Last week, the U.S. District Court for the Eastern District of Michigan refused to void a private settlement agreement entered between Sierra Club and DTE in the face of an objection by the United States that the settlement agreement interfered with a related consent decree and infringed on the government’s enforcement authority. United States v. DTE Energy Co., et al., No. 10-CV-13101 (E.D. Mich. Dec. 3, 2020).

The litigation arose from a Clean Air Act enforcement action brought by the United States against DTE. Sierra Club later intervened and brought a citizen suit action against DTE. The United States and Sierra Club alleged that DTE implemented major modifications at several coal-fired electric generating units without obtaining the necessary permits, without installing the required emission control technology, and without achieving the lowest achievable emissions rate (“LAER”). The parties ultimately negotiated a Consent Decree which the court entered, requiring DTE to reduce emissions, pay a civil penalty of $1.8 million, and perform an environmental mitigation project that replaces municipal buses with lower emitting buses.

The Consent Decree recognized DTE and Sierra Club’s intent to submit a separate proposed settlement agreement that would resolve Sierra Club’s claims against DTE. The United States reserved the right to oppose any motion concerning or seeking approval of the settlement agreement. The settlement agreement required DTE to: (1) fund at least $2 million in community based environmental projects; (2) carry out a project to improve energy efficiency and reduce energy use at a public recreation center; (3) satisfy the bus replacement project required under the Consent Decree through the provision of electric buses and related electrification infrastructure; and (4) retire certain power plants.

Sierra Club filed a motion seeking to have the court either enter or take notice of the settlement agreement and dismiss Sierra Club’s complaint against DTE. The United States opposed the motion. The court ultimately rejected the United States’ argument that the settlement agreement was, “in effect, a second consent decree or judgment and thus erodes government enforcement primacy, conflict[s] with the statutory scheme, is contrary to sound environmental enforcement policy, and potentially interferes with constitutionally mandated separation of powers.” (internal quotations omitted). The court found that the settlement agreement, unlike a consent decree, did not require the court to retain jurisdiction and that instead the parties would be required to bring a separate suit for breach of contract to enforce it. The court also found that the settlement agreement was entirely consistent with the Consent Decree and did not erode or jeopardize any of the United States’ interests or any of the terms of the Consent Decree. The court noted that the settlement agreement “requires that DTE follow through on its long-announced plans to retire (rather than retrofit, refuel, repower, or retire, as provided in the Consent Decree) three coal plants and use electric (rather than simply lower-emitting) buses in the Consent Decree’s mitigation project.” (emphasis in original).

If DTE and Sierra Club settled on terms that conflicted with the Consent Decree, the court could have denied Sierra Club’s motion and refused to take notice of the settlement agreement. The settlement agreement, however, did not conflict with the Consent Decree, even though it did limit some of the more general requirements in the Consent Decree. This case illustrates a potential outcome where the United States resists settling on terms that it feels would create too stringent of a precedent for future settlements, but where the regulated entity wants to settle all outstanding claims and obtain closure in the matter. Overall, the court’s holding allows parties flexibility in resolving enforcement and citizen suit actions.