Environmental Appeals Board Decision in the Elementis Case: What It Means For The "Continuing Violation" Doctrine Under The Statute of Limitations For TSCA Section 8(e) and EPA's Guidance Definition For "Corroborative Information"

            On March 13, 2015, the Environmental Appeals Board (EAB) overturned a controversial decision issued by an Administrative Law Judge (ALJ) in 2013.  The ALJ held that Elementis Chromium (Elementis) failed to report to the U.S. Environmental Protecting Agency (EPA) a study on occupational exposure involving hexavalent chromium, in violation of section 8(e) of the Toxic Substances Control Act (TSCA), and imposed $2,571,800 in administrative civil penalties. 

            The case against Elementis was initiated after EPA learned of an epidemiological study that Elementis and other chromium manufacturers commissioned in anticipation of a possible Occupational Safety and Health Administration (OSHA) rulemaking.  The study, completed in 2002, found a correlation between occupational exposure to hexavalent chromium and an increased incidence of cancer.  “However, the only exposure (dose) level in the [Elementis] study at which a statistically significant lung cancer effect was observed was substantially higher than the lowest dose level in [a prior EPA] study that was associated with a statistically significant lung cancer effect.”[1]  As a result, Elementis did not believe it was required to submit the study under TSCA section 8(e) because it considered the new information confirmatory of the earlier EPA study and, therefore, did not turn over the study until it was subpoenaed by EPA in 2008. 

            On appeal from the ALJ decision, Elementis argued that the case should have been dismissed on two grounds:  (1) because EPA failed to file the complaint within the five-year statute of limitations; and (2) the study in question was exempt from TSCA section 8(e) reporting because it was “known to the Administrator” as corroborative of existing information.  In its decision, the EAB ruled that although EPA’s complaint was not time-barred, the study in question was exempted from reporting as corroborating existing information in EPA’s possession.  This conclusion, said the Board, was required by EPA’s own guidance on how to interpret the statutory provision in section 8(e).[2]  Accordingly, the substantial administrative penalty imposed by the ALJ was set aside.

I.                   Statute of Limitations

            The facts surrounding the development of the study and Elementis’ involvement are not unusual, particularly where companies commission and pay to have certain scientific studies performed.  For purposes of this case, however, the salient facts begin with Elementis first learning of the study’s conclusions on October 8, 2002.  Elementis did not submit the study to EPA “because it did not contain any information ‘showing an adverse effect that was especially unexpected or much greater than expected.’”[3]  In an OSHA proceeding between 2002 and 2006, a third party submitted the study to that agency, with OSHA then stating that the study was not considered as it was submitted after the close of the comment period and contained no “additional information of risk” relevant to the proceeding.  In 2006, EPA learned of the study from a press report and, two years later, issued a subpoena requesting a copy of the study, with Elementis responding to the subpoena and submitting the study on November 17, 2008.  Two years later, on September 10, 2010, EPA issued its complaint against Elementis with a total proposed penalty of $2,238,000, based on 2,211 days of violation, more than six years in toto and almost eight years after Elementis first learned of the study’s findings

            TSCA does not have language establishing a specific statute of limitations for violations of its provisions.  In the earlier case of 3M v. Browner,[4] the D.C. Circuit Court of Appeals ruled that the general statute of limitations provision governing federal agency enforcement actions applies to TSCA violations, therefore setting at five years the time within which EPA must file a complaint to avoid being time-barred.[5]  Elementis argued that EPA’s complaint was untimely because EPA did not file the complaint within five years after the company was made aware of the study’s results.  However, EPA argued that the duty under section 8(e) to report information to the agency is a continuing one that renews each day, thus triggering a new five-year statute of limitations period every day the study was not submitted and until the information was provided to the Administrator. 

            The Board, in a lengthy discussion, agreed with EPA and concluded that neither the language nor the agency’s interpretations of the statute established a definitive time limit or deadline for submitting information under section 8(e), thus making each day a manufacturer fails to submit information a “fresh violation [that] springs anew, giving rise to a new cause of action each day information is required and not provided.”[6]  Thus, the Board said, EPA’s administrative complaint was timely because it was filed within five years of the date when Elementis finally satisfied its obligation by submitting the information.  The court limited EPA’s potential recovery of civil fines to the five years preceding the filing of the complaint, as any violation that continued beyond that period of time would fall outside the limitations period. 

            This reading of TSCA Section 8(e) and the general statute of limitations, however, creates an essentially unlimited liability for the regulated community.  Obviously, it benefits EPA because the statute of limitations does not run until the report is received by EPA, giving them five years to decide whether to pursue enforcement.  But the decision also violates the fundamental principle underpinning statutes of limitation generally, which is to effectuate “the basic policies of all limitations provisions: repose, elimination of stale claims, and certainty about a plaintiff’s opportunity for recovery and a defendant’s potential liabilities.”[7]

            In the 2013 Gabelli decision, albeit a case that did not involve TSCA or the “continuing violation” doctrine, the Supreme Court noted that statutes of limitations are intended to “promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared,” and provide “security and stability to human affairs,” and deemed them “vital to the welfare of society,” concluding that “even wrongdoers are entitled to assume that their sins may be forgotten.”[8]  The Court held that the “discovery rule” – where the limitations period does not begin to run until the government knew or should have known of the violation – did not apply to 28 U.S.C. § 2462 because the agency involved in that case, the Securities and Exchange Commission, is charged with rooting out wrongdoing and has substantial investigative resources to do so.  In 3M, a TSCA case that like Gabelli rejected application of the “discovery rule” under the general federal statute of limitations, the D.C. Circuit explained the inherent unfairness in allowing violations to be prosecuted decades later.  “An agency's failure to detect violations, for whatever reasons, does not avoid the problems of faded memories, lost witnesses and discarded documents in penalty actions brought decades after alleged violations are finally discovered” or, as in Elementis’ case, corrected.[9]  The Board’s decision fails to acknowledge these important considerations, leaving open the possibility that section 8(e) violations are never too stale to be revived.  In other words, when does the obligation end?

