Seventh Circuit Throws Ice Cold Water on Attempt to Undo Adverse State Court Decision

Published by Jeffrey A. Mandell, Kurt M. Simatic on

In a relatively short opinion, EOR Energy LLC v. Illinois Environmental Protection Agency, the Seventh Circuit categorically rejected a defendant’s attempt to undo a series of adverse decisions from the Illinois state courts. Although it could be classified as a civil procedure “no-brainer,” litigants would be well served to remember, in this era of constantly evolving state administrative rules and prosecutions, that do-overs in the federal courts are the rare exception rather than the rule.

The Illinois Environmental Protection Agency (“IEPA”) charged EOR and another company with violating state law for transporting hazardous waste acid, storing the waste, and then injecting the waste into EOR’s industrial wells. IEPA prosecuted the claims before the Illinois Pollution Control Board (the “Board”). Although the IEPA originally prevailed (unopposed) on summary judgment, EOR filed a motion for reconsideration and argued, for the first time, that the Board lacked jurisdiction. Specifically, EOR asserted that it was not injecting “waste” into its wells because the acid was being used to treat the wells. Because the acid was not “waste,” reasoned EOR, the Illinois Department of Natural Resources, not the Board, had exclusive jurisdiction. The Board rejected EOR’s argument and denied the motion for reconsideration.

EOR appealed to the Appellate Court of Illinois. Interpreting Illinois’s statutory scheme, the appellate court concluded that the acid was indeed a “waste,” giving the Board exclusive jurisdiction over the matter. The Supreme Court of Illinois and the United States Supreme Court both declined EOR’s requests for further appellate review.

Undeterred, EOR filed a new lawsuit in federal district court, seeking a declaratory judgment under the federal Resource Conservation and Recovery Act and the Safe Drinking Water Act. EOR’s federal “hook” appeared to be that it was seeking a declaration of its rights under these acts; it envisioned a declaration stating that it was allowed to continue injecting acid into the wells without fear of IEPA prosecution.

The district court dismissed EOR’s complaint for failure to state a claim. First, the district court ruled that the federal government’s approval of Illinois’s hazardous waste program superseded the application of federal regulations and ensured that the IEPA (rather than the federal government and instead of the Board) had regulatory jurisdiction. Then, the district court took judicial notice of the adverse Illinois state court decisions (which EOR conveniently omitted from their federal complaint) and concluded that the Eleventh Amendment, issue preclusion, and the Rooker-Feldman doctrine preluded relief for EOR in the federal courts.

EOR appealed to the Seventh Circuit, which affirmed the district court. The Seventh Circuit did not mince words in condemning EOR’s tactics: “We emphatically reject this undisguised attempt to execute an end-run around the state court’s decision.” Slip op. at 5. The Seventh Circuit cited multiple rationales. The state court’s decision was final. Federal courts must respect state-court judgments. And, to the extent that EOR wanted the federal courts to set aside the adverse state-court decision, the Rooker-Feldman doctrine barred that outcome. Rather, if EOR believed that the Illinois courts were wrong, its relief lay with the Illinois Supreme Court and the United States Supreme Court. Those courts’ denial of EOR’s petitions for review “was the end of the line” for EOR, such that “it may not come to the federal courthouse for Round Two.” Slip op. at 6. The court could have stopped there, but it went on to cite claim preclusion and the Eleventh Amendment as additional bars to EOR’s efforts.

One could speculate that a hazardous-waste-dumping oil company may have had a better chance in front of the Seventh Circuit if the panel had not included the only two Democratic appointees left on the circuit (Chief Judge Wood and Judge Hamilton). However, given the strong, unequivocal language that the panel used, it is doubtful that EOR would have prevailed in front of any panel combination. Therefore, although this case originated in Illinois, all litigants in the Seventh Circuit should be on notice that this court of appeals is clearly asserting that it will not abide any attempted end-runs around final judgments issued in state-court enforcement actions.

Filed Under: Seventh Circuit

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