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18 ELR 21398 | Environmental Law Reporter | copyright © 1988 | All rights reserved Public Interest Research Group of New Jersey, Inc. v. Struthers-Dunn, Inc.No. 87-1773 (28 ERC 1218) (D.N.J. August 10, 1988)The court holds that Federal Rule of Civil Procedure 68, the offer of judgment rule, does not apply to citizen suits under the Federal Water Pollution Control Act (FWPCA). The rule provides that where a party rejects an offer of judgment, prevails at trial, and is awarded less than the amount of the offer of judgment, it will be assessed costs incurred by the offeror after the time of the offer. The court notes that application of the rule to citizen suits creates a disincentive to proceed to trial, since citizen plaintiffs do not personally share in civil penalties awards. This disincentive is contrary to the intent of Congress that persons should be unconstrained to bring citizen suits against FWPCA violators. Under the Rules Enabling Act, 28 U.S.C. § 2072, a federal rule of civil procedure may not so impinge the operation of a congressionally passed statute. Counsel for Plaintiffs Edward Lloyd Counsel for Defendant I. Leo Motiuk, Regina A. Murray Brotman, J.: This action is a citizen suit, brought by Public Interest Research Group ("PIRG"), Friends of the Earth ("FOE"), and Pennsylvania Public Interest Research Group ("PennPIRG"), pursuant to Section 505 of the Federal Water Pollution Control Act (the "Clean Water Act" or the "Act"), 33 U.S.C. § 1251, et seq., against Struthers-Dunn, alleging certain violations of the Clean Water Act. Presently before the court is plaintiffs' motion for a declaration that an offer of judgment, made by defendant pursuant to Federal Rule of Civil Procedure 68, is null and void as contrary to federal law. For the reasons set forth below, plaintiffs' motion is granted. Plaintiffs instituted this lawsuit on May 13, 1987, alleging that [18 ELR 21399] defendant was guilty of making past and ongoing waste water discharges into the Delaware River which did not comply with the effluent limitations set forth in three National Pollution Discharge Elimination System/New Jersey Pollution Discharge Elimination System ("NPDES/NJPDES") permits, issued to defendant pursuant to Section 402(a) of the Clean Water Act, 33 U.S.C. § 1342(a). The complaint also alleges that defendant failed to comply with the monitoring and reporting requirements of the Act, 33 U.S.C. § 1318(a)(4)(A). On October 13, 1987, plaintiffs moved for a preliminary injunction directing defendant to comply with the Clean Water Act by halting discharges which did not meet the limitations set forth in defendant's NPDES/NJPDES permits, and by fulfilling the Act's reporting requirements. Following the November 6, 1987 oral argument on plaintiffs' motion for equitable relief, the parties reached a consent agreement, which was entered by order of this court on November 16, 1987. This order resolved plaintiffs' claims for injunctive relief, but left open the issue of defendant's monetary liability for its past violations of the Clean Water Act. Thereafter, plaintiffs moved for partial summary judgment on the issue of defendant's liability, and defendant moved to dismiss all or part of plaintiffs' claims on the basis of mootness and lack of subject matter jurisdiction. Prior to the return date for these motions, defendant served on plaintiffs an offer of judgment, pursuant to Federal Rule of Civil Procedure 68. By the terms of this offer, defendant would allow judgment to be taken against it in a certain specified amount "for alleged violations of waste water discharge, reporting, monitoring and sampling requirements of the defendant's NPDES/NJPDES permits," and in another specified amount for "plaintiffs' costs (including reasonable attorney's fees) accrued to date."1 Plaintiffs then made their present motion for a declaratory judgment, pursuant to 28 U.S.C. § 2201, stating that defendant's offer of judgment is null and void. Section 505 of the Clean Water Act, 33 U.S.C. § 1365, provides, in pertinent part . . . any citizen may commence a civil action on his own behalf — (1) against any person . . . who is alleged to be in violation of (A) an effluent standard or limitation under this chapter or (B) an order issued by the Administrator or a State with respect to such a standard or limitation 33 U.S.C. § 1365(a). A person or entity found guilty of non-compliance with the Act may be subject, pursuant to 33 U.S.C. § 1319(d), "to a civil penalty not to exceed $ 25,000 per day for each violation." Id. However, monies paid in penalty, as the result of a § 1365 citizen suit, do not go to the plaintiff who instituted the action. As was explained by the court in Chesapeake Bay Foundation v. Bethlehem Steel Corp., 608 F. Supp. 440 [15 ELR 20785] (D. Md. 1985), when citizen plaintiffs bring actions under § 1365, they are suing as private attorneys general, and they seek the enforcement of federal law. Although the statute provides that a citizen sues "on his own behalf," any penalties recovered