Posted by: Steven M. Taber | January 28, 2009

Court Tells GE: CERCLA Does Not Violate 5th Amendment

The U.S. District Court for the District of Columbia held that the EPA’s “pattern and practice of administering section 106 of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) (42 USC 9606) does not violate the Due Process Clause of the Fifth Amendment. See the Court’s Opinion:  General Electric Co. v. EPA, Case No. 00-2855 (D.D.C. Jan. 27, 2009).

GE originally filed its Complaint back in 2000 alleging (1) that CERCLA itself facially violates the Due Process Clause of the Constitution and (2) that EPA’s “pattern and practice” of administering the “Unilateral Administrative Order” regime under sec. 106 violates GE’s due process rights.  The first issue was disposed of in a series of District Appellate Court decisions, so that the sole issue before the court now is the second one.

The Court summarily rejects the EPA’s arguments that the standard in United States v. Salerno, 481 U.S. 739 (1987) should apply and that GE did not have standing because it never failed to comply with UAO. It also rejected GE’s argument that section 106 runs afoul of Ex Parte  Young, 209 U.S. 123 (1908) because court impose the penalty and imposing stiff daily fines and punitive damages is within the discretion of the reviewing court.

Thus, what remained before the court was GE’s argument that EPA’s administration of sec. 106 violates the Due Process Clause because, applying the framework of Mathews v. Eldridge, 424 U.S. 319 (1976), sec. 106 deprives PRPs of protected liberty and property interests without a hearing.  Under Mathews, courts balance the private interests, the governmental interests, and the risk of error to determine whether existing procedures are adequate to satisfy constitutional due process requirements.  424 U.S. at 335.

After going through an exhaustive analysis of the interests and the risk of error, the court arrived balancing the issues.  In summary:

The private interest depends on whether or not a PRP complies.  If the PRP complies, then the average costs of compliance are $4 million and the deprivation last for an average of three years.  If the PRP does not comply, then the average size and length of the deprivation are substantial but unclear.  And whether or not a PRP complies, the deprivations are primarily financial, although for some PRPs the financial deprivations are sufficiently large to have collateral effects on operations.

As for the government interest, EPA does not issue UAOs in emergency situations.  But EPA nonetheless has a substantial financial and administrative interest.  Because UAOs are issued frequently, even minimal additional process would tax EPA’s resources.

Finally, the risk of error – as represented through the actual rate of error over many years in this pattern and practice case – is low.  GE has provided concrete evidence to establish that EPA has made errors in issuing five UAOs, including three UAOs issued to GE itself.  Assuming that GE has plumbed for error all 68 of the UAOs that it has received, and assuming that GE’s experience is representative, EPA makes some sort of error in roughly four percent of its UAOs.

The court then concludes that because instituting a pre-decision hearing in front of a neutral presiding officer would not significantly reduce an already low risk of error and because the size and nature of the private interests of the PRP are not so great as to justify the increased cost of such a hearing, GE’s due process rights were not violated by the EPA’s pattern of practice with respect to the sec. 106 program.

Since this case is one where a balancing test was used, it will be a tough one for GE to win on appeal, if it decides to appeal it.  So many factors go into the balancing test, it is difficult to say if a different finding on any of the subsidiary decisions by the court will tip the balance the other way.  The sole exception most likely is the rate of error.  Had GE been able to show that EPA got it wrong a substantial number of times, the court might have been persuaded that a pre-decision hearing by a neutral officer would be worth the cost.  In the absence of such a showing, though, the court was hard pressed to find any good reason why such a program ought to be instituted.

The court ended its decision with this admonishment to GE:  “[t]o the extent that GE continues to believe that EPA generally over-uses or abuses UAOs, thereby overstepping its mandate, any broader remedy should be sought from Congress, not the courts.”

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