DOUG SIMPSON MEDIATION | TACOMA • SEATTLE • OLYMPIA • SAN DIEGO • ONLINE ANYWHERE
Environmental Mediation Is Complex
Environmental mediation is complex, with difficult questions of federal, state, administrative, and even tribal law. Usually there are complicated issues of science and engineering also, as well as a history spanning decades. Toxic-tort/environmental exposure cases can be enormous, involving hundreds or even thousands of people and millions (or even billions) of dollars. And because of these factors, there are myriad environmental insurance coverage issues also, especially as ISO forms have changed over the years and as interpretations vary both from state to state and over time.
Courts generally don’t want to deal with these cases—and are often ill-equipped to do so. Environmental cases lend themselves to mediation.
Mediation of Environmental Disputes Can Be Challenging
Mediation of environmental disputes is challenging—but it’s generally a much better solution to the problem than resorting to court.
Environmental property cases typically arise from soil, groundwater, air, or watercourse contamination, or a combination of these. Often the litigants themselves might care little about the contamination, but an administrative body has ordered a litigant to clean up the contamination. Often the person or entity ordered to clean up the site is not the person or entity that caused the contamination. The person ordered to clean up the site might or might not have the financial resources to do so. Yet the regulatory entity might threaten to impose thousands of dollars of daily penalties for noncompliance with various orders.
Often not just one but several regulatory entities are involved in environmental cases. For example, a regulatory entity with responsibility for ensuring water quality in the process of inspecting storm drains might notice that erosion has occurred, exposing what appears to be trash. Investigation might reveal that, unbeknownst to the current owner, the property was once a dumpsite, or maybe grading nearby moved trash to its current location. In such circumstances, the water-quality regulatory entity might order the site owner to investigate whether the trash is affecting water quality. The water-quality regulatory entity might itself notify other regulatory entities, such as regulatory entities responsible for waste management, or entities such as cities that might be responsible for ensuring that federal Clean Water Act storm-water-quality objectives are met.
Because a stream is involved, the initial regulatory entity might also report the contamination to a regulatory entity having responsibility for flora and fauna, such as a department of fish and game, or a regulatory entity responsible for navigable streams and their tributaries—the Army Corps. of Engineers. And even if the initial regulatory entity doesn’t make such reports to other regulatory entities, the site owner might have an independent duty to make such reports.
Environmental matters thus can have a number of regulatory entities involved, apart from the litigants. And the regulatory entities might each have the power to order entities to perform certain investigative and cleanup duties, each with onerous penalties.
Investigative and reporting obligations can be very lengthy and expensive. In a situation where groundwater contamination is suspected, for example, typically a study will need to be done to characterize the impacted aquifers, the quality of the upgradient water to establish a background level, the nature and extent of the contamination (constituents of potential concern and vertical and horizontal extent thereof), and the downgradient water quality. But before the study is performed, qualified experts must propose the investigative plan and get it approved. This can be a months-long iterative process, compounded by involvement of multiple regulatory entities and litigants. Often it’s important for litigants to cooperate—to avoid creating the perception that the problem is more severe than the agency(ies) initially believed. Because liability under most environmental laws is joint and several, proving up liability of others is proving up on liability against one’s self.
Once the investigative plan is prepared, a remedial plan needs to be prepared and approved before cleanup can be performed. Often there is significant debate about what cleanup level needs to be achieved—about “how clean is clean?” This remedial-plan process also is often a months-long process. Once the remedial plan is designed, approved, and the remedial work is performed, typically the regulatory entity demands a report confirming that the intended cleanup levels have been achieved. In the case of groundwater, this often requires four consecutive quarters of good findings—if not more reporting. And if the findings are not good enough, the cycle might begin anew, with regulators requiring additional investigation, additional remedial planning, and additional confirmation reporting. In some cases, for example in landfills, there could be a specific regulatory reporting obligation for the next 30 years—or more.
Despite what can be a complicated critical path to success, an effective mediator can help guide the parties to a cost-effective resolution by helping them build on common interests. By helping the parties to work cooperatively, remedial costs can be kept down they can avoid exacerbating the already-expensive situation. Environmental lawyers likewise can help steer the process to a cost-effective end.
