While media attention has focused on the David versus Goliath storyline, the ruling will impact a wide range of parties—including the largest corporations in disputes with the EPA.
In a much-anticipated decision, a unanimous Supreme Court has decided that parties subject to administrative compliance orders (ACOs) under the Clean Water Act may seek judicial review without waiting for enforcement action by the federal Envionmental Protection Agency. In Sackett v. EPA (March 21, 2012), the Supreme Court held that two Idaho homeowners could use the Administrative Procedure Act (APA) to mount a judicial challenge to an ACO.
While media attention on the case has focused on the David versus Goliath storyline, the ruling will impact a wide range of parties — including the largest corporations in disputes with the EPA.
The Clean Water Act prohibits, among other things, the “discharge of pollutants” into “waters of the United States” without a permit. When the EPA identifies a violation under the act, there are three principle avenues of enforcement. First, the EPA may commence an administrative enforcement action, after providing the alleged violator with “a reasonable opportunity to be heard and to present evidence” and opportunity for public comment. Any penalties assessed are subject to judicial review. Second, the agency may bring a civil enforcement action in federal court.
Another option, and the one at issue in Sackett, is the ACO. These orders set forth the nature of the violation and a timeline for achieving compliance (e.g., restoring the site to its prior condition). As noted in the Sackett decision, the EPA considers ACOs to be a valuable tool, because they encourage “quick remediation through voluntary compliance.” If a party does not “voluntarily” come into compliance with the ACO, the EPA must bring an action in federal court in order to enforce it. While the recipient of an ACO may challenge it in court, the Clean Water Act does not prescribe a means for the recipient of an ACO to challenge it before that time. Meanwhile, the recipient of the ACO faces penalties of up to $75,000 per day of noncompliance ($37,500 for the initial violation, and $37,500 for failing to comply with the ACO). The decision in Sackett provides a path for those parties who do not wish to “voluntarily” comply with an ACO, and do not want to wait for penalties to reach into the millions of dollars before the EPA brings an enforcement action.
Chantell and Michael Sackett presented a compelling narrative as property owners subject to the whims of the EPA. They had purchased an undeveloped 0.63-acre lot near the shore of Idaho’s Priest Lake and planned to build a house. In April and May of 2007, the Sacketts graded and filled the site to prepare for construction. Six months later, the Sacketts received an ACO from the EPA. Alleging that the site contained wetlands, the agency contended that the Sacketts’ placement of fill material had constituted the discharge of pollutants into waters of the United States, as prohibited by the Clean Water Act (the definition of “waters of the United States” is a complex issue in itself, but one not at issue in this case). The EPA ordered the Sacketts to restore the site to its prior condition.
The Sacketts contended that their property was not wetlands, and sought a meeting with EPA officials. The agency declined. The Sacketts were faced with the choice of coming into compliance by restoring the site, or waiting for an EPA enforcement action. As discussed above, the Sacketts could have accumulated millions of dollars in penalties while waiting for the EPA to take action.
The Sacketts brought an action in federal court in Idaho seeking pre-enforcement judicial review of the ACO. At the district court level, the Sacketts asserted that the ACO was arbitrary and capricious under the Administrative Procedures Act, it had been issued without a hearing in violation of the Sacketts’ procedural due process rights, and it had been issued on an unconstitutionally vague standard. The EPA argued that the district court lacked subject-matter jurisdiction, because the Clean Water Act precludes judicial review of an ACO unless and until EPA brings an action to enforce it. The court granted the EPA’s motion to dismiss.
The Sacketts appealed to the U.S. Court of Appeals for the Ninth Circuit. The Ninth Circuit upheld the district court’s decision, noting that “[e]very circuit that has confronted this issue has held that the [Clean Water Act] impliedly precludes judicial review of compliance orders until the EPA brings an enforcement action in federal district court.” The Ninth Circuit held that the Sacketts’ due process rights had not been violated, proposing the following work-around: the Sacketts “could seek a permit to fill their property and build a house, the denial of which would be immediately appealable to a district court under the [Administrative Procedures Act].” The Sacketts appealed to the U.S. Supreme Court.
Steering clear of the constitutional due process claim raised by the Sacketts, the court reversed the Ninth Circuit and held that ACOs under the Clean Water Act are subject to pre-enforcement review under the Administrative Procedures Act. While the Clean Water Act does not speak to judicial review of ACOs, the APA provides for judicial review of final agency action for which there is no other adequate remedy. Judicial review is not available where the statute specifically precludes review. The analysis thus turned on whether the EPA’s action was final, whether there was an adequate remedy other than the APA provision, and whether the Clean Water Act precluded pre-enforcement review of ACOs.
Justice Antonin Scalia, writing for the majority, stated that an ACO “has all the hallmarks of APA finality” because legal consequences flow from it. While EPA may reconsider its order following informal discussions with the regulated entity, it is still a final agency decision. Further, the court held that there was no adequate remedy other than an APA challenge, because there was no Clean Water Act mechanism by which the Sacketts could challenge the ACO unless the EPA decided to bring an enforcement action where the recipient of the order could present their arguments to the court.
Finally, while the Clean Water Act does not explicitly provide for judicial review, nor does it preclude judicial review. The APA creates a presumption favoring judicial review, and the EPA did not successfully rebut that presumption. The court was not swayed by the argument that pre-enforcement review of ACOs would hamper the efficiency of an important regulatory tool.
“The APA’s presumption of judicial review is a repudiation of the principle that efficiency of regulation conquers all,” Justice Scalia wrote, noting that there is nothing in the language of the Clean Water Act to suggest that it “was uniquely designed to enable strong-arming of regulated parties” into so-called voluntary compliance. ACOs will still encourage voluntary compliance where there is “no substantial basis to question their validity.”
While the Sacketts presented a compelling narrative, the decision applies to all parties facing ACOs under the Clean Water Act. Even the largest corporations can use Sackett to seek pre-enforcement judicial review of an ACO brought under the Clean Water Act.
The decision focused on the statutory language of the Clean Water Act in particular, so impacts on other statutory schemes will vary greatly depending on the applicable statutory language and their similarity to the Clean Water Act. Courts may be persuaded to review ACOs brought under the Resource Conservation and Recovery Act because, like the Clean Water Act, it does not expressly prohibit pre-enforcement review. By contrast, Sackett will likely not be helpful to those seeking to challenge ACOs brought under the Comprehensive Environmental Response, Compensation and Liability Act, because pre-enforcement review is expressly prohibited.
By providing an avenue for pre-enforcement challenges of ACOs, Sackett paves the way for further Clean Water Act litigation. In a stinging concurring opinion, Justice Samuel Alito highlighted a possible avenue for future challenges. Calling the Clean Water Act’s grant of jurisdiction “notoriously unclear” and harkening back to the murky 2006 Rapanos opinion, Alito contended that parties would continue to be swept into inappropriate Clean Water Act enforcement. “Real relief requires Congress to do what it should have done in the first place: provide a reasonably clear rule regarding the reach of the Clean Water Act,” Alito wrote. Without congressional action or a clear jurisdictional statement from the EPA, we can expect to still see more challenges of EPA jurisdiction under the Clean Water Act.