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Ninth Circuit Chides Agencies for Using Consent Decree to Circumvent Rulemaking

May 23, 2013

A recent Ninth Circuit decision calls into question the government’s practice of using consent decrees in a judicial proceeding to set policy for parties nationwide in environmental matters. In Conservation Northwest v. Sherman (Conservation Northwest II), No. 11-35729, 2013 WL 1760807 (9th Cir. Apr. 25, 2013), the court makes a critical distinction between consent decrees which temporarily modify a rule to achieve a particular result in a particular case, and consent decrees which purport to have broader applicability. Specifically, the court held it is an abuse of discretion for a federal court to “enter a consent decree that permanently and substantially amends an agency rule that would have otherwise been subject to statutory rulemaking procedures.”[1]

Background

Consent Decrees and Complex Environmental Litigation

A number of commentators and legislators have called attention to the government’s practice of setting national policy through settlement of individual lawsuits that raise novel issues. Setting policy in this way is said to deprive affected third parties of the right to meaningfully participate in the rule making process. In 2012, Republican legislators proposed the Sunshine for Regulatory Decrees and Settlements Act of 2012, which would have required that any party affected by a decree be given the right to intervene in the pending court action.[2] Another bill introduced last year, the Federal Consent Decree Fairness Act, would have amended the federal judicial code to give states and local governments the right to apply to modify or terminate a consent decree.[3] The burden of proof with respect to such a motion would fall on the party who filed the original judicial action to demonstrate the consent decree is necessary to prevent the violation of a federal law. Opponents argue these legislative efforts would effectively end the use of consent decrees, and disadvantage local citizen and environmental groups. While these particular bills did not advance past the committee stage, the issue continues to be debated in policy circles.[4]

The Northwest Forest Plan

In the wake of the controversial listing of the northern spotted owl as a threatened species under the Endangered Species Act,[5] federal timber sales were drastically reduced in the Pacific Northwest,[6] and the federal government, timber industry and environmental groups squared off in a series of lawsuits regarding the proper balance between species protection and timber production on federal forest lands.[7] In response, President Clinton created a cabinet-level interagency panel called the Forest Ecosystem Management Assessment Team (FEMAT) to address these difficult issues and to ultimately “call a truce between conservationists and logging concerns.”[8] After evaluating a series of different management options, FEMAT eventually recommended its preferred alternative, which was ultimately adopted by the Secretaries of Agriculture and Interior as the “Northwest Forest Plan” (NFP).[9]

Covering 24.5 million acres of federal lands in California, Oregon, and Washington, the NFP amended the planning documents of the nineteen National Forests and nine Bureau of Reclamation (BLM) areas in a “balancing act” designed to serve dual purposes: “(1) to protect the long-term health of the forest ecosystem, and (2) to provide a sustainable supply of timber and other forest products.”[10] The NFP adopted a system of land designations with different management objectives and restrictions. The vast majority of the lands, about 19 million acres, were placed in the most-protective category, “Reserves,” where logging is only allowed under “very limited circumstances.”[11] Some 1.5 million acres were designated as “Adaptive Management Areas,” while about 4 million acres comprise the “Matrix,” where most logging occurs. The NFP, however, failed to quell the controversy, and various aspects of the NFP have been tied up in litigation since its promulgation, as discussed previously in this Newsletter. J. Ferrell, Logging on Private Lands Enjoined to Protect Spotted Owls, Marten Law, Environmental News (Sept. 12, 2007) (assessing preliminary injunction issued in Seattle Audubon Society v. Sutherland, No. 06-1608, 2007 WL 2220256 (W.D. Wash. Aug. 1, 2007); J. Ferrell, Federal Court Strikes Down Federal Resource Agencies’ Amendments to Northwest Forest Plan, Marten Law, Environmental News (June 13, 2007). (discussing Pac. Coast Fed’n of Fishermen’s Ass’ns v. Nat’l Marine Fisheries Servs., 482 F. Supp. 2d 1248 (W.D. Wash. 2007)); Controversial Old Growth Environmental Impact Statement Would Allow Stalled Timber Projects to Proceed, Marten Law, Environmental News (Aug. 9 2006); Federal Court Halts Pacific Northwest Logging, Marten Law, Environmental News (Jan. 25, 2006).

