1027 CHAPTER 15 Environmental Law John Fehrenbach Eric P. Gotting Winston & Strawn LLP Washington, DC 20006 202.282.5000 www.winston.com Scott P. DeVries Yelitza V. Dunham Winston & Strawn LLP San Francisco, CA 94111 415.591.1000 Averil M. Edwards Winston & Strawn LLP Chicago, IL 60601-9703 312.558.5600 Michael T. Champion Winston & Strawn LLP Charlotte, NC 28202-1078 704.350.7783 Andreas H. Leskovsek Senior Corporate Counsel Dynegy Inc. Houston, TX 77002 713.767.0396 www.dynegy.com
Transcript
1027
CHAPTER 15
Environmental Law
John FehrenbachEric P. Gotting
Winston & Strawn LLPWashington, DC 20006202.282.5000 www.winston.com
Scott P. DeVriesYelitza V. Dunham
Winston & Strawn LLPSan Francisco, CA 94111415.591.1000
Averil M. EdwardsWinston & Strawn LLPChicago, IL 60601-9703312.558.5600
Michael T. ChampionWinston & Strawn LLPCharlotte, NC 28202-1078704.350.7783
Andreas H. LeskovsekSenior Corporate CounselDynegy Inc.Houston, TX 77002713.767.0396 www.dynegy.com
§ 15.5.1.3 Issuance of Lone Pine Case Management Orders Is Consistent with Heightened Pleading Requirements Enunciated by the U.S. Supreme Court in Twombley and Iqbal . . . . 1059
§ 15.5.2.1 Other Vehicles, Such as Discovery, Are More Appropriate for Discovering Plaintiffs’ Contentions . . . . . . . . . . . . . . . . . . . . . 1062
§ 15.5.2.2 Lone Pine Orders Should Only Be Issued in Those Cases Presenting Facts Resembling Those Presented in Lone Pine . . . . . . . . . . . . . . . 1064
In 2010, climate change litigation exploded due to challenges to the Environmen-tal Protection Agency’s (EPA’s) regulation of greenhouse gases (GHGs) under the Clean Air Act (CAA). The following discussion provides a brief overview of the major climate change litigation activity that occurred in 2010.
§ 15.1.1 Litigation over EPA Rulemakings
Endangerment FindingOver the past year, EPA has issued numerous GHG regulations that have been the subject of vigorous court challenges. On December 15, 2009, EPA issued two separate but related fi ndings regarding the regulation of GHGs under Sec-tion 202(a) of the CAA1: 1) a fi nding that current and projected concentrations of GHGs in the atmosphere threaten public health and welfare (the endanger-ment fi nding); and 2) a fi nding that the combined emissions of GHGs from new motor vehicles and new motor vehicle engines contribute to GHG pollution (the cause or contribute fi nding) (collectively, the “Endangerment Finding”). These fi ndings did not establish any enforceable GHG control requirements, but were required before EPA could fi nalize the GHG emission standards for light-duty vehicles it had proposed in September, 2009.
As background, in Massachusetts v. EPA, 549 U.S. 497 (2007), the Supreme Court held that carbon dioxide (the primary GHG) is an air pollutant and accord-ingly, if EPA made the determination that GHG emissions contribute to climate change, EPA was not only authorized but also required to regulate GHGs from new motor vehicles. In other words, EPA could “avoid taking further action only if it determine[d] that [GHGs] do not contribute to climate change or if it provide[d] some reasonable explanation as to why it [could not or would not] exercise its discretion to determine whether they do.” After Massachusetts v. EPA was decided, EPA issued an Advance Notice of Proposed Rulemaking
1. Section 202(a)(1) requires EPA to promulgate emission standards applicable to new motor vehicles or engines, to address pollutants which “cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.” 42 U.S.C. § 7521(a)(1).
(ANPR) soliciting public comment on the propriety of regulating GHGs under the CAA, while still retaining the view that such regulations were ill-advised. However, after the new administration took offi ce, new EPA Administrator Lisa Jackson embraced the concept of GHG regulations and initiated a number of GHG regulatory initiatives, including the Endangerment Finding and the associ-ated motor vehicle GHG emission standards.
After the Endangerment Finding was issued, EPA received 10 petitions from various organizations including the U.S. Chamber of Commerce (“Chamber”), the Coalition for Responsible Regulation (CRR)2, numerous congressional rep-resentatives, the states of Virginia and Texas, and others. The petitioners argued for reconsideration on several bases. The petitions fi led by the congressional representatives, CRR, and others argued that e-mails and data disclosed in the “Climategate”3 scandal demonstrated that climate data relied upon by EPA had been manipulated to establish warming trends, that climate scientists had sup-pressed dissenting views from scientifi c publications relied upon by EPA, and that several fi ndings of the Intergovernmental Panel on Climate Change (IPCC) had been demonstrated to be false. The petitioners claimed that reconsidera-tion of EPA’s Endangerment Finding was necessary because data and e-mails had not been released during the public comment period, which closed on June 30, 2009.
Other petitioners, including the Ohio Coal Association and the Chamber, argued that statements made by EPA and state environmental regulatory agencies regarding the infeasibility of requiring Prevention of Signifi cant Deterioration (PSD) construction permits for stationary source GHG emissions necessitated reconsideration of EPA’s Endangerment Finding. The Chamber also pointed to a February 19, 2010 letter from Chief Counsel O. Kevin Vincent of the National Highway Traffi c Safety Administration (NHTSA), in which Vincent stated that NHTSA has independent authority to regulate GHGs from new motor vehicles without EPA regulations under the CAA. The Chamber argued that this acknowledgment that EPA rulemaking was not required for the regulation of GHG emissions from new motor vehicles, combined with EPA’s statements in the tailoring rule proposal that regulating GHGs under the PSD program of the CAA would produce absurd results, necessitated reconsideration of the Endangerment Finding since the fi ndings had been issued to support the EPA and NHTSA’s joint GHG emission standards. If EPA “affi rmatively wish[ed] to pursue an Endangerment Finding to lay the necessary groundwork to regulate GHG emissions from stationary sources,” the Chamber argued, “the Agency
2. According to a motion fi led with the District of Columbia Circuit Court, the CRR is a nonprofi t corporation supported by various companies and formed for the specifi c purpose of preventing climate change regulations from becoming effective prior to the enactment of climate change legislation. 3. The November 2009 release of thousands of e-mails and other documents from the University of East Anglia’s Climatic Research Unit (CRU) has been referred to in the media as Climategate. The CRU’s models of worldwide temperatures were partly used to form the basis of the Intergovernmental Panel on Climate Change’s (IPCC) global warming assessments, which in turn were relied upon by EPA in forming its endangerment/cause or contribute fi ndings.
must clearly say so and explain how such regulation can occur without absur-dity.”
On July 29, 2010, EPA denied the petitions for reconsideration.4 On the petitioners’ Climategate allegations, EPA determined that the petitioners had not demonstrated that the scientifi c studies used to support the Endangerment Finding were fl awed or inappropriately relied upon by EPA. EPA stated that the Climatic Research Unit (CRU) e-mails had been taken out of context by the petitioners, and that independent inquiries conducted into Climategate had all concluded that no scientifi c misconduct or intentional data manipulation had occurred. The limited number of factual mistakes in the IPCC’s report were “tangential and minor” and did not “change the key IPCC [] conclusions that [were] central to the Administrator’s Endangerment Finding.”
Finally, EPA pointed to a recent report issued by the National Research Council of the U.S. National Academy of Sciences in May 2010, which con-fi rmed the fi ndings of the reports relied upon by EPA in issuing its Endangerment Finding. EPA then addressed the petitioners’ objections based on the tailoring rule, and determined those objections were “not of central relevance to the outcome of the [Endangerment Finding] and/or could have been raised during the public comment period.” EPA rejected the petitioners’ absurdity argument because the fact that absurd results could follow from the Endangerment Find-ing was not a basis for making the fi nding.
On December 23, 2009, a coalition of companies and trade associations led by the CRR fi led a petition to review the Endangerment Finding with the District of Columbia Circuit Court of Appeals. Coalition for Responsible Regulation, et al. v. United States Environmental Protection Agency, No. 09-1322 (D.C. Cir. Dec. 23, 2009). CRR’s petition for review was consolidated with 16 other petitions subsequently fi led by various states, companies, and trade associa-tions, and a group of Republican House Representatives led by the Southeastern Legal Foundation (SLF). CRR and other petitioners, such as the Chamber, also petitioned for review of EPA’s denial of their petitions for reconsideration of the Endangerment Finding. Many states have intervened in the case in support of EPA or the petitioners. The states that have intervened in support of the petition-ers are Michigan, Mississippi, Florida, Hawaii, Indiana, Kentucky, Louisiana, Nebraska, North Dakota, Oklahoma, South Carolina, South Dakota, and Utah. Opposing them are the following states and municipality that have intervened in support of EPA: City of New York, Massachusetts, Pennsylvania, Alaska, Arizona, California, Connecticut, Delaware, Illinois, Iowa, Maine, Maryland, Minnesota, New Hampshire, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington. In addition, various trade associations and conser-vative legal organizations have intervened on behalf of the petitioners while environmental groups such as the Sierra Club and Natural Resources Defense Council have intervened in support of EPA.
Reconsideration of PSD Interpretive Memorandum (“Timing Rule”)On March 29, 2010, EPA issued a fi nal decision on its reconsideration of the PSD interpretive memorandum issued by former EPA Administrator, Stephen John-son, on December 18, 2008.5 The PSD interpretive memo addressed whether the phrase “subject to regulation” in the PSD regulations applied to GHGs given the holding in Massachusetts v. EPA that GHGs are air pollutants and the fact that some CAA regulations required monitoring of CO2. The PSD regulations only apply to “regulated NSR pollutants,” which include pollutants for which a national ambient air quality standard has been promulgated, certain pollut-ants identifi ed in the regulations, and “any pollutant that otherwise is subject to regulation under the Act.” 40 C.F.R. § 52.21(b)(50). The memo concluded that pollutants for which only monitoring requirements were established did not constitute regulated New Source Review (NSR) pollutants, and that only pollutants subject to a provision of the CAA or a regulation under the CAA that required “actual control of emissions” are “regulated” within the meaning of 40 C.F.R. § 52.21(b)(50).
In its fi nal decision on the reconsideration, referred to by litigants as the Tim-ing Rule, EPA decided not to change the interpretation of the scope of pollutants subject to the PSD program as set forth in the PSD interpretive memo, except for one minor change. The memo had stated that a pollutant would be consid-ered “subject to regulation” “upon promulgation of a regulation that requires actual control of emissions.” EPA clarifi ed that a pollutant will be considered “subject to regulation” when the regulations requiring control “become fi nal and effective.” As a practical matter, EPA’s retention of the main interpretation provided in the memo did not slow down the application of PSD requirements to GHG emissions, due to the EPA/NHTSA’s joint rulemaking which was fi nalized in April and established GHG emission standards on new light-duty vehicles beginning with the 2012 model year. EPA stated that because 2012 model year vehicles can be introduced into commerce no earlier than January 2, 2011, the PSD program would apply to GHG emissions no earlier than that date. Therefore, based on the mobile source GHG rulemaking, the impact of the interpretive memo was that GHG emissions would need to be addressed in the PSD program by January 2, 2011.
