General Electric Co. v. Jackson
Court rejects argument that Superfund clean-up orders issued by EPA deprive company of its constitutional right to due process
Status: Case remains pending before D.C. Circuit (No. 09-5092); GE may seek further review by D.C. Circuit or Supreme Court
Discussion & Analysis: Owing to its business and manufacturing activities over the past century, General Electric (GE) is associated with various waste sites around the country. These include, for example, a factory in Hoboken, New Jersey that made mercury vapor lamps in the 1920s; two manufacturing facilities that dumped PCBs into the Hudson River in New York; and a New Hampshire paint company (now bankrupt) to which GE sold oil containing PCBs in the 1950s and 1960s. In the late 1990s, EPA sought to have GE undertake cleanup activities at these sites under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, or Superfund).
CERCLA is designed to ensure that hazardous-waste sites resulting from industrial pollution are quickly cleaned up. Under Section 106, if EPA’s negotiations with a “potentially responsible party” (PRP) fail to achieve a settlement on how to go about the clean-up, EPA may issue a “unilateral administrative order” (UAO) requiring the PRP to clean up the site. If a company does not believe it is a “responsible party,” it can refuse to comply with the UAO. Non-compliance exposes a PRP to significant fines and other penalties that EPA can seek to have imposed through court order. EPA cannot penalize a PRP absent a court order.
In 2000, GE launched a “broad constitutional attack” against EPA’s efforts to enforce CERCLA against the company. GE argued that the use of UAOs under CERCLA is unconstitutional because it violates the Due Process Clause of the Fifth Amendment. The right to procedural (as opposed to “substantive”) due process ensures that the government does not deprive persons of their property or liberty without first providing an opportunity to challenge the government’s action, usually through a court trial or similar process. GE pressed two basic claims on this theory.
First, GE argued that the use of UAOs is facially unconstitutional because in every case it forces PRPs to make a Hobson’s choice: either pay for expensive site clean-ups or expose themselves to heavy fines for not complying with the UAO. Second, GE claimed that even if the statute itself was not facially unconstitutional, EPA’s “pattern and practice” of aggressively using UAOs increases their frequency of issuance and decreases their accuracy, resulting in a due process violation. The D.C. Circuit rejected both arguments, with Judge David Tatel writing for a unanimous three-judge panel.
The court began its analysis of the facial challenge by determining whether GE had been deprived of any protected liberty or property implicating due process protection. The court agreed that the costs of compliance with a UAO, as well as the monetary fines and damages associated with noncompliance, qualify as protected property interests. However, the court held, CERCLA affords to non-complying parties sufficient constitutional safeguards—including meaningful, pre-deprivation judicial review—to avoid creating a Hobson’s choice.
GE also argued that “consequential” losses associated with issuance of a UAO are a property interest for purposes of due process. Consequential losses stem from the market’s reaction to the EPA action against the PRP, and include loss of stock value, loss of brand value or reputation, and increased costs of financing. The court explained that to trigger constitutional protection, the government must do more than simply hurt plaintiffs’ reputation: it either has to deprive them of some benefit “to which they have a legal right,” or impose a stigma so severe that it “broadly precludes” them from “pursuing a chosen trade or business.” The court held that the effects of a UAO on a business’s profit, share value, or credit rating do not meet that standard, so GE had not proven its facial due process claim.
The court then turned to the claim that EPA’s “pattern and practice” of issuing UAOs violates due process rights. GE pointed to EPA policies, such as “enforcement first” and delegation of authority to regional offices, that create an incentive to issue UAOs, arguing that these policies increase the chance that PRPs will suffer pre-hearing deprivations such as damage to stock price, brand value, and credit rating. But because the court had already ruled that these consequential effects are not constitutionally protected interests, the court did not need to analyze this claim any further.
Last, GE claimed that EPA administers CERCLA so as to “intimidate” PRPs from exercising their option not to comply with a UAO. The court held that this claim lacked evidence: GE’s own expert found that PRPs did not comply with a UAO in 4.6% of cases—a non-trivial rate. And in any event, the court observed, “in light of the extensive procedures CERCLA requires EPA to follow before issuing a UAO … recipients may be complying in large numbers not because they feel coerced, but because they believe that UAOs are generally accurate and would withstand judicial scrutiny.”
The D.C. Circuit’s ruling squarely rejects the view that costly and time-consuming new procedures—not provided for by Congress in CERCLA—would be necessary to ensure that EPA’s enforcement efforts comport with due process. Further, by holding that lost profits, diminished share value, and lower credit ratings do not, standing alone, trigger constitutional protection, the court reaffirmed Congress’s intent that CERCLA promote prompt environmental clean-ups that are paid for by those responsible.
The court’s opinion is significant for another reason. Opponents of environmental regulation often portray an EPA that wields its authority arbitrarily, creating unnecessary roadblocks to economic growth. The extensive factual record developed in the case suggests otherwise, and it led the district court judge to conclude that in the history of CERCLA enforcement, “the paucity of evidence of error … is telling.”
Key Opinion: General Electric Co. v. Jackson, --- F.3d ---, 2010 WL 2572955 (D.C. Cir. June 29, 2010), affirming 595 F. Supp. 2d 8 (D.D.C. 2009).
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