November 01, 2012

Pleading standards in environmental cases following the Supreme Court’s decisions in Twombly and Iqbal

The U.S. Supreme Court’s recent “adjustments” to the federal pleading standard may significantly affect toxic tort and long-tail environmental contamination claims. The Court began making these adjustments (some call it a clarification, others claim it is a real change) to the pleading standard in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). The Court held that “[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555 (internal citations omitted). The Court characterized the standard as a question of plausibility: “[a]sking for plausible grounds to infer an agreement [to restrain trade] does not impose a probability requirement at the pleading stage; it simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of illegal agreement.” Id. at 556.

The Court further clarified its earlier “adjustment” in Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), noting that while the pleading standard does not require the allegations to be probable, it does require more than a “sheer possibility that a defendant has acted unlawfully.” “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’” Id. (citing Twombly, 550 U.S. at 557). Iqbal provided courts with a two-pronged approach:

a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.

Id. at 679.

In dismissing certain of the plaintiff’s allegations in Iqbal, the Court noted that it was the “conclusory nature of respondent’s allegations . . . that disentitles them to the presumption of truth.” Id. at 681.

The adjusted pleading standard in the environmental context

This adjusted pleading standard can raise issues in toxic tort or environmental contamination cases. These long-tail environmental contamination claims may not become apparent until many years after the polluting event(s) took place, making it especially difficult to pinpoint the details of the release of contaminants. In Z-J, Inc. v. Pfizer Inc., Cause No. 2:10-cv-125-WTL-WGH (S.D. Ind. Feb. 11, 2011), this was a key issue. The plaintiff owned property adjacent to the defendant and asserted the defendant contaminated its property by operating a dump from approximately the 1940s to the 1970s.

Plaintiff sued in state court, asserting various claims including an Indiana Environmental Legal Action (Ind. Code § 13-30-9-2), Antidumping (Ind. Code § 13-30-3-13), nuisance, and trespass. The defendant removed to federal court and moved to dismiss the claims under Federal Rule of Civil Procedure 12(b)(6). The defendant’s primary argument was the complaint failed to meet the Twombly standard. The defendant claimed that by failing to specifically identify what substances (and in what amounts) had been released into the soil and groundwater, the complaint was “speculative” and did not provide sufficient allegations showing the claims were “plausible.”

The court disagreed, noting:

The boundary between a well-pled complaint and an insufficient one under Twombly and its progeny is, quite frankly, still evolving and therefore somewhat blurry. While it may be difficult for courts to articulate why a particular case falls on one side or the other of the line, the overriding principle of the new pleading standard is clear: notice pleading is still all that is required, and “a plaintiff still must provide only enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests, and, through his allegations, show that it is plausible, rather than merely speculative, that he is entitled to relief.” Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir. 2008) (citations and internal quotation marks omitted). The Plaintiffs’ Second Amended Complaint satisfies this standard and is thus not subject to dismissal pursuant to Twombly.

Z-J, slip op. at *6.

It continued stating that under notice pleading, “conclusory statements are not barred entirely . . . and that ‘the complaint merely needs to give the defendant sufficient notice to enable him to begin to investigate and prepare a defense.’” Id. at *7 (quoting Tamayo, 526 F.3d at 1083).

A district court in California confronted a similar issue in Chubb Custom Ins. Co. v. Space Systems/Loral, Inc., No. C 09-4485 JF (PVT), 2010 U.S. Dist. LEXIS 15624 (N.D. Cal. 2010). In Chubb, the plaintiff filed an action pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and various state statutes seeking recovery of costs it incurred in response to the release of hazardous materials. Id. One defendant argued that the complaint did not state a claim upon which relief could be granted, citing Twombly and Iqbal. The defendant claimed the complaint contained “no facts describing where, when or how any of the alleged hazardous substances were released from the gasoline service station.” Chubb, 2010 U.S. Dist. LEXIS 15624, *8–9 (citations to record omitted). Plaintiff countered that “nowhere does CERCLA require the level of factual specificity demanded by Defendants” and explained who caused the contamination, how much money was spent remediating it, the hazardous substances released, and generally when and how the contamination was released. Id. at *9. The court agreed with the defendant, holding that it must apply the Iqbal standard to every civil complaint—including one under CERCLA—and dismissed plaintiff’s claim, but allowed plaintiff to amend its complaint. Id. at *11–12.

