Supreme Court Allows Challenges to Section 404 Jurisdictional Determinations

U.S. Army Corps of Engineers v. Hawkes Co., Inc., No. 15-290 (May 31, 2016)

Why It Matters: The U.S. Supreme Court unanimously concluded that property owners who are required to obtain Clean Water Act (CWA) Section 404 permits are entitled to challenge the government’s Jurisdictional Determinations (JD) of the extent of “waters of the United States” on their land when they are made, rather than waiting for an enforcement action to be brought at an unanticipated time or waiting until the often lengthy and costly Section 404 permit process has concluded. The Court had no problem in exposing the chicanery behind the federal government’s application of Section 404 and concluding that the government was wrong. In addition to the Chief Justice’s Opinion for the Court, there were three concurring opinions, including a somewhat scathing critique by Justice Kennedy of how the government has abused property owners under the CWA. This opinion follows the trend of recent pro-property owner Supreme Court opinions and may be a harbinger that, even without Justice Scalia, the Court is not hesitant to deal with ham-handed government tactics.

Legal Background: Section 404 of the CWA regulates discharge of pollutants into “waters of the United States,” and grants the U.S. Army Corps of Engineers (Corps) and the Environmental Protection Agency (EPA) strong powers to enforce that broad concept. How broad? The Corps has asserted its Section 404 jurisdiction over half the state of Alaska and an area the size of California in the Lower 48. (Rapanos v. U.S. (2006) 547 U.S. 715, 722.) Although one would think it is obvious whether property has “waters of the United States” on it, that is not always the case, particularly in California where “ephemeral” drainages can be regulated. To determine whether specific areas qualify as federally protected “waters of the United States,” property owners may ask the Corps for a JD. The point of that is to obtain a safe harbor if the Corps determines it has no jurisdiction. The problem is that the Corps (or the EPA, which has joint authority to enforce the CWA) can change its mind once a property owner relies on a negative JD and begins to develop the property. What then? Finding the answer to that question was the focus of this Supreme Court opinion.

Facts: The property owners here were three companies that mined peat in Minnesota. By definition, one finds peat in wetlands and bogs, i.e., the stuff of CWA regulation. In the course of the expensive permitting process to expand operations to a 530-acre peat deposit, the Corps issued a JD stating that the property contained “waters of the United States.” The reason? The property had a “significant nexus” to a river located 120 miles away. Eventually, the property owners found themselves challenging the Corps’s JD in court. The District Court dismissed for lack of jurisdiction because the JD was not “final” agency action that could be reviewed in court. That, in fact, had been the uniform treatment of JDs by the judiciary for years. Here, however, the Eighth Circuit reversed. The conflict between the Eighth Circuit and the others prompted the Supreme Court to grant certiorari.

The Decision: Acknowledging its understanding that “legal consequences flow” from approved JDs, the Court applied what it called the “pragmatic” approach that it has long used to determine “finality” in other contexts. Some of us might have called that the “walks like a duck . . .” theory of jurisprudence. Everything about the Corps’s JDs looked like “final” decisions, and so they should be treated as such.

The government did not aid its case by making arguments that would probably not have convinced anyone outside the government’s own moot court preparation for this argument. Two alternatives were available to the property owners according to the government: (1) they could discharge material into the wetlands without a permit, inviting a CWA enforcement action, during which they could claim that no permit was required at all; or (2) they could formally apply for a permit and seek judicial review when they were turned down. With elegant simplicity, the Court said, “Neither alternative is adequate.” As to the first, risking prosecution, with its potential for both criminal liability and fines of up to $37,500 for each day, is not a risk that ordinary citizens should have to take. This brings to mind the Court’s recent decision in Horne v. U.S. Department of Agriculture (2013) 133 S. Ct. 2053, where the Court rejected the government’s argument that a property owner should pay more than $700,000 in fines before being allowed to challenge government action in court. The alternative of going through the permit process was no better, with Corps officials themselves having described the process as “arduous, expensive, and long.” Indeed. The process would take between one and two years, at a cost between $30,000 and $270,000—and here, the Corps asked for studies that would have added another $100,000 to that ticket. Neither proposed alternative was adequate. Nor was the Court impressed by the government’s argument that property owners should “count their blessings” and be happy with what the government regulations allow. Judgment reversed.

The Hawkes case should have come as no surprise. It follows by a mere four years the Supreme Court’s similar decision in Sackett v. EPA (2012) 132 S. Ct. 1367. The differences between the two cases were that Hawkes took the alternative of applying for a JD, while Sackett assumed there were no wetlands and was subjected to an EPA enforcement action after he was determined to have deposited material into waters of the United States. In both cases, however, the government position was the same: neither decision was sufficiently “final” that it could be challenged in court. The Supreme Court in Sackett plainly told the government it was wrong—and it did so in a unanimous opinion that should have left no doubt that the Court believed that individual property owners should be allowed to challenge immediately any government action that directly affects their property. In the words of Sackett (which the Court quoted in Hawkes), individuals should not have to assume the risks of waiting while the EPA decides to “drop the hammer” before they can have their day in court. The government’s ploy didn’t work in Sackett, and it didn’t work in Hawkes either.

Concurring opinions emphasized how out of touch the government position was. Justice Kennedy (joined by Justices Thomas and Alito) adopted everything in the Court’s opinion and then added that “based on the Government’s representations in this case, the reach and systemic consequences of the Clean Water Act remain a cause for concern.” The scope of the CWA is “notoriously unclear,” while the consequences of even “inadvertent violations can be crushing.” This opinion called out the Corps for saying that its JDs actually have no binding effect, nor does its agreement with the EPA about how to handle matters under the CWA, leaving the Court with a view of the CWA as having “unchecked” and “ominous reach.” In sum, it appears that the government’s “take no prisoners” attitude in arguing this case “continues to raise troubling questions regarding the Government’s power to cast doubt on the full use and enjoyment of private property throughout the Nation.” It appears that the government’s overreaching has triggered a protective reaction by the Court.

Berger’s Concluding Observations:

• Pay attention to the pragmatics of government action. Focus on what the government has done, rather than the legalistics of what it says it has done.
• Be wary when the government tells you to count your blessings and be happy with what its regulations allow.
• Government agencies need to spend more time serving the public and less time empire-building.