New environmental laws muzzle critics.

Two model statutes, the Agricultural Disparagement Statute and the Environmental Audit Privilege, have been sweeping through state legislatures at breakneck speed.

These two model statutes represent legislative attempts to insulate certain economic sectors from criticism. They also demonstrate how corporate defendants, who often decry the value of the tort system, are busily instituting unprecedented new bases for tort actions against environmental critics.

Agricultural disparagement laws, while varying slightly from state to state, give food producers an actionable tort against those who make "disparaging statements" or disseminate "false information" about the safety of agricultural products.

Among the states that have passed these statutes are Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Louisiana, Mississippi, Ohio, Oklahoma, South Dakota, and Texas.

The group of laws referred to by their corporate advocates as "environmental audit protection" laws (and by their opponents as "dirty secrets laws" and "polluter protection acts") grant businesses the new privilege of withholding environmental information from citizens and, in certain instances, from law enforcement officials when the business assembles documentation during the course of a self-audit.

Agricultural disparagement laws

The impetus for agricultural disparagement statutes was a 1989 report on the television show 60 Minutes about the pesticide Alar and its effect on the sale of apples in Washington.' The CBS news report was primarily based on a Natural Resources Defense Council report entitled Intolerable Risk: Pesticides in Our Children's Food.

Both reports cited the health risks and potential carcinogenic effects of Alar. After the broadcast, the Washington apple industry alleged it lost millions of dollars as consumer demand for apples fell.

In response, a group representing some 4,700 Washington state apple growers sued CBS. However, the Ninth Circuit found that the growers' challenge--based on the premise that studies performed on animals cannot serve as reliable indicators of the effects of suspected carcinogens on humans--was insufficient to overturn a district court's decision to grant summary judgment.(2) In essence, the court concluded that scientific uncertainty over health risks should be construed in favor of free speech.

Agribusiness interests then sought to achieve by statute what they could not achieve under common law. The American Feed Industry Association and the American Farm Bureau Federation hired the Washington, D.C., law firm of Olsson, Frank & Weeda to draft model state food disparagement legislation--that is, to manufacture a new cause of action in tort to achieve what current law could not.(3)

The general legislative purpose of these disparagement statutes allegedly has been to protect the agricultural and aquacultural economy by providing a cause of action for producers to recover damages for the disparagement of any perishable product or commodity. Generally, the person who actually grows or produces perishable agricultural food products is the proper party permitted to file an action for disparaging agricultural food products.(4)

For the most part, the standard of conduct giving rise to a cause of action is the dissemination of statements that either include "false information" or are "disparaging" regarding the safety of an agricultural food product for human consumption. Some states also require that the defendant knew or should have known that false information was disseminated to the public. A few others require that the dissemination of false information be done in a willful or malicious manner. However, there are states that apply a strict liability standard, requiring no knowledge or awareness to make a statement actionable. In these states, all that is required for an actionable tort is the mere dissemination of "false" information to the public.

The remedies provided by the statutes are compensatory damages and the possibility of punitive damages. A few statutes, however, grant the recovery of treble damages for disparaging any perishable agricultural food product where the statement has been made with intent to harm the producer.

Of greatest concern is the ambiguous definition of false information provided under the various statutes. In general, false information is defined either as information that is not based on reliable scientific facts and data or as information not based on reasonable or reliable scientific inquiry, facts, or data. By not defining who has the burden of proof regarding this false information, many of the agricultural disparagement statutes appear to place the burden on the disseminator to show that what was said or written about food safety was true. Thus, many of these laws could be read to actually require potential defendants to provide the "reasonable and reliable scientific inquiry, facts, or data" that formed the basis of their comments.(5)

Those most likely to be sued under these statutes are not-for-profit organizations and news organizations attempting to provide information to the public. Thus, the result of the laws will be to institute an actionable tort against those entities that should be accorded the highest level of constitutional protection.

