Environmental, fee issues bring splits among circuits.

Two significant environmental cases resulted in splits in authority among federal appeals courts in September 2005, a month that also saw splits relating to a variety of issues from attorney fees to ERISA, telecommunications and beyond.

Environmental

In Consolidated Edison Co. of New York v. UGI Utilities Inc., 423 F.3d 90 (Sept. 9), the 2nd Circuit split with the 1st in finding that Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act does not limit actions for recovery of cleanup costs to parties who are not liable for any costs.

Although Consolidated Edison, known as "Con Ed," was likely partially liable for the cleanup costs of certain contaminated sites, the 2nd Circuit found that to disallow Con Ed from filing an action for recoupment of costs from UGI ran counter to the language of CERCLA as well as the statute's policy rationale of encouraging voluntary cleanup.

In 1994, the 1st Circuit held in United Technologies Corp. v. Browning Ferris Industries, 33 F.3d 96, that Section 107(a), because it provides for 100 percent recoupment of costs (i.e., no apportionment among the parties), was "intended only [for] innocent parties," i.e., not parties that themselves could be liable. The 2nd Circuit dismissed this reasoning, arguing that a party sued for 100 percent recoupment under Section 107(a) of CERCLA could bring a counterclaim under Section 113(f)(1) to offset any overpayment under Section 107(a).

In the background of the 2nd Circuit's decision was the Supreme Court's recent decision limiting contribution claims under Section 113(f)(1) of CERCLA to instances in which the party seeking contribution had itself been sued under CERCLA, thereby preventing parties involved in voluntary cleanup efforts from seeking contribution from other responsible parties under Section 113(f)(1). Cooper Industries Inc. v. Aviall Services Inc., 125 S. Ct. 577 (2004).

Unless Section 107 provided an alternative means of potentially responsible parties to obtain contribution from others who had caused environmental damage prior to being subject to suit, the purpose of CERCLA--encouraging private parties to assume the financial responsibility of environmental cleanup--world be compromised.

Environmental/Administrative

In a major environmental case about the ability of state and local governments to develop and expand existing rights of way on federal lands, including federally controlled wilderness areas, the 10th Circuit ruled that a decision of the federal Bureau of Land Management regarding the existence and scope of existing fights of way was not entitled to deference because the bureau did not have "primary jurisdiction" over the issue. Southern Utah Wilderness Alliance v. Bureau of Land Management, 2005 U.S. App. LEXIS 19381 (Sept. 8).

In so holding, the 10th Circuit recognized an existing circuit split regarding the standard of review to be applied to district court decisions regarding the issue of whether an agency has primary jurisdiction over a matter. The 10th Circuit, as well as the 4th and D.C. Circuits, reviews district court decisions in this area for abuse of discretion. The 1st, 2nd, 8th, and 9th Circuits, in contrast, apply a de novo standard to review such determinations. E.g., Newspaper Guild of Salem v. Ottaway Newspapers Inc., 79 F.3d 1273 (1st Cir. 1996).

Although the split involves many circuits, its significance is not clear because the "primary jurisdiction" question is principally a matter of law, and even courts applying an abuse of discretion standard hold that errors of law are presumptively abuses of discretion. See, e.g., Southwestern Utah. The ultimate question of whether an agency does have primary jurisdiction determines the ultimate standard of review that is applied at the merits stage, with agency determinations receiving a greater degree of deference in areas under their primary jurisdiction.

Federal Courts

In Osborn v. Haley, 422 F.3d 359 (2005), the 6th Circuit addressed two different circuit splits concerning the immunity of federal employees for the commission of torts. Under the Westfall Act, 28 U.S.C. Section 2679, the attorney general may certify that a federal employee was acting within his or her scope of employment during the commission of the alleged tort; in that instance, the United States is substituted as a party for the employee, and the government may remove any such case filed in state court to federal court.

The Westfall Act further provides that such certification of the attorney general "shall conclusively establish the scope of office or employment for purposes of removal."

In Osborn, the 6th Circuit joined the D.C., 3rd and 8th Circuits to hold that a certification by the attorney general relying upon a complete denial that the alleged tortious incident ever occurred must be properly considered by the district court as an initial factual determination in a motion to substitute in the United States as the defendant.

