San Antonio Bay v. Formosa Plstc ( 2021 )

Case: 20-40575 Document: 00515843624 Page: 1 Date Filed: 04/30/2021
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
April 30, 2021
No. 20-40575 Lyle W. Cayce
Clerk
San Antonio Bay Estuarine Waterkeeper; Sylvia Diane
Wilson,
Plaintiffs—Appellees,
versus
Formosa Plastics Corporation Texas; Formosa Plastics
Corporation USA,
Defendants—Appellants.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 6:17-CV-47
Before King, Smith, and Haynes, Circuit Judges.
Per Curiam:*
This case concerns a dispute between Formosa Plastics Corporation
Texas and Formosa Plastics Corporation U.S.A. (jointly, “Formosa”) and
San Antonio Bay Estuarine Waterkeeper and Sylvia Diane Wilson (jointly,
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
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“San Antonio Bay”) over the interpretation of three paragraphs in a Consent
Decree the parties entered into to settle San Antonio Bay’s Clean Water Act
(“CWA”) claims. Specifically, the parties disagree about what triggers
Formosa’s payment and reporting obligations—new, post-Consent Decree
discharges of plastics (as Formosa contends) or the presence of any plastics,
regardless of when they were discharged (as San Antonio Bay contends).
The district court resolved the dispute in favor of San Antonio Bay. For the
following reasons, we REVERSE and REMAND for further proceedings
consistent with this opinion.
I. Background
San Antonio Bay sued Formosa under § 505(a)(1) of the CWA, 33
U.S.C. § 1365(a)(1), 1 for illegally discharging plastic pellets and other
materials through its stormwater and wastewater into Cox Creek and Lavaca
Bay in violation of Formosa’s Texas Pollutant Discharge Elimination System
(“TPDES”) permit. 2 Formosa’s permit prohibited it from discharging
“floating solids or visible foam other than trace amounts.” The district court
held a bench trial and found that Formosa violated its permit because the
plastics discharged exceeded “trace amounts” as the district court construed
that term.
1
Under this provision, “any citizen may commence a civil action on his own behalf
against any person . . . who is alleged to be in violation of (A) an effluent standard or
limitation under this chapter or (B) an order issued by the Administrator or a State with
respect to such a standard or limitation.” 33 U.S.C. § 1365(a)(1).
2
Under the CWA, the “discharge of a pollutant” is defined as “any addition of
any pollutant to navigable waters from any point source” or “any addition of any pollutant
to the waters of the contiguous zone or the ocean from any point source other than a vessel
or other floating craft.” 33 U.S.C. § 1362(12).
2
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Following the district court’s ruling, the parties agreed to settle San
Antonio Bay’s CWA claims, executing a Consent Decree to that effect. 3
Relevant here, paragraphs 36, 37, and 38 of the Consent Decree concerned
the documentation of discharges by a designated third party (the
“Monitor”), as well as Formosa’s payment and reporting obligations for its
discharges. These paragraphs are located in a subsection entitled
“Monitoring, Reporting, and Future Mitigation Payments.”
Paragraph 36 focuses on the circumstances that would result in a
violation of Formosa’s discharge permit and a corresponding penalty
payment. It provides:
If either Formosa or the Monitor documents any Plastics
resulting from sampling at the WSM for Outfall 001 or
upstream of containment Booms, including on the upstream
shores or in the water, for outfalls discharging into Cox Creek,
and including discharges of Plastics found by the Monitor in
accordance with paragraph 37, Formosa, subject to any claim
by Formosa of a Force Majeure Event or Force Majeure
Events, is in violation of its discharge permit and Formosa will,
within thirty (30) Days of learning of the violation, pay into the
Mitigation Trust . . . .
The paragraph also includes a payment schedule “[f]or discharges in
calendar year[s]” 2019 to 2024 (and after).
Paragraph 37 focuses on the documentation of discharges. It provides:
Plaintiffs or other concerned citizens may send documentation
of Plastics outside of Formosa’s outfalls in Cox Creek or on the
shores of Cox Creek for outfalls discharging into Cox Creek to
the Monitor for review. If the Monitor determines the
3
The Consent Decree acted as the “full and final settlement of the civil claims for
violations of the [CWA] . . . , as alleged in the complaint . . . up through the date of entry of
th[e] Consent Decree.”
3
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submitted documentation demonstrates new discharges of
Plastics not already identified, the Monitor will add the new
discharges demonstrated by the citizen documentation to the
discharges documented by the Monitor, as provided in
paragraph 36.
