U.S. v. Stauffer Chemical Co.

• Decision Date: 07 July 1982
• Docket Number: No. 81-5311,81-5311
• Citation: 684 F.2d 1174
• Parties: , 12 Envtl. L. Rep. 20,810 UNITED STATES of America, Plaintiff-Appellee, v. STAUFFER CHEMICAL COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1174

684 F.2d 1174

17 ERC 1753, 12 Envtl. L. Rep. 20,810

UNITED STATES of America, Plaintiff-Appellee, v. STAUFFER CHEMICAL COMPANY, Defendant-Appellant.

No. 81-5311.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 17, 1981.

Decided July 7, 1982.

Charles F. Lettow, Eric C. Jeffrey, Cleary, Gottlieb, Steen & Hamilton, Washington, D. C., Robert J. Walker, Leigh W. Davidson, Bass, Berry & Sims, Nashville, Tenn., for defendant-appellant.

Hal D. Hardin, U. S. Atty., Nashville, Tenn., Judson W. Starr, Pollution Control Section-P.O. 7415 Land and Natural Resources Div. U. S. Dept. of Justice, Washington, D. C., John H. Johnson, Jr., Regional Counsel, U. S. E.P.A. Region-IV, Atlanta, Ga., for plaintiff-appellee.

Before WEICK, ^* Senior Circuit Judge, JONES, Circuit Judge and SILER, ^** U. S. District Judge.

WEICK, Senior Circuit Judge.

Stauffer has appealed to this court from an order of the district court denying its motion to quash an invalid administrative search warrant issued ex parte by a United States Magistrate, which authorized EPA to conduct an air pollution inspection of private commercial property belonging to Stauffer, namely, its plant located at Mt. Pleasant, Tennessee, said inspection to be made not only by authorized employees of EPA and the State of Tennessee, but also by unauthorized private contractors objected to by Stauffer to protect it from disclosure of its trade secrets or other proprietary information to competitors or others with a conflict of interest. Stauffer refused to permit the inspection to include the employees of private contractors unless such private contractors signed a nondisclosure agreement to protect Stauffer against disclosure by private contractors of Stauffer's trade secrets. The private contractors refused to execute the nondisclosure agreements prepared by Stauffer and Stauffer The opinion of the district court in the present case is reported in United States v. Stauffer Chemical Co., 511 F.Supp. 744 (M.D.Tenn.1981).

refused to permit the inspection of its property. EPA cited Stauffer with contempt of court for refusing the inspection. Stauffer then filed its motion to quash. The contempt citation and motion to quash were heard together by the district judge. He denied the motion to quash holding that the phrase "authorized representative" of the Administrator, as used in Section 114(a)(2) of the Clean Air Act, 42 U.S.C. § 7414(a)(2) ¹ authorizes the EPA to use employees of private contractors in making such inspections and that Stauffer was required to comply with the warrant. He dismissed the contempt citation holding that "(b)ecause Stauffer legitimately believed that private contractors were not authorized representatives under the Clean Air Act, EPA's motion for contempt is denied. If Stauffer's subsequently refuses entry to its Mt. Pleasant plant to authorized representatives of the Administrator presenting proper credentials and a warrant, a contempt citation shall issue." This constituted a final appealable order.

Stauffer raises important questions on appeal. It argues that the EPA has no authority to obtain ex parte search warrants which would deprive Stauffer of the opportunity to contest the validity of the warrant and a search and seizure in pursuance thereof. Stauffer also contends that the phrase "authorized representative" of the EPA Administrator, used in section 114(a)(2) of the Clean Air Act, means full time employees of the EPA, not employees of private contractors. Further, Stauffer maintains that the EPA is collaterally estopped from bringing this action, because the parties have already litigated the question of who can act as an authorized representative of the EPA in a prior lawsuit in the federal courts in Wyoming, which decided the question in favor of Stauffer and against EPA. Stauffer Chemical Co. v. EPA, 14 E.R.C. 1729, affirmed 647 F.2d 1075 (10th Cir. 1981).

Because we agree with Stauffer that the present action is governed by collateral estoppel and res judicata, it is unnecessary to reach other issues, but we will treat all of the issues because they were briefed by both parties.

