Judge Vacates Jury Verdict in MFS, Inc. Case

March 2011Newsletters In the Zone

On Feb. 16, 2011, Judge Joel Slomsky of the U.S. District Court for the Eastern District of Pennsylvania issued a 142-page decision vacating the jury verdict that held four Pennsylvania Department of Environmental Protection (PADEP) employees in the Northeast Regional Office personally liable for $6.5 million in a claim filed by MFS, Inc. under Section 1983 of the Civil Rights Act and Pennsylvania common law. I wrote about that jury verdict and its implications in a blog posting on March 8, 2010.

The same judge who heard the case originally has now granted the post-trial motion filed on behalf of the PADEP employees for a Judgment as a Matter of Law, which vacates the jury verdict. I can hear the collective sigh of relief all the way from Harrisburg, Wilkes-Barre and the other regional PADEP offices.

In the decision, the judge goes over the testimony in meticulous detail. On MFS’s First Amendment retaliation claim, the judge ruled the exercise of the company’s First Amendment rights was not a substantial or motivating factor for the actions of the PADEP employees, which included issuing a draft Title V permit with conditions the plaintiff found objectionable. In that regard, Judge Slomsky wrote:

When regulators such as Defendants propose lawful terms in a Draft Permit, or draft an internal memorandum for their supervisor, or in the case of an attorney for his or her client, this conduct is not evidence of antagonism. If such conduct of a regulator could amount to antagonism under the law, it would inhibit a public employee from performing his or her duties in the best interest of the public.

The judge went on to note the PADEP employees were acting in a “charged atmosphere” where they were simultaneously trying to “assuage the feelings of angry residents living close to the plant” and enforce “environmental statutes and regulations without forcing a viable business in Pennsylvania to shut down.” In those circumstances, the judge found that issuing NOVs and putting conditions in a draft permit “were appropriate.” The judge went on to say PADEP and its employees “have extensive discretion in enforcing state environmental laws.” That discretion included taking actions necessary to compel compliance with the state’s regulations on malodors.

One fact the jury found highly indicative of malice on the part of the PADEP employees was the issuance of a field enforcement order on a Friday with a response required in one day. The judge didn’t see it that way, noting the issuance of the field order was a final action of the Department, giving the plaintiffs a right to appeal that order to the Environmental Hearing Board (EHB), which they did. The judge also noted the company was represented by counsel before the EHB and had a meaningful opportunity to be heard with regard to the field order, but it withdrew that appeal when a settlement was reached with the Department. After reviewing all the testimony, Judge Slomsky concluded:

The evidence admitted at trial shows that [the PADEP employees’] actions were rational and appropriate, rather than egregious and outrageous, even when viewing the evidence of claimed animus offered by MFS in the light most favorable to the company. When operating in a highly regulated industry, some animus between a regulator and the regulated will naturally arise, especially when a business makes a request which is not granted. Sometimes a lawsuit will follow, but a court should not readily convert itself into a mechanism to settle disputes between a company and regulators when the law affords the regulator latitude in decision-making.

The judge noted recent decisions involving Section 1983 claims applied a “shocks the conscience” test to avoid pulling the courts into second-guessing the decisions of state and local governments. After reviewing the evidence, Judge Slomsky concluded the actions of the PADEP employees in this case did not “shock the conscience.” In fact, he found their actions reflected “decisions that needed to be made by regulatory officials who are responsible for regulating a company that has the potential to cause great harm to the environment and public if certain procedures or standards were not followed.” Those regulators are given “broad discretion,” and Judge Slomsky found the PADEP employees were “acting within the scope of the discretion afforded to them under statutes and regulations.”

Lastly, on the issue of whether the actions of the PADEP employees were covered by governmental immunity, the judge ruled “each Defendant is protected by the cloak of qualified immunity.” That conclusion was based on the fact that MFS had failed to present evidence upon which a reasonable jury could find liability on the constitutional claims and also on the fact that “a reasonably objective regulator would not know that his conduct was unlawful.”

In the key passage of the decision, Judge Slomsky summed up the case as follows:

[I]t is evident that MFS sued [the PADEP employees] because it resented the malodor citations and other decisions that Defendants and their PADEP colleagues made in the course of carrying out their responsibility to protect the environment and the public. Although a regulated entity has constitutional and common law rights, it would be unjust based on the evidence presented at trial to hold [the PADEP employees] liable in their individual capacity for lawfully performing their statutory and regulatory duties. Consequently, a miscarriage of justice would result if the verdicts against Defendants DiLazaro, Bedrin, Wejkszner, and Robbins were allowed to stand.

I think there are important lessons to be drawn from this case. First, there will always be disagreements between the Department and the entities it regulates. When disagreements arise, all parties must act like professionals. When things get heated, parties need to step back and cool off, on both sides. The MFS jury verdict provided a useful reminder that a PADEP employee is first and foremost a public servant and must act accordingly. Presumably, the overturning of the jury verdict does not erase the lesson learned. Second, I hope the overturning of the jury verdict will dissuade those whose first reaction to an adverse action on the part of the Department would be to bring a discrimination claim against the Department. I saw the MFS jury verdict as the nuclear bomb of dispute resolution. The Slomsky decision has now taken that out of the arsenal. My feeling is there are many, many more effective ways to resolve a dispute with the Department.

Presumably, MFS will have a right to appeal the judge’s decision overturning the jury verdict to the Third Circuit, so we may not have heard the end of this case.

For more information, please contact M. Joel Bolstein at 215.918.3555 or [email protected]