Morrison Enterprises v. Dravo Corporation

Apr 5: In the U.S. Court of Appeals, Eighth Circuit, Case No: 10-1468 & 10-1469. On appeal from the United States District Court for the District of Nebraska. The Appeals Court explained that Morrison Enterprises, LLC (Morrison) and the City of Hastings, Nebraska (City) (collectively, appellants), and Dravo Corporation (Dravo) are liable within the meaning of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) for hazardous substances released at the Hastings Ground Water Contamination Site (Site). Appellants each sued Dravo under § 107(a) of CERCLA, seeking to recover some of the costs they incurred responding to contaminated ground water at the Site.

 

    The district court denied appellants' motions for summary judgment and granted summary judgment to Dravo on appellants' cost-recovery claims. The district court held (1) CERCLA § 113(f), 42 U.S.C. § 9613(f), provided appellants' exclusive remedy to recover response costs incurred removing contaminants from the City's ground water, and (2) the City's water supply system claims were untimely. The Appeals Court affirmed the district court decision.

 

    The Appeals Court explains further as part of its decision, "We agree with the district court that the City's previously filed counterclaims against Dravo for declaratory judgment and contribution under § 113(f) do not constitute an initial action to recover response costs under § 107(a). Section 113(g)(2) refers to initial and subsequent actions to recover costs specifically under § 107, not contribution claims under § 113(g). In addition, as Dravo points out, § 113(g)(2)(A) and (B) each set forth a specific limitation period that applies to initial actions. Section 113(g)(3) sets forth a separate limitation period for contribution claims. Allowing a contribution claim to serve as the initial action under § 113(g)(2) would impermissibly subject the action to two different limitation periods. The City's contention conflicts with the express language and the overall scheme of CERCLA."

 

    Access the complete opinion (click here).

Arkansas Game & Fish Commission v. U.S.

Mar 30: In the U.S. Court of Appeals, Federal Circuit, Case No. 2009-5121 & 2010-5029. Appeals from the United States Court of Federal Claims. The Appeals Court explains that the Arkansas Game and Fish Commission (the Commission) filed a physical takings claim against the United States in the Court of Federal Claims (Claims Court), alleging that the United States had taken its property without just compensation. The Commission claimed that temporary deviations by the Army Corps of Engineers (the Corps) from an operating plan for Clear-water Dam during the years 1993 to 2000 caused in-creased flooding in the Commission's Dave Donaldson Black River Wildlife Management Area (Management Area). The flooding, in turn, caused excessive timber mortality in the Management Area. The Claims Court concluded that the United States had taken a temporary flowage easement over the Commission's property and awarded a total of $5,778,757.90 in damages. Ark. Game & Fish Comm'n v. United States, 87 Fed. Cl. 594, 617, 647 (2009).

 

    The Appeals Court, however, in a split decision, concluded that the Corps' deviations did not constitute a taking, and reversed the decision of the claims court. The majority ruled, "Because the deviations from the 1953 plan were only temporary, they cannot constitute a taking. The actions at most created tort liability. We recognize that in other contexts the distinction between a temporary and permanent release plan may be difficult to define. The government cannot, of course, avoid takings liability by characterizing inevitably recurring events as merely a series of temporary decisions. Here, however, the Corps' regulatory scheme has itself clearly distinguished between permanent and temporary release rates. The deviations in question were plainly temporary and the Corps eventually reverted to the permanent plan. Under such circumstances, the releases cannot be characterized as inevitably recurring."

 

    The dissent Judge concluded, "The findings of the Court of Federal Claims are not disputed by my colleagues as to the nature, cause, and amount of the damage to the Arkansas property. The determination that a compensable taking occurred is fully in conformity with precedent. My colleagues' ruling contradicts the entire body of precedent relating to the application of the Fifth Amendment to government-induced flooding. I respectfully dissent."

 

    Access the complete opinion (click here).

