Courthouse Steps Decision: Atlantic Richfield Co. v. Christian

[Music]

 

Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at fedsoc.org.

 

 

Micah Wallen: Welcome to The Federalist Society’s Teleforum Conference Call. This afternoon’s topic is a Courthouse Steps Decision Teleforum on Atlantic Richfield Co. v. Christian. My name is Micah Wallen, and I’m the Assistant Director of Practice Groups at The Federalist Society.

 

      As always, please note that all expressions of opinion are those of the expert on today’s call.

 

      Today, we are fortunate to have with us Jonathan Wood, who is a Senior Attorney from the Pacific Legal Foundation as well as a Research Fellow at the Property and Environment Research Center.

 

      After Jonathan gives his opening remarks, we will then move to an audience Q&A. Thank you for sharing with us today. Jonathan, the floor is yours.

 

Jonathan Wood:  Thanks, Micah, and thank you to The Federalist Society for organizing and hosting this call.

 

      On April 20, the Supreme Court released its opinions in Atlantic Richfield Co. v. Christian, an under-the-radar case that could have pretty significant implications for property rights, federalism, and the environment. The issue in the case is whether property owners within a designated Superfund site can sue a neighboring polluter for damages under state law in order to restore their property. The polluter argues that CERCLA preempts those claims and that once EPA approves a mediation plan, that’s all landowners can possibly get. That question would have real implications for lots of other contexts where you may have different standards for federal and state law. In particular, there was some expectation this case would affect the ongoing climate change nuisance suits, which are probably the highest profile preemption challenge in the environmental space.

 

      Fortunately or unfortunately, depending on your perspective, the Court ultimately punted that big issue and instead decided the case on the grounds that, under CERCLA, which is the Comprehensive Environmental Response, Compensation, and Liability Act, anyone who owns polluted land within the boundaries of a Superfund site is a, “potentially responsible party” under the statute and therefore can only remediate their land, whether at their expense or someone else’s, with EPA approval. Since that procedural step hadn’t been done here, the Court held that the case couldn’t proceed until the plan is submitted to EPA and that there was no opportunity to resolve the other questions in the case.

 

      The facts of the case are really, actually, quite stark. From the late 1880s to about 1980, the Anaconda Smelter Stack dumped tons of heavy metals, arsenic, and lead on surrounding properties every single day. And over time, the buildup of these pollutants was extremely significant, so much so that, in 1983, EPA designated a 300-square-mile area around the stack as a Superfund site. It’s one of the largest Superfund sites in the country.

 

      EPA and the polluter, the company that owned the stack, eventually negotiated a settlement of the CERCLA claims that provided for Atlantic Richfield to spend approximately $450 million implementing a cleanup plan based on standards negotiated with the Agency. This work is ongoing, and there’s a preliminary estimate that it may conclude as soon as 2025. That seems unlikely. Based on the opinions and based on most of the filings in the case, this is a cleanup that is likely to continue for a while. However, 98 landowners sued because the cleanup is done at least with regards to their property.

 

      And, despite the big price tag for the cleanup, it is something far short than an entire cleanup.

      If you divide the 450 million over the entire 300-square-mile area, you’re talking only about $2,000 an acre. And, so, instead of cleaning everything, the settlement provides for Atlantic Richfield to focus on some properties. The 98 landowners’ complaint is that only about 5 percent of their land was touched and the rest of it remains highly polluted even though it’s residential property, that their land has levels of arsenic and lead that wouldn’t be tolerated anywhere else. And they have a fair point there.

 

      The cutoff the EPA and the polluter negotiated was that land would only be remediated if it had greater than 250 parts per million of arsenic. Now, by comparison, federal regulations say that 100 parts per million is too much for a landfill. Other Superfund sites use 25 parts per million, and states set standards as low as .04 parts per million. So we’re talking about a lot more arsenic on these properties than is generally allowed anywhere else. The landowners claim that under state law they have a right to take the company to court under Nuisance and Trespass and get money not only for lost value, but also to finally fully restore their property.

