At the U.S. Court of Appeals for the D.C. Circuit this morning, lawyers for the General Electric Co. and the Environmental Protection Agency sparred over the constitutionality of a legal tool used to force the cleanup of hazardous waste sites. Carter Phillips, managing partner of Sidley Austin’s D.C. office, faced off against Justice Department attorney Sambhav Sankar.
The D.C. Circuit appeal is the latest chapter in a decade-long effort by GE to prove that a provision of the federal Superfund statute is unconstitutional. The Superfund statute, known formally as the Comprehensive Environmental Response, Compensation and Liability Act, was passed in 1980 to ensure that polluters would pay for the environmental hazards they created. The provision in question permits the EPA to unilaterally order a private party to clean up a site that poses an "imminent and substantial" threat to public safety. Companies that fail to follow the unilateral administrative order face stiff fines.
Phillips argued that the EPA’s use of such orders violates the private party’s due process rights. That’s because companies must spend money to clean up and take a hit to their market value caused by the bad publicity of being labeled a polluter before getting a chance to challenge the order in court, Phillips said.
“What you’ve got is an agency of the government engaging in a specific adjudicative process without an independent adjudicator presiding over it,” Phillips told the panel composed of Judges David Tatel, Judith Rogers, and Thomas Griffith.
Even if that’s true, said Griffith, any fines imposed under a unilateral administrative order can’t be enforced without a court order. “The [order] is just a step in the process, not the end of the process,” Griffith said. “GE doesn’t have to pay a dime until an Article III court tells them too.”
Phillips countered that, while a company waits for a court to determine whether it may be held liable, the public will hear that the company is in “violation” of the law, which will damage its stock value. Also, there’s a $37,500 fine for each day of noncompliance, he pointed out.
Phillips said that the unilateral administrative orders, which he called the EPA’s “sledgehammer,” were designed to be used only in emergency situations, but have become a go-to enforcement tool.
Tatel asked whether Goldman Sachs should have received a hearing before it was charged with fraud by the Securities and Enforcement Commission. “Goldman’s stock lost more than 10% of its value upon word of the lawsuit,” Tatel said.
“Yes, but there is a dividing line between that situation and an adjudicative order leading to consequential damages,” Phillips said.
When Sankar took the lectern, he returned to Griffith’s point that the EPA’s use of unilateral administrative orders was simply a stage in the process. “The idea that once [an order] is issued the EPA closes the door and refuses to talk to anyone any more is simply wrong. The EPA often goes back and makes changes,” Sankar said.
Tatel questioned whether the EPA would be better served by filing a civil lawsuit against violators. “Isn’t the EPA disregarding one of the tools that Congress gave it?” he asked.
Sankar, a former Wilmer Cutler Pickering Hale and Dorr associate, replied that it is “hard to state that one of the options is off the table because the EPA isn’t using it.”
Besides, Sankar argued, the EPA isn’t trying to defend every single unilateral administrative order in this case. “But GE is trying to attack every single one. We’re not closing the door on anything,” Sankar said.
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