Reply Brief — Navistar International Transportation Corp. v. United States Environmental Protection Agency

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| FILES

APR 19 498°

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No. 88-1321.

ee me were ee

JOSEPH F. CPANIOL, JR.

CLERK

Supreme Court of the United States

OCTOBER TERM, 1988

IN THE

—_———

NAVISTAR INTERNATIONAL TRANSPORTATION

i CORPORATION,

~ Petitioner,

VS.

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

REPLY BRIEF IN SUPPORT OF PETITION

STEVEN A. SMITH

(Counsel of Record)

JAMES H. SCHINK

KIRKLAND & ELLIS

200 East Randolph Drive

Chicago, Illinois 60601

(312) 861-2000

Of Counsel:

STEVEN K. COVEY

NAVISTAR INTERNATIONAL

TRANSPORTATION CORPORATION

401 N. Michigan—24th Floor

Chicago, Illinois 60611

DATED: April 19, 1989

Pandick Midwest, Inc., Chicago * (312) 733-6000

TABLE OF CONTENTS

Page

|. Respondent’s interpretation of the Ohio adminis-

trative regulation is in derogation of the State’s role

IE I ie Fe HU varies ncticcnesentsidsininccaniisnnncres 2

2. The liability determination made by respondent

i should not be accorded considerable deference ....... 4

3. Respondent’s interpretation of the Ohio adminis-

trative regulation is plainly erroneous and incon-

sistent with the terms of that regulation.................... 5

4. There is a direct conflict between the Sixth and

SI II cia ics aciigaglecnitscenccadatiincpusdietcpaasasindian 8

The listing of parties appears at page ii of the Petition ( hereafter

“Pet.”).

TABLE OF AUTHORITIES

Cases: Page

AFL-CIO v. Donovan, 757 F.2d 330 (D.C.

CAE, Fe ickscsencavicinsiceiceeneeiannaion 5

Alabama Power v. Costle, 636 F.2d 323 (D.C.

Cae GTP isccietsiscntrcettdanantadepisieeaiaeecgtalamenians 3

Bethlehem Steel Corp. v. Gorsuch, 742 F.2d

ORD Ct Fe GOR Fe cision: 2

Bethlehem Steel Corp. v. EPA, 638 F.2d 994

"- FG Cee hisuasiontintiebcihndniasenedn 9

Dirks v. SEC, 463 U.S. 646 (1983) .........cecceee

Dougherty v. Torrence, 2 Ohio St. 3d 69, 442

PE E.2e TABS CTE) cacerciecctnicasgnpwiliccnicditinninn 6

Edward J. DeBartolo Corp. v. Florida Gulf

Coast Bldg. & Constr. Trade Council, 108 S.

C6 TC eitactnccinccnnieannnnsinnnss 4,5

Florida Power & Light Co. v. Costle, 650 F.2d

ST CI Be D eiiccciceaiececisindspstiontilaneninsann 2

Indiana & Michigan Elec. Co. v. EPA, 509

ee Fe to a: . 5 Paencenmeemm eee 9

Industrial Union Dep’t v. American Petroleum

Bronk, GER UE: Ge CED Setntcttentcttieeenes 4

INS v. Cardoza—Fonseca 480 US. 421

L. R. Willson & Sons, Inc. v. Donovan, 685

Fe Gs Me RED icstiinsinetieaenctaintnnes 6

Lewis v. Buena Vista Mut. Ins. Ass’n, 183

N.W.2d 198 (Towa 1971) ...........cccccssssssseeeees 10

National Steel Corp., Great Lakes Steel Div. v.

Gorsuch, 700 F.2d 314 (6th Cir. 1983)......... 3

Cases —Continued Page

Newport News Shipbldg. & Dry Dock Co. v.

BEGC, 462 US. 669 ( 1963) ................0....... 4

NLRB v. Yeshiva Univ., 444 U.S. 672 (1980) . 4

Ohio Envtl. Council v. United States EPA, 593

Pe Ey PFT DP idicsniccseencsiocescseccsoncses 2

Train v. Natural Resources Defense Council,

Rk SL LS i) 2,3

United States v. Interlake, Inc., 432 F. Supp.

