Appeals Court Dismisses Legal Challenge to New York RGGI Program

This week, the New York Supreme Court, Appellate Division, Third Department (“Third Department” or “Court”), issued a memorandum decision in the case of Thrun v. Cuomo, dismissing a legal challenge to New York’s involvement in the Regional Greenhouse Gas Initiative (“RGGI”).  The RGGI program is a cooperative effort of nine northeast states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont) to reduce greenhouse gas emissions through a cap and trade program applicable to fossil-fuel powered electricity generating units having a rated capacity of at least 25 megawatts.  The RGGI program was the product of a 2005 Memorandum of Understanding (“MOU”) between the governors of the seven initial RGGI states, including former New York Governor George Pataki.  By signing the non-binding MOU, Governor Pataki agreed to propose for legislative or regulatory approval a carbon dioxide cap-and-trade program in New York.  The program was implemented through a CO2 Budget Trading Program administered by the New York State Department of Environmental Conservation (“DEC”) and a CO2 Allowance Auction Program administered by the New York State Energy Research and Development Authority (“NYSERDA”).  The DEC and NYSERDA regulations implementing RGGI (found at 6 NYCRR Part 242 and 6 NYCRR Part 507) were adopted in 2008.

In 2011, the plaintiffs in Thrun v. Cuomo filed their lawsuit seeking a declaratory judgment and injunctive relief against the RGGI program.  They alleged that MOU was executed, and regulations promulgated, without legislative authorization and in violation of the New York Constitution and separation of powers doctrine.  The plaintiffs also asserted that the RGGI program imposed an unlawful tax upon ratepayers, that the program was arbitrary and capricious as implemented, and that the MOU constituted an interstate compact in violation of the U.S. Constitution.  The Supreme Court, Albany County (McNamara, J.), in a decision and order dated June 12, 2012, dismissed the lawsuit on the basis that the plaintiffs lacked standing to sue because their injury was not distinct from the general public, and on the basis of laches because the potential for harm from the long delay in challenging the 2005 MOU and 2008 regulations was sufficiently prejudicial to bar the action.  The plaintiffs subsequently appealed.

The Third Department’s decision upholds Justice McNamara’s dismissal, albeit on different grounds.  The Third Department “assum[ed], without deciding, that [the] plaintiffs [had] standing,” and instead held that the claims were time-barred or otherwise moot.  The Court ruled that the “essence” of the challenge was that the regulations were “arbitrary and capricious” and their adoption was “affected by an error of law.”  Accordingly, the claims were subject to the four-month statute of limitations for proceedings under Article 78 of the New York Civil Practice Law and Rules.  Because the regulations became effective more than 2½ years before the plaintiffs’ commencement of the action, their claims were time-barred.  The Court further held that the petitioners’ challenge to the Governor’s authority to enter into the MOU was moot because it was the enactment of regulations that formed the legal basis for the State’s participation in RGGI, not the signing of the MOU.  Accordingly, a decision on the Governor’s authority would have no effect on the validity of the regulations or the rights of the parties.  Therefore, the claim was moot.