Reply Brief — Vista Paint Corp. v. United States

2.

AUG 2 1 1998

No. 97-1897

ae | -_

Ir A epy

i ULEKK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1998

VISTA PAINT CORPORATION,

Petitioner,

We

UNITED STATES OF AMERICA,

Respondent.

On Petition for Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

REPLY TO BRIEF IN OPPOSITION

WILLIAM F. FAHEY CHRISTOPHER LANDAU

HANNA & MORTON * Counsel of Record

THORPE & THORPE JEFFREY BOSSERT CLARK

Wilshire-Grand Building KIRKLAND & ELLIS

17th Floor 655 Fifteenth Street, N.W.

600 Wilshire Boulevard Washington, D.C. 20005

Los Angeles, CA 90017 (202) 879-5000

Counsel for Petitioners

August 21, 1998

TABLE OF AUTHORITIES

CASES:

Adamo Wrecking Co. v. United States,

cde oe ei.) ee rere

Addington v. Texas,

ee 5A EGE P ETD occ kb cdeudecctirs

Arizona v. Fulminante,

Pe TR CUP PES 66:5 0 coe cicencees

Buckeye Power, Inc. v. EPA,

481 F.2d 162 (6th Cir. 1973) ..........

Indiana & Mich. Elec. Co. v. EPA,

S09 £00 GSP (7 Cis. 1975) 25. cess

In re Adair,

965 F.2d 777 (9th Cir. 1992) ..........

International Harvester Co. v. Ruckelshaus,

478 F.2d 615 (D.C. Cir. 1973) .........

Lebeck v. William A. Jarvis, Inc.,

ya Joe we fi oe 2 7s ere

Lloyd A. Fry Roofing Co. v. EPA,

554 F.2d 885 (8th Cir. 1977) ..........

Morales v. Trans World Airlines, Inc..,

Pe BA PURE OME 60 0a cco eceN eevee

Murphy v. Tivoli Enters.,

953 F.2d 354 (8th Cir. 1992) ..........

McNary v. Haitian Refugee Ctr., Inc.,

Ge Sa EPPO OED Sib 0 occa dna evens

ceaeee y

Phonetele, Inc. v. AT&T,

889 F.2d 224 (9th Cir. 1989),

cert. denied, 503 U.S. 914 (1992) .............. 8

St. Mary’s Honor Ctr. v. Hicks,

Fa As ED on 845 0 beendanns ener 6

Student Public Interest Research Group v.

Monsanto Co.,

18 Envtl. L. Rep. 20,999, 1988 WL 156691

Ge COE sods bo ntdavisacdrete ese 6

Sullivan v. Louisiana,

Se te PO CRP OED hbo dae bebe toca eces 7

Union Elec. Co. v. EPA,

gk Re Ot | Re eae ry eee ees 2,4

United States v. Midwest Suspension and Brake,

824 F. Supp. 713 (E.D. Mich. 1993),

aff'd, 49 F.3d 1197 (6th Cir. 1995) ............. 6

Walton v. United Consumers Club, Inc.,

Tee ee er LE eh bok nes ci aes beeen 8

Western Oil & Gas Ass'n v. Air Resources Bd,

ee fe ari a oe ero ee me 3

Yakus v. United States,

See a SOREN bikes os bed eei weeks l

STATUTES AND RULES:

Chetan PRO 6 whdd decks icssaneskaueleeeneeel 4

Wier 2M a ee 5

SECONDARY SOURCE:

C. Richey, A Modern Management

Technique for Trial Courts to Improve

the Quality of Justice: Requiring Direct

Testimony to Be Submitied in Written

Form Prior to Trial, 72 Geo. L.J. 73 (1983) .

. 8-9

The Government attempts to persuade this Court, as it

persuaded the Ninth Circuit, that this case is nothing more than

a routine administrative dispute unworthy of attention. But it

is precisely this cavalier approach toward the imposition of

staggering civil fines that warrants this Court’s review. Each

of the three questions presented relates to the integrity of the

judicial process afforded to petitioner. Each of those three

questions, in addition, was incorrectly decided below, and

conflicts with other rulings. Accordingly, this Court should

grant review.

