Tag: Litigation

Six Flags Raises Red Flags: Illinois Supreme Court Weighs In On BIPA

On January 25, the Illinois Supreme Court held that a person can seek liquidated damages based on a technical violation of the Illinois Biometric Information Privacy Act (BIPA), even if that person has suffered no actual injury as a result of the violation. Rosenbach v. Six Flags Entertainment Corp. No. 123186 (Ill. Jan. 25, 2019) presents operational and legal issues for companies that collect fingerprints, facial scans, or other images that may be considered biometric information.

As we have previously addressed, BIPA requires Illinois businesses that collect biometric information from employees and consumers to, among other things, adopt written policies, notify individuals, and obtain written releases. A handful of other states impose similar requirements, but the Illinois BIPA is unique because it provides individuals whose data has been collected with a private right of action for violations of the statute.

Now, the Illinois Supreme Court has held that even technical violations may be actionable.  BIPA requires that businesses use a “reasonable standard of care” when storing, transmitting, or protecting biometric data, so as to protect the privacy of the person who provides the data. The rules are detailed. Among other things, BIPA requires businesses collecting or storing biometric data to do the following:

  • establish a written policy with a retention schedule and guidelines for permanently destroying biometric identifiers and biometric information;
  • notify individuals in writing that the information is being collected or stored and the purpose and length of time for which the biometric identifier will be collected, stored, and used;
  • obtain a written release from the individual; and
  • not disclose biometric information to a third party without the individual’s consent.

The Illinois Supreme Court has now held that a plaintiff may be entitled to up to $5,000 in liquidated damages if a company violates any of these requirements, even without proof of actual damages.

In Rosenbach, the plaintiff’s son’s fingerprint was scanned so that he could use his fingerprint to enter the Six Flags theme park under his season pass. Neither the plaintiff nor her son signed a written release or were given written notice as required by BIPA. The plaintiff did not allege that she or her son suffered a specific injury but claimed that if she had known that Six Flags collected biometric data, she would not have purchased a pass for her son. The plaintiff brought a class action on behalf of all similarly situated theme park customers and sued for maximum damages ($5,000 per violation) under BIPA. The Illinois appellate court held that plaintiff could not maintain a BIPA action because technical violations did not render a party “aggrieved,” a key element of a BIPA claim.

In a unanimous decision, the Illinois Supreme Court disagreed. The court held that “an individual need not allege some actual injury or adverse effect, beyond violation of his or her rights under the Act, in order to qualify as an ‘aggrieved’ person and be entitled to seek liquidated damages and injunctive relief pursuant to the Act.” Even more pointedly, the court held that when a private entity fails to comply with BIPA’s requirements regarding the collection, retention, disclosure, and destruction of a person’s biometric identifiers or biometric information, that violation alone – in the absence of any actual pecuniary or other injury—constitutes an invasion, impairment, or denial of the person’s statutory rights.

This decision – along with the 200 class actions already filed – shows how important it is for vendors and companies using fingerprint timeclocks or other technologies that may collect biometric information to be aware of BIPA’s requirements.

 

© 2019 Schiff Hardin LLP

EPA Sued to Issue Pending Methylene Chloride Prohibition Rule in Final

On January 14, 2019, in the U.S. District Court for the District of Vermont, the Vermont Public Interest Group; Safer Chemicals, Health Families; and two individuals (plaintiffs) followed up on their earlier notice of intent to sue and filed a complaint against Andrew Wheeler and the U.S. Environmental Protection Agency (EPA) to compel EPA to perform its “mandatory duty” to “address the serious and imminent threat to human health presented by paint removal products containing methylene chloride.”  Plaintiffs bring the action under Toxic Substances Control Act (TSCA) Section 20(a) which states that “any person may commence a civil action … against the Administrator to compel the Administrator to perform any act or duty under this Act which is not discretionary.”  Plaintiffs allege that EPA has not performed its mandatory duty under TSCA Sections 6(a) and 7.  TSCA Section 6(a) gives EPA the authority to regulate substances that present “an unreasonable risk of injury to health or the environment” and TSCA Section 7 gives EPA the authority to commence civil actions for seizure and/or relief of “imminent hazards.”  Plaintiffs’ argument to direct EPA to ban methylene chloride is centered on the issue of risk to human health only, however, stating that it presents “an unreasonable risk to human health” as confirmed by EPA.  Under TSCA Section 20(b)(2), plaintiffs are required to submit a notice of intent to sue 60 days prior to filing a complaint which they did on October 31, 2018.

