Francisco Sanchez v. Esso Standard Oil Co.

• Decision Date: 19 June 2009
• Docket Number: No. 09-1211.,09-1211.
• Citation: 572 F.3d 1
• Court: U.S. Court of Appeals — First Circuit
• Parties: Jorge FRANCISCO SÁNCHEZ; Dolores Service Station and Auto Parts, Inc., Plaintiffs, Appellees, v. ESSO STANDARD OIL COMPANY (Puerto Rico), Defendant, Appellant.

572 F.3d 1

Jorge FRANCISCO SÁNCHEZ; Dolores Service Station and Auto Parts, Inc., Plaintiffs, Appellees, v. ESSO STANDARD OIL COMPANY (Puerto Rico), Defendant, Appellant.

No. 09-1211.

United States Court of Appeals, First Circuit.

Heard May 6, 2009.

Decided June 19, 2009.

Tynan Buthod, with whom Scott Janoe, Karlene Poll, Baker Botts LLP, Carla Garcia-Benitez, and O'Neill & Borges were on brief, for appellant.

Orlando Cabrera-Rodriguez for appellees.

Before LIPEZ, HANSEN,^* and HOWARD, Circuit Judges.

LIPEZ, Circuit Judge.

This interlocutory appeal requires us to assess the validity of a preliminary injunction order entered pursuant to the federal Resource Conservation and Recovery Act (RCRA), 42 U.S.C. §§ 6901-6992k. Invoking RCRA's citizen-suit provision, which allows private plaintiffs to bring suit to enforce the Act's requirements, Dolores Service Station and Auto Parts, Inc., and its operator, Jorge Francisco Sánchez, sued Esso Standard Oil Company (Esso) in federal district court in Puerto Rico. For over two decades, Esso was Dolores Service Station's gasoline and diesel fuel supplier as well as the owner of three Underground Storage Tanks (USTs) on the property. The complaint asserted that, at some point during Esso's ownership of the USTs, the tanks had leaked petroleum-related substances into the surrounding soil and groundwater. Plaintiffs alleged that Esso's subsequent failure to comply with federal and Commonwealth environmental regulations governing reporting and remediation of such leaks had resulted in unacceptable levels of contamination, thereby creating a serious public health hazard.

Shortly after filing their complaint, plaintiffs sought a preliminary injunction that would order Esso to immediately comply with various environmental regulations, investigate the extent of the contamination, and implement remedial measures to clean up the site and prevent any further contamination. After a two-day hearing, the district court granted plaintiffs' motion, entering a preliminary injunction and issuing a supporting opinion that contained a number of factual findings and legal conclusions. The order itself set forth a process for the completion of a comprehensive site assessment "before the court further order[ed] Esso to remediate soil and groundwater contamination at the site." The order "enjoined and restrained" Esso "from contributing by action or inaction to further environmental contamination at the site," and stating that "Esso will be ordered, depending on the results of the Comprehensive Site Assessment, to pay for all necessary testing, corrective actions, and removal of all pollution and contamination within the site and into adjacent areas."

Esso now challenges this order. Besides two threshold jurisdictional challenges that we reject, Esso argues primarily that the preliminary injunction is invalid because it demonstrates that "liability has been summarily determined without discovery [and] without the benefit of a trial on the merits." Because we agree with that contention, we vacate the order to the extent that it represents an improper adjudication of the merits of the dispute. However, we leave intact the provisions concerning an environmental assessment of the allegedly contaminated site.

I.

A. Factual and Procedural Background

Plaintiff Jorge Francisco Sánchez and his family have operated Dolores Service Station and Auto Parts, Inc. in Canóvanas, Puerto Rico since the early 1960s. In or around 1985,¹ Esso replaced Shell Oil as the station's gasoline and diesel fuel supplier and also purchased three USTs—two gasoline and one diesel—underneath the station. Esso provided gasoline to the service station until October 2008, when it stopped supplying gasoline for retail stations generally and sold its equipment, including the USTs underneath the Dolores Service Station, to Total Petroleum.² During the time that Esso was supplying the service station, the company replaced both the diesel and the gasoline USTs at least once.