Finally, paragraph 38 focuses on Formosa’s reporting obligations to
state officials, cross-referencing the discharge provisions in paragraph 36. In
relevant part, 4 it provides:
When there has been a discharge of Plastics, as determined
pursuant to paragraph[] 36, within twenty-four (24) hours of
Formosa learning of the discharge, Formosa will report each
event as a permit violation to the Texas Commission on
Environmental Quality (“TCEQ”) identifying the water body
(Cox Creek or Lavaca Bay) where Plastics were
discharged . . . .
Beyond these paragraphs, the Consent Decree required Formosa to
pay $50 million over five years for “Mitigation Projects to the Matagorda Bay
Mitigation Trust”; instituted various procedures and remedial measures to
address past, current, and future discharges; and mandated zero discharges
from Formosa’s Point Comfort Plant. If violations were found, then
Formosa was required to pay into the Mitigation Trust.
The parties initially worked together to implement the terms of the
Consent Decree, but they disagreed over whether Formosa’s payment and
reporting obligations are triggered only on a “new discharge” of plastics (as
Formosa contended) or whether they are triggered on the “visual detection”
of plastics irrespective of when those plastics had actually been discharged
from a Formosa property (as San Antonio Bay contended).
4
Paragraph 38 also discusses Formosa’s obligation to “propose a new reporting
policy.” That portion of paragraph 38 is not relevant to the present dispute.
4
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The district court agreed with San Antonio Bay. 5 It held that the
presence of plastics outside of Formosa’s outfalls constituted violations of
the zero-discharge mandate set out in the Consent Decree and Formosa’s
TPDES permit. The district court also determined that, in analyzing
whether plastics were present, the Monitor was required “to simply
document[] the presence of Plastics,” not “to determine source or cause, or
justify his findings based on a found discharge of water(s).” Consequently,
the district court placed on Formosa the “burden to refute that the Plastics
found [were] not the result of a new release”; Formosa could petition for a
refund if it carried that burden. Formosa timely appealed. 6
II. Jurisdiction & Legal Standard
The district court had federal question jurisdiction over this case
under 33 U.S.C. § 1365(a) and 28 U.S.C. § 1331, and appropriately retained
jurisdiction under the terms of the Consent Decree. We have jurisdiction
over this interlocutory appeal under the collateral order doctrine. 7 See In re
Deepwater Horizon, 793 F.3d 479, 484 (5th Cir. 2015).
5
The district court later issued an amended order to correct various factual errors
but did not change its substantive holding.
6
Formosa also moved to stay the payment and reporting penalties pending appeal.
We granted a temporary administrative stay pending resolution of this appeal.
7
Jurisdiction under the collateral order doctrine can be invoked “when an order:
(1) conclusively determined the disputed question, (2) resolved an important issue separate
from the merits of the case, and (3) is effectively unreviewable on appeal from a final
judgment.” In re Deepwater Horizon, 793 F.3d 479, 484 (5th Cir. 2015). Here, the district
court’s amended order conclusively resolved an important and disputed issue separate
from the merits of Formosa’s CWA liability—the scope of Formosa’s penalty obligations
under the Consent Decree—which is effectively unreviewable on appeal from a final
judgment.
5
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We review questions regarding consent decree interpretation de novo.
Frew v. Janek, 820 F.3d 715, 723 (5th Cir. 2016). Because the Consent Decree
at issue was agreed to and executed in Texas, it is “subject to Texas
principles of contract interpretation.” Id. at 721 (internal quotation marks
and citation omitted). Under Texas law, words and phrases are given their
“ordinary and generally accepted meaning.” Nassar v. Liberty Mut. Fire Ins.
Co., 508 S.W.3d 254, 258 (Tex. 2017) (per curiam) (internal quotation marks
and citation omitted). The overall goal “in construing a written contract is
to ascertain the true intent of the parties as expressed in the instrument.”
Nat’l Union Fire Ins. Co. of Pittsburgh v. CBI Indus., Inc., 907 S.W.2d 517, 520
(Tex. 1995) (per curiam). Accordingly, “courts should examine and consider
the entire writing in an effort to harmonize and give effect to all the provisions
of the contract so that none will be rendered meaningless.” Coker v. Coker,
650 S.W.2d 391, 393 (Tex. 1983). In addition, a court must consider the
contract “in light of the circumstances present when the contract was
entered” to determine whether a given term is ambiguous. Phila. Am. Life
Ins. Co. v. Turner, 131 S.W.3d 576, 587 (Tex. App.—Fort Worth 2004, no
pet.).
