RSR Corp. v. Browner

No. 96-6186 (2d Cir. March 26, 1997)

The court holds that the Freedom of Information Act (FOIA) doesnot exempt from disclosure lead production-rate information contained in Federal Water Pollution Control Act (FWPCA) compliance reports that a lead smelting company submitted to the U.S. Environmental Protection Agency (EPA). The court first holds that the company's action to enjoin EPA's disclosure of information is an action under the Administrative Procedure Act, not under FOIA. The court next holds that the district court's use of the arbitrary and capricious standard was appropriate. Because reverse FOIA actions are adjudicatory in nature, de novo review is warranted only if the fact-finding procedures that EPA used were inadequate. The court notes that it would have been better if EPA had disclosed to the company the information-requesting party's argument that the information was ineligible for confidential treatment because it was "effluent data" under the FWPCA. Nevertheless, the court concludes that this deficiency did not render EPA's procedures inadequate under the law. The company should have recognized that the data at issue at least arguably fell under the definition of "effluent data," and made the appropriate arguments in its response to EPA. Further, the regulations do not require EPA to provide the requesting party's arguments to the business asserting confidentiality. The court next upholds EPA's conclusion that because the information was necessary to determine compliance with FWPCA pretreatment standards, it was "effluent data" subject to FOIA's disclosure requirements. Because the statutory standards are expressed in pounds of pollutant per million pounds of lead produced from smelting, it is obvious that production rate data would be necessary to determine the ratio as it is set forth in the FWPCA. The court next holds that the record is sufficient to uphold EPA's conclusion. It contains both EPA's and the requesting party's detailed explanations of the necessity of production rate data to a determination of compliance. The court next upholds the district court's ruling that discovery beyond the administrative record was unnecessary. The record is not incomplete; rather, it supports EPA's determination and provides a sufficient basis to evaluate the reasonableness of its decision. Last, the court holds that the company's plant is a point source subject to the pretreatment standards and the reporting requirements of the FWPCA. The company's argument that it is merely an indirect discharger into a publicly owned treatment works rather than a point source not only is contrary to the plain language of the statute, but also requires the court to ignore the large portion of the statute that details pretreatment standards and requirements for compliance.

[The district court's opinion is published at 26 ELR 21343.]

Counsel for Plaintiffs
David B. Weinberg
Weinberg, Bergeson & Neuman
1300 I St. NW, Washington DC 20005
(202) 962-8585

Counsel for Defendant
Patricia R. McCubbin
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

[27 ELR 20822]

Lay,^* J. (before McLaughlin and Calabresi, JJ.):

RSR Corporation and Revere Smelting and Refining Corporation (collectively RSR), sought review of a final determination by the [U.S.] Environmental Protection Agency (EPA)'s Regional Counsel, that RSR's monthly production rate information contained in compliance reports was not exempt as confidential business information under the Freedom of Information Act, 5 U.S.C. § 552 (FOIA). The district court granted summary judgment for the EPA; RSR now appeals that ruling. RSR asserts the district court erred (1) in failing to review the Regional Counsel's determination de novo; (2) in upholding the Regional Counsel's determination that RSR's Wallkill plant's monthly production data was necessary to determine the plant's pretreatment standards; (3) in finding that RSR's request for discovery was inappropriate; and (4) in upholding the Regional Counsel's determination that the Wallkill plant was a "point source" under the Clean Water Act (CWA), 33 U.S.C. §§ 1251 et seq.

Background

RSR operates a secondary lead smelting plant in Wallkill, New York, near the Wallkill River. The lead smelting process generates industrial wastewater, which subjects the plant to the requirements of the CWA. 33 U.S.C. § 1311(a). In order to be in compliance with the CWA, RSR pretreats its wastewater on-site, and then sends it to a publicly owned treatment works (POTWs) for further treatment and discharge into the Wallkill River. The CWA mandates that the EPA promulgate pretreatment standards applicable to plants which send wastewater to POTWs. 33 U.S.C. § 1317(b). These standards are expressed in pounds of pollutant allowed per million pounds of lead produced from smelting. See 40 C.F.R. § 421.135(b). The statute also requires these plants to provide periodic reports to the EPA detailing their compliance with the pretreatment standards. See 40 C.F.R. § 403.12(e)(1). RSR supplied compliance reports to the EPA regularly, but since they contained information regarding the rates at which RSR produces lead, RSR designated them as confidential.

