Posted on May 27, 2011 by Andrew Wooley

Parties May Agree to Expanded Judicial Review Under Texas Arbitration Act -- Nafta Traders, Inc. v. Quinn

One of the prominent features of arbitration under the Federal Arbitration Act (“FAA”)[1] and the arbitration statutes of most states is a stringently limited right of appeal, which is integral to the goal of expeditious and economical dispute resolution. Some parties choose to arbitrate for reasons other than cost and efficiency, however, such as a desire for privacy, to avoid a forum perceived to be hostile, or to present their case to a tribunal with special expertise, and those parties often would also like to reserve the right to appeal the arbitrators’ award under a traditional judicial standard of review for errors of law and the sufficiency of the evidence to support the findings underpinning the award.

The United States Supreme Court foreclosed the possibility of traditional judicial review under the FAA in 2008, when it held that the limited grounds for vacatur or modification of an arbitration award specified in the FAA are exclusive and may not be supplemented or expanded by agreement. Hall Street Assocs., L.L.C. v. Mattel, Inc.[2] The Court made clear though that it was simply construing the text of the FAA and not ruling out other avenues of expanded review of arbitration awards.[3] “The FAA is not the only way into court for parties wanting review of arbitration awards: they may contemplate enforcement under state statutory or common law, for example, where judicial review of different scope is arguable.”[4] 

The Supreme Court of Texas recently confirmed that review of arbitration awards under the Texas General Arbitration Act (“TAA”)[5] is indeed different from review under the FAA, notwithstanding the substantial similarities between the FAA and the TAA.[6]  It held in Nafta Traders, Inc. v. Quinn that the TAA does not limit judicial review of an arbitration award to the grounds specifically stated in the TAA and that the FAA does not preempt expanded judicial review of an arbitration award under the TAA.[7]  Consequently, parties whose agreement to arbitrate is within the scope of the TAA may preserve the right to traditional judicial review of the arbitration award by restricting their arbitrators’ powers to those typically possessed by a judge or by expressly agreeing that the arbitration award will be subject to a traditional judicial standard of review.[8]  Of course, they will also need to make a verbatim record of the arbitration proceeding and should consider specifying in their arbitration provision that the TAA governs any proceeding thereunder and that any suit to confirm, modify, or vacate an award must be brought in a Texas state court. 

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  1. 9 U.S.C. §§ 1-16.
  2. 552 U.S. 576, 578 & 584 (2008).
  3. Id. at 586-88.
  4. Id. at 590.
  5. Tex. Civ. Prac. & Rem. Code Ann. §§ 171.001-098.
  6. The statutory grounds for vacating an arbitration award are substantially the same under both the FAA and the TAA: (1) it was procured by corruption, fraud, or undue means, (2) there was evident partiality or corruption in the arbitrators, (3) the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or any other misbehavior by which the rights of any party have been prejudiced; or (4) the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. 9 U.S.C. § 10, Tex. Civ. Prac. & Rem. Code Ann. § 171.088.
    The statutory grounds for modifying an arbitration award are likewise similar under the FAA and the TAA: that the arbitrators made an award on a matter not submitted to them or there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award. 9 U.S.C. § 11, Tex. Civ. Prac. & Rem. Code Ann. § 171.091.
  7. Nafta Traders, Inc. v. Quinn, No. 08-0613, 2011 WL 1820875, at *7 & *10, 2011 Tex. LEXIS 361, at *33 & *45-46 (Tex. May 13, 2011).
  8. The issue presented for decision in Nafta Traders was the availability of judicial review concerning whether an arbitrator had exceeded his powers, but the supreme court characterized its holding more broadly: “The TAA, as we have construed it, permits parties to agree to expanded review, or to a corresponding limit on the arbitrator’s authority, as in this case . . . .” Nafta Traders, 2011 WL 1820875, at *10, 2011 Tex. LEXIS 361, at *45.
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Posted on May 17, 2011 by Kelly Becker

EPA and Army Corps of Engineers Issue Draft Guidance on Waters Protected by Clean Water Act

