Title: Treacy v. Smithfield Foods

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  All the Justices 
 
DENNIS H. TREACY, ET AL. 
 
v.  Record No. 971773   OPINION BY JUSTICE BARBARA MILANO KEENAN  
 
 
 
June 5, 1998 
SMITHFIELD FOODS, INC. 
 
FROM THE CIRCUIT COURT OF ISLE OF WIGHT COUNTY 
Kenneth E. Trabue, Judge Designate 
 
 
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. § 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. §§ 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. §§ 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 
                     
 
1"VAC" refers to "Virginia Administrative Code." 
 
 
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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 § 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 
 
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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 § 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 
                     
 
2Although the Special Order was amended in November 1994, 
the changes are not relevant to the present case. 
 
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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 
 
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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 
 
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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 
 
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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 §§ 8.01-
184 through –191, is to provide relief from the uncertainty 
arising out of controversies over legal rights.  Code § 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 
 
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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 § 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.  
 
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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 
 
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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. 
 
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Reversed and final judgment.
 
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