(CN) - Compliance with federal regulations does not protect a distillery and a power plant from being sued for causing "whiskey fungus" and coal ash on neighboring properties, the Sixth Circuit ruled.
Diageo Americas Supply makes whiskey in Louisville, Ky., while Louisville Gas & Electric Company operates the Cane Run power plant there, according to court records.
A group of residents sued the utility in 2013, claiming its power plant drops dust and coal ash onto their homes and properties several times a month.
The distiller was hit with similar allegations in 2012, when nearby owners and renters claimed that "whiskey fungus" - created when ethanol vapors from Diageo's facilities combines with condensation - accumulated on their properties. The fungus was described in complaints as a black, sooty substance.
A Western Kentucky district court refused to dismiss state law nuisance and trespass claims against the utility company and the distiller, rejecting the argument that the claims were preempted by the Clean Air Act.
On Monday, the Cincinnati-based appeals court upheld the district court orders. It found that the Clean Air Act's "text makes clear that the act does not preempt such claims," according to the ruling.
Diageo argued that it had no duty to curb ethanol emissions at its Louisville facilities, citing Environmental Protection Agency decisions and its permits. But Judge John Rogers noted that the federal law's "states' rights savings clause" allows states to adopt more stringent emissions standards.
"Allowing states to apply their common law to emissions advances the act's stated purposes by empowering states to address and curtail air pollution at its source," Rogers wrote for a three-judge panel. "Regulation of emissions under state common law, moreover, is consistent with Congress's declaration that it 'is the primary responsibility of states' to prevent and reduce air pollution 'through any measures.'" (Emphasis in original.)
Rogers also disagreed with Diageo's argument that allowing state law claims to proceed would disturb the balance of authority between federal and state law.
"We acknowledge the concern that a comprehensive federal scheme imposes substantial costs on industries, and that some suggest it is unduly burdensome for such industries to remain subject, in addition, to the requirements and remedies of state common law," the judge wrote. "Such a concern must however be directed to Congress. There is no basis in the Clean Air Act on which to hold that the source state common law claims of plaintiffs are preempted."
Rogers, however, ruled that the Sixth Circuit does not have jurisdiction over residents' challenge of district court orders dismissing federal law claims because they did not file a cross-petition for appeal of those orders.
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