Wednesday, April 25, 2012

Temporary Restraining Orders in Environmental Litigation

Temporary restraining orders, known in the legal world as “TROs”, are a powerful tool in environmental litigation.  For a party that is considering a TRO, it has the power to immediately halt excavation, stop construction, or prevent the imposition of a new regulation.  For a party facing a TRO, violation of such an order can lead to steep fines, being held in contempt of court, and a multitude of other punishments.

TROs are often litigated in the environmental arena.  Recently, the Indiana Supreme Court considered a TRO in the context of an underground storage tank (“UST”) site.  In Witt v. Jay Petroleum, Inc., Cause No. 38S02-1110-CV-608 (Ind. March 21, 2012), the Supreme Court decided that the property owner, his attorney, and his environmental consultant were properly held in contempt of court for violating a TRO.  In that case, the property owner sued a prior owner, claiming the petroleum contamination he was cleaning up was from the prior owner’s use of the USTs.  The parties could not agree on a method for removing the USTs and testing the surrounding soil.  The trial court issued a TRO prohibiting any UST removal, soil excavation, or other environmental investigation and remediation activities until the court could conduct a preliminary injunction hearing.  Id., slip op. at 3.  The environmental consultant and other parties to the litigation continued excavating the UST area, and the trial court found them in contempt.  Id. at 3–4.  The Indiana Supreme Court eventually affirmed the trial court’s order.  See also Commissioner  v. RLG, Inc., 755 N.E.2d 556, 558 (Ind. 2001).  In RLG, the Indiana Department of Environmental Management (“IDEM”) sought preliminary injunctive relief against a landfill.  The defendant landfill agreed to remedy its environmental violations and to close the landfill, and IDEM agreed to drop its action for other civil penalties.  When defendant failed to comply, default judgment was entered for $3.1 million against landfill for violating the temporary restraining order.  The Indiana Supreme Court affirmed the judgment.          

This short recap of the Witt and RLG cases illustrates the applicability of the TRO in environmental litigation, and the extreme importance in abiding by a TRO.  A TRO expires within ten days after it was issued (unless the court extends it for good reason).  Ind. R. Trial P. 65(B). As soon as possible after the entry of a TRO, the trial court will conduct a preliminary injunction hearing where all parties can present their arguments regarding whether the activity that is the subject of the TRO should be enjoined pursuant to a more permanent preliminary injunction.  This powerful tool should not be overlooked—by the party filing it, or the party opposing it.

Indiana Rule of Trial Procedure 65 controls injunctions and temporary restraining orders (“TROs”).

To obtain a preliminary injunction, [the movant has] the burden of showing by a preponderance of the evidence that: (1) their remedies at law were inadequate, thus causing irreparable harm pending resolution of the substantive action; (2) they had at least a reasonable likelihood of success at trial by establishing a prima facie case; (3) the threatened injury to them outweighed the potential harm to the Appellees resulting from the granting of an injunction; and (4) the public interest would not be disserved by the granting of a preliminary injunction. If the party moving for an injunction fails to prove any of those four requirements, a. grant of an injunction to that party is an abuse of discretion. Stated another way, if, on appeal, the moving party cannot demonstrate that it proved each of those four requirements then the trial court’s denial of the movant's request for an injunction must be affirmed.

Curley v. Lake County Bd. of Elections & Registration, 896 N.E.2d 24, 32–33 (Ind. Ct. App. 2008).  While Curley was a case about elections, not the environment, the same TRO rules apply in the environmental context.

The lesson?  TROs are a powerful tool for any party—the government, property owners, defendants, plaintiffs, and anyone in between.  Parties should be aware of the usefulness of such a weapon, and if a TRO is entered against you, beware the consequences of violating that court order. 

Wednesday, April 18, 2012

IDEM's New Remediation Closure Guide

Yesterday, fellow Monitoring Well bloggers Brianna Schroeder, Sean Hirschten, and I attended a presentation by Keramida's Steven Sittler on using IDEM's new Remediation Closure Guide.  The Remediation Closure Guide replaces the Risk Integrated System of Closure (RISC) guide that had been used since 2001.  Some of the important characteristics of the Remediation Closure Guide are that: remediation objectives have replaced hard and fast default closure levels; the Conceptual Site Model may lead to increased up-front costs but may reduce the amount of remediation needed; and the guide is intended to be flexible to allow for alternative remediation approaches.  It is important that environmental attorneys and other environmental professionals stay on top of these and other changes at IDEM.

