The Threat of Citizen Suits

You’re sitting in your office, dealing with the daily challenges of running a busy scrap company. Your secretary brings in the mail, and you leaf through it. There’s a heavy manila envelope with a return address from an unfamiliar attorney. 
   You open the envelope, and your worst fears are confirmed. A citizens’ environmental group is suing your company for allegedly discharging polluted storm water runoff.
   You sit back, contemplating the future. At best, you’ll spend hours preparing the case with your attorney, endure negative publicity, experience emotional pain, and eventually win by proving you use best management practices to meet the benchmarks in your industrial storm water permit.
   At worst, you’ll expend hours of time on the case, endure the negative publicity and emotional toll, and lose the case. You’ll pay not only a fine but also all of the associated court costs for your company and the plaintiff. Plus, you could be forced to operate your business under a consent decree.
   Think it can’t happen to you? Think again.

The Next Environmental Challenge
Just as the scrap recycling industry is emerging from the gloom of unjust Superfund liability, a new threat is taking its place—lawsuits filed by citizens’ groups over alleged environmental infractions by industries subject to storm water permitting, including scrap recycling operations.
   Though virtually all environmental statutes have provisions allowing for citizen suits, the scrap industry has seen the most activity under the Clean Water Act. These suits have thus far been focusing on storm water runoff issues and whether a particular company is in compliance with rules under the Clean Water Act and its industrial storm water permit.
   Initially, citizens’ groups went after facilities that didn’t have the required storm water permit. However, even companies that have a permit aren’t immune from such suits. “Any company that’s employing best management practices in pollution prevention, from a mom-and-pop operation to a large business, can fail the standards being used by environmental groups,” asserts William Funderburk Jr. of Stanzler Funderburk & Castellon L.L.P. (Los Angeles), who provides legal counsel to several West Coast scrap recyclers.
   For example, citizens’ environmental groups have successfully sued scrap companies for up to six-figure settlements on the basis that their storm water best management practices weren’t effective enough or that the facility didn’t adequately consider certain types of best management practices such as covers or paving. Recently, these citizens’ groups have also filed suits on the basis that the discharge “targets” in the industrial storm water permits are effluent limits.
   The numbers in the permits are derived from the Clean Water Act, where the U.S. EPA intended them to be used as benchmarks for evaluating the effectiveness of best management practices. In fact, when the storm water permits were promulgated in 1995, the agency promised that the benchmarks wouldn’t be used as limits.
Some of the more than 40 states that regulate their own water quality have adopted those discharge benchmarks into their industrial effluent permits. Recently, a judge interpreted them as limits, not goals. EPA’s regional offices have mistakenly done the same.
   The scrap industry argues that holding up effluent water samples against these limits isn’t an accurate reflection of a recycler’s pollution-prevention efforts. The content of storm water runoff varies, depending on soil conditions, rainfall, and other environmental factors.
   The problem in this situation, according to Jay Maille, a consulting environmental engineer based in Los Angeles, is that environmental groups are attempting to establish a single or point source for pollution where none exists. “The environmental community fails to acknowledge the lack of connection between what a recycler is discharging and the ultimate pollution problem. For example, most of the metals in storm water runoff are from the road, not from recyclers somewhere upstream. It’s urban runoff, not point-source pollution.”
   Recyclers also charge that the language in the permits, such as best management practices and best available technology, is too vague. “Because of the way the permit is phrased, there’s a concern that you never know whether you’re in compliance,” says Tracy Mattson, ISRI’s director of environmental compliance.
   As an example, she cites a case in which an environmental group nitpicked a company’s storm water pollution prevention plan. The permit requires firms to have a plan in writing and document best management practices, and the company thought it was complying. But an environmental group sued on the grounds that, though the plan existed and incorporated best management practices, the company hadn’t “done enough” to control pollution.
   “In some ways, the vagueness of the environmental laws gives owners more flexibility,” acknowledges Funderburk, who serves on the National Storm Water Advisory Board of Thompson Publishing Group. “But the permits are written in such a way as to be an incentive to many groups that act as do-gooders to use the law, the uncertainties in it, and the uncertain standards to file litigation and force the cost of it on the defendant.”

