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Published in Michigan Environmental Law Journal, Spring–Summer 2016, Vol. 34, No. 1, Issue 101 [view full issue].
Cite: 34 Mich Env Law J 1 (2016)

Corporations are "Persons" under NREPA's Citizens' Suits Provision

by Rebecca J. S. Cassell, Myers & Myers, PLLC

The Michigan Court of Appeals recently held that a corporation has standing to bring a citizen suit under the Michigan Natural Resources and Environmental Protection Act (NREPA), MCL 324.101 et seq. This decision reverses a long-held understanding among environmental practitioners that a corporation has no standing to bring such an action based upon the holding in Flanders Indus. v. Michigan, 203 Mich App 15, 34; 512 NW2d 328 (1993).

In Tennine Corp. v. Boardwalk Commercial, LLC[1], the defendant Central Michigan Railway Company ceased using its railroad right-of-way (ROW) in 2004. The company then began the process of abandoning the ROW and converting it into a recreational trail. A work crew began demolishing the tracks and rails on the ROW and, in so doing, allegedly stacked railroad ties and tracked contaminated soil onto the plaintiff's property. Plaintiff, a corporation, gave notice of its intent to file a claim under Part 201 of NREPA and then commenced litigation.

The trial court dismissed plaintiff's claim relying on Flanders, holding that because plaintiff was a corporation, it was not a person whose health or enjoyment of the environment could be adversely affected by a release of hazardous chemicals under NREPA. The Flanders plaintiff, also a corporation, had filed suit seeking recovery of costs and expenses and seeking injunctive relief under former MCL 200.615 (the Michigan Environmental Response Act (MERA), the predecessor statute to Part 201 of NREPA), claiming it was a person whose health or enjoyment of the environment was adversely affected by a release.[2] The Flanders Court found that plaintiff was not a person whose health may be affected because plaintiff was seeking relief only from the monetary costs associated with the release.[3] Therefore, Flanders was found not to be within the class of persons who may seek relief under the provisions of former MCL 299.615.[4]

The Court of Appeals panel in Tennine reversed the trial court decision, finding that the circumstances and allegations in the case were different from those in Flanders. The holding confirmed that a corporation has a right to enjoyment of its property that can be adversely affected by an environmental release or threatened release. The Tennine Court found that the plaintiff's claim for injunctive relief was based on sufficient allegations of adverse effect to its health and enjoyment of the environment to create standing, clarifying as follows:

The Flanders Court did not hold that a corporation lacked standing under the NREPA simply because of its corporate status. Rather, it held that the plaintiff lacked standing because it brought suit under the former MERA to obtain relief for the costs of remediation ordered by the DNR. The plaintiff did not bring suit in the capacity of a person whose health or enjoyment of the environment was adversely affected; therefore, it lacked standing under the statute.[5]

In contrast, the Tennine plaintiff alleged that the defendant's removal activity released or threatened to release hazardous substances that would endanger the health of people on plaintiff's property and reduce the value of plaintiff's property. Accordingly, the Tennine Court found that plaintiff sufficiently alleged that the release adversely affected its health or enjoyment of the environment.

The court of appeals then considered whether a corporation has standing to sue as a "person" for purposes of a citizen suit under MCL 324.20135. The Court initially noted that a corporation has the power to sue and be sued and "participate in actions and proceedings, judicial, administrative, arbitrative, or otherwise, in the same manner as natural persons."[6] Next, the Court noted that the statutory definition of "person" in NREPA was unambiguous in its inclusion of a corporation in the definition.[7]

The Tennine Court next revisited the limitation in NREPA that not all "persons" have standing to bring suit, but only those persons "whose health or enjoyment of the environment is or may be adversely affected by a release from a facility or threat of a release from a facility."[8] Since the plaintiff did not present any evidence that the health of its employees was compromised as a result of the removal activity in the ROW, the Court focused on whether Tennine, as a corporation, may suffer from the loss of the enjoyment of the environment as a result of any release.[9] Since NREPA does not define "enjoyment," the Court considered common dictionary definitions, which focused on "possession and use" with respect to property, and held that "a corporation may exercise the right to use its land or water—in other words, a corporation may enjoy the environment."[10] The Court noted that this interpretation was in line with the Michigan Supreme Court's historic holding that a corporation may "enjoy" its real property.[11] The Tennine Court extended this analysis by finding that a corporation's "enjoyment" of the environment and use of its land or water may be adversely affected by the release or threat of release of hazardous substances.

