San Antonio Bay v. Formosa Plstc

Case: 20-40575     Document: 00515843624         Page: 1     Date Filed: 04/30/2021

              United States Court of Appeals
                   for the Fifth Circuit
                                                                        United States Court of Appeals
                                                                                 Fifth Circuit

                                                                           April 30, 2021
                                  No. 20-40575                            Lyle W. Cayce

   San Antonio Bay Estuarine Waterkeeper; Sylvia Diane



   Formosa Plastics Corporation Texas; Formosa Plastics
   Corporation USA,


                  Appeal from the United States District Court
                      for the Southern District of Texas
                            USDC No. 6:17-CV-47

   Before King, Smith, and Haynes, Circuit Judges.
   Per Curiam:*
          This case concerns a dispute between Formosa Plastics Corporation
   Texas and Formosa Plastics Corporation U.S.A. (jointly, “Formosa”) and
   San Antonio Bay Estuarine Waterkeeper and Sylvia Diane Wilson (jointly,

            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
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   “San Antonio Bay”) over the interpretation of three paragraphs in a Consent
   Decree the parties entered into to settle San Antonio Bay’s Clean Water Act
   (“CWA”) claims. Specifically, the parties disagree about what triggers
   Formosa’s payment and reporting obligations—new, post-Consent Decree
   discharges of plastics (as Formosa contends) or the presence of any plastics,
   regardless of when they were discharged (as San Antonio Bay contends).
   The district court resolved the dispute in favor of San Antonio Bay. For the
   following reasons, we REVERSE and REMAND for further proceedings
   consistent with this opinion.

                                    I.    Background
           San Antonio Bay sued Formosa under § 505(a)(1) of the CWA, 33
   U.S.C. § 1365(a)(1), 1 for illegally discharging plastic pellets and other
   materials through its stormwater and wastewater into Cox Creek and Lavaca
   Bay in violation of Formosa’s Texas Pollutant Discharge Elimination System
   (“TPDES”) permit. 2 Formosa’s permit prohibited it from discharging
   “floating solids or visible foam other than trace amounts.” The district court
   held a bench trial and found that Formosa violated its permit because the
   plastics discharged exceeded “trace amounts” as the district court construed
   that term.

             Under this provision, “any citizen may commence a civil action on his own behalf
   against any person . . . 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.” 33 U.S.C. § 1365(a)(1).
              Under the CWA, the “discharge of a pollutant” is defined as “any addition of
   any pollutant to navigable waters from any point source” or “any addition of any pollutant
   to the waters of the contiguous zone or the ocean from any point source other than a vessel
   or other floating craft.” 33 U.S.C. § 1362(12).

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           Following the district court’s ruling, the parties agreed to settle San
   Antonio Bay’s CWA claims, executing a Consent Decree to that effect. 3
   Relevant here, paragraphs 36, 37, and 38 of the Consent Decree concerned
   the documentation of discharges by a designated third party (the
   “Monitor”), as well as Formosa’s payment and reporting obligations for its
   discharges.       These paragraphs are located in a subsection entitled
   “Monitoring, Reporting, and Future Mitigation Payments.”
           Paragraph 36 focuses on the circumstances that would result in a
   violation of Formosa’s discharge permit and a corresponding penalty
   payment. It provides:
           If either Formosa or the Monitor documents any Plastics
           resulting from sampling at the WSM for Outfall 001 or
           upstream of containment Booms, including on the upstream
           shores or in the water, for outfalls discharging into Cox Creek,
           and including discharges of Plastics found by the Monitor in
           accordance with paragraph 37, Formosa, subject to any claim
           by Formosa of a Force Majeure Event or Force Majeure
           Events, is in violation of its discharge permit and Formosa will,
           within thirty (30) Days of learning of the violation, pay into the
           Mitigation Trust . . . .
   The paragraph also includes a payment schedule “[f]or discharges in
   calendar year[s]” 2019 to 2024 (and after).
           Paragraph 37 focuses on the documentation of discharges. It provides:
           Plaintiffs or other concerned citizens may send documentation
           of Plastics outside of Formosa’s outfalls in Cox Creek or on the
           shores of Cox Creek for outfalls discharging into Cox Creek to
           the Monitor for review. If the Monitor determines the

             The Consent Decree acted as the “full and final settlement of the civil claims for
   violations of the [CWA] . . . , as alleged in the complaint . . . up through the date of entry of
   th[e] Consent Decree.”