I I a enc antuiniaaensinnees 2

United States v. Louisiana-Pacific Corp., 682

F. Supp. 1141 (D. Colo. 1988)... 9

United States v. Menasche, 348 U.S. 528

(8 NOSES RUD g a ee ee 6

United States v. Riverside Laboratories, Inc.,

678 F. Supp. 1352 (N.D. Ill. 1988) ...00000...... 2

United States v. Town of N. Hempstead, 610

rede SU CE GER, BOF D cvvccccsesrscvsessescacecseses 9

United States v. West Penn Power Co., 460 F.

I Ce 0 WP Py, FOTO) vcccncneccccccescsoseees 9

Statutes and regulations:

Clean Air Act, 42 U.S.C. 7401 ef seg. .....00..00... passim

Bo Sak 8 oly” oy FS ee 2

Nt, FEU cieninasecessscsnacosecesssonte 3

§ 110(a)(2), 42 U.S.C. 7410(a)(2) o0...... 3

IS Irs WUMIIID ickhitacssiacencasinncsccnccsesss |

Ohio Admin. Code ( 1987):

EID isiiscnicersnsvessascsiccesceses 5,6

5 SS 8

§ 3745-21-09( U)(1)(a) (iii) «ee. 6,7

Peo kb) | cre 7,8

a |

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1988

NAVISTAR INTERNATIONAL TRANSPORTATION

CORPORATION,

Petitioner,

vs.

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

REPLY BRIEF IN SUPPORT OF PETITION

This is a watershed case in federal environmental law

respecting Clean Air Act noncompliance proceedings. It is one

of the first noncompliance proceedings brought to a liability

determination pursuant to Section 120 of the Clean Air Act, 42

U.S.C. 7420. The case is being widely followed by segments of

the business community, the environmental bar, and the gener-

al press. 2

To avoid the significant questions presented for review,

respondent has been compelled to refashion for this Court

several of its arguments raised below. Respondent now urges

that this Court’s previous decisions allowing de novo review of

administrative interpretations should properly be read to accord

considerable deference to the respondent’s liability determina-

tion below. Similarly, in a revealing volte face, respondent now

argues that the exclusion of evidence of technological and

economic infeasibility comported with constitutional due pro-

cess since such evidence was to be retained in the record for the

penalty phase of the noncompliance proceeding.

Issnirsinnieansinneseeeneiieniaiaieenteiiaill

1. Respondent’s interpretation—of the Ohio administrative

regulation is in derogation of the State’s role under the

Clean Air Act.

Respondent first argues that Congress placed the primary

responsibility for enforcement of the Clean Air Act on EPA,

and that considerable deference should thus be paid the

respondent’s interpretation of the Ohio administrative regu-

lation. (Resp. Br. 6) On the contrary, courts have consistently

recognized that it is for the state, not EPA, to interpret its SIP,

and that EPA’s interpretation is entitled to no deference.’

Thus, for example, the Fifth Circuit in Florida Power & Light

Co. v. Costle, 650 F.2d 579 (Sth Cir. 1981), clearly stated that a

State’s interpretation of its state implementation plan is of great

moment in contrast to EPA’s secondary role under the Clean

Air Act:

{I]t must be emphasized that EPA is to be accorded no

discretion in interpreting state law. Quite the contrary is

true: ‘[the United States] should defer to the state’s

interpretation of the terms of its air pollution control plan

when said interpretation is consistent with the Clean Air

Act.” United States v. Interlake, Inc. 432 F. Supp. 985, 987

(N.D. Ill. 1977). See also Ohio Envtl. Council [v. EPA},

593 F.2d [24] at 29 [(6th Cir. 1979)] (EPA reliance on

state’s interpretation of state law is consistent with the

agency’s secondary role under the Clean Air Act).

650 F.2d at 588.

As this Court noted in Train v. Natural Resources Defense

Council, 421 U.S. 60, 64 (1975), Section 107(a) of the Clean

Air Act, 42 U.S.C. 7407(a), importantly provides that “[{e]ach

State shall have the primary responsibility for assuring air

quality within the entire geographic area comprising such

' See, e.g., Bethlehem Steel Corp. v. Gorsuch, 742 F.2d 1028,

1035-36 ( 7th Cir. 1984); United States v. Riverside Laboratories, Inc.,

678 F.Supp. 1352, 1355-57 (N.D. Ill. 1988).

State... .”” The Aet accords to the states the responsibility and

discretion to formulate acceptable plans, subject only to the

limitations of the Act itself:

Under § 110(a)(2) [of the Act (42 U.S.C. § 7410(a)

(2))], the Agency is required to approve a State plan

which provides for the timely attainment and subsequent

maintenance of ambient air standards, and which also

Satisfies that section’s other general requirements ....