Background

On January 19, 2017, EPA issued a proposed rule under TSCA Section 6 to prohibit the manufacture (including import), processing, and distribution in commerce of methylene chloride for consumer and most types of commercial paint and coating removal (82 Fed. Reg. 7464).  EPA also proposed to prohibit the use of methylene chloride in these commercial uses; to require manufacturers (including importers), processors, and distributors, except for retailers, of methylene chloride for any use to provide downstream notification of these prohibitions throughout the supply chain; and to require recordkeeping.  EPA relied on a risk assessment of methylene chloride published in 2014, the scope of which EPA stated included “consumer and commercial paint and coating removal.”  The proposed rule stated that in the risk assessment, EPA identified risks from inhalation exposure including “neurological effects such as cognitive impairment, sensory impairment, dizziness, incapacitation, and loss of consciousness (leading to risks of falls, concussion, and other injuries)” and, based on EPA’s analysis of worker and consumer populations’ exposures to methylene chloride in paint and coating removal, EPA proposed “a determination that methylene chloride and NMP in paint and coating removal present an unreasonable risk to human health.”  The comment period on the proposed rule was extended several times, ending in May 2017, and in September 2017 EPA held a workshop to help inform EPA’s understanding of methylene chloride use in furniture refinishing.

No further action was taken to issue the rule in final, however, until December 21, 2018, when EPA sent the final rule to the Office of Management and Budget (OMB) for review.  On the same day, EPA also sent another rule to OMB for review titled “Methylene Chloride; Commercial Paint and Coating Removal Training, Certification and Limited Access Program,” which has not previously been included in EPA’s Regulatory Agenda; very little is known about this rule.  Plaintiffs do not refer to it in the complaint but there is speculation, based on its title, that this second rule may allow for some commercial uses of methylene chloride.

Commentary

We recall the lawsuit filed by the Natural Resources Defense Counsel (NRDC) in 2018 challenging EPA’s draft New Chemicals Decision-Making Framework document as a final rule.  The current action further reflects the commitment of detractors of EPA to use the courts and every other means available to oppose the Administration’s TSCA implementation efforts.  Whether and when this court will respond is unclear.  What is clear is that the case will be closely watched, as the outcome will be an important signal to the TSCA stakeholder community regarding the utility of TSCA Section 20(a)(2) to force non-discretionary EPA actions that the Administration may be disinclined to take.

 

©2019 Bergeson & Campbell, P.C.

Export Sanctions List: Know Your Customer

If your company sells products to customers or distributors located in foreign countries during this time of sanctions and export controls, you should consider the surprising case of Cobham Holdings Inc. a cautionary tale.

The U.S. Treasury Department’s Office of Foreign Asset Control (“OFAC”) publishes a sanctions list of foreign individuals and entities to which U.S. companies may not sell goods or services without first obtaining an export license. OFAC may fine the U.S. companies that violate these sanction regulations. Prudent companies check the OFAC sanctions list before selling products to foreign customers. In fact, many companies have purchased software that searches the sanctions list for prohibited individuals and entities. If your foreign customer is not found on the sanctions list, your company is free to sell products to that customer.

That’s what Cobham Holdings Inc. thought, but on November 27, 2018 they settled a case with OFAC that involved sales to a foreign customer that was not on the sanctions list. Cobham agreed to pay a fine of $87,507 for exporting approximately $745,000 worth of silicon switches to Almaz Antey Telecommunications LLC in Russia between 2014 and 2015 when that entity was not named on OFAC’s list of “Specifically Designated Nationals and Blocked Persons”. Cobham used software to search for OFAC sanctions, the customer came up clean, and Cobham shipped the goods.

Cobham used the software to search for “Almaz Antey Telecom” but not “Almaz Antey.” If it would have searched for the latter, there were numerous hits for entities under the Almaz Antey umbrella, including the entity allegedly responsible for providing the missile that shot down Malaysia Airlines Flight MH17 over Ukraine in 2014. Upon further investigation, OFAC determined that Almaz Antey owned 51% of Almaz Antey Telecommunications LLC. As a result, OFAC initially informed Cobham that it would face potential fines up to $1.9 million.