Taking these considerations together, “[i]f a written contract is so
worded that it can be given a definite or certain legal meaning,” the contract
is unambiguous, and that interpretation of the contract governs. CBI Indus.,
907 S.W.2d at 520. If, however, the language “is subject to two or more
reasonable interpretations,” then the relevant term is ambiguous, and courts
may “consider the parties’ interpretation” and “admit extraneous evidence
to determine the true meaning of the instrument.” Id.
III. Discussion
The parties’ dispute primarily concerns the interpretation of
paragraph 36, as informed by the text of paragraphs 37 and 38. These
6
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paragraphs articulate Formosa’s mitigation payment and reporting
obligations, as well as the Monitor’s documentation role. Formosa maintains
that paragraph 36 concerns only “new discharges”—not the “mere
presence”—of plastics, such that Formosa’s payment and reporting
obligations arise only after the Monitor determines a given plastic was
discharged after the Consent Decree’s effective date. San Antonio Bay
responds, in effect, that paragraph 36 does not require the Monitor to
determine whether a given plastic has been newly discharged, and, even if it
did, the mere presence of plastics is a satisfactory shorthand to conclude that
such a discharge occurred. Upon review of the entire Consent Decree, we
conclude that Formosa’s interpretation is the only reasonable one.
First, the text of the operative provisions indicates that only new,
post-Consent Decree discharges trigger Formosa’s payment and reporting
obligations. Paragraph 36, for one, contains several forward-looking
references. It refers to “discharges of Plastics” in the present sense—
suggesting that the parties contemplated only active discharges, rather than
past discharges. Similarly, the paragraph refers to a Force Majeure Event as
a possible exemption from Formosa’s payment liability, implying that an
unforeseen event in the future could cause a “discharge[]” of plastics.8
Critically, paragraph 36 contains a mitigation payment schedule which
includes penalty payments for “discharges” only for the years following the
Consent Decree, demonstrating that the parties did not contemplate pre-
Consent Decree discharges triggering Formosa’s payment and reporting
8
A Force Majeure Event is an unanticipated future occurrence; as defined in
paragraph 11 of the Consent Decree, it is an “event” caused “solely by an act of God, war,
strike, riot, or other catastrophe” for which Formosa must take reasonable steps to
“prevent” from causing discharges.
7
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obligations. This portion would make little sense under San Antonio Bay’s
reading.
Paragraphs 37 and 38 contain similar language. Paragraph 37 refers to
“discharges of Plastics” and “discharges document[ed] by the Monitor, as
provided in paragraph 36.” 9 Paragraph 38 also contemplates a “discharge of
Plastics” (characterizing it as an “event”). In particular, paragraph 38’s use
of the phrase “[w]hen there has been a discharge of Plastics”—coupled with
a time sensitive twenty-four-hour reporting obligation—appears to
contemplate that a discharge is an “event” in the future. The word “event”
itself also suggests some kind of action to trigger liability, rather than the
passive presence of something. Further, paragraph 38’s language requiring
the identification of “where the Plastics were discharged” indicates that the
parties expected the specific location of the initial discharge to be noted by
Formosa. If the discharges referenced in paragraph 38 referred to past
discharges, it might be impossible to make this determination insofar as some
plastics could have moved over the years. In short, paragraph 38’s emphasis
on “when” and “where” plastics were discharged suggests that the mere
presence of “what” was being discharged (that is, plastics) is not enough to
trigger Formosa’s reporting obligation.
Second, we observe that the overall structure of the Consent Decree
suggests that the parties contemplated only post-Consent Decree discharges
as triggers for Formosa’s payment and reporting obligations. In general, the
Consent Decree addresses past discharges and future discharges in separate
9
Paragraph 74 also cross-references paragraph 36, though it is not located in the
same subsection. Notably, paragraph 74 allows for Formosa to request termination of the
Consent Decree “after the Monitor, Plaintiffs, and cleanup records have all documented
no discharges of Plastics as defined in paragraph 36 . . . for six (6) consecutive months.”
Thus, paragraph 74 (like paragraph 37) suggests that paragraph 36 contemplated that active
discharges, not the mere presence of plastics, triggered Formosa’s obligations.
8
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ways and in separate parts of the agreement. Of particular importance is the
“Remedial Measures” section, which contains five subsections (A through
E), of which Subsections A through C are the most relevant to this dispute. 10
Notably, paragraphs 36, 37, and 38 are in Subsection B.
