Iowa Supreme Court Says That The Federal Clean Air Act Does Not Preempt State Common Law Claims Against Grain Processor

Freeman v. Grain Processing Corp., No. 13-0723, 2014 Iowa Sup. LEXIS 72 (Iowa Sup. Ct. Jun. 13, 2014)


The Iowa Supreme Court has ruled that neither the federal Clean Air Act[1] (CAA), nor its Iowa counterpart, Iowa Code chapter 455B, preempts state common law claims alleging negligence, nuisance, or trespass. In so holding, the Court denied summary judgment to a grain processing company and allowed a lawsuit demanding injunctive and monetary relief filed by eight Muscatine residents to continue.  The court’s opinion has significant implications for agricultural activities in Iowa that could give rise to claims under the CAA.

Background Facts and District Court Ruling

For the past 30 years, the grain processing company operated a corn wet milling facility in Muscatine, turning corn kernels into products for commercial and industrial use. In 2011, the Iowa Attorney General, on behalf of the Iowa Department of Natural Resources, filed an action against the company, seeking injunctive relief and civil penalties stemming from the company’s alleged violations of the CAA and the Clean Water Act (CWA). In 2012, eight Muscatine residents filed a putative class action against the company, seeking injunctive relief and actual and punitive damages for common law and statutory nuisance, trespass, and negligence. In March of 2014, the company and the Iowa Attorney General reached a settlement under which the company agreed to transition from using coal-fired boilers to natural gas-fired boilers no later than July 15, 2015.

Shortly thereafter, the company filed a motion for summary judgment in the private action, arguing that the residents’ claims were preempted by the CAA and Iowa Code chapter 455B, the state counterpart to the CAA. The company also sought summary judgment on the grounds that the issues raised by the residents amounted to political questions involving complex policy and economic issues that cannot and should not be resolved by the judicial process. The district court granted summary judgment in favor of the company under all three theories.

Iowa Supreme Court Overview

On appeal, the Iowa Supreme Court reversed, finding that state common law claims are not preempted by the CAA or by its Iowa companion statute. The Court also shot down the argument that the claims were subject to dismissal under the political question doctrine. In its 63-page opinion, the Court engaged in an in-depth discussion of historical remedies for environmental protection, reaching the conclusion that state common law and nuisance actions have a different purpose than the regulatory regime established by the CAA. The purpose of the historically common law remedies, the Court found, was to protect the use and enjoyment of specific property, not to achieve a general regulatory purpose.  The Court stated, “It has long been understood that an activity may be entirely lawful and yet constitute a nuisance because of its impairment of the use and enjoyment of specific property.” Without these traditional remedies, the Court opined that property owners would be unable to seek full compensation for harm related to their use of enjoyment of their property. The Court therefore “decline[d] to conclude that the increased complexity of the CAA has categorically elbowed out a role for the state nuisance and common law claim” before the Court.

Summary of Applicable Law and Arguments

This Case presented a unique opportunity for the parties and the Court to practice the art of distinguishing and applying existing CAA preemption case law, which is largely fact-driven and inconsistent.

In 1987, the United States Supreme Court ruled in International Paper Co. v. Ouellete that the Clean Water Act (CWA) preempts lawsuits stemming from “non-source state law,” meaning that it bars lawsuits alleging common law or statutory claims based upon the laws of states other than the state where the regulated discharges occur. [2] Courts have uniformly found this to mean that the similar CAA also bars lawsuits alleging nuisance or negligence based upon the laws of states other than the state where the emissions occur. The Ouellete Court reasoned that application of an affected state’s law to an out of state source would undermine the important goals of efficiency and predictability in the permit system. Years later in American Electric Power Co. v. Connecticut (AEP), the United States Supreme Court ruled that the CAA also preempts the application of federal common law.[3]  This holding, for example, bars a federal common law nuisance claim against the holder of a CAA permit. The United States Supreme Court, however, has never ruled on the question before the Iowa Supreme Court in the present case: Does the CAA preempt source state common law claims (i.e. nuisance, trespass and negligence claims brought under the law of the state where the emissions occur)?

The plaintiffs argued that the Ouellete Court answered the question in dictum when it stated that a nuisance action brought against the alleged polluter under the laws of its home state would not frustrate the goals of the CWA, as would a suit governed by the laws of another state. The Supreme Court, the plaintiffs pointed out, specifically stated in Ouellete that the imposition of only source-state law would not disrupt the regulatory partnership established by the permit system.

The company countered that the 1987 dictum of the Ouellete Court (which is not by definition controlling) was in reference to the CWA, not the CAA. Even if the statements had application, the company argued, the extensive 1990 amendments to the CAA effected a “regulatory tsunami,” pushing the law in a direction making preemption even more crucial to CAA permit holders. Plaintiffs’ claims; the company contended, conflicted with the CAA’s goals and methods, the very principle driving the Ouellete Court to find preemption as to the non-source state law. 

