A N E W S L E T T E R FO R MO R G A N LEWIS CLIENTS www.morganlewis.com
TOXIC TORT insurers with more than $1 million in previous IN THIS ISSUE
asbestos personal injury expenditures will be
The Senate Bill Proposes Trust Fund as assessed mandatory contributions to the fund.
Alternative to All Pending and Future Companies and insurers will each contribute a 1 TOXIC TORT
Asbestos Litigation Claims. When the minimum aggregate of $52 billion to the fund;
Senate returns from its August break, it may assets from existing asbestos trust funds,
have the task of considering S. 1125, the 1 CLEAN AIR ACT
estimated at more than $4 billion, will also be
“Fairness in Asbestos Injury Resolution Act of transferred into the fund. Individual company
2003,” (the “FAIR Act”). The bill’s sponsors contributions will initially be determined by 2 TOXIC SUBSTANCE
claim it will “create a fair and efficient system
to resolve claims of victims for bodily injury
tiered assignments based on the company’s CONTROL ACT
past asbestos personal injury expenditures and
caused by asbestos exposure” through the its revenues. The bill includes scheduled
establishment of a $108 billion privately step-down contribution reductions, so that a 2 WHAT’S NEW
funded, federally administered trust fund. company’s annual contribution will decrease
Asbestos claims steadily increased during over the fund’s 27-year life. Insurers will not
the 1980s and then exploded during the last be assigned to tiers; rather, their contributions 3 STATE LAW
decade, creating a backlog in the courts. In will be assessed by an Asbestos Insurer DEVELOPMENTS
light of the backlog, the United States Commission created by the bill. Direct
Supreme Court has repeatedly called for insurers will be required to contribute the
national legislation to manage the problems in entire amount they are assessed within three
the current asbestos litigation system. The years of the date of enactment.
FAIR Act answers that call by taking asbestos The FAIR Act faces a tough fight in the
injury claims out of the existing tort system Senate. Four Judiciary Committee members
and processing claims through the trust fund. who voted to report the bill favorably to the
The sponsors of the bill promise that it Senate recently stated that major changes
will introduce “uniformity and rationality to would have to be made to the bill before they Visit the award-winning Morgan Lewis
the system” by tying compensation to disease would vote for it on the Senate floor. See S. Environmental Law Information Resources
severity through the use of standardized Report No. 108-118, at 74-79. The insurance website at www.envinfo.com.
medical criteria. See S. Report No. 108-118, at industry, labor organizations, attorney groups
2. Thus, those who are the sickest will receive and manufacturer groups have all expressed
the highest awards from the fund. Payments plans to fight the bill in its current form. This newsletter is provided as a general informational
from the trust fund will be made over a Kimberly K. Heuer, Philadelphia, 215.963.4756, service to clients and friends of Morgan, Lewis
three- to four-year period; however, provisions e-mail: email@example.com. & Bockius LLP. It should not be construed as
allow for expedited payments in certain imparting legal advice on any specific matter.
circumstances. In exchange for this quick and CLEAN AIR ACT
almost-guaranteed compensation from the Copyright 2003
trust fund, potential plaintiffs will no longer Eleventh Circuit Holds EPA’s Morgan, Lewis & Bockius LLP. All Rights Reserved.
have the right to sue in court for Administrative Consent Orders in New Printed on Recycled Paper.
asbestos-related personal injuries: all pending Source Review Litigation Unconstitutional.
and future claims will be swept into the fund,
including all nonfinal settlements and
On June 24, 2003, the U.S. Court of Appeals
for the Eleventh Circuit issued a decision in the
SAVE THE DATE!
judgments that are subject to appeal when the new source review (NSR) enforcement
litigation involving the Tennessee Valley October 20, 2003 Teleseminar
trust fund is certified as fully operational. Getting the Deal Done:
Authority (TVA). Tennessee Valley Authority v.