Indeed, the first highly publicized case employing these new statutes was instituted by a Texas cattleman who brought suit against Oprah Winfrey for comments made on her April 1996 television show about the human health consequences of consuming beef from cows ailing from bovine spongiform encephalopathy, or "mad cow disease."(6)

The cattleman claimed that on the day following the show, cattle prices plummeted, which led him to suffer more than $1 million in damages. The complaint alleged that the show "carefully and maliciously edited statements" that "were designed to hype the ratings at the expense of the American cattle industry."(7)

Meanwhile, the firm that drafted the model bill has continued its work on behalf of another client, the United Fresh Fruit and Vegetable Association. This organization recently sent a cease-and-desist letter to Food & Water Inc., an environmental group in Walden, Vermont, threatening suit to stop the group's campaign against food irradiation:

"As you are no doubt aware, nearly 30 state legislatures have passed or are considering legislation which codifies a cause of action against persons who disseminate false statements regarding agricultural products. Food and Water could be subjecting itself to substantial liability."(8)

The chilling effect of this legislation could be stated no better than in a letter written to the Hawaii Department of Agriculture by a representative of a corporation involved in food irradiation, requesting support for a state statute:

Enclosed is a copy of the Florida law familiarly

called the Agricultural Disparagement Act.

Some people attribute the pullback of Food &

Water's attacks on us. . . to this legislation. It is

nearly impossible to assess whether they are

correct, but you may want to encourage the

Hawaiian legislature to enact something similar

since it might help muzzle the "anti's."(9)

This same intent to muzzle the opposition is evident in efforts by industry to pass statutes granting themselves an environmental audit privilege. While agribusiness was lobbying for disparagement protection to silence detractors, polluters of the environment have initiated equally ominous legislation to silence their critics.

Environmental audit privilege

Environmental audits are generally defined as a company's study of issues related to its compliance with environmental laws. These may include extensive information relevant to the environment, public health, or worker safety.(10)

In reality, the "audit privilege" constitutes a right to conceal documents--including notes, communications, data, or opinions designated by business managers as coming from audits--if remedial actions are taken.

In 1993, Oregon became the first state to codify a privilege for environmental audits.(11) An internal environmental audit, undertaken voluntarily, cannot be used against the company in a trial or administrative action unless efforts to comply were not promptly initiated and pursued with reasonable diligence or the privilege was invoked for fraudulent purposes.

After this law was passed, the oil, chemical, paper, and waste disposal industries--led in part by the Corporate Environmental Enforcement Council, Inc. (CEEC),(12)--mounted a nationwide effort to pass state and federal laws intended essentially to immunize themselves from liability or responsibility for past transgressions.

Despite opposition from almost every environmental organization, including the federal EPA, privilege bills have passed in Alaska, Arkansas, Colorado, Idaho, Illinois, Indiana, Kansas, Kentucky, Michigan, Minnesota, Mississippi, Montana, New Hampshire, Ohio, Oregon, South Carolina, South Dakota, Texas, Utah, Virginia, and Wyoming.

In promoting this legislation, the companies emphasized that existing environmental policies discourage thorough environmental audits. According to their argument, since the EPA and states may demand audits in some instances, firms that conduct them are left with uncertainty as to whether their own voluntary audits will be used by prosecutors or private tort and citizen suit plaintiffs.

Corporate lobbyists contend that if their companies are not afforded new secrecy rights, they will be less likely to put the findings of environmental reviews in writing. If employees cannot document problems, lobbyists claim, the internal communications needed for compliance will be paralyzed. In other words, the laws that currently mandate disclosure are standing in the way of companies voluntarily "doing the right thing."

Under the new privilege laws, if an entity conducting a voluntary self-audit discovers a violation, takes "reasonable" steps to correct the violation, and reports the finding to the appropriate government agency, then no civil, administrative, or--in some cases--criminal penalties may be imposed, nor may the information itself be subject to disclosure. Generally, those who participate in conducting the audit cannot even be compelled to testify at an administrative or judicial proceeding.

It has been asserted that this legislation in regard to the privilege against disclosure merely expands common law privileges. This assertion is misleading, because the legislation institutes a new privilege that protects audits even if they are not part of attorney-client communications or prepared in anticipation of litigation.(13)

Indeed, when Sen. Mark Hatfield (D-Or.) introduced a federal version of the environmental audit privilege in 1995,(14) he lauded the Oregon law because "lawyers are no longer needed in Oregon to shield audit documents under the attorney-client privilege . . . substantially reduc[ing] the cost of auditing."(15) In other words, on behalf of the bill's proponents he was urging that since corporations are manipulating information to prevent disclosure anyway, the new laws are justified as a cost-saving measure!

