July 7, 2011

Bookmark and Share

Wilderness Society V. United States Forest Service


The Demise of the Misguided "Federal Defendant Rule" and the Return of Project Proponents and State and Local Interests to NEPA Litigation in the Ninth Circuit

John C. Lemaster, Shareholder
Ryley Carlock & Applewhite

The Ninth Circuit, in an en banc opinion, has abandoned its long-standing, and much-maligned, "federal defendant rule" that provided that only the federal government and its agencies could be defendants in actions seeking redress under the National Environmental Policy Act ("NEPA").[1]  Wilderness Society v. United States Forest Service, 630 F.3d 1173 (9th Cir. 2011) (en banc).  The rule had "categorically preclude[d] private parties and state and local governments from intervening of right as defendants on the merits of NEPA actions."  Id. at 1177.

This means that the Ninth Circuit categorically refused to even entertain a motion to intervene as of right filed by a project proponent - the company that has spent years working with the coordinating agency to obtain permits and rights-of-way and financing scientific study to support the agency's "hard look" into the environmental impacts of the project, and with investments in the project typically totaling millions of dollars.

The rationale for the rule was that, because NEPA is a procedural statute that does not provide a substantive right, the federal agency charged with implementing NEPA was the only proper defendant in a NEPA action.  Churchill County v. Babbitt, 150 F.3d 1072, 1082 (9th Cir. 1998).    Indeed, in establishing the rule in Portland Audubon Society v. Hodel, the Ninth Circuit held that a proposed intervenor's "significant economic stake" in the outcome of a NEPA action was not a "protectable interest" that would justify intervention.  866 F.2d 302, 309 (9th Cir. 1989).   The court concluded that NEPA did not provide protection for "purely economic interests."  Id.

The federal defendant rule did not prohibit private parties and local and state government from intervening in the remedial phase of a NEPA action.  See e.g., Forest Conservation Council v. United States Forrest Service, 66 F.3d 1489, 1494 (9th Cir. 1989).  This bifurcation of NEPA actions - precluding private parties from intervening in the merits phase of the litigation but allowing intervention on the remedial phase of the litigation - caused significant confusion.  For example, an intervenor could seek to intervene as of right in opposition to entry of a preliminary injunction, which is remedial, not on the merits.  However, the question arose whether the intervenor could argue the likelihood of success on the merits of the NEPA claim, which is a fundamental component of the Ninth Circuit's preliminary injunction test.  Clear Channel Outdoor Inc. v. City of Los Angeles, 340 F.3d 810, 813 (9th Cir. 2003) (A preliminary injunction will be entered when the movant establishes "either (1) a likelihood of success on the merits and the possibility of irreparable injury; or (2) that serious questions going to the merits were raised and the balance of hardships tips sharply in its favor.").

For years, project proponents and other non-federal entities interested in the outcome of NEPA litigation in the Ninth Circuit have argued that the federal defendant rule was at odds with the text and purpose of Rule 24(a), Federal Rules of Civil Procedure.  Rule 24(a) provides that "the court must permit anyone to intervene who...claims an interest relating to the property or transaction that is the subject of the action...."  How can it be said that a project proponent with millions of dollars of investment has no interest relating to the project that is the subject of the NEPA litigation?

The rule's disapproval was underscored by the positions taken in Wilderness Society.  Thirty-seven amici filed briefs urging the Ninth Circuit to abolish the rule, id. at 1178, and not even the appellee conservation groups opposing intervention would speak in favor of the rule.  Id. at 1177 ("The conservation groups took no position on the propriety of the rule.").  The thirty-seven amici represented nearly every conceivable contingent with interests in NEPA litigation, including commercial interests, state and local governments, the federal government, and regional water authorities. Id. at 1178.  Even conservation groups, recreation groups, and Indian tribes - groups that would typically be opposing projects, and therefore would be opposing intervention of non-federal defendants - argued against the prohibition on intervention as of right.  Id.

Twenty-two years after establishing the rule in Portland Audubon, the Ninth Circuit finally came around.  After analyzing the history and rationale of the federal defendant rule compared to the construction of Rule 24(a) in other contexts, the court found that the federal defendant rule "runs counter to all of the" standards governing intervention under Rule 24(a), and is "at odds" with the standards of intervention applied in all other intervention contexts.  630 F.3d at 1179.  The court found the federal defendant rule "eschews practical and equitable considerations and ignores our traditionally liberal policy in favor of intervention."  Id.  The court also found that the federal defendant rule was "out of step" with all of the other circuits except the Seventh Circuit. Id. at 1180.

Stated most succinctly, "the ‘federal defendant' rule mistakenly focuses on the underlying legal claim instead of the property or transaction that is the subject of the lawsuit."  Wilderness, 630 F.3d at 1178. 

The Ninth Circuit's abolition of the federal defendant rule does not mean that project proponents are now recognized to have sufficient interests for intervention as a right.  Rather, the Ninth Circuit will now analyze each would be intervenors' interests on a case-by-case basis, just like every other motion to intervene.  Id. at 1180.  However, the guidance given by the court regarding what must be shown suggests that most project proponents / investors will be able to make a strong case that they have a legally protectable interest giving rise to a right to intervene.  Id. at 441 ("A putative intervenor will generally demonstrate a sufficient interest for intervention of right in a NEPA action, as in all cases, if ‘it will suffer a practical impairment of its interests as a result of the pending litigation.'") (citing California ex rel. Lockyer v. United States, 450 F.3d 436, 441 (9th Cir. 2006) (emphasis added).

What Abolition of the Rule Means For

NEPA Litigation In The Ninth Circuit

Objecting entities can now expect that their attacks on projects constituting major federal actions will now be defended on the merits not only by the Department of Justice on behalf of the coordinating agency, but also by private firms on behalf of the project proponents backing the projects with private investments. Our experience with DOJ NEPA lawyers is that they are typically very good.  However, the investors have a much greater financial incentive to see the project come to fruition, and they will often fund a more vigorous and expensive defense, which in turn can increase the attention that the challengers must devote in order to mount a credible opposition to the project.  Ultimately, we expect that fewer challenges will be successful now that proponents will be able to participate in the liability phase.

[1] 42 U.S.C. § 4331 et seq.