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IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA WINSTON-SALEM DIVISION FLUE-CURED TOBACCO COOPERATIVE STABILIZATION CORPORATION, et al., Plaintiffs, v. ) Civil Action No. 6:93CV370 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, et al., ) Defendants. PLAINTIFFS' MEMORANDUM IN OPPOSITION TO EPA'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT AND FOR A PROTECTIVE ORDER Plaintiffs brought this action to invalidate the Environmental Protection Agency's (EPA) unlawful classification of environmental tobacco smoke (ETS) as a Group A (known human) carcinogen and the Risk Assessment on which the classification is based. On July 20, 1994, in an Order denying EPA's motion to dismiss the Complaint, the Court directed the parties to develop a factual record. Instead of cooperating on a reasonable plan of discovery, EPA filed five diversionary motions on September 30, 1994 to thwart the development of a factual record and impede plaintiffs' ability to prepare the litigation for a decision on the merits. In addition, EPA produced a so-called "administrative record" that is incomplete, raises more questions than it answers, and intentionally omits relevant Agency documents that do not support the Group A classification. This brief demonstrates that

plaintiffs are entitled to discovery so that we can develop a proper factual record for judicial review. Statement of the Case Background. The ETS Risk Assessment and classification decision was prepared by EPA's Office of Health and Environmental Assessment (OHEA) pursuant to authority claimed under the Radon Gas and Indoor Air Quality Research Act of 1986, Pub. L. No. 99-499, Title IV, §§ 401-405, 100 Stat. 1758, reprinted in 42 U.S.C. § 7401 note (Radon Act). Steven P. Bayard was the OHEA project manager for the ETS risk assessment. He reported on this project to OHEA's Director, William H. Farland. Then EPA Administrator William K. Reilly released the ETS Risk Assessment on January 7, 1993 (EPA/600/6-90/006F). Plaintiffs served the Complaint on June 22, 1993, and simultaneously filed Requests for Admission to narrow the issues for discovery and trial. Defendants moved to dismiss all four counts of the Complaint on July 20, 1993 on the grounds that EPA's decision on ETS was not judicially reviewable under the Administrative Procedure Act (APA) and that plaintiffs' due process count failed to state a claim. On June 14, 1994, plaintiffs served a Request for Production of Documents. Defendants' obligation to respond to plaintiffs' discovery was delayed by agreement while the motion to dismiss was pending. On July 20, 1994, the Court denied defendants' motion to dismiss the first three counts of the Complaint and determined - 2 -

that EPA's decision is judicially reviewable. The Court deferred ruling on defendants' motion to dismiss the due process claim "until a factual record has been developed." Memorandum Opinion (Mem. Op.) at 20. Current Motions. Despite having lost its motion to dismiss, EPA refuses to comply with its discovery obligations. On September 30, 1994, instead of cooperating in the Court's direction to develop a factual record, EPA moved the Court yet again to dismiss the due process count or, alternatively, for stay of that count. In a third motion, EPA seeks a protective order insulating defendants from any discovery, while refusing to answer the long-pending Requests for Admission and Request for Production of Documents. Finally, EPA challenges plaintiffs' standing to seek judicial review and seeks summary judgment to limit the scope of review to a purported "administrative record." No agency administrative record existed when EPA took its actions, when this case was filed, or even when defendants filed their motion to dismiss. It was only after the Court denied EPA's motion, and the Agency faced the prospect of having to respond to pending discovery requests, that the "administrative record" was created. EPA argues that neither the Court nor plaintiffs are entitled to look anywhere beyond that post-hoc compilation of materials the Agency selected to support its position. But plaintiffs already know that this "record" contains factual gaps and fails to include key Agency documents such as those that severely criticize EPA's position on ETS and 3

demonstrate that EPA knew the Group A classification could not be justified under its Guidelines for Carcinogen Risk Assessment. These internal critiques were purged from the "record" EPA constructed for the Court's review.l/ Discovery will assure that information like this, and other relevant information needed to explain EPA's decision and the complex information on which it is based, is available to the Court before it is asked to decide this case. Discovery will also permit plaintiffs to demonstrate EPA's bad faith more fully and prove EPA's due process violations. That is what the law requires. EPA's motions should be denied because there are material facts in dispute on which plaintiffs are entitled to take discovery.?/ 1/ Some of these documents were released to plaintiffs under the Freedom of Information Act (FOIA), but, curiously, were excluded from the "record" EPA certified to the Court. 2/ Plaintiffs are also filing today a motion to hold in abeyance EPA's motions to dismiss or stay the due process count, and to dismiss the Complaint on standing grounds. In addition, we have sent defendants a letter under Local Rule 204(c) detailing our specif ic concerns with EPA's non-responses to the pending Requests for Admission and Request for Production of Documents. This brief addresses plaintiffs' general right to discovery under applicable legal authorities. Upon a favorable ruling by the Court, specific discovery issues will be worked out, if possible, between the parties, as contemplated by the Local Rule. - 4 -