      The Montana Supreme Court agreed with them and held that that is a valid state-law claim and that nothing in CERCLA preempted, and that is what would ultimately be reviewed by the Supreme Court.

 

      The petition raised three distinct questions and, as I indicated in the beginning, the Supreme Court ultimately decided only to resolve the first two, which are the relatively less high-profile questions. The first was a jurisdictional question: One, can the Supreme Court review this case? And two -- or a two-part jurisdictional question, I should say -- one is can the Supreme Court review an appeal that looks like an interlocutory appeal within the state court, and two, did the Montana Supreme Court have jurisdiction? Do state courts have jurisdiction to consider cleanup cases like this in the first place?

 

      The majority dispensed with both of those issues pretty quickly. On the first point, they held that, as a matter of state law, the particular type of [inaudible 00:06:12] writ proceeding in this case is treated as a stand-alone case under Montana law rather than interlocutory appeal, though for that reason, the Supreme Court had jurisdiction to review the case. And on the CERCLA, the state-court-jurisdiction question, the Court looked to CERCLA, which says that federal district courts have exclusive jurisdiction for claims, “arising under” CERCLA.

 

      In analogizing to the general grant of federal jurisdiction, the Court interpreted that to mean that only claims that exist because of CERCLA are covered, and any other claim, like these that come under state law or common law, are simply outside the bounds of that provision. Justice Alito, who concurred in the judgment, wrote a partial dissent on that point. He thought the statutory interpretation question was much more complicated and shouldn’t be decided in this case because there are bound to be many other cases down the road with really complicated facts, and it’s not clear what the overall consequences would be. So, rather than decide an issue that is extremely complicated, he would have just decided the case under the next issue I’m going to talk about, which is the potentially responsible-party issue I mentioned at the top.

 

      Under CERCLA, whenever EPA designates a site for study, there’s a provision in the Act regarding settlements that says essentially the status quo has to be maintained. EPA can’t go do a cleanup and try to charge the polluters, and the polluters can’t try to do a cleanup and charge everyone else. CERCLA, like some other federal environmental statutes, has a pretty significant, strict liability regime that would impose liability on anyone who contributed to the pollution as well as possibly some other parties. And, so, the concern is, if someone sees EPA is coming in, will they go and run up a bunch of costs and then try to shift those onto someone else?

 

      So this provision says that no potentially responsible party can do anything, take any sort of remedial action on the site, without EPA approval so that the status quo is maintained until EPA negotiates a settlement that includes a final cleanup plan. Here, as I said, that happened back in the ‘80s. So the landowners are saying, “Well, that obviously can’t apply to us. We’re not potentially responsible parties for two reasons. One, we’re completely innocent landowners. The company polluted our property; we didn’t. And, two, even if we could have been treated as a potentially responsible party, the time for EPA to identify us and include us within the settlement ran decades ago. So, at this point, any question about our status is purely academic.”

 

      The majority rejected those arguments. It treated potentially responsible party as a status that exists forever. It’s a phrase that is not defined in the statute, so the Court looked to other provisions to try to figure out who might fit within this potentially-responsible-party designation. And it looks to the liability provisions of the statute, which identify classes of persons who can be sued by EPA. And that is an extremely broad provision that includes anyone who owns polluted property or has, essentially, ever touched a polluted property. And, then, there are a series of carve-outs to make sure that truly innocent people can’t actually be held liable, but the basic presumption is everyone is in, and, then, the onus is on you to show that you get out. The Court equated, or treated potentially responsible party as essentially just a stand-in for covered persons in this other section. And, because these landowners owned polluted property within the boundaries of a Superfund site, the Court deemed them potentially responsible parties.