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          submitted documentation demonstrates new discharges of
          Plastics not already identified, the Monitor will add the new
          discharges demonstrated by the citizen documentation to the
          discharges documented by the Monitor, as provided in
          paragraph 36.
          Finally, paragraph 38 focuses on Formosa’s reporting obligations to
   state officials, cross-referencing the discharge provisions in paragraph 36. In
   relevant part, 4 it provides:
          When there has been a discharge of Plastics, as determined
          pursuant to paragraph[] 36, within twenty-four (24) hours of
          Formosa learning of the discharge, Formosa will report each
          event as a permit violation to the Texas Commission on
          Environmental Quality (“TCEQ”) identifying the water body
          (Cox Creek or Lavaca Bay) where Plastics were
          discharged . . . .
          Beyond these paragraphs, the Consent Decree required Formosa to
   pay $50 million over five years for “Mitigation Projects to the Matagorda Bay
   Mitigation Trust”; instituted various procedures and remedial measures to
   address past, current, and future discharges; and mandated zero discharges
   from Formosa’s Point Comfort Plant.             If violations were found, then
   Formosa was required to pay into the Mitigation Trust.
          The parties initially worked together to implement the terms of the
   Consent Decree, but they disagreed over whether Formosa’s payment and
   reporting obligations are triggered only on a “new discharge” of plastics (as
   Formosa contended) or whether they are triggered on the “visual detection”
   of plastics irrespective of when those plastics had actually been discharged
   from a Formosa property (as San Antonio Bay contended).

            Paragraph 38 also discusses Formosa’s obligation to “propose a new reporting
   policy.” That portion of paragraph 38 is not relevant to the present dispute.

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                                         No. 20-40575

           The district court agreed with San Antonio Bay. 5 It held that the
   presence of plastics outside of Formosa’s outfalls constituted violations of
   the zero-discharge mandate set out in the Consent Decree and Formosa’s
   TPDES permit.         The district court also determined that, in analyzing
   whether plastics were present, the Monitor was required “to simply
   document[] the presence of Plastics,” not “to determine source or cause, or
   justify his findings based on a found discharge of water(s).” Consequently,
   the district court placed on Formosa the “burden to refute that the Plastics
   found [were] not the result of a new release”; Formosa could petition for a
   refund if it carried that burden. Formosa timely appealed. 6

                        II.    Jurisdiction & Legal Standard
           The district court had federal question jurisdiction over this case
   under 33 U.S.C. § 1365(a) and 28 U.S.C. § 1331, and appropriately retained
   jurisdiction under the terms of the Consent Decree. We have jurisdiction
   over this interlocutory appeal under the collateral order doctrine. 7 See In re
   Deepwater Horizon, 

793 F.3d 479

, 484 (5th Cir. 2015).

            The district court later issued an amended order to correct various factual errors
   but did not change its substantive holding.
           Formosa also moved to stay the payment and reporting penalties pending appeal.
   We granted a temporary administrative stay pending resolution of this appeal.
             Jurisdiction under the collateral order doctrine can be invoked “when an order:
   (1) conclusively determined the disputed question, (2) resolved an important issue separate
   from the merits of the case, and (3) is effectively unreviewable on appeal from a final
   judgment.” In re Deepwater Horizon, 

793 F.3d 479

, 484 (5th Cir. 2015). Here, the district
   court’s amended order conclusively resolved an important and disputed issue separate
   from the merits of Formosa’s CWA liability—the scope of Formosa’s penalty obligations
   under the Consent Decree—which is effectively unreviewable on appeal from a final

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                                       No. 20-40575

            We review questions regarding consent decree interpretation de novo.
   Frew v. Janek, 

820 F.3d 715

, 723 (5th Cir. 2016). Because the Consent Decree
   at issue was agreed to and executed in Texas, it is “subject to Texas
   principles of contract interpretation.”

Id. at 721

(internal quotation marks
   and citation omitted). Under Texas law, words and phrases are given their
   “ordinary and generally accepted meaning.” Nassar v. Liberty Mut. Fire Ins.

508 S.W.3d 254

, 258 (Tex. 2017) (per curiam) (internal quotation marks
   and citation omitted). The overall goal “in construing a written contract is
   to ascertain the true intent of the parties as expressed in the instrument.”
   Nat’l Union Fire Ins. Co. of Pittsburgh v. CBI Indus., Inc., 

907 S.W.2d 517

, 520
   (Tex. 1995) (per curiam). Accordingly, “courts should examine and consider
   the entire writing in an effort to harmonize and give effect to all the provisions
   of the contract so that none will be rendered meaningless.” Coker v. Coker,

650 S.W.2d 391

, 393 (Tex. 1983). In addition, a court must consider the
   contract “in light of the circumstances present when the contract was
   entered” to determine whether a given term is ambiguous. Phila. Am. Life
   Ins. Co. v. Turner, 

131 S.W.3d 576

, 587 (Tex. App.—Fort Worth 2004, no
            Taking these considerations together, “[i]f a written contract is so
   worded that it can be given a definite or certain legal meaning,” the contract
   is unambiguous, and that interpretation of the contract governs. CBI 

907 S.W.2d at 520

. If, however, the language “is subject to two or more
   reasonable interpretations,” then the relevant term is ambiguous, and courts
   may “consider the parties’ interpretation” and “admit extraneous evidence
   to determine the true meaning of the instrument.”