Critical Players and Critical Path to Success in Environmental Mediations
Because environmental property cases often involve not only the litigants, but also a layer of regulators, often the regulators’ decisions or the required regulatory path is of primary importance. Often litigants and even regulators do not or cannot predict the decision tree of possible regulatory paths. Regulatory outcomes frequently will impact damages or other relief that will be sought in the lawsuit.
But regulators are often susceptible to persuasion, and environmental litigants can and should work to persuade regulators early and often to adopt cost-effective solutions, whether informally or formally as part of a due-process hearing. Parties in a case, for example, might be successful in persuading the regulator that a certain contaminant need not be cleaned up to a standard of one part per billion, but instead needs only to be cleaned up to one part per million. Or a party might be able to demonstrate that the contaminant is degrading naturally and, over time, will resolve itself. In either of these circumstances, there could be a dramatic cost savings, a savings that accrues to the benefit of all parties.
But persuading regulators is an issue of timing, method, money, and often of personalities. The parties need to be equipped with scientific evidence that can persuade regulators. To get the evidence, knowledgeable experts, armed with evidence gathered via proper and properly documented efforts, should be presented. And the lawyers need to be able to understand and articulate how those findings fit within the regulatory scheme. This can be a long, expensive process.
Parties working together in harmony often are more persuasive with regulators than those who are at cross-purposes. Regulatory staff generally do not want to arbitrate, mediate, or adjudicate disputes between parties—they simply want to determine whether evidence establishes that somebody or anybody has cleaned up an environmental problem.
Generally, parties pointing fingers at each other in the presence of regulators can create additional regulatory problems by giving rise to additional concerns that a regulator might not have previously addressed—waking the sleeping dog, so to speak, and potentially increasing costs and making resolution more difficult. Admittedly, at other times, regulators need to know that there are genuine scientific issues of disagreement or significant areas of disagreement about the regulatory scheme, such as whether a particular guidance document or order applies to one party or another.
For example, in many cases, either in mediation or outside that setting, the litigants might formalize their united approach, taking great strides toward litigation resolution and cost savings in the process. The parties might, for example, be able to create a shared-expert agreement, agreeing on a joint expert (or joint team of experts) to perform a joint site investigation, on joint reporting, and on a joint technical expert for meeting with regulators. And just in case gaps are not bridged and to otherwise be prepared should dispute resolution fail, the parties might retain their own consultant(s) who can review and comment on the joint expert’s data and analysis, affecting the joint expert’s approach, while being prepared for litigation, without each party having their own experts fully involved.
Generally, parties fare better by working out key differences together in advance of regulatory meetings, thus appearing more in harmony about how regulatory objectives can and should be met. In all events, mediators need to understand, either through experience or through the lawyers’ briefing, the environmental regulatory setting, including the critical players and decision makers, and the likely critical regulatory path to success. Lawyers can and arguably should begin mediation early, with the initial objective being an effort to structure a united approach to persuading regulators.
Timing Issues in Environmental Mediations
Litigation, even lengthy litigation, often travels more quickly than the environmental-property-regulatory process. If the matter is on track to proceed to trial in advance of the environmental cleanup, there often is a significant difference of opinion in the ultimate cost of cleanup and as to damages available in the lawsuit. Thus the plaintiffs’ experts might deal with the uncertainty by padding numbers, either via scope of work or unit costs. And in the face of the uncertainty, the defense experts might understate the requirements. Thus, plaintiffs in the face of uncertainty could suggest that regulators might require soil and groundwater investigation, requiring 10 boreholes and 10 monitoring wells with 30 years of monitoring. The defendants might suggest only three boreholes and three monitoring wells with one year of monitoring. The defense will assert that damages are speculative, whereas the plaintiffs will assert that the defense’s Band-Aid approach would never pass regulatory muster.
The long regulatory critical path, as compared to the short litigation path, often is a settlement impediment because of the uncertainty. Consequently, methods to reduce the impact of the timing issue can help achieve resolution and decrease costs. Environmental cases often are not judges’ favorite cases, and courts can be persuaded to put them on the back burner or the slow track to trial. The parties might also be agreeable to a tolling or a stand-still agreement so that the regulatory process can proceed and can decrease the uncertainty, narrowing the divide between the parties while putting off litigation. The parties can then resolve the case more easily in the mediation context or through other settlement discussions.