 

      In addition to the statutory-language question, the Court also rested its argument on Congressional intent and policy. The concern seemed to be for the majority that, if you didn’t give EPA this authority to review and approve all cleanup plans, you run the risk that thousands of landowners will all pursue their own independent and possibly conflicting cleanup plans, which could cause all sorts of financial and environmental chaos. The sense was that Congress, in creating this regime, had the goal of creating one unified, comprehensive plan overseen by EPA.

 

      And, so, for that reason, the Court was willing to accept a seemingly unfair consequence that these landowners, who hadn’t contributed to the pollution and realistically never could be actually liable or responsible for the pollution, could nonetheless have this obligation imposed on them, that, again, whether at their expense or someone else’s, if they want to do anything to remediate their property, that has to go to EPA. And, since EPA participated in the case’s amicus and file on the other side, there’s some concern, some likelihood, that EPA will ultimately decide that this cleanup is either too costly or rated environmental harms and has to be rejected. But we can get into that a little bit later.

 

      On that main holding of “anyone who owns polluted land within a Superfund site is a potentially responsible party that needs EPA permission,” the Court was 7-2, with Justices Gorsuch and Thomas dissenting, and their dissent was a really powerful argument that I think tees up questions that you’ll see in a lot of future cases, not only under CERCLA, but in some of the other preemption issues that I highlighted at the top.

 

      So according to Justice Gorsuch and Justice Thomas, since potentially responsible party isn’t defined by the statute, it should be given its ordinary meaning. It is simply absurd, in their view, to call an innocent landowner, whose property has been polluted by someone else, responsible for that pollution. That it is inconceivable EPA would never actually try to make them financially responsible; there is a policy that’s been in place since the ‘90s to never go after innocent residential landowners like the property owners in this case. And, as I said earlier, the time for trying to make them responsible has long since passed. So, according to the dissent, there is simply no basis, using the ordinary meaning of the phrase “potentially responsible party,” to treat these landowners as that.

 

      The dissent also disputed the equating of covered persons and potentially responsible parties. Those phrases appear many times in the statute and seem to possibly refer to different things. And the dissent faulted the majority of equating them without any real explanation. The analogy that the dissent evokes is all squares may be rectangles, but not all rectangles are squares, that “covered persons” is the broadest possible category identified in CERCLA. It’s everyone EPA could conceivably sue, including people that clearly can’t be made responsible. And that’s why “covered persons” isn’t followed by all the exemptions I mentioned earlier, including innocent neighboring landowners, whereas “potentially responsible parties” is the meat of the case. Those are the people who have to be included in every settlement and every remedial plan. They’re the people who are actually responsible and they’re going to be forced to pay. So, for that reason, the dissent also rejected the idea, setting aside the difference in language, that purpose might suggest these two phrases should be given the same meaning.

 

      The dissent also argued that both the preemption question the Court didn’t reach and the potentially responsible party question it did raised significant constitutional questions that the Court tries to sidestep, the two most important being that, if CERCLA requires innocent landowners like the parties in this case to accept pollution on their property for some unknown period of time and perhaps forever, that would seem to be a pretty clear violation of the Takings Clause under Loretto, to which they’d be owed some sort of compensation, and there’s no language in the statute that seems to accept that premise or assume that premise or clear mechanism for deciding how EPA or when EPA must pay landowners when it imposes this sort of obligation.

 

      And the second major constitutional concern is where the federal government gets the power to control what innocent landowners do with their own land. The dissent notes that, although remedial action can be a really broad and big activity, it can also be triggered by more mundane activities when you have heavily polluted land like this. So maybe the landowners could plant a flowerbed, but if they wanted to do more serious digging for, say, a septic tank, that removed arsenic-laced soil, that likely would require EPA approval. And where does EPA or the federal government generally get the constitutional authority to regulate that? Even under the Court’s broadest Commerce Clause precedent, the mere local activity of moving dirt around on your own property doesn’t seem to be the kind of thing that could be characterized as interstate commerce.