Natural Resources Defense Council v. U.S. EPA

Mar 30: In the U.S. Court of Appeals, Ninth Circuit, Case No. 08-72288. On Petition for Review of an Order of the U.S. EPA. The Appeals Court explains that pursuant to the Clean Air Act, the U.S. EPA regulates emissions of particles known as particulate matter. In order to meet statutory and regulatory requirements, California submitted a state implementation plan (SIP) to the EPA for its approval. The SIP contains, among many other things, limits on motor vehicle emissions for the years 2009 and 2012. Although the EPA's overall approval process of the SIP is still underway, the Agency has made a preliminary finding that the SIP's limits on motor vehicle emissions for years 2009 and 2012 are adequate for purposes of the State's transportation plans and projects.

 

    The EPA's adequacy determination allows California to approve transportation plans and projects that otherwise could not proceed. Pursuant to 42 U.S.C. § 7607(b)(1), several environmental groups (Natural Resources Defense Council (NRDC), et al) filed the petition for review. Petitioners assert that the EPA's adequacy determination was arbitrary, capricious, or otherwise contrary to law. The Appeals Court denied the petition.

 

    The Appeals Court explains it decision further saying, "Petitioners challenge the EPA's final agency action -- its determination that the baseline budgets were 'adequate' for transportation conformity purposes. Our jurisdiction is limited to deciding whether that decision was arbitrary, capricious, an abuse of discretion, or otherwise contrary to law. 5 U.S.C. § 706(2)(A); see also 42 U.S.C. § 7607(b) (describing the extent of jurisdiction); Envtl. Def., 467 F.3d at 1332-33 (discussing the limits of jurisdiction under § 7607(b)). This limitation is important because, at many times in Petitioners' briefs, they appear to be challenging other, earlier actions by the EPA." The Appeals Court cites for example that, "Petitioners appear, at times, to argue that the placement of air quality monitors is erroneous because none of those monitors is in close proximity to a highway. But as the government correctly points out, the placement of monitors was the subject of earlier rulemaking and, therefore, cannot be challenged in this action."

 

    On the main issue of, "challenging the EPA's application of those rules to California's submitted motor vehicle emissions budgets," the Appeals Court says, "Petitioners argue that the EPA failed to consider a relevant factor -- attainment -- when it made its adequacy determination concerning the milestone-year budgets. The EPA concedes that it did not consider Petitioners' attainment data for purposes of the milestone-year budgets but argues that nothing requires it to do so. Therefore, the parties' dispute boils down to whether the EPA must consider attainment data when conducting its adequacy review of a budget for a milestone year."

 

    On the issue of compliance with the Conformity Rule, the Appeals Court points out that, "Quoting only portions of the conformity rule, petitioners argue that the rule requires that the milestone-year budgets be 'consistent with . . . attainment.' . . . But Petitioners' repeated quotation of only part of the rule is misleading. The full text of the rule flatly contradicts their reading. A budget must be 'consistent with applicable requirements for reasonable further progress, attainment, or maintenance (whichever is relevant to the given implementation plan submission). (emphases contained in original). The plain-text meaning of the rule is clear: For budgets concerning milestone years, reasonable further progress requirements are relevant; for budgets concerning

the attainment year, attainment requirements are relevant; and for budgets concerning maintenance years, maintenance requirements are relevant. Because the approved budgets at issue concern milestone years only, the only relevant requirements are reasonable further progress requirements; attainment requirements are not relevant."

 

    Finally, the Appeals Court said, "In summary, the EPA's reading of its own regulations, which does not require an approvable attainment demonstration, is reasonable. Accordingly, an alternative reading to the agency's interpretation is not 'compelled by the regulation's plain language.' Thomas Jefferson Univ., 512 U.S. at 512. We have carefully considered all of Petitioners' other arguments as well, but we find none of them persuasive."

 

    Access the complete opinion (click here).

