Unanimous Supreme Court Tells EPA Its Orders Can Be AppealedBy Russell Prugh, Steve Jones and Brad Marten
In a decision handed down on March 21, 2012, Justice Antonin Scalia found it easy to give Mike and Chantelle Sackett their day in court. Writing for a unanimous Supreme Court in the case of Sackett v. EPA, Justice Scalia said that the EPA could not find that the Sacketts had illegally filled wetlands on their property, order them to remove the fill, and then threaten them with penalties without allowing them to appeal the order. The outcome in the case had been widely predicted based on the sympathetic plight of the plaintiffs, which had moved the case into the mainstream media and the stump speeches of presidential candidates. When due process allows a driver to appeal a parking ticket before paying it, providing the Sacketts the opportunity to seek judicial review of EPA’s administrative enforcement order without having to wait for EPA to first sue them was not much of a stretch.
However, as with most environmental cases decided by the Supreme Court, the impact of the Sackett decision is not that simple and sure to be hotly debated. As with the high court’s 2006 plurality decision in Rapanos v. United States regarding the reach of CWA jurisdiction and the Court’s 2009 decision in Burlington Northern & Santa Fe Railway Co. v. United States on divisibility under CERCLA, the devil is in the details and there is much left to be determined as the decision plays itself out.
In Sackett, the Supreme Court struck down EPA’s ban on “pre-enforcement review” under the Clean Water Act (“CWA”), finding that an administrative compliance order issued by EPA is “final” for purposes of judicial review under the Administrative Procedure Act (“APA”) and that nothing in the CWA bars a party from filing suit to challenge such an order before EPA initiates a judicial enforcement action. While Sackett likely does not affect orders issued under CERCLA, which contains an explicit pre-enforcement bar, parties will almost certainly argue that Sackett allows pre-enforcement review under statutes without explicit pre-enforcement bars, such as the Resource Conservation and Recovery Act (“RCRA”) and the Clean Air Act (“CAA”).
The decision raises a host of questions for environmental lawyers and their clients, both in the government and the regulated community. For example:
- Will the Justice Department require a greater level of review of EPA orders, knowing it is more likely to have to defend them?
- Does the Sackett decision apply retroactively to allow parties already complying with an enforcement order to now challenge that order?
- Will parties currently in negotiation with EPA regarding compliance with an enforcement order now see benefit in appealing – or at least threatening to — in the hope of gaining a tactical advantage?
- What kind of burden will the decision place on EPA and state agency personnel, who will likely now have to devote more resources to preparing for litigation?
- Will filing an APA challenge succeed in tolling the accrual of penalties? If the challenge is unsuccessful, will penalties run from the date of the order or the date of final resolution of the challenge?
- To what extent will state-level enforcement actions under delegated programs be impacted?
The CWA prohibits the discharge of “any pollutant” without a permit into “navigable waters.” The Act defines “navigable waters” as “waters of the United States,” which have been defined by regulation to include wetlands adjacent to navigable waters or their tributaries. More specifically for the Sacketts, the CWA prohibits depositing fill material into wetlands without a permit under CWA Section 404. Administration of the Section 404 permit program is done by the United States Army Corps of Engineers (“Corps”), but the Corps shares enforcement authority with EPA. When EPA determines that an unauthorized discharge has occurred, it has three enforcement options: (1) assess an administrative penalty; (2) initiate a civil enforcement action in U.S. district court; or (3) issue an administrative compliance order directing the violator to remove the discharged material. A party that fails to comply with an administrative order is potentially liable for up to $37,500 for each day of non-compliance with that order and potentially an additional $37,500 per day for the underlying CWA violation as well.
The Sacketts own a 0.63 acre undeveloped parcel near Priest Lake in Idaho. In 2007, they filled a portion of their property without a CWA permit. Although the Sacketts’ property “is separated from [Priest] lake by several lots containing permanent structures,” EPA determined that the fill violated the CWA because the parcel contained a wetland subject to CWA jurisdiction and issued an administrative compliance order requiring the Sacketts to remove the fill and restore the parcel to its original condition. The Sacketts asked EPA for a hearing to challenge the wetland determination and, after EPA refused, filed suit in federal district court. EPA argued that review of an agency order was barred until the Agency first sued (which it had not) and insisted that the Sacketts comply, threatening penalties if they did not. The district court agreed, and dismissed the Sacketts’ suit for lack of jurisdiction.
The Sacketts appealed to the Ninth Circuit, arguing that: (1) the APA allows pre-enforcement review of CWA compliance orders; and (2) due process requires EPA to allow pre-enforcement review. The Ninth Circuit affirmed the district court, joining four other U.S. Circuit Courts of Appeal in concluding that the CWA “impliedly” barred pre-enforcement review under the APA and that the pre-enforcement bar did not violate due process.
