Unanimous Supreme Court Sides With Property Owners In Clean Water Act Row

by Morrison & Foerster LLP


On Tuesday, the U.S. Supreme Court issued an important decision that continues a trend of judicial skepticism toward federal agency efforts to avoid judicial review of agency permitting and related actions. In the high-stakes Clean Water Act (CWA) case Army Corps of Engineers v. Hawkes Co., Inc., a unanimous Court held that the Army Corps of Engineers’ “jurisdictional determination” findings that property features are “waters of the U.S.” subject to CWA requirements are “final agency actions” amenable to immediate legal challenge. Tuesday’s decision comes four years after the Court ruled, also unanimously, in Sackett v. EPA that a landowner could sue to challenge an EPA “compliance order” finding that it had filled “wetlands” qualifying as “waters of the U.S.” under the CWA. Although both decisions came in the context of CWA jurisdictional findings, which have long been controversial because of the federal government’s sweeping view of its authority in this area, the decisions could signal a greater willingness on the part of the Court to allow for speedy judicial review in cases arising from other permitting and enforcement regimes.

CWA Jurisdictional Determination

In 2010, Hawkes Co. Inc. applied to the Army Corps of Engineers (Corps) for a CWA section 404 permit to “fill” wetlands in the course of expanding its northwestern Minnesota peat mining operation. Two years later, the Corps issued a final jurisdictional determination finding that Hawkes’ 150-acre property included “waters of the U.S.” subject to the CWA.

The wetlands in question, according to the Corps, had a “significant nexus” to the Red River, a traditional navigable water of the U.S. located some 120 miles from the wetlands themselves. Hawkes and related property owners filed suit against the Corps under the Administrative Procedure Act (APA), contending that the Corps’ jurisdictional determination was unlawful and that the land in question was therefore not subject to CWA permitting requirements.

Circuit Split

The district court granted the Corps’ motion to dismiss, concluding that the property owner could not challenge the jurisdictional determination under the APA because the determination was not a “final agency action for which there is no other adequate remedy in a court.” The Eighth Circuit reversed, concluding that the jurisdictional determination was amenable to immediate judicial review. That decision created a conflict with an earlier Fifth Circuit decision. The Supreme Court then granted a petition for a writ of certiorari filed by the Solicitor General on behalf of the Corps asking the Court to resolve the conflict by finding that Corps jurisdictional determinations are not final agency actions.

Supreme Court Finds Final Agency Action

In an opinion written by Chief Justice John Roberts, the Court rejected the Corps’ position and concluded that the property owner could immediately challenge the jurisdictional determination. In so finding, the Court relied heavily on its 1997 decision in Bennett v. Spear, which held that agency actions are “final” if they meet two conditions. First, the action must constitute the completion of the agency’s decision-making process. Second, the action must result in the conferral of rights, obligations, or legal consequences.

In Hawkes, the Corps conceded that the first condition was satisfied because a jurisdictional determination “clearly ‘mark[s] the consummation’ of the Corps’ decisionmaking process” on the question of “waters of the U.S.” The Court also found the second condition satisfied because a jurisdictional determination has “direct and appreciable legal consequences.” In particular, a jurisdictional determination that property does not include waters of the U.S. provides a safe harbor for certain federal enforcement actions. Conversely, a positive jurisdictional determination constitutes a denial of that safe harbor.

Even a final agency action may not be amenable to immediate review under the APA if there exist adequate alternatives for review. The Court rejected the Corps’ argument that such adequate alternatives were present in this case, and this portion of the decision is the one that potentially has the most long-term significance. The Corps noted that a party that fills wetlands without a permit may defend itself in any enforcement action on the ground that the jurisdictional determination was wrong and that no permit was actually needed. In addition, the Corps observed, a party can seek a permit and then “seek judicial review if dissatisfied with the results.”

The Court found neither of the Corps’ alternative routes to judicial review sufficient. Citing its Sackett decision, the Court rejected the notion that a property owner can reasonably be expected to risk sanctions and “wait[] for EPA to ‘drop the hammer’ in order to have their day in court.” Second, the Court rejected the notion that property owners should have to go through the “arduous, expensive, and long” permitting process before securing judicial review of whether that permitting process was even required in the first place.

In a concurring opinion joined by Justices Thomas and Alito, Justice Kennedy stated that “the reach and systemic consequences of the Clean Water Act remain a cause for concern.” He went on to shoot what appear to be a couple of warning shots across the bow of the Corps. First, in response to the government’s suggestion that the Environmental Protection Agency might not be obligated to respect a negative jurisdictional determination by the Corps, Justice Kennedy suggested that the Due Process Clause might embody such a requirement. Second, in response to the government’s suggestion that the Corps could simply cease issuing jurisdictional determinations altogether, Justice Kennedy stated that the absence of such an important safeguard for property owners would “raise troubling questions regarding the Government’s power to cast doubt on the full use and enjoyment of private property throughout the Nation.”

Increased Judicial Scrutiny Under the Clean Water Act and Beyond?

The Court’s decision allowing immediate challenges to jurisdictional determinations is a major victory for property owners. The Corps issues thousands of CWA jurisdictional determinations each year, and they may now be immediately challenged in court. Yet much uncertainty lingers in this area. For example, it remains to be seen whether and how the Corps will respond to the Court’s ruling and the prospect of increased judicial scrutiny of its jurisdictional determinations. On the one hand, the Corps may react by making less expansive jurisdictional determinations. On the other hand, however, the Corps may seek to revise its regulations in an attempt to render jurisdictional determinations of little value to property owners, or even to eliminate them altogether (notwithstanding Justice Kennedy’s cautions to the contrary). At the same time, the Corps’ new Clean Water Rule embodying the government’s global view of its authority over “waters of the U.S.” remains stayed pending judicial review. The Supreme Court’s unanimous skepticism of the government’s position in both Hawkes and Sackett suggests that this important rule will get a hard look from the Supreme Court when and if it goes there for review.

Taking a broader view, the Court’s unequivocal rejection of the government’s long-standing opposition to “pre-enforcement review” in CWA cases may have wide-ranging implications for other federal regulatory programs involving permitting and similar actions. The Court’s focus on the unfairness of subjecting regulated entities to the delays and costs of the Corps’ permitting process before they may seek judicial review could have implications in other areas outside of the CWA and environmental regulation. Parties facing such lengthy and expensive pre-judicial review processes often view themselves as having no choice but to make concessions to the government to secure a permit — even when they think the government’s position is legally wrong — because they cannot afford to spend the time and money necessary to finally secure judicial review. Hawkes shows that the Court “gets” this dynamic and may signal its willingness to adapt judicial review doctrines to do something about it. 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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