On April 2, 2010, CRR fi led a petition to review the Timing Rule with the D.C. Circuit Court. Coalition for Responsible Regulation, Inc., et al. v. U.S. EPA, 10-1073 (D.C. Cir. Apr. 2, 2010). CRR’s petition for review of the Tim-ing Rule was consolidated with 17 other petitions subsequently fi led by various industry-affi liated groups such as the SLF, Clean Air Implementation Project, American Iron and Steel Institute, the State of Texas, and others. Various states have fi led motions to intervene in support of the respondent or the petitioners. Industry groups have intervened in support of the petitioners, while environ-mental advocacy groups such as the Sierra Club have intervened in support of EPA. On November 16, 2010, the court issued an order consolidating the
petitions for review of the Timing Rule (Case No. 10-1073) with the petitions for review of the Tailoring Rule (Case No. 10-1131).
On May 28, 2010, the Center for Biological Diversity (CBD), an environ-mental advocacy organization, also fi led a petition for review of the Timing Rule. Center for Biological Diversity v. U.S. EPA, 10-1115 (D.C. Cir. May 28, 2010). The CBD’s petition has been consolidated with other petitions fi led by other environmental groups. The CBD’s statement of issues fi led on July 7, 2010, indicates the petitioner will argue that EPA abused its discretion by not regulating GHGs under the PSD program until January 2, 2011. On November 16, 2010, the court issued an order granting the environmental groups’ request to hold the petition in abeyance until further order of the court, in light of the pending industry challenges to EPA’s GHG rules.
Tailoring RuleOn May 13, 2010, EPA issued the PSD and Title V GHG Tailoring Rule.6 PSD is the permitting program under the CAA that requires new major sources and major modifi cations that will result in signifi cant emission increases to obtain a PSD permit that includes emission limits and requires implementation of Best Available Control Technology (BACT). Under the CAA, a source is major if it emits between 100-250 tons per year (tpy) of any air pollutant. The Tailor-ing Rule phases in the applicability of PSD and Title V permit requirements to stationary sources emitting GHGs, and alters the regulatory threshold from 100 tpy or 250 tpy to 75,000 tpy or 100,000 tpy. In the fi rst phase of the Tailoring Rule, which spans the six-month time period from January 2, 2011 to June 30, 2011, only sources currently subject to PSD permitting requirements because of non-GHG emission increases would be required to address GHG emissions under the PSD requirements. These sources would only be subject to PSD for GHG emission increases of 75,000 tpy carbon dioxide equivalent (CO2e) or more. Beginning July 1, 2011, new stationary sources that emit or have the potential to emit at least 100,000 tpy of GHGs would be required to comply with the PSD requirements, regardless of whether they exceed the permitting threshold for any other pollutants. Major modifi cations that increase GHG emissions by at least 75,000 tpy would be subject to PSD, regardless of other emissions.
The Tailoring Rule also addressed the applicability of stationary sources that emit GHGs under the Title V operating permit program, which requires major stationary sources to obtain a permit that sets forth all applicable air pol-lution control requirements. Under the fi rst phase of the Tailoring Rule, only sources subject to the Title V permit program due to non-GHG emissions would be required to address GHG emission requirements in their Title V permits. In the second phase beginning on July 1, 2011, stationary sources that emit or have the potential to emit at least 100,000 tpy GHGs would be required to obtain a Title V permit, even if they would not be considered “major” for any other pollutant.
EPA justifi ed the Tailoring Rule by reference to three legal doctrines—absurd results, administrative necessity, and the one-step-at-a-time doctrine. EPA acknowledged that without the Tailoring Rule, the regulation of GHGs under the PSD program would encompass an unreasonably large number of smaller sources7, many of whom had never been subject to CAA permit require-ments before. Furthermore, because of the short timeframe within which the permitting requirements would apply (January 2, 2011, as set forth in the PSD interpretive memo reconsideration decision) and the extensive and costly nature of complying with PSD requirements, a phased-in approach was necessary to avoid overburdening the regulated community. Additionally, permitting authorities would be unable to handle the overwhelming number of permit applications that would be required. The absurd results doctrine was invoked because of the admitted absurdity in regulating sources that emit only 100 to 250 tpy of GHGs.
The Tailoring Rule has triggered a deluge of lawsuits fi led against EPA by states, industry representatives, and environmental advocacy groups. A group of states fi led a petition for review, and Texas also fi led its own petition. Many industry organizations have also fi led suit against the Tailoring Rule, includ-ing the National Mining Association, National Association of Manufacturers (NAM), and a coalition of Republican House Representatives and companies led by the SLF. A total of 26 petitions for review of the Tailoring Rule were consolidated as Case Number 10-1131 in the D.C. Circuit Court. As stated above, on November 16, 2010, the court consolidated the challenges to the Tailoring Rule (Case No. 10-1131) with the challenges to the Timing Rule (Case No. 10-1073).
Tailpipe RuleOn April 1, 2010, EPA and NHTSA fi nalized a joint rule in which EPA estab-lished GHG emission standards under Section 202(a) of the CAA (“Tailpipe Rule”) and NHTSA established corporate average fuel economy (CAFE) stan-dards under the Energy Policy and Conservation Act.8 Both standards apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles built in model years 2012 to 2016. The GHG emission standards require these vehicles to meet an estimated combined average emissions level of 250 grams of CO2/mile in model year 2016, which is the equivalent of 35.5 miles per gallon in fuel economy. NHTSA’s CAFE standards require the above-referenced vehicles to meet an estimated CAFE level of 34.1 mpg in model year 2016.
Although the Tailpipe Rule applies to model year 2012 vehicles, the rule actually becomes effective in January 2011 because that is the earliest date that model year 2012 vehicles can be introduced in commerce. In its preamble to the fi nal Tailpipe Rule, EPA stated that the GHG emission standards were required by the CAA, which directs EPA to promulgate “standards applicable
7. EPA estimated approximately 6.1 million major sources, compared to the 15,000 major sources that are currently regulated under the PSD program. 8. 75 Fed. Reg. 25324 (May 7, 2010).
to the emission of any air pollutant from … new motor vehicles … which … endanger public health or welfare.” Because of the Supreme Court’s holding in Massachusetts v. EPA that GHGs are air pollutants, and EPA’s determina-tion that GHG emissions from new motor vehicles endanger public health and welfare, EPA was required to promulgate GHG emission standards for new motor vehicles.
The CRR fi led a petition to review the Tailpipe Rule on May 7, 2010. CRR’s petition was consolidated with 16 petitions against the Tailpipe Rule subsequently fi led by various trade groups, including the Energy-Intensive Manufacturers’ Working Group on GHG Regulation, which, like CRR, appears to be an organization specifi cally established for the purpose of challenging EPA’s GHG rules. The SLF, along with a number of Republican House Repre-sentatives, has also fi led a petition to review the Tailpipe Rule. As in the other petitions, a number of states have intervened for the petitioners and respondents, and various industry parties have intervened for the petitioners. A total of 17 petitions for review have been fi led against the Tailpipe Rule, and have been consolidated in the D.C. Circuit as Case Number 10-1092.
Motions for StayOn September 15, 2010, several petitioners in these consolidated cases fi led four motions for a stay of all or some of EPA’s GHG regulations. Specifi cally, the NAM, joined by seven other petitioners, fi led a motion for a partial stay of the effects of the Endangerment Finding, Timing Rule, Tailpipe Rule, and Tailoring Rule on stationary sources, until fi nal resolution of NAM’s petition for review. The NAM motion for partial stay does not seek to stay the effects of EPA’s rules on mobile sources. The NAM motion asserts that the applica-tion of EPA’s GHG rules to stationary sources is substantively and procedur-ally invalid under the CAA because no National Ambient Air Quality Standard (“NAAQS”) has been established for GHGs and no region of the country has been designated attainment or unclassifi able for GHGs. The motion also asserts that regulating GHG emissions from stationary sources would cause irreparable harm to the economy, and that granting a partial stay would benefi t the public interest and not harm EPA.
Also on September 15, 2010, the State of Texas fi led two motions for stay—one requesting a stay of implementation of the Tailoring Rule in Texas, the other requesting a stay of implementation of the Endangerment Finding, Timing Rule, and Tailpipe Rule in Texas. The motion for a stay of the Tailor-ing Rule argued that the Tailoring Rule is unlawful, that a stay is necessary to avoid irreparable harm to the state’s economy, and that a stay would be in the public interest and would not harm any other party. Texas’s motion argued that the Tailoring Rule’s GHG applicability thresholds of 75,000 and 100,000 tpy are inconsistent with the CAA’s major source applicability thresholds of 100 and 250 tpy. This inconsistency, the state argued, is not justifi ed by any of the judicial doctrines cited by EPA.
In the motion for a stay of EPA’s other GHG rules, Texas argued that the Endangerment Finding was legally fl awed because EPA relied on the judgment
of other organizations such as the IPCC instead of exercising its own judgment, because EPA did not defi ne “endangerment” or apply any standards or criteria by which to measure it, and because the fi nding included GHGs that are not emitted from motor vehicles (hydrofl uorocarbons and hexafl uoride), or emit-ted only in insignifi cant amounts (nitrous oxide and methane). With respect to the Tailpipe Rule, Texas argued that EPA failed to comply with the CAA’s requirement to consider compliance costs by failing to consider the impact of the Tailpipe Rule on stationary sources. Texas also argued that the Tailpipe Rule is unnecessary and redundant given NHTSA’s CAFE standards, and will only have a negligible effect on climate change. As did the NAM, Texas requested a stay of the Timing Rule because no NAAQS have been established for GHGs. Texas’s motion also refers to the administrative burdens that would result from the Timing Rule, due to the overwhelmingly large number of additional sources that would require PSD and Title V permitting. Finally, in its motion Texas objected to EPA’s request for the states to revise their State Implementation Plans (SIPs) by January 2, 2011 as an unreasonable and premature request.
The fourth stay motion was fi led by a number of petitioners including the CRR, SLF, Competitive Enterprise Institute, Landmark Legal Foundation, and the Ohio Coal Association. The motion fi led by the CRR and other petition-ers makes essentially the same arguments as the other motions—that the CAA cannot be used to regulate GHGs and that EPA’s attempt to do so violates the plain language of the statute. The CRR stay motion asserts that the GHG rules at issue would at best result in negligible improvements in climate change, except for the Tailpipe Rule, whose effects would be achieved by NHTSA’s CAFE standards alone. Given the irreparable economic injuries that would result if the GHG rules go into effect, a stay pending the outcome of the litiga-tion is necessary.
On October 28, 2010, EPA fi led one comprehensive response to all of the motions for stay. EPA defended its Endangerment Finding as justifi ed by the CAA. EPA argued that D.C. Circuit case-law precedent does not require the type of specifi c defi nition of endangerment called for by the petitioners. With respect to the Tailpipe Rule, EPA challenged the notion raised by the CRR and the state of Texas that EPA should have declined to promulgate the Tailpipe Rule because the standards set forth would not by themselves achieve a substantial reduction in climate change. Although EPA disagreed with the petitioners’ characterization of the impact of the Tailpipe Rule on climate change, EPA also argued that the directive set forth in Section 202(a)(1) of the CAA imposes a nondiscretional duty to promulgate standards for air pollution from new motor vehicles that endangers public health or welfare. 42 U.S.C. § 7521(a)(1).
