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Dow Chemical Co. v. United States Environmental Protection Agency and Douglas Costle

decided: August 24, 1979.



Before Adams, and Rosenn, Circuit Judges, and Lacey, District Judge.*fn*

Author: Adams


One of the assumptions upon which our society is premised is that technological advancement will be encouraged and material comfort will be increased by rewarding innovation with profit. Long ago, Sir Edward Coke noted that "everyone thirsteth after gaine,"*fn1 and, by and large, the law recognizes that experimentation and innovation will be persisted in only to the degree that an opportunity for "gaine" is presented.*fn2 This may be especially so today when our continued efforts in scientific research depend almost as much on those who are willing to fund them as on the ingenuity of the researchers themselves.

But the recognition of the desirability of encouraging technological advancement does not mean that the Congress, if it chooses to do so, may not diminish innovation to some degree in order to further some other purpose. Nor does it mean that courts may refuse to give effect to such a legislative decision even if they suspect that the "other purpose" guiding the legislature will be disserved rather than furthered by the statute in question. This is so because Congress is entitled to make its own judgments in this area and once they are made the judiciary must respect them even if its own assessments are to the contrary.


The present appeal is by Dow Chemical Company, which charges that the Environmental Protection Agency (EPA) is misread its statutory mandate in seeking, under § 8(d) of the Toxic Substances Control Act, 15 U.S.C. § 2607(d) (1976), to obtain information and studies regarding research and development projects undertaken by a commercial enterprise, when such research and development are ultimately expected to produce a profitable product. Section 8(d) provides:

(d) Health and safety studies. The Administrator shall promulgate rules under which the Administrator shall require any person who manufactures, processes, or distributes in commerce or who proposes to manufacture, process, or distribute in commerce any chemical substance or mixture (or with respect to paragraph (2), any person who has possession of a study) to submit to the Administrator

(1) lists of health and safety studies (A) conducted or initiated by or for such person with respect to such substance or mixture at any time, (B) known to such person, or (C) reasonably ascertainable by such person, except that the Administrator may exclude certain types or categories of studies from the requirements of this subsection if the Administrator finds that submission of lists of such studies are unnecessary to carry out the purposes of this Act; and

(2) copies of any study contained on a list submitted pursuant to paragraph (1) or otherwise known by such person.

Guidance in interpreting § 8 is provided by the following definition in subsection (f):

"For purposes of this section, the terms "manufacture' and "process' mean manufacture or process for commercial purposes." The dispute in the case at hand concerns the scope of the authority given the Administrator under § 8.

Congress passed the Toxic Substances Control Act, 15 U.S.C. §§ 2601-2629 (1976), in order to prevent the general environment from becoming the laboratory in which harmful effects of chemicals are discovered. The Act establishes an intricate and at times unfathomable system of regulation administered by the EPA. It places the burden of ensuring adequate research and testing of toxic substances squarely on those companies who seek to profit from the use or sale of such chemicals.

One of the most important provisions of the Act is § 4, which gives the Administrator the authority to require that certain companies those that manufacture, distribute in commerce, process, use, or dispose of chemical substances or mixtures that the EPA suspects may be hazardous conduct tests on such materials. 15 U.S.C. § 2603(a). Section 4(e) calls for the establishment of a committee that is expected to make recommendations to the EPA regarding what chemicals or mixtures should be tested pursuant to § 4(a). This committee, known as the Interagency Testing Committee (I.T.C.), is required to publish in the Federal Register and transmit to the EPA a list of chemicals and proposed areas of study.

In October 1977 the I.T.C. published such a list, including ten chemicals and categories of chemicals. 42 Fed.Reg. 55026. According to the I.T.C. list, the specified chemicals presented serious potential for public exposure and there was a substantial possibility that they could be hazardous. The Committee recommended testing in six general areas: carcinogenicity, mutagenicity, teratogenicity, other chronic effects, environmental effects, and epidemiology.*fn3

To determine what tests would be necessary, the EPA, pursuant to § 8(d), proposed a rule designed to obtain the submission of already existing health and safety studies.*fn4 This proposed regulation stipulated that all manufacturers, processors and distributors of any of the named chemicals must submit to the EPA lists of studies initiated by or conducted for them and copies of any such studies in their possession. Section 1(a)(4) of EPA's proposed rule defined the terms "manufacture or process" to include all manufacture or process of chemicals even if only for research purposes.*fn5

Several interested parties commented on § 1(a)(4) of the proposed rule, complaining that submission to the EPA of information gleaned from tests for new uses of chemicals might discourage product research and development inasmuch as competitors would be apt to gain valuable information about a company's future plans.*fn6 Notwithstanding these complaints, the changes made in the final rule gave no relief to those troubled by the possible chilling effects of the regulation on product research and development and innovation in the chemical field generally. Instead, the Agency specifically included a "Note" in the final regulation stating that the definition of manufacturing "for commercial purposes" includes "product research and development." 43 Fed.Reg. 39086. And the two principal changes made to the proposed rule broadened rather than narrowed the scope of the regulation.

Most important for our purposes, the final rule required that the companies subject to the rule submit copies of health and safety studies in their possession even if the studies were of chemicals that that company did not manufacture, process, or distribute. The listing requirement itself, however, remained limited to those substances actually manufactured, processed or distributed by the reporting company. See 40 C.F.R. § 730.5(a), 43 Fed.Reg. 30986. A second change substantially expanded the scope of the type of studies sought beyond the six areas suggested by the I.T.C.