Cobham was able to reduce the potential fine by agreeing to utilize new and improved screening software, along with a business intelligence tool and new internal checks for high risk transactions. Given that companies now know (or should know) of the potential pitfalls of using these software solutions as a stand-alone procedure, OFAC may not be so generous to the next company to run afoul of its sanctions and export controls through negligence or inadvertent software errors.

This case highlights not only the dangers of exclusively relying on software solutions to search the combined sanctions list, but the inherent risk of the vast number of related entities and the difficulty of understanding their ownership structure. Even if your customers come up clean on the sanctions search, if they are owned more than 50% by a sanctioned entity, then the transaction is still prohibited. Best efforts must be used to ensure that neither the foreign customer nor its majority owner is on the OFAC sanctions list, and a simple software solution or minimal approach may not be enough. A thorough analysis of all relevant facts and information related to your customers and sanctioned entities is vital to ensure your company will not run into the same snare as Cobham.

 

©2019 von Briesen & Roper, s.c
Read more legal news at the National Law Review.

Fourth Circuit Expands Title IX Liability for Harassment Through Anonymous Online Posts

The Fourth Circuit recently held that universities could be liable for Title IX violations if they fail to adequately respond to harassment that occurs through anonymous-messaging apps.

The case, Feminist Majority Foundation v. Hurley, concerned messages sent through the now-defunct app Yik Yak to the individual plaintiffs, who were students at the University of Mary Washington. Yik Yak was a messaging app that allowed users to anonymously post to discussion threads.

Because of the app’s location feature, which  allowed users to see posts within a 5 mile radius, the Court concluded that the University had substantial control over the context of the harassment because the threatening messages originated on or within the immediate vicinity of campus. Additionally, some of the posts at issue were posted using the University’s wireless network, and thus necessarily originated on campus.

The Court rejected the University’s argument that it was unable to control the harassers because the posts were anonymous. It held that the University could be liable if it never sought to discern whether it could identify the harassers.

The dissent encouraged the University to appeal the decision stating that “the majority’s novel and unsupported decision will have a profound effect, particularly on institutions of higher education . . .  Institutions, like the university, will be compelled to venture into an ethereal world of non-university forums at great cost and significant liability, in order to avoid the Catch-22 Title IX liability the majority now proclaims. The university should not hesitate to seek further review.”

 

Copyright © 2019 Robinson & Cole LLP. All rights reserved.
This post was written by Kathleen E. Dion of Robinson & Cole LLP.
Read more about college and university legal news on the National Law Review’s Public Education Page.

New Jersey Appellate Panel Countenances Beach Easement Condemnations for Federal Funding

A New Jersey appeals court recently upheld the Township of Long Beach’s exercise of eminent domain to acquire beachfront access easements in the consolidated appeal of Twp. of Long Beach v. Tomasi, N.J. Super. App. Div. (per curiam) – the latest chapter in a series of disputes between coastal New Jersey municipalities and owners of beachfront property within those municipalities.

The Township of Long Beach sought federal funding pursuant to the “Sandy Act,” which authorizes the Army Corps of Engineers (“Army Corps”) to protect the New Jersey shoreline through beach replenishment and dune construction projects funded either in whole or in part by the federal government. See Disaster Relief Appropriations Act, 2013 (Sandy Act), Pub. L. No. 113-2, 127 Stat. 4. In order to obtain such federal participation and funding, the township was required to comply with conditions set forth in the Army Corps’ engineering regulations, including the requirement that participating municipalities provide “reasonable public access rights-of-way” to the beach, defined as “approximately every one-half mile or less.” U.S. Army Corps of Engineers, ER 1105-2-100, Planning Guidance Notebook 3-20 (2000); see also N.J.A.C. 7:7-16.9.

As the township’s shoreline did not have the required public access, it resolved to obtain public access easements in various locations to achieve compliance with the Army Corps and NJDEP regulations such that it would be eligible for inclusion in an ongoing shoreline protection project undertaken by those entities. Accordingly, the township passed appropriate resolutions authorizing it to condemn and acquire via eminent domain four public access beach easements, including a ten-foot-wide strip of land along the defendants’ properties. After unsuccessfully negotiating with the defendants to purchase the easements, the township initiated condemnation proceedings in the Superior Court, giving rise to the Tomasilitigation.

