The post John Mucha, III Elected President of Michigan Defense Trial Counsel appeared first on Dawda PLC.

The Clean Water Act prohibits the discharge of pollutants to waters of the United States from any point source without a permit, and the CWA established the National Pollutant Discharge Elimination System (NPDES) to regulate such discharges. Originally the CWA did not regulate stormwater runoff, however, in 1987 Congress amended the CWA to establish a phased approach for regulating stormwater runoff under the NPDES system.

As detailed by the 9th Circuit in Decker, the EPA’s Silvicultural Rule (40 CFR 122.27(b)(1)), which was originally promulgated in 1973, has a long history and was the subject of prior lawsuits shortly after it was promulgated (and again after it was revised). The Rule regulates “any discernible, confined and discrete conveyance related to rock crushing, gravel washing, log sorting, or log storage facilities which are operated in connection with silvicultural activities and from which pollutants are discharged into waters of the United States.” However, it exempts “non-point source silvicultural activities such as nursery operations, site preparation, reforestation and subsequent cultural treatment, thinning, prescribed burning, pest and fire control, harvesting operations, surface drainage, or road construction and maintenance from which there is natural runoff.”

The 9th Circuit found that the CWA was intended to be comprehensive in controlling pollution and the Court took issue with the EPA’s attempt to exempt an entire category of point sources on the basis of the origin of the water (natural ran versus man made). Essentially the Court determined that this differentiation was not justifiable and could not be given the deference that is normally afforded to governmental agencies. Thus, the 9th Circuit held that the Silvicultural Rule did not exempt stormwater runoff from logging roads that is “collected and channeled into a system of ditches, culverts and conduits before being discharged” to rivers and streams.

Further, the Court held that Congress did not approve of the Silvicultural Rule by enacting the 1987 CWA amendments. The 9th Circuit pointed out that Congress’1987 amendments addressed five categories of industrial discharges in Phase I and one of those categories included logging operations. Thus, in the 9th Circuit’s view, even though the EPA’s Phase I industrial stormwater regulations exempted those activities covered by the Silvicultural Rule, the Court ruled that a NPDES permit was required under the EPA’s industrial stormwater regulations for logging road runoff because logging operations were encompassed within one of the CWA’s “industrial activities.”

The Supreme Court agreed to review the 9th Circuit’s decision on June 25, 2012, however, a hearing date has not been announced. In the meantime, the Court will have to sort through the numerous amici briefs that have already been filed on behalf of the Petitioner and those that will undoubtedly be filed in support of the 9th Circuit decision and the Northwest Environmental Defense Center.

The post Regulating Runoff From Logging Roads appeared first on Dawda PLC.

Under the new law, commencing on January 1, 2013, each Michigan circuit court with three or more judges must create a business court. The Michigan Supreme Court will appoint judges to the business court who will serve six-year terms and will be assigned cases by a blind draw. Business disputes involving an amount in controversy over $25,000 will be heard by judges with specialized knowledge of business and finance, alleviating some of the burden these suits currently place on circuit courts.

The new business court will have jurisdiction over a wide range of “business or commercial disputes” which includes actions where all the parties are “business enterprises.” The term “business enterprises” is similarly broad and includes for-profit and not-for-profit corporations as well as “any other entity in which a business may be lawfully conducted”. The range of issues of classified as a “business or commercial dispute is equally broad and includes but is not limited to the following: issues involving software and technology, the internal organization of business entities, contractual agreements in business dealings, commercial transactions, commercial insurance policies, and commercial real property. However, the bill specifically excludes disputes pertaining to personal injury, product liability, family, criminal, and probate matters, condemnation, landlord-tenant issues, foreclosures, motor vehicle and individual insurance disputes, employment discrimination, civil rights, disability, workers compensation matters, and appeals from a lower court.

The impact that such business court will have on disputes involving environmental matters is still unclear because environmental litigation involves a layer of complexity that goes beyond what is found in typical business or commercial matters. Whether or not a suit involving environmental law will be heard in the new business court will depend upon the matters asserted and the parties involved in the dispute.

Because most environmental suits involve a business entity, it is likely many of them will be resolved in the business court, as long as the suit meets the amount in controversy requirement. The types of environmental cases that might be assigned to a business court include:

• A corporate real estate purchaser suing a corporate seller for indemnification pursuant to the terms of a purchase agreement;
• A business filing suit against another business to recover costs incurred in cleaning up a predecessor’s contamination;
• A business suing an adjacent business for contamination that has migrated onto its property.

