On March 20, 2012, the U.S. Supreme Court handed down the much anticipated decision in Sackett v. EPA. The Court rejected U.S. EPA's claims that its administrative enforcement orders were not subject to pre-enforcement review. The Court's decision provides a new tool to challenge EPA administrative compliance orders.
Synopsis of the Case
The Clean Water Act prohibits filling of wetland without a permit. The Sacketts own a .63 acre parcel of land on which they hoped to construct a home. EPA said that the Sacketts had filled wetlands as part of their development without a permit.
EPA decided to take enforcement by issuing an administrative compliance order directing the Sacketts to remove the fill. If the Sacketts failed to comply with EPA's order they could potentially be liable for penalties of $37,500 for each day of non-compliance with the order and potentially an additional $37,500 per day for the underlying Clean Water Act violation.
The Sacketts attempted to appeal the administrative order in Court to challenge EPA's determination they filled regulated wetlands. EPA argued that the Sacketts were not entitled to any pre-enforcement review of the administrative order.
Lower Courts Ignore the Legal Presumption of a Right of Appeal
The Administrative Procedure Act ("APA") sets the standards for when administrative actions of federal agencies are subject to review or judicial appeal. The APA contains a presumption that federal statutes allow for judicial review of agency actions. That presumption can be overcome if: 1) there is an explicit bar to pre-enforcement review in the statue; or 2) the presumption "may be overcome by inferences of [congressional] intent drawn from the statutory scheme as a whole."
The Clean Water Act does not contain an explicit bar to pre-enforcement review (such a bar does exist under CERCLA- the federal Superfund law). Therefore, EPA had to argue the bar can be inferred from congressional intent.
Both the District Court and Appeals Court sided with EPA holding that a bar to review could be inferred from the congressional record and the language in the the Clean Water Act.
Supreme Court Unanimously Disagrees
Before determining whether there was a bar to appeal, the Court had to determine whether the administrative action amounted to a final order. The Court found that the order issued by EPA had all the hallmarks of a final order, including:
- It determined the rights of the party- in this case, the Sacketts were required to restore the wetland;
- Legal consequence flow from the order- the Sacketts were subject to penalties if they failed to comply;
- The order is final- EPA did not provide the Sacketts a meaningful opportunity to challenge the order
After finding the order was final, the Court then rejected the lower courts finding that the history and language of the Clean Water Act suggested there should be no pre-enforcement review of orders. The Court held:
"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 the strong-arming of regulated parties into 'voluntary compliance' without the opportunity for judicial review- even judicial review of the question whether the regulated party is within the EPA's jurisdiction."
It is interesting that both lower courts sided with EPA, but yet the Supreme Court unanimously sided with the Sacketts. Its difficult to understand how such a split could occur.
Clearly, the Courts ruling gives attorneys representing regulated parties who are the subject of an EPA unilateral compliance order a tool to challenge the merits of those orders. Certainly, allowing such a review is a clear victory and certainly seems to comport with logic. The right to challenge EPA orders also likely extends to other environmental statutes that do not contain an explicit bar to pre-enforcement review, including orders issued related to hazardous waste (RCRA) and the Clean Air Act.
However, the standard for overturning an EPA order is very difficult to meet. In addition, the Supreme Court's decision is unclear as to whether penalties continue to amass while litigation proceeds.
Under the APA, an EPA action is entitled to deference and can only be overturned if it is demonstrated that the EPA acted in an "arbitrary and capricious" manner or "otherwise in violation of the law." That is a pretty tough hurdle to clear.
Also, the Court didn't address whether EPA could be entitled to penalties for non-compliance during the appeal let alone whether EPA could be entitled to double penalties- one set of penalties for failing to comply with the EPA's order at $37,500 per day and a second for violating the Clean Water Act (also at $37,500 per day). Therefore, a party could be risking up to $70,000 per day to continue its challenge of the EPA's action.
Until another court rules EPA is not entitled to collect such large penalties during the appeal, the deck is still pretty much stacked in EPA's favor or in the Court's words, EPA can still "strong arm" regulated parties.