On March 21, 2012, the United States Supreme Court in Sackett v. EPA unanimously reversed the Ninth Circuit Court of Appeals and declared that a property owner, upon receiving a compliance order from the EPA under the Clean Water Act, may immediately bring suit to challenge the EPA’s jurisdiction for issuing such an order. This decision prevents property owners from having to incur additional potential liability while waiting for the EPA to bring its own suit to enforce the compliance order.

In this case, the Sacketts owned a parcel of land in Bonner County, Idaho. The Sacketts’ lot is separated from a nearby lake by several lots containing permanent structures. While preparing to construct a home on their lot, the Sacketts filled in part of their lot with dirt. Several months later, the EPA issued a compliance order asserting that the property was subject to the Clean Water Act (the “CWA”) because it contained wetlands and was adjacent to a navigable water. The order alleged the Sacketts had violated the CWA by filling in part of their lot and directed them to restore the land in accordance with an EPA-created plan.

The Sacketts contended their property was not subject to the CWA. The EPA denied the Sacketts’ request for a hearing, prompting the Sacketts to file suit under the Administrative Procedure Act (the “APA”) seeking a declaratory judgment and injunctive relief. The Sacketts alleged the agency action was arbitrary and capricious and that it violated the Due Process Clause of the Fifth Amendment. The district court dismissed on the basis that the CWA precluded pre-enforcement judicial review of compliance orders. The Ninth Circuit Court of Appeals affirmed.

The Supreme Court reversed the Ninth Circuit and held property owners may immediately bring suit to challenge the jurisdictional basis for an EPA compliance order relating to wetlands protection under the CWA. The Court addressed two primary issues: 1) Whether the agency action final for the purposes of the APA’s grant of judicial review; and 2) Whether the CWA expressly or impliedly preclude judicial review.

The Court concluded the compliance order was a “final agency action.” The order imposed on the Sacketts a legal obligation to restore their property and to provide the EPA access to their records. Additionally, the order imposed legal consequences, including serious civil penalties, for not complying with this obligation.

The Court also concluded the CWA did not preclude judicial review of the EPA compliance orders. If a statute expressly or impliedly precludes judicial review of agency action, the APA’s default grant of judicial review will not apply. The Court held the CWA did not overcome the APA’s presumption favoring judicial review of administrative action. After failing to find express preclusion, the Court rejected the EPA’s argument that the CWA impliedly precluded judicial review. First, the Court found Congress’s grant to the EPA of the option to either bring an enforcement suit or issue a compliance order did not imply that compliance orders should not be reviewable in a judicial proceeding. Second, the Court found the judicial review is not precluded simply because the compliance orders are not self-executing. Finally, the Court held the CWA’s affirmative grant of judicial review of penalties assessed after a hearing without expressly providing for review of compliance orders did not impliedly preclude review of such orders. The express provision of judicial review “in one section of a long and complicated statute” did not overcome the APA’s presumption of reviewability.

Justice Ginsburg concurred, noting it is still an open question whether a property owner may immediately bring suit to litigate more than just the jurisdictional basis for a compliance order. That is, it is unresolved whether an owner may also immediately litigate the terms and conditions of a compliance order.

Justice Alito also concurred to express his concern for the CWA’s “notoriously unclear” reach. Justice Alito urged that either Congress or the EPA should better delineate the jurisdictional bounds of the Act.

Fraser Stryker has an active Environmental, Energy & Natural Resources Practice Group. We defend clients in federal and state enforcement actions and citizens’ suits under the major environmental laws. We continually monitor federal, state, and local environmental legislation and regulations for our clients, and our practice includes work on state and federal legislation. For more information, contact Stephen Bruckner.

This article is provided by Fraser Stryker for general informational purposes and is not intended to be and should not be construed as legal advice on any specific facts or circumstances.

Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any matters addressed herein.