Bowfin Keycon Holdings, LLC v. Pa. Dep't of Envtl. Prot.
| Decision Date | 08 September 2022 |
| Docket Number | 89 MAP 2022 |
| Parties | BOWFIN KEYCON HOLDINGS, LLC; Chief Power Finance II, LLC ; Chief Power Transfer Parent, LLC ; KeyCon Power Holdings, LLC ; Genon Holdings, Inc. ; Pennsylvania Coal Alliance; United Mine Workers of America; International Brotherhood of Electrical Workers; and International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers, Appellants v. PENNSYLVANIA DEPARTMENT OF ENVIRONMENTAL PROTECTION and Pennsylvania Environmental Quality Board, Appellees |
| Court | Pennsylvania Supreme Court |
AND NOW, this 8th day of September, 2022, Petitioners’/Appellants’ Application for Order Modifying Injunction During Pendency of Appeal is hereby DENIED . For purposes of Pa.R.Civ.P. 1531(b)(1), the bond amount of $100 million set by the Commonwealth Court's order of July 8, 2022 is to be filed with the Commonwealth Court no later than Thursday, September 15, 2022. The Application for Leave Nunc Pro Tunc to File an Amici Curiae Brief (1) in Support of Respondents’/Appellees’ Response Per August 18 Order or (2) in Support of Appellees’ Answer to Appellants’ Application for Order Modifying Injunction During Pendency of Appeal is DENIED.
Justice Mundy files a dissenting statement in which Justice Brobson joins.
Justice Brobson files a dissenting statement in which Justice Mundy joins.
Appellants, the plaintiffs in the underlying action, obtained relief in the form of a preliminary injunction. That relief became all but illusory when the Commonwealth Court imposed a bond requirement in the immense amount of $100 million. To ensure that access to justice remains more than a theoretical possibility, I would remand for imposition of a nominal bond. Hence, I respectfully dissent from this Court's present denial of Appellants’ request for an order modifying the injunction.
The background in this matter is spelled out in detail in the Commonwealth Court's opinion granting the preliminary injunction, see Bowfin KeyCon Holdings, LLC v. DEP , No. 247 M.D. 2022, slip op . at 1-10 , and it need not be repeated in detail here. Very briefly, as a purported exercise of its rulemaking power, the Department of Environmental Protection (DEP) enacted a major change in policy which will significantly impact electricity producers and consumers in this Commonwealth.1 Under the policy change, Pennsylvania is to join the Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade initiative that presently includes eleven New England and Mid-Atlantic states. Through quarterly auctions, carbon-dioxide allowances will be purchased by electric utility steam generating units of at least 25 megawatts serving generators that produce electricity for sale. These auctions will have a dramatic effect on DEP's budget. DEP's total budget for the most recent fiscal year was approximately $169 million, but with the inclusion of the carbon-dioxide auction proceeds, DEP expects to receive approximately $443 million for the 2022-2023 fiscal year, an increase of $274 million, or 162%.2
Appellants argued that the rulemaking amounted to an unconstitutional usurpation of the General Assembly's power to levy taxes. The Commonwealth Court determined Appellants had raised a substantial legal question, as required for the issuance of a preliminary injunction. See generally Marcellus Shale Coal. v. DEP , 646 Pa. 482, 185 A.3d 985, 986 n.4 (2018) (). It noted, inter alia , that, per the rulemaking record, the cost of administering and overseeing the carbon-dioxide trading program would only consume 6% of the proceeds from the auctions, making it difficult to characterize those proceeds as a fee. The court observed, as well, that it is unclear how DEP is authorized to obtain auction proceeds for Pennsylvania allowances purchased by non-Pennsylvania sources not subject to DEP's regulatory authority which are not tethered to carbon-dioxide emissions in Pennsylvania. See Bowfin KeyCon , No. 247 M.D. 2022, slip op . at 25-28. Thus, the court enjoined DEP from implementing, administering, or enforcing the rulemaking until further order of the court. See id . at 33. Contemporaneous with its order granting preliminary injunctive relief, the court issued a separate order pursuant to civil rule 1531(b)(1) requiring Appellants to post a bond in the amount of $100 million.3
Appellants sought reconsideration of that amount, asserting it would effectively prevent the injunction from safeguarding the interests of Appellants it was designed to protect; it did not reflect actual damages occasioned by the injunction; it was excessive and unnecessary under the circumstances; it effectively denied access to judicial review and injunctive relief; and it should be reduced to a nominal amount. Cf. People v. Tahoe Reg'l Planning Agency , 766 F.2d 1319, 1325 (9th Cir. 1985) ().
