On March 21, 2012, the Supreme Court unanimously reversed a decision by the United States Court of Appeals for the Ninth Circuit, holding that a compliance order issued under the Clean Water Act ("the Act") constitutes a "final agency action" and that recipients of these orders may immediately file suit challenging such orders under the Administrative Procedure Act ("APA"). The decision repudiates the position of the United States Environmental Protection Agency ("EPA") that the targets of such orders must wait until EPA decides to enforce the order before seeking judicial review.
The ruling not only means that recipients of compliance orders can seek judicial review immediately, it will also cause the EPA to develop more robust enforcement cases before issuing compliance orders so that such orders are able to withstand judicial scrutiny. The implications of this ruling will also likely reach into other administrative contexts (both environmental and otherwise) and enable regulated entities to challenge regulatory actions sooner.
Case Background
The facts of the case tell a compelling story of individual citizens confronting a powerful government bureaucracy. Michael and Chantel Sackett own a 2/3 acre residential lot in Idaho and planned to build a house on their property. The lot lies just north of Priest Lake, but it is separated from the lake by several lots containing permanent structures. To prepare the land for construction, the Sacketts filled in part of the lot with dirt and rock. Months later, they received a compliance order from the EPA finding that the property contained jurisdictional wetlands, that the wetlands were located adjacent to a navigable body of water (Priest Lake), and that the fill material constituted an unauthorized discharge of fill material prohibited by the Act. On the basis of these findings, the order directed the Sacketts to immediately restore the property. If the Sacketts failed to comply and the EPA decided to file a civil suit to enforce the order, the couple could have been subject to up to a $75,000 fine per day of violation.1
Faced with such severe consequences and believing that the EPA was in the wrong, the Sacketts sought a hearing with the EPA. Their request was denied. They then filed suit in the federal District Court of Idaho, seeking declaratory and injunctive relief. The Sacketts argued that the EPA's issuance of the compliance order was arbitrary and capricious under the APA, and that the order deprived them of life, liberty or property without due process in violation of the Fifth Amendment. The District Court dismissed the claim for lack of subject matter jurisdiction, and the Ninth Circuit affirmed. The Ninth Circuit held that an administrative compliance order does not constitute a final agency action. Additionally, the Court joined four other Courts of Appeal and held that the Act precludes preenforcement judicial review of compliance orders.2
In an opinion by Justice Scalia, the Supreme Court reversed the Ninth Circuit decision, holding that: (1) the compliance order was a final agency action reviewable in court under the APA, and (2) the Act does not preclude pre-enforcement judicial review of compliance orders. Although the Court highlighted the Sackett's due process challenge when it accepted the Sackett's petition for hearing, the Court's opinion did not address this issue.
The Compliance Order Constitutes Final Agency Action
The Ninth Circuit did not address whether the compliance order constituted final agency action, instead concluding that the Act bars pre-enforcement review (discussed further below). The Supreme Court, however, focused on the APA and determined that the compliance order constituted final agency action for several reasons. First, the Court noted that through the compliance order, the EPA determined that the Sacketts had a legal obligation to restore their property. Second, legal consequences flowed from that order; specifically, the Sacketts would be subject to a doubling of daily penalties in a future enforcement proceeding. Finally, the EPA's issuance of the compliance order marked the consummation of the agency's decision-making process. Although the government protested that the Sacketts were invited to "engage in informal discussion," this opportunity did not suffice to make what would otherwise be a final agency action nonfinal. For these reasons, the Court held that the compliance order constituted a final agency action.
The Court also determined, in keeping with the APA's requirements, that the Sacketts had no other adequate judicial remedy. Under EPA practice, the Sacketts had to wait until the EPA initiated an enforcement action before they could have a hearing in court, at which time the penalties accrued would be astronomically high. Additionally, if the Sacketts had filed for a permit from the Corps of Engineers, been denied, and then sought judicial review, the Sacketts still would not have a judicial remedy for the compliance order issued by the EPA, an entirely separate agency.
The Administrative Procedure Act Permits Judicial Review of Clean Water Act Compliance Orders
The Supreme Court then addressed whether the Act's structure – which permits the EPA to enforce certain provisions of the Act either by issuing a compliance order or by filing a civil action – precludes judicial review. The government argued that Congress gave the EPA the choice between a judicial action and an administrative decision, and that a ruling to allow judicial review of the latter would undermine the Act. The government also argued that compliance orders were not self-executing, but that they must be enforced in a subsequent judicial action in which the Sacketts would be afforded judicial review of the order.
The Court rejected these arguments. Having already held that issuance of a compliance order constitutes final agency action, the Court leaned on the APA's strong presumption of reviewability and held that the Act does not preclude judicial review. Without an express bar to pre-enforcement review of such orders (such as exists in the Comprehensive Environmental Response, Compensation and Liability Act, known as the Superfund law3), the Court held that the APA permits immediate judicial review of compliance orders issued under the Act.
Policy Implications
The Court's decision in Sackett will have several profound effects.
First, the Sackett decision significantly alters the EPA's ability (and that of any state-level delegated authority) to issue compliance orders under the Act. Following Sackett, in order to issue a compliance order, the EPA must be prepared to litigate the order immediately and so will need to build an administrative record. This increased administrative burden will likely reduce the EPA's ability to enforce the Act's provisions. But litigants filing suit to challenge an order may also drive the EPA to immediately counterclaim to enforce the Act's civil and criminal penalty provisions, thereby raising the stakes of challenging such orders.
Second, the robust application of the APA's presumption of reviewability will likely be a boon to regulated entities because they will be able to gain an earlier determination of the government's jurisdiction to enforce the Act.4 However, as Justice Alito noted in his concurring opinion, the continuing uncertainty over the Act's jurisdictional scope and the EPA's current reliance on case-bycase jurisdictional determinations may still require some regulated entities to await a compliance order (and to challenge it) before they can definitively determine whether the Act applies.
Finally, Sackett's holding will likely ripple through the enforcement programs of other environmental laws such as the Resource Conservation and Recovery Act and the Clean Air Act. Both laws permit the EPA (or state-level delegated authorities) to issue administrative orders and do not explicitly preclude pre-enforcement judicial review. Indeed, Sackett's rationale may even reach into securities, employment, and other contexts that permit agencies to issue administrative orders. At a minimum, Sackett ensures that the recipients of EPA compliance orders are entitled to have their day in court.
Footnotes
1 Sackett v. EPA, 566 U.S. __(2012), slip op. at 2.
2 622 F.3d 1139, 1147 (9th Cir. 2010).
3 42 U.S.C. § 9613(h) ("[n]o Federal court shall have jurisdiction . . . to review any order issued under section 9606 (a) of this title.").
4 Justice Ginsburg noted in her concurring opinion that the Court's holding permits immediate challenge to EPA's jurisdictional authority, but does not reach the question of whether the Sacketts could also challenge the terms and conditions of a compliance order.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.