Beveridge & Diamond
 

Fourth Circuit Limits Nuisance Suits and Strengthens Preemption under Federal Environmental Laws

Beveridge & Diamond, P.C., July 30, 2010

On July 26, the United States Court of Appeals for the Fourth Circuit barred a public nuisance action brought by North Carolina against the Tennessee Valley Authority (“TVA”) based on interstate air emissions from TVA’s power plants, finding that the state’s action is preempted by the comprehensive air pollution scheme under the Clean Air Act.  See North Carolina v. TVA, No. 09-1623, __F. 3d__, 2010 U.S. App. LEXIS 15286 (4th Cir. July 26, 2010).  The three-judge panel dissolved the District Court’s injunction that would have required TVA to spend $1 billion on pollution controls at its coal-fired power plants in Alabama and Tennessee.  The Fourth Circuit’s opinion is one of the broadest and strongest statements in years that tort suits and particularly nuisance actions can be barred where an industrial activity is regulated and permitted.  This will likely reinvigorate efforts to preempt such suits through motions to dismiss and summary judgment.  The opinion will discourage both government and private parties from using tort suits to second-guess regulatory decisions and its impact should extend beyond the Fourth Circuit and air pollution cases.

The large size of the lawsuit and the importance of the parties underscore the impact and precedental value of the opinion.  The State of North Carolina sued TVA, one of the country’s largest power generators, in 2006, arguing that eleven of TVA’s coal-fired power plants located in Tennessee, Alabama, and Kentucky posed a public nuisance because air emissions from these plants crossed state lines and contributed to North Carolina’s air pollution.  See North Carolina v. TVA, Slip Op. at 9.  The Western District of North Carolina sided with the state last year, granting a comprehensive injunction that ordered TVA to upgrade or install pollution controls for sulfur dioxide and nitrogen oxides at four of TVA’s eleven power plants.  Id. at 10.

Judge Wilkinson’s opinion for the Fourth Circuit overturning the injunction criticizes common law tort remedies in a way not often seen in preemption decisions, which tend to be narrow and rooted in the preempting statute. The panel wrote 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 would be a balkanization of clean air regulations and a confused patchwork of standards, to the detriment of industry and the environment alike.”  Id. at 6.

The Fourth Circuit relied on and reinvigorated a 1987 United States Supreme Court opinion, International Paper Co. v. Ouellette, 479 U.S. 481 (1987), that is often overlooked in preemption jurisprudence.  Ouellette allowed a private nuisance suit to proceed despite the discharger’s permit under the Clean Water Act but emphasized that allowing “a number of different states to have independent and plenary regulatory authority over a single discharge would lead to chaotic confrontation between sovereign states.”  Id. at 16 (citing Ouellette, 479 U.S. at 496-497).  Agreeing with this principle, the Fourth Circuit found that a patchwork of nuisance injunctions based on interstate air emissions would frustrate Congress’s judgment, supplant agencies’ conclusions, and upset the reliance interests of both permit holders and source states.  Id. at 24-25.  The Fourth Circuit also found persuasive the fact that TVA’s operations are expressly permitted by the states in which they are located, noting that it would be “odd” to find that an activity explicitly permitted by a state was a nuisance.  Id.  29-30. The TVA opinion, in applying Ouellette aggressively to the Clean Air Act, has expanded preemption under the Clean Air beyond what other courts have done under the Act.  Importantly, the Fourth Circuit found the policy needs for preemption more important than the savings clause of the Clean Air Act (similar to other environmental statutes) that allows for state law to regulate emissions more strictly than federal standards.  Id. at 18-21.  The panel also emphasized that North Carolina could pursue administrative remedies under the Clean Air Act to challenge the permits for the TVA facilities.  Id. at 32-34. (citing Clean Air Act sections 126 and 304, 42 U.S.C. §§ 7426, 7604). 

The Fourth Circuit further held that the district court’s decision compromised federalism principles by applying the law of North Carolina extraterritorially to TVA plants located in Alabama and Tennessee.  Id. at 25.  Specifically, the appeals court held that the district court, while acknowledging that a court must apply the law of the state in which the point source is located, erroneously applied North Carolina’s Clean Smokestacks Act extraterritorially in Alabama and Tennessee.  Id. 

The Fourth Circuit did not hold that Congress has entirely preempted the field of emissions regulation, noting that it cannot anticipate every circumstance that may arise in every future nuisance action.  Id. at 18. 

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For more information about the implications of the North Carolina v. TVA decision, please contact Jimmy Slaughter (jslaughter@bdlaw.com, 202-789-6040), David Friedland (dfriedland@bdlaw.com, 202-789-6047), or Richard Davis (rdavis@bdlaw.com, 202-798-6025). 

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