Ehrlich v. Reno

No. 94-2220 (3d Cir. September 7, 1995)

The court holds that § 113(h) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) does not bar preenforcement judicial review of an as-applied constitutional due-process challenge to a request the U.S. Environmental Protection Agency (EPA) made under CERCLA § 104(e) for a potentially responsible party's (PRP's) personal financial information regarding cleanup at the Strasburg Landfill Superfund site. The district court, construing the PRP's claim as a facial constitutional challenge, held that it had jurisdiction over the PRP's constitutional claim under 28 U.S.C. § 1331, but held that the PRP failed to state a claim on which relief could be granted. The court first notes that the parties agree that plaintiff's action is an as-applied challenge, not a facial challenge, to the constitutionality of § 104(e), which authorizes EPA to demand private personal financial information without any procedural protections. An as-applied challenge requires a factual examination of the nature, scope, and context of EPA's demand on the PRP. Because the district court's analysis did not include the type of fact-based determination usual in an as-applied challenge, the court remands the claim to be litigated as part of the § 104(e) suit that EPA filed against the PRP for penalties based on the PRP's refusal to disclose the information EPA seeks.

Counsel for Appellant
John A. Yacovelle
8438 Mackall Rd., St. Leonard MD 20685
(410) 586-0524

Counsel for Appellee
Lisa Jones
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Before Sloviter and Ambrose,^* JJ.

[25 ELR 21586]

Scirica, J.

Opinion of the Court

This appeal raises the issue of whether section 113(h) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9613(h), bars preenforcement judicial review of an as-applied constitutional challenge to a request made by the Environmental Protection Agency for an individual's personal financial information. For reasons that follow we will vacate and remand to the district court.

The EPA placed the Strasburg Landfill on the National Priorities List on March 31, 1989, and initiated a response action using funds from the Hazardous Substance Superfund. Materials disposed at the landfill generated leachate containing hazardous substances that contaminated the surface water and groundwater.

David Ehrlich, the plaintiff in this action, owned a 50% interest in the Newlin Corporation, which in turn owned a 25% stake in the Strasburg Landfill. Thus, Ehrlich held a 12.5% ownership interest in the landfill. The EPA contends that Ehrlich also served as supervisor of operations for the landfill, although Ehrlich characterizes his involvement as that of a passive investor.

On March 12, 1992, the EPA sent Ehrlich an information request letter under section 104(e)of CERCLA.¹ 42 U.S.C. § 9604(e). The letter demanded detailed information regarding Ehrlich's finances, including his bank accounts, assets, asset transfers, and anticipated income, as well as similar information from his spouse and dependents, together with documentation. Ehrlich refused to provide the requested information.

The EPA also sent Ehrlich a "General Notice" letter on November 12, 1992, informing him that he may be liable under section 107 of CERCLA,² 42 U.S.C. § 9607, which imposes liability for the costs of remedial actions. The EPA has not sought recovery of response costs under section 107, nor has it issued a cleanup order under section 106,³ 42 U.S.C. § 9606. But on February 3, 1995, the EPA filed suit against Ehrlich under section 104(e)(5)(B), 42 U.S.C. § 9604(e)(5)(B), seeking penalties for refusal to disclose the information requested in its March 12 letter. United States v. Ehrlich, No. 95-0661 (E.D. Pa. filed Feb. 3, 1995). Although that suit is before the district judge in this case, it is not before us.

II.

On November 3, 1993, Ehrlich brought this action in federal court, challenging the EPA's actions. He alleged the EPA violated CERCLA because it neither brought a cost recovery action against him nor exonerated him as a potentially responsible party because of a state judgment finding him not liable under Pennsylvania law for environmental damage at the site. Ehrlich also alleged the EPA's actions violated his constitutional right to due process. Ehrlich sought injunctive relief and requested either that the EPA be required to bring a cost recovery action or that it be enjoined from pursuing him as a potentially responsible party.

The district court dismissed Ehrlich's statutory claims, holding that it lacked jurisdiction over the enforcement activities relating to uncompleted phases of the cleanup. The district court held it had jurisdiction over completed phases of the cleanup, but found that Ehrlich failed to state a claim upon which relief could be granted.

The EPA contended that section 113(h) barred jurisdiction over constitutional claims. But the district court, finding a strong presumption against such a withdrawal of jurisdiction, held that it had jurisdiction over Ehrlich's constitutional claim under 28 U.S.C. § 1331. The court characterized Ehrlich's constitutional claim as an allegation "that because CERCLA fails to require a timely cost recovery action and hearing, the statute, violates constitutional due process. His constitutional claim does not challenge EPA's failure to file a CERCLA cost recovery action, but CERCLA itself." Ehrlich v. Reno, No. 93-5829, slip op. at 16-17 (E.D. Pa. Nov. 1, 1994).

