Supreme Court Lets Stand Appeals Court Decision Giving Extraterritorial Application to CERCLA

On January 7, 2008, the U.S. Supreme Court denied certiorari[1] and let stand a Ninth Circuit ruling allowing a CERCLA case to proceed against a Canadian smelter for discharges of slag and effluent carried across the Canadian border by the Columbia River into Washington State, Pakootas v. Teck Cominco Metals Ltd.[2]The Pakootas decision is the first to find that a U.S. court has jurisdiction over a foreign entity for operations that are permitted in its own country but which violate U.S. law. The decision leaves U.S., Canadian and Mexican companies vulnerable to private litigation in each other’s courts for cross-border environmental discharges.[3] Indeed, there is some evidence, discussed below, that this is already beginning to occur in Canada.

The decision to deny certiorari also preserves the Ninth Circuit’s conclusion that “arranger” liability under CERCLA may arise even where no third party is involved. Defendant Teck Cominco Metals, Ltd. (“Cominco”) argued, unsuccessfully, that the Ninth Circuit’s decision should be reviewed because it conflicted with a First Circuit decision in American Cyanamid Co. v. Capuano,[4] which held that for arranger liability to attach, the disposal or treatment of hazardous substances must be performed by a third party.[5]

Background

Cominco owns and operates the world’s largest lead-zinc smelter, on the Columbia River in Trail, British Columbia (the “Trail Smelter”), approximately ten river miles north of the border between Canada and Washington. Between 1906 and 1995, Cominco generated and disposed of hazardous substances, in both liquid and solid form, into the Columbia River. These hazardous materials included untreated effluent and “slag,” a by-product of the smelting process which contains heavy metals including arsenic, cadmium, copper, mercury, lead, and zinc. Up until mid-1995, the Trail Smelter discharged hundreds of tons of slag each day – up to 145,000 tons of slag per year – into the Columbia River. The Columbia River carried the Trail Smelter’s slag south, across the border, into the United States, where it was deposited on the bed and banks of the Upper Columbia River and Franklin D. Roosevelt Lake (“Lake Roosevelt”).[6]

The reservation of the Colville Confederated Tribes (“Tribes”), in northeastern Washington, is bounded on the east and the south by the Columbia River. The northern edge of the reservation lies approximately 54 river miles south of the Canadian border.[7] In August, 1999, the Tribes petitioned the Environmental Protection Agency (“EPA”) under CERCLA §105[8] to conduct a preliminary assessment of hazardous substance contamination in and along the Columbia River, for the 150 miles from the Canadian border south to the Grand Coulee Dam. EPA performed its site assessment between October, 1999 and March, 2003, and found slag on beaches and other depositional areas in the Upper Columbia River, as well as heavy metals contamination including arsenic, cadmium, copper, lead, mercury and zinc. EPA concluded that the Upper Columbia River Site was eligible for listing on the National Priorities List (“NPL”), as a so-called Superfund Site.

EPA also concluded that the source of the slag and heavy metals in the Upper Columbia River was the Trail Smelter, and that Cominco had arranged for the disposal of its hazardous substances from the Trail Smelter into the Upper Columbia River by directly discharging up to 145,000 tons of slag annually prior to mid-1995, even though the discharge into the river occurred in Canada.

The Unilateral Administrative Order

While EPA was considering whether to propose the NPL-eligible site for listing, Cominco’s wholly-owned American subsidiary, Teck Cominco American, Inc. approached EPA and expressed a willingness to perform an independent human health study if EPA would delay proposing the site for NPL listing. Subsequent negotiations were unsuccessful, and on December 11, 2003, EPA issued a Unilateral Administrative Order (“UAO”) directing Cominco to conduct a CERCLA Remedial Investigation/Feasibility Study (“RI/FS”) of the Upper Columbia River. The UAO, which asserted jurisdiction under CERCLA over a foreign company operating in a foreign country for environmental harms in the United States, was the first of its kind issued by EPA in the 27-year history of CERCLA.[9]