On October 6, 2008, plaintiffs sued Esso in the United States District Court for the District of Puerto Rico, alleging, inter alia, violations of the Solid Waste Disposal Act, as amended by RCRA, 42 U.S.C. §§ 6901-6992k, and related federal and Commonwealth environmental regulations. The complaint asserted that Esso's failure to properly store and dispose of petroleum products had resulted in the discharge of hazardous waste, including benzene and other petroleum-related hydrocarbons, into the soil and groundwater below the Dolores Service Station. Plaintiffs averred that Esso had been aware of the contamination since at least 1993 but had not properly reported, investigated, mitigated, or remedied the situation. Plaintiffs sought injunctive relief and costs under RCRA. Then, on November 7, 2008, they requested a preliminary injunction, which defendants opposed. At the two-day hearing on December 2 and 3, 2008, both parties called several witnesses and introduced documents into the record.

The district court issued its Preliminary Injunction Findings and Order on December 5. Crucially, the court found that the site underneath the Dolores Service Station had been contaminated with various petroleum-related substances, including Total Petroleum Hydrocarbon (TPH) and benzene, and potentially lead, for over a decade. The court concluded that Esso had known about this contamination since at least 1993, but had failed to investigate, report, or remediate the pollution. Accordingly, Esso appeared to be "in continuous violation" of federal and Commonwealth regulations.

The injunction order required the parties to submit recommendations for companies that could perform a comprehensive site assessment to determine the nature and scope of the soil and groundwater contamination originating from petroleum products dispensed at the service station during Esso's ownership of the tanks. The court then scheduled a hearing to "consider the implementation" of the environmental testing, and required the parties to promptly "jointly notify the EQB and the EPA" about the issuance of the injunction. Finally, the court enjoined Esso from contributing "by action or inaction" to further contamination at the site, and stated that "depending on the results" of the testing, that "Esso will be ordered ... to pay" for all of the necessary testing and remediation. The district court subsequently denied Esso's motion for reconsideration, its request that the court require plaintiffs to post a bond for the estimated $75,000 cost of the Comprehensive Site Assessment, and its motion to stay enforcement of the injunction pending this appeal.

B. Esso's Appeal

After losing below, Esso filed with this court an "emergency" motion to stay the preliminary injunction order pending its interlocutory appeal. In their opposition to Esso's Motion to Stay, the plaintiffs contended that the stay was not warranted because "the trial on the merits was held" at the preliminary injunction hearing.

We denied Esso's request for a stay to the extent that it pertained to "the completion of a comprehensive site assessment and the completion of a remedial plan." However, we granted the request "to the extent the district court order can be read to require defendant to undertake any remedial measures in advance of the preparation of a remedial plan, except as may become necessary to remedy any emergent threat to human health or safety." We also directed the parties to confer and determine whether this appeal should be expedited.

After we issued this order, the district court entered the following Notice:

Regarding the Order by the Court of Appeals dated March 16, 2009, in Case No. 09-1211, this court states that, consistent with the Court of Appeals' Statement, it was never our intention to require Defendant to undertake any remedial measures in advance of the preparation of a remedial plan, except as may become necessary to remedy any emergent threat to human health or safety.

We strongly recommend that the appeal on the preliminary injunction be handled on an expedited basis as suggested by the Court of Appeals.

Despite this notice, the district court never amended the preliminary injunction itself.

On the parties' motion, this appeal was expedited. Meanwhile, the comprehensive site assessment has been completed and, as of the time of oral argument on May 6, 2009, the parties were awaiting the reports that would reveal the nature and extent of any potential contamination at the site. Aside from the site assessment, however, it appears that discovery in the district court has been stayed pending this appeal. After Esso contacted plaintiffs to schedule a discovery conference pursuant to Rule 26 of the Federal Rules of Civil Procedure, plaintiffs responded with an "urgent" motion to stay all discovery, arguing that discovery was not warranted because the case "had already been heard" and the relevant documents had been "produced in open court" at the preliminary injunction hearing.

II.

A. Statutory and Regulatory Background

Subchapter IX of RCRA regulates USTs. 42 U.S.C. §§ 6991-6991(m). Pursuant to this statutory authority, the Environmental Protection Agency (EPA) has promulgated a series of regulations that include provisions relating to UST registration, leak detection, notification, and cleanup requirements. See generally 40 C.F.R. Part 280. The EPA is also empowered to delegate UST program administration to a state if that state's regulatory requirements are at least as stringent as their federal counterparts, 42 U.S.C. §§ 6991c, 6991g. It has delegated that task to Puerto Rico's Environmental Qaulity Board (EQB), which is the entity responsible for administering the UST program. See 40 C.F.R. § 282.102(a). "The EQB is an administrative agency created by the Environmental Public Policy Act, 12 L.P.R.A. §§ 1121-1140a, to promote environmental and resource conservation." Esso Std. Oil Co. v....