Fourth Circuit Reverses $1 Billion Injunction Related to Air Emissions in State of North Carolina v. TVA

August 2, 2010

On July 26, 2010, a 4th U.S. Circuit Court of Appeals panel issued one of the most important environmental law decisions of the year, reversing the trial court’s finding that emissions from four Tennessee Valley Authority power plants (three in Tennessee, one in Alabama) constituted 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, State of North Carolina v. TVA, had been one of the most closely watched in the nation – with half of the states submitting an amicus brief in support of one side or the other – for two reasons: (1) the trial court decision had 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 Decision

The 4th Circuit decision found that the trial court’s ruling was flawed for several reasons.

First and most importantly, the panel stated that “[i]f allowed to stand, the injunction would encourage courts to use vague public nuisance standards to scuttle the nation’s carefully created system for accommodating the need for energy production and the need for clean air.” “The result,” the court went on to say, “would be a balkanization of clean air regulations and a confused patchwork of standards, to the detriment of industry and the environment alike.”

The court went out of its way to describe the current regulatory regime as “comprehensive,” representing “decades of thought by legislative bodies and agencies,” and a “cooperative federal-state framework that Congress through the EPA has refined over many years.” The court saw the trial court’s action as attempting to impose a different set of standards and a collateral attack on the regulatory regime, and opined that “[t]he pitfalls of such an approach are all too evident.” The court further said:

It ill behooves the judiciary to set aside a congressionally sanctioned scheme of many years’ duration – a scheme, moreover, that reflects the extensive application of scientific expertise and that has set in motion reliance interests and expectations on the part of those states and enterprises that have complied with its requirements. To replace duly promulgated ambient air quality standards with standards whose content must await the uncertain twists and turns of litigation will leave whole states and industries at sea and potentially expose them to a welter of conflicting court orders across the country.

In finding preemption of the state of North Carolina’s nuisance claim, the panel also found that “North Carolina’s approach would reorder the respective functions of courts and agencies.” In essence, the panel spent several pages in its decision explaining why courts are not qualified to engage in the rulemaking that was in essence what the trial court’s injunction really was: “While expressing the utmost respect for the obvious efforts the district court expended in this case, we doubt seriously that Congress thought that a judge holding a twelve-day bench trial could evaluate more than a mere fraction of the information that regulatory bodies can consider.”

In addition, the court noted that it was important for utilities to know what their obligations with regard to air emissions are. The court stated: “[a] company, no matter how well-meaning, would be simply unable to determine its obligations ex ante under such a system, for any judge in any nuisance suit could modify them dramatically.”

The court also articulated two other grounds why reversal was appropriate. First, the court found that “the injunction improperly applied home state law extraterritorially, in direct contradiction to the Supreme Court’s decision in International Paper Co. v. Ouellete, 479 U.S. 481 (1987). Finally, the court noted that even if the trial court had not applied North Carolina law and had applied Alabama and Tennessee law, the injunction would still be error because the activity at issue was “expressly permitted and extensively regulated by both federal and state government,” and Alabama and Tennessee law prohibit a finding of nuisance under such circumstances.

B. Analysis

  1. Severe Blow to Tort of Public Nuisance

    When the trial court first released its decision declaring that TVA’s air emissions were a public nuisance, it was a huge boon for the tort of public nuisance and one of the most important public nuisance decisions in quite some time. The 4th Circuit’s reversal is equally important because it went to great lengths in its decision to discredit public nuisance and illustrate why it should not be used in such suits. One need merely look at the panel’s description of nuisance law to ascertain their feelings toward it: “vague,” “an ill-defined omnibus tort of last resort,” “at such a level of generality as to provide almost no standard of application,” without “any manageable criteria” or “principle,” and “the least predictable and the most problematic method for resolving interstate emissions disputes.” Indeed, the 4th Circuit provides one of the most damning critiques of public nuisance law in recent memory, stating:

    Thus, while public nuisance law doubtless encompasses environmental concerns, it does so at such a level of generality as to provide almost no standard of application. If we are to regulate smokestack emissions by the same principles we use to regulate prostitution, obstacles in highways, and bullfights, . . . we will be hard pressed to derive any manageable criteria.

    Though the tort of public nuisance law has soared in popularity with the plaintiffs’ bar in recent years for precisely this reason, the 4th Circuit’s emperor-has-no-clothes critique will doubtless blunt some of the tort’s momentum.

