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VILLAGE OF PALATINE v. USPS

June 7, 1990

VILLAGE OF PALATINE, Plaintiff,
v.
UNITED STATES POSTAL SERVICE, Defendant



The opinion of the court was delivered by: MORAN

 JAMES B. MORAN, CHIEF UNITED STATES DISTRICT JUDGE

 The Village of Palatine (Palatine) has filed a five-count complaint asking that we enjoin the United States Postal Service (Postal Service) from proceeding with its plans to construct a major regional mail distribution center, truck terminal and vehicle maintenance facility on a 43-acre site in Palatine. The complaint alleges that the Postal Service violated the National Environmental Policy Act, the Intergovernmental Cooperation Act, the Administrative Procedure Act, Executive Order No. 11988, and the administrative regulations that govern the operation of the Postal Service.

 We denied Palatine's motion for a temporary restraining order and granted in part Palatine's motion for expedited discovery. Shortly thereafter, and well before discovery was complete, the Postal Service moved to dismiss, or in the alternative, for summary judgment, on each count. For the following reasons, we deny the motion on all counts. We set this matter for a status conference on June 11, 1990, at 10:00 a.m., to consider what discovery necessarily must be completed and to establish a date for an expedited hearing, if necessary.

 LEGAL BACKGROUND

 The National Environmental Policy Act of 1969 (NEPA), 83 Stat. 852, 42 U.S.C. § 4321 et seq., requires that agencies prepare an environmental impact statement (EIS) for major federal projects that significantly affect the quality of the human environment. Environmental impact statements are extensive studies that must include, inter alia, a detailed discussion of alternative means to fulfill the goal of the contemplated project and the potential environmental impact of those alternatives. 42 U.S.C. § 4332(2)(C). *fn1"

 To determine whether a contemplated action will cause a significant impact and thus require a full EIS, agencies conduct a more limited study called an environmental assessment (EA). If an environmental assessment properly concludes that a project's impact on the environment will not be significant, an agency may forego preparing an EIS. When a project will have some impact on the environment, but not a significant enough impact to require an environmental impact statement, section 102(2)(E) of the National Environmental Policy Act nevertheless requires agencies to consider alternatives that may have less environmental impact. 42 U.S.C. § 4332(2)(E).

 The Council on Environmental Quality has drafted binding regulations to guide federal agencies in fulfilling their responsibilities under NEPA. See 40 C.F.R. §§ 1501-08 (1989). The Supreme Court has held that these regulations deserve "substantial deference." See, e.g., Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 109 S. Ct. 1835, 1848-49, 104 L. Ed. 2d 351 (1989); Andrus v. Sierra Club, 442 U.S. 347, 358, 60 L. Ed. 2d 943, 99 S. Ct. 2335 (1979). The regulations require federal agencies to draft environmental assessments to determine whether a full environmental impact statement is required. 40 C.F.R. §§ 1501.3, 1501.4 (1989). They also require that every federal agency draft its own administrative regulations to implement and supplement the regulations promulgated by the Council on Environmental Quality. 40 C.F.R. § 1507.3 (1989).

 Executive Order 11988, Floodplain Management, issued on May 27, 1977, instructs federal agencies to "avoid direct or indirect support of floodplain development wherever there is a practicable alternative." 3 C.F.R., 1977 Comp., p. 117. It requires that before taking action, federal agencies determine whether the action will occur in a floodplain and further requires agencies to consider alternatives that avoid adverse effects and development that is incompatible with the floodplain. It requires agencies to adopt administrative regulations implementing the order.

 Section 401(a) of the Intergovernmental Cooperation Act of 1968, now codified at 31 U.S.C. § 6506, recognizes that the "sound and orderly development of urban communities depends to a large degree on the social and economic health and the sound development of small communities and rural areas." To promote that sound development, it directs the President to prescribe regulations to govern the planning of federal projects that will have a significant impact on community development. It lists several specific objectives and directs that federal officials make "reasoned choices" when those objectives conflict. One objective listed is "appropriate land uses for housing, commercial, industrial, governmental, institutional, and other purposes." 31 U.S.C.A. § 6506(b)(1). Executive Order 12372, issued on July 14, 1982, directs federal agencies to implement the statute and further directs agencies to draft administrative regulations that will guide their implementation of the Intergovernmental Cooperation Act. 3 C.F.R., 1982 Comp., p. 197.

