WETLANDS:

Supreme Court rules unanimously against EPA in enforcement case

The Supreme Court handed a decisive loss to U.S. EPA today when it ruled unanimously that property owners facing potential enforcement actions under the Clean Water Act can seek judicial review before being forced to comply.

The justices held that Mike and Chantell Sackett of Priest Lake, Idaho, can challenge an EPA compliance order that claims they are in violation of the statute because they filled in wetlands on their land without obtaining a permit.

The couple began earth-moving work on the lot just yards from scenic Priest Lake in 2007.

EPA has traditionally relied on the compliance orders -- which say those in violation are subject to a fine of up to $37,500 a day -- to encourage landowners to come into compliance in a speedy fashion.

But in the Sacketts' case, the couple objected, saying they don't believe their property is a wetland. However, they had no way to challenge EPA's determination in court based on the way the Clean Water Act had previously been handled by EPA and the courts.

The matter would get into court only if EPA acted on the compliance order and initiated a full-scale enforcement action.

Now, in a boost to property rights advocates keen to tackle what they see as EPA's overzealous interpretation of what constitutes a wetland under the Clean Water Act, people like the Sacketts will -- in some circumstances -- likely be able to challenge the agency's underlying reasoning for issuing a compliance order.

The Sacketts -- backed by the Pacific Legal Foundation (PLF), a conservative Sacramento, Calif.-based group that focuses on property rights -- initially filed suit in the District of Idaho, seeking a hearing so they could challenge EPA's order, but a federal judge dismissed their request.

The San Francisco-based 9th U.S. Circuit Court of Appeals agreed with the district judge's conclusion, rejecting the Sacketts' argument that their due process rights under the Fifth Amendment to the Constitution were not violated by their inability to contest the order.

Double penalty

The Supreme Court didn't buy the Sacketts' broad argument that their due process rights were violated. Instead, the court held that they should be able to contest EPA's findings under the Administrative Procedure Act, a statute used to challenge agency decisionmaking.

It was clear based on January's oral argument that justices of all ideological stripes were sympathetic to the Sacketts' plight (Greenwire, Jan. 9).

The justices were particularly concerned at the time about a contention by the government that the Sacketts could be subject to a total fine per day of $75,000, based on the belief that an extra penalty of $37,500 a day is applied for each day the Sacketts remained in violation after receiving the compliance order.

In the majority opinion, Justice Antonin Scalia concluded that the Sacketts did not have any compelling alternative to filing suit.

The government had claimed that judicial review is available once the enforcement action goes to court, but Scalia noted that "the Sacketts cannot initiate that process, and each day they wait for the agency to drop the hammer, they accrue, the government's telling, an additional $75,000 in potential liability."

But the key to the case was that the Clean Water Act does not, as the government claimed, preclude judicial review under the Administrative Procedure Act, Scalia said.

The statute's "presumption of judicial review is a repudiation of the principle that efficiency of regulation conquers all," he wrote. "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.'"

More work ahead for EPA

At a minimum, the ruling "will require EPA to change its practice," said Adam Kushner, a partner at Hogan Lovells who until recently served as director of civil enforcement at the agency. EPA issued around 1,300 compliance orders last year, he said.

One way of tackling the issue might be to send out more notices of violation, which merely point out a violation and do not directly threaten penalties, Kushner added.

Robert Andersen, an attorney at Clark Hill who is a former chief counsel of the Army Corps of Engineers, said EPA might also rewrite the compliance orders to remove any reference to the double penalty. The agency would also likely not include language telling property owners what they have to do to restore the property.

"You can write a compliance order so it's more like a warning letter," Andersen said. Such a move may limit the ability of property owners to seek judicial review, he added.

EPA will, however, be on notice that its jurisdictional determinations could be contested in court.

For EPA staff, it means "a good deal more work in a time of diminishing resources," Kushner said.

EPA did not immediately comment on the decision.

Although the focus in the ruling on the Clean Water Act means the impact of the decision will be somewhat limited, it could also potentially affect the use of administrative compliance orders under other statutes, including the Clean Air Act, legal experts say.

More broadly, the decision, as the Pacific Legal Foundation and property rights advocates hoped, will likely open the door to more court challenges to EPA's wetlands determinations.

The Sacketts' lead attorney, Damien Schiff, said EPA "can't threaten property owners with financial ruin and not have to justify its threats to a judge."

Wetlands jurisdiction is notoriously confusing, in part thanks to the Supreme Court, which issued a fractured ruling in a 2006 case, Rapanos v. United States, that failed to offer lower courts conclusive guidance (Greenwire, Feb. 7, 2011). Today's ruling is likely to add to the number of cases touching on the issue.

Justice Samuel Alito, in a concurring opinion, called on 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."

In the meantime, "the combination of the uncertain reach of the Clean Water Act and the draconian penalties imposed for the sort of violations alleged in this case still leaves most property owners with little practical alternative but to dance to the EPA's tune," he added.

Click here to read the decision.