In September 2017 the trial court entered summary judgment in favor of the township and held that it had properly exercised its eminent domain power in acquiring the beach easements for public use. The defendants appealed and sought reversal based on their contention that the township was unable to establish either necessity or proper public purpose for the condemnations. More specifically, the defendants argued that reasonable beach access already existed in the township such that there was no necessity to condemn the easements under the Public Trust Doctrine or otherwise; and that the stated impetus for the condemnations, i.e. seeking federal funding, could not constitute a viable public purpose.

On December 20, 2018, the two-judge appellate panel issued its decision affirming the lower court and rejecting both of the defendant-appellants’ primary arguments. The court noted its “limited and deferential” review of municipal exercises of eminent domain power, cited the traditionally broad conceptual scope of public use, and held that the township’s undertaking to protect its shoreline – including conforming to state or federal requirements to obtain project funding – was a proper public use or purpose.

There are several relevant takeaways from the Tomasi decision, though they should be understood with an important caveat. The court resolved the narrow question before it without engaging in a comprehensive or detailed legal analysis and as a result, land use practitioners and municipal personnel should be cautious not to overstate the holding in this brief unpublished opinion. Nevertheless, the Tomasi decision is significant based on its factual distinctions from more traditional beach easement litigations.

Specifically, the easements at issue in Tomasi were for perpendicular access to the beach and ocean rather than for dune construction. Though both dune construction and access easements relate to shore protection, the former directly enable and contribute to such protection, whereas the latter are merely incidental to it. In that sense, the Tomasi easements are arguably less justifiable than dune construction easements in the eminent domain context – and the defendants in Tomasi appeared to base their public purpose-driven arguments on precisely that premise. However, the court evidently did not find the above-described “direct vs. incidental” distinction meaningful and rejected the defendants’ argument, finding that pursuing federal funding for shoreline protection was a sufficient public purpose for eminent domain purposes.

Under the facts of this case, that is a logically defensible outcome, as the township’s acquisition of the access easements was a de-facto prerequisite for constructing dunes and otherwise protecting its shoreline area, per the Army Corps and NJDEP regulations. Accordingly, a possible implication for future cases is that the precise nature of the condemnation easement in question will not necessarily be dispositive, and the focus of a reviewing court’s inquiry instead will be whether such an easement is ultimately necessary to effectuate the contemplated shoreline protection program.

It is unclear if this premise informed the court’s decision in Tomasi. To the extent that it may have, it would be valuable for municipalities, property owners, and land use practitioners to know that the court employs a functional analysis in evaluating public use / purpose in eminent domain cases. Similarly, but conversely, it would be equally valuable for those stakeholders to know that the court did not equate access easements with dune construction easements but rather expanded the scope of eminent domain by permitting condemnation for easements which are merely incidental to shore protection.

Accordingly, the ambiguity in this space following the Tomasi decision is worth monitoring, both in that litigation as the Supreme Court considers whether to hear a (presently unfiled but) likely forthcoming appeal, and in future cases with similar or slightly different facts. Though its implications are presently limited, the Tomasi case clearly stands for the proposition that beach access condemnation easements to obtain federal funding for shore protection projects are permissible exercises of municipal eminent domain power.

 

© 2018 Giordano, Halleran & Ciesla, P.C. All Rights Reserved

Ninth Circuit Affirms Jury Verdict In Favor of Homeopathic Remedy for Flu-Like Symptoms

On November 8, 2018, the Ninth Circuit affirmed a jury verdict in a consumer class action deceptive advertising case in favor of Defendants Boiron Inc. and Boiron USA, Inc. (together, “Boiron”), the sellers of a homeopathic treatment for flu-like symptoms called Oscillococcinum (“Oscillo”).  Although the Ninth Circuit’s memorandum decision is marked “Not for Publication” and therefore is non-precedential under Ninth Circuit rules, the decision is still worth noting, as jury verdicts in class action false advertising cases are rare.

According to the appellate briefs, Oscillo’s active ingredient is a compound (extracted from the heart and liver of the Muscovy duck for those foodies in our readership) that is subjected to a homeopathic dilution process.  The diluted compound is then sprayed onto specially-manufactured granules.  Plaintiff argued that, due to the homeopathic dilution process, Oscillo was essentially “water sprayed on sugar,” which could not provide the relief from flu-like symptoms that Boiron advertised.  Plaintiff claimed that Boiron had therefore violated two California deceptive advertising statutes, the Unfair Competition Law (“UCL”) and Consumers Legal Remedies Act (“CLRA”).

