Appeals from the United States District Court for the Southern District of Indiana, New Alabany Division. No. 81 C 7 -- Carl J. Holder, Judge. No. 81 C 8 -- James E. Noland, Judge.
Wood, Circuit Judge, Fairchild, Senior Circuit Judge, and Roszkowski, District Judge.*fn*
ROSZKOWSKI, District Judge.
This consolidated appeal arised under the Clean Air Act Amendments of 1970. The issue is whether a federal court may enforce an implementation plan provision which was adopted by the state to meet federal air quality standards, subsequently was approved by the Environmental Protection Agency, but thereafter was invalidated by a court of the adopting state on state law procedural grounds. The district courts below held that such a provision is not enforceable. For the reasons herein stated, this court affirms those decisions.
The Clean Air Act Amendments of 1970,*fn1 described by the Supreme Court as "a drastic remedy to . . . . (the) otherwise uncheckable problem of air pollution," Union Electric Co. v. EPA, 427 U.S. 246, 256, 96 S. Ct. 2518, 49 L. Ed. 2d 474 (1976), empowered the EPA to set national primary and secondary ambient air quality standards. 42 U.S.C. § 7409.*fn2 Compliance with the standards were then to be implemented through state plans. Each state, "after reasonable notice and public hearings, [was to] adopt and submit to the Administrator, within nine months after the promulgation of a national primary ambient air quality standard . . . . for any pollutant, a plan which provides for implementation, maintenance, and enforcement of such primary standard in each air quality control region . . . . within such state." 42 U.S.C. § 7410. The Act essentially gave the states the initial opportunity to develop a workable and equitable implementation for meeting national standards within the state. In the event the state was unable to present an implementation plan which met statutory requirements, the EPA administrator was authorized to develop its own implementation plan for the state. 42 U.S.C. § 7410(c).*fn3
On April 11, 1972, the State of Indiana submitted to EPA an implementation plan that included provision APC-13, which was designed to regulate sulfur dioxide emissions. On May 31, 1972, EPA approved APC-13 in part and rejected APC-13 in part.*fn4 The State of Indiana revised APC-13 to conform to EPA's objections and submitted the revised version to the EPA on September 15, 1972. The EPA accepted the revised APC-13 and revoked its prior disapproval.
A group of Indiana utilities, including one of the appellees now before us, chose to challenge APC-13 in both the federal and state courts.
The federal court challenge reached this court in 1975. In Indiana & Michigan Electric Co. v. EPA, 509 F.2d 839 (7th Cir. 1975), the utilities unsuccessfully challenged the EPA Administrator's approval of the Indiana implementation plan. Among the challenges raised was a due process objection. In rejecting the claim, this court held that the procedural scheme prescribed by the Act provided "adequate opportunity for the submission of views and for judicial appeal." Id. at 847. We observed that the utilities had "a right to challenge the reasonableness of state plans in state courts, and if part of a state implementation plan is held invalid by a state court, the state would have to revise that part." 509 F.2d at 847. It was further noted, that "should the state fail [to revise the invalidated provision] . . . . the Administrator must propose and promulgate a revision." Id. We reminded the utilities that whether the state or the Administrator made the revisions, "in either case a hearing, or at least an opportunity for a hearing is a prerequisite to adoption of the new regulation." Id.
As was suggested in Indiana & Michigan Electric Co. v. EPA, the utilities proceeded with their procedural challenges to APC-13 in state court. On November 10, 1975, the Circuit Court for Marion County held APC-13 invalid. Four years later, the Indiana Court of Appeals for the Second District affirmed the Circuit Court's invalidation on the procedural ground that the state officer who presided over the hearing had failed to submit written findings to the Indiana Environmental Management Board. Indiana Environmental Management Board v. Indiana-Kentucky Electric Corp., 181 Ind. App. 570, 393 N.E.2d 213, 222 (Ind. App. 1979).
Despite the state court ruling, the Sierra Club brought suits to enforce APC-13 against alleged polluters. In Case No. 81-1822, the Sierra Club sought to enforce APC-13 against the Indiana-Kentucky Electric Corporation. In Case No. 81-2173, the Sierra Club brought an identical action against the Indiana & Michigan Electric Company, the same utility which brought the earlier federal challenge.
