Supreme Court Faces Thorny Issue of Attorneys' Fees in Environmental Suits

Recent ELR Comments have discussed the gradual erosion in the past few years of the "American rule" barring awards of counsel fees to successful litigants.¹ The appearance of public interest legal organizations has accelerated that trend, as the relief sought is usually injunctive, and injunctions do not pay the rent. Beginning with the Civil Rights Act of 1964, Congress has included provisions authorizing grants of counsel fees in several pieces of legislation that depend on citizens' initiative for their implementation and enforcement. The Clean Air Act, the Federal Water Pollution Control Act Amendments of 1972, and the Noise Control Act all state that in any final order on a citizen's suit brought pursuant to those statutes, the court may award the costs of litigation, including reasonable attorneys' fees, to "any party," when it deems such an award appropriate.²

At the same time, the courts have been increasingly willing to grant counsel fees even without statutory authorization, utilizing the three exceptions to the American Rule. As recently restated by the Supreme Court in Hall v. Cole,³ these are: cases of "obdurate behavior" by the losing party; cases in which the successful litigation has made a "common fund" available to a group similarly situated to the plaintiff, or has conferred a "common benefit" on it, and an award of fees against the defendant is the best means of spreading the cost of litigation among the benefitted group; and cases in which the plaintiffs have successfully vindicated an important public policy of the United States, and one which the nation depends on the private litigant to enforce as a "private attorney general."

Although environmental suits under NEPA would seem to fit naturally into the third of these categories, a specific statutory provision, codified at 28 U.S.C. § 2412, prohibits awards of attorneys' fees in suits against the government. Frequently, NEPA suits are brought against both a government agency and the private party which has requested a particular action from that agency. NEPA itself contains no reference to citizens' suits or to awards of attorneys' fees.

This term, the Supreme Court will review the decision of the D.C. Circuit in Wilderness Society v. Morton,⁴ approving a grant of attorneys' fees to environmental plaintiffs who successfully challenged the Interior Department's grant of a right-of-way for the Alaska Pipeline. The plaintiffs based their case on the Mineral Leasing Act, which prescribed the maximum width for pipeline rights-of-way, and NEPA. Since the court found for the environmentalists on the former issue, and correctly foresaw that Congress would enact remedial legislation authorizing the pipeline, it did not rule on the plaintiffs' NEPA claims. The court found that the government and Alyeska, the pipeline consortium, were equally to blame for the violation of the law. Because of the statutory bar to awards against the government, it awarded the plaintiffs only fifty percent of their attorneys' fees, to be paid by Alyeska. (In computing the amount of their fees, however, the court used the hourly rate which the attorneys would have been earning in private practice, rather than the substantially lower salaries they earned as public interest advocates.)

Since the D.C. Circuit decided Wilderness Society, that holding has been attacked frontally by the Fifth Circuit in Sierra Club. v. Lynn.⁵ That case, like Wilderness Society, presents a complex fact situation, and one in which the equities are more difficult to balance. It involved San Antonio Ranch, a planned new community of 88,000 residents to be built twenty miles from San Antonio, Texas, on hilly ground now used for grazing and ranching. The [4 ELR 10190] development, covering about 15 square miles, lies above underground rock formations through which water flows to the Edwards Aquifer, the sole source of water for a million residents of San Antonio and nearby areas. Early in 1970, the developers applied to HUD for assistance, and in the following year, the agency reported favorably on the project to its Community Development Corporation. Only afterwards was a draft environmental impact statement prepared. Soon after a final statement was issued in January, 1972, HUD formally offered to guarantee an $18 million bond issue, with a qualification: there was to be no development over the environmentally most sensitive area until certain studies were completed and environmentally protective measures instituted.

The Sierra Club and three local citizens' groups immediately field suit, asking for a temporary restraining order against the grant or acceptance of any federal assistance by HUD or the developers. The defendants moved that the case be held in abeyance while the developers met the conditions set out in HUD's offer of commitment, and this motion was granted. The agency then set up a review board, which held public meetings and studied the probable effects of the project on the aquifer, and retained a geologist for an independent review. In August, 1972, HUD issued an addendum to the final impact statement, and in October, having concluded that all the conditions in its offer of commitment had been met, began negotiations toward a project agreement with the developers.

