5th Circ. Says $20M Exxon Pollution Verdict Needs 2nd Look

By Juan Carlos Rodriguez 

Law360 (July 30, 2020, 6:42 PM EDT) -- Environmental groups saw their $20 million judgment against Exxon Mobil Corp. for air pollution violations at a Texas facility thrown into question Wednesday as the Fifth Circuit said a district court judge must more closely examine their claims.

The appeals court said there was a problem with the way U.S. District Judge David Hittner resolved the question of whether the Sierra Club and Environment Texas Citizen Lobby had standing to pursue their claims that Exxon was responsible for millions of dollars in damages from excess operations at its Baytown, Texas, refinery, chemical plant and olefins plant. In 2017, the judge penalized Exxon $19.95 million, and the company appealed.

On remand, the appeals court asked Judge Hittner to delve deeper into whether the plaintiffs can show whether the injuries to their members are sufficiently traceable to Exxon's conduct. "The district court outlined in general terms how Exxon's violations had injured plaintiffs' members; it did not assess traceability as to each violation," Circuit Judge Gregg Costa wrote. "That is necessary because it is not apparent that all of Exxon's violations were capable of causing the types of injuries plaintiffs' members suffered."

The decision appears to raise the bar for plaintiffs to prove standing in some Clean Air Act citizen suits in the Fifth Circuit. Under the statute, plaintiffs can make claims in citizen suits for repeated violations of an emissions standard, and there is no limit on how many violations a plaintiff may include in one claim. In this case, the plaintiffs are seeking relief for 16,386 days of alleged violations.

In past cases, Judge Costa said courts have held that plaintiffs must prove standing by showing traceability for each claim, but not every single violation. He cited the Supreme Court's 2000 decision in Friends of the Earth Inc. v. Laidlaw Environmental Services and the Fifth Circuit's 2000 decision in Texans United for a Safe Economy Education Fund v. Crown Central Petroleum Corp. as examples.

"But these other cases do not involve the number and variety of violations that this case does (24 different pollutants)," Judge Costa said. "That explains why in this case, unlike in Laidlaw and Texans United, the standing inquiry is not one-size-fits-all." He said plaintiffs in citizen suits are usually based on injuries from just one or two pollutants that only exceed one or two emissions standards, and all "in the same manner."

On remand, Judge Hittner must more closely evaluate some — not all — of the days of violations. The panel said the plaintiffs must show that some individual violations actually caused or contributed to the alleged injuries, which include health problems and interference with use of the surrounding environment. The green groups must also show that there is a "specific geographic or other causative nexus" linking a violation to its effect on their members.

The panel found that some swaths of violations don't need a deep analysis: those that "created flaring, smoke, or haze; released pollutants with chemical odors; or released pollutants that cause respiratory or allergy-like symptoms." And with regard to the geographic nexus, the panel said "there is no need for 'scientific certainty.'"

Circuit Judges W. Eugene Davis and Andrew S. Oldham joined Judge Costa in the judgment, but Judge Oldham filed a partial dissent because he said the courts' traceability standards are "a mess" and said there is no way for a panel to make proper sense of the existing precedents. He said the case should go to en banc review at the Fifth Circuit.

Judge Oldham said courts should begin to impose a "but-for" standard of proof for plaintiffs to meet the traceability hurdle. That would be a stronger standard that currently exists.

Josh Kratka, a senior attorney at the National Environmental Law Center who represents the plaintiffs, downplayed the importance of the panel's stance on traceability.

"We do not view the Fifth Circuit opinion as in any way changing the legal landscape for environmental citizen suits regarding standing," Kratka said Thursday.

He noted that the panel made clear that it altered the normal standard only because this was a "highly unusual" case, given the very large number of violations and the many different pollutants and industrial processes involved.

The environmental groups filed suit in December 2010, claiming that the Baytown facility emitted millions of pounds of pollutants into the air over the past several years, well in excess of legal limits. They originally sought $642 million from Exxon.

Some of the pollutants — including sulfur dioxide, carbon monoxide, nitrogen oxides and benzene — are carcinogenic, cause or aggravate respiratory illnesses, or contribute to the formation of smog, according to the suit.

While Exxon succeeded in getting a remand to reassess some of the claims, it failed to convince the appeals court on several other of its arguments. The company said the plaintiffs lacked standing because they couldn't show that the monetary penalty would sufficiently redress the environmentalists' alleged injuries. According to Exxon, its violations "are undeterrable because they do not arise from a single 'root cause,'" the panel noted.

"There is a glaring problem with the idea that Exxon could not have reduced its emissions violations after the filing of this suit: Exxon has done just that," the panel said. "Exxon steadily and substantially reduced the rate and magnitude of emissions violations throughout the claims period … Even if Exxon cannot address every 'root cause' of its emissions violations, it has implemented measures that drastically reduced those violations."

The panel also instructed Judge Hittner to review some of the groups' claims to see if they fit under Exxon's "Act of God" defense that the company says covers pollution exceedances that occurred during Hurricane Ike.

Texas' Clean Air Act State Implementation Plan also includes an affirmative no-fault defense for some emissions, such as if a company can meet certain criteria that generally show it "was not at fault and that the violation was not particularly serious."

Exxon tried to claim access to that defense, but the panel upheld Judge Hittner's finding that the company failed to meet its burden.

This is the second time the case has made it to the Fifth Circuit.

The first time, the appeals court revived the groups' suit after Judge Hittner initially awarded nothing to the groups after trial. The circuit said the judge abused his discretion when considering some of the factors in the Clean Air Act's penalties and incorrectly analyzed some of the groups' claims. On remand, the groups reduced their requested amount of penalties from $642 million to about $40 million.

Exxon spokesperson Todd Spitler said the company agrees with the court's decision to vacate the penalty award.

Circuit Judges W. Eugene Davis, Gregg J. Costa and Andrew S. Oldham sat on the panel for the Fifth Circuit.

The Sierra Club is represented by Philip H. Hilder of Hilder & Associates PC and Joshua R. Kratka of the National Environmental Law Center.

Exxon is represented by Russell S. Post, Eric J.R. Nichols, Fields Alexander, Robert D. Daniel and Bryon A. Rice of Beck Redden LLP and Albert R. Axe and Keith A. Courtney of Winstead PC.

The case is Environment Texas Citizen Lobby Inc. et al. v. ExxonMobil Corp. et al., case number 17-20545, in the U.S. Court of Appeals for the Fifth Circuit.

--Editing by Bruce Goldman.

5th Circ. Says $20M Exxon Pollution Verdict Needs 2nd Look