Update: Sackett v EPA: Supreme Court Declares EPA Compliance Orders “Final Agency Action” Subject to Judicial Review Under the APA.

Mar 27, 2012   

On March 21, 2012, the Supreme Court of the United States issued its opinion in the case of Sackett v. Environmental Protection Agency. In a unanimous decision, the Court held that compliance orders issued by the Environmental Protection Agency (“EPA”) constitute final agency action subject to review in federal court pursuant to the Administrative Procedure Act (“APA”). A copy of the Courts opinion can be read here.

As we previously reported, the Sacketts fight with the EPA centers on a small 0.63 acre property located near Priest Lake, Idaho and an EPA compliance order prohibiting its development. In May of 2007, the Sacketts began to fill in the property with dirt and rocks in preparation for construction of a three-bedroom home. However, in November of that year, the EPA issued a Compliance Order that ordered construction to be halted claiming that the Sacketts land was a wetland, was subject to EPA jurisdiction under the Clean Water Act (“CWA”), and that the construction could not continue without first obtaining a permit from the Army Corp of Engineers. The Compliance Order also required the Sacketts to remove all fill material, restore the property to its original condition, and replant the property with wetland vegetation no later than April 30, 2008. Additionally, the Compliance Order threatened civil penalties as high a $32,500 per day for each day the Sacketts did not comply with the Order. A copy of the EPAs news release announcing the issuance of the Compliance Order can be read here.

In its opinion, the Court focused on three issues in determining whether EPA compliance orders are final agency action subject to review under the APA: 1) whether a compliance order constituted “final agency action” under the APA; 2) whether “no other adequate remedy in a court” exists for challenging the compliance order, see generally 5 U.S.C. § 704; and 3) whether the judicial review of compliance orders pursuant to the APA is precluded by the CWA.

In holding that compliance orders were “final agency action,” the Court relied on three factors. First, the Court found that through the issuance of the compliance order, the agency “determined rights or obligations” of the Sacketts. The Court found that in order for the Sacketts to be in compliance with the compliance order, the Sacketts were legally obligated to, among other things, restore their property according to an EPA approved restoration plan and grant the EPA access to the property and records related to the conditions of the site.

Second, the Court found that because the failure to comply with a compliance order exposes a party to additional penalties above and beyond those for violating the CWA, “legal consequences flow” from the EPAs issuance of the order. Third, the Court noted that the “order also mark[ed] the consummation of the agencys decisionmaking process” because the findings and conclusions contained within it were not subject to further agency review. The Court rejected the Governments argument that the compliance order did not mark such a consummation because the order invited the Sacketts to engage in informal discussions regarding the terms stating that such an invitation “confers no entitlement to further agency review” and “the mere possibility that an agency might reconsider in light of Ëœinformal discussions. . . does not suffice to make an otherwise final agency action informal. Thus, the Court found that the compliance order “has all of the hallmarks of APA finality that our opinions establish.”

The Court also held that “no other adequate remedy in a court” existed to challenge validity of a compliance order in court other than through a challenge pursuant to the APA. Outside of a direct challenge under the APA, the Court found that only two other possible paths to judicial review existed, neither of which was adequate: 1) a civil enforcement action brought by the EPA for failure to comply with an order issued; or 2) apply to the Army Corp of Engineers for a permit to fill a wetland, and if rejected seek judicial review of that decision pursuant to the APA. However, the Court found that because the Sacketts could not initiate the civil enforcement action and were subject to additional penalties for each day of noncompliance with the order, this was not an adequate remedy for challenging the orders validity. With regard to judicial review of a permit denial by the Army Corps of Engineers, the Court stated “the remedy for denial of action that might be sought from one agency does not ordinarily provide an Ëœadequate remedy for action already taken by another agency.” Thus, no other adequate remedy existed.

Additionally, the Court held that the CWA does not preclude judicial review of compliance orders pursuant the APA. Judicial review of final agency action is precluded under the APA “to the extent that [other] statutes preclude judicial review.” See 5 U.S.C. § 701(a)(1). However, the Court has long recognized that the APA creates a “presumption favoring judicial review of administrative actions.” Block v. Community Nutrition Institute, 467 U.S. 340, 345 (1984).Here, the Court found that nothing in the statutory scheme of the CWA precludes judicial review of compliance orders pursuant the APA. Therefore, the Court found that compliance orders are subject to review.

The Court also directly addressed the Governments argument that the agency would be less likely to use compliance orders in the future and voluntary compliance could suffer. Writing for the Court, Justice Scalia noted:

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 APAs 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 [CWA] was uniquely designed to enable the strong-arming of regulated parties into Ëœvoluntary compliance without the opportunity for judicial review “ even judicial review of the question of whether the regulated party is within the EPAs 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.”

Ultimately, rather than focusing on the merits of the dispute between the Sacketts and the EPA, the Court focused on whether a party to a final agency action may seek judicial review of the jurisdiction and authority of the agency to act when review of such action has not otherwise been precluded. While the Courts holding may not have revolutionized private parties ability to sue the federal government, the case will undoubtedly lead to further disputes between federal agencies and private parties regarding its true significance. These disputes, we suspect, will help to develop the jurisprudence of the lower courts regarding when, and under what circumstances, a private entity may sue the federal government.

Fuerst Ittleman will continue to monitor the impact the Courts decision on administrative law jurisprudence. For more information on how to ensure that your business maintains regulatory compliance at both the state and federal levels, contact Fuerst Ittleman PL at contact@fidjlaw.com.