On the other hand, because the parties must be business enterprises, the courts would not hear environmental cases brought by individual homeowners against adjacent businesses, or individuals against businesses for personal injuries allegedly caused by contaminants or pollutants emitted by a business. Likewise, a homeowner would not have to file a nuisance suit against a business in the new court.

However, because non-profits are included in the definition of “business enterprise), if the homeowners bring their action against a business as a non-profit homeowner’s association, they may be required to file the action in the business court. Similarly, a non-profit environmental group pursing an environmental claim against a company under a statute like the Michigan Environmental Protection Act (something that is not typically seen as a business type dispute) may be required to file the action in the new business court. And what happens if a company asks that the non-profit’s litigation be assigned to the business court or the court assigns it sua sponte? Those decisions cannot be appealed to the court of appeals. (§308(1)(d))

It is also unclear whether environmental litigation between a company and a governmental agency would be heard by the new court. Although it’s pretty clear that a governmental agency issuing a permit is not engaging in typical business activity (and the Business Court Act proscribes appeals of agency decisions), it is less clear when the government sells contaminated land or engages in polluting conduct as part of activity that many businesses engage in. Such cases may be “business court worthy.”

Although there are some uncertainties as to whether particular environmental disputes will be heard in the business court, it is possible that the new business court will play a large role in deciding environmental cases.

(Thank you to Kylie Angileri who assisted with the preparation of this blog.)

The post New Michigan Business Courts May Play Important Role in Resolving Environmental Disputes appeared first on Dawda PLC.

The Tarrant case is a dispute between Texas (Tarrant, Texas Regional Water District) and Oklahoma over water located in the Red River. The Texas Water District believes it has a right to access water in the Red River in Oklahoma pursuant to an agreement signed by Texas, Oklahoma, Arkansas and Louisiana (the “Red River Compact”). Siding with Oklahoma, the lower agreed that Texas is only guaranteed a certain minimum downstream flow under the Compact. In this context, the case appears to have very little to do with the compacts governing water use within the Great Lakes basin.

However, it’s the Water District’s constitutional argument that the Great Lakes States and Canada should pay attention to. The Water District claims that the “protectionist” character of the Red River Compact violates the dormant Commerce Clause of the U.S. Constitution. The Commerce Clause of Article 1 of the U.S Constitution gives Congress the exclusive authority to regulate interstate commerce. The dormant Commerce Clause is the legal theory that because Congress regulates interstate commerce, States cannot enact legislation that unreasonably restricts interstate commerce and prevents States from being “protectionist” with their natural resources.

According to the Water District, the Supreme Court has consistently required that Congress unambiguously acknowledge and approve a statute’s or a Compact’s unreasonable restrictions on interstate commerce and cited Sporhase v. Nebraska, 458 U.S. 941 (1982) and South-Central Timber v. Wunnicke, 467 U.S. 82 (1984) in support of its position. In the Water District’s view, Congress has to explicitly approve the restrictive nature of the Compact and Congress’ intent cannot be gleaned by looking at the restrictive language in the Red River Compact as a whole.

The two main compacts affecting the Great Lakes are the Great Lakes Charter and the Great Lakes St. Lawrence River Basin Water Resources Compact. A detailed description of the scope of each is beyond the intent of this article, but the following provides a brief summary of each:

• Great Lakes Charter / Annex 2001. Established a cooperative arrangement between the Great Lakes States and Ontario and Quebec whereby each party agreed to provide notice to each other and to consult on any proposed diversions of water from the Great Lakes Basin.
• Great Lakes – St. Lawrence River Basin Sustainable Water Resources Agreement / Great Lakes St. Lawrence River Basin Water Resources Compact. Established the structure that the Great Lakes States and Provinces use to manage water withdrawals from the Great Lakes Basin. In particular, the agreements call for an outright ban on new diversions of water from the Basin and grant only limited withdrawals for use by communities within the Basin. The agreements are managed by two governing bodies: the Great Lakes – St. Lawrence Water Resource Regional Body and the Great Lakes – St. Lawrence River Basin Water Resources Council. Congress consented to and approved the Water Resources Compact in 2008 by enacting Public Law 110-342.