With respect to the Timing Rule, EPA cited a D.C. Circuit case for the proposition that any regulated air pollutant, even those for which no NAAQSs have been established, can be subject to the PSD program. Of all the rules chal-lenged by the petitioners, the Tailoring Rule is the most susceptible to the legal challenges due to its effective rewriting of the CAA. EPA defended the rule on the basis of the absurd results, administrative necessity, and one-step-at-a-time legal doctrines, but it remains to be seen whether the court will determine those
doctrines justifi ed the rule, or whether the rule is an impermissible extension of regulatory authority. Predictably, EPA downplayed the petitioners’ irreparable harm due to economic injury, characterizing the petitioners’ claims as specu-lative. On December 10, 2010, the D.C. Circuit Court denied the motions to stay in a per curiam order. The Court held that the petitioners had not met the “stringent standards required for a stay pending court review” because they had not shown that the alleged harms were certain, or would directly result from EPA’s regulations.
§ 15.1.2 Common Law Nuisance ActionsIn 2009, one of the most signifi cant climate change decisions was issued in appeals of common law nuisance actions brought before the Second and Fifth Circuit Courts of Appeal. In Connecticut v. American Electric Power Co. (“AEP”), 582 F.3d 309, 332, 349 (2nd Cir. (N.Y.) 2009), the Second Circuit held that the petitioners’ common law nuisance claims against electric utilities regarding climate change impacts could be decided by the courts, and that the petitioners had standing. In Comer v. Murphy Oil USA, Inc., No. 07-60756 (5th Cir. (Miss.) Oct. 16, 2009), the Fifth Circuit held that a group of property owners had standing to assert their nuisance, trespass, and negligence claims against various insurance, oil, coal, and chemical companies for climate change impacts, and that the claims were judiciable.
Following the Second Circuit’s decision in Connecticut v. AEP, the electric utilities fi led a petition for a panel rehearing, or in the alternative, for rehearing en banc. The court denied the petition for rehearing in an order dated March 5, 2010. A group of electric utilities fi led a petition for certiorari before the Supreme Court on August 2, 2010. The petitioners argued that the Court should grant certiorari to address the issues of whether private parties and states have standing to impose GHG emission reductions on the utilities, whether a cause of action to cap GHG emissions can be implied under federal common law given the fact that the CAA addresses GHG emissions and authorizes EPA to regulate GHG emissions, and whether the plaintiffs’ claims present nonjustic-iable political questions.
On August 24, 2010, the Tennessee Valley Authority (TVA), one of the electric utilities in the case, fi led a brief in support of the certiorari petition. Because the TVA is owned by the federal government, the certiorari petition was drafted and fi led by the Department of Justice (DOJ). Given EPA’s stance on regulating GHGs under the CAA, some environmental advocacy groups expressed dismay with the DOJ’s fi ling, but the fact that the federal govern-ment would want to protect itself against common-law nuisance claims over climate change impacts is not surprising. The TVA’s brief was based on two main arguments. First, that the concerns underlying plaintiffs’ common law nuisance claims would be more appropriately addressed by Congress due to the broad categories of potential plaintiffs and defendants in a climate change nuisance action. TVA’s second argument was that the plaintiffs’ federal com-mon law claims had been displaced by EPA’s regulation of GHGs under the
CAA. The state and private party respondents fi led a brief in opposition to the electric utilities’ certiorari petition on November 3, 2010.
On December 6, 2010, the Supreme Court granted the petition for certio-rari. Justice Sotomayor, who had listened to oral arguments when the case was before the Second Circuit Court of Appeals, recused herself from the case. The Supreme Court’s grant of certiorari will undoubtedly be viewed by industry as a chance to foreclose climate change tort actions, as EPA’s ongoing regulation of GHG emissions under the CAA could lead the Court to hold that such claims have been displaced.
The aftermath of the Fifth Circuit’s October 16, 2009 decision has taken several unusual turns. That decision holding that the plaintiffs had standing to bring common law nuisance claims for climate change impacts was issued by a three-judge panel. Thereafter, the full court en banc vacated the decision and ordered additional briefi ng and oral argument before the full court. On April 30, 2010, the court notifi ed the parties that it had lost its quorum due to the recusal of one of the judges who was slated to consider the case. Due to the loss of the quorum, the court dismissed the appeal, but ruled that the October 16, 2009 vacatur remained in force. Not surprisingly, the plaintiffs fi led a peti-tion for writ of mandamus in the Supreme Court, requesting an order that the circuit court has a duty to render a decision on the plaintiffs’ appeal. In Re Ned Comer, et al., No. 10-294 (Aug. 26, 2010). On January 11, 2011, the Supreme Court denied the petition.
Another common law nuisance case that was decided in 2009 by a Califor-nia district court is now pending before the Ninth Circuit Court of Appeals. In Kivalina v. ExxonMobil Corp., et al., No. 4:08cv1138 (N.D. Cal. Feb. 26, 2008), an Inupiat Alaskan village and city sought monetary damages from several oil and power companies for injuries suffered as a result of climate change. The court dismissed the case for lack of jurisdiction because the case presented a nonjusticiable political question. The plaintiffs then appealed the court’s deci-sion to the Ninth Circuit. Kivalina v. ExxonMobil Corp., et al., No. 09-17490 (9th Cir. (Calif.) fi led Nov. 5, 2009). The plaintiffs’ reply brief was fi led on September 30, 2010, but oral arguments have not yet been scheduled.
§ 15.1.3 ConclusionWhile 2010 has not been a year of signifi cant climate change litigation decisions, the GHG regulatory regime embarked upon by EPA has unleashed a deluge of litigation activity in the form of over 80 petitions for review that are currently pending before the D.C. Circuit. Ultimately, it would not be surprising if the issues raised by the petitions for review of EPA’s GHG rules are brought before the Supreme Court. The Supreme Court has also been asked to weigh in on common law nuisance claims based on climate change impacts. The outcome of these two legal challenges may affect the other, as the industry defendants in the nuisance actions have cited EPA’s regulation of GHGs as a reason for dismissing the nuisance actions. Given the current state of congressional inac-tion on any comprehensive legislation to address GHG emissions, the courts
are likely to experience a signifi cant volume of climate change litigation for the foreseeable future.
§ 15.2 Other Clean Air Litigation
In 2010, the intersection of public nuisance law and interstate air pollution again made headlines with the U.S. Court of Appeals for the Fourth Circuit overturn-ing a lower court decision that had found upwind out-of-state emissions sources liable for creating a public nuisance. In addition, the U.S. Court of Appeals for the Eighth Circuit became the third court of appeals to decide whether the failure to obtain a PSD permit was an ongoing violation of the CAA.
§ 15.2.1 Public Nuisance Law and Interstate Air Pollution
As reported in the 2010 ABA Annual Review, in State of North Carolina v. TVA, 593 F. Supp. 2d 812 (W.D.N.C. 2009), the district court determined that air pollution from four upwind TVA coal-fi red power plants (three in Tennessee and one in Alabama) created a public nuisance in North Carolina and issued an injunction requiring installation of air pollution control technology (i.e., fl ue gas desulphurization and selective catalytic reduction systems) at an estimated total cost exceeding $1 billion. TVA subsequently appealed the district court’s decision to the U.S. Court of Appeals for the Fourth Circuit, which in 2010 unanimously reversed the lower court’s decision. State of North Carolina v. TVA, 615 F.3d 291 (4th Cir. (No. Car.) 2010).
The Fourth Circuit’s reversal rests on three grounds. First, the court con-cluded that the State of North Carolina’s public nuisance actions were effectively preempted by the CAA given the “comprehensive” regulatory and permitting regime in place under the statute and that “emissions have been extensively regulated nationwide” by the CAA for 40 years. 615 F.3d at 298. The court viewed North Carolina’s nuisance actions as “an attempt to replace compre-hensive federal emissions regulations with a contrasting state perspective about the emission levels necessary to achieve those same public ends.” Id. at 304. Citing International Paper Co. v. Ouellette, 479 U.S. 481 (1987), the court was concerned that the vague standards of common law public nuisance would interfere with the joint federal-state air pollution control rules that had been so carefully drafted under the CAA. 615 F.3d at 303. “If courts across the nation were to use the vagaries of public nuisance doctrine to overturn the carefully enacted rules governing airborne emissions, it would be increasingly diffi cult for anyone to determine what standards govern.” Id. at 298. Moreover, vague public nuisance standards would be used “to scuttle the nation’s carefully cre-ated system for accommodating the need for energy production and the need for clean air.” Id. at 296. However, the court cautioned that it was not holding
that Congress has entirely preempted the fi eld of emissions regulation. Id. at 302-303.
In addition to the vagaries of public nuisance, the court was troubled that a public nuisance approach to interstate air pollution would reorder the respective functions of courts and agencies. As expressed through the CAA, Congress “rather emphatically” chose the benefi ts of agency expertise, informed through public processes, for setting emission control standards, especially in comparison to judicially managed injunctive relief in nuisance lawsuits. Id. at 304. “It is crucial therefore that courts in this highly technical arena respect the strengths of the agency processes on which Congress has placed its imprimatur.” Id. at 305-306.
Second, the Fourth Circuit concluded that the district court incorrectly applied North Carolina law extraterritorially to power plants in Alabama and Tennessee. “There is no question that the laws of the states where emission sources are located … applies in an interstate nuisance dispute.” Id. at 306 (cit-ing International Paper Co. v. Ouellette, 479 U.S. at 487). However, based on the plain language of North Carolina’s Clean Smokestacks Act, the testimony of North Carolina’s primary expert witness, and the fact that the district court’s emission limits for TVA’s four plants were clearly drawn to provide a remedy equivalent to the requirements of the North Carolina Clean Smokestacks Act, the court concluded that the district court for all practical purposes applied North Carolina’s law extraterritorially to TVA’s plants in Alabama and Ten-nessee. Id. at 307-309.
Third, the Fourth Circuit concluded that even if the district court had applied the source state law of Alabama and Tennessee, TVA’s plants “cannot logically be public nuisances” under the state law where they were located because the plants were in compliance with applicable federal and state emission limits and expressly permitted to operate as they did. Id. at 310. While an act that is not illegal can still be a public nuisance, TVA’s plants were expressly permitted to operate as they did. Id. “It would be odd, to say the least, for specifi c state laws and regulations to expressly permit a power plant to operate and then have a generic statute countermand those permissions on public nuisance grounds.” Id. at 309.
While the court rejected public nuisance law as an appropriate course of action against interstate air pollution, it noted that North Carolina had other avenues to seek relief against upwind out-of-state emission sources, including petitioning EPA to take action under CAA Section 126, participating in rule-makings involving SIPs of upwind states, and fi ling citizen suits where upwind sources failed to comply with CAA requirements. Id. at 310-311.
§ 15.2.2 Failure to Obtain a PSD Permit Is Not an Ongoing Violation
In Sierra Club v. Otter Tail Power Co., 615 F.3d 1008 (8th Cir. (So. Dak.) 2010), Sierra Club brought a CAA citizen suit against the owners and operators (Otter Tail) of a coal-fi red power plant located in South Dakota, alleging violations of the CAA involving modifi cations made to the plant. Specifi cally, Sierra Club alleged that Otter Tail had failed to obtain a PSD permit before making three modifi cations (a switch from lignite to subbituminous coal in 1995, increasing the surface area of the primary superheater in 1998, and changes enabling the plant to provide steam to a nearby ethanol plant in 2001) and continued to vio-late the CAA by operating without BACT limits that would have been imposed through the PSD permitting process. Sierra Club also alleged that Otter Tail vio-lated new source performance standard (NSPS) limits that applied as a result of the project involving the ethanol plant, a project that had been approved through Title V permitting processes. The district court had dismissed the complaint, fi nding that the PSD allegations were untimely and that the NSPS allegation was outside the court’s subject matter jurisdiction. Sierra Club v. Otter Tail Corp., 608 F. Supp. 2d 1120 (D.S.D. 2009). The Eighth Circuit affi rmed.