By Lesley Foxhall Pietras

On April 27, 2011, the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (the Corps) released new proposed guidance on how the agencies will identify waters protected by the Clean Water Act (CWA) in light of Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, 531 U.S. 159 (2001) (SWANCC) and Rapanos v. United States, 547 U.S. 715 (2006). Although EPA and the Corps have previously issued guidance interpreting SWANCC and Rapanos (EPA’s earlier guidance on Rapanos is discussed at www.theenergylawblog.com/2007/07/articles/environmental/epa-and-army-corps-of-engineers-publish-joint-guidance/ ), the agencies believe “previous guidance did not make full use of the authority provided by the CWA to include waters within the scope of the Act, as interpreted by the Court.” Guidance at 2. The agencies therefore expect that, under the new proposed guidance, “the number of waters identified by the [CWA] will increase compared to current practice.” 76 Fed. Reg. 24479, 24479 (May 2, 2011). Accordingly, the proposed guidance appears to substantially expand the agencies’ jurisdiction when compared to the prior guidance. Public comment on the proposed guidance must be received on or before July 1, 2011. Id.

In SWANCC, the Supreme Court addressed the question of CWA jurisdiction over isolated, non-navigable, intrastate ponds, and concluded that CWA jurisdiction could not be based solely on the presence of migratory birds. In Rapanos, the Court addressed CWA protections for wetlands adjacent to non-navigable tributaries, but issued five opinions with no single opinion commanding a majority. The proposed guidance emphasizes that the plurality opinion concluded that “waters of the United States” extends beyond traditional navigable waters to include “relatively permanent, standing or flowing bodies of water.” Rapanos, 547 U.S. at 731-32; see also id. at 739. The proposed guidance also highlights the plurality opinion’s conclusion that only wetlands with a “continuous surface connection” to other jurisdictional waters are considered “adjacent” and protected by the CWA. Id. at 742. In contrast, Justice Kennedy’s concurring opinion, the proposed guidance notes, concluded that “waters of the United States” includes wetlands with a “significant nexus” to traditional navigable waters. Rapanos, 547 U.S. at 780. The agencies continue to believe that they can assert jurisdiction over waters that satisfy either the plurality standard or Justice Kennedy’s standard, because a majority of justices would support jurisdiction under either standard. Guidance at 2.

Under the proposed guidance, the following waters are protected by the CWA: traditional navigable waters (including water bodies that have been found to be navigable-in-fact by a federal court, and waters which are currently used, historically have been used, or are susceptible to being used for commercial navigation); interstate waters (even if such waters are not traditional navigable waters); and wetlands adjacent to either traditional navigable waters or non-wetland interstate waters.

Moreover, the proposed guidance determines which waters are covered by the CWA pursuant to the standard set out in the Rapanos plurality opinion. In this vein, non-navigable tributaries are subject to CWA jurisdiction, if the tributary is connected to a downstream traditional navigable water, and flow in the tributary is at least seasonal. Guidance at 13. Wetlands that directly abut relatively permanent waters are also covered by the CWA. Id. at 15.

Additionally, the following types of waters are covered by the CWA if a fact-specific analysis determines they have a “significant nexus” to traditional navigable waters or interstate waters:
• tributaries to traditional navigable waters or to interstate waters;
• wetlands adjacent to jurisdictional tributaries to traditional navigable waters or interstate waters; and
• waters that fall under the “other waters” category of the regulations, including intrastate lakes, rivers, and mudflats. The proposed guidance divides these waters into two categories (those that are physically proximate to other jurisdictional waters and those that are not) and discusses how each category should be evaluated.
According to the proposed guidance, waters have the requisite “significant nexus” “if they, either alone or in combination with similarly situated waters in the region, significantly affect the chemical, physical, or biological integrity of traditional navigable waters or interstate waters.” Guidance at 7.

Under the proposed guidance, waters that are not covered by the CWA include artificially irrigated areas which would revert to upland if the irrigation ceased; artificial lakes or ponds which are used for stock watering, irrigation, settling basins, or rice growing; artificial reflecting pools or swimming pools excavated in uplands; water-filled depressions created in dry land incidental to construction activity and pits excavated in dry land for the purpose of obtaining fill; groundwater drained through subsurface drainage systems; and erosional features, swales and ditches that are not tributaries or wetlands. Guidance at 21.

The proposed guidance will apply to all CWA programs, including section 303 water quality standards, section 311 oil spill prevention and response, section 401 water quality certification, section 402 National Pollutant Discharge Elimination System permits, and section 404 permits for discharges of dredged or fill material.

After the agencies receive comment on the proposed guidance, they plan to finalize the guidance and then propose revisions to the existing regulations to further clarify which waters are covered by the CWA.