The district court concluded that HUD had complied with all applicable federal statutes, and granted judgment for the defendants. At the same time, however, it ruled that it would retain jurisdiction over the case until all the planned environmental safeguards were implemented, directed the parties to file copies of all new data and reports relating to the project with the court, and ordered the developers to pay $20,000 to defray the plaintiffs' counsel fees, court costs, and other expenses of litigation. As such, the case probably represents the high water mark of the trend toward liberalized grants of attorneys' fees in the absence of statutory authorization.

The district court's rationale for awarding fees was, however, uncertain. In its first opinion, it declared:

This court is firmly convinced that even though the plaintiffs may have, at this stage, technically lost this lawsuit, nevertheless, a very important service has been performed in creating a greater public awareness of the dangers of pollution threatening this very valuable natural resource…. It is difficult to conclude that the filing of the suit did not help to ensure that adequate precautions would be taken to protect South Texas' very valuable water resource and that the measures taken would be made available to the scrutiny of the public eye…. After reviewing the facts here, this court is of the belief that the position of the citizen plaintiffs is analogous to that of a plaintiff in a civil rights suit, wherein it has been concluded that attorneys' fees should be awarded unless the trial court can articulate specific reasons for a denial.

Simply publicizing environmental hazards is hardly adequate reason to force an innocent party to pay the expenses of both sides of a lawsuit it has won. A far more convincing argument could have been made that the impact statement to which the suit objected was woefully inadequate; it was rendered adequate only by the addendum prepared because plaintiffs filed suit; plaintiffs would have won on the merits if the case had gone to trial immediately, instead of being held in abeyance while HUD prepared the addendum; and in reality, therefore, plaintiffs had succeeded on the merits. That argument was made, obliquely, in a later opinion issued on the defendants' motion for reconsideration: "though the judgment entered in this cause clearly and unequivocally denied all relief sought by the plaintiffs, it does not necessarily consitute the sole basis for determining the success or failure of plaintiffs in bringing this lawsuit." The court went on to explain, citing a commentator in the University of Chicago Law Review, that Hall v. Cole stands for the principle that

Where previously the courts were led to start with the traditional rule and then ascertain whether the case fell into one of the three Fleischmann-approved exceptions, now they are to start with the equitable power of the courts to grant appropriate remedies with the burden on the other side to prove a legislative "purpose to circumscribe the courts' power."⁶

Thus even if the judgment in the above entitled case were read as totally unfavorable to the plaintiffs, and resulted in none of the relief which they originally sought, it would still remain within the inherent equitable power of the Court to award attorneys' fees if so prompted by "overriding considerations" indicating the need for such a recovery.

With due respect both to the judge and to the University of Chicago Law Review, nothing in Hall v. Cole or any other case can reasonably be said to support this position.

The district court's approach to the question of allocating fees was similar:

Finally, although this court would like to spread the cost of the award equally between San Antonio Ranch, Ltd., and HUD, it finds that, by congressional mandate, it is prohibited from doing so. See 28 U.S.C.A. § 2412. It is, therefore, hereby ORDERED that the citizen plaintiffs recover reasonable attorneys' fees from the defendant San Antonio Ranch, Ltd.

The court appears to be holding HUD and the developers jointly and severally liable. In a contracts or torts suit in which two or more parties are found jointly and severally liable, if one defendant is bankrupt or beyond the reach of the court, his share must be paid by the other defendants, as the purpose of the award is to make the plaintiff whole. Where, however, one defendant is the government, which enjoys sovereign immunity because Congress had decided on policy grounds that it is preferable for plaintiffs not to be made whole than for attorneys' fees to be assessed against the government, it seems both inequitable [4 ELR 10191] and contrary to congressional intent for those fees to be shifted entirely to the other defendants.