In 1997, Senate Majority Leader Trent Lott (R-Miss.) endorsed a similar measure, the Senate's Environmental Protection Partnership Act.(16) In addition to granting immunity and protection against disclosure, the bill specifically prohibits the EPA from revoking the enforcement authority of states that pass audit privilege laws. A companion bill has been introduced in the House of Representatives.(17)

What is surprising about these federal bills is that they support a number of state laws that not only include privileges designed to prevent corporate managers from being questioned about the contents and nature of environmental audits, but also limit disclosures by public environmental personnel. In some cases, these laws even include protection from potential "whistle-blowers."(18) Employees may be forbidden to make public disclosures of information from an audit and punished if they do. The Colorado audit law even institutes a new tort holding employees personally liable for disclosure of privileged audit information.(19)

A common problem with these laws is that the definition of "audit" is usually so broad that it will encourage firms to initiate purported audits to keep evidence secret. The kinds of information that firms may conceal under these laws include pollution prevention opportunities, accident safety assessments, certain emissions test data, or even certain assessments of hazardous waste cleanups.

Moreover, these privileges generally extend to third-party contractors. Thus, in most cases, no one outside the corporation's broad umbrella will ever know what information is being hidden behind these classifications. With these exemptions in place, there is less chance for a prosecutor or affected residents to identify environmental and public safety abuses.

In essence, these laws seem intended more to create barriers for civil lawyers and immunity from criminal prosecution than to advocate any real "self-evaluation." Indeed, plaintiffs blocked in discovery by the audit privilege are left with the extremely daunting task of challenging each assertion of the privilege before a judge.

In the presumed in camera review procedure, determination of whether a document qualifies for protection against disclosure--typically a complex technical matter--necessarily rests with judges. Judges will have to ascertain which information is required to be disclosed under other existing laws and, therefore, not protected by the privilege--without the help of analysis or briefing by public or private plaintiffs.(20)

It seems unlikely that judges will be able to invest the resources needed to make these distinctions. Knowing that judges are handicapped in this way, corporations conducting audits have an incentive to write audit reports that encompass otherwise discoverable materials.

A recent example of an attempt to avoid public sanction through the use of an environmental audit privilege occurred when Waste Management, Inc. (WMX), the nation's largest waste management firm, sought the return of evidence that had been secured by low-income community residents during their effort to clean up a Cincinnati landfill.

The Ohio EPA had ordered WMX to halt emissions of toxic and explosive gas. In response, WMX claimed that Ohio's recently enacted environmental secrecy law encompassed documents--including air emissions data, compliance reviews, groundwater information, and maps dating back to 1988 prepared for audits before the Ohio law was enacted--that should be privileged. The privilege claim was denied by an agency hearing examiner.

Secrecy is no incentive

At the urging of well-funded lobbies, many states have passed agricultural disparagement laws and environmental audit privileges. They have been passed in spite of the fact that the quality of the food we eat, the water we drink, and the air we breathe is a matter of grave public concern. These laws ignore the known role of secrecy and low-visibility decision making in the history of corporate crime, malfeasance, and failure to protect people from harm.

The assumption that greater secrecy and diminished criticism will lead companies to "do the right thing" strains credulity when applied in the face of the corporate profit motive. Nevertheless, these laws are rapidly being passed.

These laws are specifically designed to limit criticism of corporate behavior and restrict the ability of citizens to gain information about issues affecting public health and safety. Lawyers in the fields of toxic torts or environmental law must carefully review any similar statute that is being considered or has passed in their state.

Notes

(1.) 60 Minutes: `A' for apple (CBS television broadcast, Feb. 26, 1989).

(2.) Auvil v. CBS 60 Minutes, 67 F.3d 816 (9th Cir. 1995), cert. denied, 116 S. Ct. 1567 (1996).

(3.) The elements of a claim for trade libel or product disparagement are stated in RESTATEMENT (SECOND) OF TORTS [sections]623A:

One who publishes a false statement

harmful to the interests of another is

subject to liability for pecuniary loss

resulting to the other if, (a) he

intends for publication of the statement to

result in harm to interests of the

other having pecuniary value, or

either recognizes or should

recognize that it is likely to do so,

and (b) he knows that the statement

is false or acts in reckless

disregard of its truth or falsity.

In defending against such an action in the absence of agricultural disparagement statutes, the defense has been entitled to employ the same privileges and defenses as have been traditionally afforded to defendants in defamation actions.

(4.) In a few states, the statutes define eligible plaintiffs more broadly. For example, the Alabama statute defines a producer as "any person who produces, markets, or sells a perishable food product." (ALA. CODE [sections]6-5-622 (1996).) The Georgia statute specifically grants a cause of action to any party in the "entire chain from grower to consumer." (GA. CODE ANN. [sections]2-16-2 (1997).)

