A Court-Side Seat: Waters, Walls and Pipelines

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Several interesting decisions have recently been made by federal and state courts.

FEDERAL APPELLATE COURTS

The U.S. Seventh Circuit Court of Appeals – ARCO Shifts from State to Federal and No Vigor for VIM
On June 18, 2020, the court decided the case of Baker, et al. v. ARCO, holding that the revised federal removal statutes authorize the removal to federal court of a state-filed complaint against several defendants by the former residents of an Indiana housing complex who contended that the defendants were responsible for the industrial pollution attributed to the operations of a now-closed industrial plant. The housing complex was constructed at the site of the former U.S. Smelter and Lead Refinery. During the Second World War, the plant produced products for the use of the government war effort, thus triggering the applicability of the federal removal statutes.

On June 25, 2020, the court decided the case of Greene, et al. v. Westfield Insurance Company. As the court notes, this is a matter that “began as a case about environmental pollution and evolved into a joint garnishment action.” An Indiana wood recycling facility, VIM Recycling, was the subject of many complaints by nearby residents that its operations and waste disposal activities exposed then to dust and odors in violation of federal law and triggered state tort law claims. VIM was sued in state court, but neglected to notify its insurer, as required by its insurance policy with Westfield Insurance. One thing led to another, and a default judgment in the amount of $ 50 million was entered against VIM. Since VIM at that point had no assets, the plaintiffs and later VIM sought recovery from Westfield. When this dispute landed in federal court, the court, after reviewing the policy, concluded that there was a provision excluding coverage when the insured knew it had these liabilities when it purchased the insurance. As a result, the lower court dismissed the lawsuit, and this decision has been affirmed by the Seventh Circuit.

The U.S. Court of Appeals for the Ninth Circuit – Sue that Wall?
On June 26, 2020, the Ninth Circuit issued separate rulings in the cases of Sierra Club, et al. v. Trump and State of California, et al. v. Trump. These cases were heard by the same panel, which ruled, 2 to 1 in both cases, that the Department of Defense’s transfer of funds appropriated in the 2019 Defense Appropriation Act for the construction of a the border wall along the southern Border violated Sections 8005 and 9002 of the Act and the Appropriations Clause of the Constitution. The court unanimously agreed that most of the plaintiffs had standing to sue, but disagreed that these transfers violated the DOD Appropriations Act. The dissent contended that while the plaintiffs had standing, they had no cause of action under the Administrative Procedure Act (APA), and that the holding of the majority that the APA does not rule out constitutional standing claims was in error. The environmental claims were based on the allegations that the construction of the wall would have deleterious effects upon the environment and wildlife in the area. There is likely to be additional litigation in this matter since the Supreme Court earlier granted a stay of the district Court’s preliminary injunction.

FEDERAL DISTRICT COURTS

The revised definition of “Waters of the United States,” promulgated by EPA and the Corps of Engineers, has already resulted in litigation challenging the new rule (effective on June 22, 2020). However, no nationwide injunction has been entered by any court.

U.S. District Court for the Northern District of California and U.S. District Court for Colorado – Rapidos Rapanos Rulings
On June 19, 2020, the refused to grant a preliminary injunction in the case of State of California, et al. v. Wheeler. One of the arguments is that this new rule is contrary to the Supreme Court’s ruling in Rapanos v. U.S. because if one reads Justice Kennedy’s concurring opinion and its holding that some waters may be subject to federal jurisdiction on the basis of their links to undisputed navigable waters (by means of a significant connection) and the dissenting opinion, then the working plurality favors this broader view. In the court’s opinion, “it is suspect to cobble together a holding based on the concurrence and the dissent.”

Later that day, in State of Colorado v. EPA, the court held that the unique interests of Colorado required that the new rule be enjoined insofar as it applied in Colorado. The Court was convinced that the new rule is in conflict with the Rapanos holding, especially Justice Kennedy’s formulation which has been adopted by many courts. Noting the California’s courts skepticism about cobbling together a theory based on Justice Kennedy’s concurrence and the four dissenters, this court suggests the California was unaware of an important Supreme Court precedent cutting the other way.

TEXAS STATE APPELLATE COURTS

First State Appellate Court – Uncommon Carrier?
On June 18, 2020, the First State Appellate Court (sitting in Houston) decided a pipeline eminent domain case in Hlavinka, et al. v. HSC Pipeline Partnership, LLC. Texas law ( i. e., the Texas Property Code and the Natural Resources Code) permits pipelines to exercise eminent domain powers in acquiring pipeline easement over private land. The exercise of this power, following a determination of the Texas Railroad Commission that the pipeline will be a common carrier, has spawned considerable litigation in the state courts. The First Court of Appeals held that the lower court (the Brazos County Court at Law No. 2) erred when it held that the HSC pipeline was a common carrier. At the present time, there is no evidence that the pipeline will be a common carrier, and the lower court’s summary judgment was reversed, and the matter was remanded to the trial court. The opinion is very instructive on Texas law in this area.


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