When Congress passed the Superfund Act in 1980, lawmakers wanted to make it tough on companies that did not cooperate in cleaning up hazardous waste sites. So they wrote into the legislation a provision that lets courts impose punitive damages -- up to three times the cost of the actual cleanup -- on polluters who, "without sufficient cause," do not comply with orders to remedy the problem.
Ever since, lawyers have debated just what that potentially onerous punishment really means -- and whether it can be enforced. Last year, the U.S. District Court in California declared the provision unconstitutional. And now, in what seems to be only the second ruling directly on the point, the U.S. District Court in St. Paul, Minn., says the provision passes constitutional muster, but only by interpreting it in a way that gives companies a lot more leeway than they feared they might have.
The constitutional question has to do with whether the company being punished by the extra damage penalty has been given a fair chance to air any disagreement it may have with the underlying cleanup order from the Environmental Protection Agency. For instance, in the case at the St. Paul court, the company thought that the remedial plan insisted on by the government was far too expensive. EPA wanted Reilly Tar & Chemical Co. to build a granular activated carbon treatment system to purify the underground water system used by St. Louis Park, Minn., a system contaminated by 55 years of chemical waste disposal from Reilly's creosote plant. The company said there were much cheaper ways of ensuring a safe water supply.
The basic rule on how to measure the fairness of government enforcement was laid down by a 1908 Supreme Court decision in another Minnesota dispute.
Then, the justices threw out a state law that told railroads they could not charge more than set rates, and imposed stiff fines on the lines that ignored the ceilings -- as well as threatening jail terms for the company directors and officers. Justice Rufus Peckham explained that when the only way for a company to test the legitimacy of the rates was to charge more, be hauled into court and face penalties that severe if it was wrong, it was being denied the rights guaranteed it by the Constitution.
Reilly Tar argued that the same standard applied to the Superfund Act, because the only way it could test the legitimacy of the EPA order was to ignore it, be hauled into court and face treble damages. Not so, Judge Paul A. Magnuson ruled on April 5 in U.S. v. Reilly Tar. He gave a much broader meaning to the words "without sufficient cause" than did the Los Angeles court.
If the company really thought that the EPA cleanup plan was inappropriate -- and costing too much can be a reason for inappropriateness -- that was "sufficient cause" to resist the order, he decreed. And even if the company eventually failed to convince the court that the EPA was wrong, mounting a "good-faith challenge" would not subject it to treble damages, he assured the litigants.
* There's no constitutional problem with Montgomery County's hotel tax. The National Institutes of Health thought there was, and convinced a trial court judge that it should not have to pay the tax. The issue came up because NIH rents rooms for some outpatients at the United Inn of America on Wisconsin Avenue in Bethesda, and objected to the tax, pointing to the constitutional provision forbidding the states (or their subdivisions) to tax agencies of the federal government.
But the U.S. Court of Appeals in Richmond overturned the initial ruling. As the appellate judges see it, the tax, even though paid by NIH, is really imposed on the patients who stay a few days at the motel, and they are not agencies of the federal government.
U.S. v. Montgomery County, May 9
* It is illegal to refuse to hire an applicant because he or she is too fat. The ruling, from the New York Court of Appeals, is based on that state's anti-discrimination laws, but the reasoning is likely to influence decisions in other jurisdictions as well, causing companies to rethink their medical examination standards. The dispute involved a computer programmer who was offered a job, and then had the offer withdrawn after she went through a pre-hire physical. The sole problem: she was 100 pounds overweight, which, corporate doctors believed, indicated she was likely to develop other health problems in the future and thereby run up the cost of the company's disability and life insurance premiums. That meant her obesity was a handicap, the justices ruled, making discrimination on those grounds unlawful.
McDermott v. Xerox, May 7
* The Internal Revenue Service is entitled to use a crystal ball. The U.S. Court of Appeals in Cincinnati okayed an attempt by the tax collectors to look into the future in assessing the value of farmland left as an inheritance. Although the property may be worth only about $330,000 under its current zoning for agricultural use, the judges said, it is reasonable in figuring taxes due to triple to reflect the jump in value that is likely to come when a proposed Interstate Highway Interchange is built nearby and pressure to construct housing on the land intensifies. Already, nearby land is being sold at prices that reflect the expected future change in zoning. Tax evaluations are not supposed to be based on speculation, but the appellate judges reasoned that increasing urbanization in the area is so likely that it represents real value, not just chancy hopes of gain.
Morris v. Commissioner, May 20