Where the law and the environment connect

Earlier this month, the United States EPA proposed a rule (“Proposed Rule”) that would update and revise National Pollutant Discharge Elimination System (“NPDES”) regulations. Rather than epa-logoreopening the existing NPDES regulations for comprehensive revision, the Proposed Rule would make “specific targeted changes to the existing regulations” that align the regulations with statutory requirements and incorporate case law decisions.  Essentially the update would “modernize” the NPDES regulations.

The Proposed Rule covers 15 topics. These pertain to permit applications; the water quality-based permitting process; permit objections, documentation and process efficiencies; the “vessels exclusion” (which authorizes certain discharges incidental to the normal operation of commercial vehicles); and the Clean Water Act (CWA) section 401 certification process.

For a complete summary of the Proposed Rule, please click here.  Comments on the Proposed Rule will be accepted through July 18, 2016 and may be submitted here.

Today, the California Supreme Court resolved this issue in Ardon v. City of Los Angeles.
Last year, I wrote about the Second Appellate District case of Ardon v. City of Los Angeles.  In Ardon, the appellate court found that a public agency can waive statutory privileges that it otherwise would have if it produces privileged documents in response to a California Public Records Act (PRA) request, even if inadvertently.  However, half a year later, the First Appellate District in Newark Unified School District v. Superior Court came to the opposite conclusion in holding that a public agency cannot inadvertently waive attorney-client and work product privileges.  These contradictory holdings created what is known as a “split of authority.”  Today, the California Supreme Court resolved this issue in Ardon v. City of Los Angeles.  The Court found that a public agency cannot waive the privileges if it inadvertently releases privileged documents in response to a PRA request.

In Ardon, the plaintiff in litigation against the City of Los Angeles sought records under the PRA from the city concerning the subject matter of its complaint. After receipt of the records, Ardon’s counsel notified the city that it had obtained copies of some records that appeared to be privileged. The city responded by asserting that the documents had been inadvertently produced. The city demanded that Ardon return the documents to the city and agree not to rely upon the documents in any way. Ardon declined this request, asserting that the city had waived any privilege claim.  Citing California Government Code section 6254.5, the court found that in producing the documents, even inadvertently, the city waived any privilege claim.

The California Supreme Court characterized this issue as “one of statewide importance.”  In reaching its decision, the Court reviewed the statutory language of California Government Code section 6254.5 and the other relevant statutes pertaining to the PRA.  The Court concluded that the statutory language as a whole was ambiguous on this issue, and resolved the ambiguity by concluding that inadvertent disclosure does not waive the privileges. The Court stressed the importance of the statutory privileges and a party’s reasonable reliance that an inadvertent disclosure would not waive the privileges.  The Court further found that there was no reason to interpret California Government Code section 6254.5 differently from Evidence Code section 912 (which applies to discovery requests in litigated disputes) in this regard.  Under Evidence Code section 912, an inadvertent disclosure of privileged documents does not waive the privilege.

After years of drought, the El Niño storms have been bringing much-needed rain and snow to California–albeit in quantities significantly less than we hoped for thus far.  In addition to the anticipated snow packs, flowing rivers, and replenished reservoirs, the California landscape has been marked by the return of ephemeral vernal pools, which may appear as seemingly insignificant ponds or puddles.

However, under the Clean Water Rule (“CW Rule”) which was promulgated mid-last year, and which defines which waters are “jurisdictional”—meaning, protected as “waters of the United States” under the Clean Water Act (“CWA”)—the reach of federal jurisdiction may include those seemingly insignificant ponds or puddles.

If such a pond or puddle is deemed a “vernal pool” that is covered by the CWA, then the pond or puddle is subject to a myriad of CWA regulatory requirements, including the federal prohibition on discharges of pollutants except in compliance with the CWA (§ 301), the requirement to obtain a permit prior to discharge (§§ 402, 404), water quality standards (§ 303), oil spill liability and oil spill prevention and control measures (§ 311), certification of compliance with State water quality standards (§ 401), and enforcement (§ 309).