Finally, the Tennine Court noted that the legislative intent and purpose of Part 201 of NREPA did not divest corporations of standing simply because of their corporate status: "[T]he purpose of Part 201 of the NREPA is 'to provide for appropriate response activity to eliminate unacceptable risks to public health, safety, welfare, or to the environmental contamination at facilities within the state.'"[12] Additionally, "Part 201 'is intended to foster the redevelopment and reuse of vacant manufacturing facilities and abandoned industrial sites that have economic development potential, if that redevelopment or reuse assures the protection of the public health, safety, welfare, and the environment.'"[13] The Tennine decision provides important precedent for corporations contemplating a citizen suits under Part 201 of NREPA as long as the corporation properly alleges that its health or enjoyment of the environment has been adversely affected by a release or threat of release from a facility and the suit does not merely seek monetary, remediation damages.

While the Tennine case is certainly of interest to environmental law practitioners, it also included an important ruling for all civil litigants involving offer of judgment sanctions. Tennine's suit included claims against the Boardwalk defendants, who asserted in response to the suit that they did not have an ownership interest in the property and that the criteria for reversion of the ROW had not been satisfied. Those defendants each submitted an offer of judgment of $500. Plaintiff did not accept the offers, but requested additional information regarding their ownership. Plaintiff failed to pursue the request through a motion to compel or otherwise, and the trial court granted the defendants' motion for summary disposition. The trial court then awarded offer of judgment sanctions of approximately $21,000.

The plaintiff appealed this ruling, arguing that the trial court failed to apply the interest of justice exception included in MCR 2.405(D)(3). The Court of Appeals upheld the award, concluding that the interest of justice provision is the exception to the general rule that should only be applied in unusual circumstances.[14] The Court noted the factors to be considered, as set forth in Derderian v. Genesys Health Care Sys., 263 Mich App 364, 381 (2004), and concluded that defendants' failure to respond to informal requests for plaintiff regarding documentation of ownership did not constitute gamesmanship or otherwise establish an unusual circumstance.[15] Moreover, the trial court argued that since plaintiff made no counteroffer under MCR 2.405 and did not include a specific amount of monetary damages in its complaint, and since there was no case evaluation award, the trial court did not have any other monetary amount to consider in determining whether the Boardwalk defendants' offers of judgment were de minimis. Therefore, the Court upheld the trial court's ruling that the interest of justice exception did not bar an award of costs and fees under MCR 2.405.[16]

The Tennine decision is not surprising given the current climate of courts recognizing the expanding rights of corporations. While the defense was unique—and persuasive enough to convince the trial court—the Court of Appeals' ruling does not appear to deviate from the historic practice of business entities bringing environmental claims. The Tennine ruling does, however, form another layer in establishing standing for corporate litigants, which adds to the volatility surrounding the type of "harm" required to grant standing for citizen suits in Michigan.[17]

The time period for the Tennine defendants to appeal to the Supreme Court recently expired, so its holding is good law at least for the time being. Apparently a corporation does have standing to bring a citizen suit, as long as the corporation properly alleges its health and enjoyment of the environment is being adversely affected. Corporate "persons" considering a citizen suit under NREPA will need to review this case carefully prior to filing a complaint to ensure that it frames its potential injury properly to achieve standing. Any defendant receiving notice of a potential lawsuit under NREPA should also carefully analyze whether the standing analysis in Tennine could be useful for their response.

[1] Tennine Corp. v. Boardwalk Commercial, LLC, ___ Mich App ___ (2016) (Docket No. 323257)

[2] Flanders, 203 Mich App 15.

[3] Id. at 34.

[4] Id.

[5] Tennine, ____ Mich App at ___; slip op at *12-13, citing Flanders, 203 Mich App at 34.

[6] Tennine, ___ Mich App at ___ *7, quoting MCL 450.1261(b).

[7] Id. at *15, citing MCL 324.301(h).

[8] Id.

[9] Id., citing MCL 324.20135(1).

[10] Id. at *16 (emphasis added).

[11] Id., citing Grand Rapids N & LSR Co. v. Grand Rapids & IR Co., 35 Mich 265, 271 (1998) (a corporation's right to "enjoy" its land and property is "sacredly guarded and protected under our constitution").

[12] Id. at *17, citing MCL 324.20102(c).

[13] Id. at *17-18, citing MCL 324.20102(l).

[14] Id. at *22.

[15] Tennine, ___ Mich App ___, at *24-25.

[16] Id.

[17] See Nat'l Wildlife Federation v. Cleveland Cliffs Iron Co., 471 Mich 608 (2004); Michigan Citizens for Water Conservation v. Nestle Waters of N America Inc., 479 Mich 280 (2007); Lansing Sch. Ed. Ass'n v. Lansing Bd. of Ed., 487 Mich 349 (2010); Anglers of the AuSable Inc. v. Dep't of Environmental Quality, 488 Mich 69 (2010); Anglers of the AuSable Inc. v. Dep't of Environmental Quality, 489 Mich 884 (2011); and Duncan v. Michigan, 300 Mich App 176 (2013).