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United States v. W.R. Grace



Ongoing serious health problems suffered by residents in Libby, Montana, the site of a vermiculite ore mining and processing facility operated by W. R. Grace, prompted the United States to obtain an indictment against the company and seven of its executives (collectively Grace). Following the district court’s dismissal of a portion of the original indictment,[1]the government’s superseding criminal indictment charged Grace with one count of dual-object conspiracy based upon Grace’s alleged actions to 1) knowingly release asbestos, a hazardous air pollutant, into the ambient air, thereby knowingly placing people in imminent danger of death or serious bodily injury,[2]and 2) defraud the United States by impairing, impeding, and frustrating government agency investigations and clean-up operations.[3]The indictment charged Grace with three counts of knowing endangerment under the Clean Air Act (CAA)[4]and four counts of obstruction of justice.[5]The Ninth Circuit reversed in part, affirmed in part, and remanded.

The district court entered six orders that led to this interlocutory appeal to the Ninth Circuit. These orders 1) dismissed as time-barred the knowing endangerment object of the conspiracy charge, 2) narrowed the government’s use of evidence of asbestos releases to only those releases of “asbestos” as defined in the CAA’s civil regulation, 3) denied the government’s motion to exclude evidence on an affirmative defense, and
4) excluded significant portions of the government’s evidence and expert testimony. Before remanding to the district court, the Ninth Circuit reversed the dismissal of the knowing endangerment conspiracy charge, allowed the broader definition of “asbestos” found in the criminal statute,[6]and issued a writ of mandamus directing the district court to disallow Grace’s use of the affirmative defense. The court affirmed the exclusion of some evidence but allowed the testimony of experts who drew inferences from that evidence. Finally, the court granted Grace’s motion to strike certain documents contained in the government’s reply brief on appeal.

a. Dismissal of the “Knowing Endangerment” Object of the Dual Conspiracy Charge

On appeal, the Ninth Circuit reversed the district court’s ruling that the government’s superseding indictment was time-barred and not protected by the savings clause of 18 U.S.C. § 3288. That provision allows the government to return a new indictment after a statute of limitations period has expired, but only if it does so within six months of dismissal of an indictment or a portion thereof.[7]The Ninth Circuit reviewed de novo both the district court’s decision to dismiss part of the indictment and its interpretation of the statutory savings clause.

A statute of limitations must be satisfied as to each object of a multi-object conspiracy.[8]Grace asserted that the “knowing endangerment” object here was time-barred because the original indictment failed to allege that Grace released asbestos, conspired to release asbestos, or committed any other overt act furthering the “knowing endangerment” object. The government responded that certain overt acts in the indictment supported both objects of the conspiracy, namely that Grace failed to remove asbestos-contaminated material from sites in the community, misled individuals regarding that contamination, and failed to disclose the existence of contaminated sites. Concluding the structure and text of the indictment was indicative of obstruction, not conspiracy, the district court dismissed as time-barred the “knowing endangerment” object of the conspiracy charge.

The government then obtained a superseding indictment that alleged many overt acts furthering the “knowing endangerment” object. Reasoning that the savings clause prohibits superceding indictments where the original indictment does not allege overt acts within the statute of limitations, the district court dismissed the new indictment as time-barred because it was not protected by the section 3288 savings clause.

The Ninth Circuit reversed. The court examined its precedent and determined that the savings clause permits amendments to a superceding indictment when the original is timely filed but suffers from structural flaws.[9]The Ninth Circuit reasoned that “[a]s long as the original indictment is filed within the statute of limitations and charges the same crime, based upon approximately the same facts charged in the superseding indictment, section 3288 allows the government to file a superseding indictment within six months.”[10]Contrary to the district court’s assertion, the Ninth Circuit stated that this reading of section 3288 does not extend the threat of indictment indefinitely but only for six months in limited situations where the government timely files an indictment charging the same crimes based on approximately the same facts. The court noted that its interpretation has the added benefit of eliminating a defendant’s incentive to wait until the end of the limitations period to move for dismissal of a technically flawed indictment so that the government is powerless to correct it. The Ninth Circuit reversed the district court and reinstated the knowing endangerment object of the conspiracy count in the superseding indictment.

b. Definition of “Asbestos”

