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HomeMy Public PortalAboutExhibit MSD 18H5 Counterclaim 032408Exhibit MSD 18H5 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI EASTERN DIVISION UNITED STATES OF AMERICA, and STATE OF MISSOURI, Plaintiffs, v. Case No. 4:07 -CV -1120 (JCH) THE METROPOLITAN ST. LOUIS SEWER DISTRICT, Defendant. STATE OF MISSOURI'S REPLY MEMORANDUM IN SUPPORT OF MOTION TO DISMISS METROPOLITAN ST. LOUIS SEWER DISTRICT'S COUNTERCLAIM AND TO STRIKE AFFIRMATIVE DEFENSES Defendant Metropolitan St. Louis Sewer District's (MSD) memo in opposition, when carefully examined, does not present any basis for denying the State's motion to dismiss counterclaims and strike affirmative defenses. First, it is useful to note that MSD acknowledges that the counterclaims and the affirmative defenses at issue are based on the same constitutional provisions. Defendant Metropolitan Sewer District's Memorandum in opposition to Plaintiff State of Missouri's Motions to Dismiss Counterclaims and Motion to Strike Affirmative Defenses (Docket No. 73) ("MSD Memo in Opposition") at 3. Thus, as a practical matter, the counterclaims and affirmative defenses rise and fall together. The State's motion is based on law and is readily resolved 1 03/24/2008 from the pleadings without the need for expensive and time consuming discovery that MSD seeks. MSD acknowledges that it can raise funds to pay "through its fees or incurring additional indebtedness." MSD Memo in Opposition at 7. Thus, MSD has a choice of methods for raising funds. MSD concedes that one of these methods, raising rates, can be done without voter approval: "MSD acknowledges that the decision in Missouri Growth Ass'n v. Metropolitan St. Louis Sewer Dist., 941 S.W. 2d 615 (Mo. App. E.D. 1997) held that MSD's current, water usage -based billing format does not constitute a "tax" subject to the Hancock Amendment, Art. X § 22(a)." MSD Memo in Opposition at 8. In other words, MSD has the ability to raise its fees without a vote under the Hancock Amendment so long as it maintains its current, water usage -based billing format. As with the rate structure in Missouri Growth Ass'n, MSD need only have a vote of its board to get the revenue it needs to comply with the law, including any order of this court. MSD goes on to claim that prior to the Missouri Growth Ass'n decision in 1997, the Hancock Amendment prevented it from raising rates without a vote. MSD Memo in Opposition at 8. MSD provides no basis for this claim, and in fact, there is none. In all relevant respects, the Hancock Amendment has been unchanged since its passage in 1980, so the only thing that prevented MSD from raising revenue prior to 1997 was its chosen method of assessing service fees. Like Dorothy and the ruby slippers, MSD always had the means to solve its problem. MSD just had to discover for itself that it had the means. In addition, § 309(e) of the Clean Water Act ("CWA"), 33 U.S.C. s 1319(e), applies prospectively if a municipality cannot raise the revenue needed to comply with a 2 court order. At this point, a court order has not even been imposed. As a result, so long as MSD has the ability to raise revenue at the time a judgment is entered, the state liability provision of 309(e) has no application. MSD says that "[a]s a practical matter" it is limited in how much it can raise rates. MSD Memo in Opposition at 8-9. That is debatable factually, but irrelevant legally. All municipal water systems face practical constraints on raising rates. Section 309(e) of the CWA only creates state liability if "laws of that State prevent the municipality from raising revenues needed to comply with such judgment." If Congress had wanted to create state liability in all situations where a municipality did not or could not, for practical reasons, meet its federal CWA obligations, Congress would have needed to do so expressly. Instead, Congress limited state liability to situations where the state created legal barriers. No legal barrier exists to raising rates needed to comply with a judgment of this court. Article V, Sec. 26(b) does not create a barrier to satisfying a judgment. That provision requires a vote on acquisition of debt, but debt is only one of two means of raising revenue for compliance. Again, MSD acknowledges that it can raise funds to pay either "through its fees or incurring additional indebtedness." MSD Memo in Opposition at 7. MSD's argument on standing undermines, rather than supports, standing for its counterclaim. MSD indicates "[t]o the extent the State may become liable for a money judgment, it will be liable ultimately to the United States and not to MSD." MSD Memo 3 in. Opposition at 10 (emphasis in original). The United States Supreme Court has been reluctant to recognize standing to assert claims of third parties except in rare instances. We have adhered to the rule that a party "generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties." Warth v. Seldin, supra, at 499, 95 S.Ct. 2197. We have not treated this rule as absolute, however, recognizing that there may be circumstances where it is necessary to grant a third party standing to assert the rights of another. But we have limited this exception by requiring that a party seeking third -party standing make two additional showings. First, we have asked whether