Carolina Water Service Inc v. McCarthy et al
Filing
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OPINION AND ORDER terminating 32 Motion to Strike ; denying as moot 40 Motion for Summary Judgment; granting 24 Motion to Dismiss; granting 32 Motion to Dismiss for Failure to State a Claim; granting 32 Motion to Dismiss. Signed by Honorable Margaret B Seymour on 9/29/2016.(mdea )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
CAROLINA WATER SERVICE, INC.,
Plaintiff,
vs.
REGINA MCCARTHY,
ADMINISTRATOR, UNITED STATES
ENVIRONMENTAL PROTECTION
AGENCY, in her official capacity,
UNITED STATES ENVIRONMENTAL
PROTECTION AGENCY,
and
TOWN OF LEXINGTON, SOUTH
CAROLINA,
Defendants.
) Civil Action Number: 3:15-cv-04919-MBS
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OPINION AND ORDER
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This matter is currently before the court for three motions: (1) a motion to dismiss filed
by Defendant United States Environmental Protection Agency and Regina McCarthy, in her
capacity as Administrator of the United States Environmental Protection Agency (collectively
hereinafter “EPA”) (ECF No. 24); (2) a motion to dismiss the counterclaim filed by Carolina
Water Service, Inc. (“Plaintiff” or “CWS”) (ECF No. 32); and (3) a motion for summary
judgment filed by the Defendant Town of Lexington, South Carolina (“Town”) (ECF No. 40).
As explained below, the court dismisses CWS’s action against the EPA for failure to state a
claim upon which relief may be granted, and dismisses CWS’s action against the Town and the
Town’s counterclaim for lack of subject matter jurisdiction.
1
I.
FACTUAL BACKGROUND
The claims in this case arise out of an ongoing dispute concerning the continued
discharge of wastewater into South Carolina’s Lower Saluda River from a CWS-owned regional
wastewater treatment plant (“I-20 Plant”). CWS is a privately-owned company that is a “public
utility, as defined by S.C. Code Ann. §§ 58-3-5(6) and 58-5-10(4), and is authorized by a
certificate of public convenience and necessity issued by the Public Service Commission of
South Carolina (‘PSC’) to provide wastewater collection and treatment services to customers in
various areas in the State of South Carolina, including portions of Lexington County, South
Carolina.” ECF No. 1 at ¶ 1. The Central Midlands Council of Governments (“CMCOG”), a
board consisting of elected officials, administrators, and appointees from local counties, towns,
and cities, is tasked with conducting water quality planning and management for the Midlands
region of South Carolina. ECF No. 24-1 at 12. CWS’s I-20 Plant is located in the Town and is
within CMCOG’s region. Id.
In 1979, pursuant to Section 208 of the Clean Water Act (“CWA”), 1 33 U.S.C. § 1288,
CMCOG drafted its original “208 Plan,” a waste treatment and water quality plan for the
Midlands area. Since then, the 208 Plan has been regularly amended. Under the current plan, the
Town is the “Designated Management Agency (hereinafter ‘DMA’) and also the regional
provider of wastewater collection and transportation services in a portion of the Midland’s South
Carolina region.” ECF No. 1 at ¶ 4. The 208 Plan is subject to the review and approval of the
South Carolina Department of Health and Environmental Control (DHEC), which the EPA
authorized South Carolina to create in 1975. ECF No. 24-1 at 13. DHEC is the permitting agency
for National Pollutant Discharge Elimination System (NPDES) permits in South Carolina. Id.
1
The formal name of the Clean Water Act is the Federal Water Pollution Control Act
Amendments of 1972. 33 U.S.C. §§ 1251-1376.
2
The NPDES program helps “regulate[] wastewater discharges from, among other things, sewage
treatment plants in the State.” Id.
In November 1994, “DHEC issued to CWS NPDES Permit SC0035564, which
authorizes CWS to operate and discharge wastewater from the I-20 Plant into the Lower Saluda
River subject to the terms and conditions of the permit.” ECF No. 1. In accordance with the 208
Plan’s requisite to eliminate discharges from small treatment facilities, the NPDES permit
required the I-20 system to be connected to a regional facility when one became operational. An
update to the 208 Plan in 1997 continued to require the I-20 Plant to connect with a regional
wastewater facility when available. ECF No. 1 at ¶ 31. In 1999, the “Town finished construction
on the regional sewer line and received a Permit to Operate from DHEC.” Id. at ¶ 30. CWS
alleges that since the completion of this facility in 1999, CWS has “proactively sought to address
the discharge elimination requirement” but “each of those attempts have been rejected and
interconnection remains unavailable to CWS.” Id. at ¶ 31.
Without an interconnection agreement, discharge of wastewater into the Lower Saluda
River continues. As a result, on January 14, 2015, Congaree Riverkeeper, Inc. (“CRK”), a South
Carolina environmental advocacy group, brought a citizen suit pursuant to the CWA § 505, 33
U.S.C. § 1365, against CWS for (1) a violation of CWS’s NPDES permit condition requiring
connection of the facility to the regional system; (2) a violation of the relevant 208 Plan, issued
pursuant to CWA § 208, 33 U.S.C. § 1288, which also requires connection of the facility to the
regional system; and (3) a violation of the NPDES permit conditions regarding effluent
limitations and other standards. 2 See Congaree Riverkeeper, Inc. v. Carolina Water Service, Inc.