The Eighth Circuit’s opinion addresses three issues. The fi rst is “a pure question of statutory interpretation. Do the CAA and related regulations pro-hibit only construction or modifi cation of a facility without a PSD permit and BACT, or do they impose ongoing operational requirements?” 615 F.3d at 1014. Two other courts of appeals that have addressed the issue reached different conclusions: Nat’l Parks & Conservation Assoc., Inc. v. TVA, 502 F.3d 1316, 1323-25 (11th Cir. (Ala.) 2007) (fi nding no ongoing obligations); Nat’l Parks & Conservation Assoc., Inc. v. TVA, 480 F.3d 410, 418-19 (6th Cir. (Tenn.) 2007) (fi nding ongoing duties to obtain a PSD permit and apply BACT).
The Eighth Circuit answered by concluding that the language of the stat-ute, 42 U.S.C. 7475(a)—“no major emitting facility … may be constructed” without meeting the PSD requirements—“unambiguously indicates that PSD requirements are conditions of construction, not operation.” 615 F.3d at 1014. In addition, the implementing regulations do not establish an independent duty to obtain a permit or apply BACT. Id. at 1016. Thus, while Otter Tail may have violated the PSD requirement by failing to obtain a permit in the fi rst instance, it did not continue to do so by failing to comply with hypothetical emission limits that would have been developed through the permitting process. Id. The court rejected Sierra Club’s and amicus EPA’s arguments that the CAA and PSD regulations should be interpreted as establishing operational duties, concluding that even though preconstruction permits may establish requirements that apply to operation after construction, that does not mean such parameters are enforce-able independent of the permitting process. Id. at 1017. Accordingly, because Sierra Club’s claims were not brought within fi ve years of commencement of the relevant modifi cations, each was untimely and barred by the general federal statute of limitations, 28 U.S.C. § 2462. Id. at 1018.
Second, the court concluded that because Sierra Club’s civil penalty claims were barred by the statute of limitations, the concurrent remedy doctrine barred Sierra Club’s equitable claims for declaratory and injunctive relief. Id. at 1018. The court found that “where a legal and equitable remedy exist[s] for the same cause of action, equity will generally follow the limitation statute.” Id. at 1019 (quoting Roemmich v. Eagle Eye Dev., LLC, 526 F.3d 343, 352 (8th Cir. (No. Dak.) 2008)).
Finally, the court rejected Sierra Club’s argument that the district court had misinterpreted the CAA’s judicial review provisions in concluding that it did not have subject matter jurisdiction over the NSPS claims. Under the CAA, if EPA does not object to a proposed Title V permit, any person may petition EPA to take such action, 42 U.S.C. § 7661d(b)(2), and any denial of such peti-tion is subject to judicial review under CAA Section 307. 42 U.S.C. § 7607. CAA Section 307(b)(1) provides for judicial review of EPA’s decision in the courts of appeals; however, Section 307(b)(2) provides that “action of [EPA] with respect to which review could have been obtained under [section 307(b)(1)] shall not be subject to judicial review in civil or criminal proceedings for enforcement.” 42 U.S.C. § 7607(b)(2) (emphasis added). The district court had concluded that Sierra Club’s NSPS claims were an impermissible collateral attack on Otter Tail’s Title V permit in that if Sierra Club had raised the issue during the permitting process (Sierra Club had not participated in the public process involving issuance of Otter Tail’s Title V permit), it could then have sought judicial review in the court of appeals under CAA Section 307(b).
The Eighth Circuit concluded that EPA’s failure to object to Otter Tail’s permit was “action” in that “it had placed Sierra Club in a position such that it ‘could have … obtained’ judicial review of the issue.” 615 F.3d at 1021. The court expressly rejected Sierra Club’s and amicus EPA’s argument that EPA’s failure to object to Otter Tail’s Title V permit was not action but inaction. The court bolstered its conclusion by noting that “to allow plaintiffs to raise issues resolved during the permitting process long after that process is complete would upset the reasonable expectations of facility operators and undermine the signifi cant investment of regulatory resources made by state permitting agencies.” Id. at 1022.
The court also rejected Sierra Club’s argument that the decision rendered meaningless the CAA’s permit shield provision for Title V permits, 42 U.S.C. § 7661c(f), which provides a permit shield against allegations of noncompli-ance only if the permitting authority makes an inapplicability determination and includes it in the permit. Sierra Club argued that the lower court’s deci-sion effectively nullifi ed the statutory language by providing a permit shield where the Title V permit did not explicitly include a NSPS nonapplicability determination, even though the state permitting authority had concluded that the NSPS did not apply. The Eighth Circuit acknowledged that its interpretation may restrict applicability of the statutory permit shield provision, but reasoned that its jurisdictional limits trumped a defense to statutory liability. 615 F.3d at 1022-23.
§ 15.3 Recent Developments in Coal Ash Disposal/Reuse Litigation
In December 2008, an ash dike ruptured at a coal ash impoundment at the TVA’s facility in Kingston, Tennessee. The dike rupture caused the release of approximately 1.1 billion gallons of fl y ash slurry (a mixture of mostly fl y ash and water), which spilled into the Emory River and onto adjacent proper-ties, allegedly covering approximately 300 acres of land. The Kingston slurry release generated intense national interest in the storage of coal combustion residuals (CCR) and triggered increased scrutiny of coal ash facilities by EPA and state agencies, particularly since there are estimated to be over 1,300 coal ash impoundments, similar to the one at Kingston, across the country. Under this new scrutiny, EPA has identifi ed 44 CCR impoundments as having “high hazard potential.”9 In perhaps the most signifi cant consequence of the Kings-ton slurry release, EPA is currently proposing to regulate the disposal of CCR from electric utilities and power producers under the Resource Conservation and Recovery Act (RCRA).
The Kingston slurry release, however, did more than garner increased agency scrutiny of coal ash storage and disposal. It also provided the impetus for citizen groups and other parties to fi le a number of lawsuits on behalf of persons believed to be harmed, or otherwise impacted, by coal ash storage and disposal. Indeed, the litigation related to the Kingston slurry release forms the bulk of such recent litigation and is proving costly for TVA. Despite spending an estimated $1.2 billion in cleanup costs, over 560 plaintiffs (mostly surrounding property owners) fi led over 50 lawsuits against TVA. While TVA has settled a number of those lawsuits, dozens remain to be tried or settled—including two “class action” suits (discussed below). TVA has already reportedly paid out tens of millions of dollars in litigation settlement.
The new coal ash-related litigation trend does not stop at Kingston, nor is it relegated to traditional expert-heavy toxic tort-style actions. Indeed, in many ways, the TVA litigation, and other recent lawsuits fi led in the wake of the Kingston spill, is substantially different from more traditional coal ash liti-gation. Coal ash lawsuits traditionally arose in situations where coal ash was deposited in unlined dump sites, allegedly seeped into the groundwater table, and contaminated community drinking water. These lawsuits were complex “toxic tort” type lawsuits and often took years to resolve because they involved highly technical scientifi c data, expensive discovery, and substantial involvement from experts in many fi elds (geologists, engineers, hydrogeologists, etc.).
Two new approaches to coal ash litigation have seemingly emerged in the wake of the Kingston slurry release to supplement the traditional approach. First, plaintiffs groups (usually concerned citizens or adjacent property own-ers) are taking a “shotgun” type approach to coal ash litigation by asserting a
9. See http://yosemite.epa.gov/opa/admpress.nsf/0/078F5EC6B5804809852575E4006F980B.
multitude of claims alleging wrongful conduct, including, among other things, nuisance, trespass, battery, negligence, and even intentional infl iction of emo-tional distress. These lawsuits include a number of common law claims above and beyond the traditional toxic tort-based claims, and they seek several types of remedies, including compensatory damages, punitive damages, and medical monitoring. Signifi cantly, such lawsuits have been brought against both power companies that store and dispose of coal ash and the companies that take the coal ash and/or transport it from the power companies.10
Second, environmental groups are entering the litigation fray as plaintiffs and taking a “regulatory” approach to litigation by alleging that defendants have violated certain provisions of their permits or the applicable federal/state regulations. These groups are either fi ling lawsuits directly (where they are able to do so) or petitioning state agencies to take action. In this section, we focus on recent (and ongoing) litigation involving coal ash disposal, storage, or reuse that is characteristic of the two emerging approaches described above.
§ 15.3.1 Summary of Recent Litigation—The “Regulatory” Approach
Sierra Club v. San Juan Coal Company11
The San Juan Coal Company operates the San Juan Coal Mine near Farming-ton, New Mexico. It is one of the largest mines in the United States storing CCR waste. The CCR waste originates at the San Juan Generating Station, and includes several types of coal ash, as well as water clarifi cation waste and sludge from the station’s coal scrubbers. In April 2010, the Sierra Club fi led a citizen suit in New Mexico federal court against San Juan Coal Company and its parent, BHP Billiton, Ltd., alleging that San Juan’s acts and violations of various state and federal statutes present an imminent and substantial endanger-ment to health and the environment. The Sierra Club claims that from 1973 to 2010, the San Juan Coal Mine stored over 40 million tons of CCR waste on Coal Mine property in a large, unlined pit, resulting in alleged violations of the Surface Mining Control and Reclamation Act (SMCRA) and RCRA.
The complaint includes three causes of action. First, the Sierra Club alleges that San Juan “fail[ed] to prevent ground water pollution … from spreading beyond the permitted area of the San Juan Coal Mine as the result of ground water fl ow, diffusion, or both ….”12 Specifi cally, Sierra Club is alleging that
10. For example, in Alabama, 150 residents fi led a lawsuit against a landfi ll company that was taking the coal ash from the Kingston spill. The lawsuit, while seeking monetary damages, was primarily aimed at stopping any future transfers of coal ash to the landfi ll site. In January 2010, the landfi ll company fi led bankruptcy essentially as a roadblock to prevent the lawsuit from going forward. 11. Sierra Club v. San Juan Coal Company, No. 1:10-cv-00332-MCA-LAM (D. N.M. Apr. 8, 2010). 12. Complaint at pg. 16.
San Juan’s construction of a diversion canal off the Shumway Arroyo and their failure to line the coal ash waste pits allegedly allowed for pollution to be dis-charged from the waste placement pits into the surface water and groundwater systems of the canal. Sierra Club alleges that this pollution has impacted or modifi ed the “hydrologic balance” in the permitted area as well as in areas adjacent to the permitted area, in violation of Section 19.8.20.2009 of the New Mexico Administrative Code (these are the promulgated state code provisions implementing SMCRA).13
Second, the Sierra Club alleges that San Juan violated RCRA by contaminat-ing groundwater and surface water to levels exceeding state and federal limits. Specifi cally, the Sierra Club alleges that San Juan violated RCRA by “discharg-ing polluted water from the permit area through the Shumway Arroyo; failing to use treatment facilities to control water pollution resulting from the discharge of polluted water through the Shumway Arroyo; creating an increase in sedi-ment load into the receiving streams; polluting the lower portion of Shumway Arroyo to the extent that it impairs the use of its waters for wildlife consumption, irrigation, and livestock watering; and polluting groundwater to the extent that it is hazardous to health and the environment.”14
Third, the Sierra Club alleges that San Juan violated the open dumping provision of RCRA because, they allege, CCR waste is “solid waste” under the statute, and that data shows that solid waste from the mine site is causing contamination of groundwater.15 This argument, of course, is tenuous at best under the current state of fl ux with respect to how CCRs will be treated under RCRA.
