DC Court of Appeals Rejects GE’s Constitutional Challenge to CERCLA‘s Unilateral Order Provisions

In General Electric Company v. US Environmental Protection Agency, United States Court of Appeals, District of Columbia, (June, 2010), General Electric Company (GE) challenged the constitutionality of certain provisions of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) authorizing the Environmental Protection Agency (EPA) to issue unilateral administrative orders (UAOs) without a pre-deprivation hearing.   The District of Columbia Court of Appeals rejected GE’s argument that CERCLA, along with the manner in which EPA administers it, violates the Due Process Clause.

CERCLA was enacted to ensure prompt cleanups of hazardous waste sites and to put the ultimate cost of such cleanups upon the responsible parties.  When EPA decides that a cleanup is needed at a hazardous waste site, it has four options:  1) negotiate a cleanup order with a potentially responsible party (PRP); 2) cleanup the site itself and recover its costs from the PRP; 3) get a  court to order the PRP to cleanup the site; or,  4) issue a UAO directing a PRP to clean up the site.

CERCLA §113(h) jurisdictionally bars a PRP from seeking immediate judicial review of a UAO.  Therefore, a PRP has only two options: First, it may comply and then seek reimbursement of its costs from EPA.  If EPA refuses to do so, the PRP can sue EPA in federal court.  Second, it can refuse to comply.  EPA can then sue the PRP to enforce the UAO or, alternatively, EPA can cleanup the site and sue the PRP to recover its costs.  In cases where the PRP doesn’t comply with the order, it can be subject to fines ($37,500 per day) or punitive damages of up to three times the cleanup costs if the Court finds the PRP did not have “sufficient cause” for such failure to comply.

The crux of GE’s argument was that the UAO provisions of CERCLA violate the Fifth Amendment because, if GE (which has received many UAOs from EPA in the past) fails to comply, GE risks severe punishment.  This leaves complying with the order - without first having the opportunity for an impartial hearing on its legality and rationality - as its only real option. The DC District Court issued two decisions subject to this appeal.  First, the District Court dismissed GE’s facial due process challenge, holding that CERCLA provides sufficient process because a PRP which refuses to comply with a UAO can force EPA to bring a court action during which the PRP can challenge the order.  Second, the District Court rejected GE’s “pattern and practice” challenge – a challenge to the manner in which EPA implements these UAO provisions.

GE appealed and the Court of Appeals reviewed the issues de novo.  The Court first examined GE’s facial due process challenge.  The Court explained that a party bringing a Fifth Amendment challenge must first show that it has been deprived of a protected ‘liberty’ or ‘property’ interest.  If so, then the Court must determine if the government’s procedures comport with due process.

GE asserted – and EPA agreed – that GE’s cost of complying with a UAO  and the fines and treble damages it faces if it fails to comply, qualify as protected property interests.  The parties disputed, however, whether there is an opportunity for judicial review before a deprivation of these interests takes place.  EPA argued that if a PRP refuses to comply, it can force EPA to sue it in court, providing an opportunity to challenge the validity of the order before spending cleanup money or paying fines.  GE argued that the statute was unconstitutional because it failed to provide a PRP with any realistic chance for a pre-deprivation review.  GE asserted that the fines and treble damages were so severe that no PRP would risk not complying, thus, depriving the PRP of the chance to challenge the order in court prior to spending substantial cleanup funds.
The Court disagreed finding that CERCLA offers a non-complying PRP with several protections: 1) the PRP faces fines and damages only if a District Court –conducting a de novo review of EPA action – finds that the UAO was proper, that the PRP did not have sufficient cause to fail to comply; and, 2) that the Court had discretion with respect to imposing fines and damages.  

GE also asserted that failure to comply subjects it to substantial “consequential” damages because issuance of a UAO stigmatizes a PRP, which, in turn, depresses stock prices, harms its brand value and increases its costs of financing.  The Court first evaluated whether such damages constitute an interest protected by the Due Process Clause.  Applying the so called “stigma-plus” rule, the Court stated that a PRP must show either that, in addition to reputational harm, the government deprived a PRP of a benefit to which they have a legal right or the stigma is so severe that it “broadly precludes” the PRP from pursuing a trade or business.  After examining a host of relevant case law, the Court concluded that GE’s argument lacked merit.

Finally the Court addressed GE’s “pattern and practice” challenge: that EPA’s implementation of UAO provisions of CERCLA increases the frequency of EPA’s use of UAOs and decreases their accuracy.  GE asserted that this practice violated its due process rights because it increased the risk of pre-hearing deprivation in the form of damage to its stock price, brand value and credit rating. The Court summarily rejected this argument. Reiterating that such consequential damages do not qualify as protected property interests, the Court held that GE’s constitutionally protected rights could not be adversely affected by such “procedure and practice” errors by EPA.

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