 The United States Postal Service has drafted regulations to implement its duties under the National Environmental Policy Act, as required by the regulations of the Council on Environmental Quality. Additional regulations of the Postal Service specify how its officials will comply with the Intergovernmental Cooperation Act and Executive Orders Nos. 11988 and 12372. See 39 C.F.R. Part 775 (1989) (Environmental Procedures); 39 C.F.R. Part 778 (1989) (Intergovernmental Cooperation Act and Executive Order 12372); 39 C.F.R. Part 776 (1989) (floodplains). The Postal Service has also issued more specific regulations in Handbook RE-6, titled Environmental and Intergovernmental Review Procedures. This publication, designated as Transmittal Letter 4 and dated May 29, 1987, is attached to Palatine's complaint as Exhibit 4. The regulations, including the regulations in Handbook RE-6, are binding on the Postal Service and can be enforced by proper parties in United States courts. See Peoples Gas Light & Coke Co. v. U.S. Postal Service, 508 F. Supp. 808, 819 & n. 14 (N.D. Ill), aff'd on relevant ground, 658 F.2d 1182, 1189-90 (7th Cir. 1981).

 Finally, the Administrative Procedure Act, 5 U.S.C. § 701 (APA), which Palatine cites as a basis for judicial review, provides that courts may review actions taken by "each authority of the Government of the United States," except when a statute prohibits review or where "agency action is committed to agency discretion by law." See Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 410, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971). When Congress created the Postal Service it specifically exempted the new entity from some federal statutes. See 39 U.S.C. § 410. We do not need to decide whether Congress intended to exempt the Postal Service from the Administrative Procedure Act. The Seventh Circuit has taken the view that the APA merely codified common law presumptions that agency actions cannot escape judicial review. Consequently, even if the Postal Service were exempt from the requirements of the statute itself, courts may nevertheless apply the statute's standards of review when litigants complain that the agency violated its own regulations. See Peoples Gas, Light & Coke Co. v. U.S. Postal Service, 658 F.2d 1182, 1191 (7th Cir. 1981).

 FACTUAL BACKGROUND

 When deciding motions to dismiss, courts accept the allegations of the complaint as true. When evaluating a defendant's motion for summary judgment, courts accept the documented allegations of the complaint except when the defendant has submitted affidavits or other evidentiary materials to dispute them. In this case, however, Palatine has tended to characterize even undisputed facts in a manner unflattering to the Postal Service and has selectively emphasized those portions of the documentary record that support its contentions. What follows, then, is a version of the facts, the tenor of which the Postal Service vigorously disputes and the specifics of which it disputes in part.

 This dispute arises from the Postal Service's decision to locate a major regional processing center and truck terminal (the facility) on a 43-acre parcel in Palatine known as the McDade property, at the intersection of Northwest Highway and Route 53. Before the Postal Service announced its plans, Palatine regarded the unoccupied site, zoned as commercial property, as a prime location for valuable development that would generate both sales and property tax.

 The proposed facility includes a two-story 600,000 square foot trucking terminal with docks that can accommodate fifty semi-trailer trucks. It also includes a maintenance building, driveways, service ramps, and parking areas for idle trucks, in addition to a parking lot large enough to accommodate almost a thousand cars. The facility will operate around the clock, seven days a week, beginning with 1500 workers and eventually employing 2500 workers.

 According to Palatine's zoning ordinances, the Postal Service facility is appropriate only in an area zoned for manufacturing. Building the Postal Service facility defeats Palatine's plans to develop the commercially-zoned McDade property and substantially impairs Palatine's ability to develop three adjoining parcels for commercial use. As land owned by the Postal Service is not subject to local taxes, the Postal Service decision removes the commercial property from the tax base. Palatine contends that the McDade site alone could produce $ 25 million in tax revenue during the 25-year estimated useful life of the Postal Service facility.

 Palatine does not simply allege that the facility will deprive it of taxes and thwart its long-range land use plans. It alleges that adding even more trucks to the already congested Northwest Highway will adversely affect Palatine and that running trucks at all hours past nearby residential areas will also adversely impact the human environment.

 About a third of the McDade land is currently designated as being within the 100-year floodplain of the Arlington Heights Branch of Salt Creek. Palatine asserts that the Postal Service's plans and procedures have violated federal regulations that apply to construction that occurs within, or that will impact on, land designated as part of a floodplain.

 The Postal Service's plans to build on the McDade site have generated a significant amount of public controversy. Palatine officials and the general public have opposed the Postal Service plans, and Palatine has successfully enlisted the support of other units of local government. The Governor of Illinois, several representatives of Congress, and both Illinois senators have asked the Postal Service to accommodate Palatine's concerns.