The district court dismissed Ehrlich's constitutional claim, holding the complaint failed to state a claim upon which relief could be granted. This appeal followed, raising only Ehrlich's claim that the EPA's information request violates the Due Process Clause of the Constitution.

III.

The district court found federal question jurisdiction under 28 U.S.C. § 1331. But the EPA argues that the United States as sovereign is immune from suit except to the extent it waives that immunity. Because section 113(h)⁴ of CERCLA withdraws federal jurisdiction over all preenforcement challenges to removal and remedial actions⁵ (except for five exceptions which are inapplicable here)⁶ the EPA maintains the district court lacked jurisdiction.

The EPA's argument focuses on the bar created by sovereign immunity. Our statement in Boarhead Corp. v. Erickson, 923 F.2d 1011, 1017-18 n.11 [21 ELR 20517] (3d Cir. 1991), is apposite:

[25 ELR 21587]

[The EPA Administrator's] argument that sovereign immunity is not waived here because CERCLA overrides the APA's presumptive right to judicial review under 5 U.S.C.A. § 701(a)(1) does no more than ring the changes on his primary argument that § 113 of CERCLA eliminates the jurisdiction a district court may otherwise have to hear a case . . . . It is simply another way of saying that § 113(h) prohibits a district court from hearing [the plaintiff's] complaint at this time.

Because we found in Boarhead that section 113(h) barred jurisdiction, we did not reach the sovereign immunity argument. But as in Boarhead, the EPA's sovereign immunity argument is not distinct from its argument setting forth section 113(h)'s bar.⁷

In a similar case, the Court of Appeals for the First Circuit analyzed the reach of section 113(h). In Reardon v. United States, 947 F.2d 1509 [22 ELR 20292] (1st Cir. 1991), the plaintiffs were owners of land subject to an EPA remedial action because of toxic chemicals on the property. Without notice to the plaintiffs, the EPA filed a notice of lien on all property owned by plaintiffs. On its way to finding this procedure constitutionally deficient under the Due Process Clause, the court interpreted section 113(h):

Under our reading, it divests federal courts of jurisdiction over challenges to EPA's administration of the statute—claims that EPA did not "select[]" the proper "removal or remedial action," in light of the standards and constraints established by the CERCLA statutes. The Reardons' due process claim is not a challenge to the way in which EPA is administering the statute; it does not concern the merits of any particular removal or remedial action. Rather, it is a challenge to the CERCLA statute itself—to a statutory scheme under which the government is authorized to file lien notices without any hearing on the validity of the lien.

Id. at 1514. But the court also stated that "we are not holding that all constitutional challenges involving CERCLA fall outside the scope of [section 113(h)]. A constitutional challenge to EPA administration of the statute may be subject to § 9613(h)'s strictures." Id. at 1515. But see Barmet Aluminum Corp. v. Reilly, 927 F.2d 289 [21 ELR 20850] (6th Cir. 1991) (holding that § 9613(h) forecloses preenforcement review of constitutional challenges).

The EPA contends Ehrlich's claim does not fall under the Reardon exception to the bar of section 113(h) because he only challenges the EPA's issuance of one information request; that is, he does not challenge the facial validity of the section but rather the administration of it. But even if Ehrlich's claim might fall under the Reardon exception, the EPA maintains that in any event "the Section 113(h) bar encompasses Constitutional claims." The EPA contends that individuals should wait until it has brought a compliance action before being able to challenge the action. As the EPA stated, "The purpose of Section 113(h) is to prevent . . . delay and interference with ongoing response actions . . . ." Appellee's Br. at 28.

At oral argument, the parties agreed that Ehrlich had made an as-applied rather than a facial challenge to the constitutionality of section 104(e). We understand that Ehrlich contends that his as applied constitutional challenge can be fairly read to attack more than the mere administration of the statute. It appears to challenge the constitutionality of the statutory scheme, as applied to him, under which the EPA is authorized to demand private personal financial information from him without any procedural protections.

IV.