The Ninth Circuit then turned to the district court’s ruling upon the parties’ cross motions in limine to exclude all evidence outside of each party’s interpretation of the term “asbestos.” The district court held that “asbestos” has no inherent meaning within the CAA’s criminal enforcement scheme; therefore, its use in this action violated the rule of lenity and the Due Process Clause. The district court looked to the CAA’s civil regulatory definition of “asbestos” and limited the definition, as applied to the knowing endangerment provision, to the six asbestiform minerals mentioned in the civil definition.[11]This limitation excluded evidence of releases of 95 percent of the asbestiform contaminants in the Libby vermiculite as well as all evidence that did not distinguish between the regulated and unregulated asbestiform minerals. The core issue before the Ninth Circuit was whether the criminal provision’s use of the term “asbestos” was ambiguous as to what substances qualified as hazardous air pollutants in the criminal context. The Ninth Circuit reviewed de novo both the district court’s construction of the CAA and its rulings on admissibility of evidence where issues of law predominated.

The Ninth Circuit agreed with the government that a statutory term may be defined differently for civil and criminal purposes, and the term “asbestos” in the CAA’s knowing endangerment provision included the minerals involved in this case. When a term is undefined by statute, the Ninth Circuit construes the term according to its “ordinary, contemporary, common meaning[,]”[12]and it is “well-known” that the common meaning of “asbestos” encompasses several substances.

The Ninth Circuit reversed the district court’s order limiting evidence of asbestos releases to those types of releases fitting within the civil regulations. The court first held that the district court improperly invoked the rule of lenity, which only applies in truly ambiguous circumstances.[13]The district court erred in finding ambiguity in the term “asbestos” simply because two oversight structures use different definitions. The Ninth Circuit determined that Congress adequately defined asbestos and no mineral-by-mineral classification was required. The court concluded that no further definition was needed, particularly for knowledgeable defendants who, as top executives in the chemical industry, knew of the health risks posed by asbestos since 1976 and knew or should have known that Grace’s vermiculite mining and processing could release asbestos into the ambient air.

Finally, the court held that, given the distinct purposes of the criminal and civil CAA enforcement provisions, these separate enforcement mechanisms may draw on different definitions for the same term or phrase. The civil provisions regulate major sources of hazardous air pollutants and focus on “commercially viable” asbestiform minerals rather than non-viable varieties that, due to market forces, are unlikely to become major sources. The criminal enforcement mechanism focuses on human health risks, so it regulates all hazardous pollutants, regardless of the size of the source. Accordingly, the Ninth Circuit held the district court erred in its decision to limit the term “asbestos” to the six minerals covered by civil regulations.

c. Mandamus

The government sought a writ of mandamus to overturn the district court’s ruling that allowed Grace to admit evidence in support of an affirmative defense established by the CAA where hazardous air pollutants are released “in accordance with” an applicable National Emission Standard for Hazardous Air Pollutants.[14]First, the Ninth Circuit determined it could

issue the writ if, among other things, the district court made a clear error as a matter of law.[15]

The Ninth Circuit, after reviewing the statutory language setting forth the affirmative defense, held that the affirmative defense is unavailable to Grace because asbestos is not an “air pollutant for which the Administrator has set an emissions standard.”[16]The court noted that while many hazardous air pollutants do have a single emissions standard, several emissions standards apply to the various categories and sources of asbestos. Moreover, there is no emissions standard at all for asbestos released at mining operations.[17]The court held that because the district court incorrectly applied an emissions standard of “no visible emissions,” which only applies to some asbestos emission standards, Grace’s asbestos releases cannot be “in accordance with” an applicable emissions standard. Therefore, the Ninth Circuit granted the government’s petition for a writ of mandamus.

d. Evidentiary Rulings

The government also appealed the district court’s order excluding evidence related to, and testimony based on, certain studies the government sought to introduce in support of the three counts in the indictment alleging violations of the CAA’s knowing endangerment provision. The studies included EPA indoor air studies, Grace’s historic testing of its vermiculite products, an Agency for Toxic Substances and Disease Registry (ATSDR) report based on a medical screening study of residents of Libby, Montana, and the peer-reviewed, published results of that screening study. The Ninth Circuit reviewed de novo the district court’s interpretation of the Federal Rules of Evidence (FRE), and reviewed for abuse of discretion the district court’s decision regarding admissibility of scientific evidence and expert testimony.

For each piece of evidence included in the district order, the Ninth Circuit considered whether the district court acted within its discretion in accordance with the relevant FRE. For the EPA indoor air studies, the Ninth Circuit held the district court acted within its discretion to exclude the indoor air studies as prejudicially confusing since the jury could confuse the indoor air quality evidence as relevant to the question of releases of asbestos into the ambient air. However, because the district court did not consider whether under FRE 702 and 703 the data is of the type reasonably relied on by experts in the field, the Ninth Circuit remanded the question of whether experts could use the studies’ data on asbestos friability without
prejudicial effect.

