Back in June, the Supreme Court agreed to hear the case of Sackett v. EPA which could forever change the way EPA enforcement actions are defended. While the case involves an EPA administrative enforcement order for unauthorized filling of a wetland, the ruling potentially impacts EPA enforcement under all its major statutes- RCRA (hazardous waste), Clean Air Act (CAA), Clean Water Act (CAA), and even CERCLA.
What is at issue?
When EPA believes a violation of its regulations has occurred it has the power to issue an administrative order compelling the alleged violator to remedy the issue. EPA takes the position that the person/entity subject to that order cannot challenge the Order's validity prior to EPA taking a formal enforcement action in Court (referred to as "pre-enforcement review").
EPA's position leaves the person or company subject to the order with a Hobson's choice- either comply and incur the costs upfront or defy the order and face penalties for its noncompliance.
The courts have almost universally upheld EPA's position that its compliance orders cannot be challenged until it takes an enforcement action. However, the Supreme Court has agreed to take a fresh look at this issue in the Sackett case.
Synopsis of Sackett Case
The Sacketts were building a residential home on their property. EPA alleges that, during construction of the home, the Sacketts filled a 1/2 wetland without a permit. Filling a wetland without a permit is a violation of Section 404 of the Clean Water Act. EPA issued an administrative order requiring the Sacketts to remove the fill and restore their property to its original condition.
Sacketts could either spend the money to remove the fill and restore the property or they faced penalties for non-compliance with EPA's order of up to $37,500 per day. To give an idea of the risk the Sacketts must take if they did not comply, one month's worth of penalties could equal $750,000.
Sacketts petitioned EPA for a hearing to challenge EPA conclusion that their property had a jurisdictional wetland. EPA did not grant the hearing, so the Sacketts filed suit making the following challenges:
- No Bar to Pre-Enforcement Review of EPA's Order- The Sacketts argue that the Clean Water Act ("CWA"), unlike CERCLA (Superfund), contains no express statutory bar to pre-enforcement review of administrative orders. Therefore, the should be able to challenge the validity of EPA's order without risking being subject to civil penalties for non-compliance with the Order.
- If there is a Bar to Pre-Enforcement Review it Violates Due Process under the Constitution- In the alternative, if the Court finds that the CWA does contain an implied bar against pre-enforcement review, such a bar violates the U.S. Constitutional guarantee of Due Process.
If the Supreme Court agrees with the Sacketts, companies and individuals would be provided much better options when facing an EPA order. Rather than immediately complying or risking penalties, they could challenge the EPA's order in Court. Importantly, the challenge could be made before EPA has the legal authority to assert civil penalties for failure to comply with the Order.
This case involves EPA's enforcement authority under all its major statutes (CWA, RCRA, CAA and CERCLA). This means EPA efforts to immediately compel action under any of these statutes through administrative orders would be practically be eliminated. It would likely mean that EPA would, in many cases, skip the administrative order step and immediately sue in Court.
Implied Bar Against Pre-Enforcement Review
Only CERCLA contains an express bar in the statute against pre-enforcement review of administrative orders issued under the Act. While the other environmental statutes (CWA, RCRA and CAA) don't contain such an express bar, the Administrative Procedures Act (APA) states that a bar exists if the "the congressional intent to preclude judicial review is fairly discernible in the statutory scheme."
The Ninth Circuit in Sackett said the bar was implied in the CWA because Congress intended EPA to have the authority to remedy violations quickly. Similar arguments have been successful in other cases challenging EPA's authority involving other statutes.
The Supreme Court will review the Ninth Circuit's determination that an implied bar exists.
Bar Against Pre-Enforcement Review Violates Due Process
Even if the Court finds the implied bar exists, it could still say such a bar violates the Constitution. At issue will be whether the negative ramifications of receiving a Unilateral Administrative Order constitute property deprivations protected by the Due Process Clause
General Electric ("GE") challenged EPA's Administrative Order authority when it received an CERCLA Order requiring clean up. GE argued that its stock price could suffer, its brand would take a hit and it could face higher financing costs. GE said all of these negative ramifications were enough a property deprivation to require due process (i.e. the ability to challenge the Order pre-enforcement).
The D.C. Circuit rejected GE's arguments. It said GE could always challenge any penalties for noncompliance once EPA brought an enforcement action in Court. It also found the consequential impacts on GE from receiving the Order were not significant enough to merit due process protection.
The odd thing is that the Supreme Court agreed to hear the Sackett case. Only three weeks earlier it rejected GE's petition on the Due Process issue. Also, regarding the existence of an implied bar, there appears to be no split among Circuits on the issue that typically is a basis for the Supreme Court to review an issue.
The fact that the Court agreed to hear the case suggests some on the Court are uncomfortable with the current state of the law.