At the conclusion of a one-week trial in the Central District of California, the jury found in Boiron’s favor that its representations that Oscillo relieves flu-like symptoms were not false.  On appeal, the Ninth Circuit affirmed, finding that the jury verdict did not constitute plain error because Boiron presented sufficient evidence from which the jury could have concluded that Oscillo actually works against flu-like symptoms.  This was a “battle of the experts” for the jury, the court wrote, that could not be relitigated on appeal.  And the jury appeared to have believed Boiron’s expert, clinical studies, and anecdotal evidence more than it believed the plaintiff’s expert, according to the court.

The Ninth Circuit further noted that in explicitly finding that Boiron’s claim that Oscillo treated flu-like symptoms was not false, the jury must have implicitly rejected Plaintiff’s argument that Oscillo was merely a sugar pill or water sprayed on sugar.  Nor did Plaintiff offer a theory of how Boiron’s representations could be false if the product did indeed treat flu symptoms.

The case is Christopher Lewert v. Boiron Inc., et al., No. 17-56607 in the Ninth Circuit.© 2018 Proskauer Rose LLP. To read all news published by the National Law Review click here.

Authored by: Lawrence I Weinstein and Tiffany Woo originally published at Proskauer Rose LLP Proskauer on Advertising Law Blog


Administrative Agency Deference Theme Reemerges with SCOTUS Considering Overturning Auer

The U.S. Supreme Court signaled that it remains concerned with the issue of administrative deference following its grant of certiorari last week to hear Kisor v. O’Rourke specific to the issue of whether the Court should overrule Auer v. Robbins and Bowles v. Seminole Rock & Sand Co. Overruling one or both of these decisions could result in courts giving considerably less deference to agencies’ interpretations of their own regulations.

The ability of regulatory agencies to interpret their own regulations is a fundamental issue in many environmental disputes. Both Auer and Seminole Rock are frequently cited in environmental cases to support agency actions, as these decisions require courts to give agencies near-absolute deference, so long as their decisions are not “plainly erroneous or inconsistent” with other regulations.

In practice, agencies that promulgate vague regulations through notice-and-comment procedures required by the federal Administrative Procedure Act can later expand the ambit of these regulations through informal memoranda or regulatory interpretations. These less formal processes preempt the ability of the public and regulated community to meaningfully participate in the regulatory process.

Administrative deference is an ongoing theme that we have seen arise a number of times in the past few years. Indeed, the legal community had pondered whether the Supreme Court would review administrative deference issues in the Weyerhaeuser Co. v. U.S. Fish & Wildlife Service caseinvolving the dusky gopher frog that was decided a few weeks ago. Although the Supreme Court decided Weyerhauser without reference to issues of administrative deference, the Kisor case is a clear example that this is not going away.

However, Kisor actually arises in a context fairly atypical for administrative deference. The case involves a claim for PTSD-related retroactive disability benefits brought by a former Vietnam-War-era Marine who was denied retroactive disability benefits for PTSD he suffered as a result of his service in Vietnam. Kisor’s eligibility for such benefits hinged on whether the VA received “relevant official service department records” after initially denying his claim for benefits in 1982.

Kisor argued that material he submitted to the VA relating to his service in Vietnam constituted “relevant official service department records” and entitled him to retroactive benefits. The Board of Veterans Appeals (“Board”) disagreed, stating that, in Kisor’s case, “relevant” records were those relating to a diagnosis of PTSD (which was contested at the time of his initial denial). That Kisor served in the military was never in dispute.

The Court of Federal Claims upheld the Board’s interpretation of the meaning of “relevant.” In so holding, the court concluded that the term was ambiguous, and that the Board’s interpretation was entitled to deference under Auer, Seminole Rock, and their progeny, because it was neither “plainly erroneous or inconsistent” with the VA’s regulatory framework.

Kisor illustrates the breadth of power granted to agencies by Auer and Seminole Rock – the agency’s determination of whether “relevant” records were provided was quite possibly outcome-determinative for the involved claims.

The case is expected to be heard by the Court at some point in 2019. We will keep an eye out for further developments on Kisor and similar cases touching on administrative deference.

 

© 2018 Schiff Hardin LLP
Read more Litigation news at the National Law Review’s Litigation page.

