18‐257‐cv Sierra Club v. Con‐Strux, LLC

In the United States Court of Appeals For the Second Circuit

August Term, 2018

Argued: September 26, 2018 Decided: December 17, 2018

Docket No. 18‐257‐cv

SIERRA CLUB

Plaintiff‐Appellant,

v.

CON‐STRUX, LLC,

Defendant‐Appellee,

MARC BRETZ,

Defendant.

Appeal from the United States District Court for the Eastern District of New York No. 16‐cv‐4960, Shields, Magistrate Judge.

1 18‐257‐cv Sierra Club v. Con‐Strux, LLC Before: HALL, LYNCH, Circuit Judges, KUNTZ, District Judge.*

Plaintiff‐Appellant Sierra Club appeals the grant of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) filed by Defendant‐Appellee Con‐ Strux, L.L.C. (“Construx”) and Defendant Marc Bretz. Sierra Club brought this action pursuant to the Clean Water Act (“the CWA” or “the Act”),

et seq., seeking declaratory and injunctive relief. Sierra Club alleged that Construx was engaged in “industrial activity” within the meaning of the Act but did not have the requisite permit to do so. The district court (Shields, M.J.) concluded that Construx’s business fell outside the classifications contemplated under the Act and its implementing regulations. We hold that Sierra Club’s allegations were sufficient to demonstrate, at the pleading stage, that Construx was engaged in “industrial activity.”

VACATED AND REMANDED.

NICHOLAS W. TAPERT (Edan Rotenberg, on the brief), Super Law Group, LLC, New York, NY, for Plaintiff‐Appellant.

DARREN O’CONNOR (Denise J. D’Ambrosio, on the brief), Allen & Desnoyers LLP, White Plains, NY, for Defendant‐Appellee.

HALL, Circuit Judge:

We are asked to decide whether the business activity of Con‐Strux, L.L.C.

(“Construx”), which involves recycling construction debris and waste and

subsequently wholesaling aggregate materials it has crushed from that debris and

Judge William F. Kuntz, of the United States District Court for the Eastern District of New *

York, sitting by designation. 2 18‐257‐cv Sierra Club v. Con‐Strux, LLC waste, is “industrial activity” within the meaning of the Clean Water Act (“the

CWA” or “the Act”),

et seq., such that Construx was required to

comply with the CWA’s permitting scheme. The district court (Shields, M.J.)

concluded that one standard industrial classification (not covered by the Act)

applied to Construx to the exclusion of another classification (covered by the Act).1

Accordingly, the magistrate judge determined that Construx was not engaged in

“industrial activity,” and thus not subject to the Act.

We disagree. We hold that Sierra Club’s allegations are sufficient to

demonstrate, at the pleading stage, that Construx was engaged in “industrial

activity,” notwithstanding that part of its business could also be classified as

activity not subject to the Act. Accordingly, we VACATE the judgment and

REMAND for further proceedings consistent with this opinion.

I.

Congress enacted the CWA in 1972 to “restore and maintain the chemical,

physical, and biological integrity of the Nation’s waters.”

(a). The

CWA provides a comprehensive approach for the regulation of pollution

1The “standard industrial classifications” are categories created by the Office of Management and Budget to classify different types of businesses for various statistical purposes. See J. App. 118–21. As discussed below, certain EPA regulations make use of the numerical SIC codes in defining what kinds of businesses are engaged in industrial activity within the meaning of the Act.

3 18‐257‐cv Sierra Club v. Con‐Strux, LLC discharged into the waters of the United States, including from stormwater

runoff.2 The CWA prohibits discharges of pollutants from point sources into the

waters of the United States except those that are in accordance with the National

Pollutant Discharge Eliminations System (“NPDES”), a system that limits the level

of pollution a source may lawfully discharge. See

§ 1342;

,

122.44.

Not every incident of stormwater runoff is subject to regulation under the

CWA. Only stormwater runoff associated with certain enumerated activities in

the Act and its implementing regulations is required to be covered by NPDES

permits. As relevant here, Congress has clarified that “discharge associated with

industrial activity” requires a NPDES permit. See

(p)(2)(B). The

EPA has by regulation provided further guidance by supplying categories of

facilities that “are considered to be engaging in ‘industrial activity.’” See

(b)(14)(i)–(xi). The category at issue here includes

[f]acilities involved in the recycling of materials, including metal scrapyards, battery reclaimers, salvage yards, and automobile junkyards, including but limited to those classified as Standard Industrial Classification [(“SIC”)] 5015 and 5093.

2“Stormwater runoff” refers to the path of rainwater and melted snow that flows over hard surfaces and is not absorbed into the ground, but instead flows into the nation’s streams, rivers, and other bodies of water.

4 18‐257‐cv Sierra Club v. Con‐Strux, LLC

§ 122.26(b)(14)(vi). Specifically, the parties agree that the question presented is

whether Construx is engaged in “industrial activity” within the meaning of SIC

5093.

SIC 5093, entitled “Scrap and Waste Materials,” encompasses

“[e]stablishments primarily engaged in assembling, breaking up, sorting, and

wholesale distribution of scrap and waste materials.” J. App. 145. The

classification lists certain materials that are considered to be scrap and waste

materials—such as fur cuttings and wiping rags—but includes in the list what

appears to be a catch‐all category identified only as “Scrap and waste materials—

wholesale.” Id.

Not included in the EPA’s categories of facilities engaged in “industrial

activity” are those specified in SIC 5032. That classification, entitled “Brick, Stone,

and Related Construction Materials,” covers “[e]stablishments primarily engaged

in the wholesale distribution of stone, cement, lime, construction sand, and gravel;

brick (except refractory); asphalt and concrete mixtures; and concrete, stone, and

structural clay products (other than refractories).” Id. at 142. In its list of examples,

SIC 5032 refers specifically to “Aggregate—wholesale.” Id.

