63 F.3d 527, 530 (7th Cir. 1995); Gordon v. Veneman, 61 F.

A’ppx 296, 298 (7th Cir. 2003). A successive summary judgment motion is particularly

appropriate “1) when the controlling law has changed; 2) when new evidence has been

discovered; and 3) when allowing such a motion would be necessary to correct a clear error or

prevent a manifest injustice.” Gordon, 61 F. App’x at 298 (citing Whitford, 63 F.3d at 530).

The Court is unwilling to permit successive motions for summary judgment here. It has

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already addressed the issues raised by Joslyn at length. Moreover, the magistrate judge struck

the claim preclusion and statute of limitations defenses from Joslyn’s answer with a directive

that, “should Joslyn believe that . . . ‘good reasons’ exist, then it may seek leave of court to file a

successive motion for summary judgment.” [DE 64 at 4]. Joslyn flagrantly ignored that ruling,

filing its motions without first seeking leave to do so. To the extent Joslyn may be arguing that it

obtained leave of court when during a telephonic status conference the undersigned

acknowledged its stated intent to refile said motions, without any disclosure of prior rulings by

the magistrate judge and without explicitly granting leave of court, that argument is unavailing

and somewhat disingenuous. Accordingly, the Court denies Joslyn’s motions for summary

judgment.2

III. Valbruna’s Motion for Summary Judgment as to Joslyn’s § 107(a) Liability

Valbruna also filed a motion for summary judgment. It seeks findings that: (1) Joslyn is

liable to Valbruna under § 107(a)3 of CERCLA, (2) Valbruna is entitled to recover its past costs

from Joslyn and (3) Valbruna is entitled to recover its future costs that are consistent with

CERCLA from Joslyn.

A. Standard of Review

Summary judgment is appropriate when there “is no genuine dispute as to any material

fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A genuine

dispute as to any material fact exists if “the evidence is such that a reasonable jury could return a

verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

2 The Court also strikes Joslyn’s abbreviated request to certify this order for immediate appeal under 28 U.S.C. § 1292(b). Joslyn may refile its request to the extent it wishes to do so in light of this order, and to afford the Court more information as to why counsel believe a § 1292(b) appeal is warranted in this case. 3 While this provision is codified as 42 U.S.C. § 9607(a), the Court will refer to it as § 107(a). It will use the same convention for other CERCLA provisions.

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“Once a party has made a properly-supported motion for summary judgment, the nonmoving

party may not simply rest upon the pleadings but must instead submit evidentiary materials that

set forth specific facts showing that there is a genuine issue for trial.” Siegel v. Shell Oil Co.,

612 F.3d 932, 937 (7th Cir. 2010) (internal quotation marks omitted). Since the Court is

evaluating a motion for partial summary judgment filed by Valbruna, it will construe all disputed

facts in the light most favorable to the Joslyn. See Anderson, 477 U.S. at 255 (at the summary

judgment stage “the evidence of the non-movant is to be believed, and all justifiable inferences

are to be drawn in his favor”).

B. Valbruna’s § 107(a) Claim

CERCLA, also known as Superfund, is a very complicated piece of environmental

legislation. Among other things, it provides a cause of action to private parties that incur

environmental cleanup costs. Section 107(a) of CERCLA “permits cost recovery (as distinct

from contribution) by a private party that has itself incurred cleanup costs.” United States v. Atl.

Research Corp., 551 U.S. 128, 139 (2007). Section 113(f) provides a contribution action to

potentially responsible persons (PRPs) “with common liability stemming from an action

instituted under § 106 [which allows the Government to bring suit against PRPs to force them to

clean up hazardous waste] or § 107(a)[.]” Id. Fortunately, this case does not implicate the

abstruse distinctions between those statutory subsections. Valbruna is proceeding under §

107(a), and Joslyn does not contest the procedural propriety of that decision.

Under § 107(a), CERCLA liability attaches where “(1) the site in question is a ‘facility’

as defined by CERCLA; (2) the defendant is a responsible party; (3) there has been a release or

there is a threatened release of hazardous substances; and (4) the plaintiff has incurred costs in

response to the release or threatened release.” Sycamore Indus. Park Assocs. v. Ericsson, Inc.,

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546 F.3d 847, 850 (7th Cir. 2008) (citing 42 U.S.C. § 9607(a); Envtl. Transp. Sys., Inc. v.

ENSCO, Inc., 969 F.2d 503, 506 (7th Cir. 1992); 3550 Stevens Creek Assocs. v. Barclays Bank,

915 F.2d 1355, 1358 (9th Cir.1990)). To establish a prima facie case under CERCLA, a non-

governmental plaintiff must also meet a fifth requirement: it “must show that any costs incurred

in responding to the release were ‘necessary’ and ‘consistent with the national contingency

plan.’” Forest Park Nat. Bank & Trust v. Ditchfield, 881 F. Supp. 2d 949, 977 (N.D. Ill. 2012)

(citing 42 U.S.C. § 9607(a)(4)(B); G.J. Leasing Co. v. Union Elec. Co., 54 F.3d 379, 386 (7th

Cir. 1995)); NutraSweet Co. v. X-L Eng'g Co., 227 F.3d 776, 791 (7th Cir. 2000). Joslyn does

not contest the first four elements of the above analysis. Rather, it argues that Valbruna cannot

satisfy the fifth element because Valbruna has not incurred costs that are necessary or consistent

with the National Contingency Plan (NCP). Joslyn also argues that its § 113(f) counterclaim

turns this into a suit for contribution, which is governed by equitable principles, as opposed to §

107(a)’s joint and several liability scheme.

C. Effect of Joslyn’s § 113(f) Counterclaim

The elements required to establish a prima facie case under § 113(f) are the same as those

under § 107(a). Bedford Affiliates v. Sills, 156 F.3d 416, 427 (2d Cir. 1998). But, under §

113(f), the district court has “broad and loose” authority to equitably allocate remediation costs

between PRPs. NCR Corp. v. George A. Whiting Paper Co., 768 F.3d 682, 695 (7th Cir. 2014).

In contrast, liability under § 107(a) is joint and several unless there is a reasonable basis for

determining the contribution of each cause to a single harm. Bernstein v. Bankert, 733 F.3d 190,

201 (7th Cir. 2013). Joslyn contends that its § 113(f) counterclaim turns this into a suit for

contribution, and so the Court should consider equitable factors in determining Joslyn’s liability.

That puts the cart before the horse. Joslyn’s counterclaim depends on its liability to Valbruna

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under § 107(a). If Joslyn were not liable to Valbruna, it would have neither the need nor a basis

to seek contribution. So, the Court must determine Joslyn’s liability to Valbruna (and

Valbruna’s liability to Joslyn, which is not at issue in this order) before diving into equitable

considerations under § 113(f). See Kalamazoo River Study Grp. v. Menasha Corp., 228 F.3d

648, 656 (6th Cir. 2000) (“The district court's imposition of a requirement that plaintiffs in

contribution actions show causation in order to establish a defendant's liability was erroneous . . .

It is true that the equitable contribution principles of § 113(f) permit a district court to consider

causation. However, consideration of causation is proper only in allocating response costs, not

in determining liability.”); ITT Industries, Inc. v. Borgwarner, Inc., 700 F. Supp. 2d 848 (W.D.

Mich. 2010) (establishing the Defendants’ joint and several liability to the Plaintiff under §

107(a) and the Plaintiff’s liability to the Defendants under § 113(f) before equitably allocating

costs).

D. Necessary Costs

Joslyn next contends that Valbruna did not incur any necessary costs of response. Under

CERCLA, costs are “necessary” if they are incurred in response to a threat to human health or

the environment and they are necessary to address that threat. G.J. Leasing Co. v. Union Elec.

Co., 854 F. Supp. 539, 562 (S.D. Ill. 1994) aff'd, 54 F.3d 379 (7th Cir. 1995). Whether costs are

necessary is a mixed question of law and fact. G.J. Leasing Co. v. Union Elec. Co., 54 F.3d 379,

386 (7th Cir.1995). Summary judgment is appropriate for the purposes of determining Joslyn’s

liability if the undisputed facts demonstrate that at least some of Valbruna’s costs were

necessary. See NutraSweet, 227 F.3d at 782.

According to Joslyn, none of Valbruna’s costs were necessary since they were incurred

for a “purpose other than responding to an actual and real public health threat.” [DE 113 at 18].

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That argument is unavailing. There is ample uncontested evidence that Valbruna spent at least

some amount of money to eliminate contamination that posed a threat to public health. See, e.g.,

[DE 113 at 18] (agreeing that Valbruna invested $1 million into environmental cleanup at the

Site); [DE 114 at 34] (not disputing that Valbruna incurred “costs in connection with asbestos, lead

paint, transformer oil, etc., in connection with demolition of the old melt shop,” but arguing that it

did so to facilitate new construction rather than to address an environmental threat); [DE 101-20 at

16] (discussing Valbruna’s remediation efforts, which have cost in excess of $1 million and resulted

in the removal of approximately 40,000 pounds of TCE from the subsurface).

Joslyn sidesteps the public health threat issue and instead focuses on Valbruna’s

intentions. It contends Valbruna cleaned up the Site to take advantage of a business opportunity,

rather than to remediate the environment. Such costs, Joslyn says, are not compensable under

the district court opinion in G.J. Leasing, which found that the plaintiffs did not incur necessary

costs where they cleaned up a site for business reasons. 854 F. Supp. at 562.

But that ignores a sizeable distinction between G.J. Leasing and this case. In G.J.

Leasing, the court did not find any evidence of a public health threat. Id. (“Plaintiffs have not

demonstrated that there are any actual or potential risks posed by conditions at the Site.”).

While it noted the plaintiffs’ business motivations, those simply underscored the absence of a

public health threat. G.J. Leasing would not appear to foreclose recovery for plaintiffs like

Valbruna who respond to a clear public health threat, even if they do so for purportedly

commercial reasons. Moreover, even if the Court did subscribe to Joslyn’s interpretation of G.J.

Leasing, it still would not find subjective motivation to be a relevant consideration in the

necessary cost calculus. See Carson Harbor Vill., Ltd. v. Unocal Corp., 270 F.3d 863, 872 (9th

Cir. 2001) (“In determining whether response costs are ‘necessary,’ we focus not on whether a

party has a business or other motive in cleaning up the property, but on whether there is a threat

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to human health or the environment and whether the response action is addressed to that

threat.”). Thus, regardless of why it may have done so, Valbruna spent at least some money in

response to a public health threat and consequently incurred some necessary costs. That is not to say

that all of Valbruna’s costs were necessary. Rather, as the Seventh Circuit has indicated, Valbruna

will be required to establish that any costs it seeks to recover were related to remediating a public

health threat and reasonable in light of the degree of that threat. G.J. Leasing, 54 F.3d at 386.

E. The NCP’s Public Participation Requirement

Joslyn also contends that Valbruna’s expenses are not compensable, since they are not

consistent with the NCP. Like the evaluation of necessary costs, consistency with the NCP is a

mixed question of law and fact. See, e.g., Bedford, 156 F.3d at 427. A private party response

action is consistent with the NCP if it is in substantial compliance with the NCP and results in a

CERCLA-quality cleanup. 40 C.F.R. § 300.700(c)(3)(i). One of the NCP’s provisions, 40

C.F.R. § 300.700(c)(6), provides that “[p]rivate parties undertaking response actions should

provide an opportunity for public comment concerning the selection of the response action[.]” It

further lists several provisions regarding public participation that are “potentially applicable to

private party response actions.” Id.

According to Joslyn, Valbruna’s expenses were not consistent with the NCP because

Valbruna did not fulfill this public participation requirement. Valbruna responds that

government agency involvement in a cleanup operation can be sufficient to meet this

requirement, and the Plaintiffs executed remediation efforts under the close supervision and

oversight of the Indiana Department of Environmental Management (IDEM). Joslyn disagrees,

arguing that the public participation requirement serves two purposes: “(1) to ensure that PRPs

and concerned citizens that may be affected by cleanup decisions are able to represent their

interests; and (2) to ensure that cleanups are carried out in an environmentally sound matter.”

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[DE 113 at 20]. Agency involvement may sometimes satisfy the second requirement, it says, but

not the first.

The Seventh Circuit addressed this issue in NutraSweet, though only indirectly. 227 F.3d

at 791. In that case, the court of appeals found that the involvement of a public agency sufficed

to meet the public participation requirement:

The Illinois EPA approved NutraSweet's clean-up plan, and the agency monitored the progress of the remediation. NutraSweet remediated its property until the Illinois EPA advised it that it could stop because NutraSweet's efforts had succeeded to the maximum extent possible. In light of this evidence, we are satisfied that NutraSweet met this requirement for a CERCLA recovery.

Id; accord Bedford, 156 F.3d at 428. So, while the Seventh Circuit has not yet decided the issue

explicitly, NutraSweet “suggests strongly that government agency involvement . . . can provide

an adequate substitute for public notice and comment.” Norfolk S. Ry. Co. v. Gee Co., 158 F.

Supp. 2d 878, 883 (N.D. Ill. 2001); see also City of Gary, Indiana v. Shafer, No. 2:07-CV-56-

PRC, 2009 WL 1605136, at *14 (N.D. Ind. June 2, 2009).

This Court will follow that precedent. The Seventh Circuit’s analysis on this issue, brief

as it may be, is the best guidance as to how to proceed. Further, such an approach is reasonable,

given the NCP provides that the public comment provisions are not intended to be rigid. See

Bedford, 156 F.3d at 428. So, it appears that state agency involvement can fulfill the public

participation requirement of the NCP.

The agency’s involvement must, however, be sufficiently substantial to ensure that the

cleanup is carried out in an environmentally sound manner. Id. Involvement is substantial

where, for example, “a state agency responsible for overseeing remediation of hazardous wastes

gives comprehensive input, and the private parties involved act pursuant to those instructions[.]”

Id.; see also NutraSweet, 227 F.3d at 791 (finding NCP compliance where “The Illinois EPA

approved NutraSweet's clean-up plan . . . the agency monitored the progress of the remediation

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[and] NutraSweet remediated its property until the Illinois EPA advised it that it could stop

because NutraSweet's efforts had succeeded to the maximum extent possible.”); Norfolk, 158 F.

Supp. 2d at 882 (finding NCP compliance where “the IEPA was involved in both the approval of

[the] remediation plans and the execution of the remediation itself, and then supplied its final

stamp of approval by way of two separate No Further Remediation (NFR) Letters.”).

Valbruna provides significant evidence that IDEM’s involvement was sufficiently

substantial to fulfill the public participation requirement. That evidence shows that Valbruna

purchased the Site under an agreement with IDEM in which Valbruna agreed to pay $500,000 of

a $1,000,000 escrow to remediate the Site in exchange for certain environmental liability

protections from IDEM. [DE 104-47 at 15-32]. Valbruna’s contractor then prepared a

remediation work plan for IDEM which recommended remediating the Site with electrical

resistance heating (ERH). IDEM reviewed that remediation work plan and allowed Valbruna to

proceed with ERH. [DE 114-16 at 35-36]; [DE 104-48 at 3]. During the ERH process, IDEM

reviewed and approved the invoices for the vendor that performed the remediation work. [DE

114-16 at 38]. After the completion of the ERH, IDEM sent Valbruna a risk assessment letter

outlining numerous sources of contamination that remained at the Site. [DE 104-47 at 41-47].

Valbruna then enrolled the Site in IDEM’s voluntary remediation program to address remaining

contamination. [DE 104-44 at 5-6]. Moreover, both Valbruna’s environmental manager and the

former IDEM project manager for the Site have indicated that IDEM has provided supervision

during remediation efforts. [DE 104-44 at 3]; [DE 104-48 at 3].

Joslyn does not provide evidence to refute these contentions. Nor does it provide other

evidence that could permit a reasonable finder of fact to conclude that IDEM’s involvement in

the Site’s remediation was insubstantial. Joslyn first points to expenses submitted by Valbruna

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and notes that IDEM did not bill Valbruna for any oversight fees in 2005 or 2006 when the ERH

took place. [DE 104-44 at 8, 10-11]. But, it is difficult to draw any inference from this, since

Joslyn does not offer any indication that substantial oversight typically comes at a cost. Second,

Joslyn says that the remediation work plan Valbruna’s ERH contractor submitted to IDEM did

not comply with the NCP because, among other things, it did not adequately compare potential

alternatives to ERH. That does not, however, allow for the inference that IDEM was

insubstantially involved in the remediation process. Indeed, it appears that IDEM recognized

that the ERH remediation work plan did not meet IDEM’s voluntary remediation plan guidelines,

but nevertheless allowed ERH to proceed largely because of a guarantee offered by the

remediation contractor. [DE 114-16 at 35-36]. Whether that was a well-founded decision or not

is irrelevant. The inquiry is whether IDEM was substantially involved in the remediation effort,

not whether its choices were prudent. Third, Joslyn says that IDEM has not issued Valbruna a

certificate of completion or a covenant not to sue. But, that would seem to be expected since

remediation is still ongoing at the Site. And at any rate, it does not indicate a lack of

involvement by IDEM. Accordingly, the Court concludes that there is no genuine issue of

material fact as to whether IDEM’s involvement was sufficiently substantial to satisfy the NCP’s

public participation requirement. So, Valbruna has established that it incurred expenses

consistent with the NCP.4

4 Joslyn also briefly argues that Valbruna’s costs are not in substantial compliance with the NCP because Valbruna did not conduct a remedial preliminary assessment and site inspection, a remedial investigation/feasibility study or a remedial design/remedial action evaluation. [DE 113 at 20]. It is not necessary to determine the extent to which Valbruna satisfied those elements of the NCP. That is because demonstrating IDEM’s substantial involvement in this cleanup is sufficient to establish not merely substantial compliance with the public participation requirement, but substantial compliance with the NCP as a whole. NutraSweet, 227 F.3d at 791 (finding NCP compliance where the Illinois EPA approved the cleanup plan, monitored remediation progress and subsequently advised that remediation could cease since it succeeded to the maximum extent possible); City of Gary, 2009 WL 1605136, at *14; Sherwin-Williams Co. v. ARTRA Grp., Inc., 125 F. Supp. 2d 739, 753 (D. Md. 2001); Norfolk, 158 F. Supp. 2d at 882.

