In the recent opinion styled General Electric Co. v. Jackson, the D.C. Circuit Court of Appeals held that Congress’ enactment of the CERCLA Section 106 Unilateral Administrative Order (“UAO”) regime did not violate the Due Process Clause of the Fifth Amendment, and that EPA’s implementation of that regime by means of issuing UAOs to General Electric did not violate General Electric’s right to due process. Over a span of years, EPA issued at least 68 UAOs to General Electric. The company sued ostensibly on the grounds that the statutory regime and EPA’s implementation of the same coerces compliance with a UAO without affording the recipient with a meaningful opportunity to be heard by a neutral decision maker. Neither the district court nor the appellate court agreed with General Electric’s contention.
Under CERCLA Section 106, 42 U.S.C. § 9606, when EPA determines that an environmental cleanup is necessary at a contaminated site because “there may be an imminent and substantial endangerment to public health or welfare or the environment because of an actual or threatened release of a hazardous substance from a facility”, the agency may issue a UAO instructing potentially responsible parties (“PRP”) to clean the site.
CERCLA Section 113 bars PRPs from obtaining immediate review of a UAO. As a result, upon receiving a UAO a PRP can either (1) comply with the order and afterward seek reimbursement from EPA or (2) refuse to comply with the order. If the PRP refuses to comply, then EPA can either sue the PRP to enforce the UAO, or clean the site itself and sue the PRP for cost recovery. Either way, if the court finds that the PRP “willfully” failed to comply with the UAO “without sufficient cause”, then the court “may” impose fines. Moreover, if EPA chooses to clean the site and sues the PRP for cost recovery, the court may award punitive damages equal to treble recovery costs.
According to General Electric, the statutory regime presents a “Hobson’s choice” because the lack of immediate judicial review of the UAO and the threat of severe penalties combine to effectively force the PRP to comply with the UAO even when the order is improper. The D.C. Circuit disagreed. First, the court held that Congress did not violate the Due Process Clause of the Fifth Amendment by enacting the UAO regime because Congress did provide procedural safeguards. To wit, although immediate judicial review of a UAO is precluded by CERCLA, Sections 106 and 107 only permit a judge to impose fines and treble recovery costs if the judge finds that (1) the UAO was proper, (2) the PRP “willfully” failed to comply “without sufficient cause”, and (3) fines and treble damages are appropriate under the circumstances. In other words, the UAO regime is constitutional because a judge is not required to penalize a PRP for refusing to comply with a UAO. Second, the court similarly held that EPA does not violate the Constitution by issuing and enforcing UAOs because only a federal judge – and not EPA – can decide whether and what penalty to impose on the noncompliant PRP. Also, the court pointed to the “extensive” notice and comment provisions in CERCLA Sections 113 and 117 and the National Contingency Plan in support of its holding that EPA’s implementation of the UAO regime affords PRPs sufficient procedural protections.
Additionally, the D.C. Circuit held that both of General Electric’s constitutional claims failed to the extent that the company did not identify a property interest entitling it to due process of law. Specifically, GE based its claims on the argument that a UAO presents a “massive contingent liability” for a PRP which in turn can depress the PRP’s stock price, harm its brand value, and increase its costs of financing. According to the court, the Due Process Clause of the Fifth Amendment does not protect a PRP’s interest in the market’s assessment of the PRP’s stock, brand, and credit worthiness. Stigma alone is insufficient to invoke due process protections. Accordingly, “consequential effects” such as depressed stock prices do not qualify as constitutionally protected property interests.
To access the opinion in General Electric Co. v. Jackson, No. 09-5092 (D.C. Cir. June 29, 2010), please click this link: http://pacer.cadc.uscourts.gov/docs/common/opinions/201006/09-5092-1252407.pdf.