Contractors Equip. Maint. Co., Inc. v. Bechtel Hanford, Inc.

Jan 24: In the U.S. Court of Appeals, Ninth Circuit, Case No. 06-35310. United Coastal Insurance Company (UCIC) appeals the district court’s order granting Bechtel Hanford, Inc.’s (Bechtel’s) motion for judgment on a supersedeas bond.

The case is the product of a breach of contract dispute in an environmental remediation project. Bechtel contracted with the United States Department of Energy (DOE) to perform environmental clean-up work at the Hanford Nuclear Reservation in Washington. P.W. Stephens Contractors, Inc. (PWS) entered a subcontract with Bechtel to work under Bechtel’s prime contract with DOE and obtained a performance bond from Acstar Insurance Co. (Acstar). When PWS defaulted on the subcontract, Contractors Equipment Maintenance Company, Inc., a second-tier subcontractor, sued Bechtel, PWS and Acstar. Bechtel subsequently filed cross-claims against PWS and Acstar.

Bechtel was awarded a judgment in 2004 against Acstar and PWS. Acstar obtained a supersedeas bond from UCIC and appealed the judgment against it. After the Ninth Circuit affirmed in part and reversed in part, Bechtel moved to collect the entire 2004 judgment from UCIC. The district court concluded that the supersedeas bond covered the judgment against both Acstar and PWS and granted Bechtel’s motion, ordering UCIC to pay the entire underlying judgment.

On appeal, UCIC claims that the bond secured only Bechtel’s judgment against Acstar. The Appeals Court said it agreed with UCIC that the bond secures only Acstar’s obligations on the underlying judgment and therefore reversed the district court decision. The Appeals Court said, "Because Acstar’s liability has been satisfied, we direct entry of judgment in favor of UCIC."

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Natural Resources Defense Council v. U.S. EPA

Jan 22: In the U.S. Court of Appeals, DC Circuit, Case No. 07-1040. Cemtura Corporation and the American Chemistry Council were intervenors in the case [See WIMS 12/19/06]. In the case, Natural Resources Defense Council challenges U.S. EPA's 2007 “critical use” exemption for methyl bromide on the grounds that it applies an unreasonable interpretation of the Clean Air Act and that it is arbitrary and capricious in light of the United States’ agreements with other nations on reducing the use of methyl bromide and other ozone-depleting chemicals.

The 2007 exemption applied a framework that EPA adopted in a 2004 rule -- a rule that NRDC challenged previously and that the DC Circuit affirmed. [See NRDC v. EPA, 464 F.3d 1 (D.C. Cir. 2006)]. The Appeal Court said that NRDC’s claim has not changed: in the first case it argued that the 2004 framework was invalid as adopted and applied to determine the 2005 exemption, and now it challenges the 2004 framework -- which EPA left unchanged -- as applied to determine the 2007 exemption. The Appeals Court said, "Under principles of claim preclusion, the first case bars NRDC’s new challenge."

The Appeals Court explained further, "A subsequent lawsuit is barred by claim preclusion 'if there has been prior litigation (1) involving the same claims or cause of action, (2) between the same parties or their privies, and (3) there has been a final, valid judgment on the merits, (4) by a court of competent jurisdiction.' Smalls v. United States, 471 F.3d 186, 192 (D.C. Cir. 2006). Because NRDC involved the same parties and proceeded to final judgment in this court, the current petition for review is precluded by our prior judgment if it involves “the same claims.” We hold that it does."

The Appeals Court ruled finally, "NRDC doesn’t get a second bite at that same apple. The petition for review is barred by the preclusive effect of our prior decision adjudicating its claims against EPA’s framework for adopting critical use exemptions."

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Nascimento v. Preferred Mutual Insurance Co.

Jan 18: In the U.S. Court of Appeals, First Circuit, Case No. 07-1792. Jack Nascimento appeals a district court judgment from the State of Massachusetts declaring that Preferred Mutual Insurance Company (Preferred Mutual) is under no contractual obligation to defend him in an environmental liability suit brought against him by his neighbors, Tiago and Maria Leal. The Appeals Court said, "We affirm, albeit on slightly different grounds than those relied upon by the district court."

On March 25, 2005, Nascimento placed a claim with Preferred Mutual requesting it to defend and indemnify him under his Commercial General Liability (CGL) policy effective from November 9, 1996 to November 9, 1997. On April 15, 2005, Preferred Mutual denied coverage under the CGL policy’s total pollution exclusion.