In its complaint, Sierra Club requested a cease and desist order, a compli-ance order, and civil penalties as allowed by RCRA. San Juan has not fi led an answer to the complaint. However, the parties recently moved the court to stay the litigation to allow time for settlement negotiations to proceed. The court entered an order staying the litigation on August 27, 2010. It is unclear whether the parties have reached a settlement.
Maryland v. Mirant Maryland Ash Management, LLC16
In November 2009, environmental groups issued a notice of intent to sue the State of Maryland over alleged violations by Mirant and its subsidiaries of the federal CAA and various state laws with respect to a local landfi ll. Respond-ing to this notice, the State of Maryland began to scrutinize the landfi ll facility records for evidence of the alleged violations. A couple of months later, the Maryland Department of the Environment (MDE) issued a notice of intent to sue Mirant Maryland Ash Management, LLC for alleged pollution violations
13. Id. 14. Id. at pg. 19. 15. Id. at pg. 20. 16. Maryland v. Mirant Ash Management LLC, No. 8:2010-cv-00826 (D. Md. Apr. 2, 2010).
related to the disposal of CCR. The intent to sue materialized on April 2, 2010 when MDE fi led a suit against Mirant Maryland Ash Management, LLC (which operates the Brandywine Landfi ll), alleging that Brandywine is leaching coal pollution into a tributary of the Chesapeake Bay. The complaint was fi led in the U.S. District Court for the District of Maryland. Certain environmental groups also fi led an intervener complaint against Mirant.
The complaint alleges, among other things, that CCR is generated at the Chalk Point power station and then disposed of at the Brandywine Landfi ll, located along the Mataponi Creek. The Brandywine site has allegedly been used as a disposal area for coal ash since 1970, with over 8 million tons of coal ash disposed in the last 40 years. There are four “disposal cells” at the site: three unlined pits currently or formerly in use, and one divided pit partially con-structed with a liner and used since 2007 as a coal ash disposal pit. In addition to these storage pits, the Brandywine Landfi ll has four “settling ponds” used to collect and treat the groundwater and leachate from the four storage pits. The entire site is monitored by several groundwater wells and three surface water monitoring locations.
Mirant has a Clean Water Act (CWA) discharge permit from the state allowing for limited discharge from the four storage pits at the landfi ll. In its complaint, however, MDE alleges that certain pollutants Mirant listed as “absent” in its 2001 permit application were in fact discharged from the site. Among those pollutants were certain heavy metals (associated with coal ash disposal) that leached from the pits, as well as from the setting ponds, into Mataponi Creek surface waters and surrounding groundwaters. MDE claims that this leachate has continually occurred in violation of the National Pollutant Discharge Elimination System (NPDES) Discharge Permit and Section 1311 of the CWA in addition to alleged violations of two state laws governing unauthor-ized discharge of pollutants to both surface water and groundwaters.
On June 21, 2010, Mirant fi led a motion to dismiss arguing: (1) that MDE cannot now hold Mirant in violation for discharged pollutants that are known to be constituent parts of a leachate waste stream when that waste stream has already been permitted by MDE under the CWA, even if those particular con-stituents were not detected when the application for permit was prepared; and (2) MDE did not provide suffi cient notice as to “critical aspects” of its CWA claim against Mirant—though it was required to do so. On September 8, 2010, the court denied Mirant’s motion without making any fi ndings or providing explanation. Subsequently, Mirant fi led its answers and then, most recently, fi led a motion with the court to enter a case management schedule for discovery and trial based on a bifurcation of the case into separate liability and remedy phases.
§ 15.3.2 Summary of Recent Litigation—The “Shotgun” Approach
Auchard v. TVA (Kingston Spill Litigation)17
On December 22, 2008, a dike holding back approximately 5.4 million cubic yards of coal ash slurry in a 98-acre containment pond was allegedly breached, spilling over 1 billion gallons of sludge into the Emory, Clinch, and Tennessee Rivers. As a result, over 300 acres of land were covered in ash sludge in nearby Kingston, Tennessee. The containment pond was maintained by the TVA and the sludge was the byproduct of coal used at the TVA’s Kingston Fossil Plant.
As mentioned above, dozens of lawsuits were fi led as a result of the Kingston spill. Many lawsuits have been settled. Others have been consolidated. Two of the largest lawsuits, both class actions, have either been fi led or proposed in 2010. In the fi rst, on February 25, 2010, a group of plaintiffs fi led a proposed consolidated complaint as a class action in the Eastern District of Tennessee.18 Because this proposed complaint has not yet been formally fi led, TVA has not yet served a responsive pleading. However, in the second, a large group of plaintiffs is also proceeding in the Eastern District with nearly identical claims. This second class action suit, styled Auchard v. Tennessee Valley Authority, was fi led in early 2010 and a second amended complaint in the action was fi led in July 2010.
In their second amended complaint, the Auchard plaintiffs raised a veritable laundry list of ten claims, including: (1) Public Nuisance; (2) Statutory Public Nuisance; (3) Private Nuisance; (4) Trespass; (5) Negligence; (6) Gross Neg-ligence; (7) Negligence Per Se; (8) Negligent Infl iction of Emotional Distress; (9) Strict Liability; and (10) Increased Risk of Future Harm.
TVA has raised several affi rmative defenses in response to the second amended complaint including that: (1) some of plaintiff’s claims are barred by the Tennessee Recreational Use Statute; (2) plaintiffs do not have a right to a jury trial; (3) recovery should be limited to the extent that plaintiffs failed to mitigate damages; (4) plaintiffs are misjoined; (5) no private right of action exists in some of the statutes cited by plaintiffs; and (6) the plaintiffs lack standing to assert a claim for public nuisance. It is unclear whether and to what extent these affi rmative defenses will prevail.
On September 17, 2010, TVA fi led a motion for summary judgment on the plaintiffs’ tort and inverse condemnation claims. In its summary judgment motion, TVA contends that there are no material facts showing that the spill caused coal ash particles to be transmitted through ambient air or water to the plaintiffs’ properties. That motion is still being briefed for the court.
17. Auchard v. Tennessee Valley Authority, No. 3:09-cv-54 (E.D. Tenn. Jul. 1, 2010). 18. Blanchard v. Tennessee Valley Authority (proposed).
Two lawsuits were recently fi led in Virginia state court alleging damages in the billions of dollars, against, among others, Virginia Electric and Power Company (“VEPCo”) which was alleged to have sold coal ash to a community for use as fi ll at a golf course. The golf course opened in 2007. However, the lawsuits were not fi led until 2009, subsequent to the Kingston spill. The fi rst lawsuit (the Fentress suit), fi led in March 2009, includes 400 residents from neighborhoods surrounding Battlefi eld Golf Club and seeks more than $1 billion in damages. The second lawsuit (the Sears suit), fi led in August 2009, was brought by 62 additional residents in the surrounding neighborhoods and seeks $1.25 billion to remove the fl y ash, clean and restore the site, and bring public water and sewer to the neighborhoods. The Sears suit also seeks unspecifi ed millions of dollars more to pay for homes, properties, medical bills, and the nuisance created by the golf course development.
As with the Auchard suit, both Fentress and Sears plaintiffs allege a laundry list of claims against VEPCo and other defendants including: (1) Nuisance; (2) Products Liability/Failure to Warn; (3) Products Liability/Express Warranty; (4) Negligence; (5) Fraud; (6) Constructive Fraud; (7) Trespass; (8) Res Ipsa Loquiter; (9) Battery; (10) Intentional Infl iction of Emotional Distress; (11) Negligent Infl iction of Emotional Distress; and (12) Conspiracy. VEPCo and another defendant, VFL Technology Corp./Headwaters, Inc., fi led responsive pleadings by entering demurrers as to all causes of action, arguing that plaintiffs had failed to suffi ciently plead the causes of action because they failed to state all of the facts necessary to meet the legal standard of pleading for each. The Virginia District Court conducted a hearing on the demurrers and issued a rul-ing on July 29, 2010. In its ruling, the court sustained demurrers on all but two causes of action (negligence and nuisance) and dismissed them accordingly. The court gave the plaintiffs 30 days from the date of the order to amend their complaints to correct any defi ciencies. The plaintiffs subsequently amended their complaint and VEPCo fi led an answer to the amended complaint, along with a motion to sever claims, on November 12, 2010.
§ 15.3.3 Issues to Consider in Light of Recent Litigation—Compliance with Applicable Regulations and Permits Is Critical
The “regulatory” approach taken in recent coal ash litigation makes it essential that companies storing, disposing, or transporting coal ash do so in strict com-pliance with local, state, and federal regulations. Moreover, companies should heavily scrutinize (when possible) the compliance records of the contractors who haul, store, and/or dispose the ash for them. While the regulatory landscape is currently in fl ux (i.e., whether and to what extent coal ash will be regulated
19. Fentress Families Trust v. Virginia Electric and Power Co., Va. Cir. Ct., No. CL09-710 and Sears v. Virginia Electric and Power Co., Va. Cir. Ct., No. CL09-912.
under RCRA), there are a number of federal and state regulations controlling the use, storage, and disposal of CCR and, though inconsistently enforced, those regulations are now being used as a predicate for litigation.
In both the San Juan and Mirant cases, the genesis of the litigation is an alleged failure to comply with existing regulations regarding the disposal and storage of coal ash residuals. In both cases, the plaintiffs used federal citizen suit provisions to bring suits or to petition governing agencies to do so. For many companies, these actions do more than trigger discrete litigation; they trigger additional agency scrutiny and investigation into the company’s general environmental practices and often result in a number of notices of violation and punitive fi nes.
The best defense against such regulatory-based litigation is, of course, a demonstrated record of strict compliance with the applicable regulations and governing permits. At a minimum, this requires a company to develop a clear understanding of what regulations apply, what obligations it has to comply with those regulations, a system or set of procedures for complying, and a record of compliance. In some cases, it is advisable for a company to engage in an environmental audit of its current operations to determine where noncompliance (if any) has occurred and to evaluate the potential liability associated with such noncompliance. Most states, along with EPA, have audit/self reporting policies that provide a self-reporting company some immunity for the violation if the company reports the violation as part of an audit process and works to get into compliance in a timely manner. Such immunity may in some cases extend to immunity against the type of citizen suits brought in San Juan and Mirant.
§ 15.3.4 Issues to Consider in Light of Recent Litigation—Lawsuits Are Now Easier to Bring and Sustain
The current trends in coal ash litigation seem to suggest that lawsuits will now be easier to bring and sustain on behalf of plaintiffs utilizing a “shotgun” approach to litigation. The plaintiffs in the Auchard and Sears cases asserted a signifi cant number of “common law” claims (i.e., trespass, nuisance, etc.). These causes of action are generally easier to plead and to prove than traditional toxic tort-based or regulatory-based causes of action (like those found in traditional contaminated water cases). The degree of scientifi c data and expert involve-ment required to prevail on these claims (or at least carry them through the summary judgment phase of litigation) is generally lower and it is potentially more diffi cult to have such claims dismissed at the outset of litigation because of notice pleading standards and the highly fact- specifi c nature of the claims themselves. In many cases, plaintiffs bringing such claims do not even need to show actual physical harm to prevail.