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F. Preliminary Investigation and Monitoring Costs

That leaves the parties’ dispute as to preliminary investigation and monitoring costs.

Valbruna says that its preliminary investigation and monitoring costs need not comply with the

NCP. Joslyn argues to the contrary, asserting that investigation and monitoring costs, like all

other expenses, must comply with the NCP. But the Seventh Circuit has found that site-

assessment costs do not have to comply with NCP requirements. PMC, Inc. v. Sherwin-Williams

Co., 151 F.3d 610, 617 (7th Cir. 1998) (noting that site-assessment costs “are not subject to the

requirement of submission for public comment”); see also CNH Am., LLC v. Champion Envtl.

Servs., Inc., 863 F. Supp. 2d 793, 809 (E.D. Wis. 2012) (collecting Seventh Circuit district court

cases which hold that “initial investigation, site-assessment, and monitoring costs are recoverable

under § 107(a) of CERCLA irrespective of compliance with NCP requirements.”). Due to the

above conclusion that Valbruna incurred necessary and NCP-compliant expenses, however, the

Court need not at this time reach the issue of what (if any) preliminary investigation and

monitoring costs Valbrua incurred.

G. Damages and Declaratory Judgment

Since Valbruna has shown that it incurred some necessary costs consistent with the

NCP—the only part of its prima facie case in dispute—it has succeeded in establishing Joslyn’s

liability under § 107(a). That means that Joslyn is jointly and severally liable for Valbruna’s

response costs. See Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 614

(2009); United States v. Capital Tax Corp., 545 F.3d 525, 534 (7th Cir. 2008) (noting that joint

and several liability is the default rule under § 107(a)). 5 Given the complexity of this case and

5 Joslyn impliedly argues that joint and several liability is restricted to governmental plaintiffs in § 107(a) cases. It provides no support for that argument and the law does not support it. Padgett Bros. LLC v. A.L. Ross & Sons, Inc., No. 1:10-CV-00858-RLY-DM, 2014 WL 3547353, at *8 (S.D. Ind. July 17, 2014) (“Once an entity is determined to be a PRP, it is typically jointly and severally liable for all costs of removal or remediation by a governmental entity

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Joslyn’s pending counterclaim, however, the Court will defer deciding what those costs are.6 See

Amoco Oil Co. v. Borden, Inc., 889 F.2d 664, 667 (5th Cir. 1989) (“Because of the complexity of

CERCLA cases, which often involve multiple defendants and difficult remedial questions, courts

have bifurcated the liability and remedial, or damages, phases of CERCLA litigation.”).

Finally, the Court notes that Valbruna is seeking a declaratory judgment as to Joslyn’s

liability for future costs under § 113(g)(2). Since Valbruna prevailed as to its § 107(a) claim, it

is entitled to a declaratory judgment as to its future costs. 42 U.S.C. § 9613(g)(2) (“In any such

action described in this subsection, the court shall enter a declaratory judgment on liability for

response costs or damages that will be binding on any subsequent action or actions to recover

further response costs or damages.”). Accordingly, Valbruna will be entitled to recover its future

costs from Joslyn, but only to the extent that those costs are not offset by Valbruna’s liability (if

any) to Joslyn under Joslyn’s § 113(f) counterclaim. Since the Court finds that a declaratory

judgment under CERCLA is appropriate, it need not reach Valbruna’s request for a declaratory

judgment under 28 U.S.C. § 2201 or Rule 57.

IV. Conclusion

The Court DENIES Joslyn’s motions for summary judgment. [DE 96; DE 99]. It

GRANTS Valbruna’s motion for summary judgment. [DE 102]. The Court further GRANTS

the request for a declaratory judgment in that motion to the extent that such judgment is not

offset by Joslyn’s pending counterclaim. Since the Court resolves this matter without oral

argument, Joslyn’s motion for the same is DENIED as moot [DE 115].

and for response costs incurred by any other person.”) (emphasis added); United States v. SCA Servs. of Indiana, Inc., 849 F. Supp. 1264, 1281 (N.D. Ind. 1994) (“The weight of authority establishes that liability under CERCLA is joint and several. Such liability extends to actions for cost recovery brought by private parties[.]”) 6 As a result, the Court will also defer addressing Joslyn’s argument that Valbruna has failed to sufficiently itemize its costs.

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SO ORDERED.

ENTERED: December 4, 2015

/s/ JON E. DEGUILIO Judge United States District Court

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UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS

WESTERN DIVISION LAJIM, LLC, PRAIRIE RIDGE GOLF ) COURSE, LLC, LOWELL BEGGS, and ) MARTHA KAI CONWAY, ) Plaintiffs, ) No. 13 CV 50348 ) Magistrate Judge Iain D. Johnston v. ) ) GENERAL ELECTRIC CO., ) Defendant. )

MEMORANDUM OPINION AND ORDER Plaintiff Lowell Beggs contends that the golf course he bought in 2007 contains more hazards than just bunkers and a creek. Beggs alleges that the course also has toxic hazards migrating through the groundwater and soil under the course and his adjacent home. He and his business partners sued General Electric under multiple environmental statutes seeking a court order requiring General Electric to clean up and pay for the damage caused by the contaminants from its former plant. The parties have each moved for partial summary judgment on one of the environmental claims, and General Electric has moved for partial summary judgment on all of the state-law claims. For the reasons that follow, General Electric’s motion for summary judgment on the state law claims [48] is granted, its motion for summary judgment on the federal environmental claim [57] is denied, and the plaintiffs’ motion for summary judgment on the federal environmental claims [37] is granted as to liability. I. BACKGROUND A. General Electric Plant The following facts are undisputed except where noted. From 1949 through 2010, General Electric operated a plant in Morrison, Illinois. The plant manufactured appliance and automotive controls for products, including refrigerators, air conditioners, and motor vehicles. During the relevant time, the manufacturing process involved using chlorinated organic solvents to remove oil from parts. The solvents included trichloroethylene (“TCE”) through 1974, perchloroethene (“PCE”) from 1973 through 1980, and 1,1,1 trichlorethane (“TCA”) from 1974 through 1994. These solvents can break down into other matter, such as 1,2-dichloroethane (“1,2-DCA), all of which are toxic and regulated by federal and state environmental agencies. General Electric stored the chlorinated solvents in degreasers located in the plant. The degreasers were decommissioned in 1994, when General Electric started cleaning parts with a soap-like solution. In 1986, chlorinated solvents were detected in three municipal supply wells that provided water to the City of Morrison. The wells were located several thousand feet southeast of the

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General Electric plant. In 1987, the Illinois Environmental Protection Agency (“IEPA”) subcontracted environmental consultant Mathes & Associates to install eight monitoring wells, and to sample and analyze water and sediment from Rock Creek and a storm water retention pond northwest of the General Electric plant. A test Mathes performed in 1987 revealed 620 micrograms per liter (“µg/L”) of TCE in one of the municipal water wells, far in excess of the 5 µg/L Maximum Contaminant Level (“MCL”) for drinking water established by the United States Environmental Protection Agency (“U.S. EPA”). In addition, chlorinated solvents were discovered in groundwater obtained from two monitoring wells downgradient from (which is south of) the plant. In 1988, a local newspaper reported that the IEPA had traced the source to the plant. After a notice and request from the IEPA, in 1988, General Electric hired environmental consultant Canonie Environmental to perform a Phase II Remedial Investigation, including the installation of an additional six monitoring wells, with the IEPA overseeing Canonie’s activities. That year, Canonie also installed an air stripper to treat water pumped from one municipal well so it could continue to supply water to the City of Morrison. The other two municipal wells were sealed. In March 1989, tests found TCE in at least four of the eight monitoring wells. Canonie’s report issued later that year concluded that while a “specific source of the VOCs [or volatile organic compounds] or the chlorides was not found” during the investigation, “the industrial complex [the site of General Electric’s plant] is not a source of VOCs to the unconfined aquifer, and therefore remediation in the industrial complex is not appropriate.” Canonie Phase II Report [Plaintiffs’ Statements of Fact [42] Ex. 23 at ES 1-2]. The Canonie Phase II Report did, however, recommend a soil gas survey be completed under the floor slab of the plant around the location of the degreasers. Following issuance of the Canonie Phase II Report, on September 27, 1988, the IEPA issued a notice pursuant to § 4(q) of the state’s Environmental Protection Act, which grants authority to “provide notice to any person who may be liable pursuant to Section 22.2(f) of this Act for a release or a substantial threat of a release of a hazardous substance or pesticide. Such notice shall include the identified response action and an opportunity for such person to perform the response action.” 415 ILCS 5/4(q). In 1989, Target Environmental Services conducted the soil gas survey recommended in the Canonie Report. Soil gas samples revealed the presence of eight different chlorinated solvents, mostly TCE and TCA, and the highest levels were found in the area beneath the degreasers. Under supervision of the IEPA, General Electric, through Canonie and its successor, Harrington Engineering & Construction, continued periodic testing of groundwater sampled from the monitoring wells. General Electric did not, however, install any soil borings or monitoring wells at the location of the degreasers.

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In June 1994, the IEPA issued a notice requiring a Phase III remediation investigation. After conferring with the IEPA, General Electric agreed to conduct a supplemental investigation to evaluate the groundwater downgradient from its plant. In 1996, General Electric solicited proposals for a new environmental consultant to conduct the supplemental investigation of the groundwater at and downgradient from the plant. General Electric ultimately hired GeoTrans in 1999 to conduct a groundwater flow modeling and a natural attenuation analysis, including performing soil borings near the locations of the degreasers. Two years later in 2001, GeoTrans issued its findings. According to its Natural Attenuation and Groundwater Modeling Report, the concentration of chlorinated solvents had decreased significantly by 2001, and the report concluded that contaminants would naturally attenuate to levels below the MCL. GeoTrans also concluded that Rock Creek was a regional groundwater divide that would prevent the chlorinated solvents from migrating to the south side of the creek. The report also found that the remaining concentrations of contaminants posed no risk to the public. According to GeoTrans, a City of Morrison ordinance prohibiting the use of private wells in the area and the air stripping treatment of groundwater from the affected municipal well eliminated any risk. The IEPA responded to the GeoTrans report and stated that it “cannot approve the proposal for monitored natural attenuation as a remedy for this site” for numerous reasons, including that after 15 years concentrations of contaminant remained relatively high. In particular, the IEPA reported a finding of 12 µg/L at one well, which was higher than previous results, and 4,300 µg/L found at another well, all in excess of the 5 µg/L MCL. The IEPA concluded that active remediation would be appropriate. In February 2004, the Illinois Attorney General filed suit against General Electric to recover costs the state had incurred because of General Electric’s release of hazardous substances as well as an injunction requiring General Electric to determine the nature and extent of the soil and groundwater contamination, and then to perform remediation. The state’s claims were brought under provisions of Illinois’ Environmental Protection Act: Count I for cost recovery, see 415 ILCS 5/22.2(f); Count II to enjoin water pollution, see 415 ILCS 5/42(d), (e); and Count III to enjoin a water pollution hazard, see 415 ILCS 5/12(d). In December 2010, the Illinois Attorney General and General Electric entered into a Consent Order. Pursuant to the Consent Order, General Electric agreed to submit to the IEPA for its approval a series of plans and reports including: (1) a work plan to survey private wells, install additional monitoring wells, and complete additional soil borings; (2) a Focused Site Investigation Report (“FSI”) summarizing the results of the work plan; (3) a Remedial Objectives Report to address the impact of the soil and groundwater contamination; and (4) a Remedial Action Plan to meet the remediation objectives within six years of the entry of the Consent Order. After development of the approved work plan, General Electric installed monitoring wells along Rock Creek. In April 2013, General Electric submitted its FSI prepared by its environmental consulting firm, MWH Americas. The FSI detailed data obtained from the monitoring wells along Rock Creek and elsewhere. The FSI also contained data showing that

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chlorinated solvents released at the General Electric plant had migrated south of the plant. Specifically, the data showed that in January 2012, TCE levels were 480 µg/L in the groundwater from one well along the creek (MW7-LS), and 4,800 µg/L in another (MW8-LS). Those wells are both 1,400 feet downgradient from the plant. In August 2012, those same two wells detected levels of 2,700 µg/L and 2,000 µg/L, respectively. Groundwater collected that same month from a supply well on the plaintiffs’ golf course south of the plant detected TCE at a concentration of 5,000 µg/L, 1,000 times the MCL. Meanwhile, shallow “grab” groundwater samples from wells adjacent to the plant also detected contamination, yielded concentrations of 130 µg/L from one site (SB-17) and 2,200 µg/L from another site (MW-10). Tests of the groundwater obtained from private wells south of Rock Creek did not detect chlorinated solvents. However, an August 2012 test of groundwater collected from a supply well on the plaintiffs’ golf course located south of Rock Creek detected TCE, although at 0.93 µg/L. The level falls under the MCL.1 After comments by the IEPA, General Electric submitted a supplemental work plan in August 2013 and an FSI Addendum in May 2014. In August 2014, the IEPA made additional comments to the FSI Addendum and withheld approval pending responses to the comments. In October 2014, MWH Americas submitted General Electric’s responses. Meanwhile, in 2010, the City of Morrison passed an ordinance that prohibited the use of groundwater as a supply of potable water, and prohibited the installation or drilling of wells in the city. The city passed the ordinance “to limit threats to human health from groundwater contamination while facilitating the redevelopment and productive use of properties that are the source of said chemical constituents.” Ex. U to GE’s Rule 56.1 on Count I [Dkt. 59-8]. B. Prairie Ridge Golf Course In 2007, plaintiff Lowell Beggs purchased the then-closed Prairie Ridge Golf Course in Morrison, Illinois. He conveyed the property to plaintiff Prairie Ridge Golf Course, LLC. Plaintiff LAJIM, LLC operates the course. Plaintiff Martha Kai Conway is Mr. Beggs’ companion, and they moved into a home next to the course. The home is held in Ms. Conway’s name. The golf course and the plaintiffs’ home are both south of the General Electric plant and are both hydrogeologically downgradient from the plant. Mr. Beggs first learned that the course was for sale in April 2007. At the time, the course was owned by Citizens First Bank of Morrison, which had acquired it in foreclosure. Mr. Beggs asked his real estate attorney Gary Gehlbach to gather information about the course, and Mr. Gehlbach wrote to Citizens First Bank requesting “whatever information you may possess that will help us put together an offer to purchase.” Ex. L to GE’s Rule 56.1 on State Law Claims [Dkt. 52]. In response, the bank provided a legal description of the property and financials from the last five years the course was in operation. Additionally, in an e-mail from Keith Hooks

1 In their memorandum [38], the plaintiffs note the detection of other contaminants at levels exceeding the MCL. For instance, the plaintiffs note that the FSI reported levels of 1,2-DCE detected in groundwater at a concentration of 22,000 µg/L, over 314 times the MCL of 70 µg/L, and concentrations of vinyl chloride in groundwater at 1,200 µg/L, 600 times the MCL of 2 µg/L. But that data is not incorporated into any Rule 56.1 statement of fact and, as a result, the plaintiffs have not established that the data is undisputed.