According to the Appeals Court, the district court based its decision solely on section f(2)(a) of the total pollution exclusion. The district court held that all of the damages claims set out in the Leal complaint involved remediation costs. Relying solely upon section (f)(2)(a), the district court held that the CGL policy excluded coverage for such "remediation damages." Nascimento, concedes that section (f)(2)(a) bars remediation damages, however, he says the Leal complaint seeks "both remediation and non-remediation damages."

Following the district court’s decision in this case and during the pendency of this appeal, the Massachusetts Supreme Judicial Court decided McGregor, in which "it interpreted the same total pollution exclusion clause as appears in Nascimento’s policy." Under McGregor, the total pollution exclusion in Nascimento’s CGL policy bars "all" of the Leals’ claims. McGregor holds that once the oil becomes a pollutant, the total pollution exclusion of the CGL policy is triggered and coverage for remediation and non-remediation claims is barred.

The Appeals Court concluded, "In this case, the home heating oil leaked from the UST Nascimento continuously used. The leak caused the pollution damage for which the Leals seek reimbursement. Therefore, section f(1)(a) of the total pollution exclusion was triggered, and Preferred Mutual has no duty to defend Nascimento in the Leal suit."

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National Mining Association v. Kempthorne

Jan 15: In the U.S. Court of Appeals, D.C. Circuit, Case No. 06-5199. The Appeals Court says, "The Secretary of the Interior has interpreted the phrase 'valid existing rights' in the Surface Mining Control and Reclamation Act to foreclose surface mining operations in sensitive areas. The National Mining Association [NMA] challenges this reading of the statute, but we conclude that we must defer to the Secretary’s reasonable interpretation of this ambiguous phrase."

In 1977, Congress enacted the Surface Mining Control and Reclamation Act (SMCRA), “to protect society and the environment from the adverse effects of surface coal mining operations.” Section 522(b) of the SMCRA authorizes the Secretary of the Interior (Secretary) to prohibit surface coal mining operations on Federal lands if he determines them to be unsuitable for that purpose. Section 522(e) bans outright surface mining in statutorily designated areas. In the appeal, D.C. Circuit is asked to determine how Congress intended that ban to work.

The relevant text of § 522(e) provides: "After August 3, 1977, and subject to valid existing rights no surface coal mining operations except those which exist on August 3, 1977, shall be permitted [in the statutorily designated areas]." The Appeals Court says, "Because one must show 'valid existing rights' (VER) to start a surface mining operation in a § 522(e) area, the meaning of the phrase is critical. For decades, the Secretary and the courts have wrestled with how best to understand VER and determine what it protects. We need not recount this history. Suffice it to say that VER has occasioned a spectrum of agency interpretations, ranging from a relaxed 'ownership and authority' standard, which required only that the miner show a property right in the coal, to a more exacting 'all permits' standard, which called for a showing that surface mining licenses had been issued prior to the date § 522(e) took effect."

In its final analysis the Appeals Court says, "At oral argument, the NMA did not claim that the government would be on the hook for a 'massive and unforeseen' sum, paid out to frustrated miners as just compensation... The record is devoid of evidence suggesting it is so. Given this implicit concession that the 1999 Rule will have relatively insignificant takings implications that can be readily addressed in the Court of Claims, there is no serious constitutional problem to be avoided. '[T]he avoidance canon is not applicable when the statute or regulation would effect a taking, if at all, only in certain situations.' Nat’l Mining Ass’n v. Babbitt, 172 F.3d 906, 917 (D.C. Cir. 1999). The usual Chevron analysis is therefore applied to the 1999 Rule, which results in our deferring to the Secretary’s reasonable interpretation of an ambiguous statutory term. The district court properly accorded Chevron deference to the Secretary’s interpretative rule. The judgment is affirmed."

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Feldman v. Bomar (National Park Service)

Jan 10: In the U.S. Court of Appeals, Ninth Circuit, Case No. 06-55675. Richard Feldman, Robert Lee Puddicombe, and In Defense of Animals (IDA) (collectively Appellants) appeal the judgment in favor of the Nature Conservancy (TNC), the National Park Service (NPS), NPS’s director, and the Chief of Natural Resources Management at Channel Islands National Park (collectively Appellees) on their claims that Appellees violated the National Environmental Policy Act (NEPA) and the California Environmental Quality Act (CEQA) in adopting NPS’s program to restore and protect Santa Cruz Island by, in part, eradicating its feral pig population.

