978-1285770178 Lecture Note BL ComLaw 1e IM-Ch25 Part 1

1

whole or in part.

2 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS

whole or in part.

• Distinct harm separate from that affecting the general public is a private nuisance. Some states

• A public authority can maintain an action to stop a public nuisance.

B. NEGLIGENCE AND STRICT LIABILITY

Businesses may be sued under these theories.

ADDITIONAL BACKGROUND—

Proof

The environment receives pollution from many sources. No one source by itself would produce the

damage caused by all the sources together. Because of the widespread effects of pollution, it may be

impossible to provide proof any particular polluter solely responsible for a specific injury or damage. Also, the

common law limited relief from pollution in situations where the harm was caused by two or more independent

sources. For example, if a number of firms were polluting the air, a harmed individual could sue any individual

firm; however, until early in the twentieth century, the plaintiff was not able to sue all of the firms

simultaneously. Consequently, specific proof of damages in individual actions was often impossible.

Another difficulty concerning proof has been to relate specific diseases to particular pollution. There is not

always medical or scientific certainty that a particular source of pollution caused a specific disease. These

difficulties in seeking relief in pollution cases, along with the forces creating additional pollution and the failure

of the common law to provide a systematic mechanism for supervising pollution, have been largely

responsible for the development of statutory regulation of environmental quality.

II. Federal, State, and Local Regulations

• Local governments regulate waste and garbage removal and disposal, the appearance of buildings

and other structures, and noise.

ENHANCING YOUR LECTURE—

 ENVIRONMENTAL TAKINGS



Environmental regulations and other legislation to control land use are prevalent throughout the United

States. Generally, these laws reflect the public’s interest in preserving natural resources and habitats for

CHAPTER 25: ENVIRONMENTAL LAW 3

whole or in part.

wildlife. At times, their goal is to enable the public to have access to and enjoy limited natural resources, such

as coastal areas. Although few would disagree with the rationale underlying these laws, the owners of the

private property directly affected by the laws often feel that they should be compensated for the limitation

imposed on their right to do as they wish with their land.

The Fifth Amendment to the U.S. Constitution gives the government the power to “take” private property

for public use. The Fifth Amendment attaches an important condition to this power, however: when private

land is taken for public use, the landowner must be given “just compensation.” An ongoing legal debate has to

do with whether environmental regulations that limit private property owners’ uses of their property constitute

a “taking” of private property in the public interest. If so, the property owners should receive the just

compensation guaranteed under the Fifth Amendment.

In some cases, the courts have held for the property owners on this issue. In others, however, the courts

have sided with government regulators. We consider here two significant cases concerning this issue, both of

which ultimately came before the United States Supreme Court.

THE DEL MONTE DUNES CASE

One case involved an owner of oceanfront property in Monterey, California. The owner had applied to the

city of Monterey on several occasions for a permit to build a residential development. Each time, the city

denied the use of more of the property until none of it remained available for any use. In effect, the entire

property had to be left in its natural state. The city claimed that it was seeking to protect various forms of

wildlife that inhabit the coastal sand dunes, particularly the endangered Smith’s blue butterfly. Eventually, the

property owner sold the property to the city and then sued the city, claiming that the restrictions on use

amounted to an unconstitutional taking without just compensation. The jury agreed and awarded the owner

nearly $1.45 million in damages. The award was affirmed on appeal.a

The city then appealed to the United States Supreme Court, arguing that the question of whether a taking

had occurred should have been decided by a judge, not a jury. The Supreme Court, however, held that

whether a taking has occurred is a predominantly factual question and, thus, was a question for a jury to

decide.b

The Del Monte Dunes case was regarded as a victory for property rights advocates. For state and local

governments, however, the decision meant that they would find it more costly to preserve natural resources in

their communities.

THE TAHOE CASE

In 2002, the United States Supreme Court reviewed another case involving a takings claim. This time,

however, the Court supported the local regulators. The case revolved around an attempt to curb pollution and

the growth of algae in Lake Tahoe, on the California–Nevada border. In 1981, the Tahoe Regional Planning

Agency issued a temporary moratorium (suspension) on the construction of residential housing in areas

around the lake that were the most susceptible to further environmental damage. The moratorium was

extended over the next several years until 1987 when it was replaced by a “revised plan,” which is still in

effect.

Most of the affected property owners were older couples who had purchased their lots decades earlier

and had planned to build their retirement homes along the lake. The moratorium, however, allowed no

exceptions and forbade any land use whatsoever. The regulations were so stringent that some owners were

4 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS

whole or in part.

even forbidden to enter their own land without the agency’s permission. Ultimately, the owners sued the

agency, claiming that a regulatory taking had occurred. Even if the taking was only temporary, the regulations

had forced the owners to give up all reasonable use of their land, economically and personally, for a period of

time, and they deserved to be compensated for this deprivation.

