Preparing for and Negotiating or Defending Civil Environmental Enforcement Actions
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1 Preparing for and Negotiating or Defending Civil Environmental Enforcement Actions Robert Brager Laura McAfee
2 I. The Prologue: Rules, Permit Terms, and the Unknown Help develop acceptable regulations Accept only achievable permit terms Have documented, comprehensive environmental compliance systems 59
3 II. Initial Assessment/ Voluntary Reporting Issues Are legal duties involved? What if the Golden Rule applied? Do you recommend investigation? What are the consequences? Do you recommend disclosure? What are the consequences? Is there an applicable audit policy? What is the relationship with regulatory agencies? 60
4 III. Civil Enforcement Triggers Environmental incidents and/or operational difficulties Agency enforcement initiatives Regulatory information requests Notices of Violation and/or Findings of Violation Citizen suit notice letters 61
5 IV. Preparing to Respond: Immediate Steps Institute litigation hold and privilege requirements Analyze the setting Standard enforcement Global enforcement initiative Citizen suit Other 62
6 IV. Preparing to Respond: Evaluating the Facts Review the information request, notices of violation, and/or findings of violation (if any) Evaluate the allegations against documentation of the events in dispute Review the claims and documentation with technical staff Ascertain whether there are exculpatory facts The allegations are not consistent with the facts as we reported them, and the reports are accurate The reports are accurate, but also are incomplete, and the additional facts are exculpatory The reports are inaccurate The incidents were beyond our control (malfunctions) 63
7 IV. Preparing to Respond: Exposure Assessment Evaluate the defenses (detail in Section VI) Determine potential exposure Potential for IRS (Information Request Syndrome) The statutory penalty amount EPA s Civil Penalty Policy Economic benefit 64
8 IV. Preparing to Respond: Exposure Assessment (cont.) Mitigating factors Good faith Lack of willfulness and negligence Cooperation with EPA Ability to pay/size of violator enhancement (CAA, not CWA or RCRA) Compliance trend/record of improvement Litigation risk Market value Settlement of similar cases Potential injunctive relief Cost Address potential impact on economic benefit component Transaction costs 65
9 IV. Preparing to Respond: Psychological Preparation Identify your goals: Direct cost minimization Penalties Injunctive relief Attorneys fees Yours If citizen suit: your adversary s Minimizing collateral damage Toxic tort exposure Impact on plant operations Impact on competitiveness Agency/company relationship Setting/avoiding precedent Client reputation Other 66
10 IV. Preparing to Respond: Evaluate Your Adversary Identify your adversary s goals Demonstrable pollution reduction Pollution reduction on paper Money/penalties Supplemental environmental projects (especially in environmental justice areas) Other 67
11 IV. Preparing to Respond: Select Initial Strategy Initial decision point: Based on exposure assessment, determine whether to settle quickly Agree to initial negotiations Even if pursuing litigation option Get a read on your adversary Optics 68
12 V. Consent Decrees: Negotiations Key negotiation considerations The person who can walk away controls the negotiation Whether there is a long term relationship Regulators: yes Citizens groups: maybe yes, maybe no Whether initial pushback is important to profit from negotiations, and if so, the consequences 69
13 V. Consent Decrees: Understand Settlement Parameters Emission limits Injunctive relief Work practice standards Installation of specific emission control equipment Enhanced emission monitoring Fuel or raw material usage restrictions Penalties Civil penalties 70
14 V. Consent Decrees: Understand Settlement Parameters (cont d) Incorporation into federally enforceable permits Supplemental environmental projects Nexus to alleged violation Cost/benefit to company Extent of penalty offset Reporting and recordkeeping 71
15 V. Consent Decrees: Decision to Settle Adversaries may attempt to impose Consent Decree obligations that reach beyond compliance Determine acceptability of Consent Decree components If unacceptable, default to litigation option 72
16 V. Consent Decrees: Modification Reasons to modify: Cannot comply with some of the CD terms Timing Pollution control equipment does not work as anticipated Other How to modify: Early assessment of the stakes (timing, stipulated penalties, force majeure) Understand the balance of power Negotiate the consideration: additional emissions reductions, possibly different control equipment, possibly additional penalties 73