Thursday, April 5, 2012

Law and Economics and the Pollution Exclusion; or Why Flexdar is Right

In stark contrast to the Indiana Supreme Court's recent decision in Flexdar (more about which is here), the Seventh Circuit Court of Appeals recently came down with a case that bends over backwards to interpret the absolute pollution exclusion to achieve the optimal outcome for insurance companies.  At issue in Scottsdale Indemnity Company v. Village of Crestwood, 2012 U.S. App. LEXIS 5069 (7th Cir.) was an absolute pollution exclusion that purported to exclude losses for bodily injury, property damage, or personal injury "arising out of . . . alleged or threatened discharge, dispersal, seepage, migration, release or escape of 'pollutants' at any time," and also excluded coverage for expenses arising from orders for "cleaning up . . . or in any way responding to, or assessing the effects of pollutants."  "Pollutants" were defined as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkilis, chemicals and waste."


The Village of Crestwood, Illinois got its drinking water in part from wells that were contaminated with PCE, a solvent commonly used in drycleaning.  Residents sued for damages, claiming they contracted cancer due to ingesting the PCE in their drinking water.  Crestwood turned to its insurers, who denied coverage based on the above exclusion.  The Court, in an opinion by Judge Posner, held that PCE was a "contaminant," and therefore a "pollutant."  Thus, there was no coverage.  However, the court didn't just stop there, as it acknowledged it could have.  Instead, it went into a long discussion of the business model of insurance companies and reached the result it did because that result is, according to the court, the most compatible with the business model of insurance companies.  The court went into this digression in the first place because it acknowledged that the pollution exclusion, if interpreted literally, would exclude coverage for accidents caused by "pollutants" even if they aren't acting like "pollutants."  The example the court gave was a tanker truck full of PCE crashing into a bridge and spilling that PCE all over the highway.  If another driver skidded in the PCE (which is a liquid) and crashed, a literal interpretation of the pollution would exclude coverage.  But of course, that result is absurd.  


The Indiana Supreme Court, in American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996), acknowledged the same thing with a similar hypothetical.  Kiger involved a gas station, and the court noted that if a customer were to slip and fall on grease, any resulting liability would be excluded by a literal reading of the pollution exclusion.  But the Indiana Supreme Court, in Kiger and again in Flexdar, used the rules of construction applicable to insurance policies, and really to contracts generally, to conclude that the exclusion is ambiguous and overly-broad and, thus, unenforceable.  The Seventh Circuit, following Illinois law, bent over backwards to enforce the exclusion in this case.  To be fair, Illinois law follows the "situational" approach, enforcing the exclusion when the harm involved is "traditional environmental pollution."  (That phrase, incidentally, always brings two images to my mind.  The first is a metal drum, oozing green gunge, and sporting a tri-corner hat.  The other is the "Tradition" song and dance routine from Fiddler on the Roof.  Because where would we be without traditional environmental pollution?)


In order to determine whether the seepage of PCE into Crestwood's wells was "traditional environmental pollution," the court went into a long discussion of why insurers developed the pollution exclusion and the business of insurance.  It's "Law and Economics of Insurance."  What it is not is an analysis of the language of the pollution exclusion based on the rules of contract interpretation.  I understand the critique of legal reasoning that claims it's just a screen to hide policy preferences, and that a wily argument can use any rule to justify any action.  And I have read many opinions that pay lip service to contra proferentem and other rules of construction, but then ignore those rules in actually deciding the case.  But with the Illinois Supreme Court having already decided that the rules don't apply to the pollution exclusion, we are left with judges falling back on what they think the outcome should be, with essentially no policy prescriptions or legal reasoning to guide them.  So the Seventh Circuit thinks that if insurers covered pollution losses, they'd all go out of business (and you should read the opinion to see just how dire the court sees things; according to this analysis, there should be no insurance available in Indiana at a reasonable rate, since insurers, who have covered pollution liability here for 15 years, should all have left a decade ago due to the dreaded "adverse selection.")  


But the question that I was left with was "why should the court bend over backward to enforce this exclusion?"  The insurance companies, after all, drafted it themselves.  If a literal application of this exclusion is unenforceable (which the court acknowledged it is), why not tell the insurers to draft a better exclusion?  The Village argued in part that, because it didn't cause the pollution (the PCE was introduced by a drycleaner), the exclusion shouldn't apply to it.  The court rejected that argument, stating that "[t]he pollution exclusion would be largely nugatory" if only the "original author [of the pollution's]" coverage were excluded.  But why is it so important that the exclusion not be "largely nugatory?"  Why are we so concerned that this exclusion has to mean something?  Why not tell the insurers that if they want their exclusions enforced, they need to draft them with an eye toward the plain, simple, and almost universal rules of construction that courts at least say they use to interpret insurance policies?  Such an approach would lead to better-written policies, and would prevent the courts from being in the awkward position of determining what an exclusion means based on how that meaning accords with the needs and inner-workings of the insurance industry.  The whole reason for writing a policy is to explain what is and isn't covered.  If the insurance company can't look out for its own interests by drafting a clear exclusion, the courts should not step in and do their job for them.