If a tolling or stand-still agreement is a possibility, the parties might address the issue of whether one or more significant issues need to be addressed by the court before the agreement goes into effect, to reduce the uncertainty of the outcome of the important motion.
Legal Theories and Nuances in Environmental Mediations
As with any case, understanding liability, causation, damages, and apportionment theories is key to resolving the dispute. Environmental lawyers ought to take care to explain or brief their mediator (if unacquainted) on the significance of such technical environmental-law issues. And the parties themselves should be familiarized with the significance of such issues as well.
For example, depending on the theories pleaded, a party might be limited to injunctive relief. Some other theories might award a party attorney’s fees. Some environmental legal theories might allow response costs, but the awardable response costs might bear little resemblance to typical consequential damages. And, as for response costs, there could be a number of hurdles—such as compliance with the National Contingency Plan—which is an expensive process often not taken by litigants, even those claiming recovery CERCLA litigation (CERCLA is Comphensive Environmental Response, Compensation, and Liabilities Act, 42 U.S.C section 9601, et seq.). Similarly, attorney’s fees might have a nuance such as under CERCLA in which fees are awardable for the effort to identify responsible parties, but are not generally available otherwise. In RCRA litigation (RCRA is Resource Conservation Recover Act) attorney’s fees are more broadly available than under CERCLA.
Ensuring that all players know the field of play and whether a party can or can’t obtain certain relief is, of course, key to successful mediation. Environmental lawyers should take care to explain the key legal theories to mediators, to clients, and to opposing parties.
Scientific and Technical Issues in Environmental Mediations
Also as in other cases, understanding the critical factual issues is important to helping parties resolve their dispute. In environmental cases, critical facts often are very technical or scientific in nature, and are issues that lawyers, mediators, and decision-making clients might not fully understand. Many times, the key issues are set forth in detail in regulatory reports, which might or might not be understandable to the average person. But experts (joint experts or individual-party consultants) can assist parties, lawyers, and mediators in understanding the key issues of consequence.
Scientific experts generally used the scientific method to come up with their conclusions and ought to be able to describe the solidity of their positions in detail. But they too are subject to persuasion. Often a meeting of experts, as can occur in the mediation setting, will help one side persuade the other in a confidential, candid discussion. Or perhaps both sides will persuade the other on an issue, narrowing the gap of disagreement. In the event of a joint expert along with individual-party consultants, the mediation context likewise can be used for candid confidential discussions in which the experts can work toward convincing one another.
Because environmental issues often are very complicated or difficult for the average person to understand, good data, good interpretation, and especially good explanatory graphics, such as demonstrative exhibits, are very helpful. Often these exhibits, or the bases for such exhibits, have been contained in reports given to regulators, so little extra effort or cost is involved in preparing them for mediation.
As an example, one expert might have suggested to his or her side’s attorney and client the need for a Visqueen curtain wall in conjunction with several groundwater extraction wells to inhibit the migration of contamination. The work might require significant trenching and backfilling, and maybe some construction demolition and later rebuilding—a lot of construction work at great expense. On the other hand, another party or consultant might assert that, because of the characteristics of clay layers within the soil, the Visqueen curtain wall will be unnecessary, saving all the parties costs by decreasing overall damages.
Having a mediation session where the experts can talk to one another can be very helpful. Depending on the attorneys, parties, and objectives, the experts might be able to meet in the confidential mediation context, either alone or with the mediator, to have a completely open discussion of issues of consequence, without grandstanding for attorneys or for clients, a process that could help narrow the gap of scientific disagreement. Or the experts might be able to crystallize an issue of consequence that a regulator will need to address before the remedy (scope and cost to repair it) can be determined.
In any event, understanding the key scientific and technical issues of consequence—the key facts in controversy—is very important to a successful mediation. Lawyers should arm their mediator with such key information, and should be sure that clients and opposing parties are able to understand it as well.
Sources of Money in Environmental Mediations
Understanding possible sources of money or other relief is one of the keys to a successful environmental mediation. As in other lawsuits, insurance is a possible source of money. Today’s insurance policies often have exclusions, exceptions, conditions, or limitations that might apply and preclude or limit available insurance coverage.
