Esso Standard Oil Co. v. Lopez-Freytes

• Citation: 522 F.3d 136
• Decision Date: 10 April 2008
• Docket Number: No. 07-1218.,07-1218.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)
• Parties: ESSO STANDARD OIL CO. (Puerto Rico), Plaintiff, Appellee, v. Carlos W. LÓPEZ-FREYTES, in his personal and official capacities as President of the Puerto Rico Environmental Quality Board; Flor Del Valle-López, in her official capacity as Associate Member of the Puerto Rico Environmental Quality Board; Angel Berríos-Silvestre, in his official capacity as Associate Member of the Puerto Rico Environmental Quality Board; Norman Velázquez-Torres, in his official capacity as Attorney of the Puerto Rico Environmental Quality Board, Defendants, Appellants.

522 F.3d 136

ESSO STANDARD OIL CO. (Puerto Rico), Plaintiff, Appellee, v. Carlos W. LÓPEZ-FREYTES, in his personal and official capacities as President of the Puerto Rico Environmental Quality Board; Flor Del Valle-López, in her official capacity as Associate Member of the Puerto Rico Environmental Quality Board;

Angel Berríos-Silvestre, in his official capacity as Associate Member of the Puerto Rico Environmental Quality Board; Norman Velázquez-Torres, in his official capacity as Attorney of the Puerto Rico Environmental Quality Board, Defendants, Appellants.

No. 07-1218.

United States Court of Appeals, First Circuit.

Heard November 8, 2007.

Decided April 10, 2008.

Salvador J. Antonetti-Stutts, Solicitor General, Department of Justice, with

whom Luis José Torres-Asencio, Assistant Solicitor General, Eduardo A. Vera-Ramirez, Eileen Landrón-Guardiola, Luis A. Rodríguez-Muñoz, and Landrón & Vera, LLP were on brief, for appellants.

Charles G. Cole, with whom Alice E. Loughran, Steptoe & Johnson LLP, Lawrence P. Riff, Jason Levin, John F. Nevares, and John F. Nevares & Assoc., PSC were on brief, for appellee.

Before TORRUELLA, Circuit Judge, BALDOCK,^* Senior Circuit Judge, and LIPEZ, Circuit Judge.

TORRUELLA, Circuit Judge.

This is an appeal from the district court's issuance of an order permanently enjoining the defendants — several members and officials of the Puerto Rico Environmental Quality Board ("EQB") — from imposing a $76 million fine on the plaintiff, Esso Standard Oil Company ("Esso"). On appeal, the defendants argue that the district court should have abstained from exercising jurisdiction pursuant to the Younger abstention doctrine and, in any event, the court erred in concluding that there existed bias necessitating the imposition of the injunction. After careful consideration, we affirm the district court's order.

I. Background

This case comes to us on appeal for the second time.¹ Given that the background facts are outlined extensively in our prior opinion, see Esso Standard Oil Co. v. Cotto, 389 F.3d 212, 213-18 (1st Cir.2004) ("Esso I"), we need not repeat them here in great detail. In brief, the case involves an underground fuel storage system at a service station in Barranquitas, Puerto Rico. Beginning in 1979, Esso had leased storage tanks and other fuel supplies to the station and in 1991 replaced the entire underground storage system. Between August 1998 and October 1999, the EQB issued three orders directing Esso to test the fuel storage system. Those investigations revealed and recovered about 550 gallons of spilled fuel.

Despite Esso's efforts to comply with the EQB's directives, the EQB issued a show cause order on May 21, 2001, proposing a $76 million fine against Esso for its failure to notify the EQB upon initial discovery of the fuel leakage and its failure to timely investigate, clean up, and remedy the harm.² In September 2002, the EQB initiated hearings on this proposed penalty against Esso. The hearings were marked by contentious debates and allegations of severe bias. See Esso I, 389 F.3d at 215. Esso filed numerous motions, including two motions seeking dismissal of the proceedings.³

In March 2004, Esso filed suit in federal court, seeking a preliminary injunction to prevent the EQB from imposing the massive fine on the ground that the proceedings were so plagued by conflict and bias that they violated Esso's due process rights. Although the district court made several findings of bias, it dismissed the case for lack of jurisdiction pursuant to the Younger abstention doctrine. On appeal, we expressed serious concern with the undisputed evidence of structural and actual bias in the case. Esso I, 389 F.3d at 218-19. We concluded, however, that despite this evidence of bias, federal intervention was inappropriate under the abstention exception recognized in Gibson v. Berryhill, 411 U.S. 564, 93 S.Ct. 1689, 36 L.Ed.2d 488 (1973), because Esso had not yet demonstrated irreparable harm. Esso I, 389 F.3d at 221-25. Specifically, we found that Esso could seek interlocutory relief from the Puerto Rico courts,⁴ and we affirmed the district court's decision to abstain.