            The parties’ dispute primarily concerns the interpretation of
   paragraph 36, as informed by the text of paragraphs 37 and 38. These

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                                         No. 20-40575

   paragraphs articulate Formosa’s mitigation payment and reporting
   obligations, as well as the Monitor’s documentation role. Formosa maintains
   that paragraph 36 concerns only “new discharges”—not the “mere
   presence”—of plastics, such that Formosa’s payment and reporting
   obligations arise only after the Monitor determines a given plastic was
   discharged after the Consent Decree’s effective date. San Antonio Bay
   responds, in effect, that paragraph 36 does not require the Monitor to
   determine whether a given plastic has been newly discharged, and, even if it
   did, the mere presence of plastics is a satisfactory shorthand to conclude that
   such a discharge occurred. Upon review of the entire Consent Decree, we
   conclude that Formosa’s interpretation is the only reasonable one.
           First, the text of the operative provisions indicates that only new,
   post-Consent Decree discharges trigger Formosa’s payment and reporting
   obligations.     Paragraph 36, for one, contains several forward-looking
   references. It refers to “discharges of Plastics” in the present sense—
   suggesting that the parties contemplated only active discharges, rather than
   past discharges. Similarly, the paragraph refers to a Force Majeure Event as
   a possible exemption from Formosa’s payment liability, implying that an
   unforeseen event in the future could cause a “discharge[]” of plastics.8
   Critically, paragraph 36 contains a mitigation payment schedule which
   includes penalty payments for “discharges” only for the years following the
   Consent Decree, demonstrating that the parties did not contemplate pre-
   Consent Decree discharges triggering Formosa’s payment and reporting

              A Force Majeure Event is an unanticipated future occurrence; as defined in
   paragraph 11 of the Consent Decree, it is an “event” caused “solely by an act of God, war,
   strike, riot, or other catastrophe” for which Formosa must take reasonable steps to
   “prevent” from causing discharges.

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                                         No. 20-40575

   obligations. This portion would make little sense under San Antonio Bay’s
           Paragraphs 37 and 38 contain similar language. Paragraph 37 refers to
   “discharges of Plastics” and “discharges document[ed] by the Monitor, as
   provided in paragraph 36.” 9 Paragraph 38 also contemplates a “discharge of
   Plastics” (characterizing it as an “event”). In particular, paragraph 38’s use
   of the phrase “[w]hen there has been a discharge of Plastics”—coupled with
   a time sensitive twenty-four-hour reporting obligation—appears to
   contemplate that a discharge is an “event” in the future. The word “event”
   itself also suggests some kind of action to trigger liability, rather than the
   passive presence of something. Further, paragraph 38’s language requiring
   the identification of “where the Plastics were discharged” indicates that the
   parties expected the specific location of the initial discharge to be noted by
   Formosa. If the discharges referenced in paragraph 38 referred to past
   discharges, it might be impossible to make this determination insofar as some
   plastics could have moved over the years. In short, paragraph 38’s emphasis
   on “when” and “where” plastics were discharged suggests that the mere
   presence of “what” was being discharged (that is, plastics) is not enough to
   trigger Formosa’s reporting obligation.
           Second, we observe that the overall structure of the Consent Decree
   suggests that the parties contemplated only post-Consent Decree discharges
   as triggers for Formosa’s payment and reporting obligations. In general, the
   Consent Decree addresses past discharges and future discharges in separate

             Paragraph 74 also cross-references paragraph 36, though it is not located in the
   same subsection. Notably, paragraph 74 allows for Formosa to request termination of the
   Consent Decree “after the Monitor, Plaintiffs, and cleanup records have all documented
   no discharges of Plastics as defined in paragraph 36 . . . for six (6) consecutive months.”
   Thus, paragraph 74 (like paragraph 37) suggests that paragraph 36 contemplated that active
   discharges, not the mere presence of plastics, triggered Formosa’s obligations.

