Unanimous Supreme Court Rebukes EPA

27 March 2012 Publication
Author(s): David M. Bates

Property Owners Have a Right to Early Judicial Review of EPA Enforcement Orders Under Clean Water Act

In a rare 9-0 decision issued on March 21, 2012, the U.S. Supreme Court rebuked the U.S. Environmental Protection Agency in an enforcement action brought under the Clean Water Act. Sackett v. Environmental Protection Agency, __ U.S. __ (2012). The Court held EPA enforcement orders can be immediately challenged in court, at least on the question of EPA jurisdiction and authority to issue the order.

The Sacketts owned a residential lot in northern Idaho. They filled in part of the lot with rocks and dirt to prepare for construction of a home. The lot was near Priest Lake, but separated from the lake by several lots with permanent structures. Nevertheless, the EPA determined that the Sacketts' property was a wetland and therefore part of the "waters of the United States," and further determined that filling the wetlands without a permit was a violation of the CWA. In the words of the EPA Order, the Sacketts "engaged, and are continuing to engage, in the 'discharge of pollutants' from a point source within the meaning of sections 301 and 502(12) of the [Clean Water] Act, 33 U.S.C. §§1311, and 1362(12)." Therefore, EPA ordered them to remove the fill material, permit access to the site by EPA, and maintain records and documentation for inspection. Failure to comply exposed the Sacketts to as much as $75,000 per day in penalties. This included $37,500 per day for violation, not of the statute, but of the Order itself.

The Sacketts did not believe that their property was subject to the CWA and sought a hearing before EPA, but the request was denied. They then filed suit in federal court in Idaho, but the court dismissed the case for want of subject matter jurisdiction. That decision was affirmed in the 9th U.S. Circuit Court of Appeals. The Sacketts were essentially helpless – with each passing day, the penalties mounted, but EPA had unilateral discretion as to whether and when to file an action to enforce the Order and collect the penalties. As Justice Alito stated in his concurring opinion, "In a nation that values due process, not to mention private property, such treatment is unthinkable."

The basic legal question was whether the EPA's Order was a "final agency action for which there is no other adequate remedy in a court." If it was, the Sacketts could properly challenge the Order under the Administrative Procedure Act, 5 U.S.C.§714. The Court concluded that the EPA Order constituted agency action and that it was final, because by its own terms it purported to make the requisite determinations and it created legal obligations on the part of the Sacketts. Among other things, failure to comply exposed them to double penalties in any future proceedings. The EPA defended its action, saying that it had invited the Sacketts to informal discussions to resolve the issues and that the decision was subject to reconsideration. The Court rejected this argument, concluding that for purposes of the Administrative Procedure Act, the Order was the consummation of the agency's decision-making process. "The mere possibility that an agency might reconsider in light of 'informal discussion' and invited contentions of inaccuracy does not suffice to make an otherwise final agency action nonfinal." Slip op. at p. 6.

The Court also found that waiting for the EPA to enforce the Order and raising the arguments then, was not an "other adequate remedy at law" precluding immediate challenge. The APA does not permit a challenge where the underlying statute precludes judicial review, but the Court found no such preclusion in the CWA, express or inferred. The Court noted that the APA creates a presumption favoring judicial review. Although the CWA gives EPA the option to file an action in court or to issue an administrative order, that does not mean that Congress intended that unilateral administrative orders are not subject to judicial review. The deliberative process ended when the Order was issued, and it is irrelevant that further deliberations by the agency were required in deciding whether to seek judicial enforcement. The Court was able to decide the issue under the APA, and it did not reach the question of whether EPA violated the Sacketts' constitutional right to procedural due process.

In a concurring opinion, Justice Ginsburg, argued that the decision in this case was narrow, noting that the Court reached only the question of whether the Sacketts had the right to contest the jurisdictional basis for the Order, and not whether they could challenge the "terms and conditions" of the Order itself.

Underlying the decision is the long-running debate and uncertainty about the scope and reach of the CWA and EPA's enforcement authority thereunder. The Court noted its prior decisions holding that "navigable waters" included freshwater wetlands if they were adjacent to navigable waters, United States v. Riverside Bayview, 474 U.S. 121 (1985); but navigable waters did not include seasonally ponded gravel pits not adjacent to open waters, Solid Waste Agency of Northern Cook Cty. v. Army Corps of Engineers, 531 U.S. 715 (2001). More recently, in the plurality opinion in Rapanos v. United States, 547 U.S. 715 (2006), the Court held that wetlands not adjacent to navigable-in-fact waters were not within the scope of the CWA, although the Court did not agree on the rationale. EPA's response has been to decide on a case-by-case basis, rather than issuing clear guidance that itself might be subject to review. The lack of certainty about the limits of EPA authority, along with the Court's apparent skepticism about EPA's position in this case, flavored the decision. Effectively, without judicial review, the agency had unrestrained carte blanche to expand its own jurisdiction, strong-arming individual property owners into submission regardless of the merits of EPA's position. In a concurring opinion, Justice Alito urged Congress to clarify the uncertainty as to jurisdiction, once and for all, stating, "Allowing aggrieved property owners to sue under the Administrative Procedure Act is better than nothing, but only clarification of the reach of the Clean Water Act can rectify the underlying problem." (Alito, J, concurring opinion at p. 3).

The broader questions will be how this principle will be applied in the settings of other agency actions and under other statutes. This decision will undoubtedly temper aggressive agency enforcement action in general, by raising the specter of prompt judicial review. The Court seemed willing to consider the practical realities of the agency's actions, and was concerned with fundamental fairness.

It remains to be seen whether EPA will be similarly constrained when issuing emergency-type administrative orders under other statutes such as the Safe Drinking Water Act. One possible example is EPA's pending enforcement action against Range Resources in connection with a hydraulic fracturing operation in Wise County, Texas. EPA unilaterally ordered Range to immediately supply nearby property owners with water and conduct investigations pursuant to its emergency powers under the SDWA. Range Resources hotly contested the claim that the water wells were impacted by its operations and presented proof that satisfied the Texas Railroad Commission on that issue. EPA, however, insisted on compliance with no opportunity for a hearing. Range Resources filed suit, which is on appeal to the 5th U.S. Circuit Court of Appeals.

EPA may take steps to create internal appeals processes to bolster a defense in other cases that the petitioner has another adequate remedy at law, whether or not that process actually provides a meaningful review in practice.

Any party facing agency enforcement action should consider whether Sackett presents an avenue for prompt judicial review. The courthouse doors may be opening to parties previously trapped in the regulatory morass.

Please contact Gardere Attorneys David M. Bates (dbates@gardere.com at 713.276.5355), Frances E. Phillips (fphillips@gardere.com or 214.999.4803) or Jeffrey M. Gaba (jgaba@gardere.com or 214.999.4625) if you have questions or would like more information about this alert.

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