The Third Circuit has joined the growing chorus of federal courts holding that a violation of the New Source Review program – i.e., failure to obtain a pre-construction permit before modifying a facility – is a discrete violation that only occurs once, at the time construction of the project begins. As a result, the Third Circuit – like the Eleventh, the Eighth, and (most recently) the Seventh Circuits – held that the five-year statute of limitations precludes civil penalties and citizen suits filed more than five years after a “major modification.”

Perhaps even more importantly, however, the case is the first federal Court of Appeals decision to address whether a subsequent owner of a facility may be held liable for a prior owner’s New Source Review violations. Previously, district courts in New York and Illinois, as well as the decision before the Third Circuit (from Pennsylvania), held that subsequent owners of a facility are not liable for the acts of a predecessor. On the other hand, at least one district court in Louisiana reached the opposite conclusion, based on a corporate law theory known as “successor liability.” Because the Third Circuit was not faced with a “successor liability” issue (the parties did not argue that the new owners accepted the liability via contract), the court held that the current owners could not be held liable for past modifications that they did not perform. In essence, the Third Circuit concluded that simply acquiring and operating a facility is insufficient to subject a subsequent purchaser to liability for a predecessor’s unpermitted modifications.

Click here to read the decision, which includes a citation to Margaret Campbell’s and Angela Levin’s article “Ten Years of New Source Review Enforcement Litigation.”