These reports are subject to FOIA, which entitles members of the public to access records maintained by federal agencies, including, of course, compliance reports submitted to the EPA. 5 U.S.C. § 552(a)(3). FOIA contains nine exceptions to this general rule, the fourth of which exempts trade secrets and confidential business information from its disclosure requirements. 5 U.S.C. § 552(b)(4).

In March 1994, the EPA received a request under FOIA from Carpenter Environmental Associates (Carpenter) for the public release of RSR's CWA compliance reports.¹ Upon receipt of Carpenter's request, the EPA, noting the confidential marking on RSR's reports, informed RSR that the request had been made and requested further information as to why the reports fell under the confidential business information exception to FOIA. RSR responded that the monthly production rates contained in the reports are confidential business information because the rates are part of the methods and processes it uses to run its lead smelting operation, and thus "any competitor which obtains this information would have an unfair business advantage over RSR." First Am. Compl. at P 16.

The EPA asked Carpenter to submit arguments as well. Carpenter maintained that the monthly productionrates are "effluent data" under the CWA, which is data necessary to determine compliance with CWA pretreatment standards, and thus exempt from the confidential business information exception to FOIA. See 5 U.S.C. § 552(b)(4) (stating that FOIA does not apply to "trade secrets and commercial or financial information obtained from a person and privileged or confidential"); 40 C.F.R. § [2.302](e) (providing that "information which is effluent data or a standard or limitation is not eligible for confidential treatment").² The EPA did not disclose to RSR that Carpenter had made this argument, and thus RSR never argued to the EPA that the data was not effluent data.

The EPA's Regional Counsel determined that the data, while perhaps confidential business information, is effluent data and thus not protected from FOIA's disclosure requirements. RSR brought suit in the federal district court seeking review of the final determination of the EPA.

The district court³ granted summary judgment for the EPA, holding that RSR's monthly production rates were effluent data under the CWA, and therefore not exempt from release under FOIA. RSR appeals.

[27 ELR 20823]

Standard of Review

RSR challenges the district court's use of the arbitrary and capricious standard of review, arguing that the court should have instead conducted a de novo review.⁴ RSR overlooks that attempts to enjoin agency disclosure of information ("reverse-FOIA actions") stand in contrast to attempts to compel agency disclosure. The Supreme Court has determined that reverse-FOIA actions are not actions under FOIA, but rather are actions under the Administrative Procedure Act, 5 U.S.C. §§ 704 et seq. (APA). See Chrysler Corp. v. Brown, 441 U.S. 281, 290-94, 316-19 (1979) (holding that a private party seeking to block an agency's disclosure of information under FOIA has no private right of action under FOIA or the Trade Secrets Act, but must instead seek review under the APA). Therefore, the district court's review of such an action is governed by § 706(2) of the APA. Reliance Elec. v. Consumer Product Safety Comm'n, 924 F.2d 274, 277 (D.C.Cir. 1991) (citing 5 U.S.C. § 706(2)). This section of the APA mandates that a reviewing court employ an arbitrary and capricious standard of review. 5 U.S.C. § 706(2)(A).