“Survey and Manage”

In addition to the system of land designations, the NFP included a program entitled “Survey and Manage” designed to account for some 400 rare, uncommon, poorly-understood but “ecologically crucial” species.[12] The species covered by the Survey and Manage standard are mostly fungi, lichen, mollusks (snails and slugs), insects, with only seven vertebrates, including one mammal on the list.[13] The Survey and Manage standard “requires the Agencies to manage known sites where these species are found, conduct surveys for their presence prior to ground-disturbing activities, locate high priority sites for hard-to-find species, and conduct general regional surveys to learn more about the least-known species.”

Within a few years of implementation, however, the agencies found the Survey and Manage program to be more costly and difficult to manage than anticipated because the requirements “were not clear, efficient or practicable.”[14] For over a decade, the agencies have now been trying to “reduce, streamline, or eliminate Survey and Manage,” and have been involved in nearly continuous litigation over such actions.[15]

In 2004, the agencies considered completely eliminating Survey and Manage and, after assessing various alternatives through a Supplemental Environmental Impact Statement (2004 SEIS), issued a Record of Decision (2004 ROD) adopting the agencies’ preferred alternative of dropping the standard.[16] But after being challenged by environmental groups, the 2004 SEIS was found to violate NEPA and the 2004 ROD was set aside by the court.[17] In response, the agencies then began preparing a supplement to the rejected 2004 SEIS, updating that document with additional background material about habitat, management activity levels, species outcomes and previous analyses.[18] In 2007, the agencies issued the Final Supplement (FSEIS) to the 2004 SEIS, and once again adopted the agencies’ preferred alternative of removing Survey and Manage from the NFP.[19]

Supplemental EIS = Supplemental Litigation

Conservation Northwest I

The 2007 FSEIS was again challenged by a coalition of environmental groups who alleged violations of NEPA, as well as the National Forest Management Act (NFMA),[20] the Federal Land Policy and Management Act (FLPMA),[21] and the ESA.[22] Lumber company D.R. Johnson intervened as a matter of right. On cross-motions for summary judgment on the plaintiff’s NEPA claims, the district court found four separate NEPA violations.[23] Noting the “highly complex issues at stake,” and the remaining NFMA, FLPMA and ESA claims, the Court declined to address the issue of remedy at that time.[24]

After lengthy settlement negotiations between the environmental plaintiffs and the agencies, the parties filed a proposed settlement agreement with the court describing how Survey and Manage would operate going forward. The settlement provided that the 2007 RODs were “set aside and of no effect.”[25] Instead, the standards provided under the 2001 RODs were reinstated, but with certain modifications. Specifically, the settlement changed the list of species subject to Survey and Manage, shifted species between management categories, and provided a series of new exemptions from pre-disturbance surveys for certain types of activities.[26] The survey also provided for the payment of over $200,000 from the federal defendants to the plaintiff environmental organizations for their attorneys’ fees and costs.[27]

D.R. Johnson objected to the settlement agreement, arguing that it modified the Survey and Manage standard without compliance with the public participation procedures required by NFMA and FLPMA. The court dismissed Johnson’s objections, stating that these statutory procedures were inapplicable to the court’s entry of the settlement agreement as a consent decree, which was a “judicial act, not an agency act.”[28] Johnson appealed to the Ninth Circuit.

Conservation Northwest II

On appeal, the main issue before the court was whether the entry of the consent decree was properly exempted from the procedural requirements of NFMA, FLPMA, and NEPA that apply to amendments to agency forest plans or resource management plans.[29] The settling parties argued that because the district court’s broad equitable discretion to craft a remedy to address the NEPA violations would have permitted it to unilaterally modify the Survey and Manage standard, then the court had the same discretion to approve a consent decree incorporating such modifications.[30] In essence, the Ninth Circuit was asked to determine if the judicial approval of a settlement agreement and issuance of a consent decree removes the underlying settlement from procedural requirements that otherwise apply to such “agency actions.”

Turtle Island Restoration Network

The parties’ briefing focused on a recent decision, Turtle Island Restoration Network v. U.S. Dep’t of Commerce.[31] In that case, environmental plaintiffs challenged the National Marine Fisheries Service (NMFS) regarding amendments to a fishery management plan issued under the Magnuson-Stevens Fishery Conservation and Management Act (MSA).[32] The parties eventually entered into an agreement with the federal defendants, who agreed to vacate certain portions of the amendments while the agency undertook further action on the provisions at issue.