 

      And, as I said, the majority largely punted on those questions and left those for another day, so I think one of the interesting aspects of the case is that, since so little is left resolved, I think you’ll ultimately see the opinion used in future litigation as a roadmap of what each side should argue to try to resolve those questions. And, in many ways, the dissent reads as a sort of step-by-step “here are all the arguments you need to make” based on what EPA does to raise some of these problems.

 

      And, finally, the dissent rejected the idea that CERCLA preempts state-based claims for remediation. According to it, “CERCLA was intended to supplement the existing state regime for Nuisance and Trespass. Since time immemorial, the way these sorts of pollution conflicts have been resolved is by landowners suing in state court under Nuisance and Trespass. Not only does CERCLA say nothing about ending that regime, there are actually three separate saving clauses that seem to confirm that Congress intended to preserve it and only provide CERCLA as an additional supplementation, additional support, for the existing regime. And the dissent actually closes the phrase -- I’ll quote because I can get some of the power of the language and why I think we’ll see it coming up a lot more. They characterize the majority’s interpretation as “stripping away ancient common-law rights from innocent landowners and forcing them to suffer toxic waste in their backyards, playgrounds, and farms. Respectfully, that is not what the law was written to do. That is what it was written to prevent.”

 

      So there really is this clash on what is the ultimate policy intended here. What is EPA supposed to be doing? The majority sees it as EPA is designing one comprehensive, expert plan that governs everything else, whereas the dissent sees CERCLA as really providing support for an existing state-law regime to try to resolve conflicts over pollution. And, because the majority’s opinion is so narrow, that conflict’s not likely to go away. Depending on what EPA does when this and similar plans are submitted to it, I expect you’ll see a lot of these arguments coming up.

 

      I have a few more things to say about that, some of the open questions left in the case, but I do want to leave time for questions, so I will ask Micah to come back in and open the floor so you guys can start lining up and asking questions.

 

Micah Wallen:  Absolutely. Let’s go ahead and get that floor mode opened. So, Jonathan, in the meantime, back over to you.

 

Jonathan Wood:  Thanks, Micah.

 

      As I hinted, because the majority’s opinion resolved so little, I think the most interesting thing about the case is what it opens up for future litigation. So even in the narrow question of how does CERCLA work going forward, there are a lot of open questions. The biggest one, I think, is, when the landowners submit their plan to EPA, how does it review a state-law-based remedial plan? Does it apply the standards that would ordinarily govern for CERCLA cleanup plans or does it create some new standard to review that? Since there’s nothing in CERCLA about state-law plans, this is really a new and open question. And perhaps the most important part of that, a piece of that dispute will be to what extent should the Agency consider costs for the polluter?

 

      As I mentioned, this cleanup plan very much was a settlement. It balanced the cost to do the cleanup with the human and environmental impacts of the pollution. I expect the landowners will say, “You can’t do that to our plan because under state law we don’t have to worry about the cost. The polluter is obligated to pay to remediate our properties and, so, that’s simply irrelevant.” There’s nothing in CERCLA to answer that question, so it’ll be interesting to see how EPA tries to resolve it.

 

      Another question, I think, will be what do landowners do if EPA says, “You can’t do your plan.” The dissent, as I said, provides pretty strong constitutional arguments that there would be a taking in possible violation of the Commerce Clause. Can the landowners sue the Agency if they deny the plan or change the plan and demand that EPA compensate them for the lost remediation or have us basically redo this case again on the question of whether EPA, even constitutionally, can reject landowner plans for their own property? Because the majority doesn’t speak to that, there’s no clear answer about what extent and under what circumstances the Commerce Clause would allow EPA to say you can’t do what you want on your own property. And then, hopefully, it will tee up some questions.