However, in Citizens to Preserve Overton Park v. Volpe, the Supreme Court interpreted § 706(2)(F) of the APA, determining that "de novo review is authorized when the action is adjudicatory in nature and the agency factfinding procedures are inadequate." 401 U.S. 402, 415 [1 ELR 20110] (1971) (citing 5 U.S.C. § 706(2)(F)).⁵ While this circuit has never had occasion to consider the issue, other courts have held that reverse-FOIA actions are adjudicatory in nature. E.g., Pacific Architects & Eng'rs, Inc. v. United States Dept. of State, 906 F.2d 1345, 1348 (9th Cir. 1990); Acumenics Research & Tech. v. Department of Justice, 843 F.2d 800, 804 (4th Cir. 1988); National Org. for Women v. Social Sec. Admin., 736 F.2d 727, 737 &$ n.95 (D.C. Cir. 1984) (Robinson, C.J., concurring). In National Org. for Women, then-Chief Judge Robinson noted that the APA defines adjudicative facts as "facts pertaining to the parties and their businesses and activities." 736 F.2d at 737 n.95 (quoting 2 Kenneth Culp Davis, Administrative Law Treatise § 12:3 (2d ed. 1979)). Analyzing a reverse-FOIA action under this principle, he determined that "indubitably, the proceedings culminating in the administrative decisions to release company-submitted data were adjudicatory in character." 736 F.2d at 737. On this basis, we find the proceedings here are adjudicatory under the APA.

Under these circumstances, de novo review is only warranted if we determine the fact-finding procedures employed by the EPA were inadequate. Overton Park, 401 U.S. at 415. FOIA procedures require the EPA to provide RSR notice and an opportunity to comment if the EPA is considering disclosure of information that RSR has marked as confidential. 40 C.F.R. § 2.204(e). The EPA provided RSR such notice, and RSR responded, submitting arguments substantiating its confidentiality claim. Carpenter also submitted a letter articulating its belief that the data contained in RSR's reports is effluent data. Since RSR never saw Carpenter's arguments, it complains that it was "sandbagged" by the EPA's reliance on the effluent data issue for its ultimate determination.

It would have been better if the EPA had disclosed Carpenter's effluent data argument. Nevertheless, we conclude that this deficiency did not taint the EPA's procedures such that they were rendered inadequate under the law.

First, RSR's argument that it was somehow "sandbagged" ignores the fact that RSR had access to the relevant regulations, and could have discussed the effluent data issue itself. The regulations detail the definition of confidential business information which is exempt from FOIA, including the exemption from this definition for effluent data, also defined in the regulations. See 40 C.F.R. §§ 2.208, 2.302(e). RSR should have recognized that the data at issue at least arguably fell under the definition of effluent data, and made the appropriate arguments in its response to the EPA. That RSR did not address the effluent data issue is not the fault of or an inadequacy inherent in the EPA procedures.

Second, the regulations set forth in the CFR do not require the EPA to provide the requesting party's arguments to the business asserting confidentiality. See 40 C.F.R. §§ 2.203-2.302. The D.C. Circuit has upheld these same procedures as adequate against an Overton Park challenge. National Org. for Women, 736 F.2d at 740 n.124 ("Submitters of information to the [EPA] are sufficiently safeguarded from unfair and faulty factfinding by EPA's normal method of processing confidentiality claims.") (citing Washington Compressors, Inc. v. Costle, 662 F.2d 45, 54 n.48 (D.C. Cir. 1981)). RSR is correct in noting that it was not informed of a legal argument Carpenter had made, and to uphold these procedures means it was expected to anticipate this argument. It urges that requiring such anticipation is analogous to requiring a plaintiff in litigation to respond to all affirmative defenses in his or her complaint. Informal notice and comment procedures, however, such as those employed by the EPA, are not intended to mirror litigation. Cf. Florida Power & Light Co. v. Lorion, 470 U.S. 729, 744 [15 ELR 20321] (1985) ("Formal hearing before the agency is in no way necessary to the compilation of an agency record.") . The purpose of these procedures is to place facts before the EPA. Here, the EPA had all the facts relevant to make its determination. RSR is not entitled to a formal response to Carpenter's argument on the effluent data issue. We will not ascribe RSR's failure to anticipate the issue to an inadequacy in the EPA's procedures. As such, we find the EPA procedure adequate and conclude use of the arbitrary and capricious standard of review was appropriate in this case.

Under this standard, the district court could have set aside the EPA's determination if it was "not supported by substantial evidence" or was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." Mr. Sprout, Inc. v. United States, 8 F.3d 118, 123 (2d Cir. 1993). Since this matter comes to our court from a grant of summary judgment, we review the district court's application of this standard de novo. New York Dept. of Social Servs. v. Shalala, 21 F.3d 485, 491 (2d Cir. 1994).