In so doing, the 6th Circuit split with the 1st Circuit, which held in Wood v. United States, 995 F.2d 1122 (1993) (en banc), that "incident-denying" certifications run contrary to the language of the Westfall Act, conflict with the right to trial by jury, and should effectively be ignored in favor of the plaintiffs version of the facts.

Next, the 6th Circuit joined the 3rd, 4th and 5th Circuits, but split with the 1st and D.C. Circuits, to hold that a federal district court must retain jurisdiction to hear the tort claim after removal under the Westfall Act and may not remand such action to state court, even if the district court finds that the attorney general's certification was improper.

In so doing, the 6th Circuit noted that four justices of the Supreme Court stated so much in a plurality decision in Gutierrez de Martinez v. Lamagno, 515 U.S. 417 (1995).

Attorney Fees

In Dupuy v. Samuels, 423 F.3d 714 (2005), the 7th Circuit reaffirmed its position that a party that obtains a preliminary injunction in a case that ultimately becomes moot may nonetheless be considered a "prevailing party" for the purposes of securing attorneys' fees in 42 U.S.C. Section 1983 actions.

Although most circuits have held similarly, including the D.C., 9th and 11th Circuits, in Smyth v. Rivero, 282 F.3d 268, 277 (4th Cir. 2002), certiorari denied, 537 U.S. 825 (2002), the 4th Circuit appeared to adopt a per se rule that a preliminary injunction can never be "an enforceable judgment on the merits or something akin to one for prevailing party purposes."

Additionally, the 7th Circuit in Dupuy noted that in the absence of mootness, attorneys' fees would not be appropriate, because the issue on which the party seeking attorneys' fees prevailed could ultimately be overturned. In this regard, the 7th Circuit appears to have split with the 5th Circuit, which awarded attorneys' fees on the basis of a preliminary injunction in the absence of mootness and finality in Deerfield Medical Center v. City of Deerfield Beach, 661 F.2d 328 (1981), albeit without expressly considering the mootness issue. See also Chu Drua Cha v. Levine, 701 F.2d 750 (8th Cir. 1983) (awarding attorneys' fees in preliminary injunction context). Although Dupuy was decided in the context of a claim for attorneys' fees under 42 U.S.C. Section 1988, it may well affect decisions under other attorneys' fee statutes.

Telecommunications

In Metrophones Telecommunications Inc. v. Global Crossing Telecommunications Inc., 423 F.3d 1056 (2005), the 9th Circuit distinguished earlier circuit precedent and split with the D.C. Circuit to find that there is a private right of action in federal court for payphone operators to sue long-distance carriers to recover compensation for coin-less payphone calls (e.g., to "10-10-220"). In an earlier case, Greene v. Sprint Communications Co., 340 F.3d 1047 (9th Cir. 2003), certiorari denied, 541 U.S. 988 (2004), examining the specific statutory provision that requires payment of fees for coinless calls to payphone operators--47 U.S.C. Section 276(b)--the 9th Circuit found that there was no such private right of action.

In Metrophones, however, the 9th Circuit reasoned that Greene did not preclude examination of other relevant federal statutes to determine if a private right of action exists. Deferring to the FCC's interpretation of a related provision, 47 U.S.C. Section 201(b), which provides a private right of action against "unjust or unreasonable" practices, and relying upon the Supreme Court's recent opinion in National Cable & Telecommunications Association v. Brand X Internet Services ("Brand X") 125 S. Ct. 2688 (June 27, 2005), the 9th Circuit held that such a private of right action does exist under Section 201(b).

This ruling creates a split with the D.C. Circuit's opinion in APCC Services Inc. v. Sprint Communications Co., 418 F.3d 1238 (June 28, 2005), which was filed one day after Brand X and is presently the subject of a petition for rehearing. APPC Services examined Section 201(b) directly and relied in part upon the 9th Circuit's holding in Greene to find that there is no such right of action. Chief Judge Douglas Ginsburg dissented in APCC, and like the Metrophones panel, would have adopted the FCC's view that a private right of action exists under Section 201(b).

Constitutional

In Bennett v. Hendrix, 423 F.3d 1247 (11th Cir. 2005), local business owners in Forsyth County, Georgia, filed suit complaining that the county sheriff retaliated against them in violation of the First Amendment because of their support for a political referendum that would have created a county police force and diminished the power of the sheriff.