(Case No. 3:15-CV-194-MBS).
2
The court has dismissed CRK’s second cause of action relating to the 208 Plan.
3
CWS contends that it is unable to reach an agreement because there is a regional
treatment facility, located in Cayce, South Carolina, that is subject to a contractual Water
Services Agreement (“Agreement”) between the City of Cayce, the Town, and the Lexington
County Joint Municipal Water and Sewer Commission. CWS alleges that as part of the Town’s
purchase of part of this regional treatment facility, the Town covenanted to not enter into any
contract or agreement (including an interconnection agreement) to treat wastewater generated by
private wastewater utility entities, such as CWS. Furthermore, CWS alleges that the “bonds
issued by the Town to finance its investment in the available allocated treatment and discharge
capacity of the City of Cayce’s [regional treatment facility] restrict the receipt and/or quantity of
wastewater generated by privately-owned . . . utilities,” such as CWS. ECF No. 25 at ¶ 45(a).
On August 1, 2016, DHEC denied renewal of CWS’s I-20 Plant NPDES permit, with
orders that give “the Town of Lexington and CWS 60 days to submit a coordinated plan to
DHEC detailing how CWS will interconnect the wastewater discharge from the I-20 plant to
Lexington's sewer system. Within 12 months, CWS must complete the tie into the Lexington
sewer system, shut down the I-20 facility and eliminate discharge into the Saluda River.” DHEC
Denies CWS I-20 Plant Permit and Orders Town of Lexington and CWS to Eliminate Discharge
into Saluda River, South Carolina Department of Health and Environmental Control (August 1,
2016), http://www.scdhec.gov/Agency/NewsReleases/2016/nr20160801-01/. DHEC had
previously announced its intention to deny CWS a new NPDES permit. ECF No. 24-1. DHEC
reasoned that CWS is ineligible for a permit because “the regional system is operational and
CWS therefore must connect to a regional sewer system or other treatment facility.” Id. at 15
(citation omitted).
4
II.
PROCEDURAL HISTORY
On December 11, 2015, CWS filed a complaint against EPA and the Town alleging
violations of the CWA, and seeking declaratory judgment or in the alternative, injunctive relief.
ECF No. 1. Specifically, inter alia, CWS seeks the following.
(1)
Declaratory judgment against EPA finding that “EPA’s approval of the annual
certifications of the 1997 208 Plan is in violation of Section 208 and is therefore
no longer valid to the extent that it recognizes as a DMA an entity lacking the
requisite authority to act as such (i.e., the Town).” Id. at ¶ 54(A).
(2)
Declaratory judgment against the Town for allegedly entering into the Agreement,
which restricts the Town’s ability to fulfill its duties under the CWA and the 1997
208 Plan. Additionally, CWS wants the court to find that the Town is in violation
of the CWA and the 1997 208 Plan because it has refused to offer interconnection
to CWS’s I-20 system to allow compliance with the 1997 208 Plan.
(3)
Injunction of the 1997 208 Plan to the extent that the Town serves as DMA for
the region or for an order enjoining the Town to offer interconnection to the I-20
system under the terms advanced by CWS and currently pending before the PSC.
A. Procedural History—CWS and EPA
On February 11, 2016, EPA filed a motion to dismiss, arguing that the lawsuit is barred
as to EPA by sovereign immunity, and that CWS failed to provide adequate notice to the EPA
prior to filing suit. ECF No. 24. On February 15, 2016, CWS filed an amended complaint adding
the Administrative Procedure Act, 5 U.S.C. §§ 701 et seq. (“APA”), as a basis for the court’s
jurisdiction. ECF No. 25.
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On March 10, 2016, pursuant to a court order establishing a revised briefing schedule
(ECF No. 27), EPA filed a supplement to its motion to dismiss. ECF No. 30. EPA’s supplement
counters, among other things, that CWS’s APA argument is a “bare reference to the APA”; and
is otherwise inapplicable because the challenged actions are committed to agency discretion.
ECF No. 30 at 9. The EPA asserts that it does not have a mandatory duty to monitor or dedesignate the Town. Id. at 14. On March 17, 2016, EPA filed an additional supplemental
memorandum in support of its motion. ECF No. 31. This memorandum was brief, simply
alerting the court that CWS mailed to EPA a letter dated February 29, 2016, purporting to serve
as notice of suit under the CWA. Id. On April 15, 2016, CWS filed a response in opposition to
the motion to dismiss, arguing that a reading of section 208 of the CWA and EPA’s
implementing regulations prove that CWS has asserted a viable claim under the APA. ECF No.
38. CWS also attempted to raise a claim that EPA failed to perform annual reviews of funds
issued to South Carolina’s State Revolving Fund (“SRF”) program. ECF No. 38 at 13. On May
3, 2016, EPA filed a reply brief rejecting CWS’s arguments and reasserting that the EPA does
not have a mandatory duty to de-designate a state’s selected DMAs. ECF No. 43 at 3–6. Further,
the EPA argued that CWS cannot assert the SRF claim for the first time in its reply. ECF No. 43
at 9–10.