 

      But the other big question about the case is how far does it reach beyond the CERCLA context? As I mentioned, the biggest conflict right now on preemption and the environment is probably the climate change nuisance cases going on in a variety of state and federal courts. Generally, the defendants in those cases are making arguments very similar to what the defendants made here, which is that we have a federal standard; we’re complying with it; and it implicitly preempts state standards beyond that.

 

      Generally, the federal courts, including the Supreme Court, have rejected that type of argument. This is the first time where the defendants got at least a partial win. So I expect you’ll see a lot of both the majority and the dissent’s opinion quoted extensively in those cases as they proceed, particularly Justice Gorsuch’s opinion explaining about the way federal environmental law is supposed to work with, as opposed to against or controlling, state environmental law.

 

      So, Micah, do we have any questions lined up in the queue?

 

Micah Wallen:  I just saw a question come through now, so we’ll go ahead and move to that caller.

 

Caller 1:  Yes, thank you. I’ve been away from Superfund for quite a long time, but for 20 years I did quite a bit of it. So I’ve lost touch with even the court cases, but I had quite a number of cases in which the state was involved, as well as the Federal EPA, and invariably the PRPs were obliged to negotiate -- the potentially responsible parties were obliged to negotiate with both the state and the fed, sometimes in tandem, sometimes separately. And the feds under both administrations, Republican and Democrat, were amenable to compelling the responsible parties to do cleanups that accommodated the state’s cleanup objectives.

 

      The settlements, the consent decrees, when they were ultimately negotiated and entered in the district court, were those decrees in which the state acquiesced, not always as a signatory but at least a non-signing party that agreed to accept that as a settlement, so that the PRPs could go forward without fear of being sued by the states. The issue of whether the states had jurisdiction, when I was involved, to initiate litigation had not been challenged in court, and I don't know that it has been since then. But I know in a number of my cases my clients were sued by both the federal and the state environmental agencies so that we routinely negotiated with both in order to achieve settlements.

 

      As far as innocent landowners go, I know EPA, after I was no longer active, did come out with a set of regulations to accommodate innocent landowners. The Agency set some standards by which people who thought they qualified for the status of innocent landowner would apply and be approved. If they did get approval as an innocent landowner, they would be immune from liability under the statute.

 

      But, in this particular case—and I’m not familiar with this case—it seems to me Atlantic Richfield had lost a couple of Supreme Court cases involving Superfund, so I’m not sure who they’re hiring to do their work, but maybe they ought to think about looking elsewhere. In any event, the landowners here, it seems to me—maybe they did; I don't know—should have sought to intervene in the litigation if a lawsuit was filed. Normally in order to enter a consent decree, the government will eventually file a lawsuit even if it starts out negotiating with the PRPs. And, actually, in order to enter a consent decree, of course, they’d have to file the lawsuit. So there is an opportunity for affected parties to seek intervention, and the landowners here might have been better advised to intervene in that litigation and seek accommodation of their demands in that context.

 

      Secondly, they would have been better advised—maybe they did. I shouldn’t say better advised. They might have been advised to work with EPA using their own counsel, using the landowners’ own counsel—to negotiate more stringent cleanup standards. I realize the EPA is going to seek to get a universal cleanup program done, and then they’re not going to be inclined to let small blocks of land detract from the major overall objective. But it’s quite conceivable to me that the individual landowners could easily convince the EPA, at least the EPA that I…

 

      Jonathan Wood:  Hopefully -- we may have lost the caller. Either that or I’ve been kicked off the call. I hope not the latter. Micah, just checking for you can hear me, right?

 

      Anyway, I’m going to try to answer the question that he sent. It was a question. I think that it’s certainly a fair point of what should a landowner who finds himself in those situations do going forward? Is it better to try to participate on the front end and get the best deal you think you can or wait? Here, we may find out soon what the EPA thinks of the landowners’ plan, but there are twists and ironies to all of those possible options.