Argument I. EPA'S MOTION FOR SUMMARY JUDGMENT LIMITING THE SCOPE OF JUDICIAL REVIEW RAISES ISSUES OF MATERIAL FACT AND MUST BE DENIED EPA's motion for summary judgment to limit the scope of judicial review to the Agency's self-serving, post-hoc "record" can be quickly dispatched. Summary judgment is appropriate only in those cases where there is no genuine dispute as to a material fact and it appears that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). In the Fourth Circuit, summary judgment should be granted only in cases "where it is perfectly clear that no issue of fact is involved and inquiry into the facts is not desirable to clarify the application of the law." Miller v. Federal Deposit Ins. Corp., 906 F.2d 972, 974 (4th Cir. 1990).3/ This is not such a case because EPA's motion raises a threshold issue of material fact: What is the administrative record? A. The Farland Declaration Demonstrates the Need for Discovery The "record" produced by EPA could hardly be more confusing. OHEA Director Farland acknowledges that EPA did not prepare "a formal docket, administrative record, or other comprehensive compilation of the materials considered in developing a risk assessment . . . in the usual course of business"; rather, EPA 3/ Any permissible inferences to be drawn from the underlying facts on review of a motion for summary judgment must be viewed in the light most favorable to the party opposing the motion. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). - 5 -

waited to begin compiling its post-hoc "record" until after the government lost its motion to dismiss.4/ Farland Declaration 11 7, 10 EPA's "record" was not only an eleventh-hour affair, it was unilaterally and selectively compiled by the Agency.5/ The Farland Declaration tells us the "record" does not in fact contain all of the materials "considered" by EPA. It omits "[t]he vast majority of the deliberative materials that pre-date the issuance of the ETS Risk Assessment and that EPA considered in developing the Risk Assessment." Id. 1[ 14. The exclusion of such relevant materials raises an obvious question of material fact about the completeness of this "record." 4/ The Court's obligation to probe what facts were before the agency when it made its decision is particularly strong where, as here, "the 'contemporaneous' factual record came into existence only after the challenged decision." Hospital Ass'n of New York State, Inc. v. Toia, 473 F. Supp. 917, 927 (S.D.N.Y. 1979); accord Pension Benefit Guaranty Corp. v. LTV Steel Corp., 119 F.R.D. 339, 342 (S.D.N.Y. 1988). 5/ EPA "may not unilaterally determine what shall constitute the administrative record and thereby limit the scope of th[e] Court's inquiry." Tenneco Oil Co. v. Department of Energy, 475 F. Supp. 299, 317 (D. Del. 1979). This Court need not, and should not, simply accept EPA's "administrative record" as the "whole record." As the Ninth Circuit has explained: The whole administrative record, however, "is not necessarily those documents that the agency has compiled and submitted as 'the' administrative record." Thompson v. United States Dep't of Labor, 885 F.2d 551, 555 (9th Cir. 1989) (emphasis in original) (quoting Exxon Corp. v. Department of Energy, 91 F.R.D. 26, 32 (N.D. Tex. 1981)); see also Environmental Defense Fund v. Blum, 458 F. Supp. 650, 661 (D.D.C. 1978) ("The agency may not, however, skew the 'record' for review in its favor by excluding from the 'record' ~ information proceeding in in its own files which has great pertinence to the question."). ~ ~ - 6 - ~ ~ G't

EPA makes much of its last-minute file search for documents to put into the "record." But what offices in EPA were searched? While the Farland Declaration (Q1 7, 9) indicates that OHEA and SAB files were searched, it also says that "other offices within EPA" were searched. What other offices? Was the Administrator's office searched? After all, former Administrator Reilly personally released the ETS classification on January 7, 1993. Id. 1 16. Who searched the office of Assistant Administrator Erich Bretthauer, "the Agency official responsible for approval of significant risk assessments"? Id. What about the offices of the many consultants to EPA who were the principal authors of the Risk Assessment? The Farland Declaration attempts to endow EPA's "record" with a patina of normalcy it does not possess. EPA purports to follow its Uniform Rulemaking Docketing Guidance (Docketing Guidance), but the Farland Declaration is full of caveats about EPA's compliance with that Guidance. For example, in paragraph six, the Farland Declaration states that the recordmaking process followed the Guidance "in part"; in paragraph ten, the Farland Declaration again states the Guidance was relied upon "in part." What else was relied upon, and in what ways did EPA not rely on this Guidance document? For example, the Guidance document indicates EPA "shall include . [i]nformation considered by the Agency." Docketing Guidance at 6. Yet, we know from the Farland Declaration that the "vast majority of the deliberative materials . . . EPA considered" are - 7 -

