International Paper Company v. Ouellette – Oral Argument – November 04, 1986

Media for International Paper Company v. Ouellette

Audio Transcription for Opinion Announcement – January 21, 1987 in International Paper Company v. Ouellette

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William H. Rehnquist:

We will hear argument now in No. 85-1233, International Paper Company versus Ouellette.

Mr. Reardon, you may proceed whenever you are ready.

Roy L. Reardon:

Mr. Chief Justice, and may it please the Court, this is a class action brought by citizens of Vermont who own property on the Vermont side of Lake Champlain.

The State of Vermont is also a plaintiff in this case because of its property ownership on the same side.

The petitioner here has a paper mill on the New York side of Lake Chaplain and discharges effluent into Lake Champlain in connection with the manufacture of paper.

The petitioner is regulated by New York State, which is part of the procedure set up under the Clean Water Act which supplements the regulation which the Act provides initially by the EPA, the Federal EPA.

In this particular case the permit is supervised in a very detailed way and the plant policed by the State of New York.

While there is a challenge in the case to the manner in which the petitioner has performed under the permit the basic thrust of the lawsuit, at least in this phase, is a common law claim of nuisance.

The plaintiffs here, the respondents in this Court, seek compensatory damages of $20 million and punitive damages of $100 million.

The petitioner moved to dismiss in the District Court, and basically the District Court held decision on that motion pending the resolution of what we refer to as Milwaukee III, which is the Seventh Circuit opinion which is referred to very fully in the briefs of both sides.

The motion to dismiss by the petitioner was predicated on the decisions of this Court in Milwaukee I and Milwaukee II and by reason of the amendments to the Clean Water Act in 1972.

Now, as the Court has very fully discussed in its two opinions to which I have referred, the Act is an extremely comprehensive Act which covers the field with respect to pollution of navigable waters and interstate waters.

There is basically regulation by the Federal Government.

The Act permits supplementation of that on more or less a dual regulatory basis by the states with the states being able to take over and assume the regulation to the extent that the state regulation equals or exceeds in terms of stringency what the Federal requirements are.

The Federal requirements are obviously technical in nature, dealing with the extent to which obvious discharges from manufacturing facilities are permitted to be injected into interstate waters.

There is within the framework of this Act a very careful balance between the position of the Federal Government and the Federal regulation and the position of the source state, and provides amply for source state regulation, indeed for the total displacement of Federal regulation by enabling the states to take over to the extent that their requirements meet or exceed the requirements of the EPA.

Under the permitting procedure, to the extent one does not obtain a permit you are in fact in violation of the law and acting illegally.

The permitting procedure if handled by the Federal Government basically calls upon the EPA to give adequate notice to those states, including the source state, which could be affected by the issuance of the permit, so everyone gets an opportunity to be heard within the framework of Federal regulation.

To the extent the states assume that role by reason of their own regulations, equal to or more stringent than those of the Federal Government, similar notice is given to affected states, non-source states, so that they again may be given the opportunity to participate in the permitting procedure.

Now, within the framework of that Act it seems to me that there is before this Court two issues.

Simply stated, the first issue is the extent to which Vermont law can be applied with respect to what has happened here anti what is involved here, and secondly, the extent to which there may be jurisdiction within the Vermont courts to hear the matter under the provisions of the Clean Water Act.

Byron R. White:

You say when the state undertakes the job then it gives notice, and so on and so forth.

Undertakes what job?

Roy L. Reardon:

Undertakes the… a state under the Act may assume the role of the authority which regulates the discharger in the source state.

Byron R. White:

In making the law or just… or making its own law conforming to Federal standards?

Roy L. Reardon:

Making its own standard provided it is equal to the Federal standard or more stringent.

Byron R. White:

But it is nevertheless a state law?

Roy L. Reardon:

It is a state permitting procedure.

It is the basic part of the Clean Water Act that the state may do this in terms of regulation.

Byron R. White:

But if someone sues and says a discharge is not conforming with the law, is it state law that he is–

Roy L. Reardon:

To the extent that–

Byron R. White:

–acting under or not?

Roy L. Reardon:

–Well, to the extent that there is a challenge permitted directly by the Act, that challenge can come from a citizen.

Byron R. White:

Yes.

Roy L. Reardon:

And to that extent the challenge would be based upon source state law as we see it in this particular case.

Byron R. White:

And that is what this… that isn’t what this case says?

Roy L. Reardon:

Well, there is a very fundamental issue here with respect to what law is applicable with respect to the claims made by the plaintiffs in this case.

We under… starting at the beginning point of Milwaukee I, where this Court, we believe, concluded that Interstate water pollution was a matter of Federal concern as to which Federal common law applied, and proceeding to Milwaukee II, where the Court stated, we believe that Federal common law had been displaced by the amendments to the Clean Water Act, we come now to the conclusion that by reason of the amendments to the Clean Mater Act, indeed, under the specific provisions with respect to where the suit should be brought, and indeed under general preemption principles, that the law of New York is applicable with respect to discharges from a New York source.

Byron R. White:

But why is any state law applicable?

It is because Congress said it could be.

Roy L. Reardon:

Congress–

Byron R. White:

Isn’t that right?

Roy L. Reardon:

–within the basic framework of the Act, Your Honor, Congress has indicated that–

Byron R. White:

New York can–

Roy L. Reardon:

–we feel source state law is applicable.

In this case New York.

Byron R. White:

–Well, Congress says the source… the state may make the law for it.

Roy L. Reardon:

Well, it really talks in terms of regulation as distinguished from making the law, but–

Byron R. White:

Yes, but you just told me the state could set the standards, too.

Roy L. Reardon:

–It does, Your Honor, the technological standards.

Yes, Your Honor.

Byron R. White:

And I suppose you say that Congress anticipated that the source state would set such standards if it undertook the job.