[SJo long as the ultimate effect of a State’s choice of

emission limitations is compliance with the national stan-

dards for ambient air, the State is at liberty to adopt

whatever the mix of emission limitations it deems best

Suited to its particular situation.

421 U.S. at 79.

Thus, while we agree with respondent that EPA reviewed

the Ohio SIP prior to its approval ( Resp. Br. 6), EPA’s review

was limited to whether the several conditions set forth in

Section 110(a)(2) of the Act, 42 U.S.C. 7410(a)(2), had been

met. None of those threshold conditions involved the appropri-

ate definition of a “coating line” or the application of the Ohio

SIP to refinishing or non-metallic part spraying operations at

issue here. EPA’s review of the Ohio SIP consequently did not

encompass the instant matters to be construed, for which EPA

has no special competence.

EPA’s role is hence limited to one of oversight—to ensur-

ing in the first instance that the state plan satisfies the general

requirements of the Clean Air Act and will enable the state to

achieve attainment of national air quality standards. See Train,

supra, 421 U.S. at 66, 79; National Steel Corp., Great Lakes

Steel Div. v. Gorsuch, 700 F.2d 314, 322 (6th Cir. 1983). This

principle has been employed to invalidate EPA attempts to

interfere in state regulatory structures in various contexts. See,

e.g., Alabama Power v. Costle, 636 F.2d 323, 364 (D.C. Cir.

1979) (EPA may not dictate to state how it will manage

internal growth by use of available increments ).

The decision by the Sixth Circuit in this case, which would

allow EPA to essentially rewrite Ohio’s regulation defining a

coating line and effecting the refinishing exemption and the

metallic parts provision, is in derogation of the State’s Tole

under the Clean Air Act. EPA’s secondary role in narrowly

reviewing the Ohio SIP to determine its conformity with general

requirements of the Act exhibits no special competence and

does not warrant considerable deference.

2. The liability determination made by respondent should not

be accorded considerable deference.

Respondent’s protestations to the contrary notwithstanding

(Resp. Br. 8-9), this Court in INS v. Cardoza-Fonseca, 480

U.S. 421, 440 (1987), unequivocally held that where purely

legal questions are at issue, the court has broad authority to

conduct an independent and de novo review of agency deci-

sions. In like fashion, this Court has regularly endorsed

independent and de novo reviews of legal questions, substituting

its judgment for that of an agency, whose interpretations were

accorded no deference. See Dirks v. SEC, 463 U.S. 646, 655-64

(1983) (de novo review of securities regulation ); Newport News

Shipbldg. & Dry Dock Co. v. EEOC, 462 U.S. 669, 673-84

(1983) (same); NLRB v. Yeshiva Univ., 444 U.S. 672, 678-80

(1980) (same); Jndustrial Union Dep’t v. American Petroleum

Inst., 448 U.S. 607, 695 n.9 (1980) (same).

Further, this Court in Edward J. DeBartolo Corp. v. Florida

Gulf Coast Bldg. & Constr. Trade Council, 108 S. Ct. 1392

(1988), did not defer to an administrative interpretation as

respondent has represented. (Resp. Br. 8) Rather, this Court

rejected the NLRB’s construction of a statutory provision,

holding that the Board’s interpretation would “raise serious

constitutional problems. ...” Jd. at 1397. In the instant matter,

constitutional considerations are likewise implicated by re-

spondent’s broad construction of the coating line definition and

its exclusion of infeasibility evidence below. Consequently,

respondent’s interpretation of the Ohio regulation should be

rejected just as the DeBartolo Court dismissed the Board’s

unduly broad construction of the National Labor Relations Act.

In the above cases, the courts used traditional tools of

construction to ascertain intent. Respondent has not demon-

strated how the instant issues respecting regulatory definitions

and exemptions are anything less than legal questions to which

independent and de novo review should be applied. Moreover,

no aspect of the instant issues regarding administrative defini-

tions and exemptions implicates the respondent’s special com-

petence. In fact, respondent’s limited review of the Ohio SIP

afforded it no special competence in interpreting the coating

line definition, refinishing exemption or metallic part provision

in issue here. Respondent’s interpretation of the Ohio SIP

should thus not be accorded considerable deference.

3. Respondent’s interpretation of the Ohio administrative

regulation is plainly erroneous and inconsistent with the

terms of that regulation.