The 11th Circuit adopted an "objective test" to determine whether a state actors retaliatory conduct adversely affected speech protected by the First Amendment, joining the D.C., 1st, 3rd, 6th, 8th, 9th and 10th Circuits. Under the objective test, the court examines whether "the retaliatory conduct would likely deter 'a person of ordinary firmness' from the exercise of Fast Amendment rights."

In Curley v. Village of Suffern, 268 F.3d 65 (2001) (citing Laird v. Tatum, 408 U.S. 1 (1972)), however, the 2nd Circuit applied a potentially more exacting test, requiring the plaintiff to prove that he or she was "actually chilled in the exercise of their First Amendment rights." On the other hand, the 11th Circuit noted that the 2nd Circuit adopted an objective test in Washington v. County of Rockland, 373 F.3d 310 (2nd Cir. 2004), creating an apparent intra-circuit conflict within the 2nd Circuit.

Title VII

In Arculeo v. On-Site Sales & Marketing LLC, 2005 U.S. App. LEXIS 21212 (Sept. 30), the 2nd Circuit recognized the existence of a circuit split relating to the requirement that an employer have at least 15 employees in order to be covered by Title VII. See 42 U.S.C. Section 2000e(b).

The split, which the Supreme Court is expected to resolve this term, is over whether the employee census is a question that goes to the court's jurisdiction over the action, or to the merits of a Title VII claim. The 2nd, 7th, and Federal Circuits view the statutory definition of an employer as a question that goes to the merits of the case, while the 4th, 5th, 6th, 9th, 10th and 11th Circuits have concluded that this is a jurisdictional requirement On May 16 this year, the Supreme Court granted certiorari in Arbaugh v. Y&H Corp., 380 F.3d 219 (2004), in which the 5th Circuit held that the 15-employee requirement is jurisdictional.

ERISA

In Unicare Life & Health Insurance Co. v. Craig, 2005 U.S. App. LEXIS 20687 (Sept. 22), the 6th Circuit reaffirmed a settled circuit split regarding the law to be applied when determining who is entitled to benefits under a life insurance policy governed by ERISA.

Unicare filed an interpleader in district court to determine whether benefits under a life insurance policy governed by ERISA should be awarded to a decedent's widower or to the decedent's three daughters. Although the widower was named as the beneficiary under the ERISA plan, there was substantial evidence indicating that prior to her death the decedent intended to substitute her three daughters as beneficiaries in place of her then husband.

Finding this evidence persuasive, the district court ruled in favor of the decedent's three daughters, and awarded them the entirety of benefits under the ERISA life insurance policy. The 6th Circuit agreed with the district court that there was "little doubt ... that [the decedent] did intend to change her designated beneficiary from her husband to her daughters" but it nevertheless reversed and ordered all benefits to be awarded to the widower.

The appellate court noted that "[t]here is a split amongst the circuits with respect to the manner in which a beneficiary is determined. Several circuits, finding no explicit answer in the text of ERISA, look to the federal common law for the controlling principles." Unicare (citing, inter alia, Guardian Life Insurance Co. of America v. Finch, 395 F.3d 238 (5th Cir. 2004)).

The district court erred, according to the circuit court, by following these cases despite the fact that they are apparently the "majority" position among the circuits. Unicare. The 6th Circuit does not follow this majority position. Rather, it looks to the "the documents and instruments governing the plan." Unicare (quoting 29 U.S.C. Section 1104(a)(1)(D)).

Given that the documents here clearly named the decedent's widower as the beneficiary, the district court should not have deviated from those documents, notwithstanding the clear evidence the decedent intended to change the relevant documents so that her daughters would receive the ERISA life insurance benefits instead of her husband.

In so holding, the 6th Circuit abided by its split with several other circuits, including the 5th, 4th, and 7th. Although not noted in its opinion, the 2nd Circuit appears to follow the same rule as the 6th Circuit. Krishna v. Colgate Palmolive Co., 7 F.3d 11 (2d Cir. 1993).

Laura W. Brill, a partner at Irell & Manella in Los Angeles, is a member of the firm's litigation and appellate practice groups. Ted M. Sichelman, Katharine J. Galston and Jonathan P. Steinsapir are associates in the same office.