U.S. v. Ruining the Env't

• Decision Date: 16 March 2011
• Docket Number: Case No. 09–cv–5277.
• Citation: 73 ERC 1556,781 F.Supp.2d 677
• Parties: UNITED STATES of America and the State of Illinois, Plaintiffs,andCitizens Against Ruining the Environment; the Environmental Law and Policy Center; Natural Resources Defense Council, Inc.; Respiratory Health Association of Metropolitan Chicago; and Sierra Club, Intervenor–Plaintiffs,v.MIDWEST GENERATION, LLC; Edison Mission Energy, Inc.; and Commonwealth Edison Co., Defendants.
• Court: U.S. District Court — Northern District of Illinois

781 F.Supp.2d 677

73 ERC 1556

UNITED STATES of America and the State of Illinois, Plaintiffs,andCitizens Against Ruining the Environment; the Environmental Law and Policy Center; Natural Resources Defense Council, Inc.; Respiratory Health Association of Metropolitan Chicago; and Sierra Club, Intervenor–Plaintiffs,

v.MIDWEST GENERATION, LLC; Edison Mission Energy, Inc.; and Commonwealth Edison Co., Defendants.

Case No. 09–cv–5277.

United States District Court, N.D. Illinois, Eastern Division.

March 16, 2011.

Jennifer Lukas–Jackson, Justin Aaron Savage, Kristin M. Furrie, U.S. Department of Justice, Washington, DC, Charles V. Mikalian, United States Department of Justice, Jonathan C. Haile, United States Attorney's Office, Susan M. Tennenbaum, United States Environmental Protection Agency, Andrew Barrett Armstrong, Rose–Marie E. Cazeau, Stephen J. Sylvester, Illinois Attorney General's Office, Chicago, IL, for Plaintiffs.Keith Ian Harley, Chicago Legal Clinic, Inc., Shannon Wanzer Fisk, Natural Resources Defense Council, Faith E. Bugel, Chicago, IL, Michael Christopher Soules, Minneapolis, MN, for Intervenor–Plaintiffs.Daniel E. Reidy, Brian Joseph Murray, Jones Day, Adrienne Banks Pitts, Byron F. Taylor, Kathleen Lynn Roach, Margaret R. Sobota, Sidley Austin LLP, Chicago, IL, James Michael Jones, Jones Day, Pittsburgh, PA, Kevin P. Holewinski, Jones Day, Washington, DC, for Defendants.

MEMORANDUM OPINION AND ORDER

JOHN W. DARRAH, District Judge.

This action arising under the federal Clean Air Act (“CAA”), codified at 42 U.S.C. § 7401 et seq., was originally brought by the United States of America and the State of Illinois (collectively, “Plaintiffs”) against Midwest Generation, LLC (“Midwest Generation”), the owner and operator of several coal-fired power plants in this district. Several “Citizen Groups” were later granted leave to intervene.¹ Plaintiffs' original Complaint, filed on October 27, 2009, asserted three types of CAA violations: (1) claims that Midwest Generation violated the CAA's provisions for the Prevention of Significant Deterioration of air quality (“PSD”); (2) claims for violations of opacity and particulate-matter limitations under Illinois law; and (3) claims under the CAA's Title V operating-permit provisions. Among other things, Plaintiffs alleged that Midwest Generation's continued operation of units unlawfully modified by a former owner constitutes continuing violations of the CAA's PSD provisions. Midwest Generation moved to dismiss Plaintiffs' PSD counts.

The motion was granted on March 9, 2010. See United States v. Midwest Generation, LLC, 694 F.Supp.2d 999, 1008 (N.D.Ill.2010) (the “March 9 Opinion”). With one exception, all PSD counts were dismissed in their entirety.² The Court held that “because a violation of 42 U.S.C. § 7475 [regarding preconstruction permits] occurs at the time of construction and no later, Midwest Generation cannot be liable for any construction that occurred prior to Midwest Generation's ownership of the relevant sources.” See Midwest Generation, 694 F.Supp.2d at 1008. Section 7475 prohibits the construction of a “major emitting facility” unless certain statutory requirements are met; it does not prohibit the subsequent operation of such a facility without a permit. Id. at 1003–04. Similarly, “nothing in the EPA's PSD regulations prohibits the subsequent operation of a source when no construction permit had been obtained.” Id. at 1004.³ Additionally, because all modifications—including those commenced by Midwest Generation—were commenced well over five years before the initiation of this action, all claims for civil penalties were dismissed as time barred. Id. at 1009.

With leave of the Court, Plaintiffs then filed an Amended Complaint, alleging new theories of PSD violations and also adding Commonwealth Edison Company (“ComEd”), the former owner, and Edison Mission Energy, Inc. (“EME”), Midwest Generation's parent company. The Amended Complaint seeks both civil penalties and injunctive relief. The Citizen Groups also filed an Amended Complaint with leave of the Court.