The Sixth Circuit held that two of petitioner’s coating

operations were regulated despite the absence of bake ovens in

the coating process. 828 F.2d at 287, Pet. App. A-10. This

finding is inconsistent with the terms of Ohio Administrative

Code Rule 3745-21-01(D)(8), which makes clear that paint

booths must have bake ovens to be regulated. Respondent’s

argument (Resp. Br. 9-10) that Rule 3745-21-01(D)(8) must

be interpreted to include petitioner’s paint booths R004 and

ROOS in order to effectuate the broad purposes of the Clean Air

Act rings hollow. This, because the plain meaning of Rule

3745-21-01(D)(8) suggests otherwise.

The first source in interpreting a statute or regulation is the

language of the provision at issue. See AFL-CIO v. Donovan,

757 F.2d 330, 334 (D.C. Cir. 1985). It is a basic tenet of

ae neil

statutory construction that, whenever possible, effect must be

given to every word and clause of a statute or regulation.

United States v. Menasche, 348 U.S. 528, 538-39 (1955).

‘‘When the wording of a statute is clear and unambiguous on its

face, judicial interpretation is not required; rather, the court

must give effect to the words used.” Dougherty v. Torrence, 2

Ohio St. 3d 69, 70, 442 N.E.2d 1295, 1296 (1982).

Here, the specific SIP provision EPA seeks to enforce

against petitioner applies only to miscellaneous metal part or

product coating lines. See O.A.C. § 3745-21-09(U)(1)(a)(im).

In turn, the plain language of the SIP makes clear that a coating

line must have three separate components—a coating appli-

cator, a flash-off area and an oven:

(8) “Coating line” means a series of one or more coating

applicators, flash-off areas and ovens wherein a sur-

face coating is applied, dried and/or cured.

O.A.C. § 3745-21-01(D)(8) (emphasis added). The defini-

tion specifies that the components must be in a series, and

provides that a single coating line may contain one or more of

each of the required elements. A coating line thus consists of a

series consisting of one or more coating applicators, one or

more flash-off areas, and one or more ovens.

Because the definition of coating line in the Ohio SIP

clearly requires bake ovens, the respondent’s reliance on ex-

trinsic evidence of EPA’s intent in construing the regulation is

unfounded. “It is well-settled that regulations cannot be

construed to mean what an agency intended but did not

adequately express.” L.R. Willson & Sons, Inc. v. Donovan,

685 F.2d 664, 675 (D.C. Cir. 1982).

Extrinsic evidence that EPA intended the SIP to apply to

booths without ovens cannot change the fact that the SIP

provision at issue simply does not regulate petitioner’s booths

R004 and ROOS, which do not have ovens. Accordingly, the

eR TT ot

respondent’s determination that these booths are in violation of

O.A.C. § 3745-21-09(U)(1)(a)(iii) is plainly erroneous as a

matter of law.

Respondent makes no attempt (Resp. Br. 9-10) to argue

that its interpretation of the refinishing exemption was neces-

sary to effectuate the assertedly broad goals of the Clean Air

Act. The Ohio SIP expressly exempts “application of a

refinishing coating to motor vehicles” from the requirements of

O.A.C. § 3745-21-09( U)(1)(a) (iii). O.A.C. § 3745-21-

09(U)(2)(c). Petitioner’s refinishing operations clearly fall

within the terms of this exemption. Nevertheless, the respond-

ent held the exemption does not apply to petitioner because

petitioner refinishes trucks prior to sale and because the ex-

emption assertedly was not intended to apply to petitioner.

(Pet. App. E-21, 22) Neither of the respondent's reasons is

sufficient to overcome the plain language of the regulation.

The respondent’s finding that petitioner does not “refinish”

trucks is based on an erroneously narrow interpretation of the

term “fmish.” EPA erroneously determined below that trucks

that have not been finished (completed) cannot be refinished.

In doing so, EPA ignored that the verb “finish” also means to

apply paint to a surface. Petitioner refinishes “finished”

(painted) trucks to correct paint defects prior to releasing the

trucks for sale in three of the paint booths at issue here. These

refinishing operations, which are similar to those performed at

body shops, clearly fall within the common meaning of the

refinishing exemption in O.A.C. § 3745-21-09( U)(2)(c).

The EPA’s finding that the exemption applies only to body

shops and does not apply to petitioner is likewise unfounded.