Going to Court
Citizens’ groups respond that they’re within their legal and constitutional rights in suing polluters. The Clean Water Act and subsequent revisions in 1987 authorized private citizens to bring environmental action if they feel the government hasn’t taken appropriate action or if they feel someone has suffered personally from the alleged pollution.
   Over the years, U.S. Supreme Court decisions, while upholding citizens’ rights to sue, have alternated between restricting and loosening the rules for bringing suit.
   In 1998, for instance, the court ruled in The Steel Co. v. Citizens for a Better Environment that the environmental group lacked standing to sue the company for violations of the Emergency Planning and Community Right-to-Know Act’s reporting requirements. Specifically, the group didn’t satisfy the standing requirements of Article III of the U.S. Constitution, the court said. Under that article, standing to sue requires an injury, a causal connection between the injury and the defendant’s conduct, and a reasonable likelihood that the requested relief would redress the alleged injury.
   While this case dealt a blow to the citizen-suit movement, a more recent Supreme Court decision has opened the door wider for environmental groups to sue. In the case—Friends of the Earth et al v. Laidlaw Environmental Services Inc.—Friends of the Earth alleged that Laidlaw was polluting South Carolina’s North Tyger River. The pollution allegedly prevented a Friends of the Earth member from enjoying the river.
   A lower court declared the case moot because Laidlaw came into compliance with its chemical discharge permit and closed its hazardous waste incinerator that was causing the problem. The Supreme Court reversed that decision, stating that a suit can continue and penalties be charged even if a company comes into compliance with its permit after the suit has been filed, as long as some harm was done to a member of the group.
   With this ruling, “the door has reopened,” says Jeffrey Longsworth of Kelley Drye & Warren L.L.P. (Washington, D.C.), who has worked with ReMA on storm water issues and who is a member of EPA’s Federal Advisory Committee on Urban Wet Weather Flows. “The net result is that citizens’ groups continue to have the right to bring a suit on the basis that their members are being impacted by the alleged polluter’s activity.”

Keepers of the Cause
California, birthplace of the environmental movement, is the epicenter of citizen suits. “The groups there have been doing this for five years or longer and are very sophisticated, with large litigation staffs who are paid by the settlements from the cases they win,” says Longsworth.
   Part of the explanation could be that, in 1986, California passed Proposition 65, also known as the Safe Drinking Water and Toxic Enforcement Act. This legislation contains a “bounty-hunter” provision, which permits private citizens to file suits against perceived environmental offenders if state officials decline to do so. In contrast to the federal Clean Water Act, which allows citizens’ groups to charge their attorney’s fees to the defendant if they win a case, the bounty-hunter provision of Proposition 65 allows citizens’ groups to collect attorney’s fees and 25 percent of any civil penalties assessed by the court.
   One of the leading groups in the citizen-suit trend in California is Santa Monica BayKeeper, whose goal is to protect and restore Santa Monica Bay, San Pedro Bay, and adjacent coastal waterways and watersheds. Similar groups exist in other areas along the California coast and throughout the United States, with one estimate counting 50 Keeper organizations in 35 states.
   Santa Monica BayKeeper has focused some of its attention on Los Angeles-area scrap and auto recycling companies because they “seem to have a high level of pollution, so we go out and investigate them,” says Steve Fleischli, executive director. The storm water rules clearly outline “what people need to do to make sure the level of contaminants isn’t too high,” he continues. “If you aren’t complying with your industrial storm water permit under the federal Clean Water Act, you should be paying more attention to what you’re contributing to the problem.”
   BayKeeper volunteers regularly monitor the water quality in Santa Monica Bay and San Pedro Bay. When they discover a sample that exceeds what they consider the limits, based on the goals in the permit, diligent volunteers and staff trace the pollutants to their alleged source by consulting land-use maps, watershed information, and other water-flow data. Typically, they work backward by targeting a company, then trying to associate it with high con-taminant levels in their water samples.
   Sun-Lite Salvage Inc. is one Los Angeles-area scrap processor being sued by BayKeeper for its failure to file and implement a storm water pollution prevention plan between 1994 and 1998.
   In a preliminary decision, the court ruled that Sun-Lite violated its permit by exceeding the benchmarks. Another reason why the scrap industry has been a target of citizen suits, says Funderburk, is that “scrap is identified as a business with deep pockets, so they go after the scrap guys.”
   So far, this approach has indeed proved successful. In the past five years, Santa Monica BayKeeper has filed suits against more than 100 companies, including some scrap recyclers, and it has won virtually every case that went to court, says Fleischli.

