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FMC Corp. v. Tribes

United States District Court, D. Idaho

September 28, 2017



          B. Lynn Winmill Chief Judge


         In several pending motions, the Tribes and FMC ask the Court to determine whether the Tribes may enforce a Judgment imposed by the Tribal Appellate Court. That Judgment imposes an annual permit fee of $1.5 million. The Court heard oral argument on the motions and took them under advisement. For the reasons explained below, the Court finds that the Tribes had jurisdiction over FMC to impose the permit fees, and will grant the Tribes' motion to enforce the Tribal Court Judgment.


         For over 50 years, FMC operated a phosphorus production plant on 1, 450 acres of property FMC owned in fee in Pocatello, Idaho, lying mostly within the Shoshone-Bannock Fort Hall Reservation. FMC's operations produced 22 million tons of waste products stored on the Reservation in 23 ponds. This waste is radioactive, carcinogenic, and poisonous. It will persist for decades, generations even, and is so toxic that there is no safe method to move it off-site.

         The waste's extreme hazards led the Environmental Protection Agency (EPA) to declare the site a CERCLA Superfund clean-up site and to charge FMC with violating the Resource Conservation and Recovery Act (RCRA). The EPA designed and implemented a program to contain the waste.

         To avoid litigation over the RCRA charges, FMC negotiated with the EPA over a Consent Decree. As a condition of agreeing to that Consent Decree, the EPA insisted that FMC obtain Tribal permits for work FMC would do under the Consent Decree on the Reservation. The Tribes, however, were demanding $100 million for those permits, although they would drop the fee to $1.5 million a year if FMC consented to Tribal jurisdiction. To get the lower permit fee, and to satisfy the EPA's condition that they obtain Tribal permits, FMC consented to Tribal jurisdiction.

         FMC challenged those permit fees in Tribal courts by producing evidence that the stored waste had caused no harm and the EPA's containment program foreclosed any need to impose substantial fees. The Tribes produced evidence that the waste was severely toxic, would remain so for generations, and could not be moved off-site. After hearing this evidence, the Tribal Appellate Court issued a Judgment against FMC requiring them to pay an annual fee of $1.5 million.

         The parties brought this action to resolve the issue whether the Tribes could enforce that Judgment. The Court finds that the Tribes have jurisdiction over FMC. The source of the jurisdiction is based on FMC's consent, discussed above, and the catastrophic threat FMC's waste poses to Tribal governance, cultural traditions, and health and welfare.

         Having identified the source of the Tribes' jurisdiction over FMC, the Court turns next to the scope of that jurisdiction. To the extent that Tribal jurisdiction is based on FMC's consensual relationship with the Tribe to pay $1.5 million annually to store hazardous waste within the Reservation, the Tribes have jurisdiction to impose the $1.5 million annual fee for as long as the waste is stored there. The Tribal Appellate Court relied on this ground of jurisdiction to impose its Judgment, and the Court finds that the Judgment must be enforced on that ground.

         To the extent that Tribal jurisdiction is based on the catastrophic threat FMC's waste poses to the Tribes, the amount of the annual permit fee must be closely tied to the threat. Here, the Tribal Appellate Court never identified the measures necessary to protect against the threat and their cost. Instead of using that calculation to arrive at the $1.5 million figure, the Tribal Appellate Court simply carried over that amount from the consensual relationship agreement between FMC and the Tribes. Using an agreed-upon figure is fine when the basis of jurisdiction is a consensual relationship, but when jurisdiction is based instead on a catastrophic threat, the amount of the Judgment must bear some relationship to the Tribes' need to protect against the threat. Because there is no such relationship in this record, the Court cannot enforce the Judgment on the basis of the catastrophic threat basis for Tribal jurisdiction. Nevertheless, the Court will enforce the Judgment because, as discussed above, it was properly entered under the consensual relationship basis for Tribal jurisdiction.


         History of the FMC Plant Cleanup

         From 1949 to 2001, FMC and its predecessors operated an elemental phosphorus production plant on 1, 450 acres of property FMC owned in fee in Pocatello, Idaho, lying mostly within the exterior boundaries of the Shoshone-Bannock Fort Hall Reservation. FMC historically stored the waste from its plant in ponds on that property. FMC has estimated that about 22 million tons of waste is contained in the 23 waste storage ponds on FMC's property. The waste includes hazardous materials such as arsenic, and radioactive materials that emit gamma radiation which exceeds the human health safety standards set by the Environmental Protection Agency (EPA). In 1990, the EPA declared the FMC plant a superfund clean-up site under CERCLA, and in 1997 charged FMC with violating RCRA, a law regulating the disposal of hazardous and non-hazardous solid wastes.

