Brown-Forman Corp. v. Miller

528 S.W.3d 886

BROWN-FORMAN CORPORATION and Heaven Hill Distilleries, Inc., Appellants

v.George MILLER, Appellee

2014-SC-000717-DG.

Supreme Court of Kentucky.

SEPTEMBER 28, 2017

COUNSEL FOR APPELLANT BROWN-FORMAN CORPORATION: Charles J. Cronan, IV, Louisville, Mark Richard Overstreet, Frankfort, Bethany A. Breetz, Marjorie Ann Farris, Louisville.

COUNSEL FOR APPELLANT HEAVEN HILL DISTILLERIES, INC.: Virginia Hamilton Snell, Donald Joseph Kelly, Lisa Catherine DeJaco, Louisville.

COUNSEL FOR APPELLEE GEORGE MILLER: None/Withdrawn.

COUNSEL FOR AMICI CURIAE: David James Treacy.

OPINION OF THE COURT BY JUSTICE WRIGHT

I. BACKGROUND

Appellee, George Miller,¹ owns properly in Jefferson County near warehouses owned by Appellants, Brown-Forman Corporation and Heaven Hill Distilleries, Inc. (referred to collectively as Brown-Forman). Brown-Forman's warehouses contain barrels of aging bourbon.

Bourbon is a uniquely Kentucky liquor. The confluence of geology, geography, fertile soil, and availability of land helped birth the bourbon industry in Kentucky. The Commonwealth's easily accessible limestone water, abundance of oak trees, and expansive land—combined with a four-season climate conducive to growing corn and aging liquor in barrels—enabled Kentucky's nascent bourbon industry to grow and prosper. According to Brown-Forman, as of 2014, Kentucky distillers produce 95% of bourbon worldwide.

Bourbon's enticing characteristics come from distilling a unique combination of ingredients and the use of a distinct aging process. 27 C.F.R. § 5.22. Before being labelled bourbon, the distilled spirit must be aged a minimum of two-years in new charred-oak barrels. Id. This distinct aging process is at the epicenter of this dispute.

During the aging process, Brown-Forman uses warehouses in Jefferson County to store its barrels of bourbon. As it ages, the bourbon interacts with the barrel as the liquid expands and contracts based on ambient temperature and air-flow. Warmer temperatures cause the bourbon to expand and seep further into the barrel, while colder temperatures cause contraction and less contact with the barrel. Movement into and out of the wood over time gives bourbon its color and taste.

Miller's complaint centers around fugitive ethanol emissions (the so-called "angels' share") that escape from the barrels during this aging process. These fugitive emissions promote the growth of the Baudoinia compniacensis fungus (colloquially referred to as "whiskey fungus"). Miller alleges the whiskey fungus causes a black film-like substance to proliferate on his property, covering virtually all outdoor surfaces—including wood, vinyl, metal, and concrete.

Miller filed suit in Jefferson County seeking damages based on several state tort theories and injunctive relief. Brown- Forman filed a motion to dismiss for failure to state a claim upon which relief could be granted. The trial court granted Brown-Forman's motion to dismiss, as it determined the federal Clean Air Act preempted Miller's claims. Miller appealed and the Court of Appeals reversed and remanded, holding that the Act did not preempt Miller's claims. This Court granted Brown-Forman's motion for discretionary review.

For reasons that follow, we affirm the Court of Appeals insofar as it held that the trial court erred in granting Brown-Forman's motion to dismiss the state tort claims for damages, as we agree these claims are not preempted by the Act. However, we reverse the Court of Appeals' holding regarding Miller's injunctive relief. While we disagree with the trial court that the Act preempted the injunctive relief, we hold that the injunctive relief was inappropriate for other reasons.

II. STANDARD OF REVIEW

We begin our analysis by looking through the lens of the proper standard of review. A trial court should dismiss an action for failure to state a claim upon which relief may be granted only when "it appears the pleading party would not be entitled to relief under any set of facts which could be proved...." Pari-Mutuel Clerks' Union Local 541 v. Kentucky Jockey Club, 551 S.W.2d 801, 803 (Ky. 1977). "In ruling on a motion to dismiss, the pleadings should be liberally construed in the light most favorable to the plaintiff, all allegations being taken as true." Morgan v. Bird, 289 S.W.3d 222, 226 (Ky. App. 2009). "This exacting standard of review eliminates any need by the trial court to make findings of fact; ‘rather, the question is purely a matter of law. Stated another way, the court must ask if the facts alleged in the complaint can be proved, would the plaintiff be entitled to relief?’ " Fox v. Grayson, 317 S.W.3d 1, 7 (Ky. 2010) (quoting James v. Wilson, 95 S.W.3d 875, 884 (Ky. App. 2002) ). Appellate courts review questions of law such as this de novo, affording no deference to the trial court. Id. at 7.