Roy L. Reardon:

I do, indeed, Your Honor.

William J. Brennan, Jr.:

Mr. Reardon, did you say there was some suits reserved for the state courts?

Roy L. Reardon:

Yes, Your Honor.

Indeed–

William J. Brennan, Jr.:

Which are they?

Roy L. Reardon:

–Well, under the general framework of the statute, you may bring a suit within the source state either in the state or the Federal court if you are an injured party.

Our position would be that you may bring such a suit.

William J. Brennan, Jr.:

Perhaps I misunderstood you.

William J. Brennan, Jr.:

I thought you said there were some kinds of suits that could be brought only in state court.

Roy L. Reardon:

No, Your Honor.

William J. Brennan, Jr.:

I am sorry.

Is there any reason–

–Excuse me.

What if xxx citizens of different states… citizens of the same state?

Roy L. Reardon:

If it is citizens of the same state who are challenged–

Byron R. White:

They aren’t… say the suit is that here you have a permit under New York law and I claim that you are violating the New York standards, and that is a claim under New York law, isn’t it?

Roy L. Reardon:

–It is really a claim under the Act, Your Honor, because if you are proceeding–

Byron R. White:

You mean you could go right into Federal court on a claim like that if you live in the same state as the discharger?

Roy L. Reardon:

–Well, my understanding is that the Act provides that you must proceed within the district in which the source is located.

Now, I think there can be diversity jurisdiction within the source state.

On the other hand, if you have citizens of the same state I would believe you would be relegated to state court.

Byron R. White:

That is… so it is not a Federal question in my example.

Roy L. Reardon:

It would not be a Federal jurisdiction-based issue at that point, Your Honor.

Byron R. White:

All right.

Roy L. Reardon:

It would be a challenge to whether or not there has been compliance with the permit as administered by the state.

Sandra Day O’Connor:

And you take the position, Mr. Reardon, that even in a diversity suit that a Federal District Court could not entertain the action in the State of Vermont–

Roy L. Reardon:

Yes, Your Honor.

Sandra Day O’Connor:

–under this Act?

Roy L. Reardon:

Yes, we do.

Byron R. White:

xxx to have to apply New York law.

Roy L. Reardon:

Yes, Your Honor, we would say that under this particular provision it is our position that New York law would in fact apply rather than the law of Vermont.

Antonin Scalia:

Why do you say that it is a state law action?

Wouldn’t the suit be for violation of the Federal law?

Roy L. Reardon:

Well, there can be two suits, Your Honor.

Maybe I misunderstood His Honor’s question.

There can be a suit directly brought in accordance with the provisions of the Act under which a Governor or citizen may challenge compliance with a discharger’s activities under the permit which is issued.

Antonin Scalia:

Right, and even though the level of discharge and the technological requirements are established by the state, if you violate that you are violating a Federal law, right, and the suit would be for violation of Federal law.

Roy L. Reardon:

That is true, Your Honor.

Antonin Scalia:

So that even if you had two citizens from the same state you could bring it in Federal court.

Roy L. Reardon:

On a Federal jurisdiction basis.

Well, now you have given two different answers to the same question.

Roy L. Reardon:

Now I have given two different answers.

I appreciate that, Your Honor.

I guess perhaps what I was thinking of is the common law nuisance suit, which is also part of what is involved in this case, and the question–

Because that would solve the whole question of whether Vermont can apply its own law, if the only law that is applicable to this discharge is a Federal law.

Well, whatever court you have to bring it in is going to apply Federal law.

Roy L. Reardon:

–With respect to the Federal claim, with respect to a violation of the permit.

However, with respect to a common law claim, which is part of what we are dealing with here, we come to the question which is one of the basic questions in the case, the extent to which Vermont law can be applied by reason of the general scheme of the Act which suggests that law other than the law of the source state has in fact been preempted, so that you wind up with a common law nuisance, as the Seventh Circuit in fact held, a common law nuisance case could lie in the state court of New York applying New York law, which would or could be a diversity case, and I believe that may be where I was misleading the Court in my earlier comments.

The irony of the situation–

Before you go on, in that New York State nuisance action I assume that New York State could have the standards of pollution that are necessary to sustain a nuisance action a good deal lower than the standards that it fixes for purposes of the Federal Water Pollution Act, couldn’t it?

Roy L. Reardon:

–I would think that is possible, Your Honor, although I would think in application it would be unlikely, but I will concede it is possible.

Right, but it could.

I mean, that is, unless you are a really bad polluter there is no nuisance action.

You can be a polluter without being a nuisance.

New York could write its law that way if it wanted to.

Roy L. Reardon:

It could.

The law of nuisance being as vague as it is, it is sort of difficult to be sure, but I will concede that for purposes of Your Honor’s question.

Because it wasn’t a nuisance wouldn’t mean that you wouldn’t have another cause of action for violation of the permit.

Roy L. Reardon:

That would be a different claim entirely, Your Honor.

Yes.

Roy L. Reardon:

That is a separate and distinct claim, I would expect.

Mr. Reardon, I take it the Federal Government here takes the position that it is also possible to have a common law damages action in the State of Vermont–

Roy L. Reardon:

It does, Your Honor.

–based on whatever New York State has set as the pollution limit.

Roy L. Reardon:

Yes, they suggest that that action proceeding in Vermont would look to New York’s choice of law with respect to what law would apply.

Right, and that it could be in either Vermont State or Federal District Court.

Roy L. Reardon:

They do say that.

They limit that argument, however, Your Honor, as I understand it, with respect to a claim for compensatory damages, the theory being, which is a theory as to which we do not agree, the theory being that that aspect of the claim would not be regulatory in nature, so to that extent, unlike abatement, and unlike punitive damages, a claim for compensatory damages being merely regulatory, the binding effect of the scheme of the Act in general, namely, to limit recourse to the source state law, would not be applicable.

