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TREACY, ET AL. v. SMITHFIELD FOODS, INC.


TREACY, ET AL. v.
SMITHFIELD FOODS, INC.


June 5, 1998

Record No. 971773

DENNIS H. TREACY, ET AL.

v.

SMITHFIELD FOODS, INC.

OPINION BY JUSTICE BARBARA MILANO KEENAN

FROM THE CIRCUIT COURT OF ISLE OF WIGHT COUNTY

Kenneth E. Trabue, Judge Designate

Present: All the Justices


The dispositive issue in this appeal from a declaratory
judgment decree is whether there was a justiciable controversy
between the parties.

This case involves permits and an order issued by the State
Water Control Board (Board) regulating the discharge of
wastewater in conjunction with the Federal Water Pollution
Control Act of 1972, 33 U.S.C. Sec.1251 et seq.
(Clean Water Act, or the Act). The Act established the National
Pollutant Discharge Elimination System (NPDES) as a means of
regulating discharges into the United States’ navigable waters. Id.

The Clean Water Act prohibits the discharge of pollutants into
such waters, except in compliance with a NPDES permit. 33 U.S.C.
Sec.1311 and 1342. Under the Act, the states have the
primary responsibility for establishing and administering permit
programs within their respective boundaries. Although the states
have authority to adopt their own water quality standards and
effluent limitations that are more stringent than the federal
requirements, the states may not enforce requirements that are
less restrictive than those required by the Clean Water Act. See
33 U.S.C. Sec.1342 and 1370.

The Commonwealth of Virginia, through the Board, is authorized
by the Clean Water Act to issue permits that have the same force
and effect as NPDES permits. See 40 Fed. Reg. 20,129 (May
8, 1975). The permits issued by the Board are called
"Virginia Pollutant Discharge Elimination System
permits" (VPDES permits). See 9 VAC 25-31-10. [1]

Smithfield Foods, Inc. (Smithfield) has subsidiary
corporations that own and operate two pork processing plants in
Isle of Wight County. In 1986, the Board issued a VPDES permit
that regulated the wastewater Smithfield discharged into the
Pagan River. However, in 1988, the Board developed a "Policy
for Nutrient Enriched Waters" (Policy) that required the
inclusion of a limitation on phosphate discharges in all permits
regulating wastewater discharged into nutrient enriched waters. 9
VAC 25-40-10 et seq.

Based on this Policy, the Board modified Smithfield’s permit
in 1990 (1990 Permit), adding a compliance schedule for the
construction of facilities that would meet a monthly average
effluent limitation of 2.0 mg/l of phosphorous. The 1990 Permit
also limited total kjeldahl nitrogen (TKN), a measure of the
amount of ammonia and other unoxidized nitrogen compounds in
wastewater discharge. Smithfield filed an administrative appeal
challenging the phosphorous standards set forth in the Policy and
the 1990 Permit.

To resolve its dispute with the Board, Smithfield consented to
the Board’s issuance of an administrative order pursuant to Code
Sec.62.1-44.15(8a)–(8d). In this May 1991 "Special
Order Issued to Smithfield Foods, Inc." (Special Order),
Smithfield agreed to notify the Board within a specified time of
its commitment either to connect its facilities to the Hampton
Roads Sanitation District (HRSD) wastewater plant or to upgrade
its facilities to meet the phosphorous standard contained in the
Special Order. The Special Order also provided that until
Smithfield satisfied this requirement, Smithfield would comply
with "the interim effluent limitations in Appendix A,"
which were less stringent than the TKN limitations in the 1990
Permit.

Upon issuance of the Special Order, Smithfield agreed to
dismiss its pending appeal of the phosphorous standards contained
in the Policy and the 1990 Permit. One month later, Smithfield
notified the Board of its commitment to connect its wastewater
plants to the HRSD.

In 1991, the Board also began the process of renewing the 1990
Permit and presented a proposed draft permit to Smithfield for
its review. Smithfield expressed concern that the draft permit
contained the same effluent requirements included in the 1990
Permit, which Smithfield believed were inconsistent with the
terms of the Special Order. In response, Debra L. Thompson, an
environmental engineer with the State Water Control Board, wrote
a letter to Lawrence D. Lively, Director of Environmental Affairs
at Smithfield, confirming that "[a]ny special order
agreements relative to compliance with water quality standards,
the Permit regulation and associated studies that have been
approved by the Board take precedence over the VPDES
Permit."

In 1992, the Board issued Smithfield a renewal permit (1992
Permit). The 1992 Permit contained the phosphorous and TKN
standards previously set forth in the 1990 Permit.

In October 1996, the Board and the Director of the Department
of Environmental Quality filed an amended bill of complaint for
the Commonwealth alleging that Smithfield committed numerous
permit violations, as well as violations of the Special Order. [2] In the amended bill of
complaint, the Commonwealth stated in part:

6. The wastewater discharges are and have been further
governed as to total Kjeldahl nitrogen ("TKN")
by an order issued by the State Water Control Board under
the authority of Code Sec.62.1-44.15(8a) on May 13,
1986 and amended on January 25, 1988 and March 21, 1990
(the "Order").