         To resolve these RCRA charges outside of litigation, FMC began negotiation over the terms of a Consent Decree with the EPA. As a condition of any agreement, the EPA required that FMC obtain necessary permits for the clean-up work from the Tribes. The proposed Consent Decree would require construction of new waste storage ponds and a treatment facility on FMC's property within the Reservation boundaries, and so the Tribes were demanding that FMC obtain Tribal permits for this work. Because the EPA was insistent on FMC obtaining the necessary Tribal permits, FMC “was justifiably concerned that an unresolved dispute between FMC and the Tribes would jeopardize the likelihood of successfully completing FMC's Consent Decree negotiations with the United States.” See FMC Response Brief (Dkt. No. 72) at p. 18. According to FMC, resolution of the waste permit issue with the Tribes was “of such great importance that FMC's negotiating team was led Paul McGrath, FMC's Senior Vice President and General Counsel.” Id.

         McGrath faced a substantial obstacle - the Tribes were demanding $100 million to issue the permits. See 002610. Finding himself in a weak bargaining position, FMC's negotiator McGrath, “select[ed] the only rational choice for resolving FMC's dispute with the Tribes - to negotiate a lower fee.” See FMC Response Brief, (Dkt. No. 72) at p. 18.

         The Tribes were willing to negotiate a lower fee but only if FMC consented to Tribal jurisdiction. FMC described its analysis of the Tribes' demand: “FMC knew that contesting the Tribes' jurisdiction would take years. Although FMC vigorously disagreed with the Tribes' assertion of jurisdiction to compel compliance with the claimed permit requirement, FMC had no realistic alternative but to resolve its dispute with the Tribes in a manner that would enable continued operation of the Pocatello Plant . . . . Permanent shutdown of the Pocatello Plant at that time would have caused FMC severe economic damages.” See FMC's Statement of Facts (Dkt. No. 67-1) at p. 9.

         On August 11, 1997, FMC's Health Safety & Environmental Manager David Buttelman filed applications for permits with the Tribes and stated in an accompanying letter as follows:

Through submittal of the Tribal “Building Permit Application” and the Tribal “Use Permit Application” for Ponds 17, 18 and 19, FMC Corporation is consenting to the jurisdiction of the Shoshone-Bannock Tribes with regard to the zoning and permitting requirements as specified in the current Fort Hall Land Use Operative Policy Guidelines.

See Exhibit 57. With FMC having consented to Tribal jurisdiction, the Tribes lowered their fee to $1.5 million a year to cover hazardous and nonhazardous waste beginning in 1998 and continuing “for every year thereafter . . . .” See Exhibit 61.

         FMC responded to that letter on May 26, 1998, by expressing its appreciation for the Tribes “agreeing to the fixed fee proposal that we discussed, which we understand will apply during the time these ponds are in operation, ” and by stating “we . . . intend to make the payments of $2.5 million on June 1, 1998, and the $1.5 million on June 1 in the following years.” See Exhibit 62. The Tribes' attorney Jeanette Wolfley objected to the language in this letter implying that the obligation to pay the fee would end with the closure of Ponds 17, 18 & 19. According to FMC's Division Manager, Robert Fields, Wolfly asked McGrath “to acknowledge in writing that the Use Permit and the annual fee applied broadly to the entire facility.” See Exhibit 66, Fields Affidavit.

         Fields testified that “McGrath agreed and sent Ms. Wolfley his letter of June 2, 1998.” Id. In that letter, FMC clarified that the language of the May 26 letter was “too narrow, and indeed it is our understanding . . . that the $1.5 million annual fee would continue to be paid for the future even if the use of ponds 17-19 was terminated in the next several years.” See Exhibit 63.

         FMC's resolution with the Tribes was a major factor in reaching an agreement with the EPA on the RCRA Consent Decree. Within just a few months of resolving the permit issues, FMC reached agreement with the EPA on the RCRA Consent Decree. By the terms of that Consent Decree, FMC agreed to pay a fine of $11.9 million and to close and cap the waste ponds in accordance with closure plans developed in coordination with the EPA - removal or treatment of the waste was deemed too expensive and too dangerous by the EPA. See Interim Record of Decision Amendment (IRODA) at pp. 1-2. To do the work necessary to comply with the Consent Decree, FMC was required to obtain Tribal permits, as set forth in paragraph 8 of the Consent Decree: “Where any portion of the Work requires a . . . tribal permit or approval, [FMC] shall submit timely and complete applications and take all other actions necessary to obtain all such permits or approvals.” Prior

         Proceedings in the Federal Courts

         The EPA did file an action against FMC but simultaneously presented the Consent Decree to this Court for approval to settle the lawsuit. The Tribes objected to the Consent Decree, seeking removal of the waste rather than capping of the ponds. The Court granted the Tribes motion to intervene, but found that “the capping requirements are adequately environmentally protective - the record contains no legitimate basis on which the Court could conclude that capping allows an unreasonable health risk to go unchecked, ” and approved the Consent Decree. See Order (Dkt. No. 27) in U.S. v. FMC, CV-98-406-BLW.