B. Procedural History—CWS and the Town
On January 4, 2016, the Town filed an answer to CWS’s complaint. ECF No. 13. As
stated above, on February 15, 2016, CWS filed an amended complaint adding the APA claims as
an additional basis for the court’s jurisdiction against EPA. ECF No. 25. CWS’s amended
complaint did not allege new claims against the Town. See id. On February 29, 2016, the Town
filed an answer to CWS’s amended complaint and filed a counterclaim against CWS seeking
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actual and punitive damages, costs and expenses, and further relief as a result of CWS’s alleged
misuse of the declaratory judgment remedy. ECF No. 29. The Town alleges that CWS and the
Town were actively negotiating, but now CWS brings this action “for an ulterior purpose and
willfully misuses the declaratory judgment remedy in an attempt to gain advantage and to
accomplish purposes not warranted by the process.” ECF No. 29 at 8.
On March 21, 2016, CWS filed a motion to dismiss the counterclaim, arguing that the
Town’s counterclaim is untimely because it is a compulsory counterclaim that the Town failed to
ask the court for leave to bring, and that the counterclaim fails to allege sufficient facts. ECF No.
32. On April 21, 2016, the Town filed a response to CWS’s motion to dismiss, detailing facts
about the negotiations between the parties to support the counterclaim’s timeliness and its
allegations. ECF No. 39. On May 13, 2016, CWS filed a reply to the Town’s response, arguing
again for dismissal of the counterclaim because of the Town’s failure to assert the counterclaim
in its first answer and failure to state a cognizable claim. ECF No. 44.
At the same time, the Town moved the court to address CWS’s allegations in the
amended complaint. On April 21, 2016, the Town filed a motion for summary judgment, arguing
that CWS’s declaratory claims are actually requests for injunctive relief and that the only private
cause of action under the CWA is a citizen suit enforcement proceeding. Therefore, the Town
argues that the court cannot grant relief to CWS because this action is not a citizen suit. ECF No.
40; ECF No. 40-1 at 4-8. On May 27, 2016, CWS filed a response, arguing that the Town
misconstrues the structure of the action, and nevertheless, injunctive relief is proper since the
court has general equitable powers and jurisdiction. ECF No. 46. On June 6, 2016, the Town
filed a reply brief rejecting CWS’s counterarguments and reasserting the Town’s request for
summary judgment. ECF No. 47. In these motions, the parties also debated the court’s subject
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matter jurisdiction over a declaratory judgment request on the restrictive covenants in the
Town’s bonds and the Agreement.
On June 27, 2016, the parties appeared before the court for a hearing on EPA’s motion to
dismiss and CWS’s motion to dismiss.3 ECF No. 48. After hearing the arguments of the parties,
the court took the motions under advisement and announced that it would issue a written order.
Id. This is the court’s written order addressing EPA’s motion to dismiss and CWS’s motion to
dismiss. The court will also address the Town’s motion for summary judgment herein.
III.
EPA’S MOTION TO DISMISS
A. Standard for a 12(b)(1) and 12(b)(6) Motion to Dismiss
EPA moves under Federal Rules of Civil Procedure Rules 12(b)(1) and 12(b)(6) to
dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim upon
which relief can be granted. Federal courts are not courts of general jurisdiction; they have only
the power that is authorized by Article III of the Constitution and statutes enacted by Congress.
Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986).
A Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction considers
whether this is the proper court to consider the action. A district court should dismiss a complaint
for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) if the complaint fails to allege
facts upon which subject matter jurisdiction can be based or if the jurisdictional allegations in the
complaint are not true. Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009). The plaintiff
bears the burden of proof in a 12(b)(1) motion to dismiss, as the plaintiff is asserting jurisdiction.
3
At the time the hearing was scheduled, briefing on the Town’s motion for summary judgment
was not complete. Therefore, the court did not hold oral arguments on this motion. The court will
address that motion herein based on the pleadings of the parties.
8
Williams v. United States, 50 F.3d 299, 304 (4th Cir. 1995). “In determining whether jurisdiction
exists, the district court is to regard the pleadings’ allegations as mere evidence on the issue, and
may consider evidence outside the pleadings without converting the proceeding to one for
summary judgment.” Richmond, Fredericksburg & Potomac R. Co. v. United States, 945 F.2d
765, 768 (4th Cir. 1991).
A Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be
granted tests the legal sufficiency of a complaint. Schatz v. Rosenberg, 943 F.2d 485, 489 (4th
Cir. 1991). While the complaint need not be minutely detailed, it must provide enough factual
details to put the opposing party on fair notice of the claim and the grounds upon which it rests.
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citing Conley v. Gibson, 355 U.S. 41,
47 (1957)). In order to withstand a motion to dismiss, a complaint must contain factual content
that allows the court to reasonably infer that the defendant is liable for the alleged misconduct.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The court must accept the allegations in the
complaint as true, and all reasonable factual inferences must be drawn in favor of the party
opposing the motion. Id. at 679. If the court determines that those factual allegations can
“plausibly give rise to an entitlement to relief,” dismissal is not warranted. Id.
