A recent decision out of the Sixth Circuit found that the Clean Air Act (“CAA”) does not preempt common law claims brought against an emitter based on the law of the state in which the emitter operates. This decision, Merrick v. Diageo Americas Supply, Inc., No. 14-6198, 2015 WL 6646818 (6th Cir. Nov. 2, 2015), highlights the increasingly fractured regulatory landscape of preemption protection from state-law nuisance claims.

Historically, public nuisance suits based on an energy company’s emissions have been found to be preempted by the CAA. For example, in N. Carolina, ex. Rel. Cooper v. TVA, the State of North Carolina sought an injunction against eleven of the TVA’s coal-fired power plants, alleging that the plants’ emissions constituted a public nuisance. 615 F.3d 291 (4th Cir. 2010). The Fourth Circuit reversed the district court’s granting of the injunction, finding that the public nuisance action was preempted.  Id. at 296. Particularly, the Fourth Circuit found that: “A field of state law, here public nuisance law, would be preempted if a scheme of federal regulation is so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.”  Id. at 303.

Over the last several years, however, state and federal courts have become more receptive to allowing state law nuisance claims to proceed in the face of CAA preemption objections.  In the case of Bell v. Cheswick Generating Station, 734 F.3d 188 (3d Cir. 2013) cert. denied sub nom., GenOn Power Midwest, L.P. v. Bell, 134 S. Ct. 2696 (2014), appellants brought a class action under state law tort theories against Cheswick Generating Station, GenOn Power Midwest, L.P. (“GenOn”), alleging that GenOn’s coal-fired electrical generation facility caused ash and contaminants to settle on their property. The District Court dismissed the case based on GenOn’s arguments that, because the plant was subject to comprehensive regulation under the CAA, it owed no extra duty to the members of the class under state tort law. The Third Circuit reversed, finding that source state common law actions are not preempted. The Bell court explained that the CAA “establish[es] a regulatory scheme through which source states, and not affected states, play the primary role in developing the regulations by which a particular source will be bound.”  Id. at 196.

The position of the Third Circuit in Bell was adopted by the Iowa Supreme Court in 2014, in Freeman v. Grain Processing Corp., 848 N.W.2d 58 (Iowa 2014) cert. denied, 135 S. Ct. 712 (2014). InFreeman, the plaintiffs filed a putative class action, on behalf of themselves and other similarly situated residents, against Grain Processing Corporation (GPC), which operated a local corn wet milling facility. The residents claimed the operations at GPC’s facility cause harmful pollutants and noxious odors to invade their land, thereby diminishing the full use and enjoyment of their properties. They based their claims on common law and statutory nuisance as well as the common law torts of trespass and negligence. As in Bell, the Freeman trial court granted GPC’s motion to dismiss on preemption grounds, and the Iowa Supreme Court reversed, finding “that conflict preemption with the CAA does not apply to a private lawsuit seeking damages anchored in ownership of real property.”Freeman, 848 N.W.2d at 85. The case was remanded to the Iowa trial court, which agreed to certify the class on October 29, 2015.

The Sixth Circuit’s Merrick opinion adopts the reasoning of Freeman and Bell, but arguably takes that reasoning a step further, finding that “[t]he Clean Air Act’s text makes clear that the Act does not preempt [common law] claims” against an emitter based on the law of the state in which the emitter operates. Merrick, 2015 WL 6646818, at *1. The plaintiffs in Merrick are owners, lessors, and renters of properties near storage warehouses owned by Diageo Americas Supply, Inc. (“Diageo”), a Louisville, Kentucky distiller. The plaintiffs contended that ethanol vapor wafted from Diego’s facilities, creating “whiskey fungus” which allegedly “creates an unsightly condition [on the property,] requiring abnormal and costly cleaning and maintenance, [and causes] early weathering of surfaces [and] unreasonable and substantial annoyance and unreasonable interference with the use and enjoyment of the property.” Id. The District Court concluded that the plaintiffs’ state common law tort claims were not preempted by the CAA, finding that “courts have increasingly interpreted the CAA’s savings clauses to permit individuals to bring state common law tort claims against polluting entities.”  Merrick v. Diageo Americas Supply, Inc., 5 F. Supp. 3d 865, 876 (W.D. Ky. 2014).

On November 2, 2015, the Sixth Circuit affirmed this decision. The Merrick court found that “[t]he states’ rights savings clause of the Clean Air Act expressly preserves the state common law standards on which plaintiffs sue.” Id. at *4. The court, in its decision, expressly relied on the recent opinions of Freeman and Bell, and attempted to distinguish the Fourth Circuit’s outcome in N. Carolina, ex. Rel. Cooper v. TVA by stating that the claims which the TVA court found to be preempted were “based on the common law of a non-source state—which are preempted by the Clean Air Act.” Id. at *7.

The Merrick court concluded by “acknowledg[ing] the concern that a comprehensive federal scheme imposes substantial costs on industries, and that some suggest it is unduly burdensome for such industries to remain subject, in addition, to the requirements and remedies of state common law.” Id.at *10. However, the court reemphasized its position that “[t]here is no basis in the Clean Air Act on which to hold that the source state common law claims of plaintiffs are preempted.” Id.

The Merrick case further emphasizes the need for energy companies to be cautious regarding a facility operation’s potential affects to its surroundings, as compliance with federal standards increasingly seems to be insufficient protection in the face of state law nuisance and trespass claims. When issues do arise, legal practitioners should be especially diligent in specifically detailing how the regulatory framework of the CAA encompasses – and even supports – the alleged action upon which damages are sought. The Supreme Court has been reluctant to take up this issue, having denied certiorari in Freeman and Bell. With the Sixth Circuit joining the Third Circuit and the state of Iowa in finding no preemption protection in the face of state law nuisance claims, the Supreme Court may finally decide to weigh in on this issue.