Litigation dominated regulatory affairs last week. Procedural posturing continued in the Waters of the United States (WOTUS) litigation while gaining some clarity and the Clean Air Act (CAA) “good neighbor” regulations returned to the Environmental Protection Agency (EPA) for further refinement. Litigants asked the courts to partially vacate and remand efficiency standards for walk-in refrigerators, putting aside controversial issues for now. The National Labor Relations Board (NLRB) successfully defended its controversial union election rules, but the Internal Revenue Service (IRS) lost an arcane rule in an unusual forum. Today and next week … Clean Power Plan.
WOTUS Litigation IV: After the approaching storm, the deluge, and the initial joining of litigation rivers, the Waters of the United States litigation has begun receding into distinct ponds, pools, or puddles. The final rule, to summarize, alters the jurisdictional definition of waters under the Clean Water Act (CWA), thereby requiring permits for possible pollution of those waters. At bottom, the EPA and Army Corps of Engineers take the position that the rule has not regulatory effect and that all effect devolves on the permitting process; numerous plaintiffs take the position that the final rule itself alters their rights and effectively harms them. Thus, litigation abounds a month after the rule was published.
1. As expected, the Department of Justice (DOJ) last Monday asked the Judicial Panel on Multidistrict Litigation (JPMDL) to consolidate ten cases from eight district courts challenging EPA and Engineers’ WOTUS rule – and proposed transfer to the United States District Court for the District of Columbia, a court in which no plaintiff filed. DOJ has previously filed motions to stay all proceedings in the district courts pending JPMDL consolidation – thus far, plaintiffs have consented to at least two stays, and one district court stayed two other cases after briefing. At least one case, Georgia v. EPA, thus far remains on schedule for a motion for a preliminary injunction argument and has not yet ruled on a motion to stay proceedings. The combination of DOJ’s multiple requests to stay district court proceedings and the motion to consolidate in JPMDL could extend the litigation well past the August 28, 2015, effective date of the rule because the next available hearing for JPMDL is October 1, 2015.
► JPMDL consolidation of district court litigation is normally driven by common questions of fact and here the issues presented are common questions of law because the administrative record before the agencies is presumptively the factual record on which judicial review is based and the district court acts much as an appellate court, not a trial court. DOJ interestingly argues that consolidation of multiple cases is appropriate because it expects challenges to the sufficiency of the administrative record and motions to complete or supplement that administrative record, which, of course, has not yet been lodged anywhere.
Consolidation of judicial review of agency action is not unprecedented, but also not well precedented. At a minimum, if JPMDL consolidates cases in a single district court, at least the parties will have fully briefed the motion for preliminary injunction.
2. The agencies filed also with JPMDL the certification of twelve petitions for review (PFR) in eight different Courts of Appeal. JPMDL selected the Sixth Circuit, from among the Second, Fifth, Sixth, Eighth, Ninth, Tenth, Eleventh, and District of Columbia Circuits, for resolution of all petitions for review timely filed under In re: EPA and DOD, Final Rule: Clean Water Rule: Definition of “Waters of the United States.” The petition for review litigation should now move forward under the Murray Energy v. EPA banner.
► Unlike district court transfers, the consolidation of the petitions for review is not discretionary: the agencies are required to certify timely-served petitions to JPMDL and JPMDL randomly draws the transferee circuit, a mere ministerial function. DOJ appears to be suggesting that jurisdiction lies only in a Court of Appeals under specific provisions of the CWA. The Sixth Circuit could grant preliminary relief from the final rule, but it may also utilize the services of a district court to resolve such motions.
Separately, twenty-nine State Attorneys General (and likely plaintiffs) asked EPA and the Engineers to immediately extend the effective date of the WOTUS rule by at least 9 months to permit judicial review to proceed in an orderly manner. A request for a stay by the agency under the Administrative Procedure Act (APA) is required by the Federal Rules of Appellate Procedure (FRAP) in the courts of appeal, but not mandatory in the district courts (although very wise).
► A note on dockets and documents: The number of motions and diversity of settings, at least temporarily, creates substantially more paper than reasonably can be provided – at least 11 separate PACER dockets must be consulted and documents purchased – all to illustrate only procedural posturing. Parties and readers are welcome to furnish filed documents and this blog will publish important pleadings while focusing on opinions and orders.
Cross-State / Transport Rule Remanded: The United States Court of Appeals for the District of Columbia Circuit remanded without vacatur specific requirements of the EPA Cross-State or Transport Rule on sulfur dioxide / particulate matter and nitrogen oxide / ozone emissions in the latest iteration of EPA v. EME Homer City Generation, L.P. The key here is specific requirements, not the whole rule, as the D.C. Circuit had previously vacated, and the United States Supreme Court (SCOTUS) had reversed.
