A federal court in Texas has denied a motion to join the U.S. Environmental Protection Agency (EPA) as a third-party defendant in ongoing litigation involving allegedly fraudulent renewable fuel credits under the renewable fuel standard program of the Energy Independence and Security Act of 2007. Vinmar Overseas, Ltd. v. OceanConnect, LLC, No. 11-4311 (S.D. Tex. 11/29/12).

In the underlying litigation, plaintiffs seek to recover losses they incurred when they purchased from defendants and relied on fuel credits or renewable identification numbers (RINs) that were fraudulently generated by biofuel producers for fuel they did not produce. After EPA discovered the fraud, it revoked the RINs; in April, 30 petroleum businesses, including refineries, agreed to pay a total of $3.65 million in penalties because they had purchased fraudulent RINs to satisfy their renewable fuel volume obligations.

The defendants in the current case are participants in the secondary market, not the originators of the fraudulent RINs. They alleged that EPA was liable under the Federal Tort Claims Act because the agency allegedly violated the Texas Clean Air Act and negligently managed the renewable fuels program, allowing the fraudulent RINs to enter the market. The defendants’ motion to serve EPA as a third party relied on impleader rules. The court concluded that the defendants could not rely on impleader to reach EPA, because they were not asserting that the plaintiffs were attempting to recover from them a liability ultimately owed by the agency. Instead, as the court viewed it, defendants asserted that EPA was separately liable, although the basis of that liability involved, in part, the same facts as the original lawsuit. Accordingly, the court denied the motion to implead EPA.