Supreme Court Opinion on Judicial Review of EPA Compliance Orders

April 2012Articles In the Zone

In a unanimous decision issued March 21, 2012, the U.S. Supreme Court for the first time gave property owners the right to pursue immediate judicial review of a compliance order issued by the EPA under the Clean Water Act. Up until now, it had been universally understood and accepted that the Clean Water Act precluded preenforcement judicial review of EPA compliance orders. After Sackett v. EPA, that is no longer the case.

The case involved Chantall and Mike Sackett who bought a vacant lot near Priest Lake, Idaho. The lot was zoned residential and was located in a subdivision with municipal water and sewer. The Sacketts obtained municipal building permits and began laying gravel for the foundation when
the EPA hit them with a compliance order alleging that the property contained federally regulated wetlands and they were building without a wetlands permit in violation of the Clean Water Act. The compliance order subjected the Sacketts to civil penalties of $37,500 per day. When they tried to challenge the compliance order in federal court, seeking a declaratory judgment and an injunction under the Administrative Procedure Act, both the district court in Idaho and the Ninth Circuit ruled against them.

When the case was argued in January before the U.S. Supreme Court, many observers detected that the justices were leaning towards the Sacketts’ side. Justice Alito remarked that “most ordinary homeowners would say this kind of thing can’t happen in the United States.” Maybe that should have been a signal to the rest of us as to where the court would be going with its decision.

Justice Scalia found that “nothing in the Clean Water Act expressly precludes judicial review under the APA or otherwise.” He said that the APA created a “presumption favoring judicial review of administrative action,” and the issuance of a compliance order to the Sacketts had to be seen as a final agency action. He rejected the EPA’s assertion that the compliance order wasn’t final because the recipient could choose to voluntarily comply. Justice Scalia wrote: “[I]t is hard for the government to defend its claim that the issuance of the compliance order was just ‘a step in the deliberative process’ when the agency rejected the Sacketts’ attempt to obtain a hearing and when the next step will either be taken by the Sacketts (if they comply with the order) or will involve judicial, not administrative, deliberation (if the EPA brings an enforcement action).” Justice Scalia also rejected the EPA’s argument that its compliance orders issued under the Clean Water Act needed to be insulated from judicial review because Congress passed the Act in response to the inefficiency of then-existing remedies for water pollution and compliance orders resulted in “quick remediation through voluntary compliance.” In response, Justice Scalia wrote: “The government warns that the EPA is less likely to use the orders if they are subject to judicial review. That may be true — but it will be true for all agency actions subjected to judicial review. The APA’s presumption of judicial review is a repudiation of the principle that efficiency of regulation conquers all. And there is no reason to think that the Clean Water Act was uniquely designed to enable thestrongarming of regulated parties into ‘voluntary compliance’ without the opportunity for judicial review — even judicial review of the question of whether the regulated party is within the EPA’s jurisdiction. Compliance orders will remain an effective means of securing prompt voluntary compliance in those many cases where there is no substantial basis to question their validity.”

It is particularly interesting that Justice Scalia referred to the EPA’s action in this case as “strong-arming,” which is term that I hear business owners frequently use in describing government regulatory over-reach in many other contexts.

Justice Alito seemed particularly sympathetic to the Sacketts’ plight. He felt so strongly about their predicament that he wrote his own concurring decision, in which his first words were as follows: “The position taken in this case by the federal government—a position that the court now squarely rejects—would have put the property rights of ordinary Americans entirely at the mercy of Environmental Protection Agency (EPA) employees.” He added: “In a nation that values due process, not to mention private property, such treatment is unthinkable.” Those are welcome words to many business owners who often find themselves under the government’s thumb, feeling powerless, and with little will to fight back. Justice Alito also got to the larger point, specifically, that the EPA was led to over-reach in this case because of Congress’ failure to “provide a reasonably clear rule regarding the reach of the Clean Water Act.” He said short of that congressional clarification, giving aggrieved property owners the explicit right to sue the EPA under the Administrative Procedure Act in these circumstances is “better than nothing.” Maybe, but it only helps those aggrieved property owners who can afford to bring an action for declaratory and injunctive relief in federal court, which no doubt would still be an expensive proposition.

So what does this all mean? Presumably, it means that property owners now have a right to seek judicial review to challenge compliance orders issued by the EPA under the Clean Water Act on jurisdictional grounds. At the root of their case, the Sacketts were arguing that their property wasn’t subject to the Clean Water Act because, they said, there were no federally regulated wetlands present. It appears the Sacketts will now “get their day in court” and will be able to make their arguments on the merits to the U.S. District Court. The Supreme Court has now opened that door for them and other potential future litigants who receive similar compliance orders from the EPA. Can Sackett be read to go beyond these specific facts and be used in cases that don’t just involve wetlands? I’m not sure at this point. But it certainly invites speculation as to whether there may be other compliance orders that the EPA issues that might now be open to preenforcement judicial review.