## Facts

- ITT Rayonier, Inc. operated a pulp mill in Port Angeles, Washington and discharged pollutants subject to an NPDES permit issued by the Washington Department of Ecology (DOE) in 1974.
- The permit included a footnote stating that certain effluent limits “will be modified” to match EPA’s final effluent guidelines when promulgated, including any changes after appeals.
- DOE began state compliance proceedings in 1975, asserting Rayonier failed to meet permit limits.
- Rayonier argued in the state administrative appeal that the footnote effectively extended the time to comply until EPA’s guidelines (and any appeals) were final.
- The state Pollution Control Hearings Board rejected Rayonier’s reading, but Washington superior court reversed and the Washington Supreme Court affirmed, construing the footnote to link compliance timing to final federal guidelines.
- Separately, the United States (through EPA) filed a federal enforcement action in the Western District of Washington seeking to enforce compliance as of the Clean Water Act’s July 1, 1977 BPT deadline.
- The district court granted summary judgment and injunctive relief to the United States, reading the footnote as allowing changes to numerical limits but not the compliance schedule.
- Rayonier appealed, asserting the federal government could not relitigate the footnote’s meaning because the issue had been finally resolved in state court and DOE and EPA were sufficiently aligned.

## Issues

1. Whether the United States (EPA) was collaterally estopped from relitigating the meaning and legal effect of the NPDES permit footnote after a final Washington Supreme Court decision construed the same footnote in litigation involving DOE.
2. Whether DOE and EPA had sufficient privity, and whether the relevant interests were adequately represented in the state proceeding, to bind the United States to the state-court construction.

## Decision

- The Ninth Circuit reversed the district court’s summary judgment for the United States and remanded.
- The court held that the meaning and effect of the permit footnote was identical to the issue litigated to final judgment in Washington state courts.
- The court concluded the United States was bound because DOE and EPA were in privity in administering Washington’s EPA-approved NPDES program and DOE adequately represented the relevant governmental interests.
- Because issue preclusion applied, the federal court could not adopt a construction of the footnote contrary to the Washington Supreme Court’s construction.

## Legal Principles

- Under 28 U.S.C. § 1738, federal courts generally give state-court judgments the same preclusive effect they would receive in the rendering state.
- Issue preclusion applies when an identical issue was actually litigated and necessarily decided in a prior final judgment, and the party to be bound was a party or in privity with a party that had a full and fair opportunity to litigate.
- In cooperative federal-state regulatory programs, a state agency implementing an EPA-approved program may be in privity with the federal agency for preclusion purposes when their interests in enforcing and administering the program are aligned and adequately represented.
- The federal government is not categorically exempt from collateral estoppel in civil enforcement matters when traditional preclusion requirements are met and no overriding policy bars its application.

## Conclusion

The Ninth Circuit held that the United States could not relitigate a state-court construction of an NPDES permit term because the identical interpretive issue had been finally decided and DOE’s litigation posture bound EPA through privity in the jointly administered permitting program, requiring reversal of the federal enforcement judgment and a remand.


United States v. ITT Rayonier, Inc., 627 F.2d 996 (9th Cir. 1980)