The Justice Department’s (DOJ) policing of class-action settlements in recent months has the potential to serve as a significant check on the plaintiffs’ bar. While DOJ has had the right to express its view of proposed class-action settlements since 2005 pursuant to the Class Action Fairness Act (CAFA), only recently has the department’s Consumer Protection Branch exercised its authority to oppose such settlements. Washington Legal Foundation certainly applauds these efforts to intervene in and oppose frivolous, unfair, or inequitable class settlements, but what DOJ has done recently in several environmental citizen suits may be even more significant.
The recent demise of “sue and settle”—the practice of federal agencies readily settling activists’ citizen suits in such a manner that imposes substantive legal obligations on regulated entities—has been a positive victory for administrative accountability and the rule of law. Environmental activists’ inability to force policy change by suing the Environmental Protection Agency, however, has inspired an uptick in citizen suits against private businesses. As the number of citizen suits increase, so too does the risk of abusive litigation—lawsuits motivated not by environmental protection but by the desire to shakedown businesses for monetary settlements and attorneys’ fees.
Under the Clean Water Act (CWA), the citizen-suit provision allows any individual or organization that can establish standing to bring litigation against both private parties and the Environmental Protection Agency (EPA). When initiating the suit, a plaintiff must submit a 60-day notice of violation to the alleged polluter, with a copy to the EPA Administrator. Upon settlement, litigants must submit a copy of the consent decree to the Justice Department for review. Congress intended for DOJ to monitor such suits, as it was concerned with abusive, collusive, or inadequate settlements. While citizen suits can be an important tool for use when the government is unwilling or unable to bring a suit on its own, incentives for abuse are apparent. Those incentives empower environmental ambulance chasing.
With the innumerable rules, guidance documents, judicial interpretations, and enforcement policies that have grown out of the CWA, it is not difficult for shakedown litigators to identify targets. One especially easy theory to advance in citizen-suit litigation is unlawful stormwater pollution. Stormwater regulations are exceedingly broad, and almost any business whose production process generates as a by-product anything that could be classified as a pollutant is vulnerable to a lawsuit. In many cases, attorneys’ fees can far exceed the damage from the alleged violations, leading companies to settle rather than litigate.
Recently, DOJ filed statements in three ongoing lawsuits that allege violations of stormwater discharge limits. See, e.g., United States’ Statement of Concern and Recommendation that Plaintiff File a Motion to Enter the Proposed Consent Decree, Lares v. Reliable Wholesale Lumber, Inc. No. 18-cv-00157 (C.D. Cal. May 18, 2018). Interestingly (or, more likely, unsurprisingly), one law firm filed all three suit. In fact, those suits are just three of more than 150 notices of violation submitted by this same law firm since 2016.
All three complaints alleged the defendants “have been discharging and continue to discharge polluted stormwater from the facility in violation of the express terms and conditions of Sections 301 and 402 of the Clean Water Act” and violated California’s general industrial stormwater permits. See Complaint at 2, Garcia v. Miller Castings, Inc., No. 17-cv-07408 (C.D. Cal. Oct. 10, 2017); Complaint at 2, Lunsford v. Arrowhead Brass Plumbing, No. 16-cv-08373 (N.D. Cal. Nov. 10, 2016; Complaint at 2, Lares v. Reliable Wholesale Lumber, Inc. No. 18-cv-00157 (C.D. Cal. Jan. 29, 2018). Each complaint, which is nearly identical, sought an injunction, the imposition of civil penalties, and attorneys’ fees. The plaintiffs all were defined in general terms, as those “dedicated to protecting the water quality” of the Los Angeles River, the San Gabriel River, or the Santa Ana River and each river’s watersheds.
Specifically, the plaintiffs alleged the defendant businesses all operated facilities that are subject to the Industrial Stormwater Permit, which regulates stormwater discharges and requires industrial dischargers to secure coverage under the Permit and comply with its terms. Industrial operations at the facility exposed pollutants to rainfall, which washed into the various rivers during storms. Among the various claims, plaintiffs essentially allege the defendants did not implement adequate procedures to avoid polluting the rivers.
The civil penalties requested border on the absurd: in Arrowhead Brass Plumbing, for example, plaintiffs sought an order requiring defendants to pay civil penalties of up to $37,500 per day for all violations occurring after August 22, 2011, well over $200 million. It is no wonder that companies, faced with defending such a case at trial, opts to settle rather than face a jury. And given that this firm has made more than 150 notices of violation in the past two years, there is no shortage of opportunities to extract settlements from unsuspecting companies who probably had no idea they were even violating these regulations to begin with.
The Justice Department typically allows citizen suits to proceed without interference, as they save the government from bearing the expenses of costly litigation. This firm drew the skepticism of DOJ, however, as its litigiousness in CWA actions brought in nearly $700,000 in attorneys’ fees in two years. DOJ complained that the alleged violations in these specific cases were vague, that the firm often used repeat plaintiffs who did not suffer any cognizable injury, and that the agreements were weak and did not truly seek to enforce the CWA. DOJ asked the U.S. District Court for the Central District of California to require the law firm to justify the proposed settlement agreements and attorneys’ fees.
DOJ argued that the plaintiffs failed to demonstrate that the consent decree is “fair, reasonable and equitable” or that it would advance public policy or the broad goals of the CWA. The assembly-line nature of this law firm’s citizen-suit practices no doubt inspired the Environment and Natural Resource Division to choose three especially egregious filings and send a message to the firm by lodging DOJ’s objections with the court.
The Justice Department noted that the sheer volume of litigation initiated by this one firm in just under two years is unprecedented. DOJ’s willingness to flag these clearly abusive lawsuits and request courts to scrutinize settlements puts environmental activist groups and their lawyers on notice that department resources will be devoted to filing and settlement review. Citizen suits exist to serve the public interest; law firms acting as ambulance chasers serve only themselves.
Also published by Forbes.com on WLF’s contributor page.