Today the U.S. Environmental Protection Agency published a proposed rule in the Federal Register which would add a vapor intrusion component to the Hazard Ranking System, the system EPA uses to evaluate sites for placement on the National Priorities List (“NPL”).  We forecasted and discussed the publication of this proposed rule in a blog post earlier this month.  Under the proposed rule, the Hazard Ranking System evaluation could directly consider “human exposure to hazardous substances, pollutants, or contaminants that enter regularly occupied structures through subsurface intrusion in assessing a site’s relative risk, and thus, enable subsurface intrusion contamination to be evaluated for placement of sites on the NPL.”  Click here to see the proposed rule.

Comments may be submitted on the proposed rule through April 29, 2016.

A  proposed rule that would add a vapor intrusion component to the Hazard Ranking System (“HRS”), the primary screening tool for the CERCLA National Priorities List (“NPL”), is scheduled for publication in the Federal Register this month.  NPL listing is a prerequisite for designation as a federal Superfund site.  Previously, the HRS did not take into direct consideration the vapor intrusion pathway, and NPL listing was based upon only the ground water migration, soil exposure, surface water migration, and air migration pathways.  The proposed rule represents a renewed effort by the U.S. Environmental Protection Agency to expressly account for vapor intrusion in the NPL evaluation process, following a prior version of this rule proposed in 2010.

Proponents of the rule contend that vapor intrusion presents unique risks to human health that the HRS does not adequately account for, while industry opponents assert the new criteria would result in the identification of few, if any, new NPL sites and that the lengthy Superfund process is not the appropriate vehicle to address any sites that may involve more imminent threats to human health.

Upon publication in the Federal Register, there will be a sixty-day public comment period.   For more information, please click here.  Check back to the blog for future updates.

Yesterday, the Department of Toxic Substances Control (“DTSC”) released its draft Stage 1 Alternatives Analysis Guide (“Guide”) under the California Safer Consumer Products program.  Public comments are being accepted on the Guide through October 24, 2015, and DTSC is specifically asking commenters to “provide the names of tools, methods, approaches, and data sources not already mentioned, as well as examples for steps and approaches, to complete an [alternatives analysis].”

By way of background, California’s Safer Consumer Products program took effect on October 13, 2013, and seeks to reduce certain chemicals from consumer products.  The program establishes a list of “candidate chemicals” of concern and “priority products” that contain candidate chemicals.  Candidate chemicals are identified here.  Initial priority products include paint stripper with Methylene Chloride; spray polyurethane foam with unreacted MDI; and children’s foam-padded sleeping products with TDCPP (or TCEP).

Manufacturers and other supply-chain participants of priority products will be required to submit priority product notifications to DTSC sixty (60) days after the effective date of the regulation establishing a product-chemical combination as a final priority product.  Subsequently, alternatives analyses will be required, in which manufacturers and other supply-chain participants will need to submit information regarding whether there is a “safer” way to make priority products.  Thereafter, DTSC is required to implement a regulatory response, which could include mandated product labeling requirements, safety measures, and bans.

In January, I wrote about the Second Appellate District case of Ardon v. City of Los Angeles.  In Ardon, the court found that a public entity can waive statutory privileges that it otherwise would have if it produces privileged documents in response to a California Public Records Act (PRA) request, even if inadvertently.  Recently, the First Appellate District in Newark Unified School District v. Superior Court came to the opposite conclusion in holding that a public agency cannot inadvertently waive attorney-client and work product privileges.  These contradictory holdings have created what is known as a “split of authority.” 

 

In Newark Unified School District, some parties requested documents from the Newark Unified School District (District) under the PRA.  The PRA requires public entities to make their public records open for inspection and copying upon request.  Within hours of delivering the documents in response to the request, the District’s interim superintendent discovered that the District had inadvertently included over one-hundred documents that it contended were subject to the attorney-client or attorney work product privileges.  The District immediately sent e-mails to the recipients of the documents requesting that they return the documents.

 

Citing California Government Code Section 6254.5, the document recipients argued that the District waived the privileges by its inadvertent release of the documents.  The court in Ardon had previously cited this provision in finding that a public entity waives any privilege if it discloses a privileged document pursuant to a PRA request, even if such disclosures are made inadvertently, by mistake or through excusable neglect.  However, the court in Newark Unified School District concluded that the District did not inadvertently waive the privileges.