The FAIR Act benefits companies and Whitman, No. 00-15936 (11th Cir.). EPA had Evaluating Insurance Assets and
insurers by providing economic stability as a issued administrative compliance orders Use of Specialty Insurance Products
result of certainty about liabilities related to For more information, please contact
(ACOs) to TVA in which EPA found that TVA had
asbestos personal injury suits. Companies and Heather Gaudin at 212.309.6353.
undertaken numerous projects in the past
MORGAN LEWIS ENVIRONMENTAL NEWS 1
without complying with NSR requirements. provisions were unlawful because they did decade ago.
After TVA challenged the validity of the not require that a source’s compliance Key changes address the reporting of
ACOs, EPA conducted a special certification state whether compliance was information pertaining to the widespread
administrative proceeding to review the “continuous or intermittent” as required by and previously unsuspected distribution of
orders. EPA subsequently issued a decision the statute, but only that a source indicate chemicals in environmental media,
upholding the ACOs in most respects, and whether the compliance methods used by emergency incidents of environmental
TVA challenged that decision in the the source for determining its compliance contamination, and the circumstances
Eleventh Circuit. status provide continuous or intermittent under which certain information need not
In its June 24 decision, the court ruled data. On March 1, 2001, EPA had be reported. The final policy revisions
that it lacks jurisdiction to review the ACOs published a direct final rule revising the clarify that information on environmental
issued to TVA by EPA because the ACOs are certification compliance provisions, but contamination found at or below
not final agency actions under the Clean later withdrew the direct final rule in light regulatory triggers is not reportable. Also,
Air Act. The court’s ruling that the ACOs of adverse comments. in an effort to avoid duplicative reporting,
are not final agency actions was based on The June 27 final rule inserts regulatory EPA now specifies that information need
its conclusion that the Act’s statutory language that requires the responsible not be reported under Section 8(e) if it
scheme regarding the issuance and review official to indicate in the certification must already be reported within certain
of ACOs is unconstitutional. The court whether compliance with each permit term time frame pursuant to other statutory
concluded that the statute accords ACOs and condition that is the basis of the authority, or if the information is derived
the “status of law,” i.e., the recipient of an certification was continuous or from specified source materials such as
ACO can be liable for civil or criminal intermittent during the period covered by scientific publications or available
penalties for violating an ACO. The court the certification. In response to industry databases. J e f f r e y N . H u r w i t z ,
further concluded, however, that this comments, the final rule deletes, as Philadelphia, 215.963.5700,
violates the Due Process Clause of the unnecessary, language from the prior rule e-mail: firstname.lastname@example.org.
Constitution because there is no that required the responsible official to
opportunity for a hearing or to otherwise
present evidence before an ACO is issued.
state whether the methods being used to
determine compliance provide continuous
Because it found that the ACOs were or intermittent data. Michael A. McCord, Morgan Lewis’ Los Angeles partners Tom
invalid as a constitutional matter, the Washington, 202.739.5431, e - m a i l : Meador and Tom Van Wyngarden, and
court ruled that the ACOs had no effect email@example.com. associates Deanne Miller and Leemore
and were therefore not final agency Libesman published “Anti-Toxins” in the
actions. In addition, the court specifically TOXIC SUBSTANCE July-August issue of the Los Angeles Lawyer.
stated that EPA must bring an action
against TVA in district court if it wishes to
CONTROL ACT The article suggests effective strategies
available to defense counsel litigating toxic
pursue the alleged NSR violations. The EPA Finalizes and Revises Key TSCA tort lawsuits, which are often brought
court did not express any opinion Guidance on Reporting of Substantial through generic complaints on behalf of
regarding the merits of EPA’s allegations Risk Information. Section 8(e) of TSCA hundreds of plaintiffs. The authors analyze
that TVA’s projects were not covered by the requires that any manufacturer, importer, the impact of recent decisions on available
regulatory exclusion for activities that processor or distributor of chemicals (or defenses and explain how to streamline the
constitute routine maintenance, mixtures) that obtains information discovery process through case management
repair, and replacement. Michael A. reasonably supporting the conclusion that orders. Read the complete article at
McCord, Washington, 202.739.5431, a substance presents a “substantial risk” of http://www.lacba.org/Files/LAL/Vol26No5/
e-mail: firstname.lastname@example.org. injury to health or the environment must 1422.pdf.