 

      So, at the front end, it’s true that a landowner in these landowners’ position has an opportunity to comment on a proposed cleanup plan. If a case is started, they can intervene and say that it’s insufficient under CERCLA, but that may be a different question than whether the cleanup complies with the state law. So then it may be a question of what do you do where the common-law right is actually more protective than CERCLA? And, then, the question of what do you do now?

      The potentially-responsible-party provision of it said, “…only applies during dependency of the ongoing CERCLA cleanup.” So, according to even the majority, if landowners simply wait, they can do whatever they want. And that’s one of the ironies of the outcome here. For all of the talk about a complete and comprehensive federal plan, long term, everyone agrees that CERCLA provides for the federal government to eventually leave and take the site out of Superfund so that state law is once again clearly the only law that applies.

 

      So that, I think, will be another interesting question in this case. Given that we at least might see the work done by 2025, will the landowners eventually face the question of accepting some modified plan the EPA is willing to approve or simply wait EPA out and let the site be undesignated? And then the case can resume as normal, solely under state law.

 

Micah Wallen:  All right. No other questions in the queue. So, Jonathan, did you have any closing remarks for us today?

 

Jonathan Wood:  I think that I said the case has been largely under the radar, I think, because CERCLA, like a few other statutes, are so complicated that it’s difficult for people that are non-experts in the statutes to follow the case and feel engaged. And that’s something that both the majority and the dissent were quick to acknowledge. One of the clearest truths about CERCLA is that it is not an artfully-written statute. There’s no way, really, to read it just according to ordinary language and get something that makes sense. Courts have long tried to turn the statute into something that works, and I think that likely explains the majority’s outcome here. But the general principles at stake have far broader application and consequences, and that’s why I think -- and that’s where I think the Court’s opinions ultimately have the broadest effect.

 

      As I said, I expect that every preemption case going forward on federal versus state environmental regulation will fight extensively the policy arguments inherent in the majority and the dissent’s argument because they relate almost perfectly with the arguments that come up in all of these cases. Do you want federal regulation to not only be a floor but a ceiling because you want one final, universal, comprehensive answer from EPA or whichever federal agency is regulating, or do you want to embrace federalism so that in some states some property owners get a better deal than others? And that conflict is rampant throughout all of these conflicts. That, I think, will be the issue to watch. As these cases proceed under different statutes, including the climate-change cases, to what extent do those themes develop as the primary themes which may, over time, sort of sway the judges to get a different alignment?

 

      As I said, an unusual outcome in that it’s the first time the Supreme Court has sided with the polluter in one of these preemption-conflict cases. It did so under language unique to the statute, so it may not suggest a similar breakdown would happen in the future, but I expect the fairness and constitutional arguments that Justice Gorsuch and Justice Thomas raised to have a lot of sway in future CERCLA cases as well as in future cases raising other preemption arguments. There really does seem to be something unfair that appeals at least to those two justices, though I imagine in time you’ll see a lot of lower courts at least express some sympathy to this idea that someone who did nothing wrong, who simply is the victim of pollution, can have their rights taken away as a result of a federal regulation with no clear means of compensation.

 

      The property-rights sacrifice that happens under that kind of regime -- it’s the kind of thing that I don’t think you’ll see -- it’s not resolved by the majority opinion and likely will have to be resolved because of everything that -- here, for instance, the dissent emphasizes this isn’t just landowners who are concerned about lost value. These are people who are concerned about their homes. There’s nowhere else in the world where they’re going to find a home that has the markings for their kids’ heights at each birthday. These are things that people care deeply about. As the case proceeds and as other cases come up, I think you’ll see those kinds of arguments stressed even more.

 

      But, with that, I think I have no others on, so, if there are no more questions, we’ll conclude early.

 

Micah Wallen:  All right. Well, on behalf of The Federalist Society, I’d like to thank our expert for the benefit of his valuable time and expertise today. We welcome listener feedback by email at [email protected]. Thank you all for joining us. We are adjourned.

 

[Music]

 

Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.