 The controversy stems from the growth in the North suburban area. The Postal Service currently services zip codes 600, 601, 602 and 603, from a mail processing facility in River Grove. It considers that facility outdated and inadequate and plans to divide its operations between two new facilities. The McDade facility will service zip codes 600 and 602.

 The Postal Service initially defined a "preferred area" for the new facility for zip codes 600 and 602 that did not include Palatine. In the summer of 1987, the Postal Service determined that the McDade site was available and pursued that site. Palatine first received notice of the Postal Service's interest in the McDade site in August 1987.

 In November 1987, before performing any environmental analysis, the Postal Service paid a non-refundable fee of $ 400,000 for an option to buy the McDade site at a price of $ 9.5 million, which was $ 1.3 million more than the appraised value. The Postal Service then retained a consulting firm to perform an environmental assessment. The option was good until March 31, 1988.

 In January 1988, the consulting firm issued a draft EA for public comment. It revealed that 15.8 of the 43 acres of the McDade property was classified as part of a floodplain. Because Postal Service plans at that time called for significant construction within the floodplain, the January 1988 EA could not and did not conclude that there would be no significant impact upon the environment.

 Palatine received a revised draft environmental assessment on March 23, 1988, eight days before the Postal Service's option on the McDade property was to expire. The revision reflected a change in the Postal Service's construction plans. Instead of a single-story building, the Postal Service now contemplated a sixty-foot tall building. Under the revised plans, no construction would take place within the 15.8 acres classified as floodplain.

 On March 29, Palatine commented on the revised draft environmental assessment and contended that it failed to adequately consider various effects on the environment, including the facility's adverse effect on the floodplain, on the wetland located on the McDade property, on traffic congestion, on air quality, on the quality of nearby waterways, and on the units of local government that would lose tax revenue. Palatine further objected that the Postal Service's contemplated use of the land was not consistent with Palatine's long-range plan and further objected that the Postal Service had failed to properly consider alternative sites that would cause less adverse environmental effects.

 Just before the Postal Service's option on the McDade property was to expire, the Postal Service offered Palatine a deal. If Palatine would pay the Postal Service $ 525,000, the Postal Service would not purchase the McDade site. On March 31, 1988, the Postal Service exercised its option and bought the McDade property.

 In May 1988, the Postal Service issued the final revised environmental assessment for the McDade site. This report stated that there would be no significant environmental impact and thus made the finding that relieved the Postal Service from the obligation to prepare a full environmental impact statement.

 In August 1988, the Northeastern Illinois Planning Commission issued a formal analysis of the 1988 environmental assessment. The Commission criticized the EA's "brief" and "perfunctory" dismissal of twenty-eight potential alternative sites and made some specific suggestions for implementation. It otherwise concluded that the EA conformed to federal regulations and guidelines.

 In the fall of 1988, Palatine suggested some alternative sites outside Palatine and the Postal Service rejected them. In early 1989, Palatine then suggested an alternative site within Palatine. This property, known as the Brandt site, occupies 34 acres immediately north of the McDade site. It is zoned for manufacturing and could thus accommodate the Postal Service facility without violating Palatine's zoning scheme.

 Considering the restrictions against building in the floodplain, the 34-acre Brandt site offers the Postal Service more buildable acreage to the Postal Service than the 43-acre McDade site. Furthermore, as the Brandt site does not front on a major roadway, it does not offer the same potential for commercial development as the McDade site. Construction on the Brandt site would thus interfere less with Palatine's plans for commercial development. In May 1989, the Postal Service agreed to consider the Brandt site as a possible alternative to the McDade site.

 Palatine also obtained a commitment from the Mitroff Companies to develop the McDade site if the Postal Service moved to the Brandt site. Mitroff proposed a commercial development that comported both with Palatine's long-range plan and its zoning ordinance.

 Although the Postal Service agreed to study the Brandt site, it indicated that it wanted to proceed at the McDade site because of the time and money already spent in planning for that location. Nevertheless, the Postal Service concluded that the Brandt site could be a viable alternative. On July 14, 1989, the Postal Service reported on the Brandt site in an alternative site evaluation study that stated that the Postal Service facility could locate at the Brandt site with a relatively minor long-term impact on the Postal Service operations, as long as direct access to Northwest Highway were provided.

 At the urging of congressional representatives, the Postal Service continued to negotiate with Palatine about building at the Brandt site instead of the McDade site. The Postal Service identified eight issues that needed to be resolved. Several issues revolved around the Postal Service's concern that it might not be able to sell the McDade site without a financial loss. Palatine provided assurances requested by the Postal Service and further negotiated a plan to address the Postal Service's concern about disposing of the McDade property. Together with Mitroff, Palatine proposed that the Postal Service simply trade the McDade site for the Brandt site. Mitroff accordingly arranged, in September 1989, for an option to purchase the Brandt site.