from such an action are paid into the United States Treasury. Unlike in a qui tam action, where a volunteer plaintiff can recover part of the penalty, in this action a plaintiff recovers nothing. Any benefit from the lawsuit, whether injunctive or monetary, inures to the public or to the United States. The citizen suit provision was designed to supplement administrative enforcement, not to provide a private remedy. Id. at 449. See also Sierra Club v. Chevron U.S.A., Inc., 834 F.2d 1517, 1522 [18 ELR 20237] (9th Cir. 1987). Rule 68 of the Federal Rules of Civil Procedure provides: At any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the defendant party for the money or property or to the effect specified in the offer, with costs then accrued. If within 10 days after the service of the offer the adverse party serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon the clerk shall enter judgment. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible except in a proceeding to determine costs. If the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer. The fact that an offer is made but not accepted does not preclude a subsequent offer. When the liability of one party to another has been determined by verdict or order or judgment, but the amount or extent of the liability remains to be determined by further proceedings, the party adjudged liable may make an offer of judgment, which shall have the same effect as an offer made before trial if it is served within a reasonable time not less than 10 days prior to the commencement of hearings to determine the amount or extent of liability.2 Normally, unless otherwise provided by statute or court order, costs are allowed "as of course to the prevailing party." Fed. R. Civ. P. 54(d). Rule 68, therefore, removes the presumption in favor of the prevailing party, and provides for the assessment of costs against a prevailing plaintiff who obtains a judgment less favorable than the offer of judgment made by defendant. As the Supreme Court has instructed, "[t]he plain purpose of Rule 68 is to encourage settlement and avoid litigation. Advisory Committee Note on Rules of Civil Procedure, Report of Proposed Amendments, 5 F.R.D. 433, 483, n.1 (1946), 28 U.S.C. App., p. 637; Delta Air Lines, Inc. v. August, 450 U.S. 346, 352 (1981). The Rule prompts both parties to a suit to evaluate the risks and costs of litigation, and to balance them against the likelihood of success upon trial on the merits." Marek v. Chesny, 473 U.S. 1, 5 (1985). Plaintiffs argue that application of this rule to citizen suits raises practical and procedural barriers to the effective enforcement of the Act through private party actions, and is therefore contrary to Congress' express intent to encourage the bringing of such actions as a supplement to governmental enforcement efforts. Specifically, plaintiffs contend that Rule 68 offers of judgment create an uneven system of settlement incentives, which place citizen suit plaintiffs in an untenable conflict of interest situation. Plaintiffs also argue that the terms of Rule 68 impermissibly abridge and modify substantive rights provided by the Act to both plaintiffs and the United States,3 in violation of the Rules Enabling Act, 28 U.S.C. § 2072.4 A similar challenge to Rule 68 was pressed before the Supreme Court in the case of Marek v. Chesny, 473 U.S. 1 (1985). In Marek, the Court applied Rule 68 to a suit brought under 42 U.S.C. § 1983,5 [18 ELR 21400] and held that a civil rights plaintiff could not recover attorney's fees pursuant to 42 U.S.C. § 1988,6 which were incurred subsequent to a rejected Rule 68 offer, when the plaintiff ultimately recovered a judgment less than the offer. Plaintiffs now seek to distinguish Marek from the case at bar by arguing that Clean Water Act plaintiffs are in a different position than plaintiffs suing under § 1988, and that the effect of Rule 68 offers on citizen suits is far more detrimental than the effect of such offers on civil rights litigation. We view as legitimate the concerns expressed by plaintiffs regarding the potential chilling effect Rule 68 may have on the vigorous prosecution of private party actions brought under the Clean Water Act. Moreover, we consider citizen suit plaintiffs to be readily distinguishable from civil right litigants of Rule 68 purposes. Therefore, the court does not feel that it is constrained by Marek to apply Rule 68 to the present action. In Marek, the Supreme court provided the following reasoning to support its conclusion that a civil rights plaintiff's attorney's fees are included within the scope of the word "costs" as that word is used in Rule 68. Here, respondent sued under 42 U.S.C. § 1983. Pursuant to the Civil Rights Attorney's Fees Award Act of 1976, 90 Stat. 241, as amended 42 U.S.C. § 1988, a prevailing party in a § 1983 action may be awarded attorney's fees "as part of the costs." Since Congress expressly included attorney's fees as "costs" available to a plaintiff in a § 1983 suit, such fees are subject to the cost-shifting provision of Rule 68. . . . 