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dated May 1, 2007, the bank stated the following: “Gary, the golf course has contamination on the first hole. This was caused by General Electric. If you go to the EPA web site, GE is listed as a superfund site. No further remediation was needed according to what I can find.” Ex. N to GE’s Rule 56.1 on State Law Claims [Dkt. 52-2]. Mr. Gehlbach confirmed that he passed the information on to Mr. Beggs. Mr. Beggs did not ask Mr. Gehlbach or anyone else to gather any more information about the environmental condition of the golf course. Later that same day as Mr. Hooks’ e-mail about the contamination on the golf course, Mr. Gehlbach wrote to Mr. Hooks: “Keith, Thanks for the information. Lowell is, as you suggested, anxious to proceed, and after talking further with him, I have revised the Memorandum to reflect this.” Ex. O to GE’s Rule 56.1 on State Law Claims [Dkt. 52-3]. The bank and Mr. Beggs reached an agreement, and the purchase closed on May 29, 2007. The purchase agreement was drafted by Mr. Gehlbach and contained the following: “[S]eller, however, has disclosed to Purchaser that there is contamination on the first hole of the Real Estate, such contamination having been caused by General Electric, as which contamination is part of the Superfund Site that apparently does not require any further remediation.” Ex. Q to GE’s Rule 56.1 on State Law Claims [Dkt. 52-5] at 7. At some time before his purchase, Mr. Beggs walked the entire golf course and noticed that the head of a monitoring well protruded above the ground surface. Later in 2007, after his purchase, Mr. Beggs noticed that the well head had been damaged by equipment used to maintain the course and was leaking water onto the course. Mr. Beggs contacted General Electric to fix it. At the time, Mr. Beggs knew the well monitored “how much stuff was coming out of GE.” Beggs Deposition [Dkt. 53-1] at 66. After purchasing the course, Mr. Beggs used two supply wells on the golf course. It is undisputed that the wells were used for irrigation, but the parties dispute whether maintenance workers also drank water from the north well. As discussed above, an August 2012 test of the water from the north supply well detected a concentration of TCE of 5,000 µg/L, one-thousand times the MCL, while a test of the south well located south of Rock Creek detected a TCE concentration of 0.93 µg/L. After General Electric conducted the well survey required under the IEPA work plan in 2012, it delivered signs to the golf course’s groundskeeper to install on the north and south well pumps and spigot that read, “DO NOT DRINK, IRRIGATION WELLS, NON-POTABLE WATER.” The golf course also included a club house. Testing of a “grab” groundwater sample collected next to the clubhouse detected a TCE concentration of 170 µg/L. In 2012, sampling by General Electric’s environmental consultant ARCADIS detected 0.55 micrograms per cubic meter (“µg/m³”) of the compound 1,2-DCA in the indoor air at the Beggs/Conway home, above the current residential standard of 0.09 µg/m³. Other chlorinated solvents were also detected in groundwater, soil boring, and soil gas samples taken from near and beneath the Beggs/Conway home, but those samples did not detect 1,2-DCA. However, 1,2-

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DCA has been detected elsewhere in soil and groundwater samples at and downgradient from the General Electric plant.2 C. Federal Lawsuit The plaintiffs filed suit against General Electric on November 1, 2013. They seek a mandatory injunction to require General Electric to remediate the contamination (Count I) under the Resource Conservation and Recovery Act (“RCRA”), see 42 U.S.C. § 6972(a)(1)(B); cost recovery (Count II) and a declaratory judgment (Count III) under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), see 42 U.S.C. § 9607(a) (cost recovery) and § 9613 (g)(3) (declaratory judgment); and allege state law claims of nuisance (Count IV), trespass (Count V), and negligence (Count VI). Before the Court are three motions for partial summary judgment. First, the plaintiffs seek summary judgment in their favor on Count I for an injunction under RCRA, contending that the undisputed facts establish that the groundwater contamination and vapor intrusion may present an imminent and substantial endangerment. Dkt. 37. Second, General Electric filed a cross-motion for summary judgment on Count I contending that the plaintiffs’ claim under RCRA is barred because the IEPA has commenced and is diligently prosecution its own enforcement action. Dkt. 57. Finally, General Electric has filed a motion for summary judgment on the plaintiffs’ three state law claims, arguing that the claims are barred by the statute of limitations. Dkt. 48. II. ANALYSIS 1. Summary Judgment Standard Summary judgment is proper “if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c); Life Plans, Inc. v. Security Life of Denver Ins. Co., 800 F.3d 343, 349 (7th Cir. 2015). A genuine issue of material fact exists if, when viewing the record and all reasonable inferences drawn from it in the light most favorable to the non-movant, a reasonable jury could return a verdict for the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Life Plans, 800 F.3d at 349. The burden to show that no genuine issue of material fact exists falls on the movant. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Hotel 71 Mezz Lender LLC v. National Retirement Fund, 778 F.3d 593, 601 (7th Cir. 2015). If the movant meets this burden, to survive summary judgment the non-movant must set forth specific facts that demonstrate the existence of a genuine issue for trial. Fed. R. Civ. P. 56(e); Celotex, 477 U.S. at 324.

2 In the memorandum in support of their motion for summary judgment, the plaintiffs also assert that vapor intrusion in the home next to theirs is so bad that General Electric installed two sub-slab depressurization systems to prevent chlorinated solvents containing vapors from entering that home. Memorandum [38] at 26 & 35. But they did not include that assertion in their Rule 56.1 statements of fact and so have not established it as an undisputed fact. In any event, according to the ARCADIS report cited in support, 1,2-DCA was detected in the neighbor’s indoor air, but not in the sub-slab soil gas. ARCADIS 2014 Report [Rule 56.1, Ex. 19], at 13.

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In addition, on the plaintiffs’ motion for summary judgment, because the plaintiff bears the burden of persuasion on an issue at trial, it must sustain that burden as well as demonstrate the absence of a genuine issue of material fact. Hotel 71, 778 F.3d at 601. Accordingly, a moving party that bears the burden at trial must satisfy both (a) the initial burden of production on the summary judgment motion – by showing that no genuine dispute exists to any material fact – and (b) the ultimate burden of persuasion on the claim – by showing that it would be entitled to a judgment as a matter of law at trial. Schwarzer, The Analysis and Decision of Summary Judgment Motions, 139 F.R.D. 441, 477-78 (1991); see also Reserve Supply Corp. v. Owens-Corning Fiberglas Corp., 971 F.2d 37, 42 (7th Cir. 1992); S. Cal Coal Co. v. City of Santa Ana, 336 F.3d 885, 888 (9th Cir. 2003) (moving party that bears burden at trial must establish beyond contention every essential element of claim); Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 989 (9th Cir. 2007) (party must demonstrate that no reasonable trier of fact could find for non-movant); 11 Moore’s Federal Practice, § 56.40[1][c], p. 56-112 (3d ed. 2013). Therefore, in these circumstances, the often-quoted rule of Celotex Corp. v. Catrett, with respect to the obligation of the non-moving party that bears the burden of proof at trial is inapplicable. Reserve Supply Corp., 971 F.2d at 42. However, the rule that the court will view the facts in the light most favorable to the non-movant still applies. Soremekun, 509 F.3d at 989.

2. General Electric’s Motion for Summary Judgment on Count I (RCRA) The Court begins with General Electric’s motion for summary judgment on Count I, which is the plaintiff’s request for injunctive relief under RCRA. “RCRA is a comprehensive environmental statute that governs the treatment, storage, and disposal of solid and hazardous waste.” Meghrig v. KFC Western, Inc., 516 U.S. 479, 483 (1996). Under RCRA, “any person may commence a civil action on his own behalf . . . against any person . . . who has contributed or who is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste which may present an imminent and substantial endangerment to health or the environment.” 42 U.S.C. § 6972(a)(1)(B). Upon such a showing, a district court may “restrain any person who has contributed or who is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste referred to in paragraph (l)(B), to order such person to take such other action as may be necessary, or both ....” 42 U.S.C. § 6972(a); Meghrig, 516 U.S. at 484. The statute entitles these actions“[c]itizen suits.” 42 U.S.C. § 6972. However, “[n]o action may be commenced under subsection (a)(1)(B) of this section if the State, in order to restrain or abate acts or conditions which may have contributed or are contributing to the activities which may present the alleged endangerment . . . has commenced and is diligently prosecuting an action under subsection (a)(1)(B) of this section.” 42 U.S.C. § 6972(b)(2)(C)(i) (emphasis added). In its motion for summary judgment on Count I, General Electric contends that because the Illinois Attorney General already commenced suit against it in state court in 2004, and has diligently prosecuted the suit since, § 6972(b)(2)(C)(i) prohibits the plaintiff from commencing a citizen suit. The plaintiffs respond that under § 6972(b)(2)(C)(i), only a state’s prior suit brought under § 6972(a)(1)(B) of RCRA may serve to bar a later-filed citizens suit, and therefore Illinois’ suit alleging claims under its own Environmental Protection Act rather than RCRA does not serve to bar their citizen suit. Moreover, the plaintiffs contend the State has not diligently

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prosecuted the case as evidenced by the fact that in the eleven years since it sued and 29 years after contamination was first discovered, it “has done nothing to compel GE to actively remediate its contamination.” Response [Dkt. 68] at 14. To determine the scope of the bar set out in § 6972(b)(2)(C)(i), the Court looks first to the plain meaning of the language of the statute. KM Enterprises, Inc. v. Global Traffic Technologies, Inc., 725 F.3d 718, 728 (7th Cir. 2013). If the language at issue has a plain and unambiguous meaning, then that meaning controls. Id. (citing Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997)). Section 6972(b)(2)(C)(i) bars the commencement of a citizen suit under RCRA only where the state “has commenced and is diligently prosecuting an action under subsection (a)(1)(B) of this section.” Thus, under the plain meaning of the terms used, only a suit brought by the State under the “imminent and substantial endangerment to health or the environment” provision of RCRA can serve to bar a citizen suit. See 42 U.S.C. § 6972(a)(1)(B). But General Electric contends that even a State’s suit under state law bars a citizen suit if the state law was implemented “in lieu of” RCRA. General Electric notes that 42 U.S.C. § 6926(b) allows the U.S. EPA to authorize a state to implement its own hazardous waste program “in lieu of the Federal program,” and that Illinois has received authorization. 51 Fed. Reg. 3778 (Jan. 31, 1986) (authorizing Illinois to operate its own hazardous waste program). General Electric has cited no authority directly holding that a suit brought under a State program operated in lieu of RCRA triggers the bar under 42 U.S.C. § 6972(b)(2)(C)(i) for citizen suits brought under subsection § 6972 (a)(1)(B). Moreover, General Electric’s argument is not supported by the statutory language. RCRA allows the U.S. EPA to authorize states to implement a hazardous waste program “in lieu of the Federal program under this subchapter” of RCRA, which is subchapter 3 entitled “Hazardous Waste Management.” 42 U.S.C. § 6926(b) (emphasis added). The “imminent and substantial endangerment” provision of 42 U.S.C. § 6972(a)(1)(B) appears in an entirely different subchapter of RCRA; namely, subchapter 7 which is entitled “Miscellaneous Provisions.” Because § 6926(b) gave the U.S. EPA the power to authorize states to implement programs only in lieu of subchapter 3, not subchapter 7, the U.S. EPA did not authorize Illinois to implement a program in lieu of § 6972(a)(1)(B). Therefore, General Electric has not established that the IEPA’s suit under state laws acting in lieu of subchapter 3 is the equivalent of a suit brought under subchapter 7’s § 6972(a)(1)(B). Nevertheless, General Electric contends that if the claims and relief sought in a citizen suit are similar to the claims and relief sought in a State’s earlier-filed suit, the citizen suit is barred even if the earlier suit was not brought under § 6972(a)(1)(B). General Electric contends that the plaintiffs’ suit is similar to Illinois’ suit because the IEPA first issued a § 4(q) notice alleging an “immediate and significant risk of harm to human health and the environment,” and then sought a permanent injunction, just like the plaintiffs allege and seek here. See GE Supplemental Statement [85] at 2. In support, General Electric relies on Adkins v. VIM Recycling, Inc., 644 F.3d 483, 494 (7th Cir. 2011), for the proposition that “to the extent that the plaintiffs’ RCRA claims overlap with the claims [the state] asserted in its first suit . . . they cannot be pursued in this citizen action because of 42 U.S.C. § 6972(b)(1)(B).” But what General Electric does not address is that Adkins involved a citizen suit under 42 U.S.C. § 6972(a)(1)(A), which allows citizens to file suit based on the “violation of any permit,

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standard, regulation, condition, requirement, prohibition, or order which has become effective pursuant to this chapter,” as opposed to § 6972(a)(1)(B) suits based on “waste which may present an imminent and substantial endangerment to health or the environment.” The circumstances under which a § 6972(a)(1)(A) citizen suit is barred is far broader than for a § 6972(a)(1)(B) citizen suit. Compare 42 U.S.C. § 6972(b)(1)(B) (applicable to (a)(1)(A) citizen suits) with 42 U.S.C. § 6972(b)(2)(C) (applicable to (a)(1)(B) citizen suits). Notably, citizen suits under § 6972(a)(1)(A) are potentially barred by a prior suit by the Administrator or the State to require compliance with any “permit, standard, regulation, condition, requirement, prohibition, or order” under RCRA. See 42 USC § 6972(b)(1)(B). This is in stark contrast to citizen suits under § 6972(a)(1)(B), which are potentially barred only by a prior suit by the State under RCRA’s § 6972(a)(1)(B) (or certain provisions of CERCLA not relevant here). See 42 USC § 6972(b)(1)(C). Adkins addresses only the restrictions on citizen suits under § 6972(a)(1)(A), and therefore provides no basis for setting aside the plain meaning of the far different restrictions on citizen suits under § 6972(a)(1)(B). Even if the Court were to look beyond the plain meaning of the relevant statutory provisions, General Electric still fails to find support for its assertion that claims under state laws implemented in lieu of subchapter 3 of RCRA are equivalent to claims under § 6972(a)(1)(B) found in subchapter 7. General Electric relies on Hudson Riverkeeper Fund, Inc. v. Harbor at Hastings Assocs., 917 F. Supp. 251 (S.D.N.Y. 1996), in which the court determined that an earlier lawsuit by the state that did not specifically allege a claim under § 6972(a)(1)(B) nevertheless barred a later-filed citizen suit. Id. at 256. Because the state’s earlier complaint was “silent as to what law they were brought under,” the court determined that under New York’s unique pleading standard, “all cases brought in the New York Supreme Court are as a matter of law brought under all applicable federal statutory provisions applicable by their terms to the ‘occurrence or transaction’ sued on, except where Congress has reserved exclusive jurisdiction to a federal court.” Id. Based on that unique pleading standard, the Hudson Riverkeeper court found that “the pending State Court action is the equivalent of one brought under the RCRA,” including § 6972(a)(1)(B). Id. at 255 (“it is impossible to say that any lawsuit arising out of an occurrence which implicates the RCRA is not being brought pursuant to that statute”), 256 (“Once it is determined that the pending action by New York State qualifies under section (b)(1)(B) of the statute of [sic] this Court concludes that it does, it must then be shown that the state has been diligently prosecuting the action for it to act as a bar to citizen’s suits.”). Therefore, Hudson Riverkeeper is distinguishable because here the State of Illinois, through the Illinois Attorney General and IEPA, specifically identified the Illinois Environmental Protection Act as the basis of its claims. Moreover, a decision by another court within this district specifically rejected the argument General Electric asserts here. Mejdreck v. Lockformer Co., No. 01 CV 6107, 2002 U.S. Dist. LEXIS 14785 (N.D. Ill. Aug. 12, 2002), involved a citizen suit brought after the State filed an earlier lawsuit alleging violations of only state environmental laws. The defendant sought to dismiss the citizen suit because “the goal of avoiding duplicitous suits can only be met if citizens’ suits are preempted by state suits seeking the same relief.” Id. at *30. Like General Electric here, the defendants in Mejdreck cited Hudson Riverkeeper to support their argument. But the court in Mejdreck rejected the argument because it was contrary to the language of the statute: “. . . the IEPA specifically brought its case under the Illinois Environmental Protection

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Act. Therefore, there is no ambiguity the Court needs to resolve and the Court finds that Hudson is not persuasive to overlook the plain language of the RCRA.” Id. at *31. See also Northern California River Watch v. Humboldt Petroleum, Inc., No. 00 CV 1329, 2000 U.S. Dist. LEXIS 15939, at *7 (N.D. Calif. Oct. 30, 2000) (“only an action by the state under RCRA subsection (a)(1)(B) itself will bar a private suit” under § 6972(a)(1)(B), rejecting defendant’s argument that earlier-filed state law actions were “the equivalent of RCRA actions”). General Electric argues that Mejdreck is inapplicable because it does not address that Illinois was authorized to implement its own hazardous waste program in lieu of RCRA, and because no other case has followed Mejdreck. However, at the same time, General Electric has cited no case rejecting Mejdreck, and General Electric has cited no authority holding that suits under the Illinois Environmental Protection Act fall under the bar set out in § 6972(b)(2)(C)(i). General Electric cites to Acme Printing Ink Co. v. Menard, Inc., 881 F. Supp. 1237, 1244 (E.D. Wisc. 1995), for the proposition that “the diligent prosecution bar in RCRA equally ensures that a civil suit filed in state court by a state agency which is authorized to administer the RCRA program as the primary enforcement authority prohibits citizen suits which overlap seeking the same relief in a parallel proceeding.” Reply [71] at 3. But Acme Printing involved a proposed citizen suit to restrain ongoing violations under § 6972(a)(1)(A), which, as detailed above, is not subject to the same bar as suits under § 6972(a)(1)(B), and therefore the case is inapplicable. General Electric also notes that Mejdreck predates Adkins v. VIM Recycling, Inc. According to General Electric, in Adkins, the Seventh Circuit “acknowledged that an earlier-filed state action (in state court, under state law and not under RCRA) may preempt a later-filed citizen suit under § 6972(b)(2)(C)(i).” Reply [71] at 5. But, as with Acme and as discussed earlier, Adkins focuses on the bar found in § 6972(b)(2)(B) involving claims under § 6972(a)(1)(A), and did not decide whether a prior suit under state law could be the equivalent of a claim under § 6972(a)(1)(B). Although it did refer to citizen suits under § 6972(a)(1)(B) and when they might be barred under § 6972(b)(2)(C)(i), it merely noted ---in a footnote, no less---only that the parties had not argued equivalency: “Although the district court found that section 6972(b)(2)(C)(i) could operate as a bar if the State had commenced its own RCRA ‘endangerment’ action, the parties failed to address whether IDEM’s suits could constitute such an action ‘under’ RCRA. . . VIM has not renewed on appeal any argument it may have that the plaintiffs’ ‘endangerment’ claim was statutorily preempted under section 692(b)(2)(B) or (b)(2)(C).” Adkins, 644 F.3d at 491 n.2. Additionally, even if the Adkins court addressed the correct statutory section, it did not address the issue. Instead, the Adkins court ducked the issue. And questions that lurk in the record, but that are not ruled upon by a court, do not constitute precedent. Webster v. Fall, 266 U.S. 507, 511 (1925); see also United States v. L.A. Truck Lines, Inc., 344 U.S. 33, 37-38 (1952) (an opinion creates no precedent on points not argued or discussed); United States v. Torres, No. 14-1538, 2015 U.S. App. LEXIS 20908, at *11 (7th Cir. Dec. 2, 2015) (caselaw cited to support an issue is unhelpful where the court “explicitly avoided” the issue). Accordingly, Mejdreck is not at odds with Adkins. General Electric also relies on two cases in which courts noted that a citizen suit under RCRA was not barred because the State had not filed an earlier enforcement action in court, either federal or state. See Chico Service Station, Inc. v. Sol Puerto Rico Ltd., 633 F.3d 20, 35 (1st Cir. 2011) (“Because the EQB has not filed an enforcement action in state or federal court,