Rather, the company argued that the Supreme Court had clearly held in AEP that Congress had delegated to the EPA the decision of whether and how to regulate emissions. The CAA’s first decision-maker, the Court had held, was the expert administrative agency involved in the balancing of complex factors. “Such complex judgments,” stated the Court, were “better left to an expert agency rather than individual district court judges who lack the scientific, economic, and technological resources an agency can utilize in deciding such issues.”

The plaintiffs countered that the Court in AEP was considering the preemption of federal common law, which presented a fundamentally different separation of powers question than the federalism question raised in determining whether a federal statute preempts state common law.

Several lower federal court opinions have considered the issue of CAA preemption. In the recent Bell v. Cheswick Generating Station[4], the Third Circuit ruled that the CAA did not preempt state common law claims brought under the laws of the source state. Since AEP, Bell is the first and only federal court decision to hold that the CAA does not preempt common law nuisance claims allegedly arising from emissions regulated under the CAA. The Bell court focused on the text of CAA’s savings clauses to determine that it was not unlike the CWA and that, as such, the Supreme Court’s language in Ouellette controlled. 

The Fourth Circuit applied Ouellette in another way, ruling in TVA[5] that a state law is preempted if it interferes with the methods by which the federal statute was designed to reach its goals. In TVA, the Fourth Circuit found that public nuisance law in the source state was preempted by the CAA because the injunctive relief requested was a collateral attack on Congress’s chosen process of determining appropriate standards and granting permits. The injunctive relief requested in TVA would have cost the permit holder in excess of one billion dollars. The Fourth Circuit’s language was pointed:

If allowed to stand, the injunction would encourage courts to use vague public nuisance standards to scuttle the nation's carefully created system for accommodating the need for energy production and the need for clean air. The result would be a balkanization of clean air regulations and a confused patchwork of standards, to the detriment of industry and the environment alike.[6]

Iowa Supreme Court Analysis

CAA Preemption

In reaching its decision, the Iowa Supreme Court first conducted an historical review of the above cases and others. It then looked at the text of the CAA and found that the “any measures” clause[7], the “retention of state authority savings” clause[8] and the “citizens’ rights savings” clause[9] “strongly suggest that Congress did not seek to preempt, but to preserve,” state law claims.

The Court explained that the danger the U.S. Supreme Court sought to prevent in Ouellette was allowing common law claims from all affected states, so as to create “chaos” due to an “indeterminate number of regulators.” The Court found that Congress did not intend to prevent state actions based upon source-state law. The Court stated that Congress wanted CAA to be a floor, not a ceiling on air pollution control and that, as such, states were given (under the cooperative federalism approach) the authority to impose stricter standards on air pollution than might be imposed by the CAA.

In so ruling, the Court relied on a case easily distinguishable from the case at hand. In re MTBE[10] was multidistrict litigation involving the contamination of drinking water by gasoline containing MTBE, one of several oxygenate additives encouraged by the CAA to improve ambient air quality. No one knew until after 1990 that MTBE would become a groundwater hazard.  In considering a state law tort verdict against the defendants stemming from groundwater contamination caused by MTBE, the Second Circuit found that the remedy was not preempted by the CAA primarily because the CAA did not require the defendants to use MTBE (as opposed to another additive) and because the defendants’ tortious conduct in spilling liquid gasoline was beyond the scope of the activities contemplated by the CAA. Nonetheless, in the case at bar, the Iowa Supreme Court cited MTBE several times, once stating in a parenthetical that the case stands for the proposition that “source-state common law claims are not preempted under the CAA.” Given the unique facts of the case, that is a huge stretch. The common law groundwater contamination claims in MTBE were unrelated to air quality. The only connection was that the defendant had used the additive in an attempt to improve air quality. Being penalized for damages caused by MTBE did not conflict with the Congressional purpose of the CAA. Other safe additives were available and the CAA had not required the defendants to use MTBE.  The CAA had nothing to do with spilling gasoline containing an unsafe additive on the ground.

In another section of the opinion, the Iowa Supreme Court stated that the approach of TVA has not been “uniformly embraced” by the federal courts and that the Second Circuit’s approach in MTBE was contrary to the Fourth Circuit’s TVA conflict preemption analysis.  However, this characterization is difficult to understand because in TVA the Fourth Circuit found that there was preemption because the injunction at issue would have directly interfered with the CAA’s regulatory scheme, requiring conduct conflicting with that allowed under the permit. The court in MTBE essentially found that the common law claims were not preempted by the CAA because, at their core, they had nothing to do with the CAA. They were groundwater claims. The cases are wholly distinguishable.

The Iowa Supreme Court did not wholly dismiss the reasoning of TVA, but rather distinguished the case by stating that any remedy in the case at hand would not pose the kind of conflict with the permitting process that the sweeping, injunction in the TVA case presented. The Court did specifically state that the question of whether injunctive relief would conflict with the CAA, thereby triggering preemption, was not ripe. The Court stated that it could not evaluate the lawfulness of injunctive relief that has not been entered. As such, the Court left open the possibility of a future preemption battle in the event the plaintiffs are granted injunctive relief.