1. Preclusion of Judicial Review

The Government first attempts to defend the Ninth Circuit’s

ruling precluding Vista from challenging the validity of the

very regulations being enforced in this proceeding. See Opp.

Br. 10-16. The Government, like the Ninth Circuit, relies on

Section 307(b)(2) of the Clean Air Act, which precludes

judicial review at the enforcement Stage of any action “with

respect to which review could have been obtained” when the

regulation was first adopted. 42 U.S.C. § 7607(b)(2). Such

reliance is wholly misplaced.

Analysis of this issue must start from the premise that it is an

extraordinary step for Congress to deny a defendant an

opportunity to challenge the validity of a regulation being

enforced against him. This Court has upheld such a drastic

restriction only once, in Yakus v. United States, 321 U.S. 414

(1944). That case. however, arose in the unique context of a

wartime challenge to an emergency price control regulation.

Even assuming that Yakus was correctly decided, it cannot

reasonably be construed as an all-purpose seal of approval for

provisions that preclude defendants from challenging the

validity of regulations at the enforcement stage. To the

contrary, courts must construe such preclusion provisions

narrowly, and resolve any doubts against preclusion. See, e. zZ.,

Adamo Wrecking Co. v. United States, 434 U.S. 275, 282-85

(1978); id. at 289-9] (Powell, J., concurring); cf McNary v.

Haitian Refugee Ctr., Inc., 498 US. 479, 496 (1991).

2

The Ninth Circuit displayed no such restraint, and instead

broadly held that Section 307(b)(2) precluded all of Vista’s

challenges to the validity of the SIP. See Pet. App. 36a. Vista

had “ample opportunity,” the Ninth Circuit declared, to

challenge the SIP at the time it was initially adopted by the

EPA. /d. That holding is manifestly incorrect.

For the past quarter century, it has been settled that the EPA

cannot consider challenges based on economic and/or

technological infeasibility in deciding whether to adopt a SIP.

See Union Elec. Co. v. EPA, 427 U.S. 246, 256 (1976). It

necessarily follows that such challenges (1) cannot be raised in

a proceeding for direct review of such a decision, and thus (2)

are not precluded in any subsequent enforcement proceeding.

See, e.g., Indiana & Mich. Elec. Co. v. EPA, 509 F.2d 839, 845

(7th Cir. 1975); Buckeye Power,-Inc. v. EPA, 481 F.2d 162,

172-73 (6th Cir. 1973). This Court noted, but did not expressly

decide, this point in Union Electric. See 427 U.S. at 268 n.18.

The Ninth Circuit thus erred, and brought itself into conflict

with these other circuits, by holding without qualification that

all of Vista’s challenges to the SIP were precluded because the

were not raised in a pre-enforcement proceeding. See Pet. App.

36a. The Ninth Circuit drew no distinction between challenges

based on economic and/or technological feasibility and other

challenges. The Government now attempts to defend that

holding on the ground that none of Vista’s challenges to the

SIP involved issues of economic and/or technological

infeasibility. See Opp. Br. 10-12. That is simply not so.

From the beginning of this litigation, Vista challenged the

validity of the SIP on numerous grounds, including several

relating to economic and/or technological feasibility issues

outside the EPA’s statutory ken. It is important to note, in this

regard, that “economic and technological infeasibility” is not

a term of art, but rather a phrase used by this Court in Union

Electric to describe considerations that the EPA is not

authorized to consider in evaluating a SIP. See 427 U.S. at

256. These considerations encompass (1) the economic costs

3

imposed on one or more affected entities, or (2) the

technological adjustments that would have to be made to

conform to the prescribed environmental norms. See, e.g.,

Buckeye Power, 481 F.2d at 167.

It is abundantly clear that several of Vista’s challenges to the

California SIP fell into one or both of these categories, and

hence should not have been precluded in this enforcement

proceeding. Indeed, the Government’s own recitation of

Vista’s challenges includes at least two that on their face

involved economic or technological feasibility. See Opp. Br.

11 n.6.