The district court addressed Ehrlich's claims on a motion to dismiss, finding his constitutional claim "presents a 'purely legal' question appropriate for judicial determination . . . . This claim is ripe for review." Ehrlich v. Reno, No. 93-5829, slip op. at 27 (E.D. Pa. Nov. 1, 1994). The district court apparently considered Ehrlich's claim to be a facial challenge to the statute.⁸ See Project Release v. Prevost, 722 F.2d 960, 970 (2d Cir. 1983) (observing that where the district court treated a statute's constitutionality as a purely legal issue it was construing the challenge as a facial attack). But as we have noted, the parties construed Ehrlich's claim as an as-applied challenge notwithstanding the allegations in his complaint. An as-applied challenge requires a factual examination of the nature, scope, and context of the EPA's demand on Ehrlich. See, e.g., United States v. Property at 4492 S. Livonia Rd., 889 F.2d 1258, 1263 (2d Cir. 1989) (holding that an as-applied challenge requires an investigation of "all the facts and circumstances" of the case); cf. Penn Elastic Co. v. United Retail & Wholesale Employees Union, Local 115, 792 F.2d 45 (3d Cir. 1986) (observing that challenges to the constitutionality as-applied of the statute in question would need to await the development of a factual record); California Fed. Sav. & Loan Ass'n v. Guerra, 758 F.2d 390, 394 (9th Cir. 1985) (refusing to "conjure up a factual record" to convert a facial challenge to an as-applied challenge), aff'd, 479 U.S. 272 (1987).

As we have noted, the district court treated Ehrlich's constitutional claim as a facial challenge and analyzed his due process arguments. But no doubt because of the way the case was presented, the district court did not attempt to develop a factual record of "all the facts and circumstances of this case . . . ." Property at 4492 S. Livonia Rd., 889 F.2d at 1263. Nor did the court analyze any of the facts of the EPA's demand on Ehrlich and his relationship to the cleanup site. Instead, the court focused on the application of section 104 and the procedural protections and interests involved. The court's analysis did not include the type of fact-based determination usual in an as-applied challenge.

It is clear that Ehrlich raised his constitutional challenge in this manner because the EPA never brought a compliance action under section 104(e)(5)(B). But, as we have noted, after the district court's decision, the EPA brought a compliance action against Ehrlich before the same district judge. See United States v. Ehrlich, No. 95-0661 (E.D. Pa. filed Feb. 3, 1995). Because the issue in this case can properly be raised in that action, we believe Ehrlich's claims should be litigated there. We are confident the important issues Ehrlich raises will be treated (to the extent he raises them) in a timely fashion in the compliance action.

VI.

Based on the foregoing, we will vacate the district court's judgment and remand to the district court for proceedings consistent with this opinion.

Each party to bear its own costs.

* The Honorable Donetta W. Ambrose, United States District Judge for the Western District of Pennsylvania, sitting by designation.

1. Section 104(e) is entitled "Information gathering and access; action authorized, access to information, entry, inspection and samples; authority and samples, compliance orders; issuance and compliance, other authority, confidentiality of information; basis for withholding." The section provides mechanisms for the EPA to obtain information relevant to the release of hazardous substances and to the EPA's remedial efforts.

2. Section 107 of CERCLA imposes liability on broad categories of persons connected to cleanup sites, including owners and operators. 42 U.S.C. § 9607(a). The liability the section imposes is extensive and includes the costs of removal or remedial action, any other response costs, damages to natural resources, and the costs of any health assessment. Id.

3. Section 106 provides the authority for the EPA to take remedial actions and to issue cleanup orders to individuals. 42 U.S.C. § 9606.

4. Section 113(h), 42 U.S.C. § 9613(h), provides in part:

No federal court shall have jurisdiction under Federal law other than under section 1332 of Title 28 . . . to review any challenges to removal or remedial action selected under section 9604 of this title, or to review any order issued under section 9606(a) of this title, in any action except [listing five enumerated exceptions].

5. Under CERCLA, removal actions include "such actions as may be necessary to monitor, assess, and evaluate the release or threat of release of hazardous substances, the disposal of removed material, or the taking of such other actions as may be necessary to prevent, minimize, or mitigate damage to the public health or welfare. . . ." 42 U.S.C. § 9601(23) (definition of "remove" or "removal"). Removal actions also include "enforcement actions related thereto," i.e., related to the actions listed in § 9601(23).

6. As the Court of Appeals for the First Circuit has observed, "The five exceptions to the jurisdictional bar are all actions filed by the government or by a private citizen seeking to enforce or recover costs for the enforcement of CERCLA. . . ." Reardon v. United States, 947 F.2d 1509, 1512 [22 ELR 20292] (1st Cir. 1991). Section 9613(h) thus bars "preenforcement review" of certain claims. Id.

7. The EPA states:

Although the [Administrative Procedure Act] provides a general waiver of sovereign immunity for persons adversely affected by agency action, it is inapplicable where, as here, a substantive statute "preclude[s] judicial review." 5 U.S.C. § 701(a)(1). As discussed, because CERCLA Section 113(h) precludes judicial review of Ehrlich's claims, the APA's general waiver does not provide jurisdiction here.

Appllee's Br. at 22 n. 18. This argument fits within the framework of our analysis in Boarhead.

8. A facial challenge cannot succeed unless the plaintiff demonstrates that under no circumstances could the law be constitutional. United States v. Salerno, 481 U.S. 739, 745 (1987).