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we hold that Chico’s citizen suit is not subject to dismissal pursuant to the diligent prosecution bar.”); PMC, Inc. v. Sherwin-Williams Co., 151 F.3d 610, 618 (7th Cir. 1998) (“We are mindful that a citizen’s (that is, that PMC’s) suit under RCRA is barred if the state at the time of suit ‘has commenced and is diligently prosecution an action’ in a federal or state court under the statute to clean up the site.”). According to General Electric, because a claim under § 6972(a)(1)(B) may be filed only in federal court, the only reason for these courts to have mentioned state court was if suits based on state law could be considered the equivalent of suits under RCRA. But the issue in those cases was whether the earlier enforcement action was an administrative proceeding rather than a lawsuit, as only a prior lawsuit (as opposed to administrative proceeding) can serve as a bar. See Chico, 633 F.3d at 35; PMC, 151 F.3d at 618-19. The cases did not decide that a state suit based on a state law standing in lieu of RCRA was the equivalent of a suit based on § 6972(a)(1)(B) itself. During the argument on the cross motions for summary judgment, General Electric’s counsel made a powerful argument that this Court should not interfere with a matter that is pending in state court. Counsel cited to several valid policy concerns that arise when a federal court interferes with ongoing matters that are being litigated in state court; concerns that this Court shares. However, importantly, Congress disagrees with General Electric’s position. And Congress’ express views trump this Court’s concerns. The clear language of RCRA evidences Congress’ belief that multiple enforcers of RCRA should exist: the U.S. EPA, the States, and private citizens. But in expressing its belief, Congress carefully balanced how, when and under what circumstances citizens can enter the fray and avail themselves of the equitable power of the federal courts. When those Congressional mandates are satisfied, citizens can file suit even when a state court has already undertaken the matter. The clear language of RCRA establishes the intentional Congressional policy decision that this Court cannot ignore. In summary, General Electric has presented no authority persuasive enough to overcome the plain language of RCRA. Specifically, § 6972(b)(2)(C)(i) applies only to actions commenced and diligently prosecuted “under subsection (a)(1)(B) of this section.” Because the State of Illinois sued only under the Illinois Environmental Protection Act and not under § 6972(a)(1)(B) of RCRA, General Electric’s motion for summary judgment on Count I is denied.3 3. Plaintiffs’ Motion for Summary Judgment on Count I (RCRA) Having determined that the plaintiffs’ claim under RCRA is not barred, the Court now turns to the plaintiffs’ motion for summary judgment on their RCRA claim. The primary purpose of RCRA is to limit the harmful effects of hazardous waste “to minimize the present and future threat to human health and the environment.” 42 U.S.C. § 6902(b). Under 42 U.S.C. § 6972(a)(1)(B), a court “may restrain any person who has contributed or who is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid of hazardous waste” and “to order such person to take such other action as may be necessary” where the waste “may present an imminent and substantial endangerment to health or the environment.” To succeed, a plaintiff must establish each of the following: “(1) that the

3 Because the Court finds §6972(a)(1)(B) was not the basis for the State’s suit, the Court need not address whether the State is diligently prosecuting its case.

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defendant has generated solid or hazardous waste, (2) that the defendant is contributing to or has contributed to the handling of this waste, and (3) that this waste may present an imminent and substantial danger to health or the environment.” Albany Bank & Trust Co. v. Exxon Mobil Corp., 310 F.3d 969, 972 (7th Cir. 2002). General Electric does not dispute that the plaintiffs can establish the first two elements. Therefore, the Court focuses on the third element: whether the undisputed facts establish that the contaminants may present an imminent and substantial endangerment to health or the environment. When interpreting the phrase “may present an imminent and substantial endangerment,” courts have found that the operative word is “may,” and that its presence requires an expansive interpretation of the entire phrase. Forest Park Nat’l Bank & Trust v. Ditchfield, 851 F. Supp. 2d 949, 976 (N.D. Ill. 2012) (“Though the Seventh Circuit has yet to comment on the significance of ‘may,’ several other circuits have construed § 6972(a)(1)(B) broadly, in large part, because of the use of the word ‘may.’”); Interfaith Community Organization v. Honeywell Int’l, Inc., 399 F.3d 248, 258 (3rd Cir. 2005) (citing Parker v. Scrap Metal Processors, 386 F.3d 993, 1015 (11th Cir. 2004)). They find support for a broad interpretation in Congress’ decision in 1980 to extend the reach of RCRA by substituting the words “may present” for “is presenting.” Solid Waste Disposal Act Amendments of 1980, Pub. L. No. 96-482, § 25, 94 Stat. 2334, 2348 (1980); Maine People’s Alliance & Natural Resources Defense Council v. Mallinckrodt, Inc., 471 F.3d 277, 287 (1st Cir. 2007). In that spirit, courts have construed “may present” as requiring plaintiffs to show only the potential for an imminent and substantial endangerment. Interfaith Community, 399 F.3d at 258. Likewise “imminent” is not limited to an “existing harm, only an ongoing threat of future harm.” Albany Bank, 310 F.3d at 972; see also Maine People’s, 471 F.3d at 287-88 (“generally has been read to require only that the harm is of a kind that poses a near-term threat; there is no corollary requirement that the harm necessarily will occur or that the actual damage will manifest itself immediately.”) (citing Cox v. City of Dallas, 256 F.3d 281, 299-300 (5th Cir. 2001)). Thus, a threat is imminent if the endangerment exists now, even though the harm may not be felt until later. Meghrig, 516 U.S. at 486. As for “substantial,” courts have construed that word to mean serious, as opposed to any certain minimum quantification of the endangerment. Grace Christian Fellowship v. KJG Investments, Inc., No. 07 CV 348, 2009 U.S. Dist. LEXIS 76954, at *16 (E.D. Wisc. Aug. 7, 2009); Interfaith Community, 399 F.3d at 259. However, “there is a limit to how far the tentativeness of the word may can carry a plaintiff.” Crandall v. Denver, 594 F.3d 1231, 1238 (10th Cir. 2010) (emphasis in original). An endangerment must be more than merely possible. Id. In addition, a plaintiff cannot prevail based solely on evidence that a contaminant is present, but rather must show that its presence may present an imminent and substantial endangerment. Birch Corp. v. Nevada Investment Holding, Inc., No. 97-55282, 1998 U.S. App. LEXIS 14923, at **9-10 (9th Cir. June 29, 1998) (where groundwater was nonpotable anyway and where the contamination plume was stabilized and levels were dropping, the contamination did not present an imminent threat to either health or the environment).

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The plaintiffs assert that the undisputed evidence establishes that an imminent and substantial endangerment may be present in the area around the General Electric plant including at the golf course and their home. In support, they identify the following undisputed evidence:

• chlorinated solvents were released at the General Electric plant and since at least 1986 have been detected in the groundwater;

• the contamination forced the City of Morrison to remove two municipal wells from serving as sources of drinking water, and the city continues to use an air scrubber to eliminate contaminants from drinking water from the remaining municipal well;

• contaminated groundwater has migrated from the plant to areas south of the plant including the Prairie Ridge Golf Course;

• the chlorinated solvents in the contaminated groundwater have been detected at levels far exceeding the MCL, sometimes at levels more than one-thousand times the MCL;

• although GeoTrans reported in 2001 that contamination levels were dropping and would naturally attenuate to levels below the MCL, tests in 2012 detected levels far in excess of the MCL in wells south of the plant including: up to 2,700 µg/L in MW7-LS, 4,800 µg/L in MW8-LS, and 5,000 µg/L in the golf course’s north supply well;

• though at a level below the MCL, chlorinated solvents have been detected in one well south of Rock Creek, despite GeoTrans’ finding that Rock Creek was a natural barrier;

• Morrison city ordinances prohibiting the use of wells for drinking water will not protect against the use of groundwater for drinking outside the city limits;

• the chlorinated solvent 1,2-DCA was detected inside the plaintiffs’ home; and

• General Electric installed a vapor control system in the home next to the plaintiffs’.

According to the plaintiffs, these undisputed facts establish that the contamination originating from the General Electric plant is “uncontrolled, unabated, undefined and unaddressed.” Memorandum [Dkt. 38] at 34. And the plaintiffs argue that even after 30 years since the contamination first came to light, followed by all of the environmental consultants hired and studies performed, General Electric has still not yet determined: (1) the vertical extent of contamination; (2) the southern boundary of contamination; or (3) whether the solvents continue to feed the plume.

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In response, General Electric argues that the evidence does not establish that the contamination may present an imminent and substantial endangerment for three reasons. First, General Electric contends that all pathways to human exposure have been eliminated. Specifically, General Electric contends that (1) the City of Morrison shut down two of the three contaminated municipal wells used for drinking water, and uses an air scrubber to remove the contaminants from water obtained from the remaining well, (2) the city enacted two ordinances to prohibit the use of private wells for potable water and from drilling new wells, (3) the contaminated wells on the golf course are used only for irrigation, and (4) signs warn users not to drink water from the golf course wells. General Electric argues that because all pathways to human exposure have been eliminated, the evidence does not establish that the contaminated groundwater may present an imminent and substantial endangerment. It purports to find support in decisions in which evidence that humans were not drinking from contaminated groundwater led courts to conclude that no threats of an imminent and substantial endangerment existed. For instance, in Scotchtown Holdings LLC v. Goshen, No. 08 CV 4720, 2009 U.S. Dist. LEXIS 1656 (S.D.N.Y. Jan. 5, 2009), the plaintiff sued under RCRA to enjoin the defendant, whose use of road salt had contaminated the groundwater beneath a site, rendering the groundwater undrinkable and prevented the site’s redevelopment for residential housing. The court dismissed the complaint because the plaintiff had failed to “allege any deleterious effects that the sodium chloride has had or may have on health or the environment other than preventing the development of the Site.” Id. at *7. Scotchtown is thus distinguishable for two reasons. First, the court found that the contaminant---salt---was deleterious only to plans to develop the site, not to humans or the environment. Id. Second, the site was uninhabitated, and there was no evidence that the contamination was migrating anywhere else, as opposed to the contamination at issue here, which is moving under residential and recreational sites within Morrison. General Electric also relies on Two Rivers Terminal, L.P. v. Chevron USA, Inc., 96 F. Supp. 2d 432 (M.D. Penn. 2000), in which the court granted the defendant’s motion for summary judgment on the plaintiff’s RCRA claim because “[t]he fact that no one is drinking this water eliminated it as a threat to health or the environment.” Id. at 446. However, in Two Rivers the nearby groundwater was unusable for drinking not solely because of the petroleum and BTEX hydrocarbons contaminating it but because of a preexisting high iron content. Id. at 445. In addition, the contaminants were flowing away from off-site drinking wells. Id. Two other cases on which General Electric relies for this point are likewise distinguishable. In Avondale Federal Savings Bank v. Amoco Oil Co., 170 F.3d 692 (7th Cir. 1999), the Seventh Circuit affirmed the district court’s entry of summary judgment for the defendant on the basis that gasoline that had leaked from an underground storage tank did not present an imminent and substantial danger. But in Avondale, the defendant had already remediated the site, obtained a “No Further Remediation” letter from the IEPA, and the plaintiff’s own expert had testified that the contaminants would present a threat only if a nearby street was ever excavated. Id. at 693, 695. Likewise, in Foster v. United States, 922 F. Supp. 642 (D.D.C. 1996), the court granted summary judgment to the defendant because asphalt paving covered the contaminated site, there was no evidence that the contaminated groundwater was

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migrating or percolating through the soil, or had been used for drinking or any other purpose. Id. at 662. The contamination that was found not to present an imminent and substantial endangerment in General Electric’s cases stands in contrast to the contamination at issue here. It is undisputed that the groundwater contaminated by General Electric’s plant has been moving under residential and recreational sites, and has demonstrated its deleterious reach by contaminating municipal wells that had been used for drinking water. In addition, a contaminated well on the golf course continues to this day to be used for irrigation. Moreover, no remediation has yet occurred, and although General Electric tried to rely on natural attenuation to solve the contamination, the contaminated groundwater continues to migrate with no sign that it has stopped. To the contrary, although chlorinated solvent levels in the well south of Rock Creek do not presently exceed the MCL, their detection indicates that the plume may have crossed the creek despite GeoTrans’ assertion that the creek allegedly acted as a natural barrier. Thus, the contamination here is more akin to that in Fairway Shoppes v. Dryclean USA, No. 95 CV 8521, 1996 U.S. Dist. LEXIS 22364 (S.D. Fla. Mar. 7, 1996) and Lincoln Properties v. Higgins, 91 CV 760, 1993 U.S. Dist. LEXIS 1251 (E.D. Calif. Jan. 18, 1993), where district courts found that evidence that groundwater contaminated with the chlorinated solvent Perc was migrating toward populated areas, and had or may reach wells from which the groundwater was used for drinking, established or was likely to establish that the contamination may present a substantial and imminent endangerment to health. In Lincoln Properties, the court partially reached its conclusion based on that fact that, as here, the contamination had already forced the removal from service and the destruction of four municipal wells. Lincoln Properties, 1993 U.S. Dist. LEXIS 1251, at *48 (granting plaintiff’s motion for summary judgment). In Fairway Shoppes, the court found that the migration of contaminants towards a residential development and the threat that they may reach potable water supplies “unquestionably meets the ‘imminent and substantial endangerment’ standard of RCRA. The Court need not—and should not—wait until the contaminated water is actually detected in public water supply wells before taking action.” Fairway Shoppes, 1996 U.S. Dist. LEXIS 22364, at **22-23 (granting plaintiff’s motion for a preliminary injunction). The Fairway Shoppes court found that the contamination was an imminent and substantial endangerment not only to health but also the environment for the independent reason that it had entered the soil and groundwater See also Voggenthaler v. Maryland Square, No. 08 CV 1618, 2010 U.S. Dist. LEXIS 74217, **41-42 (D. Nev. July 22, 2010) (granting plaintiff’s motion for summary judgment where contaminated plume continued to migrate toward residential properties even though wells in the plume’s path were not currently used for drinking water), rev’d in part on other grounds 724 F.3d 1050 (9th Cir. 2013). For similar reasons, the cases which General Electric cites for the proposition that the mere presence of contaminants is insufficient under RCRA are also distinguishable. For instance, in Birch Corp. v. Nevada Investment Holding, Inc., the court held that the mere presence of contaminants did not present an imminent and substantial threat because the plume was stabilized, contamination levels were dropping, and the threatened groundwater was nonpotable anyway. Birch, 1998 U.S. App. LEXIS 14923, at **9-10. In contrast, the plume from the General Electric plant is migrating under residential areas downgradient from the plant

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where levels have risen over time, some to thousands of times the MCL. In another case General Electric cited to support its mere presence argument, Leister v. Black & Decker, No. 96-1751, 1997 U.S. App. LEXIS 16961, at *9 (4th Cir. July 8, 1997), the court held that the contaminants that remained after a fully-implemented remediation plan did not present an imminent and substantial endangerment because the evidence suggested that the remaining contaminants were no longer a threat to health or the environment. In contrast, the contaminants from the General Electric plant have not yet been remediated, remain at levels far in excess of the MCL, and continue to migrate. General Electric contends that because the City of Morrison’s wells have already been removed from service and city ordinances prohibit the use of any other wells for drinking, the contaminated groundwater no longer meets the “may present a substantial and imminent threat” standard. But the court in Forest Park National Bank & Trust v. Ditchfield, 881 F. Supp. 2d at 976, rejected as “twisted” a similar argument offered by a defendant in support of its motion to dismiss. The defendant argued that a threat was not imminent where environmental reports recommended that a building remain vacant because of contaminated air vapors. The court rejected the defendant’s argument: “Whether a threat is ‘imminent’ cannot turn on whether the allegedly contaminated residence is currently occupied; by that twisted rationale, the owner of any property rendered uninhabitable by extreme contamination could not bring a § 6972(a)(1)(B) claim based on an imminent threat to health.” Id. Likewise, General Electric cannot establish lack of imminence based on the fact that contamination from its plant was so extreme that all of Morrison is prohibited from using wells for drinking water. Unlike the situation in the cases offered by General Electric and discussed above, the contamination from the plant is the sole---and undisputed---reason that Morrison’s groundwater is no longer potable. The court notes that General Electric focuses only on the threat to humans even though RCRA also addresses contaminants that “may present an imminent and substantial endangerment to health or the environment.” 42 U.S.C. § 6972(a)(1)(B) (emphasis added). Thus, in cases such as Interfaith Community v. Honeywell Int’l, 399 F.3d at 262, the court granted the plaintiff’s motion for summary judgment based on evidence that a contaminated river threatened not only humans but also the environment where the evidence showed that the area was home to dogs, birds, and fish, and that the mortality rate for organisms living in the river’s sediment was 50 to 100 percent. See also Fairway Shoppes Joint Venture, 1996 U.S. Dist. LEXIS 22364, at *22 (although wells towards which contamination was migrating “are apparently used for irrigation, and not for potable water supply, the drawdown effect of these wells may result in further spreading of the contamination into the development” and thus may present a threat to the environment). Although the plaintiffs have identified undisputed evidence that groundwater used to irrigate the golf course is contaminated, they have not identified if or how that constitutes a threat to plants or wildlife and, therefore, could not prevail at this stage based solely on endangerment to the environment. However, as discussed above, they have presented sufficient evidence to establish liability under RCRA based on endangerment to health. In short, although General Electric purports to find support in cases where contamination fell short of the substantial and imminent standard, those cases are distinguishable because the contamination was not spreading, had already been remediated, or was not threatening residential areas. In contrast, in Morrison, chlorinated solvents have been migrating for nearly 30 years and

