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Energy and Environment Monitor

Beyond Baudoinia compniacensis:

January 21, 2015

By: Patrick F. Estill and Kevin M. McGuire

Federal Clean Air Act Does Not Preempt State Common Law in Kentucky’s Latest Whiskey Case[i]

In November 2014, the Kentucky Court of Appeals addressed whether the federal Clean Air Act preempts state common law nuisance claims based on emissions of airborne pollutants. Brown-Forman Corporation and Heaven Hill Distilleries, Inc. operate whiskey distilleries in Kentucky.  The whiskey production and aging process emits ethanol gas as a by-product. The plaintiffs, who lived near the distilleries, alleged that the ethanol emissions promoted the growth of “whiskey fungus,”[ii] which caused a “pervasive black film” to cover, and eventually damage or destroy, any property left outdoors.[iii]

The trial court dismissed the case, finding that the Clean Air Act preempted the plaintiffs’ state common law nuisance, trespass, and negligence claims. The Kentucky Court of Appeals, however, disagreed.  In Merrick v. Brown-Forman Corporation, 2013-CA-002048-MR, 2014 WL 6092218 (Ky. App. Nov. 14, 2014), the court reversed the trial court’s dismissal and remanded the case for further proceedings, holding that the distilleries failed to establish federal preemption.[iv]

In reaching its result, the Kentucky Court of Appeals perceived a split of authority on the issue, citing both the Fourth Circuit’s opinion in North Carolina, ex rel. Cooper v. Tennessee Valley Authority[v] (finding preemption) and the Third Circuit’s opinion in Bell v. Cheswick Generating Station (finding no preemption).[vi]  The court ultimately sided with the Third Circuit, finding Bell to be “clear, unambiguous and subject to but one interpretation.”  Further, because the Bell decision came three years after Cooper, the court reasoned that the newer vintage Bell “may reflect the most recent iteration of this evolving field of federal case law.” 

Whether the law on Clean Air Act preemption of state common law has been aging, or evolving, as rapidly as the Kentucky opinion suggests is subject to debate.  A finer reading of the case law may suggest otherwise.  While the Fourth Circuit found preemption and the Third Circuit did not, this may arise more from the distinguishing nature of the lawsuits and the parties rather than a divergence in reasoning and evolution of the law. 

In Cooper, the state of North Carolina brought a public nuisance suit against the TVA, seeking an injunction against eleven coal-fired power plants.  Broad relief was requested, and the federal district court eventually imposed specific emissions caps and emission control technologies on four of the plants. The Fourth Circuit found the ruling flawed for several reasons, contrasting the “defined standard of the Clean Air Act” with the concept of public nuisance, an “ill-defined omnibus tort of last resort.”  It noted that North Carolina attempted to frame the case “in terms of protecting public health and saving the environment from dirty air,” but that the litigation amounted to nothing more than a “collateral attack on the system.”[vii]

The plaintiffs in Bell, on the other hand, sued for private nuisance,[viii] alleging that a neighboring power plant was causing ash and contaminants to settle on their property.  While also seeking injunctive relief, the plaintiffs acknowledged that such relief would be limited to requiring the plants to cease causing whatever particulates, specifically, were falling on the plaintiffs’ own properties. 

The Third and Fourth Circuits also relied on similar precedent, notwithstanding the differing results.  Both opinions relied on the Supreme Court’s decision in International Paper Co. v. Ouellette, 479 U.S. 481 (1987), which held that the Clean Water Act does not preempt a suit brought under the state common law of the source state.  In Bell, the Third Circuit found the Clean Air Act and Clean Water Act to have “nearly identical savings clauses” and similarly comprehensive “cooperative federalism” structures.  Further, both circuits acknowledged the Ouellette Court’s concern over the practical effects of having multiple and conflicting standards to guide emissions.  Cooper ultimately found that the lower court’s decision “compromised the principles of federalism by applying North Carolina law extraterritorially to TVA plants located in Alabama and Tennessee,” in violation of Ouellette

While the Fourth Circuit in Cooper focused on state law undermining the Clean Air Act’s comprehensive regulatory scheme, the Third Circuit in Bell observed that the Clean Air Act imposes a regulatory floor, not a ceiling. And, under Ouellette, only the law of the source state can raise that regulatory floor. This is consistent with the Sixth Circuit’s decision in Her Majesty the Queen v. City of Detroit,[ix] which also extrapolated from Ouellette and held that the Clean Air Act does not displace source state statutory law that is as strict as, or stricter, than the Clean Air Act. 

In conclusion, while the Kentucky Court of Appeals may have preferred Bell over Cooper in its opinion in Merrick, the doctrine of Clean Air Act preemption may still survive.  Which state’s law applies (i.e., source or non-source state), the type of claim (i.e., private or public nuisance), and the type of plaintiff (i.e., individually injured plaintiff or public interest plaintiff) remain relevant factors in weighing application of the preemption defense. 

This article was authored by Kevin M. McGuire and Patrick F. Estill, Jackson Kelly PLLC.



[i] Not to be confused with the earlier, and still unsolved, mysterious case of the missing Pappy Van Winkle bourbon.  See http://www.courier-journal.com/story/money/2014/10/10/stole-pappy-mystery-continues/17030725/

[ii] Or, Baudoinia compniacensis, “a sac fungus that has been observed on a wide range of substrates in the vicinity of distilleries, spirits maturation facilities, bonded warehouses, and bakeries. The fungus is a habitat coloniser with a preference for airborne alcohol.” See  http://en.wikipedia.org/wiki/Baudoinia_compniacensis

[iii] In March 2014, the same plaintiffs sued Diageo America Supply, Inc. (another distillery operator) in federal court. The Western District of Kentucky also held that the Clean Air Act did not preempt the plaintiffs’ state tort claims.  Merrick. v. Diageo America Supply, Inc., 5 F. Supp. 3d 865 (W.D. Ky. 2014).

[iv] Citing Wyeth v. Levin, 555 U.S. 555 (2009), the court noted that the distilleries had the burden of demonstrating federal preemption.

[v] 615 F.3d 291 (4th Cir. 2010).

[vi] 734 F.3d 188 (3d Cir. 2013).

[vii] See Cooper, 615 F.3d at 301-02 (quoting Palumbo v. Waste Techs. Indus., 989 F.3d 156, 159 (4th Cir. 1993)).

[viii] The Plaintiffs in Bell also claimed negligence, recklessness, and trespass.

[ix] 874 F.2d 332 (6th Cir. 1989).

 

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