Environmental Law Insight

Updates and Analysis from Taft's Environmental Trial Lawyers

Indiana Court of Appeals upholds trial victory for Taft client in environmental contamination suit

Bradley R. Sugarman Posted in Indiana Environmental Legal Action

In a case that examines the limits of liability for environmental cleanup costs under Indiana’s Environmental Legal Action Statute (“ELA”), the Indiana Court of Appeals recently upheld a trial judgment finding that a film-processing company and its owner had no liability for environmental cleanup costs of a commercial property located in Indianapolis under the ELA. The Court of Appeals upheld the trial court’s determination that the plaintiff and current property owner failed to prove that the previous owner caused or contributed to the site’s contamination.

Taft attorneys Brad Sugarman, Tom O’Gara and Jeff Stemerick represented the previous property owner and The Indiana Lawyer covered the case in a recent article.

Cyprus Decision Opens Door for Indirect Successor Liability Under CERCLA

Julian Harrell Posted in CERCLA / RCRA

In Cyprus Amax Minerals Co. v. TCI Pacific Comm. Inc., the U.S. District Court for the Northern District of Oklahoma addressed a successor-in-interest issue in an environmental cleanup case where plaintiff Cyprus Amax Minerals Company (“Cyprus”) sought contribution payments from defendant TCI Pacific Communications, Inc. (“Pacific”). The court examined Cyprus’s claim that Pacific was the successor-in-interest to New Jersey Zinc Company (“N.J. Zinc”) and that Tulsa Fuel and Management Company (“Tulsa”) was a subsidiary of N.J. Zinc. Cyprus alleged that Tulsa was the alter ego of N.J. Zinc and that Pacific had assumed responsibility for N.J. Zinc’s liabilities. Based on this argument, Cyprus sought to hold Pacific liable for environmental harms caused by one of Tulsa’s smelting operations. As discussed below, the court accepted Cyprus’s alter ego argument; however, it did not actually determine Pacific’s CERCLA liability.

The court’s decision in Cyprus is important because it demonstrates the potential pitfall of over-emphasizing a parent corporation’s control of its subsidiaries. Although N.J. Zinc’s arguments in the ICC Hearing prevented Tulsa’s formal complaint from being blocked by the statute of limitations, N.J. Zinc’s repeated assertions of broad and overarching control resurfaced in a harmful way such that its successor-in-interest, Pacific, could face indirect liability for costs of cleanup and investigation under CERCLA. The court’s analysis suggests that N.J. Zinc likely could have succeeded in persuading the ICC that it had limited authority to file a complaint on Tulsa’s behalf. Nevertheless, N.J. Zinc rejected that course of action and chose to demonstrate its utter control of Tulsa. Thus, Cyprus shows the potential danger of not evaluating how today’s decision could affect tomorrow’s outcome.

To date, the court’s ruling has not been appealed, and the parties are engaged in settlement discussions.

To learn more about this decision and its implications, I invite you to read a recent article that I published.

California Federal District Court Uses Burlington Northern Holding to Limit “Arranger” Liability

Jayna M. Cacioppo Posted in CERCLA / RCRA

Recently, a federal district court in California used the opinion from Burlington Northern to limit liability under a California statute with a CERCLA-like liability scheme. See City of Merced Redevelopment Agency v. Exxon Mobil Corp., 2015 WL 471672 (E.D. Cal. Feb. 4, 2015).

In 2009, the U.S. Supreme Court issued an opinion that fundamentally changed the scope of liability for “arrangers” under CERCLA. See Burlington Northern & Santa Fe Railway Co. v. United States, 556 U.S. 599 (2009). Since then, a number of federal courts have applied the Burlington Northern holding, in varying degrees, to limit CERCLA liability.

I recently published an article on the City of Merced decision as well as more background on the Burlington Northern ruling and its impact since 2009.