In both cases, the defendant moved to dismiss the complaints. The courts below granted the motions, essentially ruling as did Judge Holder in Case No. 81-1822 that the action[s] "seek to enforce invalid regulations."
Plaintiff, Sierra Club, now appeals the two orders of dismissal. Appellant contends that APC-13, once approved by the EPA, becomes enforceable federal law which a subsequent state court ruling may not disturb. Sierra Club essentially argues that APC-13 should continue to be enforceable until a new state implementation plan is established in its place. Otherwise, Sierra Club argues, a major loophole in the Act would open.
The appellees claim that a plan (or plan provision) invalidated in state court is unenforceable under the Act in either federal or state court. They contend that a state cannot be deemed to have submitted a plan provision when that state's own court has held that the provision was not adopted in accordance with state law. The appropriate recourse under the Act, appellees argue, is for the EPA to formulate immediately a replacement provision.
Our examination of the statute, relevant judicial precedent, and the legislative history reveals that the Act does permit a successful state court challenge to render an implementation plan provision unenforceable in both federal and state court.
Three reasons support this conclusion. First, administrative action, to be valid, must substantially comply with applicable procedural rules. Because APC-13 was not promulgated in accordance with Indiana procedural law, APC-13 is invalid and may not be enforced. Second, decisions construing the Act have encouraged litigants to pursue their procedural challenges to state implementation plans in the state courts. For that review to be meaningful, a state court ruling, like that of the Indiana Appellate Court, must be given effect. Finally, no precedent exists to support the Sierra Club's novel suggestion that an invalid plan should be given effect until a replacement is devised; instead, the Act and its Legislative history foresaw EPA action as the appropriate remedy for any state level failure.
A. APC-13 WAS NOT ADOPTED IN ACCORDANCE WITH APPLICABLE PROCEDURES AND THEREFORE WAS AN INVALID PLAN SUBMISSION
The 1970 Amendments to the Clean Air Act provide that "each State shall, after reasonable notice and public hearings, adopt and submit to the Administrator . . . . a plan which provides for implementation, maintenance, and enforcement of such primary standard in each air quality control region (or portion thereof) within such State." 42 U.S.C. § 7410. Although the terms "shall submit" could be construed to impose a mandatory duty upon the states to formulate a plan, judicial construction of the Act has established that the Act merely gives the States the first opportunity to draft and submit a plan. A state may not be compelled to formulate or submit an implementation plan. Columbia v. Train, 172 U.S. App. D.C. 311, 521 F.2d 971 (D.C. Cir. 1975), vacated on other grounds 431 U.S. 99, 97 S. Ct. 1635, 52 L. Ed. 166 (1977). If, however, a proper plan is not submitted, EPA may establish a plan for the state. Id.
The record clearly establishes that Indiana's proposed submission for the control of sulfur dioxide emissions, APC-13, was promulgated without adherence to Indiana procedural law. Because administrative actions taken without substantial compliance with applicable procedures are invalid, it is as if Indiana never submitted APC-13. Since a valid APC-13 was never submitted, EPA's adoption of APC-13 cannot be given effect since EPA approved a provision which was invalid when submitted to the agency.
Both the federal and Indiana state courts have repeatedly recognized that administrative action which fails to substantially comply with applicable administrative procedures cannot be given effect. This Circuit, while noting the limited nature of judicial review of administrative action, has nevertheless stressed the need for judicial review to assure compliance with established procedures:
A judicial review of administrative proceedings respecting agency employee disciplinary action under the Administrative Procedure Act is limited to the question whether there has been substantial compliance with applicable procedures and statutes.
Fagan v. Schroeder, 284 F.2d 666, 668 (7th Cir. 1960) (emphasis supplied). The Indiana Courts have also recognized the need to assure that administrative decisions are not "without observance of procedure required by law." Natural Resources Commission of Dept. of Natural Resources v. Sullivan, 428 N.E.2d 92, 97 (Ind.App. 1981); State Dept. ...