Pacific Merchant Shipping Asso. v. Goldstene (CARB)

Mar 28: In the U.S. Court of Appeals, Ninth Circuit, Case No. 09-17765. Appeal from the United States District Court for the Eastern District of California. Plaintiff Pacific Merchant Shipping Association (PMSA) appealed the District Court's denial of its motion for summary judgment in its action against Defendant James Goldstene, the Executive Officer of the California Air Resources Board (CARB). PMSA challenged, on Federal statutory and constitutional grounds, California fuel use regulations (known as the Vessel Fuel Rules) insofar as they purport to apply to sea-going vessels located more than 3 miles from the California coast. The Appeals Court affirmed the district court ruling.

 

    On April 16, 2009, CARB transmitted the "Vessel Fuel Rules" to the California Secretary of State for filing pursuant to state law, and the regulations went into effect as planned on July 1, 2009. As the District Court noted, the express purpose of the Vessel Fuel Rules "is to reduce air pollutants affecting the State of California by requiring ocean-going vessels to use cleaner marine fuels." The regulations were adopted only after a lengthy process that included consultation with the public, state and local agencies, and the federal government.

 

    The Vessel Fuel Rules mandate that vessel operators "use cleaner marine fuels in diesel and diesel-electric engines, main propulsion engines, and auxiliary boilers on vessels operating within twenty-four nautical miles off the California coastline."

Specifically, the regulations apply to a geographical region known as "Regulated California Waters," which includes the waters within 24 nautical miles of the state's shoreline. In general, the Vessel Fuel Rules only cover vessels calling at a California port, and they accordingly contain an express exemption for vessels simply traveling through the region (known as "innocent passage").

 

    In discussion, the Appeals Court said, ". . .we are not currently confronted with a state attempting to regulate conduct in either another state of the Union (such as in PMSA's example of a hypothetical California regulatory scheme requiring automobiles driving from Arizona to switch to certain kinds of fuel 24 miles from the California border), in the territory or waters of a foreign nation (such as, in another example provided by PMSA, a regulation governing fuel use in Shanghai harbor), or in the open ocean waters hundreds or even thousands of miles from the state's coast. In contrast, the state of California clearly has an especially powerful interest in controlling the harmful effects of air pollution resulting from the fuel used by ocean-going vessels while they are within 24 miles of the state's coast. . ."

 

    In it conclusion the Appeals Court said, "In the end, we acknowledge the unusual characteristics and circumstances of the Vessel Fuel Rules. We are clearly dealing with an expansive and even possibly unprecedented state regulatory scheme. However, the severe environmental problems confronting California (especially Southern California) are themselves unusual and even unprecedented. Under the circumstances, we do not believe that the Commerce Clause or general maritime law should be used to bar a state from exercising its own police powers in order to combat these severe problems."

 

    Access the complete opinion (click here).

Stewart and Jasper Orchards v. Salazar

Mar 25: In the U.S. Court of Appeals, Ninth Circuit, Case No. 10-15192. Appeal from the United States District Court for the Eastern District of California. The Appeals Court indicates that the appeal addresses whether application of sections 7 and 9 of the Endangered Species Act to the California delta smelt violates the Commerce Clause in the United States Constitution. The Appeals Court concludes that it does not, and it affirms the judgment of the district court.

 

    The delta smelt is a small fish, 60-70 millimeters in length, that is undisputedly endemic to California. The United States Fish and Wildlife Service (Service) listed the delta smelt as a threatened species in 1993 under the Endangered Species Act (ESA) and designated critical habitat for the delta smelt. In 2010, the Service announced that the delta smelt should be re-listed as endangered but that it would forgo re-listing for the time being on account of higher priority listings.

 

    Section 7 of the ESA requires federal agencies to consult with the Service before undertaking any action "authorized, funded, or carried out" by the agency that might "jeopardize the continued existence of any endangered species or threatened species" or might "result in the destruction or adverse modification of habitat" used by any endangered or threatened species. After the consultation, the Service provides the agency with a "biological opinion." If the Service concludes that the proposed action will likely jeopardize the species, then it may suggest "reasonable and prudent alternatives" for agency action that, the Service believes, will not result in violations of the ESA.