Intentional Accidents: California Supreme Court Announces that General Commercial Liability Policies Apply to Negligent Hiring, Training, and Supervising Claims for Failing to Prevent Intentional Torts

In a recent decision, the U.S. Court of Appeals for the Ninth Circuit observed that under California law, there was an unresolved question as to whether a commercial general liability (“CGL”) insurance policy covers an employer-insured for negligently failing to prevent an employee’s intentional misconduct. In essence, it was unclear whether such an incident constituted an “occurrence” that only covers “accidents,” as an intentional act cannot, by definition, be an accident. Through a certified question from the U.S. Ninth Circuit Court of Appeals, the California Supreme Court answered that such insurance policies indeed cover negligent hiring, training, and supervision claims because the crux of inquiry is the insured’s negligence—not the employee’s intent.

In Liberty Surplus Insurance Corporation, et al. v. Ledesma and Meyer Construction Company, Inc., No. 14-56120 (9th Cir. Oct. 19, 2018), the insured construction company was sued because its employee sexually abused a minor. Ledesma and Meyer Construction Company, Inc. (“L&M”) had been retained by a school district to oversee the construction of a middle school. During the course of construction, an employee sexually abused a 13-year-old student. The student sued L&M alleging claims of negligent hiring, training, and supervision of the employee that committed the intentional tort.

L&M’s CGL carrier filed a declaratory judgment action in federal district court, alleging that the claim against L&M was not covered by the insurance policy because it was premised on an intentional act. The district court granted summary judgment in favor of the plaintiff insurer. It reasoned that, because the policy covered “bodily injury” that was “caused by an occurrence,” and because an “occurrence” is defined as an “accident,” the claims for negligent hiring, training, and supervision were too attenuated from the intentional injury-causing conduct to trigger coverage.

On appeal, the Ninth Circuit certified the question of coverage to the California Supreme Court. The Supreme Court rephrased the question as follows: “When a third party sues an employer for the negligent hiring, training, and supervision of an employee who intentionally inured that third party, does that suit allege an ‘occurrence’ under the employer’s commercial general liability policy?” The Supreme Court answered in the affirmative, reasoning that, “[b]ecause the term ‘accident’ includes negligence, a policy which defines ‘occurrence’ as an ‘accident’ provides ‘coverage for liability resulting from the insured’s negligent acts.’” (internal citations omitted). On the basis of this answer, the Ninth Circuit reversed the district court’s decision and remanded for further proceedings.

This decision solidifies what amounts to an expansion of insurance coverage in the Ninth Circuit over an employer-insured’s employee’s intentional acts, where the claims are premised on the employer-insured’s negligent hiring and supervision of the employee. Underwriters should take note and consider appropriate exclusions and/or pricing of premiums of insured risks in California and elsewhere in the Ninth Circuit.

 

©2011-2018 Carlton Fields Jorden Burt, P.A.

Preliminary approval of class action settlement for Experian data breach exceeds $47M

Remember Experian’s massive data breach of 15 million customers in 2015?  The resulting consolidated class action is nearly resolved.  On December 3, 2018, a California federal judge granted preliminary approval to a proposed class settlement valued at over $47 Million.

Forty lawsuits against Experian were consolidated in the U.S. District Court for the Central District of California.  The class members, all T-Mobile USA customers, may have had their names, addresses, Social Security numbers, birth dates and passport numbers compromised in the breach.

Strictly speaking, this is no longer a FCRA case. In December 2016, the court granted in part Experian’s motion to dismiss, agreeing with Experian that it did not furnish a consumer report in violation of the FCRA because “[t]heft victims don’t ‘provide’ a thief with stolen goods.”

The settlement includes a $ 22 million nonreversionary settlement fund, which will be used to provide two years of credit-monitoring and insurance services to class members who submit valid claims, cash payments for out-of-pocket costs and documented time spent due to the data breach, $2,500 service awards for each class representative, as well as attorneys’ fees and costs, not to exceed $10.5 million.  In addition, $11.7 million must be set aside for remedial and enhanced security measures at Experian.

Copyright © 2018 Womble Bond Dickinson (US) LLP All Rights Reserved.

This post was written by John C. Hawk IV of Womble Bond Dickinson (US) LLP.