473 U.S. at 9. Therefore, the result in Marek was that plaintiff, although having prevailed on the merits of his claim, and having obtained a judgment, was not awarded attorney's fees. Under this approach, plaintiffs in the present action would also be precluded from an award of attorney's fees if they obtained a judgment less favorable than defendant's Rule 68 offer. This is made so by virtue of the wording of 33 U.S.C. § 1365(d), which refers to "costs of litigation" (including reasonable attorney and expert witness fees)." See also Marek, 473 U.S. at 46 (Brennan, J. dissenting) (§ 1365(d) listed in Appendix to dissent as one of the many fee-shifting statutes which describe attorney's fees as being part of costs, and which when sued under, pursuant to the majority's reasoning, would result in attorneys's fees being considered part of costs for purposes of Rule 68). Therefore, if defendant's offer of judgment is to be given effect, plaintiffs must face the choice of either consenting to the assessment of a penalty now which they may perceive as being too low, or else pursuing the litigation in hopes of a larger penalty being imposed, at the risk of later having to pay defendants costs and sacrificing an award of attorney's fees. The problem with this situation is, as plaintiffs put it, that there is no "upside" benefit to plaintiffs if they reject defendant's offer, while there is a substantial "downside." That is to say, plaintiffs' incentive to "hold out" for a larger penalty judgment is greatly minimized by the fact that plaintiffs will not keep any of the money that defendant is made to pay. At the same time, plaintiffs are confronted with the possibility of not only having to work for free, but also having to pay money to defendant if the ultimate judgment does not meet plaintiffs' expectations. Not even the most altruistic litigant can be expected to persevere under such circumstances.7 In this sense, plaintiffs here are quite different from civil rights litigants, who may personally benefit from their decision to reject a Rule 68 offer if the ultimate award is higher than defendant's settlement price. This choice between a potentially higher award and a risk of an assessment of costs is at the heart of the Rule 68 mechanism. "Because prevailing plaintiffs presumptively will obtain costs under Rule 54(d), Rule 68 imposes a special burden on the plaintiff to whom a formal settlement offer is made. If a plaintiff rejects a Rule 68 settlement offer, he will lose some of the benefits of victory if his recovery is less than the offer." Delta Air Lines, Inc. v. August, 450 U.S. at 352. In the present case, plaintiffs have already obtained the full benefit of this lawsuit as far as their immediate interest are concerned, by virtue of the injunctive relief contained in the consent decree. It would be unrealistic to think that plaintiffs would now be willing to bear the risks inherent in Rule 68's operation, regardless of how inadequate they believe defendant's offer to be. Defendant, of course, disagrees with this analysis, and argues that citizen suits are indistinguishable from many civil rights actions, in which the awards may be predominately injunctive. This argument, however, ignores the fact that courts in civil rights litigation must "evaluate the 'value' of nonpecuniary relief before deciding whether the 'judgment' was 'more favorable than the offer' within the meaning of Rule 68." Marek, 473 U.S. at 33 (Brennan, J. dissenting). Consequently, the value of any injunctive relief will be included in the court's Rule 68 calculations. Moreover, the fact that civil rights actions may not always yield high compensatory damage awards does not alter the fact that a civil rights plaintiff faced with a Rule 68 offer still chooses between the potential for personal gain and the risk of personal loss. By contrast, defendant's offer of judgment in this case presents plaintiffs with the threat of a substantial costs assessment, while the best result plaintiffs can hope for is to break even. In Marek, the Supreme Court wrote, "[t]o be sure, application of Rule 68 will require plaintiffs to 'think very hard' about whether continued litigation is worthwhile; that is precisely what Rule 68 contemplates." 473 U.S. at 11. But in fact, the exact opposite is true in the case at bar. One would suspect that plaintiffs would not have to think very hard at all before deciding that there is very little percentage in their continuing with this litigation if defendant's offer of judgment is allowed to stand. Nonetheless, defendant argues that this apparent conflict between the public's interest in enforcement of the Clean Water Act through private party actions and the plaintiff's own financial interests is no different from the situation that existed when plaintiffs first filed suit. To be sure, plaintiffs from the beginning faced certain litigation risks, i.e. having to pay defendant's costs or not having attorney's fees reimbursed if defendant prevailed. Additionally, plaintiffs never had an opportunity to reap financial gain from the