And you plan to address that?

Roy L. Reardon:

I do, Your Honor.

I will do it now if it pleases the Court.

I fundamentally see no reason why there should be the distinction which the government makes.

The statutory scheme is very clear.

Pollution of interstate waters has been held very specifically to be a problem of national dimension which the Federal court should address.

The Congress did address it after studying the matter for many years and concluded that within the framework of the Act the source state and the Federal government would be the partnership that would regulate in a sensible way the control of pollution in the navigable rivers and streams and interstate waters of the United States.

Now, for a unique reason which I do not acknowledge as being valid the government here argues that because it’s compensatory damages that it should be treated differently, that compensatory damages do not interfere with this overall regulatory purpose.

Well, if I may–

Does our… does this Court’s decision in Silkwood and Kerr-McGee have some relevance to that inquiry, do you suppose?

Roy L. Reardon:

–My understanding, if Your Honor please, of Silkwood is that it represents a basic reconciliation of two separate Federal laws, the first providing to the NRC or the Atomic Energy Commission or what have you the preemption, the regulation of safety within atomic energy facilities.

Well, I think the thrust of it is that tort remedies, state tort remedies may be compatible even with a comprehensive Federal regulatory schemes.

Roy L. Reardon:

I would agree with that, Your Honor, but you must… at least I feel I must read that case, taking into account that there was a Federal statute specifically dealing with this, to wit, Price Andersen, which I understood the Court to very specifically hinge its position on and find on the basis of that that there was a very clear and distinct determination by Congress that the tension created by the preemption of the safety Issue in the atomic energy aspects had to be, and Congress had in fact reconciled it with the equally compelling reason provided by statute and the legislative history that there should be private rights of action under state law, and that is not present here.

At least I don’t see it.

So that is the distinction, and I think it is a valid one in terms of Silkwood.

So it is not the same situation in any respect, and I might say, Your Honor, this whole question of compensatory damages is most troubling when it comes in the context of a nuisance situation.

The government makes the argument that compensatory damages is really economic, that it is only incidental.

Well, when you are accused of committing a nuisance, particularly in a situation such as this, where the defendant has committed millions of dollars toward putting up a plant and is a discharger complying every day and under the scrutiny of the state lay and the state permitting authority, it is nonetheless faced with the possibility that it can and rill have to meet all sorts of downstream common law nuisance claims and nuisance being so unique in the sense that it is not like any other tort.

The unique feature of nuisance is if the Court concludes there is in fact a nuisance, the great danger will be that the only relief is abatement.

And if it isn’t abatement, if you do not abate, you run the risk of continuing damage every day you keep the nuisance in place, so to that extent in… as distinguished from any other tort, when you are dealing with a tort of nuisance, you are dealing with something much more potent and as equally regulatory as the remedy of abatement or the remedy of punitive damages.

Mr. Reardon, had the Federal legislation never been passed… just assume we never had any Federal legislation… then you would have precisely the same problem, wouldn’t you?

Roy L. Reardon:

Well, if Federal legislation had not been passed, Your Honor, we would be operating under the Federal common law, because I believe Milwaukee I told us that Federal law controls in Interstate disputes.

To that extent–

Do you think… even when it is purely private parties, you think that was clear?

Roy L. Reardon:

–I do, Your Honor, I don’t think that makes a valid distinction, and I think the prevailing opinion or the only opinion in Milwaukee I indicates, I believe, that the character of the parties, as Justice Douglas said it, the character of the parties makes no difference in connection with this issue.

So I don’t think, whether it is a governmental body or a state which is suing or whether it is a private party makes any difference in the sense of the application of the Federal common law pre–

So that in your view you should prevail unless the Federal legislation had the effect of creating an additional remedy for private citizens of Vermont that did not previously exist?

Roy L. Reardon:

–Yes, Your Honor, precisely.

Or unless the Federal law sale we will let state common law control.

Roy L. Reardon:

Yes, but it–

And if you say that New York nuisance actions are available–

Roy L. Reardon:

–In the source state, Your Honor, they are.

–Yes.

That wouldn’t have been true, would it?

Roy L. Reardon:

Yes, Your Honor.

It would have been true, yes, it would, under Milwaukee I because it is just the source state.

Roy L. Reardon:

Yes, Your Honor.

Someone could have brought that claim.

It would have been–

No one in Vermont could have.

Roy L. Reardon:

–It would have been a Federal law… a Federal common law claim could have been brought in New York, yes.

So, If I may harken back to the point that I was making with respect to the issue of nuisance and the government’s distinction, I don’t think it is a valid distinction.

Now, there are several other arguments upon which the District Court and the Second Circuit based its decision, and I would like to talk about the savings clauses of the Clean Water Act amendments which were passed in 1972, and to begin with, as Justice Stevens was developing in questions to me, it is our position that even prior to Milwaukee I, an issue with respect to interstate waters, resolution of disputes in that area would have been covered by the Federal common law.

Even before Milwaukee I there was a decision of this Court in Hinderlider which we have referred to in the briefs which suggest in such disputes, disputes with respect to interstate waters, they are resolved by seeking to determine under the guidance of Federal common law.

When you talk about savings clauses, chronologically, I think it is important to appreciate the fact that the Milwaukee I decision came down in April of 1972.

The Clean Water Amendments were passed in October of 1972.

As of the time Milwaukee I came down, it, I believe, flatly said that there are no rights within the states to seek to impose the laws of the states with respect to issues dealing with interstate water pollution.

That being the case, and Federal law being dominant, as of the time the statute was passed I respectfully suggest that there was nothing to say.

There were no state remedies which could exist under Milwaukee I.

The remedies with respect to such disputes were limited to resort to the Federal common law.