The Commonwealth Court denied reconsideration and, at this Court's direction, see Bowfin KeyCon Holdings, LLC v. DEP , No. 89 MAP 2022, Order (Pa. Aug. 18, 2022), it eventually issued an opinion in support of the bond amount. Essentially, the court explained the bond requirement is designed to compensate the defendant in the event the preliminary injunction is later determined to have been improperly granted, and the bond here fulfills that function. In terms of the $100 million figure, the court stated it roughly covers the monetary benefits DEP would have reaped absent the injunction from the September 2022 RGGI auction of carbon-dioxide allowances pegged to emissions from Appellants’ generating stations. See Bowfin KeyCon Holdings, LLC v. DEP , No. 247 M.D. 2022, slip op . at 1-7 . Thus, although DEP would not lose any actual funds, the court fashioned the bond to cover DEP's opportunity costs. Although Appellants pointed out that DEP, in fact, could not possibly have participated in that auction because it had been enjoined from doing so in the companion case of Ziadeh v. Pennsylvania Legislative Reference Bureau , No. 41 M.D. 2022 (Pa. Cmwlth.)4 – and thus, the opportunity cost was fictitious – the court summarily dismissed that concern as having "no relevance" because the Id . at 8. Finally, the court rejected Appellants’ claim that posting such a large bond was infeasible, stating Appellants had failed to supply evidence during the hearing on the merits of the preliminary injunction concerning how large of a bond they would be able to supply, and they did not request a hearing on the issue when they asked for reconsideration. See id . at 9.
Reviewing courts should disfavor extraordinarily high bond amounts. The trial court has balanced the harms and determined the damage from not enjoining the challenged conduct is greater than that from enjoining it, the harm to the party seeking the injunction is irreparable, and the injunction will not adversely affect the public interest. See Marcellus Shale Coal. , 185 A.3d at 986 n.4. I am also particularly troubled by the Commonwealth Court's reasoning in the present case, and its determination that the bond must cover the opportunity cost the preliminary injunction imposes upon the government, even where the forgone opportunity derives from a program as to which a substantial question has been raised concerning its legality – and where the cost will not, in fact, be incurred in any event. Because DEP is prevented from participating in the September 2022 auction by virtue of the injunction in Ziadeh , DEP's opportunity costs do not arise "by reason of granting the injunction" in the present case for purposes of Rule 1531(b)(1). See supra note 3.
Even if they did, I would not be convinced DEP would suffer irreparable harm from having to delay its participation in RGGI auctions until such time as the legality of its entry into that scheme can be fully tested in the courts. DEP is not a private, profit-seeking entity; like all government agencies, it is an arm of the state tasked with fulfilling certain functions in the public interest with the public funds that have been allocated for its use.5 Under the Commonwealth Court's reasoning, moreover, perverse incentives are created: the government can allocate to itself ever increasing sums of money through programs that are of questionable legality, and the greater the sums involved the more difficult it will be for anyone to effectively challenge the conduct. When the ship of state multiplies its speed, courts should not make the steering mechanism unduly difficult to use.
More generally, when assessing the propriety of the government's decision to embark upon a program that will garner benefits to itself in perpetuity, if the program's validity is suspect, courts should be scrupulous to ensure that litigation testing the legality of the state's actions can go forward in an effective fashion. If the state's ability to enter upon that course of action is temporarily delayed, causing it to incur short-term opportunity costs, that is simply the price society is willing to pay to ensure the government acts within the bounds of the law. Ultimately, it is the people who are harmed when the government takes actions benefitting itself which are later determined to be unlawful. We may assume they are willing to incur a modest opportunity cost in each case where the propriety of the state's conduct may reasonably be questioned to ensure they do not lose out in the general run of cases.
I would hold that the $100 million bond amount represents an abuse of discretion and remand for entry of a nominal bond.
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Bowfin Keycon Holdings, LLC v. Pa. Dep't of Envtl. Prot.
...in the quarterly auctions involved until such time as the legality of its actions could be tested in the courts. See id. at 693 (Brobson, J., dissenting). the preliminary injunction would at most impose on the agency a temporary opportunity cost which is "the price society is willing to pay......