Appellants do not dispute that the pigs threatened Santa Cruz Island’s ecological and archeological infrastructure; however, they would have preferred eliminating the population through non-lethal means, such as sterilization or removal of the pigs to the
mainland, and they challenge NPS’s process in reaching its conclusion that the pigs should be killed instead. Because NPS completely eradicated the feral pigs from Santa Cruz Island during the pendency of this litigation, and because Appellants allege only procedural violations in the development of the eradication program and do not seek compensation in monetary damages, the Appeals Court granted Appellees’ motion to dismiss the appeal as moot. The Appeals Court said, "Appellees have met their heavy burden of demonstrating that 'no effective relief for the alleged violation[s] can be given,'" citing, Neighbors of Cuddy Mountain v. Alexander, 303 F.3d 1059, 1065 (9th Cir. 2002).

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Bering Strait Citizens v. US Army Corps of Engineers

Jan 3: In the U.S. Court of Appeals, Ninth Circuit, Case No. 07-35506. The appeal concerns a permit issued to Defendant-Appellee Alaska Gold Company (AGC), by Defendant-Appellee Army Corps of Engineers (the Corps) for a major gold-mining project near Nome, Alaska. The permit was issued pursuant to Section 404 of the Clean Water Act (CWA) which authorizes the Corps to issue permits for the discharge of dredged or fill material into the navigable waters of the United States. The project, known as the “Rock Creek Mine Project,” would consist of two open-pit gold mines at separate locations outside of Nome, plus facilities built for recovering and processing gold ore. Once the project is commenced, about 15,592,411 cubic yards of fill from the mine will be placed in wetlands totaling 346.5 acres.

Plaintiffs-Appellants Bering Strait Citizens for Responsible Resource Development, et al (collectively, BSC), allege that the Corps violated the CWA and the National Environmental Policy Act (NEPA) by granting a permit for the Rock Creek Mine Project. BSC appeals the district court’s denial of its motion for a temporary restraining order and a preliminary injunction, and the district court’s dismissal of the suit on summary judgment. The Appeals Court concluded that the Corps complied with the requirements of the CWA and NEPA, and affirmed the judgment of the district court.

In its decision, the Ninth Circuit said regarding the CWA issues, "The record shows that the Corps extensively and properly considered alternatives to the design of the Rock Creek Mining Project that was ultimately approved. The PEDD [Permit Evaluation and Decision Document] reflects the Corps consideration of 24 different alternatives, including different placements of the mine pits and related facilities, alternative designs for the pits and tailings storage facilities, 'co-disposal' of tailings and development rock together, and relocation of access roads. After extensive consultation with AGC, the Corps determined that all alternatives were impracticable because the nearby uplands were too steep to stabilize the facilities, because the alternative designs would require the destruction of higher value wetlands, or would expand the project’s footprint, or because alternatives were cost prohibitive or undesirable for other reasons. This rationale is acceptable under the CWA."

On the NEPA issues the Appeals Court concluded, "The Corps adequately considered the environmental impacts raised by BSC, its conclusions were not arbitrary and capricious, nor were they contrary to law... On balance, we conclude that the Rock Creek Mine Project has no significant detrimental effect on the environment in and near Nome. Accordingly, the Corps was not required to prepare an EIS based on the issues raised by BSC or by the EPA."

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Royal Indemnity v. Apex Oil Company

Jan 2: In the U.S. Court of Appeals, Eighth Circuit, Case Nos. Case No: 06-3454, 06-3461 and 06-3469. Royal Indemnity Company brought the action pursuant to 28 U.S.C. §§ 2201 and 2202, to seek a declaration of the rights and obligations of Royal Indemnity Company, various other insurance companies and Apex Oil Company, Inc. (Apex), under certain insurance policies Royal Indemnity Company and the other insurance companies issued to Apex. The Appeals Court affirmed the district court’s decision to abstain, but vacated the dismissal order and remanded the case so that the court can instead enter an order staying the proceedings.

Between May 2003 and April 2005, the State of Illinois, the United States, and a group of individuals filed five separate lawsuits (the underlying suits) against Apex in state and federal courts in Illinois based on the actions of Apex and its predecessor companies in releasing contaminants into the soil surrounding its oil refinery in Hartford, Illinois. Royal Indemnity Company defended Apex on the majority of the underlying suits. On August 5, 2005, Apex brought suit against multiple insurers in the Circuit Court of Madison County, Illinois (the Illinois lawsuit), seeking a declaration of the parties’ rights and responsibilities with respect to the Hartford soil contamination under policies the insurance companies had issued to Apex.