Do you think Milwaukee I ruled out a suit in a state court claiming state remedies?

Roy L. Reardon:

Yes, Your Honor, I do.

I think the Federal common law.

Now, are we talking about an interstate body of water, Your Honor?

An interstate body of water in the same sense that Hinderlider versus LaPlata was.

Roy L. Reardon:

Yes, Your Honor, because I think it would represent an attempt by a state to impose its law in a unitary way with respect to a controversy that was interstate and more Federal in character than would be permissible.

That is easy to see where it is, let’s say the source of pollution is New York and it is easy to see how Milwaukee I would prevent Vermont from applying its law to a New York polluter.

Would Milwaukee I necessarily prevent New York from applying its law to a New York source that is polluting in Vermont?

I mean, the rationale of the case is interstate conflict, and there is no interstate conflict here.

New York is applying its law to a polluter within New York, and allows a Vermont citizen to sue in New York courts for the pollution.

Would Milwaukee I have prevented that?

Roy L. Reardon:

No, I think it is the application of the law of another state–

Of Vermont.

Roy L. Reardon:

–into the law of the source state which would be prescribed, Your Honor.

Yes.

Right.

Roy L. Reardon:

In any event, the point that I was making is that as of the time of the passage of the Act there were no state statutes under our interpretation, no state rights to be saved.

I might also say that the burden of the legislative history upon which those who make this argument rely is legislative history which was generated prior to the decision of this Court in Milwaukee I, so it is really not helpful to look at that legislative history to ascertain the intention of Congress, particularly since Milwaukee I was in place before the law was in fact passed.

The two particular savings provisions to which the courts below have referred, the first is the citizen suit provision and the second is the state authority provision.

With respect to the citizen suit provision that provision, as this Court pointed out in Milwaukee II, is almost identical if not actually the same as many other statutes on the books with respect to environmental matters, so that it is not really capable of providing any guidance with respect to the specific intention of Congress when it passed these amendments to the Clean Water Act as to what it intended to save, what was there, or what the future might be in terms of the law.

The same is true with respect to Section 5.10.

Section 5.10 has been held again by this Court to relate simply to matters dealing with the source state, and I might also say that a section of the law prior to the amendments in 1972 quite comparable to this was not believed at the time Milwaukee I was decided to have any effect.

There was a comparable statute on the books and when Justice Douglas’s opinion came out in Milwaukee I, it gave no heed to that provision as preserving states’ rights.

With the Court’s permission I would very much like to reserve the few remaining minutes for rebuttal.

William H. Rehnquist:

Thank you, Mr. Reardon.

We will hear next from you, Mr. Langrock.

Peter F. Langrock:

Mr. Chief Justice, and may it please the Court, what we have here is a private nuisance action brought by citizens of the state of Vermont against a New York corporation which was removed from Vermont courts to the Federal court based on diversity of jurisdiction.

We are seeking compensatory damages for actual damages done to property owned by my clients.

We are seeking punitive damages and we are seeking injunctive relief if under usual theories of equity jurisprudence injunctive relief is appropriate.

We are suggesting to this Court that Vermont law in the Vermont courts or the Vermont Federal court in this case is appropriate.

In full candor the solicitor’s position is such that they ask for a division in effect, of Vermont law and New York law based upon the compensatory versus punitive Injunctive relief.

We don’t think that will make any difference in our case.

As far as we know Vermont law and New York law are identical on the question of private nuisance, in effect that unless this Court holds that we are cut off from all remedies, the damages done to our properties, that the position of the court below should be affirmed.

The reason that we think Vermont law applies is, first of all, under traditional choice of law provisions.

We think the Act preserves it.

There are the saving clauses 1370 and 1365(e).

There is the legislative history.

We don’t read the Milwaukee cases as changing that, and we think whatever analysis of Federal preemption, either express or implied, by the petitioner is incorrect.

What I would like to do first is talk about the saving clause itself and the legislative history.

Quite clearly the legislative history says that a private damages, private action damages is to be preserved.

Peter F. Langrock:

I think one of the questions–

You are referring to in-state, though.

Peter F. Langrock:

–Excuse me?

I mean, that is not clearly referring to an interstate cause of action.

Peter F. Langrock:

We are saying whatever existed at common law or statutory state.

And we have to go with whatever was existing.

And certainly the private nuisance going back to Tennessee… Georgia versus Tennessee Copper was recognized in interstate pollution type cases.

That’s right.

But what Milwaukee I said is that there wasn’t any, and that was before the statute was passed.

Peter F. Langrock:

Milwaukee I said, if I understand the way the holding of that was set forth in Justice Rehnquist’s opinion in Milwaukee II, was that a state could no longer depend on Federal common law, or that held a state had to go to Federal common law to abate a nuisance, and that was the only holding.

And when the Federal Clean Water Act came along, then Milwaukee II came down.

Milwaukee II says you have a minimum standard that is set by Congress, and we are not going to create in the Federal courts a superlegislature to impose a higher minimum standard.

But it certainly did nothing to displace any other existing state law that we can see, either expressly or by Federal preemption.

I understand, but what state law did you have?

Once you said that there is no state law on the matter but only Federal common law, what state law was preserved by these preservation clauses?

Peter F. Langrock:

Either… If we are damaged under a nuisance theory prior to Milwaukee I we have an action, a state court action.

Milwaukee I could be read to say you no longer have that, or you can say that was an original jurisdiction case.

We are creating it to deal with that problem and we don’t know where that opinion would have gone because six months later we have the Federal law in a narrow band, not a comprehensive statute, really, but a narrow band of problems comes and directly deals with the problem of Milwaukee I.

Well, you say it is essential to your case then that we read Milwaukee I very narrowly.

Peter F. Langrock:

No, you could also say that you have created a whole Federal common law of private nuisance.

I don’t think that is necessary.