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   ways and in separate parts of the agreement. Of particular importance is the
   “Remedial Measures” section, which contains five subsections (A through
   E), of which Subsections A through C are the most relevant to this dispute. 10
   Notably, paragraphs 36, 37, and 38 are in Subsection B.
           Each subsection deals with a different aspect of the overall
   remediation scheme. Subsection A (“Engineering Changes”) designates an
   “Engineering Consultant” to produce a plan to update Formosa’s facility
   “to prevent the discharge of Plastics,” including “plans to address
   deficiencies in Formosa’s current system.” Subsection B (“Monitoring,
   Reporting, and Future Mitigation Payments”) designates a Monitor to
   document relevant information at certain locations to determine whether
   Formosa must make additional mitigation payments. Lastly, Subsection C
   (“Remediation of Past Discharges”) designates a Remediation Consultant to
   review remediation methods, develop and propose a plan to remove plastics,
   keep daily records of cleanup activities, and create a final report.
           In short, each phase of Formosa’s remedial efforts is controlled by a
   designated individual with different responsibilities. Because Subsection B
   (which contains paragraph 36) focuses on monitoring Formosa’s current
   progress and future mitigation payments, the location of paragraph 36 in that
   subsection suggests that it has a similar focus. On that score, perhaps more
   telling than where paragraph 36 is located is where it is not located:
   specifically, it does not appear in Subsection C, which deals with “Past
   Discharges.” 11 Thus, the location of paragraph 36 suggests that the focus of

             Subsections D and E concern mitigation issues largely unrelated to the discharge
   dispute; they address “Permit and Mitigation Terms” and “Environmental Mitigation
              Subsection C includes a specific provision concerning the notification of “the
   Remediation Consultant of the presence of Plastics in the Cox Creek or Lavaca Bay so those
   Plastics can be cleaned up.” This provision, as well as its surrounding provisions, does not

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   this provision is on post-Consent Decree discharges only; the failure to
   remediate past discharges would be a separate violation addressed by a
   different subsection.
           We conclude the Consent Decree, taken as a whole, is therefore
   unambiguous. This conclusion is confirmed by the parties’ intent in the
   Consent Decree itself. Simply put, it makes no sense for Formosa to agree to
   pay $50 million to obtain a “full and final settlement” of the CWA claims,
   “up through the date of entry of th[e] Consent Decree,” if it was subject to
   continuing liability for past discharges of plastics, even if those discharges
   were limited to a particular geographic area. 12 Indeed, if the mere presence
   of plastics in the designated area were sufficient to trigger Formosa’s penalty
   payment and reporting obligations, then Formosa would be in perpetual
   violation of its discharge permit, regardless of the amount or age of those
   plastics. That would effectively mean that the Consent Decree would
   continue forever if any plastics remained in the environment, even though
   the parties specifically contemplated that the Consent Decree would
   terminate, upon request, after “no discharges” were documented for six
   months. Such an interpretation is at odds with the parties’ intent to settle
   their dispute regarding the CWA claims—especially when their goal for the

   mention penalty payments, nor does it cross-reference paragraph 36. If past discharges
   subjected Formosa to such penalties, why did the Consent Decree not provide for it (or
   reference it) in this subsection? The omission of such a provision supports the conclusion
   that past discharges were not considered for penalty payment treatment under paragraph
              Formosa previously argued that it had no CWA liability because plastics outside
   the outfalls might be “latent[,]” the same plastics “seen on a previous visit” to that outfall,
   or a “legacy” of “25ish years” of discharges of plastics. Given Formosa’s past position, it
   is unlikely that Formosa would subject itself to liability for these past discharges while
   paying $50 million for a settlement.

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                                         No. 20-40575

   remediation of past discharges was simply the “removal of most Plastics from
   the environment . . . .” 13
           Accordingly,      we    REVERSE           and    REMAND            for   further
   proceedings. 14 On remand, the district court is instructed to reconsider the
   responsibilities of the Monitor in light of our conclusion that the Consent
   Decree, as a whole, contemplated only post-Consent Decree discharges.

             San Antonio Bay highlights what it sees as notable omissions casting doubt on
   the conclusion that the parties contemplated liability for only post-Consent Decree
   discharges—including, for example, that the Consent Decree does not specifically describe
   how the Monitor should determine whether a given plastic is the result of a pre- or post-
   Consent Decree discharge. Although we acknowledge that the Consent Decree does not
   specify such a process, that omission is not dispositive given the actual language in the
   Consent Decree, indicating that Formosa’s obligations trigger only on post-Consent
   Decree discharges. See 

Gonzalez, 394 F.3d at 392

(noting that “courts must examine and
   consider the entire writing and give effect to all provisions such that none are rendered
   meaningless” (internal quotation marks and citations omitted)).
              The parties also dispute whether the district court modified the Consent Decree
   by creating a burden shifting and refund framework not mentioned in the actual Consent
   Decree. Because this modification was made in light of the district court’s interpretation
   that the mere presence of plastics in certain locations was enough to trigger Formosa’s
   payment and reporting obligations, we necessarily reverse it, along with the rest of the
   district court’s order.


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