U.S. Supreme Court Ruling: Interpretive Rules Issued by Federal Agencies Are Not Subject to Public Notice and Comment

Katherine Grgic Posted in Environmental Litigation

On March 9, 2015, the U.S. Supreme Court determined that interpretive rules issued by federal agencies are not subject to notice-and-comment procedures under the APA. Perez v. Mortgage Bankers Ass’n, 135 S. Ct. 1199 (2015). The court held that the Paralyzed Veterans doctrine requiring agencies to undergo notice-and-comment rulemaking procedures for interpretations that “deviate[] significantly” from previous interpretations was “contrary to the clear text of the APA’s rulemaking provisions, and it improperly imposes on agencies an obligation beyond the ‘maximum procedural requirements’ specified in the APA. . . .” Id. at 1206 (internal citations omitted).

As a result, as was the case in Perez, an agency can issue an interpretation of its regulations and then later change its mind and issue a contrary interpretation even if parties have detrimentally relied on the previous interpretation. See id. at 1204.

Perhaps the most interesting aspect of the decision, however, comes from the concurring opinions of Justices Thomas, Scalia and Alito. Justices Thomas and Scalia called into question the validity of the Seminole Rock doctrine — which required deference to agencies’ administrative interpretations of regulations — and signaled their willingness to reconsider the doctrine in an appropriate case. Justice Alito, referencing the reasons offered by Justices Thomas and Scalia, echoed their desire for the case that will allow for reconsideration of the doctrine. Taft will monitor upcoming cases for such developments.

I invite you to click here to read an article I recently published on this ruling.

Sixth Circuit Decision Applies Clean Water Act’s Permit Shield to Protect General Permit Holders From Liability

Devin Parram Posted in Water

The 6th Circuit recently ruled that facilities holding a Clean Water Act (“CWA”) Section 402 general permit — one of two types of National Pollutant Discharge Elimination System (“NPDES”) permits — can use the CWA’s “permit shield” provision (33 U.S.C. § 1342(k)) to protect themselves from liability for certain discharges of pollutants that the general permit does not mention. See Sierra Club v. ICG Hazard, LLC, App. No. 13-5086 (6th Cir. Jan. 27, 2015).

ICG Hazard is important because it is the first circuit court decision that extends the permit shield defense to general permits. However, the court’s conclusion was based largely on the facts of the case and the particular language of the Kentucky Division of Water’s (“KDOW”) general permit. Although the ICG Hazard court extended the permit shield to general permits, some courts have refused to do the same. The 9th Circuit recently held that the permit shield could not be applied to protect the holder of a general permit from liability. These cases show that some courts may find that generic language within a general permit can make the permit holder liable for discharges of certain pollutants even though these pollutants are not specifically delineated in the general permit. While the ICG Hazard decision should provide some comfort to general permit holders that the permit shield may be applied, it is important for permit holders to strictly comply with all requirements of the permitting authority and conditions of their general permits.
I invite you to read more about this decision in an article I recently published.

Seventh Circuit Applies Indiana Choice of Law Rules to Deny Insurance Coverage for Contamination at an Indiana Manufacturing Facility

Jeffrey Stemerick Posted in Insurance

Hoosier land owners sleep well at night knowing that they are insured against liability for environmental contamination because Indiana does not enforce the standard pollution exclusion clauses found in many insurance policies. State Automobile Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845 (Ind. 2012); Am. States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996). However, just because an insured’s contaminated site is located in Indiana does not necessarily mean that the pollution exclusion will be void.

In a recent case, the 7th Circuit applied Michigan law to an insurance policy covering Visteon’s Connersville, Ind., facility to foreclose coverage. Visteon Corp. v. National Union Fire Insurance Company of Pittsburgh, 777 F.3d 415 (7th Cir. 2015). Michigan law enforces the standard pollution exclusion in insurance policies; thus, Visteon was left holding the bag for the millions of dollars it spent cleaning up TCE contamination and settling lawsuits with its neighbors.

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Multi-Million Dollar Insurance Bad Faith Claim in Environmental Contamination Case Affirmed on Appeal

William C. Wagner Posted in Insurance

An environmental contamination case resulting in a $3.4 million award for emotional distress and punitive damages due to unfair claims settlement practices by the insurer was recently affirmed on appeal in Indiana Insurance Company v. Demetre, Case No. 2013-CA-338 (Ky. Ct. App. Jan. 30, 2015). In the case, the policyholder sought to insure two pieces of property with Indiana Insurance, in addition to $2.5 million of liability insurance coverage that the policyholder already had with the company. Indiana insurance decided to insure both properties. 

