About the author: Dan Kucera is a partner in the law firm of Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois 60603—4080, (312) 845—3000.
>Generally, environmental regulation of water and wastewater systems is dual in nature. The federal Safe Drinking Water Act (SDWA) and Clean Water Act (CWA) are administered and enforced by the United States Environmental Protection Agency. However, when states achieve primacy, they share permitting and enforcement responsibility under the SDWA and CWA with U.S. EPA and may even impose more stringent standards than those of EPA.Some times, this duality can lead to a "who’s on first" problem. For example, if a water or wastewater utility is sued by a state environmental agency for exceeding an NPDES permit parameter and enters into a consent judgment, can EPA later bring an enforcement action for the same permit violation? If such utility obtains a state variance from a permit parameter, is EPA bound by the variance? If EPA obtains an enforcement order against a utility, can a state agency subsequently bring a similar action?
This type of issue was addressed in a recent decision of the Virginia Supreme Court in State Water Control Board v. Smithfield Foods, Inc., 2001 WL 207248 (2001). Defendant was issued a pollutant discharge elimination system permit by the state agency that imposed more stringent limitations on phosphate discharges then required by the CWA. Defendant challenged the limit in state administrative appeals. Ultimately, the parties negotiated a state administrative order that allowed a discharge of phosphorus above the permit limitation for a period of time.
Subsequently, EPA advised the state agency that it intended to sue Defendant for permit violations and invited the state agency to join the action. The state agency declined and filed suit in state court to enforce the administrative order and permit. While the state action was pending, EPA filed its suit in federal court.
The federal court found that the state administrative order was not binding on EPA. The ruling was affirmed on appeal. United States v. Smithfield Foods, Inc., 191 F. 3d 516 (4th Cir. 1999), cert. denied, 121 S. Ct. 46 (2000). Interestingly, the Court of Appeals stated that the state’s enforcement scheme was not sufficiently comparable to that under the CWA.
Defendant then argued that the pending state enforcement action was barred by the doctrine of res judicata, which states that a final judgment on the merits of a claim bars the parties from further litigation based on that claim. However, the state agency argued that res judicata did not apply because, since it was not a party to the federal action, the two agencies were not in "privity," a necessary element for application of res judicata.
The Virginia Supreme Court stated that, although the state agency was not a party to the federal case, the prior judgment of the federal court could be preclusive if the agency otherwise was in privity with the prior action. Whether privity exists is determined on a case by case analysis, the court stated. "The touchstone of privity for purposes of res judicata is that a party’s interest is so identical with another that representation by one party is representation of the other’s legal right. . . . The question in this case, then, is whether the interests of [EPA] and [the state agency] are so identical that the legal right advanced by [EPA] in its federal action is the same legal right the [state agency] seeks to vindicate here." Id., p. 2.
The Virginia Supreme Court concluded that the interests of both agencies were vested in a single permit. "Two sovereign powers, the Commonwealth and the federal government, agreed that effective protection of their separate but mutual interests in clean water could be realized by qualifying the state regulatory program as provided in the CWA and thereby agreeing that the state program would be the entity issuing the permits designed to protect water quality. Even though, in the abstract, the state and federal government could each administer its own program to protect water quality, they chose to participate in this joint endeavor." Id.
Thus, the court held that the state agency and EPA share an identity of interest in the permit issued to Defendant, and the state agency’s legal right was represented by EPA in the prior federal action. Accordingly, the Court concluded, the state action was barred by res judicata.
The court cited Harmon Industries, Inc. v. Browner, 191 F. 3d 894 (8th Cir. 1999) that applied res judicata to conclude a prior judicially approved settlement with a state agency barred a subsequent action filed by EPA under the federal Resource Conservation and Recovery Act (RCRA) for the same alleged violations.
On a different twist, a federal district court recently held that EPA was barred by the doctrine of "collateral estoppel" from bringing suit because of a prior consent decree including the same issues in which it was involved. U.S. v. Sherwin Williams Co., 52 ERC 1117 (C.D. Ill. 2001). The court explained that the doctrine of collateral estoppel generally prevents a party from relitigating an issue that was previously litigated. It stated that a prior consent decree may be conclusive if the parties have indicated intent to give it a conclusive effect. The court found that all of the factors necessary for collateral estoppel were present. "(1) the issue sought to be precluded must be the same as that involved in the prior action; (2) the issue must have been actually litigated; (3) the determination of the issue must have been essential to the final judgment; and (4) the party against whom estoppel is invoked must have been fully represented in the prior action." Id. at 1,124.
These recent decisions may reflect a growing judicial distaste for the potential burdens of multiple enforcement actions for the same alleged violations. They also should serve as a caution to utilities to attempt to structure settlements, variances and consent orders with one agency so as to be preclusive as to the other. The res judicata path in environmental litigation can wander through many obstacles.
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