In Turtle Island, a defendant-intervenor similarly challenged the consent decree, arguing that it violated “federal law by allowing [NMFS] to change duly promulgated rules without following [applicable] procedural rulemaking requirements.”[33] The district court rejected that argument, finding that “a consent decree is a judicial act, rather than an agency act,” and entered the consent decree.[34] The Ninth Circuit upheld the consent decree, but on narrower grounds than those described by the district court:

Turtle Island and the Federal Agencies argue that the Consent Decree is a judicial act and thus is not subject to the Magnuson Act's rulemaking provisions [which are] directed at the Federal Agencies and the Regional Councils, not the courts. The district court adopted this reasoning in approving the Consent Decree. Because the Consent Decree merely temporarily restores the status quo ante pending new agency action and does not promulgate a new substantive rule, however, we need not address the broader issue regarding applicability of statutory rulemaking procedures to judicial acts in general.[35]

Instead, the Ninth Circuit in Turtle Island focused its inquiry on the narrower question of whether the Magnuson Act precluded adoption of the particular settlement agreement reached by the parties in the case.[36] The court eventually found that the consent decree did “not purport to make substantive changes to the Fishery regulations, so the rulemaking provisions of the Magnuson Act and the APA do not apply.” [37]

In the recent Conservation Northwest II decision, the court identified this as a critical distinction, distinguishing the consent decree in Turtle Island as “simply a stop-gap measure while the agencies amended their regulations through existing administrative procedures, [while i]n contrast, the consent decree in this case sets the rules for Survey and Manage unless and until the Agencies decide to conduct further analysis and decision making. If the Agencies are satisfied with the version of the Standard as amended by the consent decree, they could simply let it stand indefinitely.”[38] Ultimately, the court held that while temporary interim modification to a rule, as in Turtle Island, need not follow rulemaking procedures, it is an abuse of discretion for a district court to “enter a consent decree that permanently and substantially amends an agency rule that would have otherwise been subject to statutory rulemaking procedures.”[39]

Implications

In its briefing, plaintiffs argued that if the consent decree were overturned based on the failure to follow procedural requirements, “it would mean that a whole suite of court-approved settlements would be improper.”[40] This may be so. But if this is the case, then the agencies have apparently allowed their desire for settlement to override their duty to comply with the required procedures of the APA and other statutes.

It is understandable that after spending years developing a regulation and years litigating it, an agency may simply want to settle the matter and move on. But the public participation procedures in the federal environmental statutes exist to give all parties – environmental groups, industry and individual citizens alike – the right to be heard when agencies make broadly-applicable decisions that affect their rights or legal obligations.[41] To the extent that agencies have been using settlement agreements and consent decrees to informally modify such regulations, the practice undercuts much-needed transparency and openness and shuts out other parties from what is supposed to be a public process.

Companies and organizations that have entered settlement agreements with federal agencies should take a close look at the terms of such settlements to see if they are vulnerable to challenge as a result of this decision. And parties currently negotiating settlement agreements should be sure that the terms of any agreement cannot be construed as a “permanent and substantial” modification of a rule. In the water quality context, settlements that set or modify water quality standards or TMDLs may be subject to challenge unless rulemaking procedures are followed. Similarly, settlement agreements that set emissions standards for particular categories of sources, or determine ambient air quality standards may be vulnerable to challenge. On the other hand, settlements regarding individual permit conditions under the CWA or CAA, or specific site cleanups under CERCLA or RCRA are not as likely to be affected by this decision.

For more information, please contact Myles Conway or any other member of Marten Law’s Permitting and Environmental Review practice group.

[1] Id. at 12 (emphasis added).

[2] HR 3862, 112th Cong. (2012).

[3] HR 3041, 112th Cong. (2012).

[4] For example, in January 2013, the American Legislative Exchange Council passed a Resolution Opposing Unfair Consent Decrees “to support policy ensuring that federal consent decrees are narrowly drafted, limited in duration, and respectful of state and local interests and policy judgments.”

[5] 55 Fed. Reg. 26114–26194 (June 26, 2990)

[6] See Oregon History Project , Northern Spotted Owl (describing greater than 80% decline in timber sales in Western Oregon)

[7] See eg., Seattle Audubon Society v. Evans, 771 F. Supp. 1081 (W.D. Wash. 1991), aff’d 952 F.2d 297 (9th Cir. 1991); Seattle Audubon v. Moseley, 798 F.Supp. 1473 (W.D. Wash. 1992), aff’d sub nom. Seattle Audubon v. Espy, 998 F.2d 699 (9th Cir. 1993).