The Fifth Circuit affirmed that part of the opinion which found HUD to have complied with the law (though it agreed that without the addendum, the impact statement would have been inadequate), but it reversed the district court's grant of attorneys' fees and its retention of jurisdiction over the case. The court reviewed the American Rule and its exceptions, concluding quickly that neither the "obdurate behavior" nor the "common fund" theories could justify an award of fees to the plaintiffs. Clearly, the plaintiffs could recover fees under the "private attorney general" exception or not at all. The case was, according to the court, "almost identical" to Wilderness Society, in which plaintiffs' suit, "while not obtaining the ultimate relief sought, did act as a catalyst to effect a change that served the public interest." The court noted that in that case, the D.C. Circuit had "arbitrarily halved" the fees and assessed that sum against the Alyeska pipeline consortium "despite the fact that it was the Interior Department which had violated the Act and failed to comply with NEPA." The Fifth Circuit declared:

We decline to follow The Wilderness Society. This circuit has never assessed attorneys' fees against a party innocent of nay wrongdoing. In the absence of proof that the private party controlled the government agency's actions or caused its default, it cannot be cast in judgment as a result of the agency's shortcomings. The fact that the breach of duty involved was committed by one who is immune from liability for financial redress affords no basis for shifting of fees …. The result of governmental immunity in this case is to require plaintiffs to absorb their own legal expenses. Another solution for future cases must come from Congress rather than in whole or half from the pocket of an innocent party.

The court added, "While Alyeska's participation in litigation that would have finally been adjudged improper but for congressional intervention might be cited as a distinguishing feature, the basic thrust of the majority position in the D.C. Circuit supports the action taken by the court below."

This last comment raises questions of syntax, word choice, and logic. Surely there was nothing "improper" about Alyeska's participation in the litigation, any more than it was improper for the developers to participate in Sierra Club, and in any case Congress' intervention did not alter the law in that regard. The clause "that would have finally been adjudged improper" must therefore modify "litigation," but the litigation itself was not improper, nor did congressional action affect retroactively its propriety. The court appears to be using "improper" as a synonym for "legally unsound or incorrect."

The Fifth Circuit's meaning in its references to Wilderness Society is clear: it is determined to view the two cases as legally indistinguishable, and to gloss over the important fact that in Wilderness Society the plaintiffs won on the merits, while in Sierra Club — according to the district court — they lost. To say that the Wilderness Society plaintiffs did not obtain "the ultimate relief sought" is flatly incorrect: they succeeded in their Mineral Leasing Act claims, and the D.C. Circuit deferred ruling on their NEPA claims in the expectation of congressional intervention. Congress' amendment of the Mineral Leasing Act had no more effect on the question of who won or lost Wilderness Society v. Morton than the repeal of Prohibition affected the validity of convictions under the Volstead Act.

The Fifth Circuit, then, takes the position that the plaintiffs in both Wilderness Society and Sierra Club lost, though in the former case, they won on the merits, while in the latter, they won in substance. If the Fifth Circuit misrepresents the two cases, it is certainly assisted by the muddled reasoning of the district court in Sierra Club, which flirts with the notion that plaintiffs won in substance, only to assert in the next breath that winning and losing are irrelevant, and that fees should be awarded unless good reason to the contrary can be shown. In tarring the D.C. Circuit, in Wilderness Society, with the brush of the district court in Sierra Club, the Fifth Circuit ignores the explicit statement by the D.C. Circuit that to recover attorneys' fees under the private attorney general exception, the plaintiff must be successful.⁷ The Fifth Circuit is simply not reflecting accurately the reasoning of the D.C. Circuit when it states that the "basic thrust" of its position supports the district court in Sierra Club. Though the district court's action could be defended on the principles of Wilderness Society, if the plaintiffs were found in fact to have succeeded on the merits of their claim, dicta in that opinion go not only beyond but contrary to the D.C. Circuit's holding.

Sound policy considerations, as well as the implicit dictates of Hall v. Cole, underlie the requirement that the litigant seeking an award of fees must be successful on the merits. Basic fairness dictates that a successful defendant should not, simply on grounds that the plaintiffs are on the side of the angels, be forced to assume the plaintiffs' attorneys' fees as well as his own. Conceptions of what is angelic are, moreover, subject to change, and it is at least theoretically possible that today's public interest plaintiffs could be hoist on their own petard tomorrow. For example, a suit to challenge the tax-exempt status of an environmental litigating organization, brought on the theory that its actions were jeopardizing the nation's energy supplies and thereby its security, might strike some judges — the minority in Wilderness Society, perhaps, to judge by their vitriolic dissents — as legally unsound but nevertheless "in the public interest."