7. The wastewater discharges are and have been further
governed as to total phosphorous by the amendment to the
Order on March 21, 1990 and a further amendment on
November 6, 1990. The Order was superseded by an order of
May 9, 1991 that was amended on November 8, 1994.

In December 1996, the United States Environmental Protection
Agency (EPA) filed suit against Smithfield in the United States
District Court for the Eastern District of Virginia seeking
penalties under the Clean Water Act for violations of certain
effluent standards, including the phosphorous and TKN standards
contained in the 1992 Permit. See United States v.
Smithfield Foods, Inc.
, 965 F. Supp. 769 (E.D. Va. 1997). On
March 25, 1997, John R. Butcher, Assistant Attorney General of
Virginia, wrote a letter to the United States Department of
Justice regarding this federal action against Smithfield, stating
in relevant part:

Virginia does not take the position that either the
[Special Order] of the State Water Control Board or the
pendency of our enforcement action in state court
precludes a federal enforcement action against
Smithfield. While Smithfield may take this position, any
preclusion is a matter of federal law to be determined in
the appropriate federal forum.

In April 1997, Smithfield filed a cross-bill in the present
case seeking a declaratory judgment that the Special Order
revised, superseded, and replaced the 1990 and 1992 Permits. In
its cross-bill, Smithfield asserted that in issuing the Special
Order, the Board entered into a contract requiring Smithfield
only to comply with the phosphorous and TKN standards specified
in the Special Order, rather than the standards set forth in the
1990 Permit. Smithfield asserted that the Board breached this
alleged contract when the Board issued the 1992 Permit and when
Butcher wrote the March 25, 1997 letter to the Department of
Justice. Smithfield requested entry of a decree (1) declaring
that the Special Order relieved Smithfield from complying with
the phosphorous and TKN standards in the 1990 and 1992 Permits
because Smithfield had elected to connect to the HRSD treatment
system, (2) modifying the 1992 Permit to conform its provisions
to those of the Special Order, and (3) enjoining the Commonwealth
and the United States from enforcing any provisions of the 1990
and 1992 Permits that are inconsistent with the terms of the
Special Order.

After the Commonwealth requested and was granted a nonsuit of
the bill of complaint, the trial court conducted a hearing on the
cross-bill. During the hearing, counsel for the Commonwealth
stated,

Judge, we have said it I think four or five times in
pleadings, we wrote it down and we signed it because we
meant it and I’ll say it to you again looking you right
in the eye, that as to phosphorous and the State Water
Control Board, this company’s behavior is regulated by
the [Special Order] and not by the permit.

The chancellor agreed that "[e]ven after the Board issued
the 1992 Permit to Smithfield, the Commonwealth’s position
remained that the 1991 [Special] Order constituted the
Commonwealth’s only regulatory command to Smithfield with respect
to phosphorous, notwithstanding the apparently contradictory
language in the [1992] Permit." Nevertheless, the chancellor
issued a declaratory judgment holding, among other things, that
(1) the Commonwealth had no authority to impose
phosphorous-related standards on Smithfield that were
inconsistent with the terms of the Special Order, and (2) the
phosphorous discharge standards in the 1992 Permit "shall
not be deemed or construed to impose any obligations on
Smithfield that are inconsistent with the [Special] Order."

On appeal, the Commonwealth argues that the trial court
erroneously issued an advisory opinion because there was no
"actual controversy" between the Commonwealth and
Smithfield. The Commonwealth contends that it consistently has
agreed with Smithfield that the terms of the Special Order take
precedence over the terms of the 1990 and 1992 Permits.

The Commonwealth notes that it has never sought to enforce the
more stringent phosphorous standards set forth in the 1990 and
1992 Permits, and that the only violations pertaining to TKN
alleged in the nonsuited bill of complaint arose under the terms
of the Special Order. The Commonwealth also contends that the
March 25, 1997 letter to the Department of Justice did not depart
from that position, but merely stated the Commonwealth’s position
that the issue whether the Special Order takes precedence over
the permits for purposes of the EPA action in the federal
district court is a question of federal law. Thus, the
Commonwealth asserts that the only existing controversy is
between Smithfield and the EPA.

In response, Smithfield contends that the Special Order was a
contract in which the Commonwealth and Smithfield agreed that
Smithfield would be governed by the requirements of the Special
Order, rather than by the terms of the 1990 and 1992 Permits.
Smithfield contends that the Commonwealth breached this contract
by sending the March 1997 letter to the Department of Justice and
by issuing the 1992 Permit. Smithfield argues that these actions
created a controversy between the Commonwealth and Smithfield
regarding the effect of the Special Order and the 1992 Permit. We
disagree with Smithfield’s arguments and hold that Smithfield was
not entitled to a declaratory judgment because it failed to
demonstrate a justiciable controversy between the parties to this
suit.

