In the last quarter of 2018, U.S. Senior District Judge David G. Larimer examined the interplay of two doctrines permitting courts to defer exercise of their jurisdiction until an administrative agency acts. One is more familiar—exhaustion of administrative remedies—and one perhaps less familiar—the prudential, not jurisdictional, doctrine of primary jurisdiction. Judge Larimer did so in the context of an environmental case under the Comprehensive Environmental, Response, Compensation and Liability Act of 1980 (CERCLA) but discusses legal, strategic, and practical concerns and principles applicable in other contexts.

Introduction

In Read v. Corning, No. 18-CV-6131L, 2018 U.S. Dist. LEXIS 215015 (W.D.N.Y. Dec. 21, 2018), four property owners in Corning, N.Y. filed suit against Corning Incorporated (Corning) under CERCLA. These plaintiffs sought damages, response costs, and injunctive relief due to alleged contamination by hazardous substances of their properties. Id. at *1. Corning's predecessor in interest acquired the subject property in 1920. Id. at *2. Plaintiffs claimed that prior to purchase of their particular plots, Corning released or disposed of hazardous substances in areas of the subject property. Id. at *2-3. Although no class had been certified, plaintiffs fashioned the complaint as a class action suit on behalf of other owners, occupants and residents. Id. at *1, 5

By way of background, on June 27, 2014, following the discovery of the aforementioned contamination, Corning entered into an Order on Consent (2014 Order) with the New York State Department of Environmental Conservation (DEC). Id. at *3. In accordance with the 2014 Order, Corning would undertake a study to determine the extent of contamination and would then recommend an appropriate remediation plan. Id. Corning commissioned a private firm to undertake this study. Id. Ultimately, this private firm recommended a two-foot excavation, with a soil cover. Id. at *3-4. After a period in which members of the public were invited to submit comments, the DEC issued a Final Decision Document (FDD), setting forth a remedy for the contaminated area, namely, excavation and removal of target fill and excavation and removal of soil within the top two feet. Id. at *4.

On Dec. 4, 2017, Corning and the DEC entered into another Order on Consent and Administrative Settlement (2017 Order), which superseded the 2014 Order. Id. at *4-5. This 2017 Order accepted the private firm's recommendations and required that Corning implement the remedial activities as required by the FDD. Id. at *5. The 2017 Order also required that Corning submit a Remedial Action Work Plan (RAWP) to the DEC, which would set forth the details of implementing the DEC-approved remedy. Id.

Plaintiffs' Complaint and Defendants' Motion to Dismiss

On Feb. 9, 2018, plaintiffs filed the instant complaint seeking response costs, compensatory and punitive damages, and injunctive relief requiring Corning to undertake additional remediation efforts, beyond that which was required by the DEC. Id. at *5-6. Specifically, plaintiffs' asserted five causes of action against the defendants: a claim for response costs under CERCLA, based on the disposal of hazardous substances on the subject property, and four common law causes of action—namely, a state-law claim for negligence based on the disposal of hazardous substances and defendants' failure to warn plaintiffs of the danger ensuing from that disposal; strict liability based on a theory of abnormally dangerous activity; private nuisance; and public nuisance. Id.

Defendants moved to dismiss all plaintiffs' claims for injunctive relief on the grounds that plaintiffs failed to exhaust their administrative remedies and the DEC had primary jurisdiction over the remediation. Id. at *6. Defendants also asked the court to dismiss all of plaintiffs' common-law causes of action for failure to state a claim upon which relief can be granted and to stay any remaining damages claims, under the primary-jurisdiction doctrine. Id.

Exhaustion of Remedies and Primary Jurisdiction

Judge Larimer's D&O began with his review of the two doctrines which would permit him to defer the court's jurisdiction pending action by an administrative agency, exhaustion of remedies doctrine and the primary jurisdiction doctrine. With respect to exhaustion of remedies, Judge Larimer stated that “[i]t is hornbook law that one who objects to the act of an administrative agency must exhaust available administrative remedies before being permitted to litigate in a court of law.” Id. at *7 (internal citations, quotations omitted). Generally, in New York, a party challenging an administrative action must first challenge it via an Article 78 proceeding. Id. (internal citation omitted). Primary jurisdiction, on the other hand, “governs the question of whether a particular issue or claim is initially cognizable in a court action or must be presented to an administrative agency for determination in the first instance.” Id. at *8 (internal citations, quotations omitted).

“[U]nder both doctrines, courts will defer the exercise of their jurisdiction until the administrative process has run its course.” Id. at *9 (internal citations, quotations omitted). These are distinct doctrines, however, and their differences are best captured in the Supreme Court quotation below.

'Exhaustion' applies where a claim is cognizable in the first instance by an administrative agency alone; judicial interference is withheld until the administrative process has run its course. 'Primary jurisdiction', on the other hand, applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views.

Id. at *9-10 (quoting United States v. Western Pacific R.R. Co., 352 U.S. 59, 63-64 (1956)).