But I don’t think–

If we do say that then you don’t have a suit on Vermont law or on New York law.

Peter F. Langrock:

–That is correct.

We would have to go back to the development.

What would have happened–

On Vermont law, anyway, right.

Peter F. Langrock:

–What would have happened, as Justice Stevens pointed out, had Milwaukee I gone into its full growth before the passage of the Act we don’t know, but it seems to me that if… there is no authority that I know of for cutting off our rights as injured parties.

Yet I think looking at the scope of the Act might be worthwhile.

This is an Act which deals not with all water pollution of navigable waters.

Peter F. Langrock:

It deals only with a minimum standard, a floor imposed upon the states.

The purpose of the Act, it is not a license to allow pollution, but the purpose of the Act was to, as set forth in the statute itself, to eliminate all pollution by 1985.

And so given that narrow network, that this was such that all Milwaukee II did in interpreting Milwaukee I as far as I can see is say Federal courts, don’t super impose your judgment on Congress by saying we are having higher limitations, but it says nothing about all the rest of that body of law out there.

It still says we are still talking about Federal common law.

Whatever you do choose to–

Peter F. Langrock:

If Milwaukee I is read as creating all Federal law and replacing all state law, then we loss on the state law claim.

If, however, at that Point we then have a Federal common law claim to deal with the type of nuisances we have, and then we would have to read Milwaukee II a little bit more narrowly and let that go.

If you don’t read them that way what you have done is abolished a right of action, a claim or property right which is traditional in the states, and there is no intention that Congress intended to do that, and we hope this Court would not intend to do that.

The Federal preemption analysis which really I have gone into here–

–There would be a… wouldn’t there be an action based on a claimed violation of the permit?

Peter F. Langrock:

–Except for the Sea Clammers, Your Honor.

We could as individuals, citizen suit or an administrator, go in and try to enforce the permit.

We claim in our suit that there are violations of the permit.

We claim that the permit itself does not absolve us from the injury we receive, and the legislative history suggests that that type of cause of action is preserved.

Well, so you don’t say you don’t have a remedy.

You just say you don’t have a remedy to enforce standards higher than the permit.

Peter F. Langrock:

We don’t have–

If the violation… If you proved a violation of the permit and proved that that violation was causing you damage, you would recover something.

Peter F. Langrock:

–I don’t think so, because under Sea Clammers there is no newly created right based upon the Federal statute or private cause of action.

All we can do is go in and enforce the permit.

Here we are suggesting really it is the traditional eminent domain concept of nuisance law that you have a polluter and you have an injured party, and the Court in its equity jurisprudence has to make a decision whether to use injunctive relief or damages enough to pay for it.

But we don’t let somebody pollute and damage this person without some sort of compensation.

Well, Sea Clammers said that the statutory remedies given private parties foreclosed any other private remedies, I take it.

Peter F. Langrock:

I don’t read it–

Well, it foreclosed a 1983 remedy, didn’t it?

Peter F. Langrock:

–Yes, it did, but we are not–

It foreclosed… it said Congress didn’t intend any private remedies other than what it provided for.

Peter F. Langrock:

–I don’t think, Your honor, It reached the position of a private nuisance case.

Well, but it reached a position of as private suit under 1983.

Peter F. Langrock:

That’s correct, Your Honor.

Which would have given a remedy in damages which the statutory suit would not.

Peter F. Langrock:

The analysis of 1983 I think is particular and peculiar to that case.

I don’t think that that case can be held by analysis to cover all common law state nuisance cases.

So you say Congress intended to foreclose any private remedies except damage remedies.

Peter F. Langrock:

What I am saying is that Congress–

But not a damage remedy under 1983.

Peter F. Langrock:

–Congress did not deal with 1983 or the Sea Clammers in the legislative history.

It quite clearly said in its legislative history that this Act and the meaning of this permit will not bar rights for people who are actually injured.

Essential to our case is that we meet the standards, and they are difficult standards, of a private nuisance under common law, under the law of the State of Vermont, the law of the State of New York, or in the unique situation if we broadly read Milwaukee I under a Federal common law, which I don’t think is necessary or the appropriate reading of that.

Well, even if you said that you are entitled to a damage suit perhaps the only kind of a Carnage suit you are entitled to is one in which you prove a violation of the permit.

Peter F. Langrock:

That would be… that might be the case.

Your Honor, if that were a license–

Because the statutory scheme is such that people give… New York is given a permit consistent with Federal standards.

Peter F. Langrock:

–Your Honor, the Federal standards put forth are minimum standards.

The job of this whole statute is not to allow pollution but to eliminate it.

But it has allowed… it allows New York to set higher standards.

Peter F. Langrock:

That’s right.

And you say it allows Vermont to set higher standards also.

Peter F. Langrock:

Yes, it does.

For dischargers in a foreign state.

Peter F. Langrock:

It does in the case, at least, Your Honor, of a private right of action, but in any case even if that… even if New York law applies we win.

You mean a New York nuisance law.

Peter F. Langrock:

That’s right.

Even though there is no violation of the permit.

Peter F. Langrock:

That’s right.

There’s specific language.

The regulations indicate that a permit does not give you a right to violate any rights under, I think it is 122.5.

The legislative history talks in terms of that, and it is part of looking at the scheme.

This was a scheme to start at a base level to eliminate pollution, encouraging the states by their own experiments in their own laboratories to go further.

It wasn’t to displace rights.

Peter F. Langrock:

It wasn’t to take away rights of people who are being damaged by pollution.

I mean, Congress didn’t come in and say we want to stop these plaintiffs who have been hurt from collecting damages against International Paper Company.

That wasn’t in there at all.

And so whatever state law existed has to be preempted by the Court’s own tests–

What about an injunction?

Peter F. Langrock:

–An injunction?