First, Vista challenged the SIP on the ground that the local

pollution-control agencies had failed to “‘assess and duly

consider the economic impacts [of the VOC limits], as required

by law.’” Opp. Br. 11 n.6 (quoting Pet. C.A. Br. 29, United

States v. Vista Paint Corp., No. 92-55160 (9th Cir.)). In

support of that challenge, Vista specifically relied on Western

Oil & Gas Ass'n v. Air Resources Bd., 691 P.2d 606, 608 (Cal.

1984), the very case on which it now relies for the proposition

that “a local air quality district must assess and duly consider

the economic impact of its standards.” Pet. 9. :

Second, Vista challenged the SIP on the ground that the local

pollution-control agencies had engaged in improper “crystal-

ball gazing” by setting standards that were infeasible in light of

the current state of technology. Opp. Br. 11 n.6 (quoting Pet.

C.A. Br. 29-30, United States v. Vista Paint Corp., No. 92-

55160 (9th Cir.) (in turn citing Jnternational Harvester Co. vy.

Ruckelshaus, 478 F.2d 615 (D.C. Cir. 1973)). Despite these

two economic and technological feasibility defenses, the Ninth

Circuit broadly held that Vista was precluded from challenging

enforcement of the SIP by its previous failure to challenge

adoption of the SIP. See Pet. App. 36a.

Vista challenged that holding in an interlocutory petition for

certiorari. See Pet. for a Writ of Cert., Vista Paint Corp. v.

United States, No. 92-2026 (filed 6/21/93). The Government

filed an opposition to that petition arguing solely that the

4

petition was untimely on the theory that Vista’s petition for

rehearing in the Ninth Circuit had been untimely. See Mem. in

Opp., Vista Paint Corp. v. United States, No. 92-2026 (filed

8/5/93). Vista addressed that argument in its reply brief. See

Reply Brief, Vista Paint Corp. v. United States, No. 92-2026

(filed 8/13/93). Over one month later, the Government filed a

“Supplemental Brief’ acknowledging the possibility that

Vista’s petition had been timely filed and for the first time

addressing Vista’s arguments on the merits. This Court denied

the petition shortly thereafter. See 510 U.S. 826 (1993). The

Government, in other words, sandbagged Vista by getting in

the last word. It is disingenuous, to say the least, for the

Government now to chide Vista for “not tak[ing] issue at that

time with the government’s characterization of its invalidity

defenses as not being based on technological or economic

feasibility,” Opp. Br. 12—a characterization made for the first

and only time in a belated supplemental brief to which Vista

had no opportunity to respond.

The Government also suggests in the alternative that Vista

could have raised a pre-enforcement challenge to the SIP based

on economic or technological infeasibility by labeling it a

challenge to the validity of the SIP under state law. See Opp.

Br. 15 (citing 42 U.S.C. § 7410(a)(2)(E)). Such semantic

sleight-of-hand, however, is untenable. Any challenge based

on economic or technological infeasibility must ultimately be

rooted in law—neither the EPA nor the courts can adjudicate

a challenge based on free-floating considerations of economic

or technological feasibility without some legal basis. This

Court’s holding in Union Electric that the EPA is not allowed

to consider challenges based on economic or technological

infeasibility would be entirely meaningless if such challenges

could be presented under the guise of challenges to the validity

of a SIP under state law. As the Seventh Circuit has explained,

“a plan’s technological feasibility and economic impact are not

among the factors which the Administrator is obliged to

consider under [42 U.S.C. § 7410(a)(2)], and . . . where a

state’s implementation plan satisfies the criteria set forth

5

therein, the statute quite specifically requires the Administrator

to approve it.” Indiana & Mich. Elec. Co., 509 F.2d at 844.

Because the EPA cannot consider a pre-enforcement challenge

to a SIP based on economic or technological infeasibility, Vista

should not be precluded from raising such a challenge now.

The Government’s argument to the contrary boils down to

nothing more than “heads | win, tails you lose.”

The Government finally attempts to downplay the effect of

precluding Vista’s validity defenses by arguing that Vista was

“free to raise such issues during the penalty phase of the case

in an effort to show ‘good faith efforts to comply’ with the

VOC limits.” Opp. Br. 16 (quoting 42 U.S.C. § 7413(e)(1)).

That argument is meritless. It is wholly foreign to our system

of justice to suggest that a defendant can be precluded from

raising a defense to the imposition of liability if he is

subsequently allowed to raise that defense to limit the penalty.