The Parties' Positions and Applicability of Doctrines

Defendants argued that if plaintiffs were dissatisfied with the remediation plan chosen by the DEC, their exclusive remedy was to file an Article 78 petition in state court, and that because plaintiffs failed to do so, their claims for injunctive relief were barred for failure to exhaust their administrative remedies. Id. at *10-11. In the alternative, defendants argued that the court should “stay its hand under the primary-jurisdiction doctrine.” Id. at *11. In response, plaintiffs argued that they had already exhausted their administrative remedies, but also contended that there was no need for them to exhaust their administrative remedies in the first place, because they were not directly challenging the DEC's remedy. Id.

The court disagreed with plaintiffs' argument that they did not directly challenge the DEC's remedy, noting that they expressly asked for equitable relief altering or going beyond the DEC's remedy. Id. at *12. Furthermore, plaintiffs' counsel conceded at oral argument that they decided not to bring an Article 78 proceeding in state court, which would have directly challenged the DEC's approved remedy, because it was unlikely that they would have succeeded. Id. at *12-13. Tactically, therefore, plaintiffs' counsel decided to bypass the Article 78 proceeding entirely and instead sought relief in federal court under CERCLA. The court found that “end-run” ran afoul to the primary-jurisdiction doctrine. Id. at *13.

While recognizing that it indeed had subject matter jurisdiction over plaintiffs' CERCLA claims, the court also recognized that the DEC had jurisdiction over remedial programs for inactive hazardous waste disposal sites, and accordingly, the power to investigate the contamination in the case and come up with a remediation plan. Id. at *13-14. The court went on to explain that subject matter jurisdiction was not at issue in the case. Id. at *14. Rather, this case concerned the primary-jurisdiction doctrine, “under which a court may, under appropriate circumstances, determine that the initial decision-making responsibility should be performed by the relevant agency rather than the courts.” Id. (internal citations, quotations omitted). Notably, while most primary jurisdiction cases involve questions of whether the district court should defer to a federal agency's determination, the doctrine can extend to state agencies as well and did in this case. Id.

After reviewing ample federal case law applying the primary-jurisdiction doctrine to defer to state agencies with particular expertise, the court concluded that under the primary-jurisdiction doctrine, “it would be better for the Court to stay its hand [], in favor of the DEC proceedings.” Id. at *17. The court emphasized that this decision was “not even a close one.” Id.

In reaching its decision, the court considered four factors: (1) whether the question at issue was within the conventional experience of judges or whether it involved technical or policy considerations within the DEC's particular field of expertise, (2) whether the question at issue was particularly within the DEC's discretion, (3) whether there existed a substantial danger of inconsistent rulings, and (4) whether the plaintiffs made a prior application to the DEC. Id. at *10.

Ultimately, the court found that all four factors weighed against plaintiffs. First, the questions presented involved matters not within the conventional expertise of judges and which often involved technical or policy considerations within the DEC's particular field of expertise. Id. at *17. In other words, even though the court had subject matter jurisdiction, the DEC had more expertise in the underlying factual matters. Id. Second, the New York legislature had committed to the DEC's discretion how best to remediate the contamination at hand. Id. at *17-18. Third, if the court were to grant the relief sought, there would be a significant risk of inconsistent rulings concerning the remediation plan, which would likely lead to confusion in the process, and inefficiency/delay in the remediation. Id. at *18-19. Lastly, plaintiffs in fact made a prior application to the DEC, which progressed to the point where the DEC approved a specific remedy. Id. at *19. In staying its hand, the court emphasized that “[l]ate-in-the-day meddling by [the] Court would serve little if any useful purpose.” Id.

The court also explained that the exhaustion of remedies doctrine was of little relevance because the plaintiffs did not challenge the DEC's order in an Article 78 proceeding, but rather filed a claim for relief under CERCLA. Id. at *19-20. To that end, the court noted that exhaustion of state administrative remedies is not an absolute precondition to bringing a CERCLA claim in federal court. Id. at *20. Nevertheless, the court addressed plaintiffs' argument that they exhausted their administrative remedies by raising objections during the process leading up to the DEC's order. Id. at *21. The court summed up plaintiffs' position as follows: plaintiffs “[] can't exhaust, [] don't need to exhaust; but [] did exhaust” their administrative remedies. Id. at *23. In rejecting plaintiffs' exhaustion argument, the court noted that it was unimpressed with plaintiffs' interpretation of the case law. Id. at *21-22.

Conclusion

Ultimately, the court granted defendants' motion to dismiss plaintiffs' common law causes of action, and stayed plaintiffs' cause of action under CERCLA until the implementation of the DEC-ordered remediation.

Through this D&O, Judge Larimer noted that the court would not tolerate a tactical decision to bring a case in federal court in order to bypass both administrative and state law. He found that to allow that strategy would circumvent important policy goals and would encourage plaintiffs to ignore the appropriate avenues of relief readily available to them.

Sharon M. Porcellio is a member of Bond, Schoeneck & King, representing businesses and institutions in commercial litigation and employment matters. She can be reached at [email protected]. Alyssa Jones, an associate with the firm's litigation department, assisted with the preparation of this article.