That again, Your Honor, we think it is appropriate if it meets the usual standards of equitable jurisprudence.

The case… there is the Boomer case In New York, which says when you have got a cement plant with 300 employees and you have all these matters, we don’t give an injunction because we can deal with damages.

The furtherance of this Act makes the polluter make the choice, the economic choice of either paying more to clean up his plant if possible or paying damages for the person–

But you don’t think there is any flat rule on your getting an injunction against these dischargers whether they are consistent with the permit or not?

Peter F. Langrock:

–I don’t think there Is any flat rule.

I think that for a private party who is being injured… you might take a situation where there is a very limited factual pattern where the damage to that individual, even though meeting the Federal permits, was so great and so outrageous as opposed to a very minor inconvenience for the polluter that the Court might grant that.

It may only be a matter of a small change.

But in this situation factually it would appear that this comes closer to the type of problem that you had in the situation in Boomer where you had a cement factory.

Here is the problem with that.

It is clear from the structure of the Act that the polluting state, the source state was to have the main call on what the level of protection was going to be both as to permitting, since they would set the permit level, and also as to whether they want to go above that level in their own domestic law.

Now, it is one thing to say that the source state can adopt some domestic law allowing injunctions even when the permit is not violated, but if you allow the non-source state to do that you are in effect allowing the non-source state to do the same thing as permitting the plant, because you can’t operate without a permit.

Similarly, you can’t operate if you have an injunction from a Vermont court.

Peter F. Langrock:

I understand that.

Again, I want to point out that we can get an injunction at whatever level under New York law for our particular case, but responding to your question–

Yes.

Well, I am just talking about Vermont law right now.

Peter F. Langrock:

–It seems to me that there is nothing in this Act which… if we took away Illinois… Milwaukee I, Milwaukee II, and this Act, where would we be?

We would be having states dealing with state common law with regard to their rights.

We would have the same type of situation that we had in Georgia versus Tennessee Copper.

We have to then look to what displaces it.

There is nothing that says that the State of New York because it has this minimal permit process has the right to dump sewage, to dump pollutants onto Vermont, and here is a perfect example.

These are boundary waters.

This pipe that dumps it out at the lake is within feet, 100 feet, 200 feet, of the Vermont border, and to give permanent… to say that New York can pollute all it Manes to at some level at the cost of Vermont is to give a preeminent position to the polluting state rather than the receiving state.

But that is what the statute does.

The statute does give a preeminent position to the source state, and if you want to protect against that perhaps some residual Federal common law can prevent against it, but to say that Vermont can step in and interpose its own law to prevent it is contrary to the scheme of the Act, Isn’t it?

Peter F. Langrock:

I don’t think so.

I think the Act responds and says we want to stop pollution.

Here is a minimum for all.

It is stopgap.

He go to the states.

If we are going to replace the state law that existed in Tennessee Copper where… there has to be a preemption from some reason.

Where does… this Act certainly doesn’t say we preempt it.

Why does the Act just allow neighboring states to come in in an advisory capacity to comment upon the permit levels?

It doesn’t permit them the right to establish permit levels with respect to pollution that is coming in their direction.

They can only advise, and the source state sets the levels.

Doesn’t that indicate that they are supposed to have–

Peter F. Langrock:

That’s correct, Your Honor, but part of the whole scheme Is that Me are not going to have anybody superimpose a minimum level, raise the floor, whether it be the Federal courts or the out of state, for purposes of a permit process.

This does not, however, prohibit the traditional common law jurisprudence, in our case nuisance law, maybe even injunctive relief, from being applied.

When we deal with a state, if we are dealing with a state apportionment as opposed to state injunctive relief, there may be–

–Well, it doesn’t make a whole lot of sense.

You mean the Federal Government goes to the trouble of saying that Vermont cannot work its will through the permitting process but it is perfectly okay if they do it through nuisance law?

I would consider that to be a conflict with the Federal scheme.

Peter F. Langrock:

–My reading of the Federal scheme is much narrower here.

William H. Rehnquist:

Thank you, Mr. Langrock.

We will hear now from you, Mr. Wallace.

Lawrence G. Wallace:

Thank you, Mr. Chief Justice, and may it please the Court, at the outset I would like to clarify the difference between the kind of case we have before us and cases that are brought under what are called the citizens’ suit provisions of the Federal Act.

There is such a provision.

It is set forth in the appendix to the petition for certiorari at Page A-51, the citizens suit provision to enforce standards under permits issued under the Federal Act, and those suits can be brought regardless of whether the permit is issued by EPA or by a state which has been authorized under the Federal Act to issue permits so long as it meets the Federally prescribed standards and adds whatever additional standards it wishes to add.

Those citizen suits enable the plaintiff to get injunctive relief to require compliance with the permit, and they–

0 xxx.

Lawrence G. Wallace:

–Yes, they are.

Even though it is a state permit and the state has jacked up the standards?

Lawrence G. Wallace:

Well, the District Courts are given Federal question jurisdiction right in this provision, Section 1365, Page A-51.

And the other relief that can be secured is civil penalty relief.

Lawrence G. Wallace:

We have discussed this on Page 14 of our brief, and we show there that any civil penalties secured are shown by the legislative history to be payable to the Federal Treasury, not to the plaintiffs in such cases, and this Court held in the Sea Clammers case in 453 US that there is no implied right of action under the Federal statute for damages by someone claiming to be damaged by violation of the permit standards nor can a 1983 suit be brought.

What the Court did not address in Sea Clammers and what is before the Court today is whether suits can be brought under state nuisance law for damages and for other relief, and that is what we are here to address.

Our answer to whether the Court of Appeals correctly decided this case is yes and no, but mostly yes, and certainly yes in its result of refusing to order dismissal of the complaint, and if the Court please, I will briefly summarize our position and then proceed to the reasons why.