(5.) See, e.g., TEX. CIV. PRAC. & REM. CODE ANN. [sections]96.003 (West 1997). These laws suffer from potential constitutional problems. See Philadelphia Newspapers, Inc. v. Hepps, 475 U.S. 767 (1986) (placing the burden of proving the falsity of a statement on the plaintiff). Many of the agricultural disparagement laws, however, do not include such provisions. As to free speech, these statutes generally fail to recognize the entrenched "actual malice" standard. See Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974); Rosenbloom v. Metromedia, Inc., 403 U.S. 29 (1971); and New York Times Co. v. Sullivan, 376 U.S. 254 (1964).

(6.) The Oprah Winfrey Show (ABC television broadcast,Apr.16, 1996).

(7.) Engler v. Winfrey, No.2-96-cv-233 (N.D. Tex. filed June, 1996).

(8.) Letter from Marshall Matz, on behalf of the United Fresh Fruit & Vegetable Ass'n, to Michael Colby (Apr. 10, 1997) (on file with author).

(9.) Letter from Bill Hargraves, FOOD TECHnology Service, Inc., to Dr. Lyle Wong, Hawaii Dep't of Agriculture (Aug. 8, 1995) (on file with author).

(10.) Environmental auditing can take many forms, including legally mandated reviews of plant safety, voluntary reviews of opportunities for pollution prevention or safety enhancement, a detailed one-time internal inspection of a facility for compliance with all relevant legal requirements, a periodic or random spot-check of environmental or safety performance aspects of an entire corporation, or a "paper" review that examines only a firm's management systems and programs These audits may be internal or external in nature, using either internal personnel or outside consultants or experts.

(11.) OR. REV. STAT [sections]468.963 (1996); 1997 OR. LAWS 320.

(12.) This organization includes the following companies: Coors Brewing, DuPont, Elf Atochem North America, Eli Lilly, Hoeschst Celanese, ITT, Kaiser Aluminum & Chemical, Kohler, 3M, Owens Corning, Pfizer, Polaroid, Procter & Gamble, Textron, and Weyerhaeuser.

(13.) See United States v. Chevron U.S.A., Inc., No. 88-6681,1989 U.S. Dist. LEXIS 12267 (E. D. Pa. Oct. 16,1989). Chevron was required to disclose its 1987 internal environmental audit and other documents to the EPA in a civil enforcement action. The company argued that the documents were privileged because a corporate attorney was involved in their preparation. The magistrate rejected this argument and ordered the documents to be turned over to the EPA, holding that

it is not enough to assert the

[attorney-client] privilege merely

because an attorney was present

or was one of the parties to whom the

communication was

made. The communication must

be between the client and

attorney in his or her capacity as

an attorney rather than as, for

example, a business adviser.

Additionally, the communication's

primary purpose must be to gain or

provide legal assistance.

Id. at *18.

(14.) Voluntary Environmental Audit Protection Act, S. 582, 104th Cong. (1995).

(15.) Press release of Sen. Mark O. Hatfield for S. 582 (Mar. 21, 1995).

(16.) The Environmental Protection Partnership Act, S. 866, 105th Cong. (1997).

(17.) The Voluntary Environmental Self-Evaluation Act, H.R. 1884, 104th Cong. (1997).

(18.) Some of these laws challenge decades of First Amendment constitutional protection for public disclosures by government employees. See Pickering v. Board of Educ., 391 U.S. 563 (1968). There is little question that workers who violate the gag orders institutionalized by these bills would face termination. Shielded by this legislation, employers could retaliate with impunity against any whistleblower.

(19.) COLO. REV. STAT. [sections]13-25-126.5 (1996).

(20.) It should be noted that some corporate studies on environment and safety would still be required to be disclosed to the government and to the public under existing legal requirements. For instance, the federal Community Right-to-Know Act initiates an obligation to disclose estimates of toxic releases, to identify whether a company uses EPA-listed toxic chemicals, and, for certain substances, to identify the maximum amount of the substance stored on-site. (42 U.S.C. [sections]11001 (1997).) Firms must also file permit application forms and submit information to agencies under the Clean Water Act (33 U.S.C. [sections]1251 (1994)) and the Clean Air Act (42 U.S.C. [sections]7401 (1994)).

Gerson H. Smoger is a partner with Smoger & Associates in Dallas and in Oakland, California.