B. Discussion
In CWS’s response to EPA’s motion to dismiss, CWS concedes that this action is not a
citizen suit brought under the CWA. 4 See ECF No. 38. Consequently, the notice requirement and
4
The citizen-suit provision of the CWA provides:
Except as provided in subsection (b) of this section and section
1319(g)(6) of this title, any citizen may commence a civil action on
his own behalf—
9
waiver of sovereign immunity issues presented in EPA’s motion to dismiss are moot. What
remains from EPA’s motion to dismiss are two issues under the APA: (1) whether the EPA under
the CWA had a mandatory and nondiscretionary duty to de-designate the Town as a DMA under
the 208 Plan; and (2) whether the EPA had a duty to perform mandated annual reviews and
oversight of funds issued to the SRF program. The court will address each issue in order. 5
1. The EPA does not have a mandatory and nondiscretionary duty to de-designate
the Town as a DMA
EPA argues that CWS’s de-designation claim is legally insupportable under the APA,
primarily because, in the eyes of EPA, CWS has misinterpreted both the CWA § 208(c)(1) and
(c)(2), and EPA regulations, 40 C.F.R. § 130.9. EPA maintains that the court should defer to
(1) against any person (including (i) the United States, and (ii) any
other governmental instrumentality or agency to the extent
permitted by the eleventh amendment to the Constitution) who is
alleged to be in violation of (A) an effluent standard or limitation
under this chapter or (B) an order issued by the Administrator or a
State with respect to such a standard or limitation, or
(2) against the Administrator where there is alleged a failure of the
Administrator to perform any act or duty under this chapter which
is not discretionary with the Administrator.
The district courts shall have jurisdiction, without regard to the
amount in controversy or the citizenship of the parties, to enforce
such an effluent standard or limitation, or such an order, or to order
the Administrator to perform such act or duty, as the case may be,
and to apply any appropriate civil penalties under section 1319(d)
of this title.
5
EPA also argues that CWS’s claim is not an appropriate limited waiver of sovereign immunity
under the APA because the APA only provides for judicial review of an agency action and
waiver of sovereign immunity “only if ‘there is no other adequate remedy in a court.’” ECF No.
30 at 7 (citing National Wrestling Coaches Ass’n v. Dep’t of Ed., 366 F.3d 930, 947 (D.C. Cir.
2004)). EPA contends that CWS has other remedies available, especially against the Town. The
court does not analyze what remedies CWS has in this section because this order will later
address the Town’s motion for summary judgment and the validity of the claims CWS brings
against the Town. Instead, in analyzing EPA’s motion to dismiss, the court will only evaluate
EPA’s de-designation claim and CWS’s SRF program claim.
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EPA’s interpretation of the statutes, which is an interpretation that allows state and local officials
to monitor activities of DMAs, and views the CWA as plainly stating that the Governor has
responsibility for the de-designation of a DMA in South Carolina. EPA also suggests that the
court cannot hold that § 1288(c)(2) imposes on EPA a nondiscretionary duty to de-designate
when § 1288(b)(4)(D)(i), the CWA’s language regarding review and withdrawal of the 208 plan,
does not require the EPA to immediately withdraw the 208 Plan if the state is not administering
the program in accordance with CWA requirements.
On the other hand, CWS argues that the APA permits action against an agency for failure
to act, and that upon the withholding of a non-discretionary action, courts, through the APA, may
compel action. ECF No. 38 at 11. CWS suggests that it has sufficiently alleged that EPA failed to
act in accordance with its mandatory and non-discretionary duty to de-designate the Town as a
DMA. Id. According to CWS, the Town should have been de-designated as a DMA after signing
the Agreement, because the Town could no longer fulfill its duties under the 208 Plan to offer an
interconnection to the I-20 system and eliminate discharge into the Saluda River.
The relevant CWA statute regarding EPA oversight and approval of a DMA reads in part:
c) REGIONAL OPERATING AGENCIES
(1) The Governor of each State, in consultation with the planning
agency designated under subsection (a) of this section, at the time a
plan is submitted to the Administrator, shall designate one or more
waste treatment management agencies (which may be an existing
or newly created local, regional, or State agency or political
subdivision) for each area designated under subsection (a) of this
section and submit such designations to the Administrator.
(2) The Administrator shall accept any such designation, unless,
within 120 days of such designation, he finds that the designated
management agency (or agencies) does not have adequate
authority—
(A) to carry out appropriate portions of an areawide waste
treatment management plan developed under subsection (b) of this
section;
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(B) to manage effectively waste treatment works and related
facilities serving such area in conformance with any plan required
by subsection (b) of this section;
(C) directly or by contract, to design and construct new works, and
to operate and maintain new and existing works as required by any
plan developed pursuant to subsection (b) of this section;
....
CWA § 208, 33 U.S.C. § 1288(c).