the party asserting the right has a "close" relationship with the person who possesses the right. Powers v. Ohio, 499 U.S. 400, 411, 111 S.Ct. 1364, 113 L.Ed.2d 411 (1991). Second, we have considered whether there is a "hindrance" to the possessor's ability to protect his own interests. Ibid. Kowalski v. Tesmer, 543 U.S. 125, 129-130 (2004). Thus, to establish third -party standing MSD would have to show a close relationship with the United States and a hindrance to the United State's protecting its own interest. Here, neither element exists. MSD, as a defendant in this case, has an adverse, rather than close, relationship with the United States and, in any event, the United States is certainly in a position to protect its own interests. MSD cannot have standing to assert on behalf of the United States and, in addition, § 309(e) of the Clean Water Act ("CWA"), 33 U.S.C. § 1319(e), does not appear to create of a cause of action directly for municipalities. This conclusion applies equally to affirmative defenses. To raise an affirmative defense, a party must have standing: In this case, the intervenors have no standing to raise the defense of res judicata to the federal consent decree. This defense, if it is available at all, may be raised only by MSD. MSD's decision not to assert this defense does not give the intervenors standing to raise it, as a party may 4 assert a third party's rights only if, inter alia, the third party is unable to assert its own rights, a condition not present here. Singleton v. Wulff, 428 U.S. 106, 115-16, 96 S.Ct. 2868, 2874-75, 49 L.Ed.2d 826 (1976). U.S. v. Metropolitan St. Louis Sewer Dist., 952 F.2d 1040, 1043 (8th Cir. 1992). Thus, to the extent it seeks to rely on 309(e) for its affirmative defenses, MSD also lacks standing. MSD goes on to argue "the laws of Missouri have prevented compliance with Clean Water Act requirements and that they may continue to prevent compliance with any future judgment." MSD Memo in Opposition at 11. This provides no basis for an affirmative defense or a counterclaim. Even if true, and the State strongly disputes the truth of this claim, MSD would not escape liability. Liability under the CWA is strict. American Canoe Assn v. Murphy Farms, 412 F.3d 536, 540 (4th Cir 2005) ("[T]he CWA creates a regime of strict liability for violations of its standards."). Such a State barrier to compliance would not relieve MSD of liability under federal law, and, therefore, would not provide a basis for MSD to pursue a claim against the State. MSD attempts to manufacture a connection to the "unfunded mandates" provision of the Hancock Amendment, Art. X, Sec. 16 of the Missouri Constitution, despite the fact that all of the claims in the complaint are based on federal law. If that provision applied, the remedy would be to relieve it of the State obligation at issue, not to give an award of damages. Fort Zumwalt School Dist. v. State, 896 S.W.2d 918 (Mo. 1995)1. Thus, even ' The Missouri Supreme Court has made it clear that the Hancock Amendment provides only for a declaratory judgment to determine whether a state statute violates the Missouri Constitution and to relieve the state subdivision from the underlying legal mandate. Taylor v. State of Missouri, --- S.W.3d ----, 2008 WL 712736 at *2 (Mo. banc March 18, 2008)(holding the Hancock Amendment does not authorize a judgment for damages or injunctive relief). Here, the mandates of which MSD complains are federal requirements not state mandates. 5 if state claims were asserted, relief from State unfunded mandates would not relieve MSD of the obligation to comply with federal law, an obligation it owes to the United States. Missouri retains it s Eleventh Amendment Immunity. First, as to abrogation, even MSD acknowledges that the cases it cites stand for the proposition that Congressional abrogation, if it occurred, occurred as to suits brought by the United States. MSD Memo in Opposition at p 17 ("The Eleventh Amendment does not protect the State from potential liability to the United States under § 309 if it should be found that state law prevents MSD's compliance with any judgment." Emphasis added.). Waiver of that immunity must be made in the clearest terms: Accordingly, our "test for determining whether a State has waived its immunity from federal -court jurisdiction is a stringent one." . . .. Generally, we will find a waiver either if the State voluntarily invokes our jurisdiction,..., or else if the State makes a "clear declaration" that it intends to submit itself to our jurisdiction.... See also Pennhurst State School and Hospital v. Haldernnan, 465 U.S., at 99, 104 S.Ct. 900 (State's consent to suit must be "unequivocally expressed"). College Say. Bank v. Florida Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 675-676, 119 S.Ct. 2219, 2226 (1999). The State did not voluntarily invoke jurisdiction. The Eighth Circuit has already recognized that if a case is brought against MSD, the State must be a party. Metropolitan St. Louis Sewer Dist., supra, 952 F.2d 1040. The Eighth Circuit went on to note that "[t]he statute requiring the joinder of the State in such actions does not prohibit the joinder of the State as a plaintiff...." Id. at 1044. Thus, the act of joining the case as a plaintiff does nothing more than what is mandated by 309(e): it joins