But unlike many other kinds of lawsuits, in the environmental context, liability can be founded on decades-old events without statutes of limitation barring relief, potentially triggering decades-old insurance policies that do not have relatively recent pollution exclusions, conditions or limitations. And a defendant’s cross-complaint against the plaintiff might trigger additional coverage.
Often an identification of the parties’ available insurance, particularly where governmental entities such as cities and counties are involved, will lead to the identification of insurance carriers that insure more than one party in the case, leading the insurance carrier to the conclusion that resolving the case might be more cost-effective than funding the parties’ ongoing debate. This is quite common in the wake of many insurance-carrier mergers and acquisitions over the past few decades.
In any event, effective environmental mediation requires an early identification of all available insurance to help fund a lawsuit’s resolution (and some of those insurance policies might be decades old) together with the early and ongoing involvement of insurance carrier representatives and/or coverage counsel. Of course, additional parties might be added not only because they are a potentially responsible parties, but because they bring more insurance coverage to the table, dividing up the settlement pie. And key coverage issues should be identified so that the case is postured accordingly.
Another key source of money that environmental litigants often miss is grant money and money that might exist within special governmental funds. This is a key issue, in part, because litigants are required to mitigate damages—and the failure to obtain available grant money arguably is a failure to mitigate damages.
Both states and the federal government often have grant programs or special funds that a litigant can use to help fund the case’s resolution. Sometimes grants are hundreds of thousands of dollars—too big to be ignored—and are often capable of bridging settlement gaps, or at least narrowing settlement gaps. Grant money is free money, and environmental lawyers ought to seek it out. Often the regulatory entities involved will provide guidance in creating a grant request to assist in giving away the grant money, because they have it in the budget and need to give it away. Finding the grants can be difficult and is a process of working with available regulatory entities and their websites, as well as keeping abreast of current legislation.
Obtaining grants often presents another timing issue—there might be only certain funding periods with specific deadlines, and funding might be available only to the first applicants—who then deplete what was available. And cooperation between the parties is important. Sometimes only the property owner can apply for or qualify for the grant or fund, but another party might have key information necessary to the application. Examples of grants and special funds are many. There may be available stream-bed-restoration grants, park-creation grants, rubber-tire-recycling grants (to be used for artificial-turf field construction), underground storage tank grants or funds, landfill-reconstruction grants, storm-water-related grants and other clean-water grants. Sometimes non-governmental organizations have grant money available as well, and should not be ignored as a helpful resource.
In any event, litigants should be united in the purpose of finding all available grants—the plaintiff to avoid the failure-to-mitigate claim and a possible unfunded orphan share of sorts, and the defendants to decrease overall damages. And pursuing grant money should occur early in the life of a case. Mediators, litigants, clients, and opposing parties should be aware that obtaining grant money is often a possibility.
Creating a Process in Environmental Mediations
Because of their complexities and their often-large size, environmental cases lend themselves to the early resolution of disputes process, potentially involving a mediator. The first objective ought to be decreasing the size of the pie that needs to be swallowed—decreasing overall damages, costs, and fees. Litigants should consider meeting early on to consider both common interests and a possible structure for resolution—presenting a united front to regulators—in an effort to decrease overall damages as much as possible. A mediator can help by working with a joint expert or with individual experts to have them develop an approach to timely meeting of regulators’ demands. The mediator can help structure an expert-sharing, quasi joint-defense agreement that will help decrease overall costs during the regulatory life of the case. And grant-fund availability should be investigated and pursued early because, if grants are available, they will decreases overall damages.
The parties should exchange information, and discovery costs should be minimized to the extent possible. The parties might, for example, agree to share non-privileged discoverable documents and information per Federal Rules of Civil Procedure Rule 26, which encourages disclosure of information—even if the matter is not in federal court. Clients likely would prefer that their resources be spent on remediating the site or on resolving the litigation than on discovery debates.
The next step—dividing the pie among the litigants and the carriers—is more difficult. Of course, dividing the settlement pie is easier when the damages pie to be divided is smaller, and when there are more parties and insurers to take a piece.
With the parties’ consent, the mediator can begin early communications with insurance carriers and their coverage counsel, in an attempt to build a coalition of entities united in purpose. All parties want their piece of damages to be as small as possible. Some carriers might help get other carriers involved, especially where some might be aware of inconsistent positions taken by carriers in other similar matters. And all carriers want to keep costs down overall.
