CITIZEN SUIT WATCH: Tenth Circuit Adopts Broad View of Issue Preclusion and Parens Patriae in Affirming Dismissal of Clean Air Act Citizen Suit
In a divided (2-1) decision, the Tenth Circuit recently affirmed the dismissal of Sierra Club v. Two Elk Generation Partners, a Clean Air Act citizen suit, based on doctrines of issue preclusion. The Court held that although the Sierra Club had not participated in prior state administrative proceedings, the presence of the Wyoming Department of Environmental Quality (DEQ) in those proceedings precluded Sierra Club's citizen suit because Sierra Club was in privity with DEQ under the doctrine of parens patriae.
The outcome of this case turned on several complicated and intertwined administrative and judicial proceedings on the validity of a Clean Air Act (CAA) Prevention of Significant Deterioration (PSD) permit issued to the defendant, Two Elk Generation Partners (Two Elk). In 1996, Two Elk obtained from DEQ a PSD permit to build a coal-fired power plant. DEQ issued Two Elk a revised permit in February 2000, which required Two Elk to begin construction no later than February 2002. DEQ later granted Two Elk an extension to August 2002. In September 2002, DEQ determined that Two Elk failed to commence construction and that the PSD permit was no longer valid.
Two Elk appealed DEQ's determination to the Wyoming Environmental Quality Council (Council). In May 2003, the Council approved a joint stipulation that if Two Elk did not commence construction by May 29, 2005 or construction was discontinued for 24 months or more, the PSD permit would become invalid. In July 2005, the Council found that Two Elk had commenced construction and that the permit was valid, and dismissed Two Elk's appeal (2005 Order).
In August 2007, DEQ determined that Two Elk had discontinued construction for 24 months or more and revoked Two Elk's PSD permit. Two Elk again appealed DEQ's determination to the Council. That appeal resulted in a stipulated settlement agreement, in which DEQ agreed that Two Elk had not discontinued construction and Two Elk agreed to apply newer technology. The Council approved the settlement agreement on December 3, 2007 (2007 Order), which allowed Two Elk to continue constructing under its PSD permit.
Shortly thereafter, Sierra Club undertook a series of actions to try to undo the 2007 Order. First, Sierra Club sought to intervene in the Council proceedings and requested that the Council reconsider and vacate its 2007 Order. The Council dismissed Sierra Club's request for lack of jurisdiction. Second, Sierra Club sought review of the 2007 Order in state district court, arguing that the facts in the stipulated settlement agreement did not support a finding that construction had not been discontinued for 24 months. The state court disagreed and dismissed Sierra Club's lawsuit. Sierra Club appealed to the Wyoming Supreme Court, but voluntary dismissed the appeal.
Third, Sierra Club filed a CAA citizen suit in federal district court. Sierra Club argued that Two Elk's PSD permit was invalid because (1) Two Elk had not commenced construction prior to May 29, 2005, and (2) Two Elk had discontinued construction for a twenty-four month period. Two Elk moved to dismiss the lawsuit based on issue preclusion and the Burford abstention doctrine. The district court determined that Sierra Club's claims were barred by doctrines of issue preclusion and dismissed the suit.
Sierra Club appealed the federal district court's dismissal to the Tenth Circuit, arguing first that a state action precludes a CAA citizen suit only if the United States or a State "has commenced and is diligently prosecuting a civil action in a court of the United States or a State to require compliance [.]"1 The Tenth Circuit explained, however, that this statutory "commencement bar" does not apply if the United States or a State has not commenced an enforcement action. As such, the "commencement bar" did not conflict with the federal full faith and credit statute, 28 U.S.C. § 1738, or state common law issue preclusion doctrines, both which therefore can be applied to federal citizen suits.
Sierra Club also argued that common law issue preclusion doctrines did not bar its claims. The Tenth Circuit explained that Wyoming state law governed this issue and considered whether the dismissal of Sierra Club's state court action precluded its claim that Two Elk had discontinued construction for 24 months or more. The Court decided the claim was precluded under the doctrine of collateral estoppel because (1) the issue of continuous construction was the same in both lawsuits, (2) the state court had issued judgment on the merits, (3) Sierra Club was a party to both proceedings, and (4) Sierra Club had a full and fair opportunity to litigate the issue.2
The Tenth Circuit then considered whether the 2005 Council Order precluded Sierra Club's claim that Two Elk had not commenced construction prior to May 29, 2005. Under Wyoming law, the doctrine of collateral estoppel applies to administrative decisions if the agency was acting in a judicial capacity and the parties had an adequate opportunity to litigate. The Tenth Circuit found that all of the elements of collateral estoppel had been met except that Sierra Club had not been a party to the administrative proceeding. The Tenth Circuit thus examined whether the Sierra Club was in privity with DEQ. Noting that the Wyoming Supreme Court had not yet addressed whether "privity may be established between a state agency and its citizens when the state is acting in its parens patriae capacity," the Tenth Circuit turned to federal law, including its own opinion in Satsky v. Paramount Communications, Inc.,3 for guidance. The Tenth Circuit agreed with the district court that DEQ was in privity with the citizens of Wyoming because it was the agency charged with enforcing the state air pollution control laws, "had the authority to act on behalf of the citizens of Wyoming and acted to protect common public rights in the proceedings before the Council."
