Sackett v. United States Environmental Protection Agency, __ U.S. ___ (2012)

Lower court decision: Sackett v. United States Environmental Protection Agency, 622 F.3d 1139 (9th Cir. 2010).

Summary: United States Supreme Court holds that Federal courts have subject-matter jurisdiction to conduct review of administrative compliance orders issued by the Environmental Protection Agency pursuant to the Clean Water Act, 33 U.S.C. § 1319(a)(3), before the EPA has filed a lawsuit in federal court to enforce the compliance order. Decision reverses the Ninth Circuit and several other circuits.

Background: The Sacketts own .63 acres of Idaho property. In 2007 they started development and filled in most of the property with dirt and rock in preparation for building a house. The EPA filed a compliance order against the Sacketts, alleging that the property was a wetland subject to the Clean Water Act. The order required the Sacketts to restore the property. The Sacketts asked for a hearing, which the EPA refused. The Sacketts filed an action in the District Court asking for injunctive and declaratory relief, arguing that EPA’s action was arbitrary and capricious under the Administrative Procedure Act, 5 U.S.C. §706(2)(A), that they had the right to judicial review of final agency action for which there was no other adequate remedy in a court, 5 U.S.C. § 704, and that the refusal to grant the right to review violated their procedural due process rights under the Fifth Amendment.

Decision. Under the Clean Water Act, 33 U.S.C. 1319(a)(3), the EPA can either issue a compliance order “on the basis of any information available,” or file a civil action in federal court seeking compliance under § 1319(b). Administrative penalties can also be issued under § 1319(g). Those penalties can accrue at the rate of $32,500 per day in fines or administrative penalties of $11,000 per day for each violation. The EPA maintains that the first enforcement option, compliance orders, are enforceable through a subsequent district court action. The EPA argued before the district court that if it issued a simple compliance order under § 1319(a)(3) in lieu of either an administrative penalty or a civil action in district court that the respondent had no right to an appeal under the APA and the CWA. In response, the Sacketts argued that the APA makes agency action reviewable when there is no other adequate remedy.

The district court dismissed the lawsuit and the 9th Circuit affirmed the dismissal. Both courts found that the uniform caselaw holds that the CWA does not grant a right to appeal a compliance order, citing decisions from the 10th, 6th, and 7th circuits. The basis for these decisions is that the compliance order does not by itself impose monetary sanctions; that the EPA must resort to the district courts first, and that the denial of pre-enforcement judicial review does not violate the Fifth Amendment’s due process guarantee. The United States Supreme Court granted a writ of certiorari and the matter was argued on January 9, 2012. A decision was issued on March 21, 2012.

The unanimous decision was authored by Justice Scalia. The reasoning in the order was straightforward and to the point. The court started with Chapter 7 of the Administrative Procedures Act. 5 U.S.C. § 704 which provides for judicial review of

The court began its analysis by addressing the legal issue of whether the compliance order was agency action. The court found that there was “no doubt” that the order was “agency action” under the APA as the APA even defines a “failure to act” as agency action §§551(13), 701(b)(2). As to whether the Order constituted “final” agency action, the court stated:

It has all of the hallmarks of APA finality that our opinions establish. Through the order, the EPA “‘determined’” “‘rights or obligations.’” Bennett v. Spear, 520 U. S. 154, 178 (1997) (quoting Port of Boston Marine Terminal Assn. v. Rederiaktiebolaget Transatlantic, 400 U. S. 62, 71 (1970)).By reason of the order, the Sacketts have the legal obligation to “restore” their property according to an agency approved Restoration Work Plan, and must give the EPA access to their property and to “records and documentation related to the conditions at the Site.” App. 22, ¶2.7. Also, “‘legal consequences . . . flow’” from issuance of the order. Bennett, supra, at 178 (quoting Marine Terminal, supra,at 71). For one, according to the Government’s current litigating position, the order exposes the Sacketts to double penalties in a future enforcement proceeding. It also severely limits the Sacketts’ ability to obtain a permit for their fill from the Army Corps of Engineers, see 33 U. S. C.§1344. The Corps’ regulations provide that, once the EPA has issued a compliance order with respect to certain property, the Corps will not process a permit application for that property unless doing so “is clearly appropriate.”33 CFR §326.3(e)(1)(iv) (2011).

Id. at __. (footnotes omitted). The court next addressed the question of whether there was any other adequate remedy. Justice Scalia held that although the CWA allows the EPA to seek enforcement of the compliance order, “each day that [the Sacketts] wait for the agency to drop the hammer, they accrue, by the Government’s telling, an additional $75,000 in potential liability.” Id. at __. The court next addressed the EPA’s argument that the CWA prohibits an appeal. The court first found that nothing in the CWA expressly precludes judicial review. The court next addressed the Government’s argument that because the CWA grants the EPA a choice of a compliance order or a judicial proceeding that it would undermine the Act to allow judicial review. This is the argument that the various circuits that had reviewed previous challenged relied upon. The court rejected this argument as resting on a question-begging premise that the relevant difference between a compliance order and an enforcement proceeding is that only the latter is subject to judicial review. The court suggested that there were other reasons that the EPA could want to issue a compliance order, other than just avoiding court. The court went on to reject all of the other arguments offered by the Government, including the final argument that subjecting compliance orders to judicial review would make it less likely that the EPA would use orders. In rejecting this argument, the court held that this “may be true—but it will be true for all agency actions subjected to judicial review. The APA’s presumption of judicial review is a repudiation of the principle that efficiency of regulation conquers all.” Id. at __. The court concluded by noting that “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—even judicial review of the question whether the regulated party is within the EPA’s jurisdiction.” Id. at __.

This case is a welcome breath of clear reasoning from the Supreme Court and a strong blow against the strong-arm tactics employed by the EPA. It is too early to tell how this will change the EPA’s practice. It is possible that the EPA will resort to another nefarious practice of dangling a consent order in front of a party with the threat that if the party does not accept the terms within a few days that the EPA will issue an order imposing a much higher fine.

Jim Pray