The U.S. Supreme Court has rejected the federal government’s argument that compliance orders issued by the U.S. Environmental Protection Agency (“EPA”) under the Clean Water Act, 33 U.S.C. §§ 1251 et seq. (the “CWA”), cannot be challenged in court.  In a unanimous opinion issued on March 21, 2012, the Court held that such orders constitute “final agency action” that can be challenged under the Administrative Procedure Act, 5 U.S.C. § 706(2)(a) (the “APA”).  Sackett v. United States Environmental Protection Agency, 566 U.S. ___, No. 10-1062 (Mar. 12, 2012).  In so doing, the Court has weakened one of the favored arrows in the EPA’s enforcement quiver. 

The case arose when Chantell and Mike Sackett bought two-thirds of an acre near Priest Lake, Idaho, intending to build their home there.  The vacant lot is zoned residential and is located in a platted subdivision, with sewer and water hookups.  The lot is separated from the lake by several lots where homes have already been built.  Sackett, slip op. at 3.  The Sacketts applied for and obtained the necessary building permits from the local authorities.  They began preparing the lot to build their home by filling in part of it with dirt and rock.  Id.  Not long after they did so, the EPA hit them with a compliance order. 

As the Court explained, the EPA’s compliance order contained a number of “Findings and Conclusions,” including: that the Sacketts’ property contains “wetlands”; that the property’s wetlands are adjacent to Priest Lake, a “navigable water” under the CWA; and that, by filling in about half an acre of the “wetlands” on their property, the Sacketts had discharged pollutants into waters of the United States in violation of 33 U.S.C. § 1311(a).  Slip op. at 3-4.  The order required the Sacketts to return the property to its prior condition and to seek a wetlands permit – costs that, according to the Sacketts, would add up to tens of thousands of dollars, many times the $23,000 they paid for the property.  Failure to comply with the order could result in fines of up to $75,000 per day – $37,500 for the statutory violation and up to $37,500 for violating the compliance order.  Id. at 2.

The Sacketts tried to challenge the wetlands finding – both before the EPA and in federal court under the APA – but their challenges were rejected.  The district court in Idaho concluded that the CWA precludes judicial review of compliance orders before the EPA has started an enforcement action in federal court, and granted the EPA’s motion to dismiss.  Sackett v. EPA, No. 08-CV-185-N-EJL, 2008 WL 3286801 (D. Idaho Aug. 7, 2008).  The Ninth Circuit affirmed.  Sackett v. EPA, 622 F.3d 1139 (9th Cir. 2010).  In other words, under the lower courts’ decisions, the only way in which the Sacketts could obtain judicial review of the compliance order would be to violate the order, wait for the EPA to sue them, and then raise their arguments in the enforcement action brought by the EPA, while potentially accruing up to $75,000 per day in civil penalties.

In his opinion for a unanimous Court, Justice Scalia set out to explain to the reader “what all the fuss is about.”  After describing the Sacketts’ situation and history – what Justice Scalia referred to as the “strong-arming of regulated parties” by government regulators – the Court held that the Sacketts were entitled to seek relief from the courts. 

The Court explained that the APA has a strong presumption in favor of allowing judicial review of final agency actions.  The Court rejected the EPA’s argument that the lack of an express provision allowing judicial review of administrative compliance orders in the CWA precluded such review, explaining:

[I]f the express provision of judicial review in one section of a long and complicated statute were alone enough to overcome the APA’s presumption of reviewability for all agency action, it would not be much of a presumption at all.

 

Slip op. at 8.

The Court held that the EPA’s compliance order against the Sacketts met all the requirements for APA judicial review.  First, the Court held that the compliance order was a “final agency action” because it imposed serious legal obligations on the Sacketts, including significant potential double penalties.  Even more importantly, the order represented the “‘consummation’ of the agency’s decisionmaking process” – because the terms of the compliance order were not subject to any further review, as the Sacketts discovered when they unsuccessfully sought a hearing before the EPA.  Slip op. at 5-6.  Second, the order clearly determined the Sacketts’ obligations by ordering them to restore their property to its prior condition.  Finally, the CWA does not expressly preclude review by the courts.  The Court therefore reversed the judgment of the Court of Appeals and remanded for further proceedings.  Id. at 10. 

Justice Ginsburg and Justice Alito filed concurring opinions.  In her one-paragraph concurrence, Justice Ginsburg emphasized that the opinion does not address the question of whether the property owners “could challenge not only the EPA’s authority to regulate their land under the Clean Water Act, but also, at this pre-enforcement stage, the terms and conditions of the compliance order” – a question that is left for another case and another day.

Justice Alito, in contrast, issued a scathing rebuke of the EPA, the CWA, and Congress, stating that “[t]he 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 [EPA] employees.”  Alito, J., concurring op. at 1.  While the Court’s opinion “provides a modest measure of relief” by allowing property owners to challenge the EPA’s jurisdictional determination under the APA, Justice Alito stated that “[r]eal relief requires Congress to do what it should have done in the first place: provide a reasonably clear rule regarding the reach of the Clean Water Act.”  Id. at 2.  Specifically, Judge Alito criticized the EPA’s and Congress’s failure to define what is meant by “the waters of the United States,” leaving this crucial jurisdictional determination to be made “on a case-by-case basis by EPA field staff.”  Id. 

The decision does not reach the merits of the Sacketts’ challenges to the compliance order, nor does it address the Sacketts’ due process argument.  Nonetheless, the decision is significant, and the stakes are high.  While the media has consistently portrayed this case as a battle between property owners as David against the EPA’s Goliath, the opinion also represents a victory for all property owners, including businesses and corporations.  Indeed, General Electric Co. had sought similar relief in a case last year, and filed an amicus brief in support of the Sacketts.  Moreover, the Court’s decision could impact not only CWA enforcement authority, but possibly could also impact review of compliance orders issued under other federal environmental statutes which, like the CWA, do not contain express prohibitions to judicial review.  And, for cases arising out of orders issued pursuant to statutes that do contain an express prohibition against judicial review, the Court may yet decide to go beyond the terms of the statute and the APA and address the due process argument it did not reach in the Sacketts’ case.

 

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