The Tenth Circuit found that this privity would exist even under the Seventh Circuit's more stringent test established in Friends of Milwaukee's Rivers v. Milwaukee Metropolitan Sewerage District.4 Under that standard, citizens are in privity with the state agency only if the agency "prosecuted or defended the previous action with due diligence and reasonable prudence." Relying on its earlier opinion in Karr v. Hefner,5 the Court explained that DEQ's prosecution need not have been "far reaching or zealous" and need not have followed the same prosecutorial strategy desired by the citizens. Also, "an unsatisfactory result d[id] not necessarily imply lack of diligence." Because DEQ had diligently monitored Two Elk's compliance with the PSD permit and the requirement that Two Elk timely commence construction, DEQ was in privity with the citizens of Wyoming, and thus, with the Sierra Club.6
Having decided that Sierra Club was in privity with DEQ, the Tenth Circuit addressed Sierra Club's argument that the Council's 2005 Order could not preclude its untimely commencement claim against Two Elk because the Council did not resolve that issue in an adversarial proceeding. The Tenth Circuit rejected this argument, noting that the Council made findings of fact and that the proceeding was indeed adversarial between Two Elk and DEQ.
Concluding its decision with a response to the dissent, the majority emphasized Sierra Club's failure to appeal the Council and state court decisions and to intervene in the Council proceedings. The Wyoming policy of finality of judgments weighed against allowing the federal claims to continue.
According to the dissent, the majority opinion improperly expanded the principle of parens patriae and "misappl[ied] the doctrine of collateral estoppel." Parens patriae, the dissent explained, is a standing doctrine that applies when a state expressly acts on behalf of its citizens in a federal court proceeding. The majority opinion, however, would allow any proceeding in which the state appeared, including any generic state enforcement action, to qualify as a parens patriae proceeding.
The dissent noted in particular that the Council proceeding could not qualify as a parens patriae proceeding because it did not take place in federal court and because Two Elk, rather than DEQ, commenced the proceedings. Thus DEQ was not participating in the proceedings on behalf of the citizens of Wyoming, but instead to defend its own administrative decisions. Also, the CAA expressly limits DEQ's ability to bring parens patriae lawsuits by creating a federal right of action. By treating every state enforcement action as creating privity under parens patriae, the dissent argued, the majority effectively nullified the CAA citizen suit provision.
The dissent also stressed that the CAA bars citizen suits if a state has commenced an enforcement action in a federal or state court. Because DEQ's notification that Two Elk's permit had expired did not commence any proceedings and the Council was not a court, the dissent believed that the CAA's diligent prosecution bar did not apply and that the Council proceedings had no preclusive effect.
The dissent argued finally that the state court proceedings could not bar the Sierra Club's federal action because the state imposed a higher burden of proof. Because the state court judgment did not preclude the possibility that Sierra Club could meet a lower standard of proof in federal court, the state court judgment should not preclude Sierra Club's federal claim.
Two Elk follows a line of federal circuit court cases analyzing the circumstances in which common law issue preclusion doctrines bar citizen suits. As illustrated by the majority's and dissent's efforts to rely on and distinguish cases from other circuit courts, as well as their own precedents, this area of law remains unsettled. Compared to other federal opinions, Two Elk appears to establish a more relaxed standard for prior state actions to preclude citizen suit claims: a citizen suit can be precluded by the decision of a state administrative body, rather than a court, even if the administrative action was commenced by a regulated entity rather than the state agency and the citizen plaintiff was not a party to the administrative proceeding. Such logic may prompt more state administrative litigation by regulated entities in an effort to resolve disputes with regulatory agencies, but may also trigger increased attempts to intervene by citizen groups at the administrative level to avoid the dismissal outcome seen in Two Elk.
This Tenth Circuit decision stands in sharp contrast to the Seventh Circuit decision (Adkins) covered in a Citizen Suit Watch in May 2011, in which the Seventh Circuit drew a very narrow construction of two federal abstention doctrines and allowed a citizen suit to proceed in the face of state enforcement. These decisions illustrate the broad range of relevant legal doctrines and precedent (and therefore a broad range of enforcement defense strategies) involving the interactions of state and private citizen environmental enforcement.
1 42 U.S.C. § 7604(b)(1)(B).
2 Sierra Club argued that its continuous construction claim should not be precluded because the state court reached its decision based on a closed record that Sierra Club had not had an opportunity to develop. Sierra Club explained that it had not participated in the administrative proceedings because it expected DEQ to diligently prosecute the issues. The Tenth Circuit rejected this argument, noting that Sierra Club's later participation was contrary to the policies of settlement and finality.
3 7 F.3d 1464 (10th Cir. 1993).
4 556 F.3d 603 (7th Cir. 2009).
5 475 F.3d 1192 (10th Cir. 2007).
6 The Court rejected Sierra Club's argument that its nationwide membership prevented it from being in privity with DEQ. Referencing an unpublished Ninth Circuit opinion, N. Cal. River Watch v. Humboldt Petroleum, Inc., 162 F. App'x 760, 764-65 (9th Cir. 2006), the Tenth Circuit explained that "privity can still exist between the state and an organization with out-of-state members where the public interest being represented by both parties is overwhelmingly that of the state."
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