Cominco never complied with the UAO, nor did EPA move to enforce it. In July 2004, two members of the Tribes, Joseph Pakootas and D.R. Michel,[10] filed a citizen suit in the United States District Court for the Eastern District of Washington under CERCLA § 159(a)(1), the CERCLA citizen suit provision, seeking to enforce the UAO.[11]

The Citizen Suit

Pakootas and Michel sought a declaration that Cominco violated the UAO, injunctive relief compelling Cominco to comply with the UAO, statutory penalties for non-compliance, and their attorneys’ fees and costs. Cominco moved to dismiss the suit, alleging that CERCLA was not intended to reach actors whose conduct occurred outside the borders of the United States. Cominco argued that while EPA had defined the “site” subject to the UAO entirely within the United States, the source of the hazardous materials attributed to Cominco was in Canada, subject to Canadian law, and finding that CERCLA applied to Cominco’s conduct constituted an impermissible, extraterritorial application of CERCLA. Cominco also asserted that the transboundary application of CERCLA to its operations in Canada would interfere with Canadian law and was contrary to reasonable foreign policy. Finally, Cominco argued that it could not face “arranger” liability under CERCLA for arranging for the disposal of hazardous substances at a “site” in the United States, because the plain language of CERCLA required the participation of another party to constitute an “arrangement for disposal” and there was no such third party.

The State of Washington moved to intervene as a matter of right, and joined in the plaintiffs’ opposition to Cominco’s motion to dismiss. The plaintiffs argued, in opposing Cominco’s motion to dismiss, that the presumption against the extraterritorial application of United States law did not apply in this case, because the effects of Cominco’s conduct in Canada were felt in the United States. “[A] broad remedial statute such as CERCLA was intended to apply to a foreign entity whose actions cause cross-border pollution that adversely affects U.S. lands and waters.”[12] In addition, because CERCLA is a remedial statute and does not regulate ongoing operations, and the UAO addressed contamination only in the United States and did not seek to compel any investigation or remediation of releases in Canada, neither the application of CERCLA nor the enforcement of the UAO would conflict with Canadian law.

The district court concluded that the extraterritorial application of CERCLA was appropriate, because the failure to extend the scope of the statute to Cominco’s operations would result in adverse effects in the United States.[13] “The facility located in Canada is rightly subject to liability under CERCLA to clean up the mess in the United States because Canada’s own laws and regulations will not compel the Canadian facility to clean up the mess in the United States which it has created.”[14] The district court held that the enforcement of the UAO would not conflict with Canadian law, holding that the plaintiffs’ use of CERCLA was not intended to supersede Canadian environmental regulation of Cominco, but, rather, to compel the cleanup of contamination in the United States – an area not subject to protection under Canadian law.[15]

Finally, in addressing Cominco’s argument that arranger liability required another party’s involvement in the disposal of the hazardous substance, the district court concluded that, while “generator” and/or “arranger” liability could not be ruled out for Cominco, the court did not need to rule on the issue because it could be litigated, if necessary, at a later date.[16] The district court denied Cominco’s motion to dismiss in November 2004, and certified the matter for immediate appeal to the Ninth Circuit Court of Appeals.[17]

The Appeal

In 2005, while the appeal was pending, the Tribes joined in the suit and the State and the Tribes amended their complaints to assert additional claims for response costs and natural resource damages under CERCLA. Then, in June, 2006, the United States (which was not participating in the citizen suit) and Cominco executed a settlement agreement under which Cominco’s American subsidiary agreed to fund and perform an RI/FS, subject to EPA oversight but outside the CERCLA framework. In exchange, EPA agreed to withdraw the UAO and not to seek civil penalties. Neither the State nor the Tribes were parties to the settlement agreement. In notifying the Ninth Circuit of the settlement agreement and withdrawal of the UAO, Cominco stated that neither the settlement nor the withdrawal of the UAO rendered the proceedings moot.