Dow, believing the changes in the proposed rule to be significant, charged that the EPA had violated the Administrative Procedure Act by enlarging the scope of the regulation without adequate notice and fair opportunity to comment. See 5 U.S.C. § 553 (1976). Dow also challenged the Administrator's substantive authority under the Act in two respects. First, it contended that the manufacture of small quantities of a chemical solely for purposes of research and development is Not manufacture "for commercial purposes" and, therefore, is beyond the reach of § 8(d). Second, Dow urged that the EPA's effort to obtain copies of studies under § 8(d)(2) should be limited to those studies that a company was required to list under § 8(d)(1). The second paragraph, Dow argued, cannot be read to give the Agency a power broader than that given in the first paragraph.

In apparent response to Dow's filing of a petition and brief on December 15, 1978, the EPA, on January 26, 1979, withdrew the rule. But the EPA still insists that the regulation was within its statutory authority and that it was revoked solely because of procedural irregularities. Given the revocation, however, the EPA maintains that Dow's appeal is now moot inasmuch as it challenges a rule that is no longer in effect. Before we may consider the merits of Dow's petition, then, we must first address the question of mootness a question that implicates the jurisdiction of the Court.


At first reading, the case for dismissing the present petition as moot has considerable appeal. Simply put, the government urges that there is at this time no rule extant with which Dow must comply. Moreover, the government asserts there is no suggestion that Dow failed to comply in any material respect with the now-withdrawn rule when that rule was in effect. Thus, it may fairly be questioned whether this litigation retains the characteristics of a live case or controversy necessary for adjudication in a federal court. A careful analysis persuades us, however, that the petition is not moot.

In recent years the Supreme Court has evolved a mootness doctrine that includes both constitutional*fn7 and policy*fn8 elements. Under Article III, section 2 of the Constitution, the power of the judiciary is limited to "cases or controversies." When a dispute ceases to be sufficiently alive or concrete so as to be a genuine "controversy" it is no longer a fit subject for federal court adjudication. The judgment of a federal court must resolve

a real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical set of facts.*fn9

We have interpreted Supreme Court pronouncements on this subject to require (1) a legal controversy that is real and not hypothetical, (2) a legal controversy that affects an individual in a concrete manner so as to provide the factual predicate for reasoned adjudication, and (3) a legal controversy with sufficiently adverse parties so as to sharpen the issues for judicial resolution.*fn10

Here Dow and the EPA are undoubtedly adverse parties. They offer contrary interpretations of a specific section of the statute. The dispute is thus real, not hypothetical; concrete not generalized. To resolve the question, this Court need not anticipate certain contingencies. Had the EPA, for example, withdrawn the rule because it was uncertain as to its statutory authority under the Act, the case might have been rendered non-justiciable either because it lacks sufficient adversary quality or because the controversy would become to some extent hypothetical inasmuch as it would depend on the mere possibility of future action by the EPA. The agency, however, withdrew the rule Only because Dow's petition raised questions regarding the EPA's compliance with the procedural requirements of the Administrative Procedure Act. In the notice revoking the regulation, the EPA clearly stated that it did not intend "to change its interpretation of the scope of its statutory authority" about which "it entertains no doubt." 44 Fed.Reg. 6099. In fact, the agency is in the process of proposing a new § 8(d) rule that will take precisely the same substantive position adopted in the withdrawn rule. Id. Under these circumstances, we believe that the Article III prerequisites for the exercise of federal court jurisdiction are satisfied.

An argument may be made, of course, that even if the constitutional prerequisites for federal court jurisdiction exist, the policy aspects of the mootness doctrine should not be lightly dismissed. But in this case policy considerations favor resolution of the petition at this time. First it is the EPA, not Dow, that urges us to treat the appeal as moot as a result of its own action in withdrawing the rule. Courts are understandably reluctant to permit agencies to avoid judicial review, whenever they choose, simply by withdrawing the challenged rule. As Judge Skelly Wright has noted:

Where a court is asked to adjudicate the legality of an agency order, it is not compelled to dismiss the case as moot whenever the order expires or is withdrawn. Consideration of important legal issues "ought not to be, as they might be, defeated, by short term orders, capable of repetition but evading review . . . ."*fn11

Although we do not believe that this case may be classified as one involving official action " "capable of repetition but evading review,' "*fn12 we are at least to some degree persuaded by the policy concerns that underlie that exception to the mootness doctrine. The EPA has not altered its substantive stance, it has merely withdrawn its regulation for technical reasons with the declaration that it will be resubmitted. If this action by the EPA were alone sufficient to render a live dispute moot, the timing and venue of judicial review could be effectively controlled by the agency. We are reluctant, then, to dismiss a genuine and concrete controversy for what in this case amounts to a technical reason, brought about by the party seeking such a dismissal.*fn13 As the Supreme Court has noted:

Voluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, I. e., does not make the case moot. A controversy may remain to be settled in such circumstances, E. g., a dispute over the legality of the challenged practices. The defendant is free to return to his old ways. This, together with a public interest in having the legality of the practices settled, militates against a mootness conclusion.*fn14

A second policy reason also supports retention of jurisdiction over this case. Although the precise regulation under scrutiny has been withdrawn, the previous promulgation of the regulation, combined with EPA's adherence to the interpretation of the statute included therein, may continue to have a Present impact on Dow. Because the EPA has unequivocally taken the public posture that it will seek health and safety studies resulting from research and development work, Dow's present decisions regarding research and development projects are necessarily colored by the very real possibility of having to provide the EPA with confidential information of considerable value to Dow's competitors. The resulting "chill" on Dow's research and development is thus a present harm that merits our attention, provided that the jurisdictional requirements have been met. To delay adjudication here would not leave the parties in the same position they occupied before the EPA took any action rather it would leave Dow under a non-speculative threat of ...

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