The EPA’s implementing regulation pertaining to the CWA and DMAs reads:
(d) Designated management agencies (DMA). In accordance with
section 208(c)(1) of the Act, management agencies shall be
designated by the Governor in consultation with the designated
planning agency. EPA shall approve such designations unless the
DMA lacks the legal, financial and managerial authority required
under section 208(c)(2) of the Act. Designated management
agencies shall carry out responsibilities specified in Water Quality
Management (WQM) plans. Areawide planning agencies shall
monitor DMA activities in their area and recommend necessary
plan changes during the WQM plan update. Where there is no
designated areawide planning agency, States shall monitor DMA
activities and make any necessary changes during the WQM plan
update.
40 C.F.R. § 130.9.
When interpreting the CWA or like statutes, courts have “long recognized that
considerable weight should be accorded to an executive department's construction of a statutory
scheme it is entrusted to administer, and the principle of deference to administrative
interpretations.” Chevron, U.S.A., Inc. v. Nat’l Res. Def. Council, Inc., 467 U.S. 837, 844 (1984).
Accordingly, EPA’s interpretation “governs if it is a reasonable interpretation of the statute—not
necessarily the only possible interpretation, nor even the interpretation deemed most reasonable
by the courts.” See Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 209 (2009) (emphasis in
original).
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The EPA interprets this regulation to mean that the Governor of each state is responsible
for designating, de-designating, and otherwise monitoring the DMAs for compliance with the
respective 208 plan. The court finds that EPA’s interpretation is reasonable irrespective of the
court’s opinion as to what would be most reasonable. Assuming, as CWS alleges, that the Town
no longer meets the criteria to be a DMA, the court finds EPA’s interpretation of the statute,
which concludes that the Governor is responsible for de-designating the Town as a DMA, is
reasonable. The court reaches this conclusion because the CWA “imposed [the] major
responsibility for control of water pollution on the states,” and the EPA implementing guidelines
explicitly provide that “[s]tates shall monitor DMA activities.” D.C. v. Schramm, 631 F.2d 854,
860 (D.C. Cir. 1980); 40 C.F.R. § 130.9. Therefore, it is reasonable to conclude that, although
the EPA is required to approve the designation of a DMA within 120 days, the EPA has no
explicit monitoring and de-designation responsibilities after its approval is given. Instead,
monitoring and de-designation responsibilities vest with the Governor and the state. Thus, even
viewing the allegations of the amended complaint as true and drawing all factual inferences in
favor of CWS, the court finds that EPA’s interpretation of the statue—that EPA does not have a
duty to de-designate the Town—is reasonable. As a result, the court cannot find that the facts of
this case give rise to a cause of action under the APA against the EPA.
2. CWS cannot bring its claim that EPA failed to perform duties related to the SRF
program
The second and final issue related to EPA’s motion to dismiss involves CWS’s allegation
that EPA “arbitrarily and capriciously performed its mandated annual review and oversight of
the funds issued under South Carolina’s SRF Program for the construction of publicly owned
treatment facilities that are contrary to the 208 [P]lan.” ECF No. 38 at 12. This claim first
appears in CWS’s response in opposition to defendant’s motion to dismiss (ECF No. 38), and is
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not included in either CWS’s complaint or amended complaint. Courts have not considered
allegations asserted in an opposition brief if they were not first asserted in the complaint. See
Phillips v. Univ. of Maryland Baltimore Cty., No. 15-02066, 2016 WL 1301276, at *2 (D. Md.
Apr. 4, 2016); see also Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir.
1984) (declaring that “it is axiomatic that the complaint may not be amended by the briefs in
opposition to a motion to dismiss”). Consequently, the court will not consider allegations
regarding the SRF Program as grounds for jurisdiction in this case.
The court grants EPA’s motion to dismiss.
IV.
THE COURT LACKS SUBJECT MATTER JURISDICTION OVER CWS’S
CLAIMS AGAINST THE TOWN
As a threshold matter, the court must first consider whether it has subject matter jurisdiction
over the claim. The court may raise lack of subject matter jurisdiction sua sponte and dismiss the
action. Arbaugh v. Y&H Corp., 546 U.S. 500, 506 (2006); Lovern v. Edwards, 190 F.3d 648, 654
(4th Cir. 1999); Fed. R. Civ. P. 12(h)(3) (“If the court determines at any time that it lacks
subject-matter jurisdiction, the court must dismiss the action.”). As discussed below, the dispute
regards whether the Town’s contract with the City of Cayce and the bond covenants violate its
responsibilities under the CWA, i.e., whether the contract is valid. The need to analyze the CWA
in determining whether the contract is valid is insufficient to create a substantial federal question.
A. The Town’s Summary Judgment Motion
On April 21, 2016, the Town moved for summary judgment pursuant to Federal Rules of
Civil Procedure Rule 56. ECF No. 40. However, the crux of the Town’s motion for summary
14
judgment is that the court lacks subject matter jurisdiction to hear CWS’s complaint. 6 CWS
argues that the Town’s arguments of lack of subject matter jurisdiction are not “properly asserted
in a motion for summary judgment, which necessarily involves a disposition of a case on the
merits.” ECF No. 46 at 2 (citing Stanley v. Cent. Intelligence Agency, 639 F.2d 1146, 1157 (5th
Cir. 1981) (holding that “[s]ince the granting of summary judgment is a disposition on the merits
of the case, a motion for summary judgment is not the appropriate procedure for raising the
defense of lack of subject matter jurisdiction”)). Nevertheless, “[t]he objection that a federal
court lacks subject-matter jurisdiction, see [Fed. R. Civ. P. 12(b)(1)], may be raised by a party, or
by a court on its own initiative, at any stage in the litigation, even after trial and the entry of
judgment.” Arbaugh, 546 U.S. at 506. Accordingly, the court must first consider whether the
court has subject matter jurisdiction over CWS’s causes of action.