 In early September 1989, Assistant Postmaster General Stanley Smith told a representative of Palatine that the proposed swap of the two sites was in the best interest of the Postal Service. At a second meeting later in September, Smith told Palatine representatives that the Postal Service must receive an additional $ 15 million to abandon its plans to build on the McDade site. In the view of Postal Service, this figure represented the difference in the value of the two sites, the cost of redesigning the facility for the Brandt site, plus extra construction costs the Postal Service contended would be incurred.

 Further negotiations took place in November 1989. Mitroff agreed to pay approximately $ 3 million in connection with the proposed land trade, including over $ 2.6 million as compensation for the differing market values of the parcels. By the end of November, the Postal Service and Palatine reached agreement on all but two issues. First, the Postal Service contended it would cost an extra $ 5 million to build on the Brandt site. Of this amount, $ 4.3 million represented the cost of building a parking garage for employees that was not needed on the McDade site. The second issue related to developing a road to connect the Brandt site to Northwest Highway.

 Despite this progress in negotiation, on November 29, 1989, the Director of the Postal Service Facilities Service Center in Chicago declared that further discussions on the land swap would not take place. In December, however, Postal Service officials in Washington instructed Chicago Postal Service officials to resume negotiations. Subsequently, Chicago Postal Service officials demanded, for the first time, that Palatine provide two access roads to the Brandt property.

 By January 10, 1990, the Postal Service conceded it did not need two access roads. Furthermore, the Postal Service agreed that the $ 4.3 million parking garage was not needed because the Brandt site could accommodate the parking envisioned for the McDade site. Mitroff designed plans for a four-lane road that would connect the Brandt site to Northwest Highway.

 Without any further substantive communication, the Postal Service announced on January 29, 1990, that it would proceed to build on the McDade site. The Postal Service then released its designs to contractors and asked for bids. Palatine subsequently appealed to the Chairman of the Postal Service Board of Governors, who responded, on March 2, 1990, that "there cannot be any further delay in the start of construction, nor will the Postal Service suffer a loss on investment in the McDade property should a swap for the Brandt farm site be feasible."

 Two United States senators and thirteen congressional representatives then asked for a meeting with top Postal Service officials to discuss the Palatine situation. The Postmaster General agreed to schedule a meeting for March 27. On March 21, 1990, the senators and two representatives wrote to the Postmaster General and asked that the Postal Service postpone the date for accepting contractors' bids from March 29 until April 6, to allow time for good-faith discussion.

 On March 22, the Postal Service stated it would not agree to the delay requested on Palatine's behalf. The next day, six days before the contractors' bids were due, Palatine filed a five-count complaint asking this court to enjoin the Postal Service from beginning to construct the facility on the McDade site until it complies with the applicable federal statutes, executive orders, and administrative regulations.

 We subsequently denied Palatine's motion for a temporary restraining order and granted in part its motion for expedited discovery. We turn now to the Postal Service's motion to dismiss or, in the alternative, for summary judgment. *fn2"

 DISCUSSION

 Palatine has alleged its claims in five counts that overlap to some extent. In all five counts, it insists that the Postal Service has not fulfilled its statutory and administrative obligations and that accordingly, it should be prohibited from going ahead until it has satisfied those obligations. In count I, Palatine alleges that the Environmental Assessment released in May 1988 was for a facility materially different from the one that the Postal Service now intends to construct. In count II, it contends that an Environmental Impact Statement is necessary. In count III, Palatine claims that the May 1988 EA is in any event inadequate because it fails to properly consider the facility's impact upon the human environment. Count IV alleges that even if the EA properly found that building on the McDade site will cause no significant impact, it is nevertheless deficient for failing to adequately consider alternative sites that might have less impact on the environment. Finally, in count V, Palatine complains that the Postal Service has failed to fulfill its obligations under the Intergovernmental Cooperation Act.

 The Postal Service responds first by contending that all claims should be dismissed because of laches. It then asserts that it should prevail on each of the five counts. We consider laches first, then count I, then counts III and IV, then count II, and finally count V.

 I. Affirmative Defense of Laches

 The Postal Service has asked that we award it summary judgment based on its assertion of the affirmative defense of laches. According to the defendant, two necessary elements of laches are present here: (1) the plaintiff has unreasonably delayed and (2) consequently prejudiced the defendant's position.


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