The United States Supreme Court sided with the regulators. The Court held that the agency’s actions had

not deprived the owners of their property for too long a time, and thus no taking had occurred. How long is too

long? The Court said no categorical rule could be stated; the answer always depends on “the facts

presented.”c

FOR CRITICAL ANALYSIS

Even though the Supreme Court sided with the regulators in the Tahoe case, the debate over en–

vironmental takings continues. On the one hand, states, cities, and other local governments want to preserve

their natural resources and need some authority to regulate land use to achieve this goal. On the other hand,

private property owners complain that they alone should not have to bear the costs of environmental

preservation, given that all members of the public reap the benefits. Should private landowners be

compensated when their land is essentially “taken” for public use by environmental regulations?

Should landowners be compensated even when a taking is temporary?

a. Del Monte Dunes at Monterey, Ltd. v. City of Monterey, 95 F.3d 1422 (9th Cir. 1996).

b. City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 119 S.Ct. 1624, 143 L.Ed.2d 882 (1999).

c. Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency, 535 U.S. 302, 122 S.Ct. 1465, 152 L.Ed.2d

517 (2002).

B. FEDERAL REGULATIONS

Federal laws intended to improve environmental quality include the National Environmental Policy Act

(NEPA) of 1969, which requires federal agencies to prepare environmental impact statements (EIS)

when major federal actions significantly affect the quality of the environment.

significantly affects the quality of the environment. An action qualifies as major if it involves a

substantial commitment of resources (monetary or other). An action is federal if a federal agency

has the power to control it. An EIS must analyze—

• The impact on the environment.

CHAPTER 25: ENVIRONMENTAL LAW 5

whole or in part.

III. Air Pollution

Federal law provides a basis for regulations of pollution emitted from mobile and stationary sources.

A. MOBILE SOURCES

Federal regulations specify standards and timetables for mobile sources (cars, trucks, and other motor

vehicles). The EPA updates these and other standards to reduce emissions further when new scientific

evidence is available.

1. Reducing Emissions

By 2050, emissions of nitrogen oxide and other pollutants from mobile sources are to be reduced

ADDITIONAL BACKGROUND—

Ensuring Compliance with

Mobile Source Regulations under the Clean Air Act

Some of the most recent mobile source regulations are discussed in the text. Other provisions

amending the Clean Air Act cover the introduction of alternative–fuel vehicles in California.

To ensure compliance with emission regulations, the EPA certifies a prototype of a new car whose

emission controls are effective up to 50,000 miles. The EPA may inspect production models. If a car does not

meet the standards in actual driving, the EPA can order a recall and the repair or replacement of pollution–

control equipment at the manufacturers’ expense. To ensure compliance, the EPA certifies a prototype of a

new car whose emission controls are effective up to 50,000 miles. The EPA may also inspect production

models. If a vehicle does not meet the standards in actual driving, the EPA can order a recall and the repair or

replacement of pollution-control equipment at the manufacturers’ expense.

Service stations must sell gasoline with higher oxygen content in forty-one cities with winter carbon

monoxide pollution and must sell even cleaner-burning gasoline in Los Angeles and eight other urban areas.

Under the Clean Air Act, the primary responsibility for controlling and preventing pollution from stationary

sources (manufacturing plants and so on) rests with the states. Different standards apply to sources in

clean areas and sources in polluted areas, and to existing sources and major new sources.

1. Hazardous Air Pollutants

Performance standards for major sources require the use of maximum achievable control

• Criminal penalties include fines of up to $1 million and imprisonment of up to two years.

• Private citizens can sue.

IV. Water Pollution

Laws and regulations govern the pollution of navigable waters, drinking water, and ocean water. Federal

• Make waters safe for swimming.

• Protect fish and wildlife.

• Eliminate the discharge of pollutants into the water.

1. Focus on Point-Source Emissions

• Water-quality standards set by the states under EPA supervision.

• A discharge-permit program that sets water-quality standards to limit pollution.

• Provisions for toxic chemicals and oil spills.

• Construction grants and loans for publicly owned treatment works (chiefly sewage treatment

plants).

whole or in part.

Phase II also allows a variance from the standards if a facility’s cost of compliance “would be significantly

greater than the benefits.” Environmental organizations, including Riverkeeper, Inc., challenged Phase II,

arguing that existing plants should be required to convert to closed–cycle systems. The U.S Court of Appeals

for the Second Circuit issued a ruling in the plaintiffs’ favor. Power-generating companies, including Entergy

Corp., appealed.