“immediately” report that information to
EPA Issues Final Rule on Title V EPA, unless the company has actual
Certifications. On June 27, 2003, EPA EDITORS:
knowledge that EPA has already been JOANNA ADAMS WALDRON 215.963.5361
published a final rule amending the informed. EPA interprets this provision to
compliance certification provisions in Parts email@example.com
be self-implementing, and has never issued
70 and 71 of the Title V operating permits JOHN J. MCALEESE, III 215.963.5094
regulations under TSCA Section 8(e).
program. 68 Fed. Reg. 38,518. Those firstname.lastname@example.org
Instead, the Agency has developed
provisions require that a responsible guidance documents interpreting this EDITORS-IN-CHIEF:
official at each source periodically certify statutory requirement, the principal one
compliance with the terms and conditions
GLEN R. STUART 215.963.5883
being its 1978 “Statement of email@example.com
of the source’s Title V permit. The final Interpretation and Enforcement Policy:
rule is intended to carry out a 1999 ERIC B. ROTHENBERG 212.309.6371
Notification of Substantial Risk.” On June firstname.lastname@example.org
decision of the U.S. Court of Appeals for 3, 2003, EPA published revisions to this
the District of Columbia which remanded policy document based on consideration of MORGAN LEWIS ENVIRONMENTAL
the compliance certification provisions to previously solicited public comments, LAW INFORMATION RESOURCES:
EPA. The court concluded that the completing a process begun more than a www.envinfo.com
2 MORGAN LEWIS ENVIRONMENTAL NEWS
STATE LAW Developments
Several other pending bills seek to NJDEP theorizes, will provide businesses
CALIFORNIA expand the powers of the SWRCB and an incentive to prevent recurrence of
strengthen the position of impacted these serious violations. To qualify for
Perchlorate Groundwater water suppliers. For example, S.B. 922 any penalty reductions, voluntary
Contamination Is a Focus for California (Soto) would settle one uncertainty disclosures must be made through
Legislature. In response to intense about SWRCB enforcement powers by NJDEP’s Self-Disclosure Report, forms
pressure from state officials expressly providing that a Cleanup and for which will be available on
and California congressional leaders Abatement Order from the SWRCB may the NJDEP website. The full proposed
r e g a r d i n g military involvement in require the recipient to provide or pay for rule can be accessed at
perchlorate contamination in California, alternative water to each affected public h t t p : / / w w w. s t a t e . n j . u s / d e p /
perchlorate contamination is the focus of water supplier or private well owner. S.B. enforcement/audit%20rule.pdf. Joanna
two bills making their way through the 543 (Machado) prohibits the operator of Adams Waldron, Philadelphia,
California Legislature. S.B. 1004 (Soto) a groundwater treatment system from 215.963.5361, e-mail: jwaldron@
and A.B. 826 (Jackson) require users of selling, transferring or assigning the morganlewis.com.