A. Interlocutory Appeals

Soon after the issuance of our opinion, Esso filed a petition for interlocutory review with the Puerto Rico Court of Appeals, asserting jurisdiction pursuant to MCS Insurer and arguing that the EQB administrative proceedings are fatally biased and violate its due process rights. The following day, the Puerto Rico Court of Appeals dismissed the appeal and denied the accompanying request to stay the EQB's administrative proceedings. It rejected the contention that MCS Insurer created an exception to the statutory administrative exhaustion requirements applicable in this case: "We resolve that insofar as the administrative process has not concluded and the `total denial' object of this appeal is not a final decision of the agency, but an `implicit' interlocutory resolution, we are barred from addressing the same." Esso Standard Oil Co. v. Junta Be Calidad Ambiental, Case No. OA-99-AG-26 & OA-99-AG-109, 2004 WL 3199104, at *5 (P.R. Cir. Dec. 3, 2004) ("Esso, P.R. Court of Appeals"); see also P.R. Laws Ann. tit. 3, § 2172. The appeal was dismissed for lack of jurisdiction. Id.

Three days later, Esso petitioned for writ of certiorari to the Puerto Rico Supreme Court, asserting that the Puerto Rico Court of Appeals had erroneously declared that it lacked jurisdiction to review Esso's due process allegations. The following day, the Puerto Rico Supreme Court summarily denied the requested writ, stating: "As to the petition for certiorari and the motion in aid of jurisdiction, [it is] denied at this stage of the proceedings." Esso Standard Oil Co. v. P.R. Env't Quality Bd., Case No. CC-2004-1155 (P.R. Dec. 7, 2004) ("Esso, P.R. Supreme Court").

Esso then returned here and filed for panel rehearing, arguing that it was now able to demonstrate irreparable harm because the Supreme Court of Puerto Rico had held that interlocutory appeal was unavailable to Esso. Although we agreed that the intervening developments had a significant impact upon a determination of the appropriateness of federal intervention, we concluded that the appropriate procedure was for Esso to renew its request for a preliminary injunction in federal district court.

B. Renewed Motion for Preliminary Injunction

On February 4, 2005, Esso filed a renewed and unopposed motion for preliminary injunction in the district court. In accordance with our decision in Esso I, the district court focused on the issue of whether Esso was able to show irreparable harm in the absence of federal intervention. The court concluded that the denials by the Puerto Rico Court of Appeals and Supreme Court provided "unquestionable proof that as a matter of both, fact and law, the only element preventing federal intervention in this case has been removed from the picture." Esso Standard Oil Co. v. López-Freytes, No. 03-2319 (D.P.R. Mar. 11, 2005) (order granting preliminary injunction). The court granted Esso's request for a preliminary injunction and ordered the defendants to show cause as to why the preliminary injunction should not be converted to a permanent injunction. The defendants opposed such a conversion on the ground that they had not received notice of the consolidation of the preliminary injunction hearing and the trial on the merits and thus had not presented any witnesses or evidence. The district court concluded that it was premature to convert the preliminary injunction into a permanent injunction without giving the defendants an opportunity to controvert the allegations of bias.

Soon thereafter, Esso filed a motion for summary judgment, opposed by the defendants, contending that there were no disputed issues of material fact. In November 2006, the district court entered summary judgment for Esso and issued a permanent injunction. See Esso Standard Oil Co. v. López-Freytes, 467 F.Supp.2d 156 (D.P.R.2006). In a separate order, the court stated:

[D]efendants are permanently enjoined from conducting any and all administrative hearings and proceedings against Esso related to the penalty provision of the order to show cause issued on May 21, 2001 in In re Esso Standard Oil Company, Case No. OA-99-TE-102. It is further ordered that the defendants are permanently enjoined from issuing any judgments or resolutions, final or interlocutory, in said matter, and from instituting, conducting and/or prosecuting any administrative penalty proceedings against Esso based on or arising from the facts and events described in said order to show cause.

Esso Standard Oil Co. v. López-Freytes, 467 F.Supp.2d 156 (D.P.R.2006) (order granting permanent injunction). Defendants appeal this order.

II. Discussion

The defendants make three separate challenges: (1) the district court was required to abstain pursuant to the Younger doctrine; (2) the evidence does not support a finding of bias; and (3) the scope of the permanent injunction is impermissibly broad.

A district court's decision to grant a permanent injunction involves factual, legal, and discretionary components. We therefore apply different standards of review: questions of law are reviewed de novo and the scope of the injunction is reviewed for abuse of discretion. Aponte v. Calderón, 284 F.3d 184, 191 (1st Cir. 2002). In this case, the injunction was issued following a grant of summary judgment and, accordingly, we view the facts in the light most favorable to the nonmoving parties, drawing all reasonable inferences in their favor. See Ramírez-Carlo v. United States, F.3d 41, 46 (1st Cir. 2007). Insofar as the threshold issue involves the application of the Younger abstention doctrine, this is a legal question that we review de novo. See Brooks v. N.H. Sup.Ct., 80 F.3d 633, 637 (1st Cir. 1996) ("[W]e must review de novo the essentially legal determination of whether the requirements for...