Effluent Data

As earlier defined, see supra note 2, effluent data is that information necessary to determine whether RSR was in compliance with the pretreatment standards of the CWA. The EPA and the district court found that since the applicable standards are expressed in terms of allowed discharge per unit of production, the plant's production rates were necessary to determine CWA compliance.

RSR argues that the EPA's determination that RSR's confidential data is effluent data is arbitrary and capricious. According to RSR, just because the EPA states that the production data is necessary does not mean that the EPA actually used the data. It relies heavily upon RSR Corp. v. EPA, 588 F. Supp. 1251 [15 ELR 20129] (N.D. Tex. 1984). There, the court considered whether certain documents constituted "emission data," which is data that is necessary to determine compliance with the Clean Air Act. It determined that the administrative record in the case did not establish that the documents at issue were necessary to determine the amount of pollutants emitted by the facility, because the record did not contain evidence that the EPA had considered alternative methods of identifying or measuring pollutants. Id. at 1256. The court refused to defer to the agency's "bare conclusion" that the data at issue was the only way to make the calculations necessary to determine compliance. Id.

The court in RSR Corp. was required to evaluate whether a complex "material balance equation," which used RSR's data, was "the only practical way to determine emissions." Id. The case presented to this court is easier to digest. Here, the statutory standards are expressed in pounds of pollutant per million pounds of lead produced from smelting. 40 C.F.R. § 421.135(b). It is obvious even to those of us unfamiliar with complex mathematical equations that production rate data would be necessary to determine the ratio as it is set forth in the CWA. The regulations themselves recognize the necessity for such information; the definition of effluent data specifically encompasses data that describes "the manner or rate of operation of the source." 40 C.F.R. § 2.302(a)(2)(I)(B).

RSR argues that even if this conclusion is reasonable, the record is insufficient to uphold it. We disagree. The record contains both the [27 ELR 20824] EPA's and Carpenter's detailed explanations of the necessity of production rate data to a determination of compliance. And, as we have noted, such a conclusion is not a complicated one to draw. Thus, we hold that the district court made a rational decision when it upheld the EPA's determination that the data RSR marked as confidential on its CWA compliance reports was effluent data, subject to the disclosure requirements of FOIA.

Discovery

RSR also argues that summary judgment was premature because it had not taken discovery. It alleges that the administrative record is incomplete because it contains nothing about the EPA's actual use of RSR's data, and therefore that the record cannot support summary judgment here. RSR relies in part upon Dopico v. Goldschmidt, where this court reversed summary judgment as premature without further discovery. 687 F.2d 644, 654 (2d Cir. 1982). There, several "fundamental documents" were "conspicuously absent" from the record. Id. This court therefore concluded that the administrative record was incomplete, rendering review of agency action premature, because the court could not follow the path the agency took in making its decision. Id.

RSR's reliance on Dopico is misplaced. As the district court noted, RSR does "not allege that the administrative record before [the court] is incomplete in the sense that any part of the record presented to the EPA's Regional Counsel has not been put before [the court]." RSR Corp. v. Browner, 924 F. Supp. 504, 509 n.2 [26 ELR 21353] (S.D.N.Y. 1996). The administrative record in this case supports the EPA's determination and provides a sufficient basis to evaluate the reasonableness of its decision. The district court correctly ruled that discovery beyond the administrative record is unnecessary.

Point Source

Finally, RSR argues that its Wallkill plant is not a "point source," and thus is exempt from CWA reporting requirements, rendering its compliance reports not subject to FOIA at all. "Point source" is defined in the CWA as "any discernible, confined and discrete conveyance . . . from which pollutants are or may be discharged." 33 U.S.C. § 1362(14). A pollutant is "discharged" when a source engages in "any addition of any pollutant to navigable waters." 33 U.S.C. § 1362(12). According to RSR, it does not add pollutants to navigable waters, but rather discharges its pretreated water into a POTW, which treats the water further and discharges it into the Wallkill River, an undisputed navigable water. Thus, it argues RSR is merely an "indirect discharger," and not a point source.