A Whole New Era of Enforcement
What has happened so far is just the beginning, cautions ISRI’s Mattson. “The actions of these environmental groups are a reality,” she states. “What started in California and a few other places has the potential to spread across the country. We’re entering a whole new era of enforcement. It’s going way beyond whether a company has the necessary permit.  These groups are forcing our industry into compliance agreements that involve a third party.”
   Environmental groups assert that the ultimate solution would be for scrap companies to retain and treat all of their storm water, a concept that recyclers dismiss as impractical, expensive, and unnecessary.
   The real answer is simple, asserts one California recycler: “The environmental laws have to be rewritten. The onus needs to be on the enforcement agencies and their due process, not citizens’ groups. As a business, I accept that I’m regulated, but I shouldn’t have to deal with a citizens’ group as my enforcement agency.”
   He isn’t the only one who wants to see the vagaries removed from storm water permits. ReMA is committed to rewriting and improving the language of the permit to make it less open to interpretation. 
   To this end, ReMA is working with EPA to develop a better permit, says Mattson. “We need to create more useful tools so that recyclers can know without a doubt that they’re in compliance. There has to be more to it than just looking at a number.”
   Meanwhile, some scrap processors challenged by citizens’ groups continue to pay. “They’re afraid to fight, they’re afraid of the perceived expenses, so they’re settling,” says the California recycler. “The precedent that’s being set is that scrap companies will roll over, that they’re easy pickings.”
   To counter that precedent, he and other recyclers believe that the time has come for scrap processors to take a stand in the courts.
   The key, says Longsworth, is for recyclers to “stop being the ‘lowest-hanging apples on the tree.’” At least a few recyclers believe that means some type of organized legal effort, even the possibility of a joint suit against the environmental groups on the basis of malicious prosecution. Their logic is that environmental groups don’t want to expend their resources if they have only a small chance of winning a large settlement.
   One court decision, at least, might support their logic. The 1997 decision in California Earth Corps v. U.S. Battery Manufacturing Co. could discourage the environmental community from bringing large lawsuits against purported polluters.
   U.S. Battery, a $30-million company in California that makes batteries for golf carts, was sued by California Earth Corps for allegedly releasing high levels of lead into the air during its manufacturing process. The citizens’ group demanded a $912,500 settlement. Rather than back down and pay up, U.S. Battery stood its ground and won a favorable court decision.
   The judge ruled that the statute of limitations on such cases was one year, not four as the plaintiff said. The plaintiff charged that every day constituted a violation under California’s Proposition 65, which allows for a penalty of $2,500 per episode.
   In a pretrial discussion, the judge said that U.S. Battery’s maximum liability would be four violations, or episodes, per year—one per each reporting period, for a total of $10,000—rather than one violation per day—or $912,500 for the year—as California Earth Corps suggested. In the end, U.S. Battery agreed to install a vacuum system—which it reportedly planned to install anyway—and California Earth Corps dropped all financial demands.
   Many attorneys believe that this ruling will help limit bounty-hunter lawsuits by setting a precedent for much lower fines and restricting the statute of limitations. Whether that prediction will hold true remains to be seen. So far, it hasn’t stopped environmental groups from filing cases in California and other states.

Pursuing Preventive Measures
While the legal battle goes on, recyclers shouldn’t sit back and wait to see what happens next, advises Funderburk. “You need to be proactive to protect yourself any way you can.”
   In particular, he offers, “Pay attention to the aesthetics and organization of your facility. A little money going into that will pay huge dividends. The inspector will look at the outside of the facility and form an opinion on how much the owner cares about the environment. The cost of environmentally friendly signs or hanging up an oleophilic sock is nothing compared to penalties and retrofitting.”
   Also consider conducting an environmental audit, Maille suggests. “It’s worth getting an expert opinion on where your weak spots are. You probably don’t need a big, fancy engineering project to solve your problem. In most cases, it’s something as easy and simple as writing a plan that will keep you out of trouble.”
   Like it or not, citizen suits are the wave of the future and scrap recyclers had better prepare for it, says Funderburk. “Pay attention to what ReMA recommends and do what it says,” he advises. “If you’re following ReMA guidelines, it’ll give you a good defense in litigation.”
   ReMA members who are knowledgeable about permit and compliance issues need to get involved by educating other members, adds Longsworth. “ISRI members can educate their colleagues on the need to comply, how to do it fully, and what the current accepted best practices may be.”
   Meanwhile, citizens’ groups will likely continue to file suits against companies they view as environmental offenders. “It would be nice to get past the litigious phase and start working together with the scrap industry to clean up the environment,” says BayKeeper’s Fleischli. “In the absence of that, we’ll continue our enforcement actions.” •