It goes without saying that an individual or entity can suffer

significant collateral injury from a finding of liability even if

no penalty at all is imposed. Thus, even assuming that Vista’s

challenges to the SIP based on economic and/or technological

infeasibility were coextensive with the company’s “good faith

efforts to comply” with the SIP—which is by no means

clear—that point would in no way justify the preclusion of

Vista’s challenges to the validity of the SIP at the liability

stage. Vista was forced to defend itself in this proceeding with

its hands tied behind its back. The Clean Air Act does not

require, and the Constitution does not tolerate, any such result.

2. Improper Burden of Proof

The Government next attempts to defend the ruling below

that there is no burden of proof in a proceeding to determine

the amount of a statutory penalty under the Clean Air Act. See

Opp. Br. 16-20. That ruling, however, makes no sense, as there

is always a burden of proof in any proceeding (like a penalty

proceeding under Section 1 13(e)(1) of the Clean Air Act) that

requires a court to determine certain facts. In addition, the

6

ruling below only exacerbates the prevailing confusion among

the lower federal courts on this important issue.

The notion, embraced by the courts below and now the

Government, that there is no burden of proof in a Clean Air Act

penalty proceeding is manifestly erroneous. The whole point

of such a proceeding, and the whole reason that the Ninth

Circuit reversed the District Court’s grant of summary

judgment in the first round of this litigation, see Pet. App. 38a-

39a, is for the court to make factual findings as a predicate for

application of the statutory penalty factors. The fact-finding

process necessarily calls for a burden of proof: either the

Government or the defendant must bear the burden of proving

that certain facts more likely than not are true. The court’s

subsequent obligation to weigh all those facts and balance the

various statutory penalty factors in no way negates the

existence of this threshold burden of proof.

There is, moreover, no reason to think that the Clean Air Act

represents a departure from the bedrock norm in our legal

system that the burden of proof in civil cases rests squarely

upon the plaintiff—here, the Government. See, e.g., St. Mary’s

Honor Ctr. v. Hicks, 509 U.S. 502, 511-12 (1993); Addington

v. Texas, 441 U.S. 418, 428 (1979). Accordingly, where (as

here) the Government seeks to exact a penalty for a violation

of the Act, it bears the burden of proving that the penalty is

justified. The defendant does not bear the burden of proving

that the penalty is not justified. See, e.g., United States v.

Midwest Suspension & Brake, 824 F. Supp. 713, 735 n. 30

(E.D. Mich. 1993), aff'd, 49 F.3d 1197 (6th Cir. 1995); Student

Public Interest Research Group v. Monsanto Co., 18 Envtl. L.

Rep. 20,999, 1988 WL 156691, at *12-*16 (D.N.J. 1988).

The Government attempts to sidestep this division of

authority by asserting that any error in the allocation of the

burden of proof in this case was harmless. See Opp. Br. 20.

That assertion is misguided as a matter of law and fact. As an

initial matter, it is settled that a misallocation of the burden of

proof is a structural error that infects an entire trial and

7

accordingly is not susceptible to harmless-error review. See,

e.g., Sullivan v. Louisiana, 508 U.S. 275, 279-82 (1993);

Arizona v. Fulminante, 499 U.S. 279, 306-07 (1991). In any

event, it is simply not true that “the district court would have

reached the same conclusion” regardless of the burden of

proof. Opp. Br. 20. As Vista detailed in its briefs below, the

misallocation of the burden of proof may well have tipped the

scales on several critical issues, including (1) financial impact

of the fine, (2) good-faith efforts to comply, and (3) financial

benefit from non-compliance. The Government’s unvarnished

(and counterintuitive) speculation that the burden of proof did

not affect the penalty imposed is baseless and unwarranted.

3. Trial by Affidavit

The Government finally attempts to defend the District

Court’s decision to dispense with oral testimony and instead

conduct a summary “trial by affidavit” with respect to the

penalty factors under the Clean Air Act. See Opp. Br. 20-23.

