Directly addressing the issue for the first time, the U.S. Court of Appeals for the Sixth Circuit has joined the Third Circuit to hold that the federal Clean Air Act does not preempt causes of action based on the common law of the state where a facility operates. In an Opinion rendered Nov. 2, 2015, in Merrick v. Diageo Americas Supply, Inc., Case No. 14-6198, the Sixth Circuit held that Kentucky common law claims of nuisance and trespass relating to ethanol vapor emissions from a whiskey distillery warehouse operation were not preempted by the Clean Air Act, even though that Act regulates those same emissions. The decision is controlling in Kentucky, Tennessee, Michigan and Ohio and allows plaintiffs’ claims to proceed on the merits.

Background

Diageo conducts Louisville area distillery operations pursuant to a federal Clean Air Act permit issued by the Louisville Metro Air Pollution Control District. The permit authorizes Diageo to maintain whiskey aging warehouse storage operations and imposes monitoring, recordkeeping and reporting requirements relating to those operations. Consistent with other similar Clean Air Act permits and the long held position of EPA and other state regulatory agencies, ethanol vapor emissions from the warehouse operations are classified as “fugitive” and not capable of capture without potential interference with product quality. In 2012, in response to neighborhood complaints, the District cited Diageo with the violation of District regulations prohibiting nuisance conditions and Diageo subsequently committed to vacate two of its whiskey aging warehouses in the Louisville area.

Without participating in the public comment process for Diageo’s air permit, or otherwise availing themselves of petition procedures, citizen suit provisions, or other regulatory processes provided for under the Clean Air Act, plaintiffs filed a class action complaint against Diageo, alleging that ethanol vapor emissions from the company’s warehouse storage operations cause “whiskey fungus” to grow on surrounding property. Plaintiffs asserted claims of negligence, nuisance, and trespass and sought compensatory and punitive damages as well as an injunction requiring Diageo to install and operate ethanol emission control technology not required by the Clean Air Act or Diageo’s permit. In 2014, the District Court dismissed plaintiffs’ negligence claim as insufficiently pled but declined to reject plaintiffs’ common law tort claims as preempted by the Clean Air Act. An interlocutory appeal followed.

The Sixth Circuit’s Ruling

The Sixth Circuit affirmed the District Court’s ruling, holding that the states’ rights savings clause of the Clean Air Act, 42 U.S.C. § 7416, “expressly preserves” state common law standards. In addition to statutory text and legislative history, the Court, like the District Court, relied heavily upon a 2013 decision from the Third Circuit Court of Appeals, Bell v. Cheswick Generating Station, 734 F.3d 188 (3d Cir. 2013), which, in 2014, the U.S. Supreme Court declined to review. In so holding, the Sixth Circuit distinguished an arguably contrary 2010 decision from the Fourth Circuit on the basis that the Fourth Circuit case involved claims brought pursuant to the common law of a neighboring state and not the common law of the state in which the facility was located. North Carolina ex rel. Cooper v. Tennessee Valley Auth., 615 F.3d 291 (4th Cir. 2010).

Other Litigation

Kentucky state court litigation regarding this issue is ongoing. In the substantially similar case styled Merrick v. Brown-Forman Corp., the Kentucky Court of Appeals also held that plaintiffs’ claims were not preempted by the Clean Air Act. 2014 WL 6092218 (Ky. App. 2014). On Aug. 12, 2015, the Kentucky Supreme Court granted discretionary review of that decision. This month, the Kentucky Chamber of Commerce and the Kentucky Association of Manufacturers filed motions for leave to participate as amici in that appeal. Briefs have not yet been filed.

Manufacturing and other industries in these and similar litigation matters have consistently argued that allowing courts and juries to determine case-by-case emission controls for Clean Air Act-regulated pollutants through common law causes of action would impermissibly conflict with the objectives of the Clean Air Act and its scheme of cooperative federalism relying on agency expertise and public input. Imposing an additional layer of tort liability to the existing regulatory program, industry argues, would frustrate the Clean Air Act scheme and its tenant of environmental protection without undue economic burden.