 

    In 2008, the Service, acting under ESA § 7, 16 U.S.C. 1536(a)(2), issued a Biological Opinion to the Bureau of Reclamation (Bureau). The Biological Opinion concerned the Bureau's and the California Department of Water Resource's operation of the Central Valley Project and the State Water Project, two of the world's largest water diversion projects. The Biological Opinion concluded that "the coordinated operations of [the water projects], as proposed, are likely to jeopardize the continued existence of the delta smelt" and "adversely modify delta smelt habitat." Stewart & Jasper Orchards, et al (collectively the Growers) sued the Service, claiming that their almond, pistachio, and walnut orchards "experienced substantially reduced water deliveries as a result of the Service's decision to act on behalf of the delta smelt."

 

    The district court denied the Growers' motion and granted the Service's and Environmental Parties' cross-motions. With respect to the issue of standing, the district court first noted that while the Growers' complaint challenges sections "7(a)(2) and 9" of the ESA, the motion for summary judgment "focuses exclusively on the theory that the application of Section 9's take prohibition to the smelt exceeds Congress' authority under the Commerce Clause." Nevertheless, the district court concluded, "[T]here is no dispute that Plaintiffs have standing to bring a section 7 claim." Id. at 931. But the court determined the Growers do not have standing to bring a § 9 claim. Id. at 929-31. It reasoned, "Given that there is no threat of imminent Section 9 enforcement in this case, there is no causal connection between Plaintiffs' injury and the conduct complained of, namely Section 9's application to the coordinated operation of the project."   

 

    The Appeals Court concludes that, "The Growers' as-applied Commerce Clause challenge to ESA §§ 7 and 9 fails because the ESA 'bears a substantial relation to commerce.' Gonzales v. Raich, 545 U.S. 1, 17 (2005). . . In summary, the Growers have Article III standing to challenge ESA § 9, and that claim is ripe for review. The district court properly concluded that the Growers' challenge to ESA §§ 7 and 9 fails under the Commerce Clause. We need not and do not reach any other issues urged by the parties."

 

    Access the complete opinion (click here).

Huber v. New Jersey Dept. of Environmental Protection

Mar 21: The U.S. Supreme Court denied to hear the case of Huber v. New Jersey Dept. of Environmental Protection (No. 10-388) with a written statement from Justice Alito respecting the denial. The statement was joined by Chief Justice Roberts, Justice Scalia, and Justice Thomas.

 

    The issues in the case were: (1) Whether the evidence obtained by the New Jersey Department of Environmental Protection during an unannounced, warrantless inspection of wetlands in the backyard behind petitioners' home, over their repeated objections, should be suppressed because it was obtained in violation of the Fourth Amendment; (2) whether the Fourth Amendment entitles petitioners to greater protection from warrantless searches and seizures on their residential property than a closely regulated business, even when their property contains regulated wetlands; (3) whether the warrantless inspection and seizure of soil samples at petitioners' property was valid under the "special public needs" exception to the warrant requirement; and (4) whether residents lose the right to be free from warrantless inspections of their property due to the presence of regulated wetlands.

 

    The statement issued by Justice Alito indicates, "Our cases recognize a limited exception to the Fourth Amendment's warrant requirement for searches of businesses in 'closely regulated industries.' . . . The thinking is that, other things being equal, the 'expectation of privacy in commercial premises' is significantly less than the 'expectation in an individual's home.' . . . And where a business operates in an industry with a 'long tradition of close government supervision' -- liquor dealers and pawnbrokers are classic examples -- the expectation of privacy becomes 'particularly attenuated.' . . .

 

    "In this case, a New Jersey appellate court applied this doctrine to uphold a warrantless search by a state environmental official of Robert and Michelle Huber's backyard. . . The Hubers' residential property contains wetlands protected by a New Jersey environmental statute. . . According to the court below, the presence of these wetlands brought the Hubers' yard 'directly under the regulatory arm' of the State 'just as much' as if the yard had been involved in a 'regulated industry.' . . . 

    "This Court has not suggested that a State, by imposing heavy regulations on the use of privately owned residential property, may escape the Fourth Amendment's warrant requirement. But because this case comes to us on review of a decision by a state intermediate appellate court, I agree that today's denial of certiorari is appropriate. . . It does bear mentioning, however, that 'denial of certiorari does not constitute an expression of any opinion on the merits.'"

