Supreme Court Holds EPA Compliance Order Asserting Clean Water Act Jurisdiction Is Subject to Judicial Review

by Sheppard Mullin Richter & Hampton LLP
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Sackett v. Environmental Protection Agency, 566 U.S. ___ (2012) (decided March 21, 2012)

[author: James Rusk]

Private property owners are entitled to immediate judicial review of Environmental Protection Agency compliance orders that seek to regulate their property under the federal Clean Water Act ("CWA"), the Supreme Court unanimously held last week. The Court's much anticipated decision in Sackett v. Envtl. Protection Agency says that property owners need not wait for the EPA to bring a judicial enforcement action in order to contest the agency's assertion that their property contains "waters of the United States" subject to CWA jurisdiction. But at least one member of the Court believes that Justice Scalia's narrowly crafted opinion will have limited benefits for most property owners and that Congressional action is still needed to clarify the extent of CWA jurisdiction.

Sackett involved a couple who filled approximately a half acre on a residential lot they owned near Priest Lake in Idaho. The EPA subsequently issued an administrative compliance order to the property owners, finding that the filled property contained wetlands that were "waters of the United States" subject to federal jurisdiction under the CWA. The order found that the fill of the wetlands violated CWA § 301 and directed the Sacketts to restore the filled wetlands according to an EPA work plan.

The Sacketts did not believe their property was subject to the CWA and requested a hearing before the EPA. EPA denied the request. The EPA's action presented the Sacketts with two unpalatable options: incur significant expense to remove the fill and restore the alleged wetlands, or wait for the EPA to bring a civil enforcement action while the potential penalties continued to accrue. The CWA provides for penalties of up to $37,500 per day for violations, and the EPA takes the position that the penalties are doubled when a person has received a compliance order and failed to comply.

The Sacketts instead filed suit in federal district court, claiming that the compliance order violated the Administrative Procedure Act ("APA") and deprived them of protected property interests without the due process guaranteed by the Fifth Amendment. The district court dismissed the Sacketts' claims for lack of subject matter jurisdiction, and the Ninth Circuit affirmed, finding that the CWA precludes pre-enforcement judicial review of compliance orders. Other circuits have reached the same conclusion.

The Supreme Court reversed, holding that the administrative compliance order was "final agency action" subject to judicial review under the APA. According to the Court, the order "has all the hallmarks of finality." It determined rights or obligations (including the obligation to restore the filled areas), gave rise to legal consequences (including the potential for double penalties), and marked the consummation of the EPA's decision making process. The Sacketts also had no other adequate remedy in a court, because they could not initiate the civil enforcement action in which judicial review of the EPA's order normally would occur. Although the government argued that the CWA precludes pre-enforcement judicial review of administrative compliance orders, the Court found no basis in the statute for that inference.

Justice Alito, in a concurring opinion, wrote that the availability of judicial review "provides a modest measure of relief" but that the "notoriously unclear" reach of the CWA and the "draconian penalties" available for violations will still leave most property owners "with little practical alternative but to dance to the EPA's tune." According to Justice Alito, "[r]eal relief requires Congress to . . . provide a reasonably clear rule" regarding the extent of "waters of the United States" over which the CWA confers jurisdiction. None of the Court's other members joined Justice Alito's call for Congressional action.

Justice Ginsburg separately wrote a brief concurring opinion, noting that the Court's decision does not resolve whether the Sacketts could challenge the terms and conditions of the compliance order, in addition to the EPA's claim of regulatory jurisdiction, prior to enforcement of the compliance order.

All in all, the Sackett opinion is not the sweeping defense of private property rights that some had expected after the Court's pointed questioning during oral argument. But the availability of pre-enforcement review provides a meaningful remedy for those facing compliance orders.

An important related issue is whether EPA and the lower courts will view the Court's reasoning as undermining the Ninth Circuit's 2008 holding that a jurisdictional determination by the Army Corps of Engineers (the federal agency responsible for permitting fill of waters of the United States under the CWA) is not reviewable final agency action because it does not "impose an obligation, deny a right, or fix some legal relationship." Fairbanks North Star Borough v. U.S. Army Corps of Engineers, 543 F.3d 586, 591, 593 (9th Cir. 2008), cert. denied, 129 S.Ct. 2825. To the extent that holding remains intact, a property owner who contests the presence of "waters of the United States" on their property still cannot have their day in court without either completing the Corps' permit process, or filling the property without authorization and incurring the risk of a compliance order that will result in substantial liability if upheld.

 

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