B.
Lack of Subject Matter Jurisdiction
In the Town’s motion for summary judgment, the Town argues that the court lacks
subject matter jurisdiction over CWS’s declaratory relief claim regarding the restrictive
covenants in the Town’s bonds and the Agreement because such claims are to be determined
under the state law that governs the contract in question. ECF No. 40-1 at 12. The Town argues
that mere necessity for interpretation of the CWA as part of a contract claim does not raise a
substantial federal question. Id. at 13. Further, the Town argues that CWS’s additional requests
for declaratory judgment and injunctive relief are not permitted under the CWA’s citizen suit
provision, CWA § 505, 33 U.S.C. § 1365(a). CWS counters that the Town misconstrues the
structure of the action. ECF No. 46. CWS argues that the bulk of its claims are in fact requests
6
The Town also asserted that CWS fails to state a claim upon which relief may be granted. As
the court dismisses for lack of subject matter jurisdiction, the court declines to determine
whether CWS’s complaint fails to state a claim for which relief may be granted.
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for declaratory relief concerning the 208 Plan and validity under 28 U.S.C. § 2202, not claims
brought under the citizen suit provisions. ECF No. 46 at 5-11. CWS argues that the Town’s
violations of the CWA 208 Plan invokes federal question jurisdiction as the court must interpret
the CWA. ECF No. 46 at 14. CWS further claims that its requests for injunctive relief are
“available only upon a declaration that a DMA must have the requisite authority to serve in that
capacity and that the Town, by entering into contracts and issuing bonded indebtedness that
contain covenants restricting its authority, lack [sic] the authority to serve as the DMA for the I20 service area.” Id. at 7, 12. Lastly, CWS suggests that this action is proper since the court has
general equitable powers and jurisdiction. Id. at 7; 11-13.
1. The court does not have subject matter jurisdiction to determine the validity of the
restrictive covenants in the Town’s bonds and the Agreement.
Original jurisdiction is conferred upon federal courts if the matter in controversy “arises
under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331 (2012). “A right
or immunity created by the Constitution or laws of the United States must be an element, and an
essential one, of the plaintiff's cause of action.” Gully v. First Nat'l Bank, 299 U.S. 109, 112
(1936). The court must first determine whether the Amended Complaint alleges a federal cause
of action in its well-plead complaint. See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63
(1987). If not, the court must determine whether some element of the claim depends on the
resolution of a substantial, disputed question of federal law. Templeton Bd. of Sewer
Commissioners v. Am. Tissue Mills of Mass., 352 F.3d 33, 36 (1st Cir. 2003); see also Merrell
Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808-09 (1986) (noting that there is federal question
jurisdiction “where the vindication of a right under state law necessarily turn[s] on some
construction of federal law”).
16
When federal law creates the cause of action, federal courts have subject matter
jurisdiction over the action. Mulcahey v. Columbia Organic Chemicals Co., 29 F.3d 148, 151
(4th Cir. 1994) (citing Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 817 (1986)). “If,
however, state law creates the cause of action . . . federal question jurisdiction depends on
whether the plaintiff's demand ‘necessarily depends on resolution of a substantial question of
federal law.’” Id. (citing Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1,
28 (1983)). “The determination of whether a federal issue is sufficiently substantial should be
informed by a sensitive judgment about whether the existence of federal judicial power is both
appropriate and pragmatic.” Ormet Corp. v. Ohio Power Co., 98 F.3d 799, 807 (4th Cir. 1996).
CWS concedes that this is not a citizen suit under the CWA. ECF No. 46 at 6 n.7.
However, Congress did not create a private remedy under the CWA outside of the citizen suit.
See Middlesex Cty. Sewerage Auth. v. Nat’l. Sea Clammer’s Assoc., 453 U.S. 1 (1981)
(hereinafter “Middlesex”). Given that CWS is not bringing a citizen suit, the issue is whether the
court must make more than a mere interpretation of the CWA in order to declare the contract and
covenants valid or invalid. In Ormet, the Fourth Circuit held that the district court could establish
jurisdiction over a state contract claim implicating the EPA’s allocation methodology because
the claim required “interpretation and application of the [Clean Air] Act to the contractual
arrangement between the parties.” Compare 98 F.3d at 807, with Rose Acre Farms, Inc. v. N.
Carolina Dep't of Env't & Nat’l Res., 131 F. Supp. 3d 496, 507 (E.D.N.C. 2015), appeal
dismissed (Sept. 17, 2015). The Ormet court further reasoned that the “allowances” are “critical
to the Acid Rain Program,” thus requiring uniform interpretation amongst the states. Id. at 807.
