Justices Appear Receptive to Argument On Review of EPA Compliance Orders

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By John H. Stam  

U.S. Supreme Court justices appeared receptive Jan. 9 to the argument that Environmental Protection Agency wetlands compliance orders are subject to judicial review before EPA begins enforcement actions in federal court (Sackett v. EPA, U.S., No. 10-1062, oral argument 1/9/12).

During oral arguments in a case in which Idaho property owners challenged an order finding they violated the Clean Water Act by filling wetlands without a permit, Justice Stephen G. Breyer emphasized that the order by its own terms was not a warning of potential liability, but rather an order to remedy violations.

Justice Elena Kagan similarly asked why the presumption of review did not apply to compliance orders, and Justice Ruth Bader Ginsburg noted that the property owners asked for a hearing on the wetlands determination and were denied by EPA.

A Georgetown University Law Center panel later said it expects the court to rule in favor of the Sacketts. (See related story in this issue.)

At issue is an order against Chantell and Michael Sackett, who filled in about a half-acre of their property near Priest Lake, Idaho, so they could build a house.

EPA issued a compliance order against the couple in November 2007, alleging the parcel is a wetland subject to the Clean Water Act and that the Sacketts violated the act by filling in their property without first obtaining a dredge-and-fill permit under Section 404 of the act.

The Sacketts then sued EPA under the Administrative Procedure Act, challenging the compliance order as arbitrary and capricious and a violation of their due process rights. The U.S. District Court for the District of Idaho granted EPA's motion to dismiss the lawsuit due to lack of subject matter jurisdiction. That decision was upheld by the U.S. Court of Appeals for the Ninth Circuit.

Act Said to Preclude Judicial Review

In its September 2010 opinion, the Ninth Circuit noted that the federal circuits have held consistently that the Clean Water Act impliedly precludes judicial review of compliance orders until the EPA brings an enforcement action in a district court (Sackett v. EPA, 622 F.3d 1139, 71 ERC 2036 (9th Cir. 2010); 181 DEN A-8, 9/21/10).

Despite the holdings in the federal circuits, the Supreme Court justices were skeptical in their questioning.

Justice Samuel Alito expressed dismay at EPA's action and said that most homeowners hearing the facts of the case would not think that it could happen to people in the United States.

Alito asked what homeowners are supposed to do when EPA says it thinks their property contains wetlands.

Deputy Solicitor General Malcolm L. Stewart, who represented the federal government, responded that property owners are able to obtain a determination on the presence of wetlands by applying for a dredge-and-fill permit before they begin construction or for an after-the-fact permit for past activities.

EPA's general practice, he said, is to contact property owners first to discuss alleged violations before proceeding to compliance orders.

What Would You Do?

Chief Justice John G. Roberts Jr. asked what Stewart would do if EPA issued an administrative order to him and he believed EPA was erroneously asserting jurisdiction.

Stewart acknowledged the options at that point were limited. Parties can comply with the order and seek an after-the-fact permit or await enforcement and present their arguments in court. Stewart argued that when determining how the statutory scheme is supposed to work it is important to look not only at the opportunities available at that moment but at the ones foregone as well.

Scalia noted that EPA could have issued a warning that was not a compliance order and that would not be subject to judicial review.

An administrative compliance order under the Clean Water Act identifies a violation, provides remedies for compliance, and spells out penalties for noncompliance with the order. The order itself is unenforceable until the agency files a civil enforcement action in a district court.

Damien Schiff of the Pacific Legal Foundation in Sacramento, Calif., represented the Sacketts.

Plaintiffs Seek Immediate Review

He argued the compliance order should be subject to immediate review under the Administrative Procedure Act to determine if EPA correctly found the property contained wetlands, which would make the property subject to regulation under the Clean Water Act. They should not be forced to wait for EPA to bring an action to enforce the order, Schiff said.

Stewart agreed that the order is an order, but said that all the Clean Water Act allows EPA to order is actions violators are already required to do—to comply with the act.