Midwest Generation and EME jointly move to dismiss multiple counts in Plaintiffs' Amended Complaint, and ComEd separately moves to dismiss all claims against it. Midwest Generation also moves to dismiss the only two counts in the Citizen Groups' Amended Complaint that allege violations of the CAA's PSD provisions. A consolidated briefing scheduling order was entered, and the matter is now fully briefed and before the Court for ruling.

BACKGROUND

The following facts are taken from Plaintiffs' Amended Complaint and the Citizen Groups' Amended Complaint. Additional background information and a brief discussion of the CAA's PSD provisions can be found in the March 9 Opinion. See Midwest Generation, 694 F.Supp.2d at 1001–02.

In 1999, ComEd sold six power plants, containing a total of fourteen coal-fired generating units, to EME. Am. Compl. ¶¶ 2, 69, 74.⁴ EME then transferred control of those plants to Midwest Generation, who operates them currently. Am. Compl. ¶¶ 2, 87. Prior to selling the plants to EME, ComEd modified nine of the fourteen generating units without first obtaining a preconstruction permit as required by the CAA. Am. Compl. ¶ 2. A tenth unit was modified by Midwest Generation—also without a preconstruction permit—after it was acquired from ComEd.⁵ Id. Had such permits been issued, they would have required ComEd to operate its plants in a manner that employed the “Best Available Control Technology” (“BACT”) to prevent significant deterioration in air quality. Id.

The transfer of the plants from ComEd to EME was accomplished by way of an asset sale agreement (“Agreement”) dated March 22, 1999. Am. Compl. ¶ 74. The Agreement, as more fully set out below, provided that EME would assume certain responsibilities for ComEd's environmental liabilities. See Am. Compl. ¶ 75. The Agreement's definition of “Environmental Laws” includes requirements relating to “air emissions” and the “impact upon human health or the environment” of “matters governed by ... the Clean Air Act (42 U.S.C. § 7401 et seq.) ... and all state counterpart statutes.” Am. Compl. ¶ 76.

The Agreement also provides that Environmental Liabilities may exist, that EME had received ComEd's environmental reports and had the opportunity to perform due diligence, and that those potential liabilities were reflected in the purchase price of the assets. Am. Compl. ¶ 78. The Agreement further provides that EME could assign its equity interests under the Agreement to another corporation, in which case the assignee would be required to “assume in writing all of [EME]'s obligations [t]hereunder ... with respect to the rights so assigned.” Am. Compl. ¶ 79.

On December 31, 2009, Midwest Generation filed a Form 10–K Report with the Securities and Exchange Commission (“SEC”), stating: “In connection with the acquisition of the Midwest Generation Plants, Midwest Generation agreed to indemnify Commonwealth Edison with respect to specified environmental liabilities before and after December 15, 1999, the date of sale.” ⁶ Am. Compl. ¶ 85. Based upon the representations to the SEC, Plaintiffs infer that EME has assigned to Midwest Generation some or all of its rights and/or obligations under, and in accordance with, the Agreement. Am. Compl. ¶ 87.

After assuming control of the power plants at issue, Midwest Generation has operated them in a manner that results in the release of significant amounts of pollutants into the atmosphere. Am. Compl. ¶ 3.

In their Amended Complaint, Plaintiffs now attempt to revive their previously dismissed PSD claims by presenting three new theories of recovery. First, they quote additional language from 415 ILCS 5/9.1(d), see Am. Compl. ¶ 65, and allege that the newly quoted language provides independent grounds under state law for prohibiting Midwest Generation from operating sources that were constructed without a preconstruction permit, see, e.g., Am. Compl. ¶ 93. Second, they have joined ComEd as a Defendant and claim that ComEd can be held liable for PSD violations committed during the time ComEd owned and operated the plants at issue. See Am. Compl. Counts 3, 8, 13, 18, 23, 30, 35, 40, 45. Third, they claim that EME's and Midwest Generation's assumption of ComEd's environmental liabilities under the Agreement subjects those Defendants to enforcement under the CAA through principles of successor liability.

The Citizen Groups' Amended Complaint named Midwest Generation as the only Defendant and asserts only one PSD count. See Citizen Am. Compl. Count 27. The Citizen Groups make no claim as to ComEd's unlawful modifications. They only claim that Midwest Generation is subject to civil enforcement for its own unlawful modifications.

LEGAL STANDARD

“A motion under Rule 12(b)(6) challenges the sufficiency of the complaint.” Christensen v. County of Boone, Ill., 483 F.3d 454, 458 (7th Cir.2007). In ruling on a motion to dismiss, the court must accept as true all well-pleaded factual allegations and draw reasonable inferences in favor of the plaintiff. Sprint Spectrum L.P. v. City of Carmel, Ind., 361 F.3d 998, 1001 (7th Cir.2004). The allegations in the complaint “must plausibly suggest that the plaintiff has a right to relief, raising that possibility above a ‘speculative level’; if they do not, the plaintiff pleads itself out of court.” E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir.2007) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

The district court need not accept as true “legal conclusions” or “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Brooks v. Ross, 578 F.3d 574, 581 (7th Cir.2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949–50, 173 L.Ed.2d 868 (2009)). Although affirmative defenses are not usually resolved on a motion to dismiss, dismissal...