     Earlier this month, the California State Water Quality Control Board (“State Water Board”) approved a General Order for Waste Discharge Requirements (“WDRs”) for composting operations, which will streamline and standardize permitting processes and regulate water quality at new and existing composting facilities.  While the General Order was approved with very little fanfare or media coverage, its implications are significant.

General Order Coverage

    The General Order, which applies to State composting facilities that process at least 500 cubic yards of material per year, will impose a regulatory scheme on a large number of the organics facilities already operating in the State.  Moreover, the General Order’s facility coverage is likely to expand in the coming years, given the recent passage of California Assembly Bill 341 (“A.B. 341”) (2011), which encourages the addition and expansion of State composting facilities by establishing a State policy goal that at least 75 percent of the solid waste generated in the State be source-reduced, recycled, or composted by 2020.

On August 20, 2015, the California Supreme Court handed down its much anticipated decision in Fluor Corporation v. Superior Court (Hartford Accident & Indemnity Company). The court held that Insurance Code §520, a seldom cited provision of the Insurance Code dating back to 1935, bars an insurer from refusing to honor a policyholder’s assignment of policy coverage regarding injuries or damages that pre-date the assignment. In the process, the high court overruled its 2003 decision in Henkel Corp. v. Hartford Accident & Indemnity Co., 29 Cal.4th 934, which had held that when a liability policy contains a “consent-to-assignment” clause (a standard provision in pre-1985 policy forms), the policyholder may not assign its rights to policy benefits without the insurer’s consent until the claim against the insured is reduced to a judgment or settlement with the claimant.

 The decision, which deals with post-loss assignment of insurance benefits under general liability policies in the context of a corporate reorganization, has particular relevance to companies who acquire companies with existing environmental or other long-tail liabilities. Before the Fluor decision, it was often necessary to structure a transaction as a stock purchase and maintain the target company as a subsidiary of the acquiring company to obtain the benefit of the target company’s legacy coverage typically dating back many years to the time period when the environmental or other liabilities for the target company’s operation arose. In Fluor, the California Supreme Court expressly recognized that its decision will protect the ability of a policyholder “in the course of transferring assets and liabilities to another business entity in connection with a corporate sale or reorganization, to assign rights to claim defense and indemnification coverage provided by prior and existing insurance policies concerning the business’s previous conduct.”

 Greenberg Glusker represents policyholders in insurance recovery litigation against insurers.  For more information regarding our insurance coverage practice, please contact Jonathan B. Sokol at 310.201.7423 or JSokol@greenbergglusker.com.

 

Last week, in Michigan v. EPA, the U.S. Supreme Court held that it was unreasonable for the U.S. Environmental Protection Agency (“EPA”) to refuse to consider costs in connection with its finding that it was “appropriate and necessary” to regulate hazardous air pollutant (“HAP”) emissions from power plants under the federal Clean Air Act (“CAA”).

By way of background, the CAA instructs EPA to regulate HAP emissions from power plants if it concludes that regulation is “appropriate and necessary.”  The “appropriate and necessary” language stems from the 1990 CAA amendments, wherein Congress established a procedure for determining the applicability of the HAP program to power plants.  Those amendments require EPA to regulate power plants as ordinary major sources if, after conducting several studies, EPA finds that it is “appropriate and necessary.”

After EPA completed the required studies in 1998, it concluded that regulation of power plants was in fact “appropriate and necessary.”  EPA’s “appropriate” finding was based on a conclusion that power plants emitted mercury and other HAPs which posed a risk to human health and the environment and that emission reduction controls were available.  EPA’s “necessary” finding was based on its conclusion that then-existing requirements did not eliminate risks.  In conjunction with its conclusions, EPA determined that “costs should not be considered” in determining whether power plant HAPs should be regulated.  A Regulatory Impact Analysis issued by EPA estimated that EPA’s decision would cost power plants $9.6 billion per year, whereas quantifiable regulatory benefits would be worth $4 to 6 million per year.