7th Circuit upholds state court jurisdiction
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February 05, 2019
7th Circuit upholds state court jurisdiction

Two types of jurisdiction were central to a case in which two plaintiff companies deposited hazardous waste generated in Colorado into industrial wells in Illinois. The Illinois Environmental Protection Agency (IEPA) found that the injections were conducted without the required Class I permit and brought charges against the companies before the Illinois Pollution Control Board (Board). The companies, plaintiffs in the case, asserted that the injected materials were, in fact, being used to stimulate oil and gas production, and thus, the action was subject to Class II permitting, which is implemented by the Illinois Department of Natural Resources (Department), not the IEPA. The companies argued, therefore, that the IEPA had no jurisdiction to find a violation of its regulations and pursue a penalty, which amounted to a combined $260,000 for both companies.

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The companies brought their argument against the IEPA and the Board to multiple state courts and lost at every stop. They then argued their point in a U.S. District Court, requesting that the court issue a declaratory judgment that under federal law (specifically the Resource Conservation and Recovery Act (RCRA) and the Safe Drinking Water Act), the IEPA and the Board did not have jurisdiction over any future attempts to inject similar waste into the Illinois wells owned by one of the plaintiffs. This is where the second jurisdictional issue came into play. Specifically, the district court said it did not have the jurisdiction to rule on the matter because of the Rooker-Feldman Doctrine and the 11th Amendment to the U.S. Constitution. Next, the companies went to the U.S. Court of Appeals for the 7th Circuit, where a panel affirmed the judgment of the district court.

The case

In 2002, a tire production facility in Colorado experienced an emergency overheating of industrial acid. AET Environmental was hired by the plant to dispose of the acid. When it could not find a nearby waste disposal plant that would accept the acid, AET decided to ship the acid to EOR Energy, an oil company with wells in Illinois. EOR stored the acid in Illinois for 2 years. At that point, it decided to inject some of the acid into its wells. It ultimately disposed of the rest of the acid after several inspections and investigations found the acid to be a potentially dangerous hazardous waste. Five years later, the IEPA brought charges before the Board against EOR and AET (collectively EOR), identifying the transportation, storage, and injection of the acid as violations of Illinois environmental law. The Board granted that motion and imposed $60,000 in sanctions against AET and $200,000 against EOR.

EOR asserted before the Board that it was not injecting “waste” into its wells. Instead, it said, it was merely injecting an acid that was used to treat the wells and aid in petroleum extraction. Therefore, according to EOR, the Department had exclusive jurisdiction over EOR’s injection of acid into a Class II well under the Illinois Oil and Gas Act. The Board rejected this argument and denied EOR’s motion for reconsideration.

Illinois agencies

Regarding which Illinois agency should be overseeing the injection, EOR said it wanted to continue the operations “without fear of a similar ordeal as they are currently enduring.” EOR cited past litigation costs and the enforcement of the state court’s order—through fines and the direction to obtain permits or cease unlawful conduct—as the kinds of harms it sought to avoid with a federal court order.

“We emphatically reject this undisguised attempt to execute an end-run around the state court’s decision,” the panel stated.

But the broader issue addressed by the panel concerns the limits of the authority of lower federal courts to review decisions by state courts. As noted, these limits are governed by the Rooker-Feldman Doctrine and the 11th Amendment.

Rooker-Feldman

The Rooker-Feldman Doctrine is the product of two U.S. Supreme Court cases, one in 1923, the second in 1983. Essentially, the Supreme Court found that no federal court, other than the Supreme Court itself, should review state court decisions or decide matters inextricably related to state court decisions. In other words, following its losses in the lower Illinois courts, EOR options were to ask the state Supreme Court and, thereafter, the U.S. Supreme Court for relief.

“It filed the necessary petitions, but those courts chose not to hear its case,” wrote the panel. “That was the end of the line. There is no asterisk appended to the Rooker-Feldman doctrine saying that it evaporates once certiorari is denied. The state court has adjudicated EOR’s claim, and that is that: it may not come to the federal courthouse for Round Two.”

The panel added that the plaintiffs would have been no better off had they, in fact, acquiesced to the state courts’ judgments and simply asked the federal courts for a “new ruling on the pure issues of law. In that case, we do not face a Rooker-Feldman problem, but EOR is no better off. The reason is simple: litigants cannot simply ignore legal rulings from a competent state court and receive a do-over in federal court. The full faith and credit statute, 28 U.S.C. § 1738, dictates the opposite rule: federal courts must give the same preclusive effect to a state-court judgment that it would receive under state law.”     

11th Amendment

“In some respects, Rooker-Feldman deprives the district court of subject-matter jurisdiction; and to the extent that anything else remains, EOR is stymied by the 11th Amendment,” the panel writes.

The 11th Amendment states: “The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”

“We add for good measure that the Eleventh Amendment prohibits a federal court from ordering any relief against a state agency based on state law,” the panel continued. “Although the enforcement of environmental laws is in part accomplished through a partnership between the states and the federal government, federal law has nothing to say about which agency a state is entitled to use in carrying out those tasks. That is purely a matter of state law.”

The panel’s ruling in EOR Energy LLC et al. v. IEPA et al. is here.

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