The Ormet court held that “[w]here the resolution of a federal issues in a state-law cause of
action could, because of different approaches and inconsistency, undermine the stability and
17
efficiency of a federal statutory regime, the need for uniformity becomes a substantial federal
interest, justifying the exercise of jurisdiction by the federal courts.” Id.
Conversely, in Rose Acre Farms, a corporate plaintiff sought a declaratory judgment that
the farm’s discharges of pollutants were exempt from federal CWA requirements and that the
North Carolina Department of Environmental and Natural Resources could not require the farm
to obtain an NPDES permit. 131 F. Supp. 3d at 507. Finding that “the CWA contemplates a
federal-state partnership that is fundamentally different from the federally-administered program
at issue in Ormet,” the district court declined to exercise subject matter jurisdiction under 28
U.S.C. § 1331. Rose Acre, 131 F. Supp. 3d at 507. The court reasoned that establishing
jurisdiction “would upset the congressionally-approved balance of responsibilities between
federal and state courts with respect to the CWA's NPDES permitting scheme.” Id.
In Templeton Board of Sewer Commissioners, the parties disputed whether, under the
CWA, the water treatment plant owners were required to pay the user charge under Water
Quality Act of 1987 § 205, 33 U.S.C. § 1284. 352 F.3d at 32–33. The First Circuit held that mere
reference to the CWA in the contract did not create a substantial federal question. Id. at 41. The
court found that the federal issue was “tangential to the parties’ contractual rights,” and that the
EPA delegates these matters to state agencies “as a matter of course.” Id. Similarly, in Board of
Trustees Painesville Township v. City of Painesville, the City of Painesville sought an EPA grant
to improve its existing wastewater treatment plant. 200 F.3d 396, 397 (6th Cir. 1999). In the
grant application, the City suggested that others outside city limits would have access to the
improved treatment plant. Id. at 398. However, the City refused to extend its services after the
plant was built. Id. The Sixth Circuit held that the plaintiffs did not have a private right of action
18
under the CWA to enforce the grant provisions. Id. (referencing Middlesex as precluding private
rights of actions under the CWA).
Here, the court has similar concerns because this claim also implicates the federal-state
partnership created by the CWA. Although a contractual matter was also at issue as in Ormet,
exercising jurisdiction over CWS’s declaratory judgment request is neither appropriate nor
pragmatic here. The contract issue between CWS and the Town deals with the specific 208 Plan
for the Midlands region. It does not require substantial interpretation of the CWA. Congress
delegated the duties to draft and approve 208 Plans to the states. CWA § 208, 33 U.S.C. §
1288(c). Congress delegated this authority to promote the efficient use of resources and “ensure
the goals of the [CWA] were achieved within the framework of local needs and requirements.”
Central Midlands Council of Governments, The 208 Water Quality Management Plan for the
Central Midlands Region 1 (Feb. 27, 1997). Accordingly, CMCOG drafted and DHEC approved
the 208 Plan for the Midland’s region. Id. A court will need to interpret the state-drafted 208 plan
to address whether the covenants and the Agreement are illegal, unenforceable, or void against
public policy under the 208 Plan. Unlike the need to interpret a term of the Clean Air Act, as in
Ormet, the court will be interpreting a state-created document. Additionally, unlike Ormet, which
affected the national interpretation of the Clean Air Act, the 208 Plan is specific for this area, and
it does not require a uniform interpretation amongst the states. Accordingly, there is no
substantial federal question. The court must dismiss for lack of subject matter jurisdiction under
28 U.S.C. § 1331.
2. CWS’s remaining declaratory judgment requests are not valid claims for relief
because the court cannot establish an independent source for jurisdiction to allow
the declaratory judgment claims to proceed.
19
The Declaratory Judgment Act, 28 U.S.C. § 2202, is not an independent source of federal
jurisdiction. Schilling v. Rogers, 363 U.S. 666, 677, (1960). “It also does not create substantive
rights; it is merely ‘a procedural device that enhances the remedies available’ to plaintiffs in
federal court.” Stewart v. Potts, 983 F. Supp. 678, 685 (S.D. Tex. 1997). In Stewart, the plaintiffs
sought a declaratory judgment to declare that a city would violate the CWA if it attempted to
construct a golf course. Id. The court in Stewart dismissed the plaintiffs’ claim under the
Declaratory Judgment Act because the court determined that there was no jurisdiction under the
CWA. Id. Here, CWS argues that its declaratory claim “arises under and depends upon the
Court’s analysis of the CWA.” ECF No. 46 at 10. Due to the nature of CWS’s declaratory
judgment requests, the court must dismiss CWS’s claims against the Town unless the court finds
jurisdiction under the CWA.
As previously set forth, there is no private cause of action under the CWA outside of the
citizen suit provision. See Middlesex, 453 U.S. at 1; see also Davis v. United States, 722 F.2d
1157, 1158 (4th Cir. 1983) (per curiam) (holding that a plaintiff cannot use the Federal Tort
Claims Act to circumvent the restrictions on citizen suits in the CWA), Ohio Valley Envtl. Coal.
v. Miano, 66 F. Supp. 2d 805, 809 (S.D. Ohio 1998) (hereinafter “Ohio Valley”) (finding that
unless a party can meet the requirements of the citizen suit provision, it is not the proper party to
enforce the regulation or law); but see Browner, 834 F. Supp. at 967–68 (allowing a declaratory
action by a city against the EPA and a state government for violations of § 208 of the CWA
because plaintiff’s complaint raised a sufficient federal question to confer subject matter
jurisdiction).
