Supreme Court Update: Environmental Protection Agency v. EME Homer City Generation, L.P. (12-1182), American Lung Association v. EME Homer City Generation, L.P. (12-1183) and Order List

May 2, 2014 Supreme Court Update

Greetings, Court fans!

We're back to bring you the third case from Wednesday, as well as this week's orders.

In Environmental Protection Agency v. EME Homer City Generation, L.P. (12-1182), together with American Lung Association v. EME Homer City Generation, L.P (12–1183), the Court addressed an EPA rule on air pollution emitted in one state but affecting downwind states. The aptly-named "Good Neighbor Provision" of the Clean Air Act is targeted at ensuring that pollution from upwind states does not "contribute significantly" to the inability of downwind states to meet national air quality standards. In 2011, the EPA issued a rule under the Good Neighbor Provision which created a two-step process to regulate emissions by upwind states. In step one, the EPA screened upwind states to determine their impact on air pollution in downwind states. States found to have a "significant" impact on air quality in other states were subjected to step two, which created a complicated process for reducing air pollution emissions. Among other things, this process took into account cost-effectiveness. It also provided each targeted state with a "budget" of air pollution that the state could emit, and allocated that budget among in-state sources (a.k.a. "cap-and-trade"). The D.C. Circuit vacated the rule on the ground that the states should have been given an opportunity to propose their own plans for allocating their "budget" among in-state sources. The panel also found that the EPA's two-step plan was an unreasonable interpretation of the Good Neighbor Provision because, among other things, it treated all regulated upwind states alike, regardless of their relative contribution to the overall problem, and did nothing to guard against potential "over-control."

The Court reversed, in an opinion by Justice Ginsburg, joined by the Chief and Justices Kennedy, Breyer, Sotomayor and Kagan. First, the Court found that nothing in the statute required the EPA to allow states to propose their own plans for allocating their budget among their in-state sources. Second, the majority disagreed that the EPA's interpretation of the Good Neighbor Provision was unreasonable. Noting that the case bore a "notable resemblance" to Chevron, Inc. v. Natural Resources Defense Council, Inc. (1982) (the leading case on deference to administrative agencies, which is now often referred to as just "Chevron deference"), the majority found that the statutory language in the Good Neighbor Provision was ambiguous, and the EPA's construction of it was reasonable. The Court observed that allocating responsibility among the states for airborne pollution was a difficult question. Quoting language from the King James Bible that one cannot tell from "whence [the wind] cometh, and whither it goeth," the Court stated it is hard to identify where air pollution comes from, or where it will travel to. Downwind states can be affected by air pollution from a number of upwind states, and upwind states can pollute more than one downwind state. Indeed, some states are classified by the EPA as both "downwind" and "upwind." Faced with the intricacies of this issue, the EPA's plan, including its consideration of the cost-effectiveness of measures to prevent pollution, was a reasonable interpretation of the Good Neighbor Provision. Focusing on cost-effectiveness made good sense, as it would require states that had done less in the past to catch up with the technologies and changes implemented by their neighbors. Finally, to the extent that the EPA rule led to "over-control" – which the majority found scant evidence of in the voluminous record – an upwind state could bring a particularized, as applied challenge. There was no need to invalidate the rule in toto.

Justice Scalia dissented, joined by Justice Thomas. (Justice Alito did not participate.) For the dissenters, the Good Neighbor Provision was not ambiguous, and the EPA was not free to consider compliance costs. Further, the EPA's refusal to allow states to submit their own plans transformed the Clean Air Act's "program based on cooperative federalism to one of centralized federal control." This transformation of the Clean Air Act's structure was, according to Scalia, an abuse of discretion. (In an unusual move, Justice Scalia issued a corrected version of his dissent after commentators noticed the original opinion mischaracterized Whitman v. American Trucking Association (1999).)

Also this week, the Court granted cert in two cases:

Jesinoski v. Countrywide Home Loans, Inc. (13-684) asks, with respect to the Truth in Lending Act, "Does a borrower exercise his right to rescind a transaction in satisfaction of the requirements of [15 U.S.C. §1635] by ‘notifying the creditor' in writing within three years of the consummation of the transaction … or must a borrower file a lawsuit within three years of the consummation of the transaction?"

Yates v. United States (13-7451) asks, with respect to the Sarbanes-Oxley Act's "anti-shredding" provision, which makes it a crime for anyone who "knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document or tangible object" with the intent to impede or obstruct an investigation: is a fish a tangible object? More specifically, was John Yates, a commercial fisherman charged and convicted under this provision for destroying purportedly undersized, harvested fish from the Gulf of Mexico after a federally-deputized officer had issued him a civil citation and instructed him to bring them back to port, "deprived of fair notice that destruction of fish would fall within the purview of 18 U.S.C. § 1519, where the term ‘tangible object' is ambiguous and undefined in the statute, and unlike the nouns accompanying ‘tangible object' in section 1519, possesses no record-keeping, documentary, or informational content or purpose?"

Enjoy the weekend! We'll be back with more decisions and orders as they are released.

Kim, Jenny & Tadhg