According to this argument, RSR's compliance reports need not have been completed at all, because only point sources must fill out such reports.⁶ By this logic, any plant sending wastewater to a POTW would not have to fill out a report indicating compliance with pretreatment standards, or even be in compliance with these standards. Indeed, pretreatment standards themselves would be nullified, since they by their terms apply only to sources introducing pollutants into POTWs. See 33 U.S.C. § 1317(b), (c), (d). RSR's argument thus not only is contrary to the plain language of the statute, but also requires the court to ignore the large portion of the statute which details pretreatment standards and requirements for compliance. See 33 U.S.C. §§ 1314(g), 1317(b), (c), (d), 1318(a), 1319(f).

We hold that RSR is indeed a point source subject to the pretreatment standards and the reporting requirements of the CWA.⁷ See EPA v. City of Green Forest, 921 F.2d 1394, 1398 [21 ELR 20610] (8th Cir. 1990) (discussing three different types of point sources, including "sources that discharge their pollutants not into navigable waters but into the POTWs"); National Ass'n of Metal Finishers v. EPA, 719 F.2d 624, 633 [13 ELR 21042] (3d Cir. 1983) (noting that the CWA includes requirements for "'indirect dischargers,' point sources which discharged their pollutants not directly into navigable waters but into POTWs"), rev'd on other grounds sub nom. Chemical Mfrs. Ass'n v. National Resources Defense Council, Inc., 470 U.S. 116 [15 ELR 20230] (1985); cf. Dague v. City of Burlington, 935 F.2d 1343, 1354 [21 ELR 21133] (2d Cir. 1991) ("The definition of a point source is to be broadly interpreted."), rev'd in part on other grounds, 505 U.S. 557 (1991). But see Connecticut Fund for the Env't v. Upjohn Co., 660 F. Supp. 1397, 1417-18 [17 ELR 21137] (D.Conn.1987) (holding that discharge into a POTW is not discharge into navigable waters).

The judgment of the district court is AFFIRMED.

* Honorable Donald P. Lay, United States Circuit Judge for the Eighth Circuit, sitting by designation.

1. RSR claims that Carpenter had "no legitimate environmental concern or interest in the data," but wanted "to obtain commercial data with which to harm RSR." Appellant's Br. at 8.

2. The CWA defines effluent data as "information necessary to determine the. . . amount . . . of the pollutants which, under an applicable standard or limitation, the source was authorized to discharge (including, to the extent necessary for such purpose, a description of the manner or rate of operation of the source)." 40 C.F.R. § 2.302(a)(2)(1)(B).

3. The Honorable Denny Chin, United States District Judge for the Southern District of New York.

4. A standard FOIA action warrants de novo review by the federal courts. See A. Michael's Piano v. Federal Trade Comm'n, 18 F.3d 138, 143 (2d Cir. 1994) ("When a member of the public challenges an agency's assertion that a record being sought is exempt from disclosure," de novo review is appropriate.).

5. The Court also concluded that de novo review of an agency decision is authorized under § 706(2)(F) when "issues that were not before the agency are raised in a proceeding to enforce nonadjudicatory agency action." 401 U.S. at 415. This second circumstance is not presented here.

6. We note, however, as did the district court, that RSR did not make the argument that it was not a point source when it completed the compliance reports, or when it submitted its argument to the EPA concerning Carpenter's FOIA request.

7. RSR appears to be correct in its conclusion that indirect dischargers are exempt from the definition of point source under the CWA's National Pollutant Discharge Elimination System, requiring permits for the discharge of pollutants from any point source into the waters of the United States. 40 C.F.R. § 122.1(b). The definition of point source, under the permitting program, specifically excludes any indirect discharger. 40 C.F.R. § 122.2. That the Wallkill plant is excluded from the permit program, however, does not exclude it from the entire reach of pretreatment standards and compliance requirements. Again, such a result would render much of the CWA impotent.