By Emma Cueto
Law360, New York (January 22, 2018, 9:00 PM EST) — The U.S. Chamber of Commerce, National Association of Manufacturers, and other trade associations and energy groups urged the Fifth Circuit on Friday to overturn a $20 million judgment against ExxonMobil Corp., saying in an amicus brief that the lower court’s decision would unfairly penalize companies that took proactive environmental measures.
The brief argued that the Sierra Club and other environmental groups that sued Exxon over air pollution were only able to prove standing for five alleged emissions events, but that the district court judge levied damages based on 16,000 days of alleged violations. The judge also factored in unrelated improvement projects when calculating Exxon’s economic benefit, which served as the basis for the award, the brief said.
“Affirming the district court would require companies to submit to yet another level of regulation — by citizen-suit plaintiffs — beyond the local, state, and federal environmental agencies that legitimately share comprehensive regulatory authority,” the brief said.
It added: “And it would penalize companies that undertake proactive projects to reduce pollution or otherwise improve their facilities because courts may later use those upgrades as the basis for an economic-benefit penalty.”
The environmental groups first filed a suit in 2010 over millions of tons of air pollution that was allegedly improperly emitted from Exxon’s Baytown, Texas, facility.
The court initially awarded nothing to the groups after trial, but the Fifth Circuit revived the lawsuit after finding U.S. District Judge David Hittner had abused his discretion when considering some of the factors in the Clean Air Act’s penalties and incorrectly analyzed some of the groups’ claims. On remand, the groups reduced their requested amount of penalties from $642 million to about $40 million.
Judge Hittner awarded them about $20 million in April, prompting Exxon’s appeal.
The environmental groups have asked for an additional $6 million in fees, which Exxon also opposes.
In an amicus brief Friday, the Chamber of Commerce and other interested parties told the Fifth Circuit that allowing the decision to stand could have grave consequences for many industries aside from the oil industry and would give too much power to citizen suits.
“If followed more broadly, [the precedent] threatens to transform citizen suits from civil actions designed to resolve concrete controversies into regulatory vehicles for dictating environmental policy,” the brief said.
The amicii argued that the environmental groups could only have standing to sue over alleged violations that caused them direct harm. Since the groups had only been able to provide evidence for harm in five alleged events, the amicii argued, they did not have standing to collect damages on all 16,000 days of alleged violations.
In addition to greatly expanding the power of citizen plaintiffs, not requiring the plaintiffs to prove standing was also unconstitutional, the brief added.
The amicii also argued that the judge should not have used tangentially related improvements to Exxon facilities when calculating Exxon’s economic benefit from the violations for the purposes of deciding on an award. The Clean Air Act only allowed projects or repairs that were directly related to the alleged violation to factor in, the brief said, arguing that many of the projects Judge Hittner included were only “generally correlated.”
“The district court made no findings as to how these projects would address or prevent the alleged violations,” the brief said. Under such a loose analysis, it argued, “virtually any improvement project could become the basis for a civil penalty under the economic-benefit factor.”
Doing so, the brief argued, would penalize companies who undertook environmental improvement projects by then forcing them to pay extra in citizen suits for projects that were largely unrelated.
Aaron Streett, chairman of Baker Botts LLP’s Supreme Court and constitutional law practice and who appeared on the brief, told Law360, “The district court assessed penalties under the Clean Air Act over thousands of alleged violations when only a handful are asserted to have harmed the plaintiffs. This outcome contravenes bedrock principles of Article III of the Constitution.”
Matt Kuryla, a Baker Botts partner who also appears on the brief, reiterated that the damages award would hurt companies that were proactive about improvements. “Companies may undertake upgrades as part of a commitment to continuous environmental improvement; or to be responsive to a local community; or to take advantage of new sources of lower-emitting fuels or raw materials; or simply to improve manufacturing operations,” he said. “Under the district court’s approach, the most environmentally proactive companies would suffer the greatest economic-benefit penalties.”
Counsel for Sierra Club and Exxon did not respond Monday to a request for comment.
The amicii are represented by Aaron M. Streett and Matthew Kuryla of Baker Botts LLP, Linda E. Kelly and Leland P. Frost of the National Association of Manufacturers’ Center for Legal Action, Richard S. Moskowitz and Taylor D. Hoverman of American Fuel & Petrochemical Manufacturers, and Steven P. Lehotsky and Michael B. Schon of the U.S. Chamber of Commerce’s Litigation Center.
The Sierra Club is represented by Philip H. Hilder of Hilder & Associates PC, Charles C. Caldart and Joshua R. Kratka of the National Environmental Law Center, and David A. Nicholas.
Exxon is represented by Russell S. Post, Eric J.R. Nichols, Fields Alexander, Robert D. Daniel and Bryon A. Rice of Beck Redden LLP, and Albert R. Axe and Keith A. Courtney of Winstead PC.
The case is Environment Texas Citizen Lobby et al. v. ExxonMobile Corporation et al., case number 17-20545, in the U.S. Court of Appeals for the Fifth Circuit.