  2. Boost for Preemption and Primary Jurisdiction Defenses

    It has long been true that federal common law as applied to environmental cases was on life support (notwithstanding the 2nd Circuit’s recent decision in Connecticut v. American Electric Power). It is equally well-settled, per Ouellette, that common law claims based on law other than source-state in air and water emission cases are preempted by federal statutes. The 4th Circuit’s decision in State of NC v. TVA, however, goes one step further, holding that even common law claims made under source state law are preempted by the regulatory regime in place because they would undermine the purpose of the regime. While the court said it “need not hold flatly that Congress has entirely preempted the field of emissions regulation,” it came about as close to doing so as possible without actually doing so.

    This has enormous implications for environmental litigation. This decision could, if taken to its logical conclusion, result in the preemption of every type of air and water emission case. Even in other types of environmental litigation, such as contamination cases, it greatly strengthens the defenses of preemption and primary jurisdiction for defendants and effectively eviscerates the savings clauses in the Clean Air Act and Clean Water Act. If future decisions follow the lead of the 4th Circuit in this case, the use of common law in environmental litigation could be greatly curtailed in the future.

  3. Boost for Legislatively Authorized Defense

    This decision gives a boost to another defense against nuisance suits – legislative authorization. The panel found that even if all of the other grounds mentioned above had not been enough for reversal, the fact that the action complained of – TVA’s air emissions – was legislatively authorized would also result in reversal. This defense had been curtailed in recent years in other nuisance litigation (such as handguns), but the 4th Circuit’s decision could re-legitimize this defense for defendants in future nuisance suits.

  4. Chilling Effect on Other End-Runs Around Environmental Regulatory Regimes

    The state of North Carolina has admitted that it originally filed this lawsuit as an end-run around the legislative and regulatory process with which it had grown frustrated. Other states were clearly watching this case closely as a possible blueprint for how they too could accomplish their objectives without the hassle of engaging at the legislative and regulatory levels. Indeed, 16 states filed amici briefs in support of the state of North Carolina’s position in the 4th Circuit. If the trial court’s decision had stood, there likely would have been a flood of copycat suits filed by these other states. The 4th Circuit’s decision has short-circuited other potential suits, and dictates that if states are unhappy with emissions coming from other states, they need to go through the proper regulatory (and, if necessary, legislative) channels for redress.

  5. 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 (which is possible but unlikely). This is for at least two reasons. First, this case touches upon a number of legal issues that the Supreme Court has wrestled with in recent years, including a dispute between neighboring states, the interplay between common law and federal statutes, 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 (especially those that reside in appellate jurisdictions other than the 4th Circuit) may pursue their own suits against emitters of pollution based in other states.

    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.

  6. Implications for climate change litigation?

    The 4th Circuit’s sweeping rejection of public nuisance has several significant implications for climate-related litigation. First, and perhaps most importantly, this decision serves as a counterweight to the 2nd Circuit’s recent decision in CT v. AEP. Though CT v. AEP arose under federal common law rather than state common law, at core it involved the same issue as that in State of NC v. TVA – whether federal statutory and regulatory law preempted/displaced the common law claim of public nuisance. The 2nd Circuit found that CT v. AEP could go forward under federal common law despite the existence of federal statutes and regulations that govern the same behavior sued upon – greenhouse gas emissions. The 4th Circuit’s decision that basically found that public nuisance actions are preempted by the Clean Air Act and Environmental Protection Agency regulations is at odds with the 2nd Circuit’s decision. Other courts (and perhaps the U.S. Supreme Court) will have to decide whether to permit common law claims such as nuisance to go forward in light of federal statutes and regulations that exist. The 4th Circuit’s well-reasoned and persuasive decision will be difficult for other courts to ignore, and could prove to be decisive in other similar suits, including climate change suits. Indeed, one could even argue that the decision in State of NC v. TVA acts as the circuit split on this issue that Comer v. Murphy Oil ultimately did not provide, making U.S. Supreme Court review of CT v. AEP or State of NC v. TVA even more likely. Look for liberal references to State of NC v. TVA when the defendants in CT v. AEP file their petition for certiorari in the U.S. Supreme Court in the near future.

    Second, the chief weapon used by the plaintiffs’ bar in climate change litigation thus far has been public nuisance. In light of the 4th Circuit’s harsh criticism of the tort of public nuisance in its decision, it is likely that other courts will notice and perhaps follow the 4th Circuit’s lead on this issue. In addition, the 4th Circuit deftly illustrated the dangers of permitting the state of North Carolina’s suit to go forward for our system of federalism, and that concern is likely to a much greater extent in climate-change litigation, which involves many more states. Finally, the 4th Circuit’s endorsement of a shift away from the judiciary deciding such issues and in favor of the executive and legislative branches making environmental policy is sure to resonate in the climate change litigation, not only on issues such as preemption and displacement, but also political question.

    Simply put, the 4th Circuit’s decision in State of North Carolina v. TVA is an extremely important decision in environmental law and has the potential to dramatically change the environmental litigation landscape.