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continue to contaminate the groundwater at levels up to one-thousand times the MCL; the contamination has already forced the removal of municipal wells from service, and continues to contaminate a well still used for irrigation. The plant may also be the source of contamination detected south of Rock Creek, despite GeoTrans’ finding that Rock Creek was a natural barrier. Therefore, the extensive contamination in Morrison satisfies the plain meaning of the language of RCRA as waste that may present an imminent and substantial threat to health or the environment. Second, General Electric argues that disputed questions of fact preclude the entry of summary judgment on the portion of the plaintiffs’ RCRA claim premised on contaminated air vapors in the home of Lowell Beggs and Martha Kai Conway. The plaintiffs contend that 0.55 µg/m³ of the compound 1,2-DCA was detected in the indoor air at the Beggs/Conway home, above the current residential standard of 0.09 µg/m³, citing in support the May 2014 report by ARCADIS. The plaintiffs contend that because other undisputed evidence shows that 1,2-DCA was also detected in soil and groundwater samples at the General Electric plant and downgradient from the plant, it follows that General Electric is also responsible for the air contamination in their home. In response, General Electric points to evidence to create a genuine question of fact over whether the air vapor contaminants originated from its plant. Specifically, it cites to the same ARCADIS report that 1,2-DCA was not detected in soil vapor testing beneath the Beggs/Conway home and was not detected in shallow groundwater nearby the home, facts the plaintiffs do not dispute. Thus, although there is no dispute over where and at what levels 1,2-DCA was detected, the parties do dispute whether the 1,2-DCA detected at the Beggs/Conway home originated at the General Electric plant. General Electric contends that the lack of 1,2-DCA in the soil under the home or in shallow groundwater upgradient and within 100 feet of the Beggs/Conway home creates a gap in evidence of a direct pathway from the plant to the home. General Electric notes that the ARCADIS report speculates that the 1,2-DCA that was detected may have originated from within the home from pesticides, upholstery cleaners, synthetic resins, rubber adhesive, or even off-gassing holiday ornaments. It argues that without evidence of a direct pathway of contamination into the Beggs/Conway home, the plaintiffs cannot establish that there may be an imminent and substantial endangerment based on the detection of 1,2-DCA. In Price v. United States Navy, 39 F.3d 1011, 1020 (9th Cir. 1994), the court held that speculation, rather than any evidence, that contaminants lurked under a foundation did not establish a pathway for contaminants into a residential home, and therefore did not establish a threat of imminent and substantial endangerment. Similarly in Grace Christian Fellowship v. KJG Investments, Inc., 2009 U.S. Dist. LEXIS 76954, at *27, the court found no threat of imminent and substantial endangerment in the absence of evidence of a pathway through which compounds under a building’s concrete slab were migrating into the basement air. General Electric argues that because of the absence of evidence of 1,2-DCA under the plaintiffs’ home, they too cannot establish a pathway of contamination, and therefore have not shown that the contamination may present an imminent and substantial threat. However, even assuming a lack of a direct pathway into the air inside the Beggs/Conway home, as discussed above, the plaintiffs have still shown that an imminent and substantial threat may be presented by the contaminated groundwater migrating from the General Electric plant

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into the surrounding area including municipal wells, residential areas, and the area under the golf course. Whether those contaminants have reached inside residential homes may impact the scope of any injunctive relief, but at this juncture any lack of a direct pathway into the homes does not undermine the Court’s previous determination that General Electric’s contaminants may present an imminent and substantial threat based on the presence in migrating groundwater. The Court briefly addresses one other issue General Electric raised in opposition to the plaintiffs’ motion. General Electric contends the relief the plaintiffs seek is moot because the Consent Order the state court entered in 2010 already obligates General Electric “to perform the investigation and remediation activities necessary to address the onsite and offsite soil and groundwater contamination.” Reply [71] at 13. But the Consent Order requires remediation only after the adoption of a Remedial Action Plan, which is not due until after adoption of a Remedial Objectives Report, stages the state court proceeding has not yet reached and, in fact, General Electric has not identified any remediation that has occurred. In contrast, in the cases General Electric cites, the relief the plaintiffs sought was moot because the defendants’ remediation efforts were already underway. See, e.g., West Coast Home Builders, Inc. v. Aventis Cropscience USA Inc., No. 04 CV 2225, 2009 U.S. Dist. LEXIS 74460, at *15 (N.D. Calif. Aug. 21, 2009) (“remediation has been underway for years.”) Having established that the contaminated groundwater may present an imminent and substantial endangerment, the plaintiffs have established liability under RCRA. The court therefore proceeds to the relief sought, which is the plaintiffs’ request for injunctive relief. In addition to liability, the plaintiffs must also satisfy the traditional elements of injunctive relief even where the statute specifically authorizes that type of relief. United States v. Bethlehem Steel Corp., 38 F.3d 862, 867 (7th Cir. 1994) (citing Amoco Prod. Co. v. Village of Gambell, 480 U.S. 531 (1987)). Thus, the plaintiffs must also show (1) an irreparable injury, (2) an inadequate remedy at law, (3) the balance of hardships weighs in favor of an injunction, and (4) the public interest would not be disserved by a permanent injunction. Maine People’s Alliance, 471 F.3d at 296. The parties have not focused on these factors and, in fact, the plaintiffs have asked the court to defer a decision on the scope of an injunction until after further proceedings. Memorandum [38] at 37-38. Bifurcating the determination of liability from the determination of the ultimate injunctive remedy is supported by the approach taken by other courts. In Voggenthaler, 2010 U.S. Dist. LEXIS 74217, *44 (D. Nev. July 22, 2010), the district court granted the plaintiff’s motion for summary judgment as to liability under RCRA, but saved the determination of precise terms of injunctive relief until after further hearing. The First Circuit affirmed a similar approach in Maine People’s Alliance, 471 F.3d at 282, 296-97, in which after a bench trial the district court determined liability and enjoined the parties to attempt to agree on a study, before devising a feasible remediation plan. Because the plaintiffs have sought summary judgment only as to liability under RCRA, and because the parties have confined their presentation of evidence and argument to issues of liability rather than whether injunctive relief is available and, if so, its scope, this Court will defer until later the parameters of any injunctive relief as to Count I. The Court notes that in their opening brief the plaintiffs also ask for leave to file a petition for fees as the prevailing

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parties and to assess a fine against General Electric. But General Electric never responded to those issues and they did not come up again in the parties’ briefs. Without a full presentation of the issues of fees and fines, the Court likewise defers any decision on those issues. 4. General Electric’s Motion for Summary Judgment on Counts IV – VI (State

Law Claims) Finally, General Electric seeks summary judgment on the plaintiffs’ state law claims of nuisance (Count IV), trespass (Count V), and negligence (Count VI). General Electric contends that the plaintiffs’ claims are untimely because they were filed more than five years after plaintiff Lowell Beggs knew about the contamination on the golf course that serves as the basis for his claims. The plaintiffs respond that their state law claims are not untimely because they are based on continuing torts and, therefore, the statute of limitations has not yet run. Alternatively, they argue that General Electric is equitably estopped from asserting the statute of limitations defense because it has allegedly concealed the extent and significance of the contamination on and around its plant. a. Discovery Rule & Continuing Tort Doctrine Under Illinois law, tort claims for damage to property are timely if made within five years after the cause of action accrues. 735 ILCS 5/13-205. The cause of action in tort accrues when the injury occurs. State Farm Fire & Cas. Co. v. John J. Rickhoff Sheet Metal Co., 914 N.E.2d 577, 593 (1st Dist. 2009). However, under the discovery rule the accrual date is tolled until “‘the injured person becomes possessed of sufficient information concerning his injury and its cause to put a reasonable person on inquiry to determine whether actionable conduct is involved.’” In re marchFirst, Inc., 589 F.3d 901, 903-04 (7th Cir. 2009) (quoting Superior Bank FSB v. Golding, 605 N.E.2d 514, 518 (Ill. 1992)). General Electric contends that it is undisputed that the plaintiffs had sufficient information about the contamination in and around the golf course at least by the time Mr. Beggs purchased the course on May 29, 2007. In support, General Electric notes that seller Citizens First Bank alerted Mr. Beggs to the contamination when bank representative Keith Hooks e-mailed Mr. Beggs’ attorney Gary Gehlbach: “Gary, the golf course has contamination on the first hole. This was caused by General Electric. If you go to the EPA web site, GE is listed as a superfund site. No further remediation was needed according to what I can find.” Ex. N to GE’s Rule 56.1 on State Law Claims [Dkt. 52-2]. Mr. Gehlbach passed the information on to Mr. Beggs, but neither made any further inquiries. Rather, that same day Mr. Gehlbach confirmed to Mr. Hooks that Mr. Beggs intended to proceed with the purchase, and included in the sale contract the representation that: “[S]eller, however, has disclosed to Purchaser that there is contamination on the first hole of the Real Estate, such contamination having been caused by General Electric, as which contamination is part of the Superfund Site that apparently does not require any further remediation.” Ex. Q to GE’s Rule 56.1 on State Law Claims [Dkt. 52-5].

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Mr. Beggs also testified that before the purchase, he noticed the head of a monitoring well protruding above the surface of the golf course. He testified that later in 2007, when he noticed that the well head had been damaged and was leaking, he knew the well was for monitoring contaminants from the General Electric plant, and contacted General Electric to fix it. General Electric notes that it is also undisputed that by the May 29, 2007, sale of the golf course, the results of numerous tests revealing the presence of chlorinated solvents in excess of the MCL had been filed with the IEPA. For instance, it notes that in August 2001, Harrington Engineering filed a letter report with the IEPA summarizing years of testing results as well as a map identifying the location of the wells tested, which included wells on the golf course. Harrington Engineering’s comprehensive letter report filed with the IEPA in April 2007 also detailed test results from 2005 and 2006, revealing the presence of solvents in excess of the MCL. Although General Electric contends that the information filed with the IEPA was available in the public record, neither party has developed any evidentiary record of how the plaintiffs could have accessed the information. But the burden of establishing facts to avail itself of the discovery rule falls on the plaintiffs, Hermitage Corp. v. Contractors Adjustment Co., 651 N.E.2d 1132, 1138 (Ill. 1995), who have not presented evidence that the records were not reasonably accessible, leaving General Electric’s contention that the records were publicly available unrebutted. Moreover, the plaintiffs admit neither Mr. Beggs nor his attorney sought any information about the contamination from the IEPA. Other information about contamination in the area around the plant and golf course was publicly and readily available by the time of the May 29, 2007, sale. In 1988, a local newspaper reported on the contamination and that it had been traced to the General Electric plant. That year the City of Morrison shut down two of its municipal wells because of the contamination, which was also reported in the newspaper article. In 2004, the State of Illinois sued General Electric over the contamination in a case that remains unresolved. In response, the plaintiffs contend that their state tort claims are timely because of the continuing tort doctrine. Under Illinois’ continuing tort doctrine, “when ‘a tort involves a continuing or repeated injury, the limitations period does not begin to run until the date of the last injury or the date the tortious acts cease.’” Brooks v. Ross, 578 F.3d 574, 579 (7th Cir. 2009) (quoting Belleville Toyota v. Toyota Motor Sales, U.S.A., 770 N.E.2d 177, 190 (Ill. 2002)). The doctrine applies for the duration of the tortious conduct, as distinguished from the duration of the damages that continue after the conduct ends. Feltmeier v. Feltmeier, 798 N.E.2d 75, 85 (Ill. 2003) (“A continuing violation or tort is occasioned by continuing unlawful acts and conduct, not by continual ill effects from an initial violation.”). General Electric argues that the continuing tort doctrine is inapplicable because it is undisputed that its use of chlorinated solvents ended in 1994. The plaintiffs respond that General Electric misapprehends the continuing tort, which the plaintiffs argue is General Electric’s continuing failure to remediate the contamination it caused. But the failure to remediate contamination left over from prior conduct is not a continuing tort. In Soo Line R. Co. v. Tang Indus., Inc., 998 F. Supp. 889, 897 (N.D. Ill. 1998), the court held that Illinois’ continuing tort doctrine did not apply because the last possible tortious conduct occurred in 1982 when the defendant vacated its scrap yard operation, even though the site of the former scrap yard

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remained contaminated: “although the effects from Tang’s violations may be persisting, any tortious activities by Tang ended in 1982.” Likewise, in Village of DePue v. Viacom Int’l, Inc., 713 F. Supp. 2d 774, 779 (C.D. Ill. 2010), the court held that Illinois’ continuing tort doctrine did not apply because the last possible tortious conduct occurred in 1989, after the defendant had stopped operating its zinc smelting facility. The court rejected the plaintiff’s argument that the continuing flow of contaminated water from the site of the former plant onto the plaintiff’s property was a continuing tort: “Plaintiff alleges that it is continually re-injured by water flowing from the Site onto its property. Plaintiff does not allege that Defendants or their corporate predecessors engaged in any conduct aside from merely owning the Site after that date; the continuing tort doctrine therefore does not apply . . .”. Id. See also Powell v. City of Danville, 625 N.E.2d 830, 831 (Ill. App. Ct. 1993) (continuing tort doctrine does not apply where defendant stopped operating landfill in 1974, but ground adjacent to landfill remained contaminated). The facts of these cases stand in sharp contrast to situations involving contaminants that continue to leak into the environment and onto surrounding properties, as were the allegations in City of Evanston v. Texaco, Inc., 19 F. Supp. 3d 817 (N.D. Ill. 2014). In City of Evanston, the court applied the continuing tort doctrine “at least at the pleadings stage,” where the plaintiff alleged that contaminants continued to leak from underground storage tanks under the site of a former gasoline station. Id. at 827-28; see also Leckrone v. City of Salem, 503 N.E.2d 1093, 1101 (Ill. App. Ct. 1987) (defendant’s continual dumping of sewage into a creek alleges a continuing tort). The plaintiffs contend that cases like Powell and Soo Line are distinguishable because the defendants in those cases no longer owned the property or had long-ago vacated their operations. But in Village of DePue, 713 F. Supp. 2d at 779, the court explicitly held that “merely owning the Site” after the last act of contamination does not give rise to the continuing tort doctrine. Conversely, in City of Evanston, 19 F. Supp. 3d at 827-28, the court applied the continuing tort doctrine even though the defendant no longer owned the property, but where the defendant’s underground tanks allegedly continued leaking contaminants into the environment. Thus, the applicability of the doctrine turns on continuing conduct, not continuing ownership or continuing injury. Illinois’ application of the continuing tort doctrine is not unique. For instance, in First Virginia Banks, Inc. v. BP Exploration & Oil, Inc., 206 F.3d 404, 406-07 (4th Cir. 2000), the court held that Virginia’s continuing tort doctrine did not apply to the continuous migration of petroleum hydrocarbons from the site of a former gasoline station onto the plaintiff’s land where the tank from which the contaminants leaked was removed in 1986. Similarly, in Haddonbrook Assocs. v. General Electric, 427 Fed. Appx. 99, 102 (3d Cir. 2011), the court held that New Jersey’s continuing tort doctrine required the breach of a “new” duty “apart from the duty to abate the contamination that is alleged in the nuisance claim.” To hold otherwise would create an exception that swallows the rule that the doctrine does not apply to merely continuing injuries. Gettis v. Green Mountain Economic Development Corp., 892 A.2d 162, 170 (Vt. 2005) (“The necessary tortious act cannot be the failure to right a wrong committed outside the limitation period. . . . If it were, the tort in many cases would never accrue because the defendant could undo all or part of the harm.”).