perchlorate to provide information on the water produced from the system until
use, spills and disposal of perchlorate replacement water has been provided to
and dictate certain pollution-prevention NEW YORK
every groundwater right holder injured by
management practices. S.B. 1004, which the contamination. A.B. 1020 (Laird) New York State’s Highest Court
passed the Senate and was heard in the would allow “a public water system to Limits Scope of Pollution Exclusion
Assembly, requires a person who causes bring a civil action to recover the costs Clause. An insurance company can not
or permits perchlorate to be associated with the investigation or use a pollution exclusion clause as the
discharged to waters of the state, remediation of the contaminated basis for denying coverage in a personal
or discharged or deposited where it may drinking water within four years of injury claim brought by a person
be discharged to any waters of the state, incurring those costs. ”Martin J. claiming to have suffered harm
to immediately notify the State Water (“Kelly”) McTigue, Los Angeles, from paint fumes. Plaintiff sued the
Resources Control Board (SWRCB). The 213.612.2575,e-mail: kmctigue@ insurance company (TIG) to secure
bill requires the SWRCB to establish a morganlewis.com. defense in a suit by a bystander
reporting threshold for perchlorate. claiming personal injury from exposure to
Owners of facilities that have stored more paint fumes. Belt Painting Corp. v. TIG
than 500 pounds of perchlorate in any NEW JERSEY Ins. Co., No. 86 (N.Y. July 1, 2003). TIG
calendar year since January 1, 1950 New Jersey Proposes Self-Disclosure claimed that personal injury damages
would have to disclose to the SWRCB Rule That Provides Penalty Reductions. from paint fumes were excluded under
certain information regarding that The New Jersey Department of the general pollution exclusion clause
storage. The SWRCB would compile and Environmental Protection (NJDEP) barring claims for “bodily injury” result-
make public the information. A.B. 826, proposed a rule on August 18, 2003 that ing from releases of pollutants, defined
entitled the “Perchlorate Contamination allows businesses to receive reduced in part as “any . . . fumes.” The court
Prevention Act,” requires the Department penalties for environmental violations found that adopting TIG’s
of Toxic Substances Control to adopt that are voluntarily discovered, disclosed interpretation would “infinitely enlarge
emergency regulations specifying man- to NJDEP within 21 days of discovery, the scope of the term ‘pollutants,’” and
agement practices for perchlorate, and adequately addressed. The proposed would contradict the common
including perchlorate inventories and rule is largely consistent with EPA’s Audit understanding and the reasonable expec-
establishing risk-management plans for Policy, which has been in effect since tations of a business person. The court
preventing releases of perchlorate. The 1995. However, unlike EPA’s Audit Policy, held that fumes from paint are not
bill would also require a “perchlorate New Jersey’s proposed rule does not offer environmental pollution, and are not
facility” to maintain unsaturated zone a 100% waiver of all penalties discovered unambiguously within the scope of the
monitoring, as well as groundwater mon- during a periodic auditing program. exclusion. Ora Sheinson, New York,
itoring if located within 1/2 mile of a Rather, the proposed rule establishes two 212.309.6673, e-mail: osheinson@
drinking water well. A.B. 826 has passed classes for violations based on actual or morganlewis.com.
the Assembly, and is now in committee in threatened harm to human health or the New York Brownfields Legislation
the Senate. Although the state’s budget environment. A business may qualify for Enacted. On September 16, 2003
crisis may impact the passage of these a 100% waiver for minor violations that approved the most important
bills that mandate new obligations on it self-discloses, but may qualify for only environmental legislation to be passed in
state agencies, the bills’ sponsors are a 75% penalty reduction for more serious the state in over a decade. Governor
optimistic that the bills will pass. violations. The harsher penalty policy,
MORGAN LEWIS ENVIRONMENTAL NEWS 3
STATE LAW Developments (continued)
Pataki is expected to sign the bill within lender exemption, an exemption for The latest advance final regulations
weeks. The legislation creates the state’s municipalities that involuntarily take title, establish criteria for defining whether
first statutory brownfields program and a fiduciary liability cap and an material constitutes safe fill and
refinances the State Superfund, which has innocent landowner defense. However, the standards for use and management of safe
been bankrupt since March 2001. The bill, bill does not include an exemption fill. PaDEP has attempted to harmonize
A.9120, passed the Assembly on June 20, for purchasers of contaminated property, the safe fill regulations with the
2003, in the early morning hours of the which was added to CERCLA in 2002. Land Recycling and Environmental
last legislative session day, but after the The bill provides financial assistance to Remediation Standards Act. Responding to
Senate had already adjourned. Senate municipalities and community-based criticism concerning the complexity of the
Majority Leader Joseph L. Bruno later organizations for the establishment of permitting scheme, PaDEP has
announced that the Senate would be “brownfield opportunity areas” and creates consolidated the types of permits required.