excluded from the "record." Farland Declaration 1[ 14. We also know that some of the information excluded by EPA concludes the Agency could not follow its Guidelines and still classify ETS as a known human carcinogen. See pp. 13-16, infra. What we do not know without discovery is what other information that is relevant to this proceeding has been excluded from the "record" presented for judicial review by EPA. The question of whether judicial review should be limited to EPA's "record" cannot be decided until the composition of that "record" is settled. EPA's motion for partial summary judgment should therefore be denied. II. DISCOVERY IS WARRANTED IN THIS CASE EVEN UNDER AN APA ANALYSIS TO PROPERLY DEVELOP THE FACTUAL RECORD EPA's no-discovery theory boils down to a rote claim that discovery is not typical in administrative law cases. That argument does not wash here because there is nothing typical about EPA's actions. In addition, EPA has vastly overstated the limitations on discovery even in typical APA cases.6/ 6/ See generally Richard McMillan, Jr. and Todd D. Peterson, Permissible Scope of Hearings, Discovery, and Additional Factfinding During Judicial Review of Informal Agency Action, 1982 Duke L.J. 333; Steven Stark and Sarah Wald, Setting No Records: The Failed Attempts to Limit the Record in Review of Administrative Action, 36 Admin. L. Rev. 333 (1984). EPA's Brief for Judgment on the Pleadings plainly misstates the law when it asserts that there are only two narrowly drawn exceptions justifying consideration of extra-record materials. The Fourth Circuit authority cited by the government discusses the circumstances in which de novo review is appropriate. The issue before the Court here, however, is much more limited: whether discovery beyond the "record" proposed by the Agency is permissible. The question of de novo review can and should be reserved pending the results of discovery. - 8 -

A. APA Case Law Permits Discovery Beyond EPA's Post-hoc "Administrative Record" Under applicable case law, discovery is available where the agency's process was particularly informal or unstructured, see, e.g., Allick v. Lulan, 1990 U.S. Dist. LEXIS 9101 (D.D.C. July 16, 1990) (copy attached at Appendix Tab 1); where the record is incomplete, see, e.g., Dopico v. Goldschmidt, 687 F.2d 644, 654 (2d Cir. 1982); where the agency has not adequately explained its decision, see, e.g., Texas Steel Co. v. Donovan, 93 F.R.D. 619, 621, (N.D. Tex. 1982); where the record must be supplemented to explain technical or complex subject matters, see, e.g., United States v. Amtreco, 806 F.Supp. 1004, 1007 (M.D. Ga. 1992); and, where the agency allegedly engaged in bad faith or improper behavior, see, e.g., U.S. v. Shaffer Equip. Co., 11 F.3d 450, 460-61 (4th Cir. 1993). Each of these factors applies here. 1. EPA's Process on ETS Was Atypical and Warrants Discovery Where an agency does not follow the typical administrative process, courts recognize that discovery has an especially important role. In Allick v. Lulan, discovery was allowed against the National Park Service because the agency decision was "the result of a relatively informal, less structured process" where "the precise boundaries of the applicable administrative record may be less clear." Allick v. Lujan, 1990 U.S. Dist. LEXIS at *4-*5. See also Pension Benefit Guaranty Corp. v. LTV Steel Corp., 119 F.R.D. 339, 342 (S.D.N.Y. 1988) ("compelling - 9 -

reasons" to allow discovery in absence of formal agency proceeding); Hosp. Ass'n of New York State, Inc. v. Toia, 473 F. Supp. 917, 927 (S.D.N.Y. 1979) (where agency action consists of non-formal decisionmaking and there was no requirement for agency to compile contemporaneous record "the factual basis for [the] decision is itself a question of fact" resolved like any other question of fact). Discovery is needed here to reveal the extent of EPA's efforts to circumnavigate its limited statutory authority.2/ Discovery is also necessary because EPA did not establish anything close to a contemporaneous administrative record or public docket, and, by its own admission, excluded from its "record" the "vast majority" of deliberative materials it actually considered. EPA's "record" is not the typical compilation of all documents and materials before an agency when 7/ As the Court's Opinion noted, the Radon Act "expressly prohibited [EPA] from taking regulatory action." Mem. Op. at 16. The Court should be aware that at about the same time EPA took the position before this Court that the ETS risk assessment was just another "technical scientific report" without legal consequences, a contrary position was communicated to one of EPA's senior policymakers. "Briefing for Dick Morganstern on Environmental Tobacco Smoke," February 3, 1993; excerpt attached at Appendix Tab 2. On the page of the briefing entitled "Potential Implications of Risk Assessment," EPA stated that: the "Report [was] widely reported as the most significant event in tobacco control since the 1964 Surgeon General's report"; "Designation of ETS as a known human carcinogen dramatically increases potential liability of building owners/employers"; "Bills [are] being introduced at state and local level [and in Congress] to restrict smoking"; and "Could effect [sic] tobacco industry revenues." These revelations show the need for discovery to get at the truth behind EPA's intentions for its ETS actions.