I

The Clean Air Act, 42 U.S.C. §§ 7401 et seq., sets up a dual state-federal system of air pollution enforcement. Under the Act, the Administrator of the EPA is responsible for establishing national ambient air quality standards. 42 U.S.C. § 7409. The states are then primarily responsible for enforcing these standards, subject to supervision and approval by the EPA. See 42 U.S.C. §§ 7407, 7410, 7412. Pursuant to its mandate under the Clean Air Act, the EPA conducts an "Overview Inspection Program" in which it annually inspects approximately ten percent of the major stationary sources of air pollution in each state. Establishments which are selected for overview inspection have already been inspected by state air pollution authorities at some prior time, with the results of the state inspection being submitted to the EPA. The purpose of the overview inspections is to evaluate the state's performance in implementing the Clean Air Act by comparing the results of the overview inspection with the previously-reported results of the state's inspection.

The State of Tennessee is part of the Environmental Protection Agency's Region IV, which also includes North Carolina, South Carolina, Kentucky, Alabama, Florida, and Georgia.

On October 17, 1979, Mr. John W. Hund, an environmental scientist employed by the EPA's Enforcement Division in Region IV, conducted an unannounced overview inspection of Stauffer Chemical Company's elemental phosphorus furnace plant in Mt. Pleasant, Tennessee. He was accompanied by two employees of the Tennessee Division of Air Pollution Control. A significant source of air pollution, the number three nodulizing kiln, was not in operation that day. As a result, the amount of pollutants being emitted was not representative of normal operating conditions, so Mr. Hund decided that a follow-up inspection would be necessary.

The follow-up inspection was set for March 27, 1980. On that day, Hund returned to the Mt. Pleasant Plant, along with an employee of the Tennessee Division of Air Pollution Control. He was also accompanied this time by Ronald Hawks and Gary Saunders, who were employees of a private company under contract with the EPA, PEDCo Environmental, Inc. ("PEDCo"). Hawks and Saunders were brought along on this visit because they had recently conducted an EPA overview inspection at Stauffer's elemental phosphorus furnace plant in Tarpon Springs, Florida, and thus were familiar with the processes and equipment involved.

The group arrived at the plant and explained the purpose of their visit. They were informed by the plant manager that Stauffer had no objection to an inspection being conducted by the EPA and Tennessee state employees, but that it was contrary to company policy to admit private individuals to company premises unless they first signed a suitable nondisclosure and hold harmless agreement. ² The team then left the plant without conducting the inspection.

During the month of April, negotiations were carried on between Stauffer company headquarters in Connecticut, PEDCo, and the EPA in an attempt to arrive at a mutually agreeable nondisclosure agreement. PEDCo employees under contract with the EPA had previously been admitted to Stauffer's Silver Bow, Montana plant after signing a nondisclosure agreement. Therefore, PEDCo forwarded to Stauffer a copy of the agreement which had been used at the Montana plant, together with some suggested modifications requested by the EPA. Stauffer sent back a counter proposal, incorporating many of the provisions suggested by the EPA, but also adding some new ones. Certain of Stauffer's proposals, including one giving Stauffer exclusive control over what areas of the plant were to be inspected and another one requiring the EPA to give Stauffer two weeks advance notice of any inspection, were deemed unacceptable by PEDCo and the EPA. Consequently, they rejected this proposed agreement on May 5, 1980. Thereafter, the parties had no further contact until August.

On August 7, 1980, the EPA submitted an application and affidavits for a search warrant to inspect the Mt. Pleasant plant, which the magistrate granted ex parte. The warrant permitted

duly authorized full-time employees (of EPA), and accompanying, authorized representatives under contract to EPA ... to have entry upon (plant) premises during normal operating hours for the purpose of conducting an inspection, sampling, and monitoring pursuant to Section There followed a long list of plant facilities and records which the inspectors were to have access to.

114 of the Clean Air Act, 42 U.S.C. § 7414....

Armed with the warrant, an inspection team consisting of EPA's Hund, Ms. Carol Donohue of the Tennessee Division of Air Pollution Control, and Messrs. Hawks and Saunders of PEDCo went to Stauffer's Mt. Pleasant plant on August 7. They were also accompanied by the EPA attorney. Again there was an impasse. After conferring with company headquarters by telephone, plant officials informed the inspectors that the state and federal employees were free to conduct an inspection, but that the PEDCo employees would not be admitted without signing a nondisclosure agreement. Once again, the group left without conducting an inspection.

The next day, the EPA filed a petition in district court to hold Stauffer in contempt for its failure to honor the warrant. At the same time, Stauffer filed a motion to quash the warrant and for a temporary restraining order enjoining its enforcement. (The latter request was subsequently withdrawn by mutual agreement.) A consolidated hearing on both motions was held in the District Court for the Middle District of Tennessee on August 29, 1980. The court issued its decision on April 17, 1981, holding that the term "authorized representative" in section 114(a)(2) of the Clean Air Act "may...