Depending on how the Supreme Court rules in the Tarrant case, if the Red River Compact falls, it could put the Great Lakes Compacts on shaky ground. Although Congress approved the Compact in Public Law 110-342 in 2008, it did not make any statement that it was explicitly authorizing the Compacts’ unreasonable restraint on interstate commerce. Although such an intent could be inferred from Congress’ approval of a Compact that clearly calls for a ban on out-of-Basin diversions, this is the type of argument that the Tarrant case has called into question. Therefore, if the Supreme Court adopts the position of the Texas Water District in the Tarrant case, the Great Lakes Water Resources Compact could be subject to a challenge by a non-Great Lakes State that was interested in establishing a pipeline from the Great Lakes to an arid out-of-Basin area.

Such an outcome could be like manna from heaven for southern arid States as they might argue like the Water District in the Tarrant case:

” [The strain on western water supplies] makes appropriations by arid western states from water rich neighboring states essential, but by encouraging the ‘tendencies toward economic balkanization’ that the Commerce Clause was intended to prevent, the decision below may make such appropriations effectively impossible. Localities blessed with substantial water reserves now are free, under the Tenth Circuit’s rule, to hoard water while their immediate neighbors go dry.” Pet. at 26.

Clearly, with water supplies becoming more scarce in arid States, they have an increased interest in tapping into States with abundant water resources. We will track this case and provide more information when it becomes available.

The post A Supreme Court Case to Keep an Eye on: Tarrant Regional Water District V Herrmann appeared first on Dawda PLC.

At issue was an ongoing dispute over the discharge of channeled stormwater runoff from logging roads in Oregon’s Tillamook State Forest. This stormwater is generated when rain runs off of logging roads and travels from ditches onto rivers and streams depositing sediments. The Northwest Environmental Defense Center (NEDC) sued logging and paper companies that were lawfully logging in the State Forest; alleging that they had violated the Clean Water Act. Specifically, the NEDC alleged that the stormwater run-off from an active logging road constituted an unpermitted discharge of a pollutant from a point source, that posed a risk to endangered species and aquatic life.

In 2007 the District Court in Northwest Environmental Defense Center v Brown, 476 F.Supp.2d 1188 (D. Or., 2007) held that NPDES permits were not required because the channels that received the stormwater were not point sources under the Clean Water Act and that the “Silvicultural Rule” did not require a permit pursuant to 40 CFR §122.27(b)(1). In 2011 the U.S. Court of Appeals (Ninth Circuit) reversed this ruling and held that, in fact, these logging roads were point sources and were not exempt from permitting requirements under the applicable industrial stormwater rules. [See Northwest Environmental Defense Center v Brown, 640 F.3d 1063 (9th Cir. 2011.]

The U.S. Supreme Court accepted the EPA’s position that the logging roads did not constitute an industrial activity and the roads were only related to the harvesting of raw material for which a NPDES Permit was not required. The Court in giving deference to EPA’s opinion, agreed that the water conveyance at issue did not directly relate to the “manufacturing, processing, of raw materials, storage areas at an industrial plant” (40 CFR §122.26(b)(14). For that reason, the Supreme Court reversed the Ninth Circuit decision and held the activity did not come within the scope of the industrial stormwater rule.

Justice Scalia issued a separate opinion dissenting in part, with the majority opinion, on the issue of giving deference to the EPA’s interpretation of a regulation, when it is at odds with the natural reading of the regulation.

The American Forest and Paper Association has come out in support of the decision and repeated its position that runoff from logging roads has been successfully regulated through best management practices employed by the industry for over 35 years.

It is interesting to note that in advance of oral arguments before the Supreme Court, the EPA clarified in the “Silvicultural Rule” and stated that NPDES permit requirement do apply to logging operations that involve rock crushings, gravel washing, log sawing and log storage. These are all activities enumerated in the Silvicultural Rule. In response, the NEDC has filed a petition to review this rulemaking by EPA.

The post Recent Supreme Court Cases – Logging Roads and the EPA’s Silvicultural Rule appeared first on Dawda PLC.

On April 4, 2013 the Court of Appeals issued its opinion upholding the trial’s ruling that the BFPP defense did not apply to Ashley. Although the district court’s decision was based on several facts, the Court focused on only one of them: Ashley’s failure to exercise appropriate care by: (i) stopping continuing releases; (ii) preventing future releases; and (iii) limiting human or environmental exposures. On appeal, Ashley argued that the “appropriate care” required under CERCLA should be a lower threshold for developers given Congress’ intent to promote brownfield redevelopment. The 4th Circuit rejected this. In doing so it examined what steps must be taken to satisfy the “appropriate care” requirement. The Court concluded that the Second Circuit’s due care inquiry was the appropriate assessment. That inquiry looks at whether the party “took all precautions with respect to the particular waste that a similarly situated reasonable and prudent person would have taken in light of the circumstances.” [Citing, New York v. Lashins Arcade Co., 91 F3d 353, 361 (2d Cir. 1996)] In Ashley’s situation, the Court noted that Ashley’s failure to fill certain sumps demonstrated it did not take reasonable steps that a similarly situated person would have taken.