If the Auchard or Sears plaintiffs are successful in getting any of the myriad common law claims through a motion to dismiss, the “shotgun” approach to coal ash litigation will continue to thrive. This remains an open question.
Just recently, the Virginia court hearing the Sears and Fentress cases ruled on motions for demurrers lodged by defendants VEPCo and Headwaters in those cases. In Virginia, a demurer is akin to a “Motion to Dismiss” in that the party raising the demurer is asking the court to rule on the suffi ciency. Relying on the second amended complaint in the Sears matter (the more complete of the two), the Virginia court addressed each of the twelve causes of action brought by the plaintiffs and found that ten of the twelve claims were not suffi ciently pled.
In its ruling, the court agreed with the defendants that the complaint was generally improperly pled because, though it stated specifi c allegations, it failed to state specifi c allegations as to each of the plaintiffs (there are hundreds) when it was necessary to do so. The court also found that the complaint failed to plead specifi c harm to any one person where it was required to do so. These fi ndings are signifi cant in light of the fact that the complaint was detailed and alleged a voluminous number of facts.
The fi nding by the Virginia court is signifi cant because it potentially signals the way similarly situated courts may treat the “shotgun” approach to pleading in coal ash litigation. While the Virginia court permitted the plaintiffs to amend their pleadings, and the plaintiffs have done so, the standard established by the court in its ruling may make it diffi cult for the plaintiffs to bring viable claims for all or almost all of the claims that were dismissed. If what is left in the Sears complaint is mainly an action for nuisance and negligence, expert testimony becomes the critical component to the defense of that case and defendant com-panies are in an improved litigation position, assuming they acted with due care in the disposal of coal ash. Open questions remain as to whether the “shotgun” approach will be effective in coal ash cases.
§ 15.3.5 Remedies under RCRA—Injunctive Relief May Be the New Remedy Standard for Coal Ash-Related Litigation
A recent case, decided by the Seventh Circuit, may have direct implications on the preferred remedy sought by EPA in future litigation involving coal ash site remediation. In United States v. Apex Oil Co., 579 F.3d 734 (7th Cir. (Ill.) 2009) (cert. denied), the appeals court affi rmed a district court grant of an injunc-tion, at the behest of EPA and on the authority of RCRA, that requires Apex to clean up a contaminated site in Hartford, Illinois. At issue in that appeal was whether the remedy injunction sought and obtained by EPA under RCRA (for the cleanup) was a dischargeable demand or a valid claim that survived the Bankruptcy “stay.” Apex argued that an injunction is not a “claim” under the Bankruptcy Code because it is not a right to money damages arising from a breach of performance. Rather, Apex argued, the injunctive claim was a demand on the debtor barred by the automatic stay provision of the Bankruptcy Code. Apex made an alternative argument that the claim was reducible to money damages and was therefore dischargeable under the Bankruptcy Code. Perhaps most signifi cantly, Apex argued that to consider an environmental cleanup order
a nondischargeable claim would confl ict with a line of Supreme Court cases starting with Ohio v. Kovacs, 469 U.S. 274 (1985). The Seventh Circuit, fi nd-ing no merit in Apex’s challenge, held that a government injunction requiring Apex to clean up a contaminated site constituted a nondischargeable debt as set out in the Bankruptcy Code. The Supreme Court declined to hear the issue, and the Seventh Circuit’s ruling stands.
EPA apparently chose RCRA as the means to compel Apex to clean up the contaminated site and to get around a potential dischargeable debt argument by Apex. RCRA does not entitle a plaintiff to demand payment of cleanup costs in lieu of specifi c performance. Thus, Apex was in the diffi cult position of argu-ing that RCRA gives EPA a “right to payment” even though RCRA does not authorize any form of monetary relief. Apex attempted to argue instead that it lacked the ability to clean up the site itself, and would have to hire a third party to do the job at a cost of $150 million. Therefore, according to Apex, the cost it would incur to comply with the equitable decree was the equivalent to EPA’s “right to payment.” The Seventh Circuit rejected this argument, however, stating that “almost every equitable decree imposes a cost on the defendant, whether the decree requires him to do something, as in this case, or, as is more common, to refrain from doing something.”20
In light of the U.S. Supreme Court’s refusal to review the Seventh Circuit’s decision in Apex Oil, it is likely that more cleanup actions by EPA will be fashioned as RCRA injunctive suits, instead of Comprehensive Environmental Response, Compensation, and Liability Act suits, particularly in situations where the defendant is at risk for declaring bankruptcy. Given the likelihood that coal ash will be regulated to some extent under RCRA, the Apex Oil hold-ing will be particularly relevant to companies analyzing the risk of litigating such issues with the government.
§ 15.4 CERCLA Litigation
The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), as amended, 42 U.S.C. §§ 9601 et seq., and its sweeping liability scheme have tended in the past to be the subject of the most signifi cant court decisions in environmental law. However, climate change litigation now garners more headlines and generates more interest than CERCLA litigation. Nonetheless, because CERCLA cases are numerous and tend to involve sub-
20. The Seventh Circuit’s reasoning is consistent with decisions handed down by the Third Circuit but contradicts a decision by the Sixth Circuit in United States v. Whizco, Inc., 841 F.2d 147 (7th Cir. (Tenn.) 1988), where it was held that to the extent compliance with a cleanup ordered under the Surface Mining Control Act of 1977 “would force the defendant to spend money, the obligation is a liability on a claim.” The Seventh Circuit fl atly rejected that application of Whizco in the RCRA context, and in general, by explaining that Whizco “cannot be squared” with controlling precedent that “costs incurred is not equivalent to ‘right to payment.’”
stantial potential liabilities, CERCLA case law continues to be of interest to most environmental law practitioners.
§ 15.4.1 “Arranger” LiabilityAs discussed in the 2010 ABA Annual Review, the most signifi cant CERCLA decision in 2009 was the U.S. Supreme Court’s ruling in United States v. Bur-lington Northern & Santa Fe Ry. Co., 129 S. Ct. 1870 (2009). The Burlington Court addressed important issues concerning liability under CERCLA, including the extent of “arranger” liability. In 2010, courts have interpreted and applied the Burlington decision in ways that benefi tted defendants.
As background, CERCLA authorizes federal and state governments to clean up contaminated sites and seek to recover the cleanup costs from those on whom the statute imposes liability. 42 U.S.C. § 9607(a). In addition to the owner(s) and operator(s) of a site, any person who “arranged for disposal or treatment … of hazardous substances [it] owned or possessed” is potentially liable. Id. at § 9607(a)(3).
The Burlington Northern case involved two adjacent parcels in Arvin, California. The larger parcel was the site of an agricultural chemical distributor that eventually went bankrupt. Adjoining that property was a smaller parcel owned by two railroads. The chemical distributor leased the railroad parcel for vehicle and equipment storage, washing, and some loading and unloading of agricultural chemicals. The alleged “arranger,” Shell Oil Company, sold a pesticide to the agricultural chemical distributor. Occasionally, delivery of the pesticide involved spillage, which resulted in contamination of both parcels.
In Burlington, the Supreme Court held that an entity that sells a useful prod-uct that contains a hazardous substance is not liable as an arranger if disposal was not the purpose of the transaction—even if the entity knows that some disposal may occur as a collateral consequence of the sale itself. In exploring the scope of arranger liability, the Court noted that CERCLA does not defi ne “arrange for.” The Court nonetheless found that the statutory language identifi es the outer limits of arranger liability. Specifi cally, the Court stated:
It is plain from the language of the statute that CERCLA liability would attach under § 9607(a)(3) if an entity were to enter into a transaction for the sole purpose of discarding a used and no longer useful hazardous substance. It is similarly clear that an entity could not be held liable as an arranger merely for selling a new and useful product if the purchaser of that product later, and unbeknownst to the seller, disposed of the product in a way that led to contamination [citations omitted].
129 S. Ct. at 1878. Within these two outer parameters, the Court acknowledged, a fi nding of arranger liability requires a fact-intensive inquiry. And, signifi cantly, the Court noted, the defendant’s “state of mind” is relevant to that inquiry.
The Court held that knowledge that some disposal may occur as a collateral consequence of the sale alone “is insuffi cient to prove that an entity ‘planned for’
the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product.” Id. Rather, to establish liability, “Shell must have entered into the sale of [product] … with the intention that at least a portion of the product be disposed of during the transfer process by one or more of the methods described in [42 U.S.C.] § 6903(3).” Id. Thus, even though there was evidence that Shell knew that minor, accidental spills occurred at the site, the Court found that the “evidence does not support an inference that Shell intended such spills to occur.” Id.
After the decision in Burlington, it was not clear whether the ruling would be applied only to the sale of “unused, useful product” or whether it would be extended beyond its facts. Two decisions in 2010 indicate that Burlington will have broader application. In Celanese Corp. v. Martin K. Eby Construction Co., No. 09-20487, 2010 U.S. App. LEXIS 19518 (Sept. 20, 2010), the Fifth Circuit held that a construction company that was unaware it had damaged a methanol pipeline while laying water pipes, ultimately causing a leak, is not liable as an “arranger” under CERCLA. Citing Burlington, the court found no liability because the construction company did not take intentional steps or plan to release methanol from the pipeline. In fact, Eby did not even know that it had struck a pipeline. It merely knew it had struck something with the backhoe. The court noted that the construction company had even less culpable mens rea than the defendant in Burlington, where the Supreme Court did not impose liability.
In another case interpreting Burlington, a district court ruled that a manu-facturer of a machine used to fi lter and recycle dry cleaning fl uid was not liable as an “arranger.” In Team Enterprises LLC v. Western Investment Real Estate Trust, No. CV-F-08-0872, 2010 WL 3133195 (E.D. Cal., Aug. 9, 2010), the court found that the manufacturer who sold the machine to a dry cleaning business was not liable for the costs of cleaning up perchloroethylene (PCE) contami-nation. The court held that the manufacturer had taken no intentional steps to dispose of a hazardous substance. Even though the machine’s instructions recommended that dry cleaners use a pail to catch wastewater containing PCE, the manufacturer did not plan for or control the disposal of the dry cleaner’s wastewater. The court concluded that the manufacturer’s knowledge that the machine wastewater would be caught in a pail did not amount to planning for or controlling the disposal of the wastewater.
Further, the court found that the machine was sold as a useful product, which precludes arranger liability. Specifi cally, the court held that the machine did not immediately result in PCE waste disposal. Rather, the machine was used—following the sale—by the dry cleaner, and it was the dry cleaner—not the machine manufacturer—that disposed of the wastewater containing PCE. Further, no PCE wastewater was sold or transferred for disposal at the time of the sale.
§ 15.5 Lone Pine Orders: Streamlining Mass Tort and Class Actions
Mass tort cases typically present a raft of complex and interconnected factual, legal, and scientifi c issues. Often, after years of heated litigation (and con-siderable expense), the court fi nally reaches the core issues, at which time it may determine that plaintiffs cannot make a prima facie case and the litigation should be dismissed. But federal and state rules enable the court to advance the time for making these critical determinations and, in recent years, courts have increasingly been utilizing this authority to streamline mass tort litiga-tion. Discussed below are some key cases addressing this matter, including several decisions issued since 2007 that consider when such authority should (or should not) be exercised. Also discussed are recent decisions of the U.S. Supreme Court which may bear on this issue.