For more information on the proposed guidance, see water.epa.gov/lawsregs/guidance/wetlands/CWAwaters.cfm

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Posted on May 5, 2011 by Kelly Becker

Latest Chapter in the "EPA v. Texas" GHG Permitting Saga: EPA Publishes Final Rule Partially Disapproving Texas SIP and Promulgates FIP for GHG Emissions

by: Carlos J. Moreno

On May 3, 2011, the U.S. Environmental Protection Agency (EPA) promulgated a final rule partially disapproving the Texas State Implementation Plan (SIP) and issuing a Federal Implementation Plan (FIP) for Texas. The action prolongs EPA's authority to issue Prevention of Significant Deterioration (PSD) permits for Greenhouse Gas Emissions (GHG) emissions in Texas. Under the Clean Air Act (CAA), states have authority to implement the federal National Ambient Air Quality Standards (NAAQS) if the state submits, and EPA approves, a State Implementation plan (SIP). The SIP must include implementation of preconstruction PSD permitting requirements for NAAQS pollutants and, according to EPA, non-NAAQS pollutants. The CAA authorizes EPA to call for revisions to a SIP ("SIP Call") if the agency later finds that a SIP is inadequate. Following a series of EPA regulatory actions, GHG emissions became subject to PSD requirements as a non-NAAQS pollutant beginning on January 2, 2011. Since then, the EPA Tailoring Rule has required sources that trigger PSD for pollutants other than GHGs to also permit GHG emissions if they are 75,000 tpy or more.

On December 1, 2010, EPA issued a SIP Call for 13 states, including Texas, whose SIPs needed revisions in order to regulate GHG emissions under their PSD permitting program. Contrary to the other states, Texas refused to set a timeline for a SIP revision, effectively telling EPA that it would not revise its SIP to cover GHG emissions. To ensure that sources could obtain GHG permits, EPA issued an interim final rule and a "mirror" rule proposal in December 2010 that partially disapproved the Texas SIP and promulgated a FIP authorizing EPA to issue GHG permits under PSD. EPA stated that it erred in approving the Texas SIP 18 years earlier because the SIP does not contain assurances of adequate legal authority for the application of PSD to newly regulated non-NAAQS pollutants. The interim final rule was set to expire on April 30, 2011. Texas has filed several judicial challenges to EPA's GHG regulations in the DC Circuit, as well as a challenge in the 5th Circuit to EPA's SIP Call finding the Texas SIP inadequate. After issuance of the final interim rule, Texas requested a stay of the rule in the DC Circuit. The DC circuit granted a 30-day stay that was subsequently lifted on January 12, 2011. Since then, EPA has effectively been the permitting authority for GHG emissions in Texas. On May 3, 2011, EPA finalized the December 2010 rule proposal partially disapproving the Texas State Implementation Plan (SIP) and issuing a Federal Implementation Plan (FIP) for Texas. The action was made effective on May 1st to ensure no gap in permitting coverage.

One of the arguments that Texas has pursued is that EPA issued the December 2010 error correction FIP without proper notice and comment. By essentially reissuing the FIP under this final rule after notice and comment, EPA has addressed this argument. Under the FIP, EPA continues to be the PSD permitting authority for GHG emissions in Texas, while Texas continues to be the permitting authority for non-GHG emissions. Therefore, a project that is currently subject to PSD may require two PSD permits: a Texas Commission on Environmental Quality (TCEQ) PSD permit for pollutants other than GHG, and a EPA PSD permit for GHG emissions if the project has 75,000 tpy or more of GHG emissions. Currently, GHG PSD permits are only required if New Source Review is triggered by a non-GHG pollutant. But, starting on July 1, 2011, EPA's GHG Tailoring Rule will also require PSD permits for sources that trigger PSD solely because of their GHG emissions (100,000 tpy or more of GHG's for new projects; 75,000 tpy or more of GHG's for modifications). For these projects, EPA will be the PSD permitting authority for all pollutants. The final error correction FIP will remain in place until Texas submits, and EPA approves, a SIP revision including GHG permitting. Under EPA's standing SIP Call, Texas still has until December 1, 2011 to submit a SIP revision that includes application of PSD program requirements to GHG emissions. EPA has already stated that if Texas does not submit a revision by this date, EPA is prepared to promulgate a new FIP associated with the SIP Call, which would replace the May 3rd FIP, but be "fully consistent" with it. In the meantime, litigation regarding EPA's authority to regulate GHGs, error correction FIP for Texas, and the GHG SIP Call is continuing in the DC Circuit and 5th Circuit.

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