Breyer questioned Stewart as to why it was not a final agency action subject to review under the APA and the court's ruling in Abbott Laboratories v. Gardner, 387 U.S. 136 (1967). Stewart argued that the court in Abbott Labs emphasized that it was then dealing with an industrywide regulation having the force of law and that the basis for challenging it was a purely legal ground unlike the factual challenges involved in challenging a wetlands determination in a compliance order.

Different Standards of Proof Cited

Stewart argued further that a determination that EPA was not arbitrary or capricious in making its wetlands finding would not resolve the issue, as different standards of proof are required for issuing a compliance order, making a finding of whether an EPA decision is arbitrary or capricious under the APA, or prosecuting a violation in a civil enforcement action.

For an agency to establish that it did not act arbitrarily or capriciously is a significantly lower standard than the one for an agency to prove a violation in an enforcement action. Alito said that this makes EPA's conduct in issuing orders more outrageous. Only after issuing orders will EPA officials do a more thorough investigation and compile a record for a civil enforcement action, which might lead officials to change their minds and decide there was no jurisdiction.

Stewart argued that any enforcement officer will prepare more before going into actual trial than when communicating with an alleged violator about alleged violations and the possibility of prosecution.

Stewart estimated that only about 3 percent of compliance orders culminate in the filing of enforcement actions.

Breyer Understands Government Concerns

On rebuttal with Schiff, Breyer said he thought he understood the government's concerns a little better.

He said that in judicial review only fact-finding made in an official record prepared for trial is considered. Breyer said that while a few cases may be brought to litigation for enforcement, there may be thousands of violations the agency has identified from its investigation that it would like to address but which it cannot address with creation of a full formal record.

Schiff argued that this is a problem of EPA's own creation and that if there is no formal record there is no substantial evidence. as required by the act, and the orders are not valid.

Scalia said that if compliance orders were reviewable EPA would just issue warnings instead of orders.

Other Issues Addressed

The justices addressed other questions as well.

Justice Sonia M. Sotomayor questioned the effect that findings by a court in an APA case challenging a compliance order—that a property contained wetlands, for example—would have if EPA later brought a civil enforcement action to enforce the order. She questioned whether parties would be precluded from challenging the findings in later proceedings.

Schiff replied that since the standards of review and proof are different, every issue—including a jurisdictional determination—would be open to litigation in both actions.

Several justices focused on the potential double liability that attaches when a property owner does not comply with a compliance order and is subject to up to $37,500 a day in penalties for violating the act and a further $37,500 a day for not complying with the order.

The Supreme Court's order granting the petition for writ of certiorari narrowly limited the issues on review to the following questions: “May petitioners seek pre-enforcement judicial review of the administrative compliance order pursuant to the Administrative Procedure Act, 5 U.S.C. §704?” and “If not, does petitioners' inability to seek pre-enforcement judicial review of the administrative compliance order violate their rights under the Due Process Clause?” (125 DEN A-6, 6/29/11)

‘Goal of Swift Corrective Action.'

In its ruling in September 2010, the Ninth Circuit said the “goal of enabling swift corrective action would be defeated by permitting immediate judicial review of compliance orders.”

The Ninth Circuit said the Clean Water Act requires that penalties for noncompliance with a compliance order may be assessed only after EPA proves in district court that defendants violated the statute in the manner alleged in the compliance order.

“Under these circumstances, preclusion of pre-enforcement judicial review does not violate” the due process rights of the Sacketts, the Ninth Circuit concluded. “The district court properly dismissed this case for lack of subject-matter jurisdiction.”

The Ninth Circuit wrote, “We do not work from a blank slate. Every circuit that has confronted this issue has held that the CWA impliedly precludes judicial review of compliance orders until the EPA brings an enforcement action in federal district court.”

“The reasoning of these courts is persuasive to us, as well as the broad uniformity of consensus on this issue,” the appeals court wrote.

For More Information  

Text of the U.S. Supreme Court oral argument in Sackett v. EPA is available at http://www.supremecourt.gov/oral_arguments/argument_transcripts/10-1062.pdf .  


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