§ 15.5.1 Judicial Authority to Enter Case Management Orders to Handle Mass Tort Litigation Effi ciently
§ 15.5.1.1 The Genesis—Lone PineThe New Jersey case which is the genesis of this trend is Lore v. Lone Pine Corp., 1986 N.J. Super. LEXIS 1626 (Nov. 18, 1986). In Lone Pine, plaintiffs sued a landfi ll operator, as well as the generators and haulers of materials to the landfi ll (464 defendants in total), asserting that chemical releases caused personal injuries and property damage.21 Shortly after the complaint was fi led, the court ordered plaintiffs’ counsel to detail the facts of each plaintiff’s claims, including: (1) exposure to alleged toxic substances (including reports of treat-ing physicians and medical or other experts supporting causation); (2) specifi c information concerning the property allegedly damaged; and (3) reports of real estate or other experts regarding property damage/diminution claims.22 The order was designed to require plaintiffs to make an objective showing—early in the litigation—that there was a suffi cient evidentiary basis to warrant continued litigation.23 Ultimately, plaintiffs were unable to establish a prima facie case for personal injuries or property damage, and the case was dismissed.24 This form of order, compelling plaintiffs to make a prima facie case at an early stage in the proceedings, has come to be called a “Lone Pine” order.
21. Lone Pine at *2. 22. Id. at *3-4. 23. Id. at *1. 24. Id.
§ 15.5.1.2 Federal Rule 16 Authorizes Courts to Craft Special Procedures for Managing Complex Litigation
Thereafter, federal courts began to cite the Federal Rules of Civil Procedure as authority for requiring toxic tort plaintiffs to come forward with basic facts to support their allegations before the parties proceed with discovery. In par-ticular, Rule 16 provides federal courts with substantial authority to fashion an effi cient and cost-effective approach to managing litigation. As the Seventh Circuit stated in G. Heileman Brewing Co., Inc. v. Joseph Oat Corp., 871 F.2d 648, 652 (7th Cir. (Wis.) 1989): “The wording of the rule and the accompany-ing commentary make plain that the entire thrust of the amendment to Rule 16 was to urge judges to make wider use of their powers and to manage actively their dockets from an early stage.” Similarly, the Advisory Committee Notes for this rule state that “[i]ncreased judicial control during the pretrial process accelerates the processing and termination of cases.”25
Rule 16(c)(2) enumerates various matters for the court’s consideration at any pretrial conference. Subpart (L) authorizes the court to take appropriate action with respect to the need for:
… adopting special procedures for managing potentially dif-fi cult or protracted actions that may involve complex issues, multiple parties, diffi cult legal questions or unusual proof problems …
The Federal Judicial Center’s Manual for Complex Litigation (4th ed. 2004) encourages use of Rule 16 in this fashion. As it explains, effective judicial management should be both “active” and “substantive.”26 It should be “active” in the sense that judges should proactively anticipate crucial issues before they arise “rather than await passively for counsel to present them.”27 It should be “substantive” by allowing the court to become familiar with the key substantive issues at an early stage so that the court can make informed rulings on issue defi nition and narrowing.28 To accomplish this, the court should seek specifi c information and require the attorneys, at the earliest possible stage, to “describe the material facts they intend to prove and how they intend to prove them.”29 As the Manual explains, “the sine qua non of managing complex litigation is defi ning the issues in the litigation. The materiality of facts and the scope of discovery (and the trial) cannot be determined without identifi cation and defi ni-tion of the controverted issues.”30
25. Flanders, CASE MANAGEMENT AND COURT MANAGEMENT IN UNITED STATES DISTRICT COURTS, 39 Federal Judicial Center (1977). 26. Id. § 10.13. 27. Id. 28. Id. 29. Id. § 11.33. 30. Id. § 11.31.
Federal and state courts have frequently employed this rule, or similar state rules, to require plaintiffs to adduce basic facts to support their allegations before the case proceeds with discovery, just as the New Jersey court did in Lone Pine.31 In many instances, a Lone Pine order directs plaintiffs to provide expert affi davits detailing key elements of plaintiffs’ case.32
The Fifth Circuit’s decision in Acuna is instructive. In that case, 1,600 plaintiffs sued numerous defendants for personal injuries and property damage arising from defendants’ uranium mining and processing activities.33 The court issued prediscovery Lone Pine orders requiring plaintiffs to submit expert affi da-vits specifying, for each plaintiff, “the nature of his injuries, the circumstances under which he could have been exposed to harmful substances, … the basis for believing that the named defendants were responsible for his injuries” and the scientifi c and medical basis for the expert’s opinions.34
The Fifth Circuit held that “Lone Pine orders are designed to handle the complex issues and potential burdens on defendants and courts in mass tort litigation.”35 The order was within the district court’s “wide discretion” under Rule 16 “to take steps to manage the complex and potentially burdensome dis-covery that the cases would require” by “refusing to allow discovery to proceed without better defi nition of plaintiff’s claims.”36 Ultimately, the Fifth Circuit affi rmed the dismissal because plaintiffs only submitted 1,000 form affi davits from a single expert which merely identifi ed a series of illnesses and effects that can occur as a result of uranium exposure, stating that the relevant plaintiff suffered from some or all of them.37
Courts also frequently use Lone Pine orders to require plaintiffs to detail the existence, manner, and extent of exposure. For example, in Baker v. Chevron, 2007 U.S. Dist. LEXIS 6601, *3 (S.D. Ohio Jan. 30, 2007), a district court required plaintiffs to provide an affi davit from a qualifi ed expert providing, among other things, “the alleged manner of exposure, and the date, duration, and dose of the exposure.” In Abuan v. General Electric Co., 3 F.3d 329, 331 (9th Cir. (Guam) 1993), the Ninth Circuit affi rmed summary judgments for defendants because, in response to a case management order, plaintiffs failed to “fi le and serve on defendants all medical and scientifi c opinions of experts, based
31. See, e.g., Acuna v. Brown & Root, Inc., 200 F.3d 335, 340 (5th Cir. (Tex.) 2000) (citing Federal Rule 16); In re Love Canal Actions, 547 N.Y.S.2d 174, 177, 179 (1989) (citing the New York Civil Practice Law & Rules that recognize the court’s inherent powers to make orders that avoid unnecessary costs or delay). 32. See, e.g., Steering Committee v. Exxon Mobil Corp., 461 F.3d 598, 604 n.2 (5th Cir. (La.) 2006); In re Mohawk Roba Co., 982 S.W.2d 494, 496 (Tex. Ct. App. 1998) (Lone Pine order requiring plaintiffs to provide medical evidence to support claim that defendants caused harm); Claar v. Burlington Northern Railroad Co., 29 F.3d 499, 500 (9th Cir. (Mont.) 1994); Eggar v. Burlington Northern Railroad Co., 1991 U.S. Dist. LEXIS 19240 (D. Mont. Dec. 18, 1991). 33. Acuna, 200 F.3d at 337-338. 34. Id. at 340. 35. Id. 36. Id. at 340-341. 37. Id. at 338.
on a reasonable degree of medical or scientifi c certainty and expressed in report form, supporting each claimant’s claim that he or she was exposed to a suffi cient level of PCBs, PCDFs and/or dioxins as a result of the Piti Power Plant incident to require future medical monitoring of said claimant and that such exposure placed claimant at increased risk of future injury, illness or disease.”
Numerous other courts have reached a similar result. For instance, in Bell v. Exxon Mobil Corp., 2005 Tex. App. LEXIS 1680, *3 (Mar. 3, 2005), the appellate court affi rmed entry of a Lone Pine order requiring plaintiffs to sub-mit expert affi davits detailing “the manner and duration of the exposure” and stating an opinion that “to a reasonable medical probability,” the injuries were sustained because of that exposure. And in Myer v. Creative Nail Design, Inc., 975 P.2d 1264, 1266, 1271 (Mont. 1999), the court entered a Lone Pine order requiring each plaintiff to provide a list of products used, the circumstances of exposure, and identifi cation of each specifi c chemical that allegedly caused harm, and a physician’s opinion of the causal connection between the exposure and the injury.38
In sum, it is settled that courts following the federal rules and similar state rules have the authority to enter a Lone Pine case management order, requiring plaintiffs to present, even prior to the exchange of initial disclosures and any other discovery, the expert and factual information that constitutes the basis for their claims of medical causation and property value diminution.
§ 15.5.1.3 Issuance of Lone Pine Case Management Orders Is Consistent with Heightened Pleading Requirements Enunciated by the U.S. Supreme Court in Twombley and Iqbal
Recent decisions of the U.S. Supreme Court support enhanced use of Rule 16 by federal courts in managing and streamlining litigation.
In Bell Atlantic v. Twombley, 550 U.S. 544 (2007) (an antitrust case), the Supreme Court rejected the instruction in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), that “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Instead, it held that the Conley holding confl icted with Federal Rule 8(a)(2) which required “a short and plain statement of the claim, showing that the pleader is entitled to relief.” A pleading that offers “labels of conclusions” or “a formulaic recitation of the elements of a cause of action will not do.”39 It proceeded to make clear that the
38. See also Renaud v. Martin Marietta Corp, 749 F. Supp. 1545, 1547-1548 (D. Colo. 1990) (court ordered “an evidentiary summary judgment hearing at which plaintiffs would present their prima facie case on causation as if they were presenting the case to a jury at trial …”). 39. Twombley at 555.
availability of various case management approaches (e.g., Lone Pine) would not relax the pleading requirements.40
In 2009, the Supreme Court elaborated on its enunciation of pleading requirements in Twombley, and in doing so, made clear that the requirements were not limited to antitrust actions and instead had wide-ranging application to all civil cases. In Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), the Court elaborated on the Twombley standard, explaining “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffi ce. … Rule 8 … does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”41
Together, Twombley and Iqbal demonstrate a heightened focus on pleading requirements, and underscore the need for defendants and the court to have a clear understanding of plaintiffs’ case at the very start of the case. As such, they are entirely consistent with increased use of Rule 16-based Lone Pine orders.