If the is granted that environmental suits are appropriate for awards of attorneys' fees, and that success on the [4 ELR 10192] merits is a prerequisite, two questions then remain. First, it is necessary to determine when a litigant may be considered successful. Second, when the action which the suit attacks is governmental, but taken at the behest of a private party, under what circumstances, if any, may the private party be compelled to pay the plaintiffs' attorneys' fees? If the answer to the second question is that there are conditions under which the private party may be assessed for the plaintiffs' counsel fees, still another issue arises, that of establishing what percentage of those fees the private party should pay.

The Fifth Circuit, in Sierra Club, sets out a standard — "proof that the private party controlled the government agency's action or caused its default" — that is so restrictive as to be virtually meaningless. Even a "captive agency" is not likely to have its actions "controlled" by an industry, much less by a single private corporation.

Even where such control does exist, the difficulties of proof in a court of law are enormous: the days in which specific governmental actions are secured through generous campaign contributions may not be gone forever, but it is safe to say that recent experience has taught circumspection, if nothing else, to politicians and businessmen alike.

More commonly, the agency and the corporation will have similar views of what is legal and in the national interest, the "what's good for General Motors is good for the U.S.A." syndrome. In political reality, the Trans-Alaska Pipeline probably fits into this category; both the Nixon Administration and the oil companies were eager that the pipeline be built, and were undoubtedly aware of the legal obstacles as well.

The D.C. Circuit in Wilderness Society skated as quickly as possible over the question of how wrongdoing by an agency is transformed into an award of counsel fees against a private party:

After successfully persuading the Interior Department to grant the rights-of-way, Alyeska intervened in this litigation to protect its massive interests. Since Alyeska unquestionably was a major and real party at interest in this case, actively participating in the litigation along with the Government, we think it fair that it should bear part of the attorneys' fees.

Without disagreeing with the court's view of what is fair in this situation, the simple fact of intervening in a case, the outcome of which may spell one's financial success or failure, should not by itself be determinative. It is easy to conceive of a situation in which a private party is aware that the government's lawyers are not a match for the plaintiffs' legal counsel, and that unless it intervenes to defend the government's action, its legally sound position may not receive adequate presentation.

What then, is a suitable standard for determining whether to allow attorneys' fees in suits attacking governmental action taken at the behest of a private party, if the positions of the district court, the Fifth Circuit, and the D.C. Circuit are, respectively, unsupported by law, highly restrictive, and too amorphous? The simplest answer, and that which the Supreme Court as presently constituted will probably adopt, is to follow the Fifth Circuit in reasoning that no matter what the private party has requested, the action being attacked in the lawsuit is the government's alone, and the private party should therefore not be assessed for the plaintiffs' counsel fees, except where control of the agency's action is proved. (It is even possible for the private party to have no role in the agency's action and to be a victim, rather than an instigator, or illegality.) The argument is tempting. It invites Congress to repeal 28 U.S.C. § 2412, if that appears desirable, or to amend NEPA to include in it a citizen suit provision like those in other environmental statutes. Moreover, it spares the courts entanglement in the complexities of determining to what extent the private party has been a moving force in procuring the particular governmental action.

In some cases, however, the plaintiffs are successful in stopping an illegal governmental action in which the private party, irrespective of whether it intervenes in the litigation, is indeed a moving force. (Sierra Club illustrates that "successful" should not be taken so literally as to exclude the situation in which defendants win on the merits only because the lawsuit has forced them to take rapid remedial action.) In some cases, the private party may have provided inadequate data to the agency, which has in turn used the data in its environmental impact statement. To be sure, the agency is at fault for accepting the insufficient data, but it seems inequitable to relieve the private party of all responsibility for such occurrences.

