In a surprising move, the Fifth Circuit Court of Appeals in Environmental Texas Citizen Lobby, Inc. v. ExxonMobil Corp.remanded back to the district court a $19.95 million civil penalty against ExxonMobile for 16,386 days of various violations at its Baytown facility in Texas. The Fifth Circuit instructed the district court that it must find that all three constitutional standing requirements (injury in fact, traceable to the defendant’s challenged conduct and redressed by a favorable decision) are met to sustain a penalty for a violation. One judge concurred in the judgment, arguing that the remand’s instructions for addressing the traceability requirement fell short of constitutional requirements.
Background. Environment Texas Citizen Lobby and Sierra Club brought a citizen suit action against ExxonMobil for 241 reported events and 3,735 recorded events encompassing 16,368 days of violation that occurred at the Baytown facility in Texas between October 2005 and September 2013. Count I alleged 10,583 days of "upset" emissions; Count II alleged 5,709 days of violation of the Texas “maximum achievable emission rate table” in Baytown’s permit; Count III alleged 18 days of violation of a 1,200 lb/hour limit on highly reactive VOCs, Count IV alleged 44 days of violation of an EPA rule limiting flaring to 5 minutes during any 2-hour period; and Count V alleged 32 days of violation of operating a flare with a pilot flame.
In its first decision, the district court found that only a small number of the violations were actionable and that it would decline to assess a civil penalty. The Fifth Circuit vacated and remanded that decision as "too narrow" a consideration of “actionability” and remanded for consideration of a penalty. On remand, the district court determined that the 16,386 days of violation were actionable and imposed a $19.95 million penalty. ExxonMobil appealed, challenging the action on standing, affirmative defense and penalty factors.
Fifth Circuit Case. In the Fifth Circuit, ExxonMobil challenged whether the constitutional grounds for standing (injury in fact, traceability and redressability) were met. The environmental groups urged that the Fifth Circuit's prior decision meant that standing existed and was binding as "law of the case." The Fifth Circuit said no, stating that because standing was not specifically addressed in the prior case it had to review whether it had standing.
Injury in fact. The Fifth Circuit found that the "injury in fact" prong of standing was easily satisfied by the harms alleged (allergies, seeing smoke and flaring and a haze, health complaints).
Traceability. The Fifth Circuit framed the question as “whether Plaintiffs must demonstrate standing for each violation” or only for the “claim.” The environmental groups argued for “claim” standing (e.g., proof that they had standing for one violation meant standing for all similar violations), but the court held that the Clean Air Act’s requirement that there be ongoing or repeated “violation” requires that standing be shown on a “violation” basis, stating that “Plaintiffs’ argument thus runs up against the principle that one injury does not entitle a litigant to right other wrongs that did not injure it.” The court gave as an example a citizen that moved into the area after some of the violations had occurred. That citizen could not logically assert a claim for a violation that had not harmed her. The Fifth Circuit also expressed concern about the “variety of aesthetic and health-related injuries, allegedly traceable to 24 different pollutants emitted in a variety of ways (flaring, leaks, workplace accidents, etc.). The impact of those different violations varied greatly.” The court appeared troubled treating a fire from an extension cord and a cigarette butt can that lasted one minute and emitted 0.01 lbs pound of CO and NOx each, but were treated as four days of violation.
Despite this promising start for ExxonMobil, the Fifth Circuit then switched directions and stated “it does not follow from the need to establish standing for each violation that separate proof of standing is needed for each violation” and that “the same testimony” may “support standing for multiple violations.” It again rejected the environmental groups’ claim that proof of “any” of the claim violations was sufficient and then rejected ExxonMobil’s argument that none of the injuries were “traceable” except for five that were linked to a specific event by one of the witnesses. The court held that such a degree of traceability was not required; instead it is something "more than conjecture" and "less than certainty." The court laid out its test as follows:
First, plaintiffs must show that each violation in support of their claims “causes or contributes to the kinds of injuries" they allege. The court directed that if a violation “(1) created flaring, smoke, or haze; (2) released pollutants with chemical odors; or (3) released pollutants that cause respiratory or allergy-like symptoms" that it would meet this first prong; and
Second, the plaintiffs must show the “existence of a ‘specific geographic or other causative nexus’ such that the violation could have affected their members.” The Fifth Circuit said that the district court could find that certain “small magnitude” events did not rise to the level where plaintiffs’ members were exposed. The Fifth Circuit said no scientific certainty is required, just enough to cause chemical odors, allergy symptoms or respiratory symptom across the fenceline would be sufficient.
The Fifth Circuit stated that the second test was not applicable to violations that could be “seen.”
Redressability. The Fifth Circuit held that the Baytown facility’s emissions had reduced over time, perhaps as a result of orders and lawsuits and that this sufficiently demonstrated redressability.
Affirmative Defenses. On ExxonMobil’s affirmative defense claim, the Fifth Circuit held that the Texas SIP does include an “act of God” defense at 40 C.F.R. § 52.2270(e) and that the district court should consider the applicability of that defense for violations during Hurricane Ike. ExxonMobil had no such luck on its other affirmative defense claims, which the district court had rejected on the basis of ExxonMobil having “only provided a general citation to the testimony and record.” ExxonMobil had filed a supplemental report, which the district court and Fifth Circuit both rejected, stating that some statements in the report “had no bearing on the emissions events for which it purportedly proved a defense.” The Fifth Circuit affirmed, holding “Judges are not ferrets.”
Concurrence. Judge Oldham concurred in the judgment. His conclusion was that the Fifth Circuit’s standing precedents “are a mess.” In Judge Oldham’s view, standing had started to go awry with the Third Circuit’s decision in PIRG of N.J. v. Powell Duffryn Terminals, Inc., 913 F.2d 64 (3d Cir. 1990), of which he observed “it’s not obvious how the Third Circuit devised that standard because the courted nothing at all to support it.” Instead of the majority’s “traceability” standard of “more than speculation” and “less than certainty” Judge Oldham would have required “but for” causation, but not legal “proximate cause.”
ExxonMobil lives to fight another day, but it is not clear that the Fifth Circuit decision will lend it much succor beyond the “small volume” discharges with “zero” emission limits. Judge Oldham is likely correct that it is not clear how the majority's standing test will be applied in practice and that it will likely lead to little certainty.
More significantly, this case highlights the fundamental problem of mass environmental claims. The per day per violation standard racks up large potential penalties ($600 million in this case) that encourage extreme positions and require extensive litigation. Both the district court and the Fifth Circuit faulted ExxonMobil for failing to address its affirmative defense claims with “sufficient particularity,” but even if ExxonMobil took an average only 10 seconds per violation, it would take over 45 hours of trial time to work through them. It is a rare court that would grant such time. Courts should insist that claims be brought promptly for a reasonable number of violations and manage the case to achieve an equitable result. Otherwise, the result may treat gross negligence and an extension cord fire the same. And that denies justice to everyone.