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ALLSTATE INSURANCE COMPANY v. CITY OF CHICAGO

April 10, 2003

ALLSTATE INSURANCE COMPANY, ATLANTIC MUTUAL INSURANCE COMPANY, ENCOMPASS INSURANCE, HARTFORD CASUALTY INSURANCE COMPANY, ST. PAUL COMPANIES, STATE FARM FIRE AND CASUALTY AND STATE FARM MUTUAL AUTO, BOTH INDIVIDUALLY AND AS SUBROGEES OF THEIR RESPECTIVE INSUREDS, PLAINTIFFS,
v.
CITY OF CHICAGO, A MUNICIPAL CORPORATION, AND HARZA ENVIRONMENTAL SERVICES, INC., A/K/A HARZA ENGINEERING COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Joan H. Lefkow, United States District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs, Allstate Insurance Company, Atlantic Mutual Insurance Company, Encompass Insurance, Hartford Casualty Insurance Company, St. Paul Companies, State Farm Fire and Casualty and State Farm Mutual Auto (collectively "plaintiffs") bring this law suit against defendants, the City of Chicago ("Chicago") and Harza Environmental Services ("Harza") alleging violations of the Clean Water Act ("CWA"), 33 U.S.C. § 1251 et seq. (Count I), and, under Illinois law, negligence (Count II), nuisance (Count III) and trespass (Count IV). Chicago and Harza each have moved to dismiss the plaintiffs' Complaint under Rules 12(b)(1) and 12(b)(6), Fed.R.Civ.P. The court has jurisdiction over the claims pursuant to 33 U.S.C. § 1365 and 28 U.S.C. § 1367. For the reasons set forth below, the court dismisses the CWA claims for lack of standing and dismisses without prejudice the state law claims.

MOTION TO DISMISS STANDARDS

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenges the court's subject matter jurisdiction. In determining whether subject matter jurisdiction exists, the court is not required to accept plaintiffs' allegations as true. A "district court ha[s] not only the right, but the duty to look beyond the allegations of the complaint to determine that it ha[s] jurisdiction. . . ." Hay v. Indiana State Bd. of Tax Comm'rs, 312 F.3d 876, 879 (7th Cir. 2002). However, when examining the material allegations of the complaint, the court must draw all reasonable inferences therefrom in favor of the plaintiff. Retired Chicago Police Ass'n v. City of Chicago, 76 F.3d 856, 862 (7th Cir. 1996).

Conversely, a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges the sufficiency of the complaint for failure to state a claim upon which relief may be granted. General Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). Dismissal is appropriate only if it appears beyond a doubt that the plaintiff can prove no set of facts in support of its claim that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Kennedy v. Nat'l Juvenile Det. Assoc., 187 F.3d 690, 695 (7th Cir. 1999). In ruling on the motion, the court accepts as true all well pleaded facts alleged in the complaint, and it draws all reasonable inferences from those facts in the plaintiff's favor. Dixon v. Page, 291 F.3d 485, 486 (7th Cir. 2002); Jackson v. E.J. Brach Corp., 176 F.3d 971, 977 (7th Cir. 1999).

FACTS*fn1

Chicago operates a combined sewer system designed to remove both raw sewage and storm water from within Chicago's city limits. Harza acted and continues to act as the engineering design consultant to Chicago and supervises the ongoing "Rainblocker" program, which has the purpose of retrofitting the storm water aspect of the combined sewer system. Under the Rainblocker program, the amount of storm water flow into the sewers was to be limited by a number of measures, the purpose being to prevent overtaxation of the sewer's capacity to convey the water away. Previously, because of the nature of the combined system, any measurable level of rainfall would fill up the combined sewers, causing the sewers to overflow, back up in basements, and eventually discharge into navigable waters in the area. The concept of Rainblocker was to limit the entry of storm water into the sewers through disconnecting homeowner "down spouts" and placing inlet restrictors between the streets and sewers. In theory, this two part process diverts run-off away from the sewers and limits the amount of water intake from the street into the sewer system. The end result would be the elimination of flooding and sewer discharge into area navigable waters after storms.