EPA’s long history of attempting to deal with upwind contributions of States to the mixture of downwind pollution in other States and the CAA “good neighbor” provision fills volumes. The bottom line today is:
Now on remand, we consider several as-applied over-control challenges to EPA’s 2014 emissions budgets. Petitioners challenge the 2014 SO2 emissions budgets for Texas, Alabama, Georgia, and South Carolina. Petitioners also challenge the 2014 ozone-season NOX emissions budgets for Florida, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia. On this record, petitioners’ as-applied challenges are meritorious, and those 2014 emissions budgets are invalid. We therefore grant the petitions to that limited extent, and we remand without vacatur to EPA for it to reconsider those 2014 emissions budgets.
► Remand without vacatur here is the result of application of the rule to only complaining states and the remand will require EPA to develop a more complex regulatory “budget.” As with any time-based regulation, such as these 2014 pollution budgets, the passage of its time pushes the calculus further down the timeline. The invalidity of the regulation as applied to these states and these pollution outputs places the onus on EPA to adjust longer trains of pollution limitations. EPA’s difficult job becomes more difficult.
Refrigeration Standards Settlement: Litigation over the legality of the Department of Energy (DOE)’s Energy Conservation Program: Energy Conservation Standards for Walk-In Coolers and Freezers headed toward settlement, an infrequent occurrence in regulatory litigation, with the filing of a joint motion for partial vacatur and remand in Lennox International Inc. v. Department of Energy. The petition for review alleged that the standards were internally inconsistent and unachievable using economically feasible technologies, based on flawed benefit / cost analysis, and failed to comply with the Regulatory Flexibility Act (RFA). The proposed vacatur and remand will require DOE to undertake a negotiated rulemaking, although it is not entirely clear on the face of the settlement whether DOE commits to a Negotiated Rulemaking Act (NegReg) process.
► A petition for review presents only bare allegations and agencies may not fully comprehend the issues presented until petitioner files a statement of issues or brief on the merits; here the respondents have not filed a brief, but reached a settlement. Settlement of a petition for review is not common, but is certainly not unprecedented. The settlement of this specific litigation on this specific final rule in the much broader DOE electricity reduction program may not reach a broad segment of the economy, but one that is quite deep, and may inform the broader range of efficiency standards that DOE adopts.
In the midst of this litigation resides DOE’s use of the contentious social cost of carbon (SCC) in its economic analysis and how SCC comports with the Information Quality Act (IQA), the RFA, and other standards. The SCC question raises as well whether DOE met its duty to examine the relevant data and articulate a satisfactory explanation for its action, including a “rational connection between the facts found and the choice made” under the APA. The settlement seems to push these issues aside, at least for now.
Labor Elections Upheld Again: The United States District Court for the District of Columbia turned away substantive challenges to the NLRB’s second Representation – Case Procedures rule in Chamber of Commerce v. NLRB. The court upheld the rule against constitutional and statutory challenges in light of the NLRB’s substantial discretion under its governing statute and the rule in managing union elections.
Another decision in the Western District of Texas also upheld the rule in June. Plaintiffs have appealed that decision to the Fifth Circuit as Assoc. Builders and Contractors v. NLRB, 5th Cir. No. 15-50497 (filed June 5, 2015).
► Expect another appeal and a return to these issues in another year, but the case representation procedures are quickly becoming entrenched.
Tax Court Vacates IRS Rule: In an unusual situation, the United States Tax Court – a specialized Article I court that hears only tax disputes – vacated an IRS regulation. The issue presented in Altera Corp. and Subsidiaries v. CIR on cross motions for summary judgment was whether a 2003 IRS final rule is arbitrary and capricious, and therefore invalid, in requiring participants in qualified cost-sharing arrangements (QCSAs) to share stock-based compensation (SBC) costs to achieve an arm’s-length result. The court held that the IRS failed to:
- support its belief that unrelated parties would share certain stock-based compensation costs with any evidence in the administrative record,
- articulate why all qualified cost-sharing agreements should be treated identically, and
- respond to significant public comments in the adoption of its final rule.
Finally the Tax Court found that the IRS’s “explanation for its decision … runs counter to the evidence before” it.
► A good tax lawyer is needed to fully explain the tax premises for this decision, but the decision itself is classic APA State Farm analysis and result. Unusual because the few specialized and high-quality Article I courts rarely are presented with regulatory practice issues.
Clean Power Plan: The Administration – according to voluminous press reports – will announce today its Clean Power Plan – the Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units final rule and may include also the Standards of Performance for Greenhouse Gas Emissions From New, Modified, and Reconstructed Stationary Sources: Electric Utility Generating Units final rule. The regulatory action will, of course, be a subject in the next Monday Morning Regulatory Review. As with WOTUS and a host of other major Administrative initiatives, litigation is likely and EPA’s carbon emissions final rule will directly raise SCC issues.
The post Monday Morning Regulatory Review – 8/3/15: WOTUS Litigation IV; Cross-State / Transport Rule Remanded; Refrigeration Standards Settlement; Labor Elections Upheld Again; Tax Court Vacates IRS Rule & Clean Power Plan appeared first on Federal Regulations Advisor.