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Finally, the plaintiffs argue that the decision in Menard, Inc. v. Wells Mfg. Co., No. 03 CV 8313, 2007 U.S. Dist. LEXIS 67010 (N.D. Ill. Sept. 11, 2007), supports their assertion that General Electric’s continuing failure to remediate falls within the continuing tort doctrine. In Menard, the plaintiff argued that its state law tort claims were timely under the continuing tort doctrine because the defendants continued to violate their duty to remediate, resulting in the continued migration of contaminants. Id. at *7. The court held that the plaintiff’s evidence created a genuine issue of material fact about whether the defendants met their duty to remediate, which precluded the court from determining as a matter of law that there was no continuing tort. Id. at *9. However, according to the Menard decision, the defendants argued only that the plaintiff had failed to set forth evidence creating a genuine issue of material fact. Id. at *7. The decision does not identify any argument by the defendants that the failure to remediate prior contamination is not a continuing tort, and, therefore, the court had no occasion to address or resolve the issue. Accordingly, Menard is not persuasive authority for disregarding that the failure to fix the continuing effects of prior conduct is not a continuing tort. Given the inapplicability of the continuing tort doctrine, the Court now focuses on when the plaintiffs’ state law claims accrued to determine whether under the discovery rule they were timely when filed on November 1, 2013. Under the relevant five year statute of limitations and the discovery rule, the claims were timely as long as the plaintiffs were not “possessed of sufficient information concerning his injury and its cause to put a reasonable person on inquiry to determine whether actionable conduct is involved” until November 1, 2008, or later. In re marchFirst, Inc., 589 F.3d at 903-04 (internal quotation marks and citation omitted). When the plaintiff is possessed of sufficient information concerning his injury to investigate whether actionable conduct was involved is usually a question of fact “‘unless the facts are undisputed and only one conclusion may be drawn from them.’” Abramson v. Abramson, 772 F. Supp. 395, 398 (N.D. Ill. 1991) (quoting Bates v. Little Co. of Mary Hospital, 438 N.E.2d 1250, 1253 (Ill. App. Ct. 1982)). General Electric argues that the plaintiffs had actual knowledge of the contamination of the area south of the General Electric plant including the golf course before the May 29, 2007, purchase of the course as evidenced by e-mails between Mr. Beggs’ attorney and the seller, as well as the sales contract itself, all of which explicitly noted the contamination under the golf course. Mr. Beggs also admitted he saw a monitoring well on the course before he purchased it, and later in 2007 contacted General Electric to fix the well knowing at that time that the well monitored contaminants from the General Electric plant. In addition, information publicly available to the plaintiffs should have further alerted them to the contamination. It is undisputed that the contamination was reported in 1988 in the local newspaper, which noted both that two Morrison municipal wells were closed as a result of the contamination, and that the IEPA traced the contamination to the General Electric plant. In 2010, the State of Illinois sued General Electric over the contamination in the circuit court of the Fourteenth Judicial Circuit. In addition, letters filed with the IEPA revealed the results of groundwater tests that showed levels of contaminants above the accepted MCL. The plaintiffs contend that unearthing those test results would have required them to review tens of thousands of pages of IEPA documents. But the plaintiffs concede that they never even tried, or for that

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matter sought out any information other than the seller’s disclosure that there was contamination under the first hole of the golf course, though the seller believed no further remediation was required. The plaintiffs also contend that they had no reason to know the true extent of the contamination until 2012, when General Electric tested groundwater from the north supply well and found TCE one-thousand times the MCL. But “the fact that it obtained more detailed information” later does not negate that by 2007 the plaintiffs knew or should have known of the contamination in the area of the General Electric plant including on the golf course, enough to put them “‘on inquiry to determine whether actionable conduct is involved.’” Village of DePue, 713 F. Supp. 2d at 780-81 (quoting Vector-Springfield Properties, Ltd. v. Central Ill. Light Co., 108 F.3d 806, 809 (7th Cir. 1997)). Based on the undisputed facts, the plaintiff knew or should have known by 2007 sufficient information about the contamination to trigger the accrual of their state law claims. Accordingly, their claims filed six years later in 2013 are outside the five-year statute of limitations period. b. Equitable Estoppel Alternatively, the plaintiffs argue that General Electric should not be allowed to assert the statute of limitations defense to their state-law claims under the doctrine of equitable estoppel. Under Illinois law, equitable estoppel suspends the statute of limitations for the time that the defendant took active steps to prevent the plaintiff from suing. Jay E. Hayden Foundation v. First Neighbor Bank, N.A., 610 F.3d 382, 385 (7th Cir. 2010). The party claiming equitable estoppel must establish each of the following: (1) the other party misrepresented or concealed material facts; (2) the other party knew at the time the misrepresentations were untrue; (3) the other party intended or reasonably expected the party claiming estoppel to rely on the misrepresentations; (4) the party claiming estoppel did not know the misrepresentations were untrue; (5) the party claiming estoppel reasonably relied on the misrepresentations in good faith to his detriment; and (6) the party claiming estoppel would be prejudiced by his reliance on the misrepresentations if the other party were permitted to deny their truth. Orlak v. Loyola Univ. Health Sys., 885 N.E.2d 999, 1011 (Ill. 2007). In addition, the party asserting equitable estoppel must have been diligent in its efforts to obtain enough information to determine whether it had a claim. Shropshear v. Corporation Counsel of City of Chicago, 275 F.3d 593, 598 (7th Cir. 2001); Nickels v. Reid, 661 N.E.2d 442, 447–48 (Ill. App. Ct. 1996) (“A party claiming the benefit of an estoppel cannot shut his eyes to obvious facts, or neglect to seek information that is easily accessible, and then charge his ignorance to others.”) (internal quotation marks and citation omitted). The plaintiffs contend that they reasonably relied on the “rosy picture” General Electric painted “of a site with low levels of contamination that were rapidly declining by the forces of nature through natural attenuation.” Response [55] at 11. But the undisputed evidence does not support an application of the doctrine of equitable estoppel. First, the plaintiffs cannot show that they reasonably relied on General Electric’s representations about the levels of contamination or natural attenuation because they admit that they never looked into the issue of contamination beyond the seller’s statement that the golf course was contaminated but appeared not to require remediation. Moreover, they present no evidence that General Electric knew at the time that

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natural attenuation would not work, or that any of the test results it filed with the IEPA were inaccurate. In short, the plaintiffs’ broad accusations that General Electric covered up the true extent of contamination is insufficient to invoke the doctrine of equitable estoppel in the absence of evidence that General Electric made specific representations to the plaintiffs that it knew to be untrue at the time and of which the plaintiffs were aware and relied on. In summary, the plaintiffs’ state law tort claims accrued at least by 2007 when they knew or should have known of the contamination in the area of the General Electric plant and golf course, and they have identified no evidence to support application of either the continuing tort or equitable estoppel doctrines. Accordingly, the state law claims asserted in 2013 were filed outside the five-year statute of limitations period, are therefore untimely, and so General Electric’s motion for summary judgment on Counts IV (nuisance), V (trespass), and VI (negligence) [48] is granted.

CONCLUSION For the reasons given, General Electric’s motion for summary judgment on the state law claims [48] is granted, its motion for summary judgment on the federal environmental claim [57] is denied, and the plaintiffs’ motion for summary judgment on the federal environmental claims [37] is granted as to liability. By 1/15/2016, the parties shall submit a joint position paper on how the Court should proceed to the preliminary injunction stage on Count I as well as the propriety of assessing fees and/or fines. Status hearing is set for 1/26/2016 at 9:00AM at which time the Court will discuss the parties’ suggestions. The Court also urges the parties to give serious consideration and to confer with the other side on whether a settlement conference would be beneficial. Date: December 18, 2015 By: __________________________________________ Iain D. Johnston United States Magistrate Judge

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA,

Plaintiff,

v.

PACIFIC GAS AND ELECTRIC COMPANY,

Defendant.

Case No. 14-cr-00175-TEH ORDER GRANTING DEFENDANT’S MOTION TO DISMISS FOR MULTIPLICITY

This matter came before the Court on October 19, 2015 for a hearing on Defendant

Pacific Gas & Electric (“PG&E”)’s Motion to Dismiss for Multiplicity: Counts 3, 7, 8, 10-

14, 16-18, and 20-23. After carefully considering the parties’ written and oral arguments,

the Court now GRANTS PG&E’s motion, for the reasons set forth below.

BACKGROUND

On September 9, 2010, a gas line owned and operated by PG&E ruptured, causing a

fire that killed 8 people and injured 58 others. Superseding Indictment (“SI”) ¶ 5 (Docket

No. 22). The fire damaged 108 homes, 38 of which were completely destroyed. Id. On

July 30, 2014, a grand jury returned a superseding indictment (“Indictment”) charging

PG&E with 27 counts of violating the minimum federal safety standards for the

transportation of natural gas by pipeline (“Pipeline Safety Act”), as set forth in 49 C.F.R. §

192 (“Section 192”). SI ¶¶ 62-75. “Knowing and willful” violations of these standards are

criminalized under 49 U.S.C. § 60123 (“Section 60123”).

Counts 2, 3, and 6-23 of the Indictment allege “knowing and willful” violations of

Section 192’s Subpart O, known as the Integrity Management (“IM”) regulations. SI ¶¶

62-63, 66-73. The IM regulations, set forth in 49 C.F.R. § 192.901 et seq., were issued by

the Department of Transportation in 2003 in response to a directive from Congress to

“prescrib[e] standards to direct an operator’s conduct of a risk analysis and adoption and

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implementation of an integrity management program.” H. R. 3609, at 18 (2002); 49

U.S.C. § 60109(c)(2)(A). The regulations detail minimum requirements for this integrity

management program. 49 C.F.R. § 192.901. The regulations apply to all “covered

pipeline segments,” which are segments in densely populated areas where the risk of injury

or death from a gas leak or other pipeline failure is the highest. Id. § 192.903.

PG&E now moves to dismiss fifteen of the Indictment’s IM regulation counts as

multiplicitous. These fifteen counts stem from five IM regulations – because the

Indictment charges for each regulation on a pipeline-by-pipeline basis – as follows:

Counts 2-3 charge PG&E with violating 49 C.F.R. § 192.917(b) by “fail[ing] to gather and integrate existing data and information that could be relevant to identifying and evaluating all potential threats on covered segments,” on two pipelines: Lines 132 and 109. SI ¶ 63.

Counts 6-8 charge PG&E with violating 49 C.F.R. § 192.917(a) by “fail[ing] to identify and evaluate potential threats to covered segments,” on three pipelines: Lines 132, 153, and DFM 1816-01. SI ¶ 67.

Counts 9-14 charge PG&E with violating 49 C.F.R. § 192.919 by “fail[ing] to include in its annual baseline assessment plan all potential threats on a covered segment and fail[ing] to select the most suitable assessment method to assess all potential threats on covered segments,” on six pipelines: Lines 132, 153, DFM 1816-01, 107, 191-1, and 109. SI ¶ 69.

Counts 15-18 charge PG&E with violating 49 C.F.R. § 192.917(e)(3) by “fail[ing] to prioritize covered segments of lines as high risk segments for the baseline assessment or a subsequent reassessment, after changed circumstances rendered manufacturing threats on segments of the lines . . . unstable,” on four pipelines: Lines 132, 153, DFM 1816-01, and 109. SI ¶ 71.

Counts 19-23 charge PG&E with violating 49 C.F.R. § 192.917(e)(4) by “fail[ing] to prioritize covered segments of a line, as high risk segments for a baseline assessment plan or subsequent reassessment after a changed circumstance rendered manufacturing threats on those segments unstable, and fail[ing] to analyze covered segments to determine the risk of failure from such manufacturing threats,” on five pipelines: Lines DFM 1816-01, 191-1, 109, 107, and 132. SI ¶ 73.

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DISCUSSION

PG&E argues that the Indictment’s pipeline-level charging is multiplicitous because

“each course of conduct that is alleged to violate a regulation gives rise to one, single

crime—no matter how many times that course of conduct is repeated—unless Congress

provides otherwise in ‘clear and definite’ language.” Def.’s Mot. to Dismiss for

Multiplicity (“Mot.”) at 1 (Docket No. 124). The Government argues that “each unique

count differs because it requires the government to prove, for each segment, a separate

act,” and “where the separate counts charge separate acts but are part of a single scheme or

purpose, the counts are not multiplicitous.” Opp’n to Def.’s Mot. to Dismiss for

Multiplicity (“Opp’n”) at 2, 5-6 (Docket No. 148).

I. Multiplicity of Counts

a. The Proper Inquiry Is What Congress Has Made the Allowable

“Unit of Prosecution”

Where, as here, a defendant is charged with multiple violations of the same

provision of law, the Supreme Court has stated that the proper inquiry is “[w]hat Congress

has made the allowable unit of prosecution.” United States v. Universal C.I.T. Credit

Corp., 344 U.S. 218, 221 (1952) (emphasis added).1 In other words, courts must

1 The Government argues that a different test applies: that “[t]o determine whether two counts of an indictment are multiplicitous, the Supreme Court set forth the test of ‘whether each [count] requires proof of an additional fact which the other does not.’ ” Opp’n at 1 (quoting Blockburger v. United States, 284 U.S. 299, 304 (1932)). To support this argument, the Government cites a line of Ninth Circuit cases that have applied this “proof of facts” test to determine whether multiple counts charged under the same provision of law were multiplicitous. See, e.g., United States v. Kennedy, 726 F.2d 546, 548 (9th Cir. 1984). The Government therefore concludes that it was proper to charge by “pipeline” because the proof will be different for each pipeline. Opp’n at 3-6.

Accepting fully the Ninth Circuit’s ruling in Kennedy, this order applies the test set forth by the Supreme Court in C.I.T. The Ninth Circuit did not distinguish or even consider the applicability of C.I.T. in Kennedy, and therefore did not provide a basis for setting it aside in favor of the Blockburger analysis. The Ninth Circuit cases that have actually considered C.I.T., however, have explicitly rejected the approach the Government now requests, because “[t]he Blockburger test . . . is generally applicable when ‘the same act or transaction constitutes a violation of two distinct statutory provisions,’ ” but is inapplicable when the “same act . . . constitutes a violation of only one statutory provision.” United States v. Keen, 104 F.3d 1111, 1118 n.12 (9th Cir. 1996).

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determine whether Congress meant to punish each instance of a violation as a separate

crime, or punish once per violation of a single provision of law. The Supreme Court has

also indicated that when such “choice has to be made between two readings of what

conduct Congress has made a crime, it is appropriate, before we choose the harsher

alternative, to require that Congress should have spoken in language that is clear and

definite.” Id. at 221-22 (emphasis added).

The Ninth Circuit has affirmed that the rule of lenity animates this inquiry: “A court

may not impose consecutive sentences for a single transaction that violates more than one

statutory provision or purpose unless Congress has clearly expressed its intent to make

each violation within that single transaction a separate offense subject to separate

punishment.” Brown v. United States, 623 F.2d 54, 57 (9th Cir. 1980) (emphasis added).

Courts must therefore limit their search for what Congress has deemed the “unit of

prosecution” to materials that directly inform congressional intent: “Unless we can find

from the face of the Act or from its legislative history a clear indication that Congress

intended to authorize multiple punishments for a single transaction, we are obliged to

construe the Act against the harsher penalties that result from cumulative punishments.”

Id. at 57 (quoting United States v. Clements, 471 F.2d 1253, 1254 (9th Cir. 1972)).

In C.I.T., the leading case on this issue, the Supreme Court considered whether the

Fair Labor Standards Act (“FLSA”) minimum-wage, overtime, and recordkeeping

provisions called for criminal penalties on an employee-by-employee, week-by-week

basis. 344 U.S. at 219-20. There, the corporate defendant had been charged with 32

counts of violating the three FLSA provisions – 6 counts for failure to pay minimum

wages, 20 counts for violation of the overtime provisions, and 6 counts for failure to

comply with record-keeping requirements.2

2 The minimum wage violations were charged for “six separate weeks, one per week, but only as to one employee in any one week and only as to three employees in all”; the overtime violations were charged for “twenty separate weeks, one per week, [with a] total of eleven employees [] involved, two violations having been charged as to each of nine employees”; and the record-keeping violations were charged for “four employees, two violations as to each of two employees.” C.I.T., 344 U.S. at 219-20.

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After reviewing the FLSA’s text and legislative history, the Court concluded that

Congress was not “decisively clear” in defining a smaller unit of prosecution, and therefore

that the “offense made punishable under the [FLSA] is a course of conduct.” Id. at 224

(emphasis added). Thus, the Court would treat “as one offense all violations that arise

from that singleness of thought, purpose or action.” Id. For example, “a wholly

unjustifiable managerial decision that a certain activity was not work and therefore did not

require compensation under [the FLSA] cannot be turned into a multiplicity of offenses by

considering each underpayment in a single week or to a single employee as a separate

offense.” Id. Because the information did precisely that, the Court affirmed the district

court’s dismissal of all but one count for each FLSA provision, “without prejudice to

amendment of the information.” Id. at 224-26.

b. Congress Did Not Define a “Unit of Prosecution” for Criminal

Violations of the Pipeline Safety Act

The question before the Court is therefore whether Congress intended for violations

of the IM regulations on separate pipelines to constitute separate “units of prosecution”

under Section 60123, such that they may be charged as separate crimes.

This is a question of statutory construction. Accordingly, the Court must look to the

wording of the statutory provision at issue, the overall statutory scheme, and the legislative

history to determine whether Congress defined a unit of prosecution “in language that is

clear and definite.” C.I.T., 344 U.S. at 222.

i. The Statutory Text Does Not Define a “Unit of

Prosecution”

Section 60123(a), the statute that criminalizes violations of the IM regulations,

provides only that:

A person knowingly and willfully violating . . . a regulation prescribed or order issued under this chapter shall be fined under title 18, imprisoned for not more than 5 years, or both.

These words contain no mention of a unit of prosecution, let alone a clear indication that

the proper unit of prosecution is the “pipeline.” Indeed, by criminalizing regulatory

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violations at a general level, Section 60123 does not even define the conduct it outlaws.