Contrary to the Government’s characterization, however, Vista

does not contend that the District Court simply “abused its

discretion” in its conduct of the penalty trial. /d. at 20. Rather,

Vista contends that the District Court violated the

straightforward command of Rule 43(a) of the Federal Rules of

Civil Procedure that “in all trials” the testimony of witnesses

shall be taken “in open court.” A district court simply has no

“discretion” to disregard that mandate by compelling litigants

to present their direct evidence by affidavits. See, e.g., Murphy

v. Tivoli Enters., 953 F.2d 354, 359 (8th Cir. 1992) (“Rule

43(a) presupposes that a witness will be physically present in

the courtroom to give testimony orally.”).

The Government attempts to defend the decision below on

the ground that Rule 43(a) is trumped by Rule 61 1(a) of the

Federal Rules of Evidence, which authorizes district courts to

“exercise reasonable control over the mode and order of

interrogating witnesses and presenting evidence.” That attempt

is unavailing. “It is a commonplace of statutory construction

that the specific governs the general,” Morales v. Trans World

vn anti

8

Airlines, Inc., 504 U.S. 374, 384-85 (1992), and the general

provisions of Rule 611(a) in no way purport to override the

specific command of Rule 43(a). The Government’s approach,

which would create a conflict between these two rules and

render Rule 43(a) a dead letter, is simply untenable.

In addition, the Government fails to explain away the

conflict between the decision below (which reflects settled

Ninth Circuit law, see, e.g., In re Adair, 965 F.2d 777, 779-80 |

(9th Cir. 1992) (per curiam); Phonetele, Inc. v. AT&T, 889

F.2d 224, 232 (9th Cir. 1989), cert. denied, 503 U.S. 914

(1992)) and decisions from other circuits construing Rule

43(a). In particular, the Government fails to distinguish a line

of cases holding that Rule 43(a) prohibits trial courts from

conducting trials by affidavit. See Pet. 19-20 (citing, inter alia,

Walton v. United Consumers Club, Inc., 786 F.2d 303, 313 (7th

Cir. 1986) (Easterbrook, J.), and Lebeck v. William A. Jarvis,

Inc., 250 F.2d 285, 294-95 (3d Cir. 1957)). The Government

contends that Walton is distinguishable because the Seventh

Circuit there concluded that the Rule 43(a) error was harmless.

See Opp. Br. 23. But that contention misses the point: Walton

set forth a rule of law diametrically opposed to the rule of law

set forth below, and whether the particular error at issue in

Walton was prejudicial is immaterial. The Government’s

further observation that Walton “did not consider the

relationship between Rule 43(a) . . . and Rule 611(a),” Opp. Br.

23, only underscores the sheer implausibility of construing the

one rule to override the other. Similarly, the Government

cannot reasonably distinguish Lebeck on the ground that the

case involved a jury, rather than a bench, trial, because Rule

— 43(a) draws no such distinction.

In the final analysis, this is the kind of elementary

procedural issue about which there should be no confusion in

the bench and bar. In this era of increasingly crowded dockets,

it is undoubtedly tempting for busy trial courts to require

litigants to present their case by simultaneous affidavits. See,

e.g., Hon. Charles Richey, A Modern Management Technique

OE

for Trial Courts to Improve the Quality of Justice: Requiring

Direct Testimony to Be Submitte

Trial, 72 Geo. L.J. 73, 73-74

device). But this understandab

cannot be allowed to supp

live witness testimony, a hall

At the very least, this shou

is unclear. Accordingly,

(19

clarify whether Rule 43(a) still means what it says.

CONCLUSION

For the foregoing reasons, and those set forth in the petition

for writ of certiorari, this Court should grant the petition.

WILLIAM F. FAHEY

HANNA & MORTON *

THORPE & THORPE

Wilshire-Grand Building

17th Floor

600 Wilshire Boulevard

Los Angeles, CA 90017

Respectfully submitted,

CHRISTOPHER LANDAU

Counsel of Record

JEFFREY BOSSERT CLARK

KIRKLAND & ELLIS

655 Fifteenth Street, N.W.

Washington, D.C. 20005

(202) 879-5000

Counsel for Petitioner

d in Written Form Prior to

83) (advocating use of this

le desire for judicial efficiency

lant the traditional right to present

mark of Anglo-American justice.

be an issue on which the law

this Court should grant review to