    Access the statement from Justice Alito (click here). Access the petitions, briefs and the opinion of the Superior Court of New Jersey, Appellate Division in the case (click here).

Industrial Enterprises, Inc. v. Penn America Insurance Co.

Mar 18: In the U.S. Court of Appeals, Fourth Circuit, Case No. 09-2346 and 09-2397. As described by the Appeals Court, the appeal involves whether a standard comprehensive general liability insurance policy (CGL policy), which indemnifies the insured for "all sums which the insured shall become legally obligated to pay as damages because of . . .property damage," covers the insured's liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for costs to remediate the presence of hazardous substances on the insured's land.

 

    On July 9, 1999, U.S. EPA sent Industrial Enterprises, Inc., and other owners of neighboring properties near the Back River in Baltimore County, Maryland, letters expressing the EPA's intent to include Industrial Enterprises' property and neighboring

properties in a Superfund Site designated for cleanup under CERCLA due to the presence of hazardous substances on the Site. EPA also advised Industrial Enterprises and the other property owners that they might be required to undertake or fund investigatory and cleanup actions to protect the public health, welfare, and the environment.

 

    Industrial Enterprises forwarded the EPA letter to its insurer, Penn America Insurance Company, requesting that it provide a defense. When Penn America denied coverage, Industrial Enterprises commenced this action for a judgment declaring that Penn America was obligated to pay Industrial Enterprises the sums that it had incurred and reasonably would incur as defense costs in response to the demands made by the EPA. It also demanded reimbursement of defense costs in an amount not less than $600,000.

 

    On the motions of the parties for summary judgment, the district court found a "potentiality" of insurance coverage, requiring Penn America to provide a defense, and accordingly it awarded Industrial Enterprises $465,774.50 for attorneys fees incurred, $89,070 in technical consulting fees incurred, and 6% interest on the sum of those amounts, all reduced by the $210,000 that Industrial Enterprises received in a settlement with the other property owners. The district court also denied Industrial Enterprises' claim for $750,000, which it paid in reaching a settlement and forming a defense coalition with the other neighboring property owners.

 

    On appeal, the Appeals Court, in a split decision, reversed the district court decision. The majority Appeals Court said, "Based on the decision of Bausch & Lomb, Inc. v. Utica Mutual Insurance Co., 625 A.2d 1021 (Md. 1993), where the Maryland Court of Appeals held that a similar CGL policy did not cover expenses incurred in response to the State's regulatory order to remove soil containing hazardous chemicals, we conclude that Industrial Enterprises' liability under CERCLA is not liability for 'property damage,' but rather regulatory liability for response costs. Accordingly, we conclude that Penn America's CGL policy does not cover Industrial Enterprises' regulatory liability and, therefore, Penn America has no duty to provide Industrial Enterprises with a defense."

 

    The majority concluded, "In sum, we hold that Penn America's standard CGL policy, which provides indemnity to Industrial Enterprises for sums that it becomes legally obligated to pay as damages because of property damage, does not provide indemnity to Industrial Enterprises for regulatory liability (including remediation costs) under CERCLA. And because the standard CGL policy in this case does not provide coverage for CERCLA liability, Penn America had no duty to provide a defense or to pay the costs of a defense with respect to such liability."

 

    The dissenting judge argued that, "Bausch & Lomb does not control the result in this case and said, "The issue is not whether contamination of land, surface water, or groundwater is damage to property (it assuredly is), but whether the contamination damages a third person's property such that the liability coverage provisions of a GCL policy are implicated. . . In Bausch & Lomb, there was no credible indication that the pollution contaminating the insured's soil and groundwater affected any property other than its own. . . Under the GCL Policy, Penn America is bound to provide coverage for 'property damage' inflicted by its insured upon third parties, in the 'sums which the insured shall become legally obligated to pay.'"

 

    Access the complete majority opinion and dissent (click here).