Recipients of environmental compliance orders may now seek judicial review if they disagree with the Environmental Protection Agency's (EPA) assertion of authority over their property.  Reversing decades of lower court decisions denying "pre-enforcement" review of EPA administrative orders, the Supreme Court unanimously ruled last week in Sackett v. EPA, No. 10-1062, 2012 WL 932018 (U.S. Mar. 21, 2012), that the Clean Water Act does not preclude judicial review of an administrative compliance order issued by the EPA.

What Does This Mean for Clients? 

Administrative enforcement of environmental statutes is widespread.  While Sackett addressed only the Clean Water Act, similar administrative orders are issued under other federal environmental statutes.  It is likely the Court's reasoning would extend to other environmental laws, where the statute itself does not expressly prohibit pre-enforcement review and there is no administrative hearing available.  Therefore, if a client receives an administrative compliance order and maintains that the EPA has no jurisdiction over its property, the Sackett decision opens the door for the order to be immediately appealed to a federal court.  

What Do We Expect Will Happen Next? 

The decision is a major setback for the EPA, which has relied on the bar against pre-enforcement review for decades.  The EPA has said that it will comply with the decision, but the added resources to defend appeals may impact how many cases are brought in the future.  The Supreme Court decision was particularly harsh in criticizing the federal government (and Congress) for its continued failure to promulgate clear standards for Clean Water Act jurisdiction that would limit the kinds of disputes reflected in Sackett.  It is not clear whether the EPA or Congress will take any action in the near term to clarify Clean Water Act jurisdiction.  The EPA, with the Corps of Engineers, has continued to determine Clean Water Act jurisdiction under agency guidance, rather than regulations, since the Rapanos decision in 2006. 

Background Information

Sackett involved a compliance order issued by the EPA in 2007 directing landowners, Chantell and Michael Sackett, to halt development of their property. The order asserted that the property in question was a protected wetland and that the Sacketts had discharged fill material onto their property in violation of the Clean Water Act.  The order directed the Sacketts to immediately restore the property and exposed the couple to as much as $75,000 in daily penalties for failure to comply with its terms.

After the EPA denied the Sacketts a hearing on the matter, the couple filed suit, claiming the wetland designation of their land was arbitrary and capricious, and the lack of a hearing deprived them of due process rights.  The government, which prevailed at the district and appellate court level, argued that the Clean Water Act precludes pre-enforcement judicial review of compliance orders.

In a 9-0 decision, the Court found the that the compliance order was a final agency action for which there was no adequate remedy other than an Administrative Procedure Act review, and that the Clean Water Act itself does not preclude, explicitly or implicitly, judicial review before the agency attempts to enforce the order.  The Court did not rule on the merits of the compliance order.

Notably, in support of its contention that the Clean Water Act precludes pre-enforcement review of compliance orders, the EPA argued that the purpose of compliance orders is to obtain quick remediation through voluntary compliance and that the EPA is less likely to use the orders if they are subject to judicial review.  The Court promptly rejected that argument, stating:

[t]he APA's presumption of judicial review is a repudiation of the principle that efficiency of regulation conquers all.  And there is no reason to think that the Clean Water Act was uniquely designed to enable the strong-arming of regulated parties into "voluntary compliance" without the opportunity for judicial review.

The Implications

This case has important implications for regulated parties going forward.  Given that the EPA issued over one thousand compliance orders in 2010, the ruling will likely force the agency to undertake more thorough investigations when addressing wetlands and pollution violations under the Clean Water Act and possibly under other environmental statutes as well. 

Although the Court limited its holding to the Clean Water Act, the Court did express its aversion to the EPA's "strong-arming" of parties into compliance without allowing any opportunity for judicial review.  Therefore, it is likely the Court's reasoning would extend to other environmental laws where the statute itself does not expressly prohibit pre-enforcement review.  For example, the Clean Air Act does not expressly preclude pre-enforcement review of compliance orders, and although the Resources Conservation and Recovery Act does provide for the right to a public hearing if requested within thirty days of the administrative compliance order, the statute does not expressly forbid pre-enforcement review of those public hearing decisions.  On the other hand, the ruling may have little effect on remediation and removal orders issued pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, which expressly states that there is generally no right to judicial review of any order issued pursuant to Section 104.

Notably, the Sackett decision allows judicial review for issues of agency jurisdiction.  In a concurring opinion, Justice Ginsburg specified that only jurisdiction, not other issues in a compliance order, could be immediately brought to court.  Where a statute offers an administrative hearing to address issues of dispute in a compliance order, it is highly unlikely that a federal court would entertain an appeal that has the effect of skipping the administrative hearing step.

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