Private environmental litigation - friend or foe?

Arkansas Business, May 22, 1995 by James F. Goodhart

Civil and criminal penalties imposed by the Environmental Protection Agency (EPA) have reached a record high. The potential for environmental liability affects nearly every real estate and financial transaction, whether involving the sale of a multi-million dollar industrial facility or refurbishing a gas service station. Large and small companies alike are having to wrestle with insurance companies for payments needed to address the consequences of past practices. Smaller businesses such as paint shops, drycleaners, bakeries and print shops are on the verge of having to procure new federal air permits and comply with strict pollution regulations resulting from the 1990 Clean Air Act Amendments. Even more requirements are expected as Congress considers revisions to environmental laws now up for reauthorization.

Businesses are also increasingly becoming involved in civil litigation with private third parties over environmental matters. Consider the following Arkansas cases:

* A poultry processing plant required to monitor its discharge into a nearby stream under a state-issued water permit increased its live-chicken production. The waste-water treatment system experienced difficulty handling the larger volume and before new treatment equipment was installed, the plant reported exceeding several pollutant limits. Although the plant's management had been communicating directly with the Arkansas Department of Pollution Control and Ecology (ADPC&E) about the planned modifications, a law suit was filed against the company by a state environmental organization.

* A wood fiberboard processing plant is permitted to emit wood dust and other air contaminants, including volatile organic compounds and formaldehyde. Due to the nature of the bonding, drying, and other process operations which take place largely outdoors, the plant has had difficulty capturing some of the emissions. New air regulations in the wake of the 1990 Clean Air Act Amendments are now imposing tighter emission requirements upon the industry as a whole and should significantly cut back on emissions from the facility. Nevertheless, surrounding property owners recently sued claiming they have already suffered damages from exposure to the plant's air emissions.

* Between 1974 and 1988, a licensed solvent-recovery, fuel-blending, and waste-brokerage business in Northeast Arkansas received over 68 million pounds of hazardous wastes from a multitude of businesses, both large and small. After the refinery was ordered to shut down, it abandoned its operations which included approximately 20,000 drums of hazardous substances, many of which had already been spilled, were leaking, or were in poor condition. A group of companies identified as having generated or transported waste materials to the site subsequently entered into a voluntary settlement with ADPC&E to pay for cleanup at the site. The group of companies, which ultimately grew in number to more than 400, pursued through private litigation those businesses which refused to voluntarily contribute toward payment of the cleanup costs.

Environmental Citizen Suits

In the early 1970s, Congress wrote specific provisions into the Clean Air Act and Clean Water Act expanding the role of citizens and environmental groups in enforcement of pollution control requirements.

A typical environmental citizen suit provision authorizes any person to commence an action either (1) to enforce requirements of the statute against any other person or entity alleged to be in violation of a standard, limitation, permit condition or agency order, or (2) to require the government to perform a mandatory act or duty specified in the statute. A citizen plaintiff must provide advance notice (typically 60 days) to EPA, the State, and the proposed defendant before filing suit and is prohibited from bringing suit if EPA or the State is already "diligently prosecuting" an enforcement action. The federal district courts are authorized to order injunctive relief to enforce the applicable requirements and, under most statutes, can impose civil penalties (e.g. $25,000 per day per violation) against the violator. Citizen enforcement is encouraged by allowing plaintiffs to recover their litigation costs, including attorney's and expert witness' fees; however, frivolous and harassing suits are discouraged by authorizing cost awards to prevailing defendants.

The 1980s witnessed a "veritable explosion" in citizen suits filed primarily under the Clean Water Act. The success of these cases prompted Congress to include similar provisions in nearly every major federal environmental statute or amendments subsequently enacted, including the Endangered Species Act (ESA); the Resource Conservation and Recovery Act (RCRA); the Toxic Substances Control Act (TSCA); the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund); and the Emergency Planning and Community Right-to-Know Act (EPCRA).

In Arkansas, one organization - the Arkansas Wildlife Federation has prosecuted a half dozen citizen suits during the past four years. Most of the companies sued chose to settle rather than proceed to trial. One widely reported settlement resulted in a poultry processor paying a total of $950,000. ZENECA Inc. (formerly named ICI Americas Inc.), which operates an agricultural chemical formulation facility in North Little Rock, successfully defended a suit the Wildlife Federation originally filed in 1991. In February, 1995, the U.S. Supreme Court upheld two lower court rulings which dismissed the suit in favor of ZENECA.