On March 22, 2006, Royal Indemnity Company initiated the lawsuit by filing a complaint in Federal court pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202, “seeking adjudication of the parties’ rights and obligations under certain insurance policies.” In its complaint, Royal Indemnity Company also sought a declaration of the rights and responsibilities of the parties based on claims of equitable contribution, subrogation, unjust enrichment and/or equitable estoppel for the costs Royal Indemnity Company incurred in defending Apex as well as attorneys’ fees, costs and interest.

Royal argues that the district court erred in applying the Wilton and Brillhart abstention doctrine and instead should have applied the “exceptional circumstances” test articulated in Colorado River. The Eighth Circuit said, "However, unlike Colorado River, this lawsuit involves a declaratory judgment action. Apex, therefore, claims that the district court correctly relied upon Wilton and Brillhart to govern its abstention analysis." Royal also argued that the Ninth Circuit’s decisions in Government Employees Insurance Co. v. Dizol, 133 F.3d 1220 (9th Cir. 1998) (en banc), and United National Insurance Co. v. R & D Latex Corp., 242 F.3d 1102 (9th Cir. 2001), support its claims that Wilton and Brillhart do not apply here. However, the Appeal Court said, "...not only are these cases not binding precedent for us, they are easily distinguishable..."

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Center for Biological Diversity v. Lohn

Dec 27: In the U.S. Court of Appeals, Ninth Circuit, Case No. 05-35638. The Apepals Court Order indicates that, "The petition for panel rehearing is granted. The opinion filed on April 26, 2007, and appearing at 483 F.3d 984 (9th Cir. 2007) is withdrawn. The superseding opinion will be filed concurrently with this order. No further petitions for rehearing or rehearing en banc may be filed." In its opinion, the Appeals Court indicates that it is asked to decide whether the federal government’s policy for listing killer whales under the Endangered Species Act is invalid.

The Center for Biological Diversity (Center), along with eleven co-petitioners not parties to this appeal, petitioned the National Marine Fisheries Service (Service) to list the Southern Resident killer whale (Southern Resident) as an endangered species under the Endangered Species Act (ESA). Applying its Distinct Population Segment Policy (DPS Policy) for listing endangered species under the ESA, the Service issued a proposed ruling that concluded listing the Southern Resident was “not warranted” because the Southern Resident was not “significant” to its taxon.

The Center challenged the Service’s proposed determination in district court. On cross-motions for summary judgment, the district court granted in part and denied in part. The district court concluded that the DPS Policy was not contrary to congressional intent regarding the ESA, and that it was a reasonable interpretation of the ambiguous term “distinct population segment.” However, the district court set aside the Service’s “not warranted” finding because it failed to utilize the best available scientific data when determining whether the Southern Resident was “significant” under that policy. The district court ordered the Service to reexamine according to the declared legal standard whether the Southern Resident should be listed as an endangered species and to issue a new finding within twelve months.

Pursuant to the district court’s order, the Service reexamined the listing petition and issued a proposed rule that recommended listing the Southern Resident as a "threatened" species. The Center then appealed from the district court’s judgment, arguing that the Service’s DPS Policy is not entitled to deference under Chevron and that the policy is unlawfully restrictive. Subsequently, the Service issued a final rule listing the Southern Resident as an "endangered" (as opposed to "threatened") species. The Service contends that this case is now moot because it has, since the district court’s decision, issued a proposed rule that recommended listing the Southern Resident as a threatened species and ultimately has issued a final rule listing the Southern Resident as an endangered species. The Center asks the Appeals Court to declare the Service’s DPS Policy unlawful and to “instruct [the Service] not to apply the DPS Policy in making a final determination on the agency’s decision to finalize the proposed rule to list the Southern Resident killer whale.”

The Appeals Court ruled, "The Service’s issuance of a final rule listing the Southern Resident as an endangered species renders this case moot. Accordingly, we vacate the portion of the district court’s order from which the Center has appealed... (noting that we will only vacate a judgment of a district court if it is appealed to this court). We dismisss this appeal as moot and remand the case to the district court with instructions to vacate its grant of summary judgment in favor of the Service."

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