17 V. Consent Decrees: Termination Termination language Payment of all penalties Installation of all control equipment required Application and receipt of permits incorporating the surviving emission limits and standards of the CD Compliance with CD terms 74
18 V. Consent Decrees: Termination (cont d) Underlying facts: Facts need to be presented in manner that makes it difficult for government to argue that there is noncompliance Relationship between parties 75
19 VI. The Litigation Option: Evaluate Potential Defenses Procedural or constitutional defenses Res judicata: A federal consent decree has a preclusive effect on citizen suits alleging claims covered by the consent decree Collateral estoppel: Precludes relitigating issues previously litigated with a party in another case involving virtually identical facts Lack of jurisdiction: Jurisdiction must be established as a threshold matter Lack of jurisdiction for citizen suits: Sending a notice letter is a jurisdictional pre-requisite for statutes allowing citizen suit enforcement. If letter was not sent or did not properly identify the violations, then a complaint can be dismissed (usually without prejudice to refile after a proper notice is sent). 76
20 VI. The Litigation Option: Evaluate Potential Defenses (cont d) Procedural or constitutional defenses Standing for citizen suits: Standing exists only where respondent s discharges/emissions, and petitioners reasonable concerns about those discharges/emissions, directly affected petitioner s recreational, aesthetic, and economic interests, and where court can provide redress for the alleged injury to these interests Vagueness: The regulation allegedly violated is unduly ambiguous or is inapplicable Due process (Fair Notice): We did not receive fair notice of the rule s applicability 77
21 VI. The Litigation Option: Evaluate Potential Defenses (cont'd) Statutory defenses Lack of statutory authority for the regulation being enforced Lack of statutory authority to interpret the regulation being enforced (e.g., EPA delegated to the state the authority to interpret the regulation, and the company has complied with the State s interpretation of the regulation) The statute of limitations 28 U.S.C (complaint filed 5 years from when claim accrued) Absent fraud, the discovery rule does not apply It is unlikely that the violations (except for failure to obtain an operating permit) will be considered continuing The statute of limitations may apply to claims for injunctive relief 78
22 VI. The Litigation Option: Evaluate Potential Defenses (cont'd) Regulatory defenses Plaintiff s interpretation of the regulation is incorrect The claims are based on guidance rather than on the regulation The federal or state rules that form the basis for the enforcement action have been invalidated by the courts A different regulation applies There is a conflict between two federal regulations or between a federal regulation and a state regulation that has been approved by EPA 79
23 VI. The Litigation Option: Evaluate Potential Defenses (cont'd) Regulatory defenses The federal government cannot enforce a purely state regulation, or, for RCRA (but not HSWA), federal regulations cannot be enforced in an authorized state The data upon which the plaintiff relies cannot be used for enforcement purposes. See the credible evidence rule. EPA or state enforcement proceedings preclude citizen suits for same violations Did not own the facility at the time of the alleged violation 80
24 VI. The Litigation Option: Evaluate Potential Defenses (cont'd) Evidentiary defenses re scientific evidence Can scientific evidence be excluded at trial by challenging sampling methods, chain of custody or reliability of analysis? Can a Daubert challenge be brought against government experts to exclude scientific opinions? Can lab records be challenged using authentication or hearsay objections? 81
25 VI. The Litigation Option: Evaluate Potential Defenses (cont'd) Corporate liability defenses Was the employee acting within the scope of employment and in accordance with company policy? Did the employee intend to benefit the corporation? Can the employee s actions be imputed to the corporation? 82
26 VI. The Litigation Option: Identify the Defense Strategy The preemptive strike pre-enforcement review Determine the utility of filing dispositive motions Setting/avoiding precedent Cost Likelihood of success Style of dispositive motions Motion to dismiss Motion for summary judgment Motion for entry of final judgment 83
27 VI. The Litigation Option: Identify the Defense Strategy (cont'd) Set the tone of litigation through discovery (minimizing the impact of discovery on you and/or maximizing the impact of discovery on the adversary) Nuclear war (constant, massive discovery) Conventional war (episodic, substantial discovery) Tactical strikes (limited discovery) Self-defense (responsive discovery) Informal discovery Constantly revisit your options and objectives (maintain perspective) 84