The 4th Circuit’s decision should be a warning to all developers; do not presume that BFPP or innocent purchaser status shields you from properly handling contaminants when the site is redeveloped. Developers should establish, and follow, a clear due care plan that describes: how continuing and future releases are to be handled and how human and environmental exposures are to be controlled. Failure to do so could result in liability for response costs beyond what was originally contemplated.

The post Redevelopments Gone Bad: An Update on Ashley II of Charleston LLC V. PCS Nitrogen INC. appeared first on Dawda PLC.

In Lockheed, Goodyear was sued after Lockheed spent millions of dollars cleaning up PCB contamination around an airship hangar and adjacent stream. Apparently, the hangar, which was built in the ’20s by Goodyear Zeppelin Corporation, was constructed of steel siding that had a protective coating of PCBs. Over time, the PCBs leached off the steel and contaminated the surrounding soil and stream. Loral Corporation acquired the site when it purchased all the assets and assumed all the liabilities of Goodyear Aerospace Corporation. Loral subsequently merged with Lockheed Martin.

As part of its claim against Goodyear, Lockheed argued that Goodyear should be liable, under CERCLA §107(a)(2), for the cleanup of the PCBs in the stream, which Goodyear owned at the time. CERCLA §107(a)(2) imposes liability on anyone “who at the time of disposal of any hazardous substance, owned or operated any facility at which such hazardous substances were disposed of”. The Court of Appeals, in rejecting Lockheed’s argument, noted that CERCLA 107(a)(2) only imposes liability on the owner of a site “at which the hazardous substances were disposed of”. Because the PCBs were released from the steel siding 1,000 feet away and not “disposed of” at the stream, there was no “disposal” contemplated by CERCLA §107(a)(2). Also, citing U.S. v. 150 Acres of Land, 204 F.3d 698 (6th Cir, 2000), the Court explained that “a disposal occurs only when there was human activity involved in whatever movement of hazardous substances occurred on the property.” Lockheed, at 8.

It will be interesting to see if future courts apply the ruling in this case to claims by property owners who allege their property has been contaminated by contaminants migrating from adjacent property. Even though a release of hazardous substances may have occurred at the time the prior owner of the adjacent property owned the property, the defendant could use the ruling in Lockheed to argue that it is not liable for the contaminants that migrated off-site either because: (1) it did not own the off-site property or (2) no human activity was involved in the movement of the contamination from its property to the off-site property and, therefore, it did not constitute a “disposal” under CERCLA §107(a)(2).

The post Contamination Migrating from Building Structural Component not a Cercla ‘Disposal’ appeared first on Dawda PLC.

The recent $5 billion record settlement between the U.S. Government and Anadarko Petroleum is a case in point. Kerr-McGee Corporation, which was purchased by Anadarko in 2006, had an extensive legacy of contaminated properties throughout the U.S.: everything from uranium mine waste to rocket fuel contaminated land. Prior to being purchased by Anadarko, Kerr-McGee transferred its environmental liabilities to one of its smaller subsidiaries, Tronox. Tronox was eventually spun off, went public in 2005 and filed for bankruptcy in 2009.

A group of plaintiffs, including the U.S. Government, sued Kerr-McGee, Tronox and its affiliates arguing that the transfer of the environmental liabilities to Tronox was a fraudulent conveyance. In other words, the U.S. asserted that Kerr-McGree had purposely transferred the environmental liabilities to Tronox shortly before Anadarko’s purchase of Kerr-McGee as a way of making Kerr-McGee more attractive to prospective purchasers. In December, 2013, the bankruptcy court agreed with the U.S. and ruled that Kerr-McGee’s environmental liabilities were fraudulently transferred to Tronox. On Thursday, the Department of Justice announced it had settled with Anadarko for $5 billion – the largest environmental enforcement award to date. A copy of the DOJ’s press release can be accessed here. Shortly after the settlement was announced, Anadarko’s stock rose 15%.

The post The Tronox Tale: Shell Corporations and Environmental Liabilities appeared first on Dawda PLC.

Yet, the old reliable Yellow Taxi is calling it quits in San Francisco, and will be declaring Chapter 11. Yellow Taxi was the oldest taxicab service in the city.