bringing of this suit. However, these characteristics of a citizen suit are inherent in § 1365 as contemplated and enacted by Congress. By contrast, the application of Rule 68 to this action in effect raises the ante, so that plaintiffs not only have to worry about losing; they must also be concerned about not winning enough. In doing so, Rule 68 runs contrary to Congress' intent that "enforcement of [the Water Act] provisions be immediate, that citizens should be unconstrained to bring these actions, and that the courts should not hesitate to consider them." S. Rep. No. 414, 92nd Cong., 1st Sess. 80 (1971). Such an impingement on a congressional statute through the application of a federal rule of civil procedure is barred by the Rules Enabling Act, 28 U.S.C. § 2072. The effectiveness of § 1365 as "a very useful additional tool in enforcing environmental protection laws," 118 Cong. Rec. 33717 (1972), 1 Leg. Hist. 221 (Sen. Bayh), cited in Gwaltney of Smithfield v. Chesapeake Bay Found., 108 S. Ct. 376, 383 [18 ELR 20142] (1987), is certainly diluted, if not decimated, by the disincentives created when Rule 68 is applied to citizen suits. Accordingly, because we feel that Rule 68 is simply incompatible with the purposes Congress sought to serve in enacting § 1365, this court holds that Rule 68 is not applicable to the present action, and declares that defendant's offer of judgment is null and void. An appropriate order will be entered. This matter having been brought before the court on motion of plaintiffs Public Interest Research Group, Friends of the Earth and Pennsylvania Public Interest Research Group for a declaration that an offer of judgment made by defendant, pursuant to Federal [18 ELR 21401] Rule of Civil Procedure 68, is null and void as contrary to federal law; and The court having considered the oral argument and submissions of the parties; and For the reasons stated in the court's opinion filed this date, IT IS on this 17th day of August, 1988 hereby ORDERED that plaintiffs' motion is GRANTED, and defendant's Rule 68 offer of judgment is declared null and void. 1. The parties have agreed that the precise amounts included in defendant's offer of judgment are not relevant to the issues presented by plaintiffs' motion, and, accordingly, have not submitted those amounts to the court. 2. Rule 68 requires that a valid offer of judgment be deemed withdrawn if not accepted within 10 days after service of the offer on plaintiff. However, pending resolution of the instant motion, defendant has consented to extend the period of acceptance until five days after the court's ruling on plaintiffs' motion is entered. The parties have also agreed to stay further action on their partial summary judgment and dismissal motion until after the Rule 68 issued is decided. The foregoing arrangement is memorialized in a stipulation signed by the parties and submitted to the court on February 15, 1988. 3. Plaintiffs make the argument that Rule 68 offers of judgment are inconsistent with Section 505(c)(3) of the Clean Water Act, 33 U.S.C. § 1365(c)(3), which provides that "no consent judgment shall be entered in an action in which the United States is not a party prior to 45 days following the receipt of a copy of the proposed consent judgment by the Attorney General and the Administrator." The court, however, need not address this issue in light of its determination that Rule 68 impermissibly creates a biased system of settlement incentives when applied to citizen suits. 4. 28 U.S.C. § 2072 provides, in pertinent part: The Supreme Court shall have the power to prescribe by general rules, the forms of process, writs, pleadings, and motions, and the practice and procedure of the district courts and courts of appeals of the United States in civil actions. . . . Such rules shall not abridge, enlarge or modify any substantive right. . . . 5. 42 U.S.C. § 1983 provides: Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress. For the purposes of this section, any Act of Congress applicable exclusively to the District of Columbia shall be considered to be a statute of the District of Columbia. 6. 42 U.S.C. § 1988 provides, in relevant part: In any action or proceeding to enforce a provision of sections 1981, 1982, 1983, 1985 and 1986 of this title, . . ., the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs. 7. An issue not resolved in Marek is whether the plaintiff could be made to pay defendant's attorney's fees as well as costs, after having obtained a judgment less favorable than the Rule 68 offer. This question was not addressed, since defendant in Marek did not seek an award of costs or fees, but merely sought to preclude plaintiffs from collection fees. Certainly, if plaintiff's incentive to vigorously prosecute this action would be chilled by the risk of having to pay defendant's costs, then plaintiffs' desire to pursue this litigation would be overcome from exposure at the prospect of being held accountable for defendant's attorney's fees. 18 ELR 21398 | Environmental Law Reporter | copyright © 1988 | All rights reserved |