In Ohio Valley, a private citizen plaintiff sought to enforce 40 C.F.R. § 123.25(c), an
EPA regulation regarding state NPDES programs, against another private entity. 66 F. Supp. 2d
20
at 809. The Ohio Valley court determined that the plaintiff was not suing the EPA; therefore, §
1365(a)(2) was inapplicable; and plaintiff was not suing to enforce an effluent standard or
omission; therefore, § 1365(a)(1) was also inapplicable. Accordingly, the Ohio Valley court
concluded that the CWA did not authorize the private cause of action to enforce § 123.25(c) and
dismissed the claim. Here, as in Ohio Valley, CWS’s requests for declarations are requests to
enforce the CWA and its applicable regulations. CWS itself acknowledges, “any determination
of this Court that the Town lacks the authority to serve as DMA for this region . . . necessarily
de-certifies the Town as a DMA.” ECF No. 46 at 13, n.14. While CWS sues EPA under the
APA, its declaratory judgment claims against the Town are not claims against the EPA
Administrator. Additionally, CWS does not contest an effluent standard or limitation. Thus, as in
Ohio Valley, this court must find that CWS fails to state a valid cause of action as to the Town.
3. The court cannot grant relief on CWS’s injunctive relief requests because the
claims are a private cause of action outside of the CWA.
CWS argues that the court has jurisdiction in equity to decide and issue injunctions
against the Town. ECF No. 46 at 12-13. CWS cites Porter v. Warner Holding Co., 328 U.S. 395,
398 (1946), for the rule that equitable jurisdiction is not limited in the absence of “clear and valid
legislative command.” Unless a statute explicitly, or through an inescapable inference, restricts
the court’s equitable jurisdiction, the full scope of that jurisdiction is to be applied. Id. CWS
argues that there is no such prohibition here, and the court has the authority to impose the
requested injunctive relief. Conversely, the Town relies on Middlesex. The Middlesex court held
that “[i]n view of [the CWA’s] elaborate enforcement provisions it cannot be assumed that
Congress intended to authorize by implication additional judicial remedies for private citizens
suing under [the CWA].” 453 U.S. at 14.
21
Middlesex controls this action. The Middlesex plaintiffs alleged that the defendants
exceeded their permit limitations by discharging and dumping pollutants, and governmental
entities allowed such discharge. 453 U.S. 1 at 12. The Supreme Court held that the Middlesex
action had to be brought under the CWA citizen suit provision for enforcement of effluent
limitations and violations, and that no private cause of action existed outside of the citizen suit
provision. Id. at 18. Here, the injunctive claims are not for enforcement of an effluent limitation
and the Town is not the Administrator, therefore § 1365(a)(2) is inapplicable. The court does not
exercise its general jurisdiction in equity. CWS’s injunctive relief claims are dismissed.
V.
THE COURT LACKS SUBJECT MATTER JURISDICTION OVER THE
TOWN’S COUNTERCLAIM
As stated above, the court must have subject matter jurisdiction over a claim. With regard
to the Town’s counterclaim, the court may have subject matter jurisdiction through supplemental
jurisdiction. Under supplemental jurisdiction, if the court has original jurisdiction over a cause of
action, the court may hear all claims related to the original cause of action. 28 U.S.C. § 1367(a).
However, as the court lacks subject matter jurisdiction over CWS’s causes of action, the court
cannot exercise supplemental jurisdiction over Town’s counterclaim.
Further, the court does not have original jurisdiction over the Town’s counterclaim. The
Town is asserting abuse of process, which is a state law tort claim. See Food Lion, Inc., v United
Food & Commercial Workers Int’l Union, 567 S.E.2d 251, 253 (S.C. Ct. App. 2002) (discussing
what plaintiff must demonstrate to prove an abuse of process claim). Federal courts do not have
original jurisdiction over claims arising from state law. Accordingly, the court dismisses Town’s
counterclaim for lack of subject matter jurisdiction.
22
VI.
CONCLUSION
For the reasons stated herein, the Motion to Dismiss the Case, ECF No. 24, filed
Defendant United States Environmental Protection Agency and Regina McCarthy, in her
capacity as Administrator at the United States Environmental Protection Agency (collectively,
“EPA”), is GRANTED. The Motion to Dismiss Defendant Town of Lexington’s Counterclaim,
ECF No. 32, filed Plaintiff Carolina Water Service, Inc., is GRANTED. Plaintiff Carolina Water
Service’s cause of action is DISMISSED for lack of subject matter jurisdiction. The Motion for
Summary Judgment, ECF No. 40, filed by Defendant Town of Lexington, South Carolina, which
the court construes as a motion to dismiss, is DENIED AS MOOT.
IT IS SO ORDERED.
s/ Margaret B. Seymour
v
Margaret B. Seymour
Senior United States District Judge
Columbia, South Carolina
September 29, 2016
23
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