If one accepts, therefore, that between the public interest litigant and the private party, it would be inequitable to place the entire cost of litigation on the former, one is finally left with the admittedly amorphous case-by-case weighing of the equities that the D.C. Circuit employed in Wilderness Society. This necessarily involves a determination — difficult, but not impossible — of the extent to which the private party was an active participant in governmental illegality. The private party's participation in the litigation, and the positions it advances, amy be one indication of whether it has disassociated itself from the government's illegal action, and should be considered the victim of governmental error, or is instead a willing partner. Once an approximate ratio of private to governmental wrongdoing is established, by analogy with comparative negligence statutes, a suitable proportion of the costs of litigation can be assessed against the private party.

One factor that the D.C. Circuit did not take into account, but which is worthy of consideration, is whether the private party is in a position to pass on the costs of the litigation to the group receiving a benefit from the lawsuit. Thus in Wilderness Society, perhaps a unique case, the costs of the prolonged litigation, which did result in the introduction of major environmental safeguards, will ultimately be reflected in the prices paid by oil consumers [4 ELR 10193] in the United States. In Sierra Club, costs could be passed on, in the form of higher prices, to the future residents of San Antonio Ranch, but not to the million persons whose water supply might have been threatened. A utility or common carrier, on the other hand, would be in a good position to pass on costs to the beneficiaries of an environmental suit.

Above all, however, the courtmust take into account the degree of benefit which the plaintiffs have conferred on the public. In the case of the Alaska Pipeline, the environmentalists' lawsuit prevented the pell-mell construction of a pipeline with minimal environmental safeguards. Had the pipeline been built as originally planned, it could easily have had devastating effects on the Alaskan permafrost, and might well have ruptured. In Sierra Club, the plaintiffs' suit led to further studies which confirmed HUD's and the developers' early hypotheses that the Ranch would cause no environmental damage, a somewhat more modest public benefit, but not necessarily undeserving of recompense.

This three-way test — degree of involvement, degree of public benefit, and capacity for fee-shifting — might provide the outlines of a solution to this thorny problem of law and policy. We shall learn in the next few months whether the Supreme Court will allow the courts to use their equity powers to deal with this complex issue, or instead follow the lead of the Fifth Circuit and put the full financial burden of vindicating NEPA on public interest litigants.

1. Comments, Attorneys' Fees: The Growing Number of Awards to Public Interest Plaintiffs, 4 ELR 10021 (Feb. 1974); More on Attorneys' Fees: Does the Eleventh Amendment Bar Awards Against State Agencies and Officials?, 4 ELR 10132 (Sep. 1974).

2. § 304(d) of the Clean Air Act, ELR 41225, states that "the court, in issuing any final order in any action brought pursuant to subsection (a) of this section, may award costs of litigation (including reasonable attorney and expert witness fees) to any party, whenever the court determines such award is appropriate." Identical language appears in § 505(d) of the FWPCA, ELR 41124, and in § 12(d) of the Noise Act, ELR 41504. In a recent case arising under the citizen suit provision of the Clean Air Act, Judge Charles Richey of the Ditrict Court for the District of Columbia awarded almost $13,000 in attorneys' fees to plaintiffs who had tried unsuccessfully to prove that construction of two high-rises would prevent the District of Columbia from conforming to 1977 national air quality standards. The court found that the plaintiffs had performed a valuable public service by demonstrating the failure of the D.C. Government to implement the Clean Air Act. Since the two developers also joined as defendants had committed no wrong, the court awarded attorneys' fees covering one-third of the plaintiffs' actual expenditures of time. Citizens Association of Georgetown v. Washington, 4 ELR 20860 (D.D.C. Sep. 30, 1974).

3. 3 ELR 20552 (U.S. 1973).

4. 4 ELR 20279 (D.C. Cir. Apr. 4, 1974).

5. 4 ELR 20844 (5th Cir. Oct. 4, 1974). For the district court opinion, see 4 ELR 20110, (W.D. Tex. 1973).

6. 38 U. Chi. L. Rev. 316, 325 (1971).

7. In Wilderness Society, the D.C. Circuit declared: "In July of 1971 no circuit had yet ruled that such an award was proper on behalf of 'private attorney general' litigants in environmental suits successfully prosecuted in the public interest. Our circuit so rules for the first time today …." (emphasis supplied).