The woes of this stalwart business contain some elements of modern bankruptcy: a changing business landscape, coupled with a crippling lawsuit and a disagreement with the California judiciary  on a critical sector of employment law.

Drivers: Employees or Contractors

Just as with Uber and Lyft, Yellow Taxi maintains that its drivers are contractors and not employers. Various California jurisdictions have maintained that for all services (Uber, Lyft and traditional cab services) that in many cases, the drivers are indeed employees. The relevant California courts have cited issues such as exclusivity as well as the dependence of the drivers on the larger company for connecting with fares, as well as receiving payment.

Yellow Taxi has experienced a significant setback as a result of these determinations, due to a large lawsuit.

Civil Litigation

In 2011, a passenger was seriously injured while in a Yellow Taxi vehicle. The case, known as Fua v. Yellow Cab hinged on the employment nature of the driver. Yellow Taxi maintained that the driver was a contractor and that Yellow Taxi provided the vehicles and the brand. Ultimately, the jury disagreed with Yellow Taxi and determined that the driver was an employee. As a result, Yellow Taxi was compelled to pay the $8 million award. This award, combined with other pending litigation and arbitration fees as well as other debts, became part of the $20 million indebtedness of the company. There are reportedly 150 other claims against the company that are pending.

Yellow Taxi in the World of Uber and Lyft

Perhaps Yellow Taxi could have handled the large debt load, but their profits are down significantly, too. Both Uber and Lyft have made huge inroads in California and in San Francisco, particularly, where they are headquartered. The availability of vehicles through the Uber and Lyft apps makes them appealing to younger riders, who also appreciate the cashlessness of the transaction.

A National Trend:

Yellow Cab has also filed for bankruptcy in Chicago and other cities’ traditional cab services may be in trouble, too. As evidence of the trouble, New York City’s yellow cab medallions have dropped in price to $700,000. As recently as 2013, the medallions went for $1.3 million each.

The post Goodbye, Yellow Taxi appeared first on Dawda PLC.

As I discussed in previous blogs (see the links below), very few cases make it to trial anymore. Instead, there has been a marked shift in the past twenty years to facilitate settlement through Alternative Dispute Resolution (ADR). Mediation or facilitation is a non-binding form of ADR as opposed to arbitration, which is fully binding and case evaluation, which is quasi-binding.

Both clients and attorneys have a lot of work to do to get ready for any kind of mediation, and it is analogous to preparing for trial. Today, I’d like to focus on what the client needs to know and be prepared for as they face upcoming mediation.

1. Clients should feel confident that they trust and have a good working relationship with their attorney. Mediation is one of the few events in litigation that requires a client to spend a significant amount of time with their attorney. Hours can be spent during the initial interview, deposition preparation and the mediation itself.
2. Be sure you and your attorney have gone over these key areas: known facts, disputed facts, liability, damages, defense. These are all critical components of your attorney’s strategy and you need to understand all of these aspects of your case.
3. Be ready to hear things you may not want to hear. It’s really important that the client allows the attorney to deliver all of the news, the good and the not-so-good. Otherwise, you can’t be fully prepared for less than ideal outcomes. So you have to allow your attorney to tell you what you need to hear, not just what you want to hear.
4. Be sure you can state with clarity what the strengths and weaknesses of your own case are. Your attorney should be able to clearly tell you what these are. In the best case, that “smoking gun” that could derail your process should not be a surprise to the attorney or the client, but something they have discussed already as a possible roadblock.
5. Be prepared for tough questioning from the mediator. Allow your attorney to role play, so you can feel comfortable, even in confrontation. Allow your attorney to “play devil’s advocate” during these meetings, so that you can see what upcoming proceedings might include.
6. Come up with a reasonable monetary figure that you can live with. If you enter into mediation and are not prepared for any point of compromise, the effort is likely a waste a time and money. Don’t expect the moon but don’t give away the store either. Ask your attorney to compare the costs of mediation with the cost of a trial, particularly an extended one. Use this information and consider the cost savings of mediation as you try to estimate the appropriate settlement amount.

Preparing for mediation mirrors the preparation for trial, but in a condensed time frame. Clients should choose an attorney with experience in mediation, with whom they can work intensely, and who is forthright and diligent.

By Adam Kutinsky, Member, Dawda, Mann, Mulcahy & Sadler, PLC

Previous blogs about mediation written by Adam Kutinsky:

Mediation: What is it and When should it be Utilized?

Choosing the Best Mediator for your Case

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