Missouri as a party. Unless and until Missouri seeks some remedy beyond that which the 6 federal government is entitled, the joinder of the State is not a clear declaration, unequivocally expressed, that the Missouri intends to submit itself to the jurisdiction of the court so as to allow a claim by MSD. MSD's reliance on Lapides is misplaced. Lapides v. Board of Regents of University System of Georgia, 535 U.S. 613, 614, 122 S.Ct. 1640, 1641 (2002). In Lapides, Georgia was sued in State court and removed to federal court. As a result, Georgia had a choice as to whether to go into federal court and its choice to remove to federal court constituted a decision to waive immunity. Missouri has no choice on whether to be in federal court. Citing Lapides as support, MSD complains of unfairness. There is no unfairness here because the State has asserted no State claims. The lack of State claims is no mere oversight. Missouri could have chosen to include the state equivalent of the federal claims in order to get penalties that go to the State treasury or injunctive relief over and above that available under federal law. See 644.051, RSMo and 644.076, RSMo. The State could also have chosen to include state claims for violations that are not covered by the current counts of the complaint. The State has taken none of these steps. At this point, the State could only add these claims with MSD's consent or by order of the court. FRCP 15(a). As a consequence, MSD need only defend claims it would face if the State was not a party at all. Missouri's state sovereign immunity remains in tact in this case for the reasons cited in its original motion. The Howlett case cited by MSD has no application in this situation because Congress has not created a cause of action that MSD may bring against 7 the State. Howlett v. Rose, 496 U.S. 356, 383 (1990). Plaintiffs in Howlett had been brought under 42 U.S.C. § 1983 against political subdivisions. In Howlett, the Court concluded that where Congress created a cause of action against an entity under federal law, a state may not override Congress through application of sovereign immunity. The Court specifically noted that Congress excluded states from liability under § 1983, but included political subdivisions. As a result, extending state sovereign immunity to these entities violated the supremacy clause. Here, § 309(e) does not create a cause of action for any entity other than the federal government, so the supremacy clause is not violated. In addition, MSD includes state claims among its counterclaims. Congress has not abrogated state sovereign immunity for claims brought under state law. Consequently, the counterclaims are barred by State sovereign immunity. MSD has argued that it had no need to raise its constitutional issues during the permitting process, so exhaustion of administrative remedies does not apply. The State maintains its position that MSD has, indeed, failed to exhaust administrative remedies. Further consideration of this issue will require the presentation of evidence. In the context of a motion to dismiss, this defense is premature and will, therefore be withdrawn and, if necessary, raised in later proceedings. Conclusion For the reasons stated herein and in the State's original motion and memorandum, MSD's counterclaims against the State of Missouri must be dismissed and affirmative defenses 9 through 12 must be stricken. 8 Respectfully Submitted, JEREMIAH W. (JAY) NIXON Attorney General /s/Joseph P. Bindbeutel JOSEPH P. BINDBEUTEL Senior Chief Counsel Agriculture and Environment Division Missouri Bar Number: 28656 P.O. Box 899 Jefferson City, MO 65102 (573) 751-8805 phone (573) 751-8796 facsimile ATTORNEYS FOR PLAINTIFF STATE OF MISSOURI CERTIFICATE OF SERVICE I hereby certify that on this 24th day of March, 2008, 1 electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which sent electronic notification to the following: Terry Satterlee Thomas Greyer David R. Erickson Shook, Hardy & Bacon, L.L.P. 2555 Grand Boulevard Kansas City, MO 64108 Telephone: 816-474-6550 Fax: 816-421-4066 Attorneys for Defendant/Counterplaintiff Metropolitan St. Louis Sewer District Robert Murray John Gianoulakis Kohn, Shands, Elbert, Gianoulakis & Giljum, LLP One U.S. Bank Plaza, 24`x' Floor St. Louis, Missouri 63101 Telephone: (314) 241-3963 Fax: (314) 241-2509 Attorneys for Defendant/Counterplaintiff Metropolitan St. Louis Sewer District Kathryn MacDonald Sara Colangelo Wyche Environmental Enforcement Section Environment and Natural Resources Division United States Department of Justice P.O. Box 7611, Ben Franklin Station Washington, DC 20044-7611 Telephone: (202) 353-7397 Fax: (202) 514-4180 10 Attorney for Plaintiff United States of America Maxine I. Lipeles Elizabeth J. Hubertz Interdisciplinary Environmental Clinic Washington University School of Law One Brookings Drive Campus Box 1120 St. Louis, MO 63130 Telephone: (314) 935-8760 Fax: (314) 935-5171 Attorney for Intervening Plaintiff Missouri Coalition for the Environment Foundation Dale A. Guariglia Bruce C. Oetter John R. Kindschuh Bryan Cave, LLP One Metropolitan Square 211 N. Broadway, Ste. 3600 St. Louis, MO 63102 Telephone: (314) 259-2000 Fax: (314) 259-2020 Attorneys for Proposed Intervenor Missouri Industrial Energy Consumers Is/Joseph P. Bindbeutel JOSEPH P. BINDBEUTEL 11