According to plaintiffs, one of the key components of the system was that the residential "down spouts" were to be disconnected. If the down spouts were not disconnected, plaintiffs allege that the Rainblocker program would not function according to the plan's design, and flooding and sewer discharge in basements and navigable waters would continue. Plaintiffs allege that the Rainblocker program was not effective because Chicago and Harza did not systematically and uniformly disconnect the down spouts on residential properties. As a result, damage resulted to basements and other property of homeowners that were insured by plaintiffs. Plaintiffs further allege that both Chicago and Harza exceeded waste water discharge limits as well as the permissible point source limitations under the CWA contained in the National Pollutant Discharge Elimination System ("NPDES") permit issued to Chicago (Permit No. IL 0045012) (the "NPDES permit").

Plaintiffs maintain that they are property insurance carriers that afford property insurance to thousands of individuals and businesses that own, occupy or operate rental apartments, automobiles, houses, offices, stores, condominiums, warehouses, factories, restaurants, and other types of commercial and residential property situated within Chicago, and these insureds use and enjoy the ecosystems affected by storm water discharges and sources governed by the NPDES permit issued to Chicago. Moreover, plaintiffs allege that, because of their respective insurance policies with the insureds (a list of whom are attached to the complaint), they are subrogated to the claims of those respective insureds against Chicago and Harza based on property damage sustained.

DISCUSSION

Plaintiffs seek injunctive and compensatory relief for Chicago and Harza's alleged violations of the CWA (Count I), negligence (Count II), nuisance (Count III) and trespass (Count IV). Chicago moves for dismissal of plaintiffs' CWA claims because plaintiffs (1) failed to give Chicago adequate notice as required under the CWA and (2) lack standing. As for the state law claims, Chicago argues, all such claims should be dismissed because Chicago has discretionary immunity for its acts or omissions in installing, constructing, operating and maintaining the Rainblocker program. Finally, Chicago argues that the insurance companies have requested inappropriate relief. Harza moves for dismissal on grounds that (1) any flooded basements and standing water are not protected waters of the United States under the CWA; (2) failure to disconnect the down spouts or otherwise implement the Rainblocker program was not a NPDES permit violation; (3) subrogated insurers' interests are not protected by the CWA; (4) plaintiffs lack standing; (5) plaintiffs' Notice letter and Complaint allege no violation by Harza; (6) Harza cannot be liable because it is neither a permittee nor an operator; and (7) plaintiffs fail to allege proximate cause necessary for tort liability. Because the court concludes that plaintiffs lack standing to assert the CWA claims, it considers only that argument and will analyze the CWA and state law claims separately.

A. Standing under the CWA

The question of standing is "the threshold question in every federal case, determining the power of the court to entertain the suit." Warth v. Seldin, 422 U.S. 490, 498 (1975). "In its constitutional dimension, standing imports justiciability: whether the plaintiff has made out a `case or controversy' between himself and the defendant within the meaning of Art. III." Id. The burden of establishing the required elements of standing lies with the plaintiff. Retired Chicago Police Ass'n, 76 F.3d at 862, citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). A dismissal for lack of subject matter jurisdiction under Rule 12(b)(1) is appropriate, where standing is challenged as a factual matter, when a plaintiff fails to support the allegations necessary for standing with "competent proof." Id.; Perry v. Village of Arlington Heights, 186 F.3d 826, 829 (7th Cir. 1999). The Seventh Circuit has interpreted "competent proof" as "requiring a showing by a preponderance of the evidence, or proof to a reasonable probability, that standing exists." Id., citing NLFC, Inc. v. Devcom Mid-America, Inc., 45 F.3d 231, 237 (7th Cir.), cert. denied, 515 U.S. 1104 (1995).

A showing of constitutional standing requires (1) an actual or threatened injury-in-fact (2) that is fairly traceable to the defendant's alleged violation of the CWA and (3) that could be redressed if the plaintiff wins in the lawsuit. Lujan, 504 U.S. at 560-61. Perhaps acknowledging that any injury in this case (i.e., having to pay out claims under insurance policies) is traceable to flooded basements and other property damage but not to discharges into navigable waters, plaintiffs ...


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