We agree that a state court and by extension a Federal court sitting in diversity jurisdiction can entertain respondents’ state law claims for compensatory damages, punitive damages, and injunctive relief, and as to compensatory damages the Court sitting in Vermont can and should apply either Vermont or New York law, depending on Vermont’s choice of law rules, but as to punitive damages or injunctive relief we believe the effect of the Federal law is to preserve only the law of the source state and thus to require the Vermont court to apply New York law, including New York choice of law principles.

Now, this may, particularly in the damages remedies, bounce back to Vermont law if the New York courts would apply this, but this is not merely an academic question, because it identifies where the legislative jurisdiction lies, which state legislature would have the power to supersede the rule of decision.

Compensatory damages in your view, Mr. Wallace, might be awarded under Vermont law?

Lawrence G. Wallace:

That is our view.

And that is perhaps the most difficult question in the case as we see it.

It is actually less important for purposes of this case than it is for in-state pollution.

I assume that you would take the same position with regard to in-state pollution, and you would say that the state of New York can have a nuisance action… well, you’d say it could do it both for compensatory and for injunctive relief, couldn’t you?

Lawrence G. Wallace:

Yes, and for punitive damages–

And for punitive damages.

Lawrence G. Wallace:

–If it wished.

That is clear to us.

To us the clearest aspect of the case is that the authority of the source state to exceed the Federal Act’s requirements in any of the respects remains unimpaired.

We don’t think the principle of Milwaukee I ever was intended to limit the source state’s authority to deal with in-state pollution.

Mr. Wallace, it would help me understand the government’s position if I suggested a specific concrete example.

The Federal Act applies to any waterway.

I don’t think it is even limited on its face to navigable waters.

So that every state on the Mississippi and Missouri Rivers, for example, if I understand your position correctly, could apply its own state common law of nuisance to obtain injunctions and compensatory damages against a manufacturer that happened to have a plant somewhere on that river, with the result that there may be ten or twelve or more states with different regulatory standards.

Is that the government’s position?

Lawrence G. Wallace:

It is with respect to compensatory damages.

And injunctions?

Lawrence G. Wallace:

Not injunctions.

Not injunctive relief.

We have said that the Vermont court, while it can entertain the case, has to apply New York law with respect to injunctive relief.

That seems to us to be–

With respect to compensatory damages a company would have to comply, for example, with a dozen different standards, despite the Federal Act?

Lawrence G. Wallace:

–Well, what we are saying with respect to compensatory damages is that even though there is compliance with the Federal Act if… and the discharger must remain free to remain in business, if he is actually damaging someone, and that can be proved in court, and the standards of a nuisance action are meant, then he will have to bear the cost for any actual injury that unreasonably results under the nuisance law if it can be proved that he caused it and if it meets the standards of unreasonable conduct under nuisance law and the fact that there was a Federal permit under the Federal Act would certainly be relevant to the reasonableness of what occurred.

Well, if another state had… under its tort law there was strict liability for water pollution, you would say that may be enforced also.

Not just a nuisance question.

Lawrence G. Wallace:

As long as it were only compensatory damages–

Yes.

Lawrence G. Wallace:

–and there were–

You prove the injury and collect your money.

Lawrence G. Wallace:

–Prove the injury and cause of the injury.

Yes.

Lawrence G. Wallace:

We don’t believe that the Federal law–

Even though the polluter was living up to all of the provisions of his permit?

Lawrence G. Wallace:

–That is correct.

It seems to us that that has to be the result so long as the source state were willing to apply its law that way.

But the source state… what do you do with Milwaukee I?

Suppose New York has established its nuisance law in such a fashion that it says it can’t be a nuisance so long as it is complying with the Federal standards that we promulgated.

Now, that is the rule that New York wants.

All right, Vermont comes in and says, we disagree with that, even though you do comply with the standards, we think it is a nuisance in Vermont.

Now, isn’t that precisely the kind of a situation that Milwaukee I was worried about and tried to avoid by saying this is a matter that ought to be handled by Federal common law?

Lawrence G. Wallace:

We don’t believe it is, Mr. Justice.

Milwaukee I addressed the problem of another state other than the source state trying to abate the operation in the source state, trying to order that an operation authorized in the source state be discontinued or changed in some way.

You think it is perfectly okay if they make them pay continuing damages every day for the continuing pollution, so long as they don’t say stop?

That’s the line?

Lawrence G. Wallace:

If they are unreasonably causing injury under that state’s law, which protects the people being injured–

Well, strike unreasonably.

If they are causing injury under that state’s law.

Are you applying a Federal unreasonably standard to that state’s law–

Lawrence G. Wallace:

–No, I–

–Okay, so if they are causing injury under that state’s law–

Lawrence G. Wallace:

–There is not a Federal standard, but there are Federal constitutional limitations on what states can do against out of state sources.

There are limitations in the Federal Constitution against state discrimination against out of state businesses both… under the commerce clause.

There is the Article IV privileges and immunities clause.

There are equal protection limitations.

Lawrence G. Wallace:

The state is not wholly unlimited and, of course, Congress can always limit it further, but what is apparent in the Act is that Congress meant to preserve damage remedies, and as this Court held in Silkwood, and the Court was unanimous with respect to compensatory damages that even though there is a comprehensive Federal regulatory scheme, if that scheme did not provide for damages for persons injured, the ordinary assumption is that Congress continued to rely on state law to provide for the damages.

–But the interstate problem is not extant there, is it?

Lawrence G. Wallace:

It is not, which is the reason we think the punitive damages situation is different, because as in Silkwood we think punitive damages were preserved in this scheme, but only in the source state, and Silkwood did not address the problem of interstate punitive damages which seems to us to come within the Milwaukee I principle of a regulatory measure, and there isn’t the same compelling need to recognize the interstate punitive damages because punitive damages are still available if the source state is willing to provide them.

