Law and the Environment

US Supreme Court Agrees to Hear Second Case on Cost Recovery under CERCLA

The U.S. Supreme Court has decided to hear a closely watched environmental case that may have significant financial implications for both the federal government and private industry. The case, U.S. v. Atlantic Research Corp., is Part II of a duo of cases that consider whether companies can recover costs incurred to cleanup contaminated sites under the Comprehensive Environmental Response, Compensation and Liability Act, when the cleanup effort was voluntarily carried out, rather than compelled by a lawsuit or government order.

In Part I of the two cases, Cooper Industires, Inc. v. Aviall Industries, Inc., the court ruled that parties who voluntarily cleaned up a hazardous waste site could not recover from other parties, including the government, under Section 113 of CERCLA--the contribution section of the federal Superfund cleanup statute, which allows one private party to sue another liable party, including governmental bodies.

In Part II, the Atlantic Research case,  the court will review Section 107, the general cost recovery provision of the statute, which is typically used by a government body or private party to sue for cleanup costs when the plaintiff is not otherwise liable for the cleanup.  The federal appeals courts are divided as to whether a private party liable under CERCLA can recover the share of costs other are responsible for under the Act.  Thus, the Supreme court may rule as to the ability of parties to bring cases at all when they voluntarily perform cleanup without first being sued or being the subject of a governmental enforcement order.

While voluntary cleanup has been growing, promoted by industry and government alike, the federal government has argued in its briefs to restrict the ability of such volunteers to recover their costs from other liable parties, primarily because the government itself is often a liable party. This is simply bad public policy, exercised by a Justice Department more motivated by winning cases than helping responsible companies recover their costs when they step up and cleanup up a hazardous waste site while other entities and governmental bodies stand by and do nothing. 

We will have to await the Supreme Court's ruling as to whether private cost recovery actions are permissible under Section 107 of CERCLA.  If the court rules that plaintiffs cannot recover under Section 107 for voluntary actions or otherwise, then calls for a fix from Congress will grow to amend the statute to allow such contribution or direct actions in order to encourage private parties to conduct cleanup of hazardous waste sites without being subject to litigation or government order.

Little Known Provision in the Federal Criminal Code Creates Trap for Those Communicating with Government Agencies

 

      Most people involved in corporate environmental compliance are unaware of the potential impact of a provision of the federal Criminal Code that was created apparently mainly to address false statements in the context of securities investigations, but was drafted broadly to encompass potentially a broad range of governmental investigations or proceedings.  Section  1001 of the Criminal provides the following short, but potentially threatening language:

Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative or judicial branch of the Government of the United States, knowingly and willfully--(1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact;

(2) makes any materially false, fictitious, or fraudulent statement or representation; or

(3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry; shall be fined under this title or, imprisoned not more than 5 years, ... or both.

          What relevance does this have for companies and their employees?  The answers is that government agencies and US attorneys have been using Section 1001, as they refer to it, to threaten or to actually prosecute companies or their employees for allegedly making false statements in the context of investigations of potential violations of federal environmental statutes.  The government has been taking the position that this provision is very broad and extends not only to actual and direct false statements, but to creating a false impression or failing to divulge fully facts in a discussion, writing, or statement to the investigating official. 

            While some of the federal environmental statutes contained provisions for prosecution for false statements, Section 1001 may be considered to be advantageous by government officials or attorneys because it may be broader than those found in environmental statutes.

            The government’s knowledge and use of this provision raises concerns for corporate environmental staff and individual business people when they are contacted  by government officials or investigators.  They should exercise caution in how they respond to these inquiries.  Thus, the adage that the cover up may be worse than the crime, certainly may apply.

            In our experience, the governmental investigators appear very knowledgeable of this provision and use it quite aggressively, accusing parties during the investigation before any decision about prosecution has been made.  Investigators may threaten prosecution under this provision, if they believe that a corporate representative is not telling the truth or failing to tell "the whole story"--thereby, in their mind, conveying a false impression. Care should be taken in what is said and what is left unsaid, and any potentially misleading statements.

            Training staff and obtaining the assistance an environmental attorney when a federal environmental investigation begins may be wise to avoid potential claims of false statements and prosecution under Section 1001.   Advising relevant employees, such as environmental staff, plant managers, and certain operational staff, as to how to communicate with federal agencies, in this case those with any form of environmental jurisdiction, such as the EPA, the U.S. Fish and Wildlife Agency, the Materials Management Service, and the Coast Guard, appears to be a wise investment.

New Web Blog on Law and the Environment

Entering the new world of blogging, my goal is to attempt to provide interesting and topical information on the developments and interrelationships between law and the environment.  Having practiced environmental law for twenty years, I hope to use this relatively new technology and forum for communication to reach out to those like me who are either involved in environmental issues and environmental regulation or who are interested in how laws and regulation affect how we as a society impact our natural environment, ecosystems, the natural cycles, such as the climate and the carbon cycle, to various other effects on the natural world that surrounds us.

Having represented companies, banks, partnerships, non profit organizations, and various other organizations and entities as well as individuals, I have learned a great deal about the issues and strategies that allow these organizations and people to address environmental liabilities and restrictions on the one hand and environmental opportunities and benefits on the other.   I hope through this blog to communicate this experience and new developments and observations from my own practice and the review of various periodicals, new statutes and regulations, and new court decisions, as well as other sources of news and information.

One thing I have observed is that environmental laws and regulations often create new developments and, at times, unintended consequences.  I have perhaps a unique view of the manner in which these developments emerge having started my career path with plans of becoming an ecologist, but departed that path to pursue environmental law. A lasting influence of my training, education, and scientific research in ecology has been a profound interest in the means by which laws and corporate behavior evolve in the greater context or “ecosystem “ of the influence of government, stakeholders, and market participants. The interrelationships and complex interactions that I observed in natural ecosystems appear and emerge in economies and corporations. 

Using this understanding and view of our society, economy, and regulatory system, I look forward to observing and reporting on the evolution of corporate environmental governance and corporate social responsibility, as well as corporate environmental policies and actions and environmental financial and social responsibility reporting.

As new environmental issues such as climate change lead to changes in regulatory structure, I will observe and report on the new corporate behavior and public reporting that emerges from these new legal restrictions.  The emergence of the carbon trading markets in the EU and much of the developing world through the structure of the Kyoto Protocol and the EU Emission Trading System Scheme presents an amazing example as to how behavior can change over time and new systems emerge from the establishment of new legal rules.

Discussing environment laws, environmental management, environmental disclosure, and the emergency of new activities and systems is what I will endeavor to bring to this blog.  I hope you will join me as I embark on this new adventure.