The Government fares no better when the Court analyzes Section 60109, the

provision of the Pipeline Safety Act through which Congress called for the IM regulations.

That section states in relevant part:

[T]he Secretary shall issue regulations prescribing standards to direct an operator’s conduct of a risk analysis and adoption and implementation of an integrity management program under this subsection. The regulations shall require an operator to conduct a risk analysis and adopt an integrity management program within a time period prescribed by the Secretary . . . .

49 U.S.C. § 60109(c)(2)(a). The statute speaks only of a single integrity management

program, and gives no indication of what Congress deemed the proper unit of prosecution

for a violation of the as yet unwritten regulations that would bring this program to life.

The Government argues that the Court should look to the IM regulations for the

“unit of prosecution,” rather than Sections 60123 or 60109, because it is the regulations

that actually define PG&E’s unlawful conduct. Opp’n at 2. And the IM regulations, the

Government argues, “mandate minimal standards that a pipeline operator must maintain on

each covered segment of pipeline,” indicating that “the unit of prosecution is not the course

of conduct, but how an operator treats threats on a pipeline.” Id. (emphasis added). The

IM regulation underlying Counts 6-8, for example, requires that “[a]n operator must

identify and evaluate all potential threats to each covered pipeline segment.” 49 C.F.R. §

192.917(a) (emphasis added).

Though the Government’s argument has logical appeal – as Congress cannot have

defined a “unit of prosecution” in a criminal statute that does not even define the unlawful

conduct – it is ultimately unpersuasive. First, it is not clear that by requiring action on

“each” covered segment, Congress (speaking through the Department of Transportation)

intended to create a separate punishment for each covered segment. Indeed, the minimum

wage statute at issue in C.I.T. likewise required that “[e]very employer shall pay to each of

his employees who is engaged in commerce or in the production of goods for commerce

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not less than 75 cents an hour.” C.I.T., 344 U.S. at 219 n.1 (emphasis added). And the

Supreme Court nevertheless declined to punish employers on an employee-by-employee

basis for failure to pay “each” employee the minimum wage. Id. at 224.3

Second, the IM regulations are of uncertain value in gleaning Congress’ “clearly

expressed [] intent” (Brown, 623 F.2d at 57), given that Congress did not actually author

them. Indeed, the regulations were not issued until 2003, nearly a quarter-century after

Congress added criminal penalties to the Pipeline Safety Act in 1979,4 making it difficult

to even conclude that Congress impliedly intended to adopt the unit of prosecution defined

in the regulations, whatever that may be. With later-enacted regulations as the only source

of the congressionally defined “unit of prosecution” for Section 60123, it is therefore

“difficult to ascribe any specific intent on this issue to Congress at all.” United States v.

Pers. Fin. Co., 174 F. Supp. 871, 875 (S.D.N.Y. 1959).

Finally, even if the Court were to look to the regulations written and issued by the

Department of Transportation for a “clear and definite” statement from Congress, and were

to determine that the regulations define “each covered pipeline segment” as the unit of

prosecution, this would still not save the multiple counts of the Indictment because the

Indictment does not charge on a segment-by-segment basis. Though the Government

argues that it plans to prove each count with segment-specific evidence (see Opp’n at 3-6),

the Indictment actually charges on a pipeline-by-pipeline basis.

ii. The Legislative History Does Not Define a “Unit of

Prosecution”

Given that the statutory text does not provide a “clear and definite” statement from

3 The Supreme Court also relied heavily on the FLSA’s legislative history in reaching this conclusion, as the legislative history indicated that Congress had considered and rejected employee-level and week-level units of prosecution. C.I.T., 344 U.S. at 222-23. But this further illustrates why the inclusion of “each” does not clearly indicate a congressional intent that the “unit of prosecution” be the noun modified by “each,” as Congress required conduct as to “each employee” in the FLSA even after almost expressly rejecting an employee-level unit of prosecution. 4 Compare 93 Stat. 989, 992 (Nov. 30 1979) (enacting predecessor to Section 60123), with 68 Fed. Reg. 69778 (Dec. 15, 2003) (adopting the IM regulations at issue).

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Congress about the allowable unit of prosecution, the Court may consider whether the

legislative history of the Pipeline Safety Act provides any insight. Brown, 623 F.2d at 57.

To that end, the Court granted the Government’s request at the October 19, 2015

hearing to provide “supplemental briefing on the question whether anything in the

legislative history of [Section] 60123 suggests that Congress either intended or did not

intend to defer to the language of the underlying regulations to answer questions like the

proper ‘unit of prosecution’ for each crime.” Docket No. 188.

PG&E submitted supplemental briefing explaining that the legislative history for

Section 60123 is “surprisingly thin,” and that “neither the committee report nor the

hearings concerning that bill address the proper ‘unit of prosecution’ under the provision,

or anything else.” Def.’s Supplemental Br. Regarding Multiplicity at 1, 2 (Docket No.

191). The Government submitted supplemental briefing to say only that it had “found

nothing in the history of [Section] 60123 that answers [the Court’s] question.” United

States’ Supplemental Br. Regarding Multiplicity at 1-2 (Docket No. 193).

The legislative history therefore does nothing to inform whether Congress intended

that the unit of prosecution for violations of the IM regulations be the segment, the

pipeline, or anything else.

iii. The Pipeline Safety Act Criminalizes a “Course of

Conduct”

Having reviewed the language of Sections 60123 and 60109 and the relevant

legislative history, the Court cannot say that Congress clearly expressed an intent to

impose cumulative punishments upon PG&E for each pipeline that violated the IM

regulations. All relevant materials are silent on the subjects of cumulative punishments

and unit of prosecution, and this silence compels the Court to adopt the more lenient

reading of the unit of prosecution. See United States v. Keen, 104 F.3d 1111, 1119 (9th

Cir. 1996) (“[W]e are compelled by the rule of lenity to hold that imposition of

consecutive sentences . . . was error.”) (citation omitted). Accordingly, the Court holds

that the Pipeline Safety Act criminalizes a “course of conduct.” C.I.T., 344 U.S. at 224.

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c. The Indictment Alleges Only One “Course of Conduct” for Each

of the Five IM Regulations at Issue

Charging PG&E with a separate crime for each pipeline that violated the IM

regulations would therefore be inappropriate unless the violation on each pipeline stemmed

from a separate “course of conduct.” Indeed, C.I.T. expressly left open the possibility that

multiple counts for violating the same provision of law would be appropriate where the

indictment alleges multiple courses of conduct. See C.I.T., 344 U.S. at 225 (“However, a

wholly distinct managerial decision that piece workers should be paid less than the

statutory requirement in terms of hourly rates involves a different course of conduct, and

so would constitute a different offense.”) (citation omitted). To uphold all twenty IM

regulation counts in the Indictment, the Government would therefore need to prove that the

failure to follow the IM regulations constituted a different “managerial decision” on each

separate pipeline, rather than a single “course of conduct.” Id.

To that end, the Government argues “each unique count differs because it requires

the government to prove, for each segment, a separate act.” Opp’n at 5-6. For example,

on counts 6-8 – which charge that PG&E “failed to identify and evaluate potential threats

to covered segments” (SI ¶ 67) – the Government explained that it “is not simply going to

prove a course of willful conduct to fail to identify threats, but rather prove how PG&E

willfully failed to do so with regard to a specific pipeline” (Opp’n at 4). The Government

also argues that because it “has carefully charged only certain exceedances on particular

dates of particular lines,” these must be different counts. Id. at 5.

While different facts would be necessary to prove the pipeline-level counts in the

Indictment, this does not direct the conclusion that each count stemmed from a different

course of conduct or managerial decision. If different evidence were the standard, then the

Supreme Court would not have rejected the employee-level counts in C.I.T., as proving

each employee-level count there would have required employee-specific evidence. The

varied degree of charging across IM regulations – with the various regulations charged on

as many as six and as few as two pipelines – likewise does not direct the conclusion that

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each count stemmed from a different course of conduct. C.I.T. is again instructive; the fact

that the government brought counts only for the employees who had actually been

underpaid, overworked, or under-reported and only in the weeks they had actually been

underpaid, overworked, or under-reported (and this number varied across the three FLSA

provisions) did not mean the government had alleged separate counts. Here, as there, the

Government cannot create multiple courses of conduct simply by identifying the specifics

of the allegedly unlawful conduct.

Ultimately, the Government does not contest that the IM regulation counts all stem

from the fact that “PG&E adopted two unlawful practices and created one allegedly

incomplete report.” Mot. at 1. Indeed, the Government admits that it “has set forth an

overall scheme in its [] Indictment.” Opp’n at 1 (emphasis added). The Government ties

every count in this scheme to a single date, January 22, 2010, the date the Baseline

Assessment Plan was due in 2010. SI ¶¶ 63, 67, 69. 71, 73. And all twenty counts of this

scheme allege a “failure” by PG&E to follow one of five IM regulations, which together

“set[] forth how a pipeline operator identifies threats to a pipeline and uses the threat

identification in its integrity program, and . . . regulate[] what needs to be in the baseline

assessment plan for a pipeline.” Opp’n at 1. PG&E’s failure to follow these regulations,

even many times over, no more directs the conclusion that multiple counts per regulation

are appropriate than the C.I.T. defendant’s failure to pay minimum wage, follow overtime

provisions, or comply with recordkeeping requirements.

The Indictment therefore alleges only a single course of conduct for each of the five

relevant IM regulations, and this is enough to sustain only five counts.5 This conclusion

does not diminish how serious PG&E’s alleged failure to heed the IM regulations was, or

how dangerous it was for PG&E to fail so many times over. As the Supreme Court has

explained:

5 PG&E concedes that at least five counts are sufficiently alleged. See Reply in Supp. of Def.’s Mot. to Dismiss for Multiplicity (“Reply”) at 9 (Docket No. 177) (“The five different regulations that the government contends PG&E violated may allow it to legitimately charge that conduct in five different counts.”).

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[T]his [is] not out of any sentimental consideration, or for want of sympathy with the purpose of Congress in proscribing evil or anti-social conduct. It may fairly be said to be a presupposition of our law to resolve doubts in the enforcement of a penal code against the imposition of a harsher punishment.

Bell v. United States, 349 U.S. 81, 83 (1955). Here, Congress has not stated in “language

that is clear and definite” that PG&E should face separate criminal penalties for each

pipeline that violated the IM regulations, so the Court has no choice but to limit the

Indictment to one count per IM regulation. C.I.T., 344 U.S. at 222.

d. Eliminating All but a Single Count per IM Regulation Introduces

Neither Duplicity Nor Proof Problems into the Indictment

The Government argues that “if all the acts on all of the numerous pipelines were

combined in a single charge, there would be a duplicity issue.” Opp’n at 1. See also id. at

2 (“Conversely, it is improper to charge more than one offense in a single count.”) (citing

United States v. Yarbrough, 852 F.2d 1522, 1530 (9th Cir. 1988)).

The Government’s argument assumes what it attempts to prove – that each pipeline

for which PG&E violated the IM regulations must be charged as a separate crime. It is

certainly true that “[a] duplicitous indictment compromises a defendant’s Sixth

Amendment right to know the charges against him, as well as his Fifth Amendment

protection against double jeopardy.” United States v. King, 200 F.3d 1207, 1212 (9th Cir.

1999). But duplicity analysis considers whether acts that may constitute separate offenses

must be brought as separate offenses. See id. at 1213 (answering in the negative whether

“an act which can be viewed as an independent execution of a scheme must be charged in

a separate count”). And as discussed above, the IM regulations criminalize a “course of

conduct” – the course being PG&E’s failure to follow each IM regulation – meaning

PG&E’s failure on each pipeline may not be brought as separate counts. The Indictment

would therefore not be charging more than one offense in each charge if all acts on each

pipeline were combined into a single charge.

The Government likewise argues that “[i]f no pipeline is alleged or proven, but

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rather merely a course of conduct, the government would not prove that PG&E willfully

failed to” follow the IM regulations because the regulations criminalize on a pipeline-by-

pipeline basis. Opp’n at 4. But as discussed above, the IM regulations criminalize a

“course of conduct,” and the Government will be free to introduce pipeline-specific and

segment-specific evidence to prove the “course of conduct” required by each IM

regulation.

II. Remedy for Multiplicitous Counts

PG&E has requested that if the Court finds the IM regulation counts to be

multiplicitous – which it has – then the Court should “either dismiss Counts 3, 7, 8, 10

through 14, 16 through 18, and 20 through 23, or order the government to elect one count

under each charged provision of the integrity management regulations on which to

proceed.” Reply at 10.

The Court agrees with PG&E that since the Indictment alleges only five distinct

crimes, “allowing the government to proceed to trial on [twenty crimes] would unfairly

prejudice PG&E in the eyes of the jury” (Reply at 9), and the Court therefore also agrees

that dismissal of all but one count per regulation is the appropriate remedy. This finding is

consistent with how other courts have handled multiplicitous counts. See, e.g., C.I.T., 344

U.S. at 226 (affirming dismissal of all but one count per FLSA provision, “[w]ithout

prejudice to amendment of the information before trial if the evidence to be offered

warrants it”).

Consistent with the discussion in this order, each count will be based on PG&E’s

alleged course of conduct, rather than PG&E’s actions as to particular pipelines. Thus, it is

irrelevant which of the multiplicitous counts are dismissed, as the Government will be free

to present evidence on all alleged pipelines – within the confines of the Federal Rules of

Evidence – to prove that PG&E violated the five IM regulations at issue in this motion.

For example, Counts 2 and 3 allege violations of 49 C.F.R. § 192.917(b), with Count 2

focusing on Line 132 and Count 3 on Line 109. Regardless of which count survives, the

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Government may offer evidence as to both lines to prove that PG&E knowingly and

willfully violated the regulation through the single course of conduct alleged in the

Indictment. Because it does not matter which of the multiplicitous counts are dismissed,

the Court will grant PG&E’s motion to retain only the first listed count for each alleged

regulatory violation.

Accordingly, the Court hereby GRANTS WITHOUT PREJUDICE PG&E’s motion

to dismiss Counts 3, 7, 8, 10-14, 16-18, and 20-23 of the Indictment. The parties shall

meet and confer on whether it is necessary for the Government to amend the Indictment,

and if so, a schedule for amendment. The parties shall file, on or before January 19,

2016, either a joint stipulation detailing the outcome of this meet and confer or a joint

statement detailing their positions on any topics of disagreement.

CONCLUSION

For the reasons set forth above, PG&E’s motion is GRANTED WITHOUT

PREJUDICE. The parties shall meet and confer and provide notice to the Court, as

directed above, on or before January 19, 2016.

IT IS SO ORDERED.

Dated: 12/23/15 _____________________________________ THELTON E. HENDERSON United States District Judge

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA,

Plaintiff,

v.

PACIFIC GAS AND ELECTRIC COMPANY,

Defendant.

Case No. 14-cr-00175-TEH ORDER DENYING DEFENDANT’S MOTION TO DISMISS FOR ERRONEOUS LEGAL INSTRUCTIONS

This matter came before the Court on October 19, 2015 for a hearing on Defendant

Pacific Gas & Electric (“PG&E”)’s Motion to Dismiss for Erroneous Legal Instructions to

the Grand Jury: Counts 2-28 and the Alternative Fines Act Sentencing Allegation. After

carefully considering the parties’ written and oral arguments, the Court now DENIES

PG&E’s motion, for the reasons set forth below.

BACKGROUND

On September 9, 2010, a gas line owned and operated by PG&E ruptured, causing a

fire that killed 8 people and injured 58 others. Superseding Indictment (“SI”) ¶ 5 (Docket

No. 22). The fire damaged 108 homes, 38 of which were completely destroyed. Id. On

July 30, 2014, a grand jury returned a superseding indictment (“Indictment”) charging

PG&E with 28 counts, including 27 counts of violating the minimum federal safety

standards for the transportation of natural gas by pipeline (“Pipeline Safety Act”), as set

forth in 49 C.F.R. § 192 (“Section 192”). SI ¶¶ 62-75. “Knowing and willful” violations

of these standards are criminalized under 49 U.S.C. § 60123 (“Section 60123”). The

Government seeks a fine exceeding the statutory maximum for these offenses under 18

U.S.C. § 3571(d) (“Alternative Fines Act”). SI ¶ 76.

//

//

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LEGAL STANDARD

Under the Fifth Amendment’s Grand Jury Clause, the grand jury serves two

essential functions: “both the determination whether there is probable cause to believe a

crime has been committed and the protection of citizens against unfounded criminal

prosecutions.” United States v. Samango, 607 F.2d 877, 882 (9th Cir. 1979) (quoting

United States v. Calandra, 414 U.S. 338, 343 (1974)).

“[A]s a general matter, a district court may not dismiss an indictment for errors in

grand jury proceedings unless such errors prejudiced the defendants.” Bank of Nova Scotia

v. United States, 487 U.S. 250, 254 (1988). Indeed, “dismissal of the indictment is

appropriate only ‘if it is established that the violation substantially influenced the grand

jury’s decision to indict,’ or if there is ‘grave doubt’ that the decision to indict was free

from the substantial influence of such violations.’ ” Id. at 256 (quoting United States v.

Mechanik, 475 U.S. 66, 78 (1986) (O’Connor, J., concurring)).