It isn’t a question of all or nothing.

Mr. Wallace, may I just follow up with one question on this?

As I understand the government’s position, the receiving state retains the compensatory damage remedy but it is precluded… this is where you differ with the District Court… it is precluded from the abatement and the punitive damage remedy.

Lawrence G. Wallace:

Exactly.

And in your view what is the legal source, not the practical argument, of that preclusion?

Is it the statute?

Is it Milwaukee I?

Or did it never exist?

Lawrence G. Wallace:

It is ultimately the principle of Milwaukee I because as we read Milwaukee II what Milwaukee II said was that the provisions, and they are elaborated in Milwaukee II much more than we did in our brief, the provisions for the affected states’ participation in the process give the affected state sufficient recourse under the Federal Act that it no longer should have to resort to Federal common law and the need to create Federal common law has been superseded by the ability of the affected state under the Federal Act to influence the standards that are to be applied so it no longer has to resort to Federal common law for abatement, but Milwaukee II never said that the Federal Act changed the inhibitions that Milwaukee I recognized on out-of-state regulation that necessitated resort to a Federal common law in the first place in the abatement context.

So you are saying that before Milwaukee I was ever decided it would have been permissible for the receiving state to bring an abatement action in a punitive damage claim?

Lawrence G. Wallace:

Well, it was an open question.

Milwaukee I answered the question, and–

And of course you don’t think it answered the question of a private compensatory damage suit.

Lawrence G. Wallace:

–We don’t believe so.

And if we read… you say this is the most difficult issue, and the reason it is difficult is that how broadly do you read Milwaukee I?

Lawrence G. Wallace:

That is correct.

We don’t see any–

Whether or not Federal law, Federal common law completely preempted all actions in interstate pollution cases.

William H. Rehnquist:

Thank you, Mr. Wallace.

Mr. Reardon, do you have something more?

You have three minutes left.

Roy L. Reardon:

Thank you, Your Honor.

If I may, I would like to just carry on with the hypothetical that Justice Powell proposed because I think it highlights the dilemma for the discharger, and you take the discharger in Montana at the headwaters of the Mississippi under the government’s theory can be sued by all of those 18 or so states along the Mississippi under the common law of any of those states for compensatory damages, and that is the tragedy of permitting these individual states to use their own law to circumvent the intention of the Act.

Yes, but your example kind of cuts the other way, because there is not much pollution in Montana that is going to go all the way to Louisiana.

Roy L. Reardon:

No, I will agree with that, Your Honor, but there is an expert in Louisiana who is waiting to say that there is, and that is my problem.

0 [Generallaughter.]

I don’t think you would take his case on a contingent basis, though.

Roy L. Reardon:

That is the very practical dilemma which we face.

Incidentally, before Milwaukee I, Hinderlider was in place, and as I read that case it flatly says interstate disputes with respect to water.

That wasn’t pollution, that was sharing of water.

Clearly a common issue, though, Your Honor, because a discharge and pollution is a sharing of interstate waters in the same sense as usage is.

It is the same thing part and parcel.

With all due respect, Sea Clammers obviously, as we interpret it, does not permit a private suit for violation of the Act, but we are not trying to deny these plaintiffs a right to sue in the source state using source state law and to recover for the nuisance which they suggest has taken place here.

And relying on New York law?

Roy L. Reardon:

Relying on… and relying on New York law and relying upon actually what the statute itself provides in terms of the forum and in terms of the law to be applied.

New York courts would normally give a remedy to… under New York law to injury caused outside the state by conduct occurring inside the state?

Roy L. Reardon:

It would, Your Honor.

That’s it, whether it is a water case or not?

Roy L. Reardon:

Well, I must… let me answer that fully because there is an issue that I would like to raise with Your Honor, and that is the extent, and you get into this when you deal with property issues, cases relating to injury to property, whether you have a transitory action or not a transitory action, which is a minefield of difficulty going way back to 1811, when Justice Marshall wrote a decision in the Livingston case and dealt with the doctrine which has really been eroded over the course of years that there should be no–

So Vermont, the Vermont plaintiff could come over to New York and not only get compensatory damages but punitive damages?

Roy L. Reardon:

–Yes, Your Honor, if New York would provide for it.

Yes.

Why not in Vermont?

Why can’t he sue in Vermont on the same cause of action in Vermont court?

Roy L. Reardon:

The Vermont plaintiff?

Yes.

Roy L. Reardon:

Basically because the statute provides a scheme under which the source state is the place to go.

Yes, but–

–This is not a statutory cause of action.

He is suing on a state cause of action.

Roy L. Reardon:

I understand that, Your Honor, but for the same reason that the Mississippi hypothetical creates the tragedy you see there, the same would be true if you permitted that plaintiff to circumvent, to go around and do by the back door–

He is not circumventing… he sues in a Vermont court and he says I am suing under New York law.

This is a diversity action and we are going to apply New York law.

Wouldn’t that be permissible?

Roy L. Reardon:

–No, Your Honor.

We respectfully submit it would not be, that he would have to sue in the source state because that is the forum that the law suggests is appropriate for dealing with this problem under 505(c) of the Act, and if you lose that–

Well, it is one thing to say he couldn’t apply Vermont law, but it is certainly another thing to say that he couldn’t sue in Vermont, and as long as he can get jurisdiction over his defendant why couldn’t he apply New York law?

Roy L. Reardon:

–It is not a matter of personal jurisdiction.

We don’t challenge that.

We are in Vermont.

We challenge it on the basis of what the statutory scheme in fact permits, Your Honor, or suggests ought to be the way forum is resolved, keeping and enabling the discharger to understand where it is he is going to be challenged.

William H. Rehnquist:

Thank you, Mr. Reardon.

The case is submitted.