Each subsection deals with a different aspect of the overall
remediation scheme. Subsection A (“Engineering Changes”) designates an
“Engineering Consultant” to produce a plan to update Formosa’s facility
“to prevent the discharge of Plastics,” including “plans to address
deficiencies in Formosa’s current system.” Subsection B (“Monitoring,
Reporting, and Future Mitigation Payments”) designates a Monitor to
document relevant information at certain locations to determine whether
Formosa must make additional mitigation payments. Lastly, Subsection C
(“Remediation of Past Discharges”) designates a Remediation Consultant to
review remediation methods, develop and propose a plan to remove plastics,
keep daily records of cleanup activities, and create a final report.
In short, each phase of Formosa’s remedial efforts is controlled by a
designated individual with different responsibilities. Because Subsection B
(which contains paragraph 36) focuses on monitoring Formosa’s current
progress and future mitigation payments, the location of paragraph 36 in that
subsection suggests that it has a similar focus. On that score, perhaps more
telling than where paragraph 36 is located is where it is not located:
specifically, it does not appear in Subsection C, which deals with “Past
Discharges.” 11 Thus, the location of paragraph 36 suggests that the focus of
10
Subsections D and E concern mitigation issues largely unrelated to the discharge
dispute; they address “Permit and Mitigation Terms” and “Environmental Mitigation
Projects.”
11
Subsection C includes a specific provision concerning the notification of “the
Remediation Consultant of the presence of Plastics in the Cox Creek or Lavaca Bay so those
Plastics can be cleaned up.” This provision, as well as its surrounding provisions, does not
9
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this provision is on post-Consent Decree discharges only; the failure to
remediate past discharges would be a separate violation addressed by a
different subsection.
We conclude the Consent Decree, taken as a whole, is therefore
unambiguous. This conclusion is confirmed by the parties’ intent in the
Consent Decree itself. Simply put, it makes no sense for Formosa to agree to
pay $50 million to obtain a “full and final settlement” of the CWA claims,
“up through the date of entry of th[e] Consent Decree,” if it was subject to
continuing liability for past discharges of plastics, even if those discharges
were limited to a particular geographic area. 12 Indeed, if the mere presence
of plastics in the designated area were sufficient to trigger Formosa’s penalty
payment and reporting obligations, then Formosa would be in perpetual
violation of its discharge permit, regardless of the amount or age of those
plastics. That would effectively mean that the Consent Decree would
continue forever if any plastics remained in the environment, even though
the parties specifically contemplated that the Consent Decree would
terminate, upon request, after “no discharges” were documented for six
months. Such an interpretation is at odds with the parties’ intent to settle
their dispute regarding the CWA claims—especially when their goal for the
mention penalty payments, nor does it cross-reference paragraph 36. If past discharges
subjected Formosa to such penalties, why did the Consent Decree not provide for it (or
reference it) in this subsection? The omission of such a provision supports the conclusion
that past discharges were not considered for penalty payment treatment under paragraph
36.
12
Formosa previously argued that it had no CWA liability because plastics outside
the outfalls might be “latent[,]” the same plastics “seen on a previous visit” to that outfall,
or a “legacy” of “25ish years” of discharges of plastics. Given Formosa’s past position, it
is unlikely that Formosa would subject itself to liability for these past discharges while
paying $50 million for a settlement.
10
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remediation of past discharges was simply the “removal of most Plastics from
the environment . . . .” 13
Accordingly, we REVERSE and REMAND for further
proceedings. 14 On remand, the district court is instructed to reconsider the
responsibilities of the Monitor in light of our conclusion that the Consent
Decree, as a whole, contemplated only post-Consent Decree discharges.
13
San Antonio Bay highlights what it sees as notable omissions casting doubt on
the conclusion that the parties contemplated liability for only post-Consent Decree
discharges—including, for example, that the Consent Decree does not specifically describe
how the Monitor should determine whether a given plastic is the result of a pre- or post-
Consent Decree discharge. Although we acknowledge that the Consent Decree does not
specify such a process, that omission is not dispositive given the actual language in the
Consent Decree, indicating that Formosa’s obligations trigger only on post-Consent
Decree discharges. See Gonzalez, 394 F.3d at 392 (noting that “courts must examine and
consider the entire writing and give effect to all provisions such that none are rendered
meaningless” (internal quotation marks and citations omitted)).
14
The parties also dispute whether the district court modified the Consent Decree
by creating a burden shifting and refund framework not mentioned in the actual Consent
Decree. Because this modification was made in light of the district court’s interpretation
that the mere presence of plastics in certain locations was enough to trigger Formosa’s
payment and reporting obligations, we necessarily reverse it, along with the rest of the
district court’s order.
11