In a unanimous decision released on March 20, 2012, the United States Supreme Court held that administrative compliance orders issued by the United States Environmental Protection Agency ("EPA") pursuant to the Clean Water Act ("CWA") are subject to pre-enforcement judicial review. This decision is likely to have a considerable impact on the EPA's future enforcement of environmental laws, providing new avenues for landowners to challenge the EPA and possibly delaying certain enforcement actions by the EPA.
Michael and Chantell Sackett, the plaintiffs in Sackett v. Environmental Protection Agency, 566 U.S. ____ (2012), purchased a residential lot that was separated from an inland lake by several developed lots. The Sacketts received an administrative compliance order from the EPA after filling a portion of their lot with dirt and rock in order to construct a home. The compliance order stated that the Sacketts' property was a federally-regulated wetland under the CWA and that filling the property violated the CWA. It ordered the Sacketts to restore the lot to its prior condition pursuant to an EPA-established Administrative Work Plan and to allow the EPA access to the lot and all records concerning the lot. If the Sacketts did not comply, they faced fines of up to $75,000 per day.
An administrative compliance order, such as that issued to the Sacketts, is a tool used frequently by the EPA to compel compliance with a number of environmental laws, including the CWA, Clean Air Act ("CAA"), Resource Conservation and Recovery Act ("RCRA"), and Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), without first commencing a lawsuit. If a party fails to comply with the administrative compliance order, then the EPA may bring an enforcement action in court, seeking daily penalties for both the alleged violation of the law and the subsequent violation of the order. However, the prospect of incurring hefty fines usually prompts the receiving party to comply with the terms of the compliance order without judicial enforcement.
The Sacketts, believing that their property was not a federally-regulated wetland, wished to appeal the compliance order immediately. However, they soon discovered that the EPA did not have a formal appeal process for compliance orders. Instead, the Sacketts filed a lawsuit, seeking judicial review pursuant to the Administrative Procedures Act ("APA"), and alleging that due process requires the EPA to have a system for pre-enforcement appeals of compliance orders. The district court ruled that it lacked jurisdiction over pre-enforcement review of the EPA's compliance orders, and the Ninth Circuit Court of Appeals affirmed.
The Supreme Court unanimously overruled the lower courts, holding that an administrative compliance order issued by the EPA under the CWA is "final" for purposes of judicial review under the APA, and that the CWA contained no "express" language barring pre-enforcement judicial review of the compliance order. Thus, the Sacketts could challenge the administrative compliance order before the EPA brought an action in court to enforce it.
While the decision in Sackett dealt with the CWA, it is likely to affect enforcement with respect to many federal environmental laws. Neither RCRA nor the CAA currently contain an express bar on pre-enforcement judicial review of compliance orders, and thus it is likely that landowners will be able to challenge any future orders issued pursuant to those acts in court prior to the commencement of an EPA enforcement action. By contrast, CERCLA does contain a direct statutory bar on pre-enforcement judicial review. Since the Court did not reach the constitutional due process issue brought by the Sacketts, at least for now it appears that there will continue to be no pre-enforcement review available for administrative compliance orders issued under CERCLA.
The EPA has already indicated that the Supreme Court's decision means that the EPA will issue fewer administrative compliance orders, opting instead to immediately commence administrative hearings or federal litigation. Formal litigation may be more costly and resource-intensive for both landowners and the EPA. Nonetheless, the Supreme Court's decision is a positive development for commercial real estate developers and landowners. Landowners will feel less pressure to simply comply with a questionable administrative order to avoid incurring hefty fines when an immediate legal challenge is available. Further, by controlling the timing of judicial review of the order, a landowner can decrease any lost time on a particular project that would have occurred by waiting for the EPA to bring an enforcement action.
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