As to Grace’s historic product testing studies, the Ninth Circuit ruled that the district court abused its discretion by excluding historic testing data under FRE 702 because the district court considered each document alone, rather than in light of the expert’s reasoning and methodology as a whole. The Ninth Circuit ruled that a limited use of historic product testing studies to inform expert opinions as to the hazardous characteristics of Libby asbestos-contaminated vermiculite and its propensity to release fibers is a permissible use of the data to show the “release” element of the knowing endangerment provision. Therefore, the Ninth Circuit reversed the district court’s ruling excluding the use of this data by experts for this purpose.

Finally, the Ninth Circuit considered the district court’s exclusion of the ATSDR report, which was based on a medical screening study of residents of Libby, Montana. The court also considered whether the government could use the peer-reviewed, published results of that screening study. The court ruled that the district court acted within its discretion in excluding the studies themselves under FRE 403, but determined that the district court abused its discretion in excluding this evidence for use in informing expert opinion and testimony. The court reasoned that an expert is the best judge of what materials would help form his or her opinion, and while trial courts can vet the basis for an expert’s opinion under FRE 703 by examining his or her methodology under FRE 702, the district court misapplied FRE 702 and incorrectly replaced the FRE 703 analysis with an FRE 403 analysis. While the district court could properly exclude the studies themselves, the Ninth Circuit reversed the district court’s order excluding these studies for purposes of expert consideration.

e. Motion to Strike

The Ninth Circuit made its last determination on a defense motion to strike six documents not included in the record. Usually, reviewing courts only consider the record that was before the district court, but this general rule is subject to three narrow exceptions: to “correct inadvertent omissions from the record,” to “take judicial notice,” and to “exercise inherent authority . . . in extraordinary cases.”[18]Although three of the six documents at issue fell within the second exception, the Ninth Circuit pointedly stated that the record is most appropriately supplemented on appeal “by motion or formal request” so that other parties and the court are made aware of the status of the documents in question.[19]Although it used its discretion to refuse to take notice of the documents on appeal, the court explained its ruling does not preclude an application to the district court to include the documents in the district court’s record on remand.

f. Conclusion

The Ninth Circuit reversed the dismissal of the knowing endangerment object of the dual object conspiracy charge, rejected the district court’s adoption of the civil regulatory definition of asbestos in the criminal enforcement context, and issued a writ of mandamus ordering the district court to disallow the affirmative defense under the CAA’s knowing endangerment provision. The court also held that while certain studies were themselves inadmissible, they could be used to ground expert testimony. Finally, the Ninth Circuit granted Grace’s motion to strike documents submitted on appeal that were not part of the record in the district court below.

[1] United States v. W. R. Grace, 434 F. Supp. 2d 879, 888 (D. Mont. 2006).

[2] 42 U.S.C. § 7413(c)(5)(A) (2000).

[3] 18 U.S.C. § 371 (2000).

[4] 42 U.S.C. § 7413(c)(5)(A) (2000).

[5] 18 U.S.C. §§ 1505, 1515(b) (2000).

[6] 42 U.S.C. § 7412(b) (2000).

[7] 18 U.S.C. § 3288 (2000).

[8] Yates v. United States, 354 U.S. 298 (1957)(overruled on other grounds).

[9]See United States v. Clawson, 104 F.3d 250, 251-52 (9th Cir. 1996).

[10] United States v. W. R. Grace, 504 F.3d 745, 753 (9th Cir. 2007)

[11] 40 C.F.R. § 61.141 (2007).

[12] United States v. Cabaccang, 332 F.3d 622, 626 (9th Cir. 2003)(en banc).

[13]See Muscarello v. United States, 524 U.S. 125, 138 (1998).

[14]See Clean Air Act, 42 U.S.C. § 7413(c)(5)(A) (2000)(emission standard).

[15]See Clemens v. U.S. Dist. Ct. for the Cent. Dist. of Cal., 428 F.3d 1175, 1177-78 (9th Cir. 2005).

[16] 42 U.S.C. § 7413(c)(5)(A) (2000)(emphasis added).

[17]See 40 C.F.R. §§ 61.142-151 (2007).

[18] Lowry v. Barnhart, 329 F.3d 1019, 1024 (9th Cir. 2003).

[19]Id. at 1025.

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