         On appeal, the Ninth Circuit affirmed that decision, holding that “the Tribes have presented no evidence that capping the ponds poses a threat to human health and the environment.” See U.S. v. Shoshone-Bannock Tribes, 229 F.3d 1161 at *2 (unpublished disposition) (9th Cir. 2000). In the proceedings before the Ninth Circuit, FMC argued that the Tribes had no right to object to the Consent Decree because the Tribes had “granted permits to FMC for its construction and use of Ponds 17 and 18 . . . subject to payment of a $1 million startup fee and a $1.5 million annual permit fee payable to the Hazardous Waste Program of the Tribes Land Use Department.” See Brief of FMC, 2000 WL 33996531, at *17-18. While not specially citing this argument, the Circuit did hold that the Tribes had been adequately consulted. Shoshone-Bannock Tribes, 229 F.3d at *2.

         Between 1999 and 2005, FMC completed closure and capping of the RCRA Ponds pursuant to this Consent Decree and the EPA-approved closure plans. In 2005, FMC certified final closure of the last of the RCRA Ponds in accordance with EPA-approved closure plans. See 002371.

         FMC paid the annual permit fee of $1.5 million under the 1998 agreement from 1998 to 2001. In December of 2001, FMC ceased all mineral processing operations at the site. When the fee became due for 2002, FMC objected, arguing its obligation had ended because (1) the Tribes failed to codify the fee to “ensure that [it] remains the same in the future”; and (2) the fee only applied to the disposal of waste, not its storage, and FMC had ceased disposing of waste. FMC refused to pay the $1.5 million fee and refused to apply for any further permits as it continued with the RCRA clean-up efforts.

         After negotiations failed, the Tribes filed a motion in U.S. v. FMC, CV-98-406-BLW asking the Court to clarify whether FMC had an obligation to obtain tribal permits for activities FMC undertook under the RCRA Consent Decree. This Court issued a decision on March 6, 2006, holding that (1) the Tribes had jurisdiction over FMC under the first Montana exception (see Montana v. U.S., 450 U.S. 544, 565-66 (1981)), (2) FMC was required to apply for Tribal permits based on FMC's agreement to submit to tribal jurisdiction in ¶8 of the RCRA Consent Decree, (3) the Tribes were intended third-party beneficiaries of the Consent Decree and therefore had a right to enforce its terms; and (4) FMC was required to exhaust tribal remedies over any challenges to the Tribal permit decisions. See U.S. v. FMC, 2006 WL 544505 (D.Idaho 2006).

         On appeal, the Ninth Circuit only addressed the third finding and reversed it, holding that the Tribes were merely incidental beneficiaries of the Consent Decree without standing to enforce its provisions. U.S. v. FMC, 531 F.3d 813 (9th Cir. 2008). The Circuit vacated this Court's decision and remanded the case with instructions to dismiss the action. Id. at 824. At the conclusion of its decision, the Circuit noted that FMC had “began the process of applying for tribal permits, which is the main relief that the Tribes have sought in this action” and that FMC's counsel during oral argument “represented to the court that FMC understands that it has the obligation to continue, and will continue, with the current tribal proceedings to their conclusion.” Id. at 824.

         Initial Proceedings Before the Tribal Courts

         FMC's application was granted by the Tribes' Land Use Policy Commission (LUPC) on the condition that FMC either resume paying the $1.5 million fee or pay a much higher fee based on the weight of the material stored in the ponds. FMC appealed that decision to the Fort Hall Business Council (FHBC), which affirmed the LUPC decision. FMC appealed the FHBC decision to the Shoshone-Bannock Tribal Court.

         The Tribal Court issued two decisions. The first, issued on November 13, 2007, held that FMC was subject to Tribal jurisdiction, and the decision also dismissed the Tribes' breach of contract and air quality permit counterclaims. The second, issued on May 21, 2008, held that (1) FMC was required to obtain a Tribal Building Permit, but the Tribes could not impose a $3000 fee for that permit; (2) FMC was not required to obtain a special use permit; (3) the 1998 Agreement between the parties had not been incorporated into a tribal ordinance; and (4) ...

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