Where an error with the grand jury proceedings is “brought to the attention of the

trial court before the commencement of the trial,” the Supreme Court has held that

“dismissal of the indictment is appropriate.” Id. The Ninth Circuit has confirmed that “if a

motion to dismiss is made before the verdict, the district judge should apply the Bank of

Nova Scotia standard.” United States v. Navarro, 608 F.3d 529, 539 (9th Cir. 2010).

DISCUSSION

PG&E now moves to dismiss all 27 Pipeline Safety Act counts of the Indictment, as

well as the Indictment’s Alternative Fines Act Sentencing Allegation. Def.’s Mot. to

Dismiss for Erroneous Legal Instructions to the Grand Jury: Counts 2-28 and the

Alternative Fines Sentencing Allegation (“Mot.”) (Docket No. 127). PG&E argues that

because the prosecutor gave the grand jury erroneous legal instructions on both the intent

requirement for violations of the Section 192 (Counts 2-28) and the Alternative Fines Act,

“[o]ne cannot conclude that the grand jury actually found probable cause the defendant

committed a crime under the laws of the United States,” and the only appropriate remedy

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is dismissal. Mot. at 2. The Government argues that the prosecutor’s collective intent

instructions were correct; that PG&E’s Alternative Fines Act argument is barred by law of

the case; and that, in any event, both of “PG&E’s claims fall far short of the high threshold

that both the Supreme Court and Ninth Circuit have set for dismissal based on grand jury

abuse.” Opp’n to Def.’s Mot. to Dismiss for Erroneous Legal Instructions (“Opp’n”) at 1

(Docket No. 141).

I. Bank of Nova Scotia Sets a High Standard for Dismissal of an Indictment

The Ninth Circuit has held in no uncertain terms that the Bank of Nova Scotia

standard sets a high bar for dismissal:

Only in a flagrant case, and perhaps only where knowing perjury, relating to a material matter, has been presented to the grand jury should the trial judge dismiss an otherwise valid indictment returned by an apparently unbiased grand jury. To hold otherwise would allow a minitrial as to each presented indictment contrary to the teaching [of the Supreme Court].

United States v. Kennedy, 564 F.2d 1329, 1338 (9th Cir. 1977) (citing Costello v. United

States, 350 U.S. 359, 363-64 (1956)). Indeed, in the Ninth Circuit, “a grand jury

indictment will not be dismissed unless the record shows that the conduct of the

prosecuting attorney was flagrant to the point that the grand jury was ‘deceived’ in some

significant way,” such that the prosecutor “significantly infringe[d] upon the ability of the

grand jury to exercise independent judgment.” United States v. Wright, 667 F.2d 793, 796

(9th Cir. 1982) (citation omitted). Even “extensive prosecutorial misconduct” before the

grand jury, though it calls for contempt or disciplinary proceedings, may not justify

dismissal of an indictment. Navarro, 608 F.3d at 539 (citing Bank of Nova Scotia, 487

U.S. at 263).

Given this high standard, the Ninth Circuit has held that “[e]rroneous grand jury

instructions do not automatically invalidate an otherwise proper grand jury indictment.”

Wright, 667 F.2d at 796. Rather, dismissal for improper instructions is warranted only

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where “the conduct of the prosecutor was so ‘flagrant’ it deceived the grand jury in a

significant way infringing on their ability to exercise independent judgment.” United

States v. Larrazolo, 869 F.2d 1354, 1359 (9th Cir. 1989) (overruled on other grounds by

Midland Asphalt Corp. v. United States, 489 U.S. 794 (1989)). The movant “must show

that the grand jury’s independence was so undermined that it could not make an informed

and unbiased determination of probable cause.” Id. Moreover, a prosecutor need not even

instruct the grand jury on the law in order to secure an indictment. United States v. Kenny,

645 F.2d 1323, 1347 (9th Cir. 1981). In fact, the Ninth Circuit has expressed a concern

that “the giving of such instructions portends protracted review of their adequacy and

correctness by the trial court during motions to dismiss, not to mention later appellate

review.” Id.

In Larrazolo, for example, defendants contended that the definition of conspiracy

offered to the grand jury “neglected to include the requirements of criminal intent and

knowledge” and therefore “misled the grand jury in [the] explanations of conspiracy law.”

Id. Specifically, the prosecutor “characterized the acts of [defendants] in loading [] bales

of marijuana as [both] the overt act and evidence of the mens rea requirement of

conspiracy[,] without finding specific knowledge of the agreement.” Id. Defendants

argued that “if complete and proper jury instruction had been given, the grand jurors would

have found evidence of the mens rea element missing.” Id. But the Ninth Circuit held that

the erroneous instructions did not require dismissal because defendants had not “shown the

erroneous instructions influenced the decision to indict or created a ‘grave doubt’ that the

decision to indict was free from the substantial influence of such a violation.” Id.

II. The Intent Instructions on Counts 2-28 Were Not in Error

PG&E argues that “the government repeatedly told the grand jury that it could

charge the defendant [for violations of Section 192] based on a ‘collective knowledge’

theory of intent,” and that such instruction was erroneous because “this theory of criminal

liability has never been applied in the Ninth Circuit.” Mot. at 1. Specifically, PG&E

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challenges the following instruction from April 1, 2014, the day the grand jury returned the

original indictment:

It’s the idea that you are imputing to a company the actions of all of its employees to get to the state of showing the company willfully violated the law. . . . The idea being that the company, not any individual, but the company through the actions of all of its employees, that that – that liability imputes to the company.

Mot. at 4-5 (citing Decl. of Nicole C. Valco in Supp. of Def.’s Pretrial Mots. (“Valco

Decl.”) Ex. 13 at 11) (emphasis in original).1

Section 60123’s mens rea requirement has two prongs: The statute criminalizes

violations of Section 192 only if they are both knowing and willful. PG&E focuses its

argument on the “willful” prong,2 and for good reason. There is ample persuasive

precedent and widespread acceptance of legal treatises that define a “collective

knowledge” theory to prove that a corporate defendant acted “knowingly.” The leading

case, out of the First Circuit, is United States v. Bank of New England, 821 F.2d 844 (1st

Cir. 1987). There, the court held that “[a] collective knowledge instruction is entirely

appropriate in the context of corporate criminal liability.” 821 F.2d at 856. Likewise, the

Restatement (Third) of Agency provides that “[o]rganizations are treated as possessing the

collective knowledge of their employees and other agents, when that knowledge is material

to the agents’ duties . . . .” Restatement (Third) of Agency § 5.03 (Am. Law Inst. 2006).

The focus of this motion has therefore rightfully been placed on aggregation of “intent,”

i.e. the “willful” prong, and its relationship to the aggregation of “knowledge,” i.e. the

“knowing” prong.

The Ninth Circuit has not addressed the question of whether a “collective intent”

theory may be used to prove that a corporate defendant acted “willfully” in violating a

1 PG&E argues that the prosecutor gave similarly erroneous instructions on three prior dates as well. Mot. at 4. 2 PG&E argues that “ ‘[c]ollective knowledge,’ at most, could be used to prove what its name implies—knowledge. It cannot be used to prove a corporation’s specific intent, i.e., the ‘willful’ prong.” Mot. at 8.

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criminal statute. The closest the Ninth Circuit has come to addressing this issue was in

United States v. Shortt Accountancy Corp., 785 F.2d 1448 (9th Cir. 1986). There, the

defendant corporation was convicted of violating 26 U.S.C. § 7206(1), which proscribes

willfully making and submitting a false income tax return. 785 F.2d at 1451-52. On

appeal, the corporation argued that it could not be found guilty because the employee who

actually submitted the false return did not know that the return was false; rather, the

corporation’s chief operating officer (“COO”) had knowingly provided false information

to the employee. Id. at 1454. Under the heading of “collective intent,” the Ninth Circuit

rejected the corporation’s argument, holding that the corporation was criminally liable for

making and subscribing the false return based on the willful intent of the COO, even if the

COO did not sign the return. Id. The Ninth Circuit noted its concern that “[i]f

[defendant’s argument] were accepted by the courts, any tax preparer could escape

prosecution . . . by arranging for an innocent employee to complete the proscribed act

. . . .” Id. PG&E correctly points out, however, that the Ninth Circuit based its decision on

the guilty mens rea of at least one agent of the corporate defendant – the COO – leaving

unanswered the question of whether courts can truly “collect” intent across employees to

meet the requirement that a defendant acted “willfully.” Mot. at 10.

To that end, the Government has offered United States v. T.I.M.E. - D.C., Inc., 381

F. Supp. 730 (W.D. Va. 1974), in which the court approved a collective corporate

knowledge theory to prove both the knowing and willful prongs of a criminal statute. In

T.I.M.E., a corporate defendant was charged with violating federal regulations related to

interstate motor carriers. A criminal violation of these regulations required the

government to prove a “knowing and willful violation of any of the [relevant] regulations.”

381 F. Supp. at 733. The court first upheld the government’s use of the collective

corporate knowledge doctrine to prove the knowing prong: “[K]nowledge acquired by

employees within the scope of their employment is imputed to the corporation. . . . [T]he

corporation is considered to have acquired the collective knowledge of its employees and

is held responsible for their failure to act accordingly.” Id. at 738. Then, as to the willful

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prong, the court explained that the very fact that the corporate defendant had corporate

knowledge, but declined to act on that knowledge, was sufficient evidence that the

corporation acted “willfully”:

The Company had an affirmative responsibility not to ‘require or permit’ drivers to operate their vehicles while impaired. Cognizant of the situation – for, as previously noted, the Company is held responsible for the knowledge acquired by its various employees – it adopted a more or less ‘hands-off’ attitude towards compliance with the regulation and, in effect, left adherence almost entirely the responsibility of its drivers.

Id. at 741. Accordingly, the court held “that the Government has established beyond a

reasonable doubt that the Company did ‘willfully’ disregard its duty under” the relevant

regulations. Id.

PG&E urges this Court to reject T.I.M.E. and instead follow what it contends is “[a]

long line of courts since Bank of New England” that have found that “ ‘[c]ollective

knowledge’ . . . cannot be used to prove a corporation’s specific intent, i.e., the ‘willful’

prong.” Mot. at 8. See, e.g., Kern Oil & Refining Co. v. Tenneco Oil Co., 792 F.2d 1380,

1386-87 (9th Cir. 1986) (holding that as a matter of Texas state law, the knowledge

possessed by a corporation’s employees would not be imputed to the corporation); First

Equity Corp. v. Standard & Poor’s Corp., 690 F. Supp. 256, 260 (S.D.N.Y. 1988) (“A

corporation can be held to have a particular state of mind only when that state of mind is

possessed by a single individual.”). However, the cases PG&E cites are distinguishable.

In both cases, the plaintiffs attempted to establish a collective state of mind by piecing

together knowledge of individual employees. In Kern, for example, a buyer of crude oil

sued to recover from the seller, and the seller counterclaimed for breach of contract. 792

F.2d at 1380. The seller argued that where the buyer’s accounting department knew the

price that was paid to the seller, and the buyer’s legal department knew the contractual

ceiling on price, the buyer’s employees collectively knew of both facts, which rendered the

buyer’s overpayment knowing and voluntary. Id. at 1386-87. In First Equity Corp.,

investors brought a fraud claim against Standard & Poor’s for an incorrect bond

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description printed in one of the company’s publications. 690 F. Supp. at 257. Plaintiffs

attempted to prove the required mens rea – recklessness – “by pointing out alleged

inconsistencies in the understandings held by various people at Standard & Poor’s,” as a

demonstration that Standard and Poor’s recklessly “had no understanding as to the

meaning of the description when it was published.” Id. at 259. Here, by contrast, the

prosecutor did not ask the grand jury to aggregate innocent pieces of information from

various employees across PG&E to construct a single “knowing and willful” transaction.

Instead, the prosecutor invited the grand jury to consider whether PG&E’s employees’

individual knowledge and disregarding of the company’s Section 192 duties rendered the

company liable for “knowingly and willfully” violating those duties.

The Ninth Circuit recognized a distinction between these two kinds of reasoning in

Kern itself, citing T.I.M.E.:

[Seller] also cites [T.I.M.E.], in which the court held that a corporation could be held criminally responsible for the collective knowledge of its employees. The corporation had a duty to insure that its drivers obeyed a federal regulation. Various employees had notice of facts that, taken together, revealed that the drivers were violating the regulation. The holding that the corporation was charged with knowledge of the violations was thus based on the corporation’s legal duty to prevent the violations. Such a duty is not present in this case.

792 F.2d at 1387. In so doing, the Ninth Circuit impliedly agreed that where a corporation

has a legal duty to prevent violations, and the knowledge of that corporation’s employees

collectively demonstrates a failure to discharge that duty, the corporation can be said to

have “willfully” disregarded that duty. See T.I.M.E., 381 F. Supp. at 741.

In this case, as in T.I.M.E., PG&E is legally obligated to follow safety regulations

set forth by the federal government. This is the closest factual and legal comparison that

either party has offered the Court to consider in understanding the mens rea requirement in

Section 60123.3 Accordingly, the Court adopts the reasoning in T.I.M.E., rendering correct

3 PG&E attempts to distinguish T.I.M.E. by arguing that the criminal statute there had a lower “knowing and willful” standard than Section 60123. Reply in Supp. of Def.’s Mot.

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the legal instructions PG&E is challenging on Counts 2-28 in this motion. These legal

instructions therefore cannot be the basis for a dismissal under Bank of Nova Scotia.

III. The Instruction on the Alternative Fines Act Sentencing Allegation Does Not

Meet the Bank of Nova Scotia Standard

The Alternative Fines Act provides:

If any person derives pecuniary gain from the offense, or if the offense results in pecuniary loss to a person other than the defendant, the defendant may be fined not more than the greater of twice the gross gain or twice the gross loss, unless imposition of a fine under this subsection would unduly complicate or prolong the sentencing process.

18 U.S.C. § 3571(d).

PG&E argues that the instruction on the Alternative Fines Act provided to the grand

jury – “This just required us to specifically allege the amount of gain or loss that we think

is appropriate.” – was erroneous and therefore warrants dismissal. Mot. at 5 (citing Valco.

Decl. Ex. 14 at 14). According to PG&E, the instruction was flawed in four respects: first,

the prosecutor did not give a causation instruction; second, the prosecutor did not instruct

that gain or loss must be limited to the charged counts; third, the prosecutor did not instruct

that only pecuniary damages may be counted toward gain or loss; and fourth, the

prosecutor inserted personal opinion into the legal instruction by stating that the amount of

gain or loss was based on what “we” (meaning either the prosecutors collectively or them

together with the grand jurors) “think is appropriate.” Mot. at 12-13.

Even assuming that PG&E is correct on all four counts, PG&E has failed to meet

the high standard required for dismissal of an indictment. The Ninth Circuit has found

to Dismiss for Erroneous Legal Instructions (“Reply”) at 6 (Docket No. 182). When asked at the October 19, 2015 hearing what authority PG&E could cite for the existence of such a difference, counsel provided nothing. But even if PG&E were correct, the Court finds the reasoning in T.I.M.E. to apply with equal force to the “higher” standard PG&E advances. See Bryan v. United States, 524 U.S. 184, 193 (1998) (“[A] person acts willfully if he acts intentionally and purposefully and with the intent to do something the law forbids, that is, with the bad purpose to disobey or to disregard the law.”).

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even “extensive prosecutorial misconduct” before the grand jury to be insufficient for

dismissal of an indictment (Navarro, 608 F.3d at 539), and the Court does not find that the

prosecutor’s passing suggestion that his or her opinion is relevant to the Alternative Fines

Act is enough to warrant dismissal. Though the challenged statement may have been ill-

advised, it was not “so ‘flagrant’ [that] it deceived the grand jury in a significant way

infringing on their ability to exercise independent judgment.” Larrazolo, 869 F.2d at

1359.

Moreover, the prosecutor need not provide legal instructions to the grand jury at all

(Kenny, 645 F.2d at 1347), and the Indictment is sound as long as the grand jury

discharged its obligation to find probable cause. The statement challenged by PG&E does

not give the Court “grave doubt” that the grand jury’s probable cause determination was

made with anything other than “independent judgment.” Bank of Nova Scotia, 487 U.S. at

256.

Finally, Apprendi v. New Jersey, 530 U.S. 466 (2000), and Southern Union v.

United States, 132 S. Ct. 2344 (2012), did not alter the role of the grand jury under the

Fifth Amendment’s Grand Jury Clause. Apprendi requires that “any fact (other than prior

conviction) that increases the maximum penalty for a crime must be charged in an

indictment, submitted to a jury, and proven beyond a reasonable doubt.” 530 U.S. at 476.

Southern Union applies this rule to the imposition of criminal fines. 132 S. Ct. at 2356.

The Court is mindful of the additional constitutional requirements Apprendi and Southern

Union placed on criminal penalties, and is carefully considering them to ensure PG&E’s

Sixth Amendment rights are protected (see Order Granting in Part Defendant’s Motion to

Dismiss the Alternative Fines Act Sentencing Allegations (Docket No. 201)), but neither

case increased the grand jury standard to something beyond probable cause.

PG&E therefore was not prejudiced as a result of the instructions, or lack thereof,

provided to the grand jury on the Alternative Fines Act. Accordingly, the Bank of Nova

Scotia standard is not met, and dismissal of the Alternative Fines Act allegation would be

inappropriate.

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CONCLUSION

For the reasons set forth above, PG&E’s motion is DENIED.

IT IS SO ORDERED.

Dated: 12/23/15 _____________________________________ THELTON E. HENDERSON United States District Judge

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