The Ninth Circuit rejected the argument that the ban on pre-enforcement review violated the APA, concluding that allowing the Sacketts to sue would slow government enforcement and that Congress had impliedly allowed EPA the latitude to choose between filing an initial suit in district court and acting unilaterally through an administrative order. The Ninth Circuit also rejected the Sacketts’ due process arguments, finding that due process was satisfied because: (1) judicial review of the order was available once EPA brought an enforcement action; (2) nothing barred the Sacketts from seeking a Section 404 permit to fill their property (the denial of which would could be reviewable in district court); and (3) the CWA authorizes the court, not EPA, to impose penalties based on a “wide range of case-specific equitable factors.”
On June 28, 2011, the Supreme Court granted certiorari to consider: (1) whether the EPA order was “final” and petitioners could seek judicial review of order under the APA; and (2) if not, whether petitioners’ inability to seek pre-enforcement judicial review of the administrative compliance order under the APA violates their rights under the Due Process Clause of the United States Constitution.
The Supreme Court’s Decision
The Supreme Court reversed the Ninth Circuit, concluding that a CWA administrative compliance order is “final” for purposes of allowing APA judicial review and that the CWA does not “impliedly” bar such review. The Court did not reach the broader question of whether a bar on pre-enforcement review violates due process.
The grounds of the decision are significant. By not reaching the due process claim, the Court did not decide whether a statutory bar on pre-enforcement review – such as is found in Section 113 of CERCLA – is unlawful. Indeed, presented with the opportunity to decide that issue last year in General Electric v. Jackson, the Supreme Court denied cert. See S. Jones & R. Prugh, Sackett Case Could Change EPA’s Enforcement of Federal Environmental Laws, Marten Law Environmental News (Oct. 24, 2011).
Nonetheless, the case is important not only to enforcement orders issued under the CWA, but potentially also to those issued under other environmental statutes which do not contain a express pre-enforcement bar – including RCRA and the CAA.
The Sacketts sought review of the CWA administrative order under the APA, which provides for judicial review of “final agency action for which there is no other adequate remedy in a court.” Thus, the Court first examined whether the administrative compliance order was “final agency action” for which the Sacketts lacked an “adequate remedy.”
The Court concluded that the compliance order “has all of the hallmarks of APA finality that our opinions establish.” First, the order “determined” “rights or obligations” by requiring the Sacketts to restore the wetlands on their property. Second, “‘legal consequences … flow’ from the issuance of the order” because it exposes the Sacketts to penalties for non-compliance and “severely limits” their ability to obtain a CWA Section 404 permit from the Corps. Finally, the order also marked the “consummation” of the agency’s decision-making process because the order’s “Findings and Conclusions” were not subject to further agency review. The Court rejected the government’s assertion that the order was not final because it invited the Sacketts to “engage in informal discussion” regarding the order’s terms and requirements and inform EPA of “any allegations therein which they believed to be inaccurate.” According to the Court, the “mere possibility” that EPA might reconsider the order in light of “informal discussion … does not suffice to make an otherwise final agency action nonfinal.”
The Court also had no trouble concluding that the Sacketts lacked an adequate remedy to challenge the final agency action. As EPA conceded, the Sacketts had to wait until the EPA brought suit to challenge the significant penalties for non-compliance and statutory violations. Moreover, although the Sacketts could potentially seek a Section 404 permit from the Corps, “the remedy for denial of action that might be sought from one agency does not ordinarily provide an ‘adequate remedy’ for action already taken by another agency.”
Next, the Court considered whether the CWA barred pre-enforcement review of administrative orders. Judicial review is unavailable under the APA if the agency acts according to a statute that “preclude[s] judicial review.” The CWA does not expressly bar pre-enforcement review. Although a statute is presumed to allow for judicial review of agency action under the APA, that presumption “may be overcome by inferences of [congressional] intent drawn from the statutory scheme as a whole.” The government argued (and the Ninth Circuit agreed) that the CWA’s structure, objectives, and legislative history evidenced that Congress intended the Act to “impliedly” bar such review. The government advanced three arguments before the Supreme Court in support of this premise: (1) Congress gave EPA a choice between a judicial proceeding and administrative action, thus it would undermine the statutory scheme to allow judicial review of the latter; (2) Congress provided for immediate judicial review of administrative penalties in other CWA contexts, but not for administrative compliance orders; and (3) in the CWA, Congress sought to provide EPA with water pollution remedies that could effect “quick remediation through voluntary compliance.” The Court rejected each of these arguments in turn.