The Ninth Circuit affirmed the district court in July 2006, concluding that the UAO was enforceable against Cominco, and Cominco was potentially liable as an arranger. Unlike the district court, however, the Ninth Circuit concluded that the releases of hazardous substances had occurred wholly within the United States, and therefore involved a domestic application of CERCLA, rather than an extraterritorial application.[18] The Ninth Circuit found that the “location where a party arranged for disposal or disposed of hazardous substances is not controlling for purposes of assessing whether CERCLA is being applied extraterritorially. …”[19]

After the Ninth Circuit denied Cominco’s request for rehearing, Cominco petitioned the United States Supreme Court for certiorari. Cominco’s petition was supported by the Canadian government and the British Columbia provincial government, as well as by several trade associations including the United States and the Canadian Chambers of Commerce, the Mining Association of Canada, the National Mining Association, the National Association of Manufacturers, and the Consumer Electronics Association, which all submitted amicus briefs. Cominco asserted that the Ninth Circuit’s decision disregarded core principles of international comity, upset a “century-old tradition of bilateral [diplomatic] solutions to transboundary pollution problems” and threatened “to disrupt the foreign policy of the United States.”[20] Cominco urged the Court to accept review on the grounds that, because the U.S. is “a net exporter of certain types of pollution,” “U.S. interests would suffer gravely under the Ninth Circuit regime.”[21]

After the parties and the amici submitted their briefs, the Court invited the United States to file an amicus brief articulating the government’s position on the matter. The United States complied, and asserted that certiorari should be denied, noting that “[w]hile international pollution can be diplomatically sensitive,” the comity concerns raised by Cominco are “unusually weak here” and the case “would provide a particularly poor vehicle for considering the comity issue” in light of the fact that Cominco “dumped millions of tons of slag into a river just upstream of the border.”[22] The United States also asserted that the citizen suit claims were rendered moot by the June 2006 settlement agreement, in which the United States resolved the government’s claims for the same relief sought in the citizen suit (injunctive relief and civil penalties).

Finally, the United States asserted that the question of the propriety of litigating transboundary pollution in U.S. courts lacks both the likelihood for recurring, and sufficient importance, to warrant the Court’s review, but rather, should be “permitted to percolate in the lower courts.”[23] In doing so, however, the United States explicitly acknowledged that the courts, rather than the executive branch, may be the appropriate forum for resolving transboundary pollution cases: “While Canada and British Columbia would prefer to resolve this dispute through diplomatic channels and negotiation rather than litigation in United States courts – a preference the United States strongly shares – Canada correctly ‘recognizes the possibility that some cases involving transboundary pollution may appropriately be resolved in the domestic courts of Canada or the United States.’”[24]

Implications

The Pakootas v. Teck Cominco decision is a significant one, which may have substantial – and immediate – repercussions, and not just for facilities operating on the Canadian or the Mexican side of the border. On January 16, 2008, a provincial court in Ontario, Canada ruled that a lawsuit against a Detroit, Michigan energy company for alleged violations of the Canadian Fisheries Act may proceed. The lawsuit alleges that mercury emissions from two coal-fired power plants near Port Huron, Michigan – less than a mile from the Canadian border – are causing mercury pollution in Ontario’s air and soil. Edwards v. DTE Energy, a “private prosecution” under the Fisheries Act, was brought by a Canadian citizen who is the legal director for the NewYork-based Waterkeeper Alliance. Private prosecutions allow any Canadian citizen to independently prosecute offenses in criminal courts, with potential fines of up to $1 million per day.[25] Although the claims were initiated last year, the action had been stalled until this month, because an Ontario judge had been unwilling to allow a summons to be issued against a U.S. company. In the wake of the Cominco decision, the Canadian case is now proceeding.

Simply put, the Cominco decision may mark the beginning of a new era of international environmental litigation where domestic environmental statutes are used with greater frequency to impose liability on foreign entities. Only time will tell, but if the Cominco and DTE Energy cases are any indication, environmental litigation may start flowing across international borders as the latest import between the U.S., Canada and Mexico.

For more information about the Cominco decision or this article, contact any member of Marten Law Group’s waste cleanup practice.