[8] Conservation Northwest v. Rey (Conservation Northwest I), 674 F. Supp. 2d 1232, 1237 (W.D. Wash. 2009)

[9] 2004 BLM ROD, 2004 FS ROD, cited in Conservation Northwest I, 674 F. Supp. 2d at 1237.

[10] Conservation Northwest I, 674 F. Supp. 2d at 1237–38.

[11] Id. at 1238.

[12] Conservation Northwest II, 2013 WL 1760807.

[13] Id. at 6 n. 1. (“[C]harismatic megafauna they are not.”) (internal citations omitted).

[14] Conservation Northwest I, 674 F. Supp. 2d at 1239, citing 1994 FEIS.

[15] Id at 1239–1240 (discussing Douglas Timber Operators v. Rey, No. 01-6378-AA (D. Or. 2001); NEA v. Rey, No. 04-844P, 2006 WL 44361 (W.D. Wash. Jan. 9, 2006); Klamath Siskiyou Wildlands Center v. Boody, 468 F.3d 549 (9th Cir. 2006).

[16] Conservation Northwest I, 674 F. Supp. 2d at 1239.

[17] NEA v. Rey, 2006 WL 44361, at *9 (W.D. Wash. Jan. 9, 2006).

[18] 2007 BLM ROD; 2007 FS ROD.

[19] 2007 BLM ROD, 2007 FS ROD, cited in Conservation Northwest I, 674 F. Supp. 2d at 1240.

[20] 16 U.S.C. § 1600–1676

[21] 43 U.S.C. §§1701–1785

[22] 16 U.S.C. §§ 1531–1544.

[23] Specifically, plaintiff’s alleged “[f]irst, … that the 2007 Final Supplement lacks a true ‘No Action’ alternative, as required by NEPA, (s)econd, … that no new information warrants elimination of Survey and Manage, [t]hird, … that the 2007 Final Supplement lacks high-quality information and accurate scientific information in four areas: (1) fire and fuel treatments, (2) costs, (3) species data, and (4) global warming, and [f]ourth … that the 2007 Final Supplement fails to disclose cumulative impacts.” Conservation Northwest I, 674 F. Supp. 2d at 1244. The court found NEPA to be violated based on (1) an inadequate “no action” alternative, (2) insufficient new information to justify eliminating Survey and Manage, (3) insufficient information regarding fire and fuel treatments and (4) insufficient species data. Conservation Northwest II, 2013 WL 1760807 at 7, citing Conservation Northwest I, 674 F. Supp. 2d at 1244–53.

[24] Conservation Northwest I, 674 F. Supp. 2d at 1257.

[25] Settlement Agreement, Conservation Northwest I, No. 08-1067-JCC, at 1.

[26] Id.

[27] Id. at 12.

[28] Conservation Northwest II, 2013 WL 1760807 at 8.

[29] The settling parties also argued that D.R. Johnson should be subject to judicial estoppel because it, through its membership in the American Forestry Resource Council, had indirectly been a party to a similar stipulation in a prior case, but the court dismissed this argument in a single footnote. Id. at 8 n. 2.

[30] Plaintiffs-Appellees’ Answering Brief, at 24; Answering Brief of the Federal Defendants-Appellees, at 29-30.

[31] 834 F. Supp. 2d 1004 (D. Haw. 2011), aff’d 672 F.3d 1160 (9th Cir. 2012).

[32] 16 U.S.C. § 1854.

[33] 672 F.3d at 1162.

[34] 834 F. Supp. 2d at 1013, 1022.

[35] 672 F.3d at 1166–67.

[36] Id. at 1167.

[37] Id. at 1169.

[38] Conservation Northwest II, at 13.

[39] Id. at 12 (emphasis added).

[40] Plaintiffs-Appellees’ Answering Brief, at 25.

[41] Administrative Procedure Act, 5 U.S.C. § 533 (providing for public notice and comment for agency rulemaking proceedings); FLPMA, 43 U.S.C. § 1740 (providing for BLM rulemaking according to APA procedures); NFMA, 16 U.S.C. 1604(d) (requiring the Forest Service to “provide for public participation in the development, review, and revision of land management plans.” See also Local No. 93 v. Cleveland, 478 US 501, 529 (1986) (“[P]parties who choose to resolve litigation through settlement may not dispose of the claims of a third party, and a fortiori may not impose duties or obligations on a third party, without that party's agreement.”)

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