§ 15.5.1.4 The California Approach—CottleA similar case management tool has evolved in California. In Cottle v. Superior Court, 3 Cal.App.4th 1367 (1992), approximately 175 owners/renters of residen-tial property sued the property developer, alleging that historical discharges of chemical waste caused a wide variety of bodily injuries and property damage. The court ordered each plaintiff to fi le a “statement establishing a prima facie claim for personal injury and/or property damages.”42 The information required included: (1) the specifi c chemical(s) to which plaintiff allegedly was exposed; (2) the date(s) and place(s) of exposure; (3) the method of exposure; (4) the nature of the claimed injury; and (5) the identity of each medical expert who would support the personal injury claim.43
Plaintiffs responded by broadly asserting that a wide array of illnesses were caused or exacerbated by the exposure. As the appellate court observed, “Peti-tioners seem to link to the [residential development] every physical infi rmity or malady that they had suffered since becoming connected to the subdivision-headaches, dizziness, bronchitis, breathing problems, skin rashes, eye irritations, sinus problems, lack of energy, throat irritation, insomnia, muscle aches and cramps, stomach problems, diarrhea, ear infections, arthritis and chronic colds and fl u.”44 This approach was not what the trial court had contemplated; as it told plaintiffs’ counsel, “it was the court’s hope to actually widdle (sic) down specifi c physical illnesses or conditions or injuries that some medical person could testify to the appropriate medical degree [were] related to the toxics,” adding “there does need to be that cause and effect.”45 The trial court provided
40. Id. 41. 129 S. Ct. at 1949-1950. 42. 3 Cal.App.4th at 1373. 43. Id. 44. Id. 45. Id. at 1375.
plaintiffs with additional opportunities to satisfy its requirements, but plaintiffs continued to fail to comply and the court ultimately issued an order excluding all evidence of personal injury.46
The appellate court upheld the dismissal, citing the trial court’s inherent authority to fashion new forms of procedures to deal with the rights of parties and manage its caseload. In doing so, it cited the trial court’s responsibility under the Trial Court Delay Reduction Act47 to develop “rules and procedures to reduce litigation delays that have reached ‘scandalous proportions’ in some counties,”48 the California Standards of Judicial Administration,49 and the Code of Civil Procedure.50 The court concluded that, as the trial court had the inherent authority and the plaintiffs failed to make the requisite evidentiary showing, dismissal was proper.51
In California, Cottle can be used in conjunction with the pleading standards delineated in Bockrath v. Aldrich Chemical Co., 21 Cal.4th 71 (1999), for cau-sation in the context of alleged toxic exposure cases. Claimants are required to plead and prove: (1) exposure to toxic materials claimed to have caused an illness; (2) the identity of each product that allegedly caused the injury; (3) that as a result of the exposure, the toxins entered or were ingested by the plaintiff’s body; (4) that as a result of the exposure, the plaintiff suffers from a specifi c illness, and that each toxin that entered his body was a substantial factor in bringing about, prolonging, or aggravating that illness; and (5) that each toxin that was absorbed as a result of the exposure was manufactured or supplied by a named defendant.52
§ 15.5.2 Plaintiff Arguments Opposing Lone Pine Orders
Not surprisingly, plaintiffs frequently raise one or more objections to a proposed Lone Pine order. While courts often reject these arguments, a number of deci-
46. Id. 47. Cal. Govt. Code § 68600 et seq. 48. Cottle, 3 Cal.App.4th at 1379 (quoting Laborers’ Int’l Union of N. Am. v. El Dorado Landscape Co., 208 Cal.App.3d 993, 1001 (1989)). 49. Id. at 1377 (citing Cal. Standards of Judicial Administration, § 19(h) (as early as is practical, all parties must attend a pretrial conference with the goal of exposing “at an early date the essential issues in the litigation and to suppress unnecessary and burdensome discovery procedures in the course of preparing trial of those issues”)). 50. Id. at 1376-1377 (citing California Code of Civil Procedure §128(a)(c) (every court shall have the power to “amend and control its process and orders so as to make them conform to law and justice”) and §187 (“When jurisdiction is, by the Constitution or this Code, or by any other statute, conferred on a Court or judicial offi cer, all the means necessary to carry it into effect are also given; and in the exercise of this jurisdiction, if the course of proceeding be not specifi cally pointed out by this Code or the statute, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of this Code.”)). 51. Id. at 1371, 1381. 52. Bockrath at 80.
sions, including several recent cases, provide further insight into when a Lone Pine order is (or is not) appropriate.
§ 15.5.2.1 Other Vehicles, Such as Discovery, Are More Appropriate for Discovering Plaintiffs’ Contentions
Plaintiffs may assert that a defendant’s motion for entry of a Lone Pine case management order is a premature request to determine the merits of plaintiffs’ claims or, in a similar vein, that they require discovery before they can respond. For example, in Morgan v. Ford Motor Co., 2007 U.S. Dist. LEXIS 36525, *36-37 (D.N.J. May 17, 2007), the court stated that discovery must not be one-sided.53 The court also noted that the parties must be given an opportunity to conduct discovery and contest the reasonableness of their adversary’s experts, and fi nding that “[d]efendants are not entitled to fi le what amounts to a sum-mary judgment motion without fi rst allowing the party opposing the motion a chance to conduct discovery.”54
The court also rejected a Lone Pine order request in In re Digitek Prod. Liab. Litig.¸ 264 F.R.D. 249 (S.D.W.V. 2010), stating that “[r]esorting to craft-ing and applying a Lone Pine order should only occur where existing proce-dural devices explicitly at the disposal of the parties by statute and federal rule [such as summary judgment, motions to dismiss, motions for sanctions] have been exhausted or where they cannot accommodate the unique issues of this litigation.”55 The court also noted that plaintiffs should be afforded the oppor-tunity to conduct expert discovery before being ordered to make a detailed causation showing.56
In a similar vein, in McConnell, et al. v. Pacifi Corp Inc., 2008 U.S. Dist. LEXIS 53949 (June 12, 2008) the court observed that the issue was “not whether a court can require [plaintiff] to make a prima facie showing; the issue is whether a court should.” There, where parties disagreed on the need for a case management order (in contrast to Eggar), the issue was being posited before the parties had a chance to proffer evidence (in contrast to Abuan), the parties were not on notice of the details of the plaintiffs’ claims (in contrast to Acuna), discovery had not been hotly contested and was ongoing (in contrast to Renaud),
53. Morgan at *36-37 (citing Hines v. Consol. Rail Corp., 926 F.2d 262, 272 (3rd Cir. (Pa.) 1991), where the court reversed summary judgment in part based on the district court’s failure to “provide [plaintiff] with the opportunity to conduct discovery on [defendant’s] expert and consequently the data and techniques that [defendant’s] expert used,” and In re Paoli R.R. Yard PCB Litig., 916 F.2d 829, 854-855 (3rd Cir. (Pa.) 1990), reversing summary judgment based in part on the skewing of discovery procedures in the defendants’ favor. 54. Id. (citing Kachmar v. SunGard Data Sys., Inc., 109 F.3d 173 (3rd Cir. (Pa.) 1997) and Dowling v. City of Philadelphia, 855 F.2d 136, 139 (3rd Cir. (Pa.) 1988)). 55. 264 F.R.D. at 259. 56. Id.
and the court had invited the defendant to move for summary judgment, a case management order was unnecessary.57
Many courts have, however, rejected this prematurity argument. In doing so, they reason that Rule 11 imposes on plaintiffs an obligation to make a rea-sonable inquiry and possess a factual basis for their claims prior to fi ling their complaints.58 As the Seventh Circuit explained, a party must conduct a reason-able inquiry before advocating a position, and that advancing a position which never had evidentiary support violates Rule 11.59 It follows that plaintiffs should have some information regarding their exposure allegations, the circumstances under which they could have been exposed to the substance at issue, and the basis for believing that the defendants were responsible for their injuries.60 61 Even where a court may not be inclined to issue a Lone Pine order early in the litigation, it could revisit the issue and order one after some discovery has taken place.62 Or a court could craft a less burdensome Lone Pine order.63
57. McConnell at *6-10. 58. See Fed. R. Civ. P. 11(b)(3); Acuna, 200 F.3d at 340 (requiring production of that infor-mation which plaintiffs should have had before fi ling their claims pursuant to Rule 11(b)(3)). 59. United Stars Indus., Inc. v. Plastech Engineered Products, Inc., 525 F.3d 605, 610 (7th Cir. (Wis.) 2008); see also Jimenez v. Madison Area Technical College, 321 F.3d 652, 656 (7th Cir. (Wis.) 2003) (stating that Rule 11 requires that the allegations and other factual contentions in a pleading have evidentiary support). 60. See Leuallen v. Borough of Paulsboro, 180 F. Supp. 2d 615, 617 (D.N.J. 2002) (Rule 11 requires attorneys, before fi ling a complaint, to make a reasonable inquiry into the existing facts and law that form the basis of the complaint’s claims). 61. The principles underlying Rule 11 are found in state law as well. For example, in California, Code of Civil Procedure §128.7 provides that by fi ling a complaint, an attorney is “certifying that to the best of the person’s knowledge, information and belief, formed after inquiry reasonable under the circumstances, … the allegations and other factual contentions have evidentiary support.” 62. See, e.g., In re Vioxx Prods. Liab. Litig., 557 F. Supp. 2d 741, 744-45 (E.D. La. 2008) (“In crafting a Lone Pine order, a court should strive to strike a balance between effi ciency and equity. Lone Pine orders may not be appropriate in every case, and even when appropriate, they may not be suitable at every stage of the litigation.”). In the In re Vioxx case, while the court did not believe a Lone Pine order was appropriate before discovery had taken place because little was known about the nature and effect of Vioxx by anyone other than the drug manufacturer, it ruled that—seven years into the case and mid-discovery— it was now appropriate to require plaintiffs to show they suffered an injury and that Vioxx caused that injury. 63. See McManaway v. KBR, Inc., 265 F.R.D. 384 (S.D. Ind. 2009). There, defendant requested a Lone Pine order establishing plaintiffs’ dosage of the allegedly harmful drug at issue, injuries, and evidence that the exposure to the drug caused the injuries. The court, instead, requested that the expert disclosures only demonstrate the presence of a detectable amount of the allegedly harmful drug in the plaintiffs’ system, and failing such a showing, a credible reason why a jury might nevertheless fi nd that plaintiffs’ injuries were caused by the chemical at issue. Id. at 389. While failure to demonstrate causation was not grounds for immediate dismissal, should the court ultimately grant defendant’s summary judgment motion for lack of causation, the court would consider granting defendant’s costs and attorney fees for fi ling such a motion. Id.
As plaintiffs were required to develop the information which is the subject of this motion before fi ling their complaints, it follows that they need no discovery to respond to such a motion. Providing the information at the front end enables the court to structure litigation in a logical and cost-effective fashion.
§ 15.5.2.2 Lone Pine Orders Should Only Be Issued in Those Cases Presenting Facts Resembling Those Presented in Lone Pine
A few cases have focused on the number of defendants, reasoning that Lone Pine’s applicability is limited to cases where there are a substantial number of defendants. In those cases, the courts reason that one purpose underlying the Lone Pine decision—enabling each defendant to sort out its own unique potential liability—has no application to cases where there are only a few defendants.
One such case is the previously discussed Morgan v. Ford Motor Co.64 There, the court distinguished Lone Pine because it involved over 400 defen-dants, whereas in Morgan there were approximately 20 defendants.65 In another case, Kirsch v. Delta Dental of N.J., Inc., 2008 U.S. Dist. LEXIS 11545, *9-10 (D. N.J. Feb. 14, 2008) (unpublished), the court distinguished this single defendant case from Acuna by noting that Acuna involved approximately 1,600 plaintiffs suing over 100 defendants based on a range of injuries that occurred over a 40-year span. The court in Kirsch further distinguished the Acuna case on the grounds that there was a single defendant which “as alleged by Plaintiff, ‘uses its uniform claims processing logic to adjust all of the claims submitted by class members, regardless of their specialty.’”66
§ 15.5.3 ConclusionTo date, courts have routinely entered Lone Pine or Rule 16 case management orders where there are numerous plaintiffs and/or defendants and causation or nexus is speculative on the face of the complaint. However, courts also note that there are limitations to the types of cases where these case management orders are appropriate, and it is important that discovery not be skewed in favor of one party at the expense of the other. Notwithstanding these concerns, courts throughout the country recognize that creative case management orders, whether pursuant to Rule 16 or analogous state statutes and rules, provide an important tool for managing complex civil litigation in a cost-effective fashion.
64. 2007 U.S. Dist. LEXIS 36525 (D. N.J. May 17, 2007). 65. Id. at *39. 66. Kirsch at *9-10.