The mediator should structure one or more mediation sessions early in the life of the case to begin the process of resolution, armed with the knowledge provided by able counsel. Mediation hearings should be keyed into the significant regulatory events—e.g., once the remedial work plan has been approved, how much will it cost, if there is grant money or insurance money available, who pays what shares, whether the parties can reach agreement, and what happens if things go wrong. Settlement agreements tend to be complicated, and crafting them requires quite a bit of forethought. Often, the parties will remain joined at the hip for years, resulting in a complicated, ongoing agreement, not a simple release and walk-away settlement.
But early preparation, early cooperation and information sharing, and early mediation will make early resolution of a complicated environmental case a distinct possibility. Often, each regulatory event will decrease the uncertainty that the parties face, thus narrowing the settlement gap even further. Effective mediators, empowered by able counsel, can help parties achieve cost-effective dispute resolution.
Take Great Care in Crafting a Mediation Agreement
In a recent multiparty environmental matter in federal court, I associated into the case years after mediation had started. The parties had sought and obtained a stay of the case. The parties had begun mediation and continued mediation efforts in federal court on a handshake—apparently all or most assumed that California law and California mediation privileges would apply.
But one of the parties withdrew from mediation. And there the troubles began.
The party that withdrew argued that California law does not apply in federal court or protect various communications that occurred in what other parties had believed was the mediation setting.
Most parties believed that because the environmental lawsuit had been stayed by the federal district judge for the sole purpose of allowing mediation, everything that followed would be protected from disclosure and discovery via mediation-confidentiality principles. After all, the case was in mediation, and all parties, attorneys, consultants, and insurers believed the matter was in mediation, protecting everything from disclosure.
But the one-time mediating party that withdrew from mediation claimed that mediation in federal court should be construed very narrowly. Mediation confidentiality should apply only to statements made during and documents prepared for face-to-face meetings with the mediator, argued that party.
The case had been going on for nearly a decade—involving hundreds of thousands pages with years of communications—occurring outside the face-to-face mediation setting. Consultants and attorneys had communicated among themselves, with clients, with regulators, and with insurers across the country via phone, email, and text.
The issues were, of course, complex, involving complicated scientific environmental issues as well as decades of history involving multiple entities and a case in the tens of millions of dollars. Not surprisingly, there were hundreds of thousands of pages of records and many environmental consultants. Environmental consultants had been communicating with one another and with regulatory agencies in an effort to work together collaboratively and resolve the matter first with regulatory agencies and then among the parties.
The party that withdrew from mediation claimed that it ought to be able to get everything other than what occurred in face-to-face discussions—or a privilege log identifying each and every communication withheld so that it could assess whether mediation privilege applied. The creation of a privilege log itself necessarily would require immense efforts—thousands of hours of attorney and paralegal time—to catalog even an index of emails, recipients, copyees, and general subject matter of the communication.
Arguably all of this trouble could have been avoided had the parties agreed on mediation terms in advance of the mediation. For example, they could have argued that state law would apply and would protect the communication, even if a party withdrew. In my standard mediation agreement, I incorporate relevant state statutes verbatim with this in mind, to protect the confidentiality of mediation, and to enhance its likelihood of success. So beware of mediating on a handshake, especially in federal court!
Doug Simpson has been handling environmental property cases for more than 30 years and mediating for nearly 20 years. He can do environmental mediation online or in -person.
Doug Simpson is one of few environmental mediators in Tacoma—and one of few environmental mediators in Seattle and Olympia too.
With special arrangements, he is available as an environmental mediator in San Diego and Los Angeles also.
Mediations can take place at a side’s attorney’s office, at local Regus or other spaces with appropriate conference rooms for the expected size of the mediation.
- Tacoma: 1201 Pacific Ave, Tacoma, WA 98402
- Seattle: Columbia Tower, 701 Fifth Avenue, Seattle, WA 98104
- Olympia: 400 Union Ave SE Suite 200, Olympia, WA 98501
- Bellevue: Skyline Tower, 10900 NE 4th St, Bellevue, WA 98004
- San Diego: 350 10th Avenue, Suite 1000, San Diego, California, 92101
Doug Simpson mediates a variety of other kinds of cases too—see mediation practice areas.