Iowa Code Chapter 455B Preemption

Once the Court found that the state law claims were not preempted by the CAA, there was little additional analysis required to determine that they were also not preempted by the companion state statute, Iowa Code chapter 455B. The Court stated that state law preemption is “substantively identical” to federal preemption. Nonetheless, the Court had never considered the issue of whether state common law claims were preempted by Iowa Code chapter 455B.  The Court relied on a hog confinement case in which it stated that “compliance with DNR regulations is not a defense to a nuisance action.”[11]  In the hog confinement case, however, the issue before the Court was not whether specific DNR regulations preempted application of state nuisance law, but whether the lower court erred in admitting evidence that the confinement operator had complied with DNR regulations. The Court actually stated, “While compliance with regulations is not a defense to a nuisance claim, we agree with the district court this evidence was relevant.” "Compliance with standards designed to avoid nuisances might in fact be some evidence that a nuisance would not necessarily result from the operation.” Given that this case had nothing to do with preemption and actually held that evidence of regulatory compliance was helpful in the nuisance context, is not clear how the Court found this to be “instructive caselaw” on the preemption issue.

The Court then found that the common law actions at issue were different from the public interest generally in controlling air pollution. As such, the Court found no implied preemption. The Court also stated that it was premature to speculate as to whether a possible judicial remedy might conflict with Iowa Code chapter 455B. Summary judgment was not the proper stage to evaluate possible injunctive relief and its implications. This question may arise again be raised if injunctive relief were to issue.

Political Question Doctrine

Finally, the Court dismissed the defendant’s reliance on the political question doctrine with little discussion. The Court first claimed that the doctrine has fallen into disuse and may have different or no application at all to state courts.  Nonetheless, because the plaintiffs did not question the applicability of the political question doctrine to the state court, the Court reviewed the six factors set forth by the United States Supreme Court in Baker v. Carr[12] and determined that none applied. The Court found that the most important absence was a textual constitutional commitment of the issues raised in the case to another branch of government.

Conclusion and Implications for Iowa Agriculture

In this case, the Iowa Supreme Court has weighed in on an issue that remains unsettled across the country. The issue of whether the CAA preempts source state common law claims is ultimately a federal question. Nonetheless, federal question jurisdiction does not exist for issues raised only as a defense to a plaintiff’s action comprising only state law claims on its face. As such, plaintiffs will continue to file common law and statutory claims such as the ones at issue in this case, and Iowa courts will be bound to follow the Iowa Supreme Court’s ruling that those claims are not preempted by the CAA (unless or until the federal courts clearly reach the opposite conclusion).

This case could serve to greatly increase the number of Iowa plaintiffs seeking common law remedies for activities regulated not only by the Clean Air Act, but also the Clean Water Act (and potentially other federal and state laws). This has major implications for livestock producers facing nuisance, trespass, or negligence claims stemming from activities governed by federal or state permits.[13] It is not enough to comply with the rigid and costly demands of regulators. Private citizens can demand injunctive and monetary relief stemming from the same activities. The danger is that these demands will be conflicting, depriving producers of certainty. In this case, the company had already agreed—as part of its settlement with the state regulators—to transition from coal-fired to natural gas-powered burners. In addition to complying with the terms of the technically complex and expensive settlement agreement, the company may now face additional or conflicting mandates stemming from court-ordered injunctive relief. It does appear, however, that the Court left the door open to again address the preemption issue if injunctive relief does issue.

This case also has potential impact for regulated companies evaluating their location options. At this point, factories or processing plants would likely feel much more secure locating in the Fourth Circuit[14] (or even in jurisdictions that have not yet ruled on this issue) than in Iowa. What impact, if any, this decision may have on the Iowa economy remains to be seen, but it is not likely to be positive.

We will closely monitor further federal court developments on this issue as they evolve. 


[1] 42 U.S.C. §§7401-7671q (2012).

[2] International Paper Co. v. Ouellete, 479 U.S. 481 (1987).

[3] American Electric Power Co. v. Connecticut, 564 U.S. __ (2011).

[4] Bell v. Cheswick Generating Station, 734 F.3d 188 (3d. Circ. 2013), cert. denied, 82 U.S.L.W. 3531 (U.S. June 2, 2014).

[5] N.C. ex rel. Cooper v. TVA, 615 F.3d 291 (4th Cir. 2010).

[6] TVA, 615 F.3d at 296.

[7] 42 U.S.C. §7401(a)(3).

[8] 42 U.S.C. §7416.

[9] 42 U.S.C. §7604(e).

[10] In re Methyl Tertiary Butyl Ether (MTBE) Prods. Liab. Litig., 725 F.3d 62 (2d Cir. 2013).

[11] Simpson v. Kollasch, 749 N.W.2d 671 (Iowa 2008).

[12] 369 U.S. 186, 217 (1962).

[13] Although the Iowa Right to Farm Act provides some protection to producers, many actions fall outside of its protection. 

[14] Those states within the Fourth Circuit are Maryland, North Carolina, South Carolina, Virginia and West Virginia.

CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.

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