II.

5 18‐257‐cv Sierra Club v. Con‐Strux, LLC Construx is the operator of a facility located in Lindenhurst, New York. Its

facility recycles demolished concrete, asphalt, and other construction products

that it then processes and resells on the wholesale market for use by the

construction industry. According to Sierra Club, this activity generates a variety

of pollutants, which in turn are regularly exposed to stormwater. Such activity,

Sierra Club asserts, qualifies as “industrial activity” requiring a permit, and it is

undisputed that Construx does not have a permit. According to Construx,

however, it processes only “recognizable uncontaminated concrete, asphalt

pavement, brick, soil or rock known as RUCARBS” and is therefore not required

to obtain a permit. Id. at 43 (internal quotation marks omitted).

Construx moved to dismiss Sierra Club’s complaint for failure to state a

claim, and the case was referred to a magistrate judge for all purposes, on consent

of the parties. After oral argument, the court addressed what the parties agreed

to be the only question: whether Construx was a SIC 5093 facility and thus engaged

in “industrial activity.” The court agreed with Construx that it was more properly

classified as a SIC 5032 facility not covered by the Act. In so concluding, the court

focused on SIC 5032’s specific reference to stone, brick, asphalt, concrete, and

aggregate, materials not listed in SIC 5093 but which are the focus of Construx’s

6 18‐257‐cv Sierra Club v. Con‐Strux, LLC business. The court thus concluded that Construx was “not a Section 5093

‘recycler’ that is subject to that statute’s storm water runoff regulation.” Id. at 235.

III.

“We review de novo the grant of a Rule 12(b)(6) motion to dismiss for failure

to state a claim, accepting all factual allegations as true and drawing all reasonable

inferences in favor of the plaintiff.” Trs. of Upstate N.Y. Eng’rs Pension Fund v. Ivy

Asset Mgmt.,

(2d Cir. 2016). “To survive a motion to dismiss, a

complaint must contain sufficient factual matter, accepted as true, to ‘state a claim

to relief that is plausible on its face.’” Ashcroft v. Iqbal,

(2009)

(quoting Bell Atl. Corp. v. Twombly,

(2007)). “A complaint is also

deemed to include any written instrument attached to it as an exhibit, materials

incorporated in it by reference, and documents that, although not incorporated by

reference, are ‘integral’ to the complaint.” L‐7 Designs, Inc. v. Old Navy, LLC,

(2d Cir. 2011) (alteration omitted) (quoting Sira v. Morton,

(2d Cir. 2004)).

The parties agree that the sole issue before this Court is whether, on the facts

pleaded in the complaint, Construx is engaged in “industrial activity” within the

meaning of the CWA, and that this question is decided by reference to whether

7 18‐257‐cv Sierra Club v. Con‐Strux, LLC Construx’s business is properly classified as falling within SIC 5093. The

magistrate judge concluded that Construx was not and was instead more properly

classified as a SIC 5032 facility not covered by the Act. We conclude the court

erred by discounting a significant portion of Construx’s business operations.

Based on the complaint, and Construx’s own description, Construx’s

business involves two distinct processes, each equally important to the business

model: (1) recycling “construction waste” and (2) wholesaling aggregate materials

it has crushed down from that construction waste. Although we agree that SIC

5032 captures the second aspect of Construx’s business, it fails to account for the

first aspect of that business. Whether ultimately borne out by the evidence, it must

be taken as true for purposes of a Rule 12(b)(6) motion that Construx accepts at its

facility what other businesses deem scrap or waste material. After receiving it,

Construx then crushes that material to sell later on the wholesale market.

We conclude that processing construction debris and waste for recycling fits

within the definition of activities covered under SIC 5093. The narrative section of

SIC 5093—“[e]stablishments primarily engaged in assembling, breaking up,

sorting, and wholesale distribution of scrap and waste materials,” J. App. 145—

clearly encompasses the first aspect of Construx’s business. On its face, the generic

8 18‐257‐cv Sierra Club v. Con‐Strux, LLC “Scrap and waste materials—wholesale,” category is broad enough to cover the

type of recycling in which Construx engages. Further, this generic category would

be superfluous if confined to the likes of the other examples, which delineate

specific types of scrap and waste recycling covered by SIC 5093. See State St. Bank

& Tr. Co. v. Salovaara,

, 139 (2d Cir. 2003) (“It is well‐settled that courts

should avoid statutory interpretations that render provisions superfluous: ‘It is

our duty to give effect, if possible, to every clause and word of a statute.’” (quoting

Duncan v. Walker,

(2001)).

Construx protests, nonetheless, that the district court properly concluded

that SIC 5032 is a better fit than SIC 5093 as a descriptor of Construx’s business

activities. But, as Construx conceded at oral argument, nothing in the Act or the

implementing regulations suggests that the classification of a facility is an either‐

or proposition, and we conclude in this case that it is not. Construx provides no

persuasive argument as to why a “better” category is either necessary or exclusive.

This is unsurprising given the inherently multifarious nature of industrial activity.

Further, restricting a business to one category would effectively allow an entity to

insulate itself from the CWA’s permitting requirement by conducting polluting

activities in the back yard while running a clean shop in the front. Accordingly,

9 18‐257‐cv Sierra Club v. Con‐Strux, LLC even if Construx’s business is properly classified under SIC 5032, that does not

preclude a finding that it is also properly classified under SIC 5093.

In determining only that the district court improperly dismissed the

complaint at the Rule 12(b)(6) stage, we express no opinion as to the ultimate

resolution of Sierra Club’s claims.

CONCLUSION

For the foregoing reasons, we VACATE the district court’s dismissal of this

action and REMAND for further proceedings consistent with this decision.

10