Key Nuisance Case (State of North Carolina v. TVA) Almost Certain to Be Reversed by 4th Circuit Panel

May 20, 2010

On May 14, 2010, a 4th U.S. Circuit Court of Appeals panel heard oral argument in the case of State of North Carolina v. TVA. At issue was whether the trial court erred in finding that emissions from four Tennessee Valley Authority power plants (three in Tennessee, one in Alabama) constitute a public nuisance to residents of North Carolina. At stake was whether the TVA would be forced to continue to comply with the trial court’s remedy – an estimated $1 billion in additional pollution control devices for the plants where TVA had been forced to implement them. This case has been closely watched for two reasons: (1) it has been credited with re-invigorating the tort of public nuisance; and (2) other states and municipalities are considering whether to pursue similar suits in the future.

A. Summary of Oral Argument

The 4th Circuit panel hearing the case consisted of U.S. Circuit Judges J. Harvie Wilkinson III, Dennis Shedd and Paul V. Niemeyer. These three jurists are considered to be among the most conservative judges on the 4th Circuit, making this panel one of the most conservative possible.

The TVA argued first as the appellant. Wilkinson immediately signaled his hostility to the state of North Carolina’s position by asking what avenues other than the instant nuisance suit were open to North Carolina to complain about the TVA’s pollution. The TVA advocate replied that participation in the permitting process, a Clean Air Act suit, and other means of redress with the Environmental Protection Agency were available to North Carolina. Wilkinson noted that the public nuisance route was the one most fraught with problems.

Niemeyer focused on whether the Alabama Air Pollution Control Act enacted by the Alabama legislature acted to preempt the field of air pollution and prevent any nuisance suits. The TVA advocate waffled a bit on this point, but ultimately agreed. Shedd asked questions related to whether the state of North Carolina was permitted to bring suit when the Alabama public nuisance statute restricts standing to the state or a private individual who has shown special harm.

The state of Alabama argued next as an intervenor in support of TVA’s position. Once again, Wilkinson indicated his predilection by tossing softball questions to the state of Alabama advocate such as whether the district court had applied Alabama law or had really applied North Carolina law extraterritorially. The advocate agreed that the trial court had applied North Carolina law despite its lip service to Alabama and Tennessee law. Shedd then focused on the argument that TVA was immune from injunctive relief because it had obtained a permit and was thus legislatively authorized to operate as it did.

Finally, the state of North Carolina argued, and the fireworks began. Soon after the state of North Carolina advocate commenced his argument, Wilkinson jumped in and launched a four-minute, demonstrably angry rant against North Carolina’s position. He first focused his ire on whether the district court applied Alabama law as it was supposed to do or simply applied North Carolina law. Wilkinson noted that the court’s finding as to the appropriate level of emissions was extremely close to the emission standards set by North Carolina statute. He noted that “[i]f it walks like a duck, and quacks like a duck, then it is a duck.” He stated that such an extraterritorial application of a state’s law “can lead to chaos and having states at each others’ throats and overturning the permitting process established by Congress.” He accused the district court judge of “supplanting the Clean Air Act.” He then asked whether it was fair to blindside the TVA with this nuisance suit after the TVA played by the rules by obtaining a permit and the state of North Carolina chose not participate in the permitting process, during which it could have objected to the expected emissions from the TVA plants at issue. Wilkinson concluded his speech by stating that allowing the nuisance suit to go forward was “chucking the entire process out the window.”

Shedd then shifted attention to the legislative authorization defense. The state of North Carolina advocate denied that this defense applied under the facts of the case. Shedd then asked whether the relief granted by the district court was disrupting the federal scheme and said that “Congress did not envision one state coming in and lowering standards in another state.” Niemeyer once again voiced his view that the Alabama Air Pollution Control Act preempted any nuisance suit. The state of North Carolina advocate was unable to make much headway with any of the three judges. The TVA declined an opportunity for rebuttal.