called back for a special session to pass $135 million in tax credits. Financing for While there are fewer permits in the
the measure. the bankrupt State Superfund program advance final regulations, there are more
The bill is the product of more than five would be provided by $60 million in fees siting, management, and recordkeeping
years of effort on the part of on business and industry and $60 million requirements relating to those permits.
the Legislature and working groups through borrowing by the State The public comment period closed on
composed of members of the Environmental Facilities Corporation. August 5, 2003. Maxine M. Woelfling,
governmental, business and John Rousakis, New York, 212.309.6082, Harrisburg, 717.237.4065, e-mail:
environmental communities. Perhaps the e-mail: email@example.com. firstname.lastname@example.org.
most significant point of contention was Challenge to PaDEP Comprehensive
whether to allow flexibility in cleanup PENNSYLVANIA Stormwater Policy Dismissed. The
levels based on future use, a common Pennsylvania Commonwealth Court
feature of brownfields legislation. The bill Advance Notice of Final Rulemaking dismissed a challenge by a homebuilder’s
declares that “the current, intended and for Safe Fill. PaDEP published an Advance association to PaDEP’s Comprehensive
reasonably anticipated future land uses of Notice of Final Rulemaking at 33 Pa. Stormwater Management Policy (Document
the site and its surroundings shall be Bulletin 2880 (June 21, 2003), No. 392-0300-002) and a related
considered” in selecting remedies for soil soliciting public comment on final agreement settling an appeal of a National
contamination. The bill then sets up a regulations concerning the use and Pollutant Discharge Elimination System
system of four “tracks,” based on the management of “safe fill” materials. “Safe (NPDES) stormwater discharge permit.
extent to which a site will be cleaned up fill” includes materials such as PaDEP agreed in the challenged settlement
and whether the future uses of the site and uncontaminated soils, brick, block, to impose certain conditions in NPDES
the groundwater under it will be restricted. concrete, and asphalt used to bring an stormwater discharge permits for the
While not every site will have to be area to grade that would otherwise be Valley Creek watershed. Home Builders
cleaned up to residential levels, the treated as municipal or residual waste by Ass’n of Chester and Del. Counties v.
technical feasibility and cost of PaDEP. The agency has been wrestling with Commonwealth, 828 A.2d 446 (Pa.
achieving a residential-level cleanup must policies and regulations for the Commw. Ct. July 9, 2003).
be evaluated at every site and the definition and use of such materials since
1996, and any final regulatory scheme will The court rejected the association’s
Department of Environmental Conservation claim that the policy was a regulation and
(DEC) retains the discretion to require such impact excavation, grading and
construction at new and brownfield that its use must be enjoined because it
a cleanup at any site it deems to be a was not adopted in accordance with the
“significant threat.” developments.
requirements of the Commonwealth
The bill establishes procedures for The Advance Notice was published in Documents Law, 45 P.S. §§ 1101 et seq.
determining eligibility of brownfield sites response to a recommendation by Because the policy “merely describes a
and conducting site investigation and the Independent Regulatory Review recommended approach for achieving
remedy selection, and, once a site is Commission (IRRC), the oversight agency compliance with the existing
cleaned up, for submitting a certification that determines whether regulations are requirements” and contains a disclaimer
and final engineering report. If satisfied, clear, necessary, reasonable, feasible, and that PaDEP does not intend to accord it
the state will issue a “Certificate of in the public interest. IRRC and the weight of a regulation, the court held
Completion,” which provides liability numerous other commenters had that it does not constitute a regulation.
protection from statutory and criticized the proposed regulations Maxine M. Woelfling, Harrisburg,
common-law causes of action. published at 32 Pa. Bulletin 564 (Feb. 2, 717.237.4065, e-mail: mwoelfling@
Significantly, the bill modifies the State 2002) as costly, complex, unnecessarily morganlewis.com.
Superfund to add liability protections burdensome, and contrary to the public
modeled on those in CERCLA, including a interest.
4 MORGAN LEWIS ENVIRONMENTAL NEWS