The United States Supreme Court affirmed. The EPA could use a cost-benefit analysis to set standards

and allow for variances from those standards. “Best technology” can mean the technology that achieves the

greatest reduction in adverse environmental impacts, but it can also describe the technology that “most

efficiently” achieves a reduction, even if the result is less than other technologies might achieve. The use of

the word “minimizing” in the controlling statute indicates that the intended objective was not the greatest

possible reduction. Also, other provisions order the EPA to consider costs and benefits in some situations.

This shows that “cost-benefit analysis is not categorically forbidden.” Also, in imposing standards on power

plants, the EPA has been weighing costs against benefits for more than thirty years. This suggests that the

practice is “reasonable and hence legitimate.”

………………….…………..……..……………………………………..……………………………..…………………..

Notes and Questions

Why would Congress intend to forbid comparisons of costs and benefits when determining the

“best available technology”? Preparing and reviewing formal cost-benefit analyses takes time, which can

delay making and implementing rules. Such analyses might emphasize quantity over quality—for example, in

the context of this case, the value of a species of fish that is marketable versus one that is not. Forbidding

cost-benefit comparisons might spur the quicker development of cheaper “best available” technologies. Costs

are often more obvious and easier to quantify than benefits. And cost-benefit analysis can yield a result that

does not maximize environmental protection.

What are some of the costs and benefits that could be considered in setting the standards and

mandating the technology for existing power plants? The most obvious costs and benefits would be the

impacts of different technologies on the aquatic organisms most directly affected. As for the power plants, the

existing facilities would need to be retrofitted with whatever technology is ordered. They would lack the

flexibility of new facilities to select the location of their intakes and to install equipment at a relatively lower

cost. These increased costs would be passed onto the facilities’ customers, which would mean higher energy

prices and production costs, and could even affect energy production. As noted in the text, existing power

plants could suffer a reduction in production, which could necessitate the building of more plants, with

consequent environmental effects.

ANSWER TO “THE ETHICAL DIMENSION”

QUESTION IN CASE 25.1

In this case, aquatic organisms were most directly at risk. Is it acceptable to apply cost-benefit

analyses to situations in which the lives of people are directly affected? Explain. Yes, because funds

are limited and costs can become prohibitive. In the environmental law context, for example, is it worth billions

of dollars to clean water that may harm only a few people? Even the most ardent supporters of environmental

protection might concede that it is not. No, because for some parties, in some situations, there may be more

whole or in part.

important factors than money to take into account. These might include such social and political goals as

assistance for the disadvantaged.

ANSWER TO “THE GLOBAL DIMENSION”

QUESTION IN CASE 25.1

In analyzing the costs and benefits of an action that affects the environment, should a line be

drawn at a nation’s borders? Why or why not? Yes, because a nation’s borders are the limits of its legal

powers. No, because pollution and other environmental harm does not respect political borders.

CASE SYNOPSIS—

Case 25.2: United States v. Lucas

Robert Lucas sold mobile-home lots in Mississippi, installing a septic system on each lot. The U.S. Army

Corps of Engineers, the Mississippi Department of Environmental Quality, the U.S. Environmental Protection

Agency, and the Mississippi Department of Health determined that the systems were being installed on

wetlands and issued cease–and-desist orders. Eventually, Lucas and others were indicted in a federal district

court on criminal charges of filling wetlands without a permit. The jury was instructed that wetlands are

“waters of the United States” if they are adjacent to a navigable body of open water. The jury convicted the

defendants, and the court imposed prison terms, and ordered restitution and fines. The defendants appealed,

arguing that the jury instructions were an “abuse of discretion.”

The U.S. Court of Appeals for the Fifth Circuit found no abuse of discretion. For wetlands to be subject to

the Clean Water Act, there must be a “significant” connection between the wetlands and navigable-in-fact

water. In this case, the drainage from the mobile-home lots, which met the definition of wetlands, ran in three

directions, all of which led to navigable waters. The jury had been instructed about this connection, and the

prosecution had offered proof that established it.

………………….………….………………………….………….………………………….…………...…………………

Notes and Questions

Would the result in this case have been different if the quality of the water flowing from the land

improved before running into navigable waters? Probably not, because the applicable standards and

definitions relating to “wetlands” do not rely on the actual quality of the water before and after its flowing or

drainage. It was the run-off and the risk that it might result in pollution that established the need for a permit or

certification and initiated the orders and indictments in this case.

whole or in part.