B. Analysis

1. Likely Reversal

Given the oral argument, it is almost certain that this 4th Circuit panel will reverse the trial court’s decision. It is sometimes unwise to base a prediction as to the result on the questions posed at oral argument. However, this is not one of those cases. The judges largely refrained from asking actual questions and instead simply made statements or asked rhetorical questions. The only open question is on what basis the panel will chiefly rely in its reversal. Many of the statements made by Wilkinson in particular focused on why the nuisance suit was bad policy without delving very far into whether it was legal error. Most likely, the panel’s decision will focus primarily on some combination of preemption, the legislative authorization defense, mistakenly applying North Carolina rather than Alabama or Tennessee law, and disruption of the federal scheme.

2. En Banc Review?

The next question is whether the 4th Circuit would perhaps grant review en banc of this decision following the panel’s reversal. En banc review is exceedingly rare in the 4th Circuit, occurring approximately once per year. But several factors make review of this decision possible. First, the 4th Circuit is changing. Judges appointed by Democrats now outnumber judges appointed by Republicans by a seven to five margin. There are currently three vacancies, and President Obama has nominated judges for two of them (Albert Diaz and James Wynn), both of whom have cleared the Senate Judiciary Committee and who could be confirmed at any time. This would give Democratically-appointed nominees an even wider margin. This matters because the TVA case has more of a political bent to it than many. The state of North Carolina’s case was brought by state Attorney General Roy Cooper, who is a Democrat. U.S. District Judge Lacy Thornburg is also a well-known Democrat in North Carolina. Second, and perhaps more importantly, both of these nominees are North Carolina residents, and their presence would triple the number of North Carolina residents currently on the court. North Carolina residents would presumably be more inclined to support the state of North Carolina’s rationale (though this could also be a basis for recusal of these judges as well). Third, given Wilkinson’s vitriol during oral argument, it is possible that the panel could issue an over-the-top polemic opinion that goes too far in the minds of other members of the 4th Circuit. Thus, while still unlikely, it is not outside the realm of possibility that the 4th Circuit could grant en banc review in this case.

3. Supreme Court Review?

It is a distinct possibility that the U.S. Supreme Court will accept certiorari of this case, regardless of whether the 4th Circuit reviews it en banc. This is for three reasons. First, this case touches upon a number of legal issues that the Supreme Court has wrestled with in recent years including preemption and federalism. The fact that these issues arise in the context of an environmental lawsuit makes it even more enticing to the court, given their recent proclivities in hearing environmental issues. Second, even though there is not a circuit split, it is clear that states view the issues in this case very differently. Approximately half of the states were involved in this case in some way, with many filing an amicus brief. Without some updated guidance from the Supreme Court on how states should deal with problems of interstate pollution, some of these states may pursue their own suits against emitters of pollution based in other states. Third, with the climate change lawsuits (Comer, AEP, and Kivalina) bubbling up the appellate ladder, it is clear that common-law nuisance suits related to air emissions is an important issue. With the possibility that the court would be unable to hear one or more of the climate-change cases due to recusals, the court might take the opportunity to accept certiorari in this case and decide once and for all whether such nuisance suits are appropriate. Notably, the Supreme Court struggled mightily with many of these issues several decades ago, but the last significant pronouncement on the subject came almost a quarter of a century ago in International Paper Co. v. Ouellette, 479 U.S. 481 (1987). The court may feel it is time to revisit these issues. In fact, the court may feel compelled to decide the future of public nuisance in the environmental pollution context and determine whether it should be a legitimate avenue for relief or whether it should instead be relegated back from whence it came – simple property disputes.

4. Other Implications

There are two other implications of the likely reversal of the district court’s decision. First, this reversal will unquestionably blunt some of the momentum acquired by the plaintiffs’ bar and environmental groups in pursuing public nuisance suits since the district court’s decision in January 2009. However, with the aforementioned climate change suits still alive, the tort of public nuisance in the context of environmental pollution remains alive and well. Only time will tell whether public nuisance remains viable or is discredited.

Second, in many ways, the state of North Carolina’s suit was a test case. Unless the 4th Circuit panel drives a stake through the heart of a nuisance case under these circumstances unequivocally, expect other states to learn what they should and should not do in order to pass judicial muster and file similar suits in the future. For instance, Shedd seemed to believe during oral argument that such a nuisance suit might have been appropriate if it had sought money damages rather than an injunction. If that sentiment finds its way into the ultimate decision on this case, then one can foresee future suits seeking monetary damages.