In conducting this de novo review, we must decide two separate, but related, legal questions. First, we must determine whether the Clean Air Act preempts Miller's state law tort claims seeking damages. Then, we must determine whether a trial court may issue an injunction such as the one Miller sought.

III. ANALYSIS

A. Clean Air Act

We will first look to the federal act on which this litigation hinges. In passing the Clean Air Act, Congress delegated its implementation and administration to the federal Environmental Protection Agency (EPA). However, Congress also specifically designated a role for states.

Under the Act, each state may adopt a State Implementation Plan setting out emission limitations, emission standards, and other requirements to meet the National Ambient Air Quality Standards established by the EPA. 42 U.S.C. § 7410. States submit their individual plans to the EPA Administrator for approval. 42 U.S.C: § 7410(a)(1). The Act sets out the contents and the authority states must possess before the Administrator may approve a State Plan. 42 U.S.C. § 7410(a)(1)-(2).

After significant amendments to the Clean Air Act in 1990, Congress allowed the Administrator to authorize state and local governments (called permitting authorities) to issue operating permits. 42 U.S.C. § 7661. The Act defines the requisite legal authority each permitting authority must possess, prescribes the process for judicial review of permitting decisions, and allows the EPA to promulgate other requirements. 42 U.S.C. § 7661a(b). Once a permitting authority's plan satisfies those requirements, then the Administrator may authorize it to issue permits under the Act.

In Jefferson County, the Administrator specifically authorized the Louisville Metro Air Pollution Control District (Metro District) to issue operating permits. 40 C.F.R. § 70, App.A—Kentucky. The Administrator also approved Kentucky's State Plan, which includes Metro District's regulations. 40 C.F.R. § 52.923. Brown-Forman and Heaven Hill both maintain permits, and Miller does not allege either distiller is in violation of its operating permit; therefore, we proceed under the premise that the companies are in full compliance with the requisite permits mandated by the Act.

1. Federal Preemption

"The Supremacy Clause makes the laws of the United States ‘the supreme Law of the Land ... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.’ " Hughes v. Talen Energy Mktg., ––– U.S. ––––, 136 S.Ct. 1288, 1297, 194 L.Ed.2d 414 (2016) (quoting U.S. Const. art. VI, cl. 2 ). The Supremacy; Clause binds this Court and requires that we give precedence to lawful federal enactments over the laws of the Commonwealth. "[T]he states have no power, by taxation or otherwise, to retard, impede, burden, or in any manner control, the operations of the constitutional laws enacted by congress to carry into execution the powers vested in the general government." M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 436, 4 L.Ed. 579 (1819) (emphasis added). "Put simply, federal law preempts contrary state law." Hughes, 136 S.Ct. at 1297. State law is contrary "to the extent of any conflict with a federal statute." Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363, 372, 120 S.Ct. 2288, 147 L.Ed.2d 352 (2000). Notably, this occurs "where, under the circumstances of a particular case, the challenged state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Hughes, 136 S.Ct. at 1297 (citing Crosby, 530 U.S. at 373, 120 S.Ct. 2288 ). Chief Justice John Marshall recognized nearly two centuries ago that "[i]t is of the very essence of supremacy, to remove all obstacles to its action within its own sphere, and so to modify every power vested in subordinate governments, as to exempt its own operations from their own influence." M'Culloch, 17 U.S. at 427.

With that in mind, we turn back to the federal Clean Air Act, which seeks to strike a balance between encouraging economic development and protecting the environment—a task here entrusted to both the Metro District and EPA. Specifically, in taking a cost-benefit approach, the Act directs the Administrator to "consider all of the economic, public health, and environmental benefits of efforts to comply with such standard," 42 U.S.C. § 7612(b), as well as "the effects of such standard on employment, productivity, cost of living, economic growth, and the overall economy," 42 U.S.C. § 7612(c).

After this careful balancing was taken into account, Brown-Forman and Heaven Hill were issued separate kinds of permits based on the amount of air pollutants each releases. Brown-Forman operates under a Title V permit, which is required for stationary sources emitting 100 tons per year or more of any non-fugitive air pollutant. See U.S.C. §§ 7661 et seq.; 40 C.F.R. § 70; Metro Dist. Regulation 2.16. Since Heaven Hill emits less them 100 tons of non-fugitive air pollutants per year, it holds a Federal Enforceable District Origin Operating Permit. See Metro Dist. Regulation 2.17. Because no party argues otherwise, we make no distinction in our analysis between...