Whether the refinishing operations at the petitioner’s facility

fall within the refinishing exemption is certainly a situation that

easily could have been foreseen. Had Ohio intended the

refinishing exemption to apply only to body shops—and not to

refinishing operations at petitioner’s facility—it could have

included such a limitation in the rule. In short, Ohio readily

could have defined “refinishing” in any fashion it wished and it

would have been equally easy for respondent to have dis-

approved the exemption proposed by Ohio. Instead, Ohio did

not define “refinishing” to limit its application only to body

shops and EPA approved the broad exemption.

In bnef, respondent’s determination that the refinishing

exemption in O.A.C. § 3745-21-09(U)(2)(c) applies only to

body shops and not to the refinishing operations conducted at

the petitioner’s facility is plainly erroneous and inconsistent

with the terms of that regulation. The rule simply is not so

limited. Further, certain parts coated on several of petitioner’s

lines are made only of non-metallic materials and have no

metal formed on them. Emissions from these non-metallic

painting operations are clearly not regulated under the Ohio

administrative rule, which plainly pertains solely to emissions

from the coating of miscellaneous metal parts. O.A.C. § 3745-

21-09(U). EPA’s finding that non-metallic coating operations

are regulated is again plainly erroneous and inconsistent with

the terms of Ohio’s administrative regulation.

4. There is a direct conflict between the Sixth and Seventh

Circuits.

Respondent argues (Resp. Br. 11) that no due process

considerations were implicated by the exclusion of evidence of

technological and economic infeasibility below because peti-

tioner can raise its infeasibility claims during the penalty phase

of the Section 120 proceeding. Yet, respondent fails to explain

how and in what manner petitioner’s infeasibility claims can be

raised during the penalty phase. Nor does respondent cite any

authority for its proposition that due process considerations are

inapposite where infeasibility claims can be made during the

penalty, but not the liability, phase of Section 120 proceedings.

In short, respondent identifies no decisional law suggesting that

due process concerns are met simply by deferring infeasibility

claims until the penalty calculation stage of noncompliance

proceedings.

On the issue of admissibility of evidence of infeasibility,

the Sixth Circuit’s decision sharpens a clear conflict in the

circuits. The Seventh Circuit held in Indiana & Michigan Elec.

Co. v. EPA, 509 F.2d 839, 844-45 (7th Cir. 1975), that US.

EPA is not required to consider technological feasibility and

economic reasonableness prior to approval of a state impiemen-

tation plan only because arguments concerning technological

feasibility and economic unreasonableness are allowed to be

raised as to a specific source in the course of an enforcement

proceeding. See also, United States v. Louisiana-Pacific Corp.,

682 F. Supp. 1141, 1166 (D. Colo. 1988) (noncompliance

begins only when air emission control equipment becomes

“technically available”); United States v. West Penn Power Co.

460 F.Supp. 1305, 1307-12 (W.D. Pa. 1978) (same); United

States v. Town of N. Hempstead, 610 F.2d 1025, 1027 and n.3

(2d Cir. 1979) (same). The Seventh Circuit réaffirmed that

technological infeasibility and economic unreasonableness are

relevant in an enforcement proceeding in Bethlehem Steel Corp.

v. EPA, 638 F.2d 994, 1005 (7th Cir. 1980).

These authorities reflect the basic constitutional tenet that

application of a regulation (whether adopted through the

legislative or administrative process) is permissible only if

reasonable and not arbitrary or capricious as specifically ap-

plied. In this proceeding, petitioner contends that the Ohio

regulation is unreasonable as specifically applied to petitioner

because its compliance with the rule is technologically in-

feasible and economically unreasonable. Because compliance

with the Ohio regulation would be infeasible, its provisions

cannot be applied to petitioner.

Because petitioner had no meaningful opportunity to

present its claims of technical and economic infeasibility during

the Ohio SIP adoption process, constitutional due process

safeguards require that such claims be considered during the

liability phase of this proceeding. The EPA’s exclusion of

evidence of these issues improperly “chok[ed] off an entire

claim or defense,” Lewis v. Buena Vista Mut. Ins. Ass’n, |83

N.W.2d 198, 200-01 (Iowa 1971), and rendered arbitrary and

capricious the application of the Ohio regulation to petitioner.

The Sixth Circuit’s decision affirming this exclusion should

therefore be reviewed.

CONCLUSION

We respectfully submit that certioran should be granted.

Respectfully submitted,