The federal government can be sued in federal courts only if Congress says it can. It is, however, not always clear just what Congress is saying.

Environmental law has proved to be one of the most contentious areas for trying to determine when and how federal agencies can be sued, with the states taking an aggressive position that Washington has to clean up its wastes just like any other polluter.

In 1976, the U.S. Supreme Court said the states were taking too expansive a view of the provisions of the Clean Water Act, which obligated federal agencies to obey its standards.

The justices said that although federal facilities were subject to substantive pollution limits, Congress had not waived the government's inherent protection against suits for "procedural" matters under the statute. Congress responded by amending the law.

Now the states and the federal government are at loggerheads over what the amendments mean.

A June 11 ruling from the U.S. Court of Appeals in Cincinnati gave the states a substantial victory.

On three separate issues, the judicial panel, hearing charges from Ohio that the Department of Energy unlawfully polluted surface and ground water with hazardous waste from its uranium processing plant at Fernald, Ohio, sided with the state.

The 2-1 ruling in Ohio v. DOE holds:

The 1977 amendments to the Clean Water Act give the states the power to collect monetary civil penalties from Washington, not just order the government to meet anti-pollution standards.

The states can also sue the federal government under their own water pollution laws, because those laws are so closely coordinated with the Clean Water Act that they become part of a combined enforcement effort.

The states can also sue under the provisions of the Resource Conservation and Recovery Act that allow citizen suits because the state is a "person" like any other potential plaintiff.

The Bush administration staunchly opposed this reading of the environmental laws, and the issue may well land back in the U.S. Supreme Court.

In other cases, courts ruled that:

A corporation need not tell its stockholders what a merger offer is worth if it's anybody's guess.

Some Genentech Inc. shareholders objected to the proxy material for the proposed merger with Roche Holdings Inc., saying it contained material omissions because there was no estimate of the dollar value of the compensation, which included a new issue of common stock to be redeemed in the future.

But the Delaware Chancery Court found that such future values were "inherently unpredictable" and so the company had no obligation to indulge in what would be pure speculation.

(In re Genentech Shareholders Litigation, June 6)

In deciding whether a copyright has been infringed, courts must consider the sophistication of the target audience.

The U.S. Court of Appeals in Richmond ruled that the standard measure of whether an alleged copy is unlawful -- whether it is "substantially similar" to a copyrighted work -- cannot be applied in the abstract.

It may be all right to come very close to copying if the end product is aimed at buyers with such specialized knowledge that they are not likely to be fooled by a copy-cat product, the judges decreed.

(Dawson v. Hinshaw Music, June 7)

A state can give a tax break to its own workers that it does not give to employees of private enterprises.

The U.S. Supreme Court last year said that a state could not exempt from income taxes pensions paid to its former workers and tax the pensions of federal civil service retirees. But the Missouri Supreme Court says there is no reason to carry that reasoning over to retirees from private firms.

The state has rational reasons to give the tax break to government workers -- to attract good people in the first place and persuade them to stay in Missouri after retirement -- and so the discriminationagainst those in the private sector is justified, the justices said.

(Schnorbus v. Director of Revenue, June 19)

What's sexual harassment under one law may not be under another.

The Idaho Supreme Court refused to apply the Equal Employment Opportunity Commission's guidelines on sexual harassment -- issued for use in cases alleging bias in hiring, firing or promotion -- in an unemployment compensation case.

The justices denied payments to a woman who said she quit her job because of improper touching and sexual innuendoes from her boss, ruling that they did not add up to a good cause to leave. They found it wrong to try to take standards adopted for one situation and use them in another.

Moreover, the opinion points out, because the woman worked for a company with fewer than 15 employees, the federal EEO law that triggered the sexual harassment guidelines would not cover the firm in any circumstances.

(Jensen v. Siemsen, June 14)

Daniel B. Moskowitz is a Washington editor for Business Week newsletters.