Noncontractual Disputes


Litigation may arise in a variety of areas during the development and operation of an algae biofuels project.  Like any large development project, an algae biofuels project may generate local opposition.  Although many people would welcome an algae biofuels project as an environmentally friendly alternative energy source that can generate new local jobs, others may view the development differently.  When outreach, education, and consensus-building breakdown, opponents of a project may resort to litigation.  Litigation can lead to costly delays, and litigation strategy often focuses on allowing a project to continue development pending resolution of the claim.

Permitting

The permitting process provides many opportunities to challenge a project.  Project opponents can delay or even prevent a project by objecting to the permitting decision, and if local opposition is particularly strong, the permitting agency may refuse to grant a permit.  The permit applicant can challenge the denial of its permit through the agency’s administrative appeal process, and then, if necessary, to the appropriate courts, and so can the opposition.  Proper defense of a permit decision begins by actively participating in the permit process and ensuring that the local government or state agency follows all steps and has all relevant information necessary to support the grant of the permit.  The decision of the permitting agency is then substantially easier to defend during the appeal process.

Environmental Review 

Several states have broad environmental review statutes that provide fertile ground for challenges to algae biofuels projects.  For example, the California Environmental Quality Act (“CEQA”) requires any governmental agency in California that makes any type of discretionary decision that potentially has an impact on the environment to conduct an environmental review and may require that an environmental impact report be prepared before approval of the project.  Washington has a statute similar to CEQA, the State Environmental Policy Act (“SEPA”).  Like CEQA, SEPA allows agencies to deny projects with significant unmitigated adverse impacts if feasible alternatives exist.  If federal agency approval is needed, the agency itself may be required to comply with a number of federal mandates that can give rise to a potential citizen suit under the Administrative Procedure Act (“APA”).  Among other federal requirements, the federal agency may need to comply with the National Environmental Policy Act, the Federal Land Policy Management Act, and the Endangered Species Act.  APA cases are generally limited to reviewing the “record”—the information considered by the agency at the time it makes a decision.  Consequently, the key to defending such actions is to participate early in the decision-making process and make sure the agency’s decision is adequately supported by the information in its possession.  Should the agency’s approval action be deemed arbitrary and capricious or otherwise contrary to law (a common litigation tactic used by citizen groups to stop or delay a project), the permit or approval may be invalidated and sent back to the agency for further consideration, resulting in substantial delay.

Post-Construction Challenges—Nuisance 

Post-construction challengers must demonstrate that the operation of the algae biofuels project violates some state or federal law and that a private lawsuit is authorized.  Preeminent among these challenges is a common-law nuisance lawsuit on the theory that the project operator is using its land in a manner that “substantially and unreasonably” interferes with a nearby property owner’s ability to “use and enjoy” his or her own property.  For algae biofuels projects, odor may be a potential issue, depending on the environment in which the algae is grown and the waste byproduct is disposed.  Plaintiffs may allege that the project creates an unreasonable amount or intensity of odor.  Nuisance suits generally seek monetary damages for compensation and, in rare cases, may be awarded injunctive relief (i.e., temporarily shut down the plant) to abate the nuisance.

Design, Engineering, and Construction Disputes 

Construction contracts usually include detailed provisions allocating risks and costs during the construction process.  These provisions are intended to anticipate problems and provide agreed-on resolutions so that disputes can be avoided.  However, sometimes disputes arise despite the parties’ best efforts.  Major construction projects are complex, involving large numbers of participants and project milestone schedules possibly spanning several years, all of which generates large volumes of paperwork.  Construction disputes are correspondingly complex, which makes them expensive to analyze and resolve.  All parties have an incentive to avoid the expense of full-blown disputes if they can.  For this reason, construction contracts should contain provisions intended to make the dispute resolution process more efficient and more predictable.

Insurance Coverage 

Most businesses have a package of insurance policies that cover them and their employees against liability for bodily injury and property damage claims by third parties outside the organization.  These policies are commonly known as comprehensive general liability (“CGL”) policies and cover the organization and its employees against claims for slander, invasion of privacy, misrepresentations, etc.  CGL policies may also cover the organization for automobile liability and certain employment practices (such as employment discrimination or wrongful discharge).  Insurance coverage is a valuable tool because it usually provides both defense coverage and coverage for indemnity.  Often the defense coverage is not limited by the amount of insurance available to pay claims.

Property insurance can protect the business against losses to its own property from natural or unexplained causes (such as lightning, fire, flood, earthquake, or collapse) and provide indemnification against such losses.  Businesses can also be covered under a third party’s insurance as a result of a contractual requirement or business arrangement.  Larger businesses will also typically have a form of directors’ and officers’ liability insurance.  Other types of specialized coverage include coverage for business interruption, pollution liability, and difference in conditions. 

Almost all insurance policies for business require a form of notice whenever there is a claim or a potential situation that might result in a claim.  The specifics of the notice provisions must be followed carefully by the company to properly initiate the duties of the insurance carrier for the claim.

Intellectual Property Litigation 

As discussed in Chapters 3 and 4, algae biofuels projects are heavily dependent on proprietary technology, patents, licenses, or trade secrets.  Litigation can arise either from infringement by third parties or from the need to defend against other parties claiming infringement.


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