United States: Supreme Court Issues Stunning Rebuke To EPA Enforcement Practice

Environmental

Decision Rejects Decades of Lower Court Precedent

In a stunning rebuke to decades of EPA practice, the United States Supreme Court on March 21, 2012 changed the way many of our federal environmental laws will be enforced. The Court unanimously rejected decades of EPA practice, and overturned lower court precedent, by declaring that recipients of EPA compliance orders under the Clean Water Act have the right to immediately challenge the issuance of these orders in court. This ruling, in Sackett v. Environmental Protection Agency, et al, will substantially reduce EPA's reliance on such orders and likely require the agency to engage with the regulated community in a more cooperative fashion. It can be expected that this change in course will be seen not only in matters under the Clean Water Act, but possibly under many of the other major federal environmental programs, including the Clean Air Act, the Resource Conservation and Recovery Act ("RCRA"), and the Comprehensive Environmental Response, Compensation and Recovery Act ("CERCLA").

Background

The Plaintiffs, Michael and Chantell Sackett, are owners of residential land located near, but not adjacent to, Priest Lake in Bonner County, Idaho. In 2007, the Sacketts placed dirt and rocks on their property in preparation for the construction of a home. EPA determined that this action constituted a discharge of pollutants to "navigable waters" without a permit in violation of Section 311 of the Clean Water Act (the Act) because the Sacketts' property contained jurisdictional wetlands located adjacent to Priest Lake, which is a "navigable water" within the meaning of the Act. Soon thereafter, the EPA issued an administrative compliance order to the Sacketts under Section 319(a)(3) of the Clean Water Act, requiring them to immediately restore their property to its original condition, to allow EPA access to the property, and to provide all records and documents to EPA related to the condition of the property. According to EPA, the issuance of the compliance order resulted in the Sacketts being subject to daily penalties of up to $75,000 for each day they did not comply with the order.

After EPA denied the Sacketts' request for a hearing on the issuance and merits of the compliance order, the Sacketts filed a lawsuit in the United States District Court for the District of Idaho alleging that EPA's issuance of the compliance order was arbitrary and capricious under the Administrative Procedures Act (APA) and a deprivation of due process in violation of the Fifth Amendment of the Constitution. The District Court dismissed the Sacketts' claim on the basis that the matter was not subject to judicial review unless and until EPA brought an enforcement action against the Sacketts for penalties. The United States Court of Appeals for the Ninth Circuit affirmed the District Court's opinion.

The Supreme Court Ruling

The Supreme Court, in an opinion written by Justice Scalia, determined that the Sacketts were entitled to immediate judicial review of EPA's issuance of the compliance order because the order constituted "final agency action for which there is no other adequate remedy in court" under Section 704 of the APA, and because the Clean Water Act does not preclude this review. The Court made no determination on the Sacketts' Fifth Amendment due process argument and did not decide the merits of EPA's determination that the Sacketts' property falls under the jurisdiction of the Clean Water Act. Importantly, as Justice Ginsburg stated in her concurring opinion, the Court also did not determine whether the recipient of a compliance order may seek judicial review of the terms and conditions of that order at the pre-enforcement stage.

According to the Court, EPA's issuance of the compliance order constituted final agency action because it determined the "rights or obligations" of the Sacketts and marked the culmination of EPA's decision-making process. The order imposed a legal obligation on the Sacketts to restore the wetlands on their property and subjected the Sacketts to double penalties for failing to comply. The Court rejected the Government's claim that the Sacketts' ability to engage in informal discussions with EPA on the terms and conditions of the compliance order was the equivalent of further agency review on the issuance of the order.

The Court also agreed with the Sacketts that there was "no other adequate remedy in court" to challenge the issuance of the order because Section 319(a)(3) of the Clean Water Act, the authority under which the compliance order was issued, grants EPA alone the right to initiate a civil court action. The Court expressed astonishment at the fact that the Sacketts were unable to seek judicial review of the issuance of an order that subjected them to $75,000 per day of potential liability that would continue to accrue until either the Sacketts complied with the order or EPA decided to file an enforcement action for penalties. As Justice Alito stated even more strongly in his concurring opinion, "In a nation that values due process, not to mention private property, such treatment is unthinkable."

Finally, the Supreme Court stated that nothing in the Clean Water Act expressly precludes judicial review under the APA. The APA, which prescribes the procedural requirements that all agencies must follow, "creates a 'presumption favoring judicial review of administrative action.'" While this presumption may be overcome by the intent of a "statutory scheme as a whole," the Court clearly stated that the statutory scheme of the Clean Water Act does not preclude judicial review of the issuance of a compliance order. The Court dismissed the Government's argument that allowing judicial review would defeat the purpose of issuing compliance orders to quickly resolve issues through voluntary compliance, because permitting a recipient to seek judicial review when they choose not to voluntarily comply is "entirely consistent" with this function. The Court found it difficult for the Government to defend its argument that Congress viewed the issuance of a compliance order as merely "a step in the deliberative process" when EPA's denial of the Sacketts' request for a hearing resulted in the Sacketts being forced to either comply with the order or wait, as penalties accrued, for EPA to bring an enforcement action in federal court. According to the Supreme Court, EPA's deliberation over whether the Sacketts were in violation of the Clean Water Act ended upon the issuance of the compliance order.

Conclusion

The Supreme Court's ruling in Sackett has implications that may reverberate through other major federal environmental programs. For example, the language of Section 319(a)(3) of the Clean Water Act is echoed in both Section 113(a)(3) of the Clean Air Act and in Section 3008(a)(1) of RCRA. In addition, Section 106(a) of CERCLA permits EPA to seek judicial relief or issue an order to abate a threat under the statute. While the Court's ruling does not address the question of whether an environmental statute, such as CERCLA, which purports to preclude such review would violate the Fifth Amendment rights of recipients of compliance orders, the language of the majority and concurring opinions suggest that none of the Justices were inclined to preclude judicial review, at least on the question of whether EPA has the authority to regulate a party's actions through the issuance of such orders.

For decades, regulated parties have struggled with the ramifications of their inability to seek judicial review of the issuance of compliance orders under environmental statutes, and it will be interesting to watch how the ruling in the Sackett case plays out under various environmental statutory schemes. It also remains to be seen how the Supreme Court's ruling in Sackett may change the practices of State environmental agencies, many of which have been delegated authority to administer these federal environmental statutes, including the authority to issue compliance orders.

Ultimately, the Supreme Court's opinion is a repudiation of what the Court views as EPA's "strong-arming of regulated parties into 'voluntary compliance' without the opportunity for judicial review – even judicial review of the question of whether the regulated party is within the EPA's jurisdiction." As Justice Alito pointedly stated in his concurring opinion, the Supreme Court squarely rejected the position of the Government which "would have put the property rights of ordinary Americans entirely at the mercy of [EPA] employees."

Blank Rome LLP has experienced attorneys covering the various counseling, regulatory, and litigation issues that will likely arise from the Supreme Court's ruling in Sackett v. EPA and related developments. We are available to discuss with you how this may affect your company and its business plans.

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