28 VI. The Litigation Option: Resolution Settlement Pretrial judicial resolution Trial 85
29 Questions?
30 Thank you! Robert Brager Laura McAfee
31 Robert Brager Mr. Brager, a former Managing Principal of Beveridge & Diamond, P.C., is located in the Firm's Baltimore, Maryland office. He is both a litigator and a counselor. Mr. Brager represents clients in product liability litigation involving alleged toxic torts to land, such as when every day compounds such as gasoline and dry cleaning solvent enter the environment. Mr. Brager also represents companies in all other types of contaminated property litigation, such as cost recovery and natural resource damages litigation under the Comprehensive Environmental Response, Compensation, and Liability Act and related state laws. Principal 201 North Charles Street Suite 2210 Baltimore, MD (T) (410) rbrager@bdlaw.com EDUCATION Columbia University (B.A., 1975; magna cum laude, Phi Beta Kappa) London School of Economics (M.Sc., 1976) Columbia University (J.D., 1979, Harlan Fiske Stone Scholar) BAR ADMISSIONS & MEMBERSHIPS State Bars: New York; District of Columbia; Maryland Federal Courts: U. S. Supreme Court; U.S. Courts of Appeals for the District of Columbia, First, Fourth, Fifth, and Tenth Circuits U.S. District Courts: District of Columbia; District of Maryland; Southern, Northern, and Eastern Districts of New York; Southern District of Texas; Northern District of California; District of Colorado Mr. Brager also represents companies in permit, variance, and enforcement proceedings (administrative, civil and criminal) under the Clean Air Act and the Clean Water Act. He also represents individuals who have been charged with being operators under the Clean Air Act. Mr. Brager also represents clients in a variety of non-environmental litigation, including such diverse subject matters as breach of contract, defamation, and toxic tort. Mr. Brager s counseling practice involves all aspects of environmental compliance, with particular focus on the Clean Air Act. Mr. Brager has extensive experience providing counseling with respect to a number of Clean Air Act regulations, ranging from the Benzene Waste Operations NESHAP and Vinyl Chloride NESHAP, to Refinery MACT and Fiberglass MACT, to New Source Performance Standards for petroleum refineries and storage tanks, to Prevention of Significant Deterioration and Non-Attainment New Source Review. Mr. Brager represents trade associations and companies in rulemaking proceedings under the Clean Air Act (including the air toxics and enforcement sections of that Act) and the Clean Water Act. Mr. Brager lectures and publishes articles on the air toxics, permitting, and enforcement provisions of the Clean Air Act, as well as on cost-effective means of avoiding and defending against enforcement actions and prosecuting and defending cost recovery and natural resource damages litigation. Mr. Brager served as law clerk for Judge Aubrey E. Robinson, Jr. of the United States District Court for the District of Columbia. Mr. Brager has been elected by his peers for inclusion in The Best Lawyers in America, and has also been selected for inclusion in Super Lawyers Edition 2011, 2012 and PUBLICATIONS Texas Environmental Rule Could Have Nationwide Impact EPA Issues NSR Reform Package WASHINGTON, D.C. MARYLAND NEW YORK MASSACHUSETTS NEW JERSEY TEXAS CALIFORNIA
32 Laura K. McAfee Ms. McAfee is a Principal in Beveridge & Diamond's Baltimore office, Co-Chair of the Oil & Gas Practice Group, and former Chair of the Firm's Air Practice Group. Her practice is devoted primarily to Clean Air Act matters, including both environmental counseling and litigation. Ms. McAfee has represented natural gas companies, petroleum refineries, chemical companies, trade associations, manufacturing companies, and others in a wide range of permitting and compliance issues under the Clean Air Act and comparable state laws. Principal 201 North Charles Street Suite 2210 Baltimore, MD (T) (410) lmcafee@bdlaw.com EDUCATION Carleton College (B.A., magna cum laude, Phi Beta Kappa, 1988) University of Texas (J.D., Order of the Coif, 1991) BAR ADMISSIONS & MEMBERSHIPS Maryland District of Columbia Colorado (currently inactive) New Mexico (currently inactive) American Bar Association Maryland State Bar Association She currently assists several refineries and chemical companies in their Clean Air Act compliance efforts, including the Benzene NESHAP, flaring, LDAR, a variety of NSPS and MACT standards, and permitting issues under the Title V and NSR programs. She is actively involved in advising and litigating on behalf of companies subjected to administrative, civil, and criminal enforcement actions under the Clean Air Act, including responding to numerous 114 information requests, defending companies targeted by EPA's national enforcement initiatives, successfully defending alleged criminal violations of the Benzene Waste Operations NESHAP, and obtaining dismissal of several citizens' suits. She has also assisted a number of natural gas companies in both their compliance efforts and enforcement defense, including wellsite permitting, compliance with MACT Subpart HH/HHH and NSPS Subparts GG, KKK, and OOOO, PSD permitting and source aggregation issues, 114 responses, and negotiations with state and federal agencies. Ms. McAfee also advises clients on facility assessment and audit issues under the EPA audit privilege and state audit laws. Ms. McAfee has also been involved in various safety-related compliance and litigation matters, ranging from worker exposure issues to electrical injuries. Ms. McAfee rejoined the firm in 2001 after several years with Colorado Interstate Gas Company, where she managed environmental compliance matters related to natural gas production, processing, storage, and transmission throughout the Rocky Mountain region, along with assisting various other refining and field services divisions of The Coastal Corporation. Major issues included multi-state compliance auditing, PSD, Title V, MACT Standards, NSPS, PCBs/mercury, CERCLA/EPCRA reporting hazardous and solid waste issues, site remediation, OSHA/PSM matters. WASHINGTON, D.C. MARYLAND NEW YORK MASSACHUSETTS NEW JERSEY TEXAS CALIFORNIA
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