The purpose of the Declaratory Judgment Act, Code
Sec.8.01-184 through –191, is to provide relief from
the uncertainty arising out of controversies over legal rights.
Code Sec.8.01-184; Erie Ins. Group v. Hughes, 240 Va.
165, 170, 393 S.E.2d 210, 212 (1990); Reisen v. Aetna Life
& Cas. Co.
, 225 Va. 327, 331, 302 S.E.2d 529, 531 (1983).
The trial court’s authority to enter a declaratory judgment is
discretionary and must be exercised with great care and caution. Liberty
Mut. Ins. Co. v. Bishop
, 211 Va. 414, 421, 177 S.E.2d 519,
524 (1970).

Under the Declaratory Judgment Act, the circuit courts have
the authority to make "binding adjudications of right"
in cases of "actual controversy" when there is
"antagonistic assertion and denial of right." Code
Sec.8.01-184; Blue Cross & Blue Shield v. St. Mary’s
Hosp.
, 245 Va. 24, 35, 426 S.E.2d 117, 123 (1993); Erie,
240 Va. at 170, 393 S.E.2d at 212; Reisen, 225 Va. at 331,
302 S.E.2d at 531. To be "justiciable," the controversy
must involve specific adverse claims that are based on present,
not future or speculative, facts that are ripe for judicial
assessment. Id.; City of Fairfax v. Shanklin, 205
Va. 227, 229, 135 S.E.2d 773, 775 (1964). Thus, the Declaratory
Judgment Act does not give trial courts the authority to render
advisory opinions, decide moot questions, or answer inquiries
that are merely speculative. St. Mary’s, 245 Va. at 35,
426 S.E.2d at 123; Erie, 240 Va. at 170, 393 S.E.2d at
212; Reisen, 225 Va. at 331, 302 S.E.2d at 531.

The present case does not involve an actual controversy
between the Commonwealth and Smithfield regarding the effect of
the Special Order. The October 1991 letter from the State Water
Control Board to Smithfield plainly stated that any special order
agreements concerning compliance with water quality standards
took precedence over the terms of the VPDES permit. In its bill
of complaint, the Commonwealth acknowledged that the Special
Order governed Smithfield’s wastewater discharge of TKN and total
phosphorous. This position was underscored by the fact that the
only TKN violations alleged in the bill of complaint were
violations of the Special Order, and there were no violations
alleged concerning the phosphorous standard.

During the hearing, the Commonwealth’s counsel emphasized that
"as to phosphorous and the State Water Control Board,
[Smithfield's] behavior is regulated by the [Special] [O]rder and
not by the permit . . . There is no dispute between the
Commonwealth and Smithfield Foods, Incorporated. The dispute is
with EPA in the [f]ederal case."

We find no merit in Smithfield’s argument that the 1992 Permit
and the Commonwealth’s March 1997 letter to the Department of
Justice created a controversy between the Commonwealth and
Smithfield on which a declaratory judgment could be based.
Although certain terms of the 1992 Permit were more restrictive
than the standards contained in the Special Order, the
Commonwealth uniformly had acknowledged that, in its enforcement
of phosphorous and TKN violations, the terms of the Special Order
took precedence over the terms of the 1992 Permit.

The March 1997 letter to the Department of Justice did not
constitute a change in the Commonwealth’s position. In that
letter, the Commonwealth merely stated the obvious proposition
that federal law governed the EPA enforcement action in federal
district court, including any issue whether that action was
precluded by the terms of the Special Order.

Nevertheless, citing Criterion Insurance Company v. Grange
Mutual Casualty Company
, 210 Va. 446, 171 S.E.2d 669 (1970),
Smithfield argues that the chancellor did not render an advisory
opinion because Smithfield’s liability to a third party, the EPA,
depended on the effect of the Special Order binding the
Commonwealth and Smithfield. However, Criterion does not
support Smithfield’s argument. In that declaratory judgment
proceeding, a controversy existed between two insurance carriers
to determine which carrier was obligated to defend actions
pending against an owner and an alleged permissive user of an
automobile. Id. at 449, 171 S.E.2d at 671. Thus, we reject
Smithfield’s argument because a declaratory judgment proceeding
may not be maintained against a party with whom there is no
controversy in order to resolve a controversy existing with one
not a party to the proceeding. Here, the absence of a controversy
between the Commonwealth and Smithfield is fatal to Smithfield’s
cross-bill and resulted in the chancellor’s erroneous issuance of
an advisory opinion.

For these reasons, we will reverse and vacate the trial
court’s decree and enter final judgment in favor of the
Commonwealth.

Reversed and
final judgment.

 

 

FOOTNOTES:

[1] "VAC" refers to
"Virginia Administrative Code."

[2] Although the Special Order was
amended in November 1994, the changes are not relevant to the
present case.

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