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U.S. Court of Appeals for the Fourth Circuit’s Decision to Vacate Mountain Valley Pipeline Nationwide Permit

On November 27, 2018, the U.S. Court of Appeals for the Fourth Circuit issued the most recent in a series of decisions from various courts affecting the federal permitting and construction of interstate pipelines. Sierra Club v. U.S. Army Corps of Engineers, No. 18-1173 (4th Cir. Nov. 27, 2018). In this instance, the Circuit held that the U.S. Army Corps of Engineers violated the Clean Water Act when it verified that construction of the Mountain Valley Pipeline project could proceed pursuant to Nationwide Permit 12 in the State of West Virginia.[1] This decision will have an impact on the flexibility of federal and state agencies when it comes to permitting projects under the Clean Water Act Nationwide Permit program.

The Mountain Valley Pipeline project is a 304-mile natural gas pipeline proposed to run through West Virginia and Virginia. Earlier this year, the Corps had reinstated its verification that the project met the requirements of Nationwide Permit 12 – a general permit that provides authorization for certain discharges associated with the construction of linear energy infrastructure. The Circuit vacated the Corps’ verification in its entirety, leaving the project with no authorization under the Clean Water Act.

Unlike many decisions where the issue is the Corps’ own process in promulgating the Nationwide Permit in the first instance or the Corps’ assessment of whether a specific project falls within the federal parameters of the Nationwide Permit, this matter turned on whether the Corps properly incorporated the State’s conditions into its verification and whether the State itself followed the required Clean Water Act process.

In order to use a Nationwide Permit promulgated by the Corps, a project proponent must provide the Federal permitting agency a Section 401 water quality certification from the State (or other permitting agency with jurisdiction over the water) in which the regulated discharge originates, unless the Federal permitting agency determines that the certification requirement has been waived. The State certification and its conditions then become part of the federal Nationwide Permit. With respect to Nationwide Permit 12, the State of West Virginia had issued a general certification that imposed, after public notice and comment, certain special conditions on projects seeking authorization under Nationwide Permit 12 beyond what the Corps required. Two of these special conditions were at issue in this case:

  • Special Condition A, which requires an individual state water quality certification for certain projects including those involving construction of pipelines equal to or greater than 36 inches in diameter or if crossing waters regulated under Section 10 of the Rivers and Harbors Act; and

  • Special Condition C, which requires that individual stream crossings be completed in a continuous manner within 72 hours in certain conditions.

Pursuant to these Special Conditions, in order to seek authorization under Nationwide Permit 12, Mountain Valley Pipeline was expected to obtain an individual water quality certification and to complete stream crossings within 72 hours. However, West Virginia purported to “waive” its requirement that the pipeline obtain an individual water quality certification following a series of challenges to West Virginia’s individual water quality certification, and the Corps replaced Special Condition C with an alternate condition that the Corps found to be more protective of water quality with the apparent concurrence of the State.

The Fourth Circuit held: (1) the Corps’ verification violated Section 401 of the Clean Water Act because Section 401 unambiguously requires the Corps to incorporate the State’s certification with its special conditions in the federal verification without modification; and (2) Section 401 does not allow a state to waive its special conditions without public notice and comment, meaning that the project proponent remained subject to the condition requiring that it apply for an individual state water quality certification and, therefore, the Corps’ own verification was invalid.

In reaching these conclusions, the Circuit noted that “the Corps’ interpretation would radically empower it to unilaterally set aside state certification conditions as well as undermine the system of cooperative federalism upon which the Clean Water Act is premised.” Sierra Club, No. 18-1173 at *22. With respect to the State’s action purporting to waive its special condition, the Circuit explained that “[a]llowing West Virginia to revoke, on a case-specific basis, conditions imposed in its certification of a nationwide permit would impermissibly allow the state to circumvent [the CWA’s] explicit requirement that state permit certifications satisfy notice requirements.” Id. at *31.

Assuming this decision stands, the upshot is that both the Corps and the States (at least within the Fourth Circuit) will have less flexibility in how projects are permitted when a State has issued a general water quality certification with specific conditions. The Corps will need to require that the terms of such certifications are strictly followed in order to make decisions that comply with the Clean Water Act.

[1] The Circuit’s November 27, 2018 decision supports and expands upon the Circuit’s October 2, 2018 decision to vacate the Corps’ verification on more limited grounds.  Sierra Club v. U.S. Army Corps of Engineers, No. 18-1173 (4th Cir. Oct. 2, 2018).

© 2018 Bracewell LLP
This post was written by Ann D. Navaro and Christine G. Wyman of Bracewell LLP.