In Chubb, a second defendant also moved to dismiss plaintiff’s claims, but on slightly different grounds. This defendant claimed the complaint failed “to allege disposal of hazardous substances during the period of [that defendant’s] ownership, claiming only that ‘[t]here were releases of hazardous substances from [the location owned/operated by the defendant] during [the defendant’s] period of ownership and/or operation.” Chubb, 2010 U.S. Dist. LEXIS 15624, *13. The complaint also alleged that “[t]he presence of hazardous substances, including but not limited to, PCE and TCE, in the soil and groundwater at the Site constitute a release or threatened release of hazardous substances into the Environment.” Id. The court found that while the plaintiff was “not required to plead the manner in which [the defendant] polluted its environment with pinpoint accuracy,” the factual allegations in the complaint were insufficient to establish that the defendant was an owner or operator under the statute. Id. at *14. The court granted the motion to dismiss with leave for the plaintiff to amend the complaint. Id. at *28. The district court entered judgment on the dismissed claims in April 2011, and an appeal is now pending before the Ninth Circuit, Chubb Custom Insur. Co. v. SpaceSystems/Loral Inc., No. 11-16272. Oral argument was held before a three-judge panel on November 8, 2012, but no decision has been released as of this publication.

Recent applications of the adjusted pleading standard

The law surrounding environmental claims and the new federal pleading standards continues to develop. See, e.g., J&P Dickey Real Estate Family L.P. v. Northrop Grumman Guidance & Elecs. Co., Cause No. 2:11cv37, 2012 U.S. Dist. LEXIS 36,497 (W.D.N.C. Mar. 19, 2012) (dismissing CERCLA claim because plaintiff failed to plead specific facts alleging the response costs were consistent with the National Contingency Plan); Hinds Invs., L.P. v. Angioli, Cause Nos. 10-15607 and 10-15951, 2011 U.S. App. LEXIS 15879, *3–4 (9th Cir. Aug. 1, 2011) (explaining that plaintiff did not meet the pleading standard for CERCLA arranger liability because it did not allege “facts showing that Defendants sold dry cleaning equipment for the purpose of disposing of [PCE] or that Defendants exercised control over the disposal process,” even though the plaintiff alleged that defendants leased the dry cleaner and were responsible for arranging of disposal of perchloroethylene); BancorpSouth Bank v. Envtl. Operations, Inc., Cause No. 4:11CV9 HEA, 2011 U.S. Dist. LEXIS 117010 (E.D. Mo. Sept. 30, 2011) (holding the complaint sufficiently alleged the defendant had control of hazardous waste so as to qualify as an operator or arranger under CERCLA because it alleged deliberate disturbance, unearthing, spilling, moving, and re-releasing hazardous materials); Commercial Judgment Recovery Fund 1 LLC v. A2Z Plating Co., Cause No. SACV 11-0572 DOC, 2011 U.S. Dist. LEXIS 79116 (C.D. Cal. July 15, 2011) (affirming that the Twombly pleading standard applies to CERCLA claims); Pateley Assocs. I, LLC v. Pitney Bowes, Inc., 704 F. Supp. 2d 140, 145–46 (D. Conn. 2010) (considering whether, under Iqbal, plaintiff properly pleaded owner and operator liability under CERCLA); United States v. Halliburton Energy Servs., Cause No. H-07-3795, 2008 U.S. Dist. LEXIS 17476, *11 (S.D. Tex. Mar. 5, 2008) (commenting that who is an “arranger” under CERCLA is difficult to ascertain at the motion to dismiss stage, and that the court should determine that “once the parties are in a position to offer relevant evidence” but that plaintiff sufficiently pleaded that defendants sent radioactive waste to the site, including the time, place, and general conduct); Vill. of Riverdale v. 138th St. Joint Venture, 527 F. Supp. 2d 760, 766 (N.D. Ill. 2007) (holding plaintiff properly pleaded a Resource Conservation Recovery Act claim when it set out factual assertions concerning ownership and operations at the site, an outline of defendants’ storage and disposal activities, and an injury-in-fact caused by the defendants: actual and threatened release of pollutants).

Although most of the application of the “adjusted” pleading standard has been developed in lower federal courts, those prosecuting environmental actions (even state-court actions, if there is a possibility of removal) should be mindful of how courts are grappling with these pleading issues. Plaintiff and defense counsel alike should consider the Supreme Court’s adjusted “plausibility” pleading standard for federal cases. The more information a plaintiff can provide in a complaint, the better chance you have defeating a 12(b)(6) motion. If defending an action, then Twombly and Iqbal provide justification for dismissing speculative claims against your client.