            A 2004 settlement between DuPont and EPA is illustrative and demonstrates how EPA can pursue what amounts to decades-old claims.  That case arose from a 2001 complaint against DuPont alleging the company failed to disclose information which showed evidence of transplacental movement of the chemical Perfluorooctanoic Acid (PFOA) in pregnant mothers to the fetus.  In the complaint, EPA alleged that DuPont first learned of this information in 1981.  Despite the intervening decades, EPA was insistent that the complaint was valid because section 8(e) violations are continuing and therefore DuPont could still be liable twenty years later for failing to submit the information under section 8(e).  The parties settled, so the issue of the statute of limitations was never fully briefed, but in its proposed final order, EPA stated that it believed if the case moved forward it would prevail at trial; though the Agency conceded it may only be able to get five years’ worth of penalties from DuPont.[10]  EPA’s belief that it had the power to look back twenty years for TSCA violations was confirmed by the EAB’s decision in Elementis.  It should not be surprising if EPA looks for other similar opportunities moving forward.

            In our view, Gabelli and 3M are persuasive because they address the same kind of administrative issues raised in Elementis – i.e., EPA is charged under TSCA with discovering violations through its investigative powers.  Although EPA has somewhat limited resources to conduct such investigations, allocation of resources affects all governmental operations, and the fact that the violation may not be discovered is not a sufficient reason to extend liability ad infinitum.  EPA’s arguments to the contrary should not be raised with the courts; rather, the agency’s complaint should be with Congress to address any perceived shortcomings of the statute. 

II.                Corroborative Information

            EPA issued guidance on what is reportable under section 8(e) many years ago, interpreting the phrase, “adequately informed” to include information that corroborates information already in the Administrator’s hands.[11]  EPA argued that the study in question was not corroborative because it contained “new” or “different” information relevant to occupational exposure to hexavalent chromium.  The Agency insisted that the Elementis study involved a “lower intensity of exposure” than previous studies and “reduce[d] uncertainty about the dose response relationship between hexavalent chromium and lung cancer.”[12]  In contrast, Elementis maintained that according to EPA’s 1991 guidance the study was corroborative because it contained information that confirmed a “well-established adverse effect,”[13] and did not show that the effects acknowledged by both parties – that hexavalent chromium caused lung cancer in people – occurred at lower levels of exposure than previously known or that they were more severe.

            The EAB agreed with Elementis, ruling that EPA guidance binds the agency.  The statute does not limit reportable information to “new” information, only to information “that … reasonably support[s] a conclusion of substantial risk of injury.”[14]  However, EPA’s interpretation of non-corroborative information is that which “‘show[s] adverse effects of a more serious degree or a different kind,’ and as to non-corroborative dose information, that means information demonstrating that effects ‘occur at a significantly lower dose or concentration.’”[15]  Elementis and the regulated community generally were entitled to rely on this interpretation, which may be subject to change, but only prospectively.  The Board’s decision, it said, is controlled by the guidance documents.

            Although Elementis was relieved of liability in the case, the EAB’s rejection of this argument does not fully settle the issue going forward.  The EAB was critical of EPA’s guidance, which it believes unnecessarily constrains the “broad reach of the statute.”[16]  The EAB stated that, were it limited to the language of the statute, it would have affirmed the ALJ’s decision.  The EAB’s discussion of interpretive guidance is foreboding in light of the recent unanimous Supreme Court case Perez v. Mortg. Bankers Ass’n, 575 U.S. __ (2015), which held that an agency’s interpretive guidance may be changed without procedural rulemaking.  What that means for TSCA section 8(e) reporting is that EPA can summarily change its interpretation of what constitutes corroborative information without following the rulemaking processes of the Administrative Procedures Act (APA), subject only to constitutional notice requirements.

            This aspect of the decision contradicts EPA’s determination in the early 1990s that not all information is helpful from a regulatory standpoint.  EPA acknowledged that certain aspects of its interpretations then in force could lead companies to over-report data on environmental contamination.  It limited reporting on such emergency incidents to “widespread and previously unsuspected distribution in environmental media… known to cause serious effect," as well as the occurrence or substantial likelihood of "widespread or significant exposure to humans or non-human organisms."[17]  Similarly, one could expect that numerous reports of information that is presently exempt will suddenly be deemed non-corroborative if the Agency adopts the invitation of the Board and modifies its guidance.    

For additional information on Section 8(e) and other TSCA compliance issues, please contact Keller and Heckman LLP’s TSCA professionals Eric Gotting at 202-434-4269 or gotting@khlaw.com or David Sarvadi at 202-434-4249 or sarvadi@khlaw.com.