Several months later, the policyholder received notice of claims by neighbors related to injuries resulting from contamination of one of the properties and promptly notified Indiana Insurance.  Instead of taking any action to protect the policyholder and investigate the neighbors’ claims, Indiana Insurance appeared to have decided to protect itself and assigned a field investigator to determine whether the policyholder was aware of the loss prior to insuring the property. Approximately two years after receiving the neighbors’ claims, Indiana Insurance sued the policyholder seeking a declaration that it did not owe coverage because the policyholder may have known of the contamination on the property prior to buying insurance.

To learn more about this case, I invite you to read more here.

Ohio Supreme Court Strikes Down Local Oil and Gas Ordinances, but…

Kim Burke Posted in Environmental Litigation

The Ohio Supreme Court recently struck down several local ordinances regulating oil and gas production on the grounds that these ordinances were preempted by comprehensive state law and that the Ohio Home Rule provisions to its constitution did not grant a right for local ordinances to intrude upon this regulated area. In a 4-3 decision, the court found in State ex. Rel .Morrison v. Beck Energy Corp., Slip Op. 2015-Ohio-485, that five ordinances enacted in 1980 and 1995 by the city of Munroe Falls are preempted by the provisions of the Ohio Constitution in Article II, Section 36, which vest in the General Assembly the power to pass laws providing for the “regulation of methods of mining, weighing, measuring and marketing coal, oil, gas and all other minerals.”

While the court’s decision might be viewed as a victory by the pro-hydraulic fracturing community, there is good reason to view the breadth of this opinion with caution given the obvious different views of several members of the court, including the swing vote.

I invite you to read a recent article that I published on this decision.

Environmental Due Diligence Needed for Commercial Real Estate

William C. Wagner Posted in Compliance

Having a properly conducted Phase I Environmental Site Assessment when purchasing or otherwise acquiring commercial real estate can mean the difference between sleeping well at night versus catastrophic financial ruin caused by environmental contamination.  Buyers recently learned a due diligence lesson the hard way for contaminated property they purchased 20 years earlier.  I described what happened and how it could have been avoided in my recent blog post “The Importance of Phase I Environmental Site Assessments for Commercial Real Estate Investors.”

Public Nuisance Claims Displaced by CERCLA

E. Chase Dressman Posted in CERCLA / RCRA

In a case of first impression, the Eastern District of Washington recently ruled in Anderson, et al., v. Teck Metals, Ltd. CV-13-420-LRS that CERCLA displaced federal common law public nuisance claims for alleged damages from the release of hazardous substances in smelter emissions. This case is an important example of potential defenses that may be available for entities facing common law damages claims that may be addressed by CERCLA or other federal statutes.

In the case, the class action plaintiffs alleged that emissions from Teck Metals, Ltd.’s (“Teck Metals”) Canadian smelter were responsible for the health problems of U.S. residents in the Upper Columbia River Region. Among the plaintiffs’ numerous causes of action were public nuisance claims under federal common law. Teck Metals argued that the public nuisance claims must be dismissed because CERCLA, which addresses liability for contamination, “displaced” such claims.

The plaintiffs argued that CERCLA’s legislative history proved that Congress rejected the inclusion of any statutory personal injury provisions and thus did not intend to “occupy the field” of personal injury liability caused by contamination. The court rejected this argument as too narrow and held that it improperly focused on the irrelevant factor of the type of remedy asserted. Instead, the court found that the “question at issue” was liability for the release and threatened release of hazardous substances. The court held that Congress had “spoken directly to” this issue by enacting CERCLA. Accordingly, the court concluded that CERCLA occupied the field to the exclusion of federal common law and the court dismissed the plaintiffs’ federal common law public nuisance claims.

To learn more about this case, I invite you to read an article I recently published.