First, the government argued that Congress structured the CWA to permit EPA to address violations judicially – through an enforcement action in court, or unilaterally – through an administrative order, and that pre-enforcement review would frustrate this scheme by allowing defendants to force EPA into court to litigate administrative orders, thereby eliminating EPA’s choice of enforcement options under the statute. The Court rejected this “question-begging premise,” concluding that “[t]here are eminently sound reasons other than insulation from judicial review why compliance orders are useful.” The Court explained that while compliance orders are a valuable enforcement tool when the recipient voluntarily complies, “[i]t is entirely consistent with this function to allow judicial review when the recipient does not choose ‘voluntary compliance.’ ” Moreover, the Court rejected the government’s assertion that, because compliance orders are not “self-executing,” Congress viewed the orders as merely a “step in the deliberative process.” Noting that the “APA provides for judicial review of all final agency actions, not just those that impose a self-executing sanction,” the Court explained “it is hard for the Government to defend its claim that the issuance of the compliance order was just ‘a step in the deliberative process’ when the agency rejected the Sacketts’ attempt to obtain a hearing and when the next step will either be taken by the Sacketts (if they comply with the order) or will involve judicial, not administrative, deliberation (if the EPA brings an enforcement action).” According to the Court, “the text (and indeed the very name) of the compliance order makes clear [that] the EPA’s ‘deliberation’ over whether the Sacketts are in violation of the Act is at an end.”
Second, the Court also rejected the government’s argument that a CWA provision authorizing prompt judicial review of penalties imposed following an administrative hearing, 33 U.S.C. § 1319(g)(8), indicated that Congress intentionally omitted a similar provision for pre-enforcement review of compliance orders. “[I]f the express provision of judicial review in one section of a long and complicated statute were alone enough to overcome the APA’s presumption of reviewability for all final agency action, it would not be much of a presumption at all.” The Court concluded that the cases on which the government relied for this proposition were inapposite.
Finally, the Court rejected the argument that CWA bars pre-enforcement review because Congress passed the CWA “in large part to respond to the inefficiency of then-existing remedies for water pollution,” and compliance orders “can obtain quick remediation through voluntary compliance.” The Court noted that although pre-enforcement review might make EPA less willing to use compliance orders, the same could be said for all agency actions subjected to judicial review. Noting that “APA’s presumption of judicial review is a repudiation of the principle that efficiency of regulation conquers all,” the Court concluded that there is “no reason to think that the [CWA] was uniquely designed to enable the strong-arming of regulated parties into ‘voluntary compliance’ without the opportunity for judicial review—even judicial review of the question whether the regulated party is within the EPA’s jurisdiction.” Thus, according to the Court, “[c]ompliance orders will remain an effective means of securing prompt voluntary compliance in those many cases where there is no substantial basis to question their validity.”
In light of these reasons, the Court reversed the Ninth Circuit, holding that EPA’s administrative compliance order was “final agency action” under the APA and that the CWA did not bar review of that order.
Two Justices filed separate concurrences to the opinion. Justice Ruth Bader Ginsberg wrote separately to stress that although the Court’s decision allowed the Sacketts to “immediately litigate” the question of “EPA’s authority to regulate their land under the [CWA],” it did not resolve the question of whether the Sacketts could challenge the “terms and conditions” of the compliance order. Justice Samuel Alito also wrote separately to challenge Congress to clarify the reach of the CWA. In so doing, he acknowledged what many environmental lawyers and the courts have said about the scope of the Supreme Court’s decision in Rapanos, having to do with the reach of federal jurisdiction under the CWA – that it is “clear as mud.” See R. Prugh, Third Circuit Weighs in on Clean Water Act Jurisdiction under Rapanos, Marten Law Environmental News (Dec. 6, 2011). Acknowledging that the majority opinion “provides a modest measure of relief” by allowing the Sacketts to challenge EPA’s wetlands jurisdictional determination, Alito posited that the “combination of the uncertain reach of the Clean Water Act and the draconian penalties imposed for the sort of violations alleged in this case still leaves most property owners with little practical alternative but to dance to the EPA’s tune.” Alito challenged: “Real relief requires Congress to do what it should have done in the first place: provide a reasonably clear rule regarding the reach of the Clean Water Act.”
While Sackett allows a party to challenge EPA administrative compliance orders under the CWA, and probably the CAA and RCRA, some commentators will point out that the decision still leaves EPA with an arsenal of enforcement tools, and that it was decided more narrowly than many had hoped. The case does not alter the standard of review under the APA, which is whether EPA acted in an “arbitrary and capricious” manner or “otherwise in violation of the law.” Moreover, EPA is entitled to deference in such proceedings. Second, the Sackett decision leaves uncertain the scope of pre-enforcement review. For example, Justice Ginsberg wrote separately to clarify that while a plaintiff may challenge the CWA jurisdictional determination underlying such orders, it may not challenge the “terms and conditions of the compliance order.” Finally, the Court assumed without deciding that EPA could collect double penalties, up to $75,000 per day, for each day that a party fails to comply with a CWA administrative order. It is unclear from the decision whether: (1) double penalties are in fact authorized, and (2) whether these penalties accrue while a recipient seeks pre-enforcement judicial review.
Finally, the decision also raises questions regarding EPA’s enforcement strategy under the CWA going forward. The Court rejected EPA’s argument that pre-enforcement review would have a chilling effect on the use of administrative orders, explaining that “[c]ompliance orders will remain an effective means of securing prompt voluntary compliance in those many cases where there is no substantial basis to question their validity.” The practical effect of this language – potentially increased litigation challenging administrative orders – may encourage EPA to curtail the use of this enforcement tool except in cases of clear cut statutory violations.
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