Supreme Court to Give Unilateral Administrative Orders a Constitutional Checkup

Posted on July 22, 2011 by Donald Fowler

Yesterday, Ted Garrett posted a blog on the Supreme Court’s grant of certiorari in Sackett v. EPA, 2011 WL 675769 (No. 10-162, June 28, 2011) which involves appeal of an EPA enforcement order under the Clean Water Act (CWA). His blog notes that the Court declined to review a similar appeal brought by GE under CERCLA. In an earlier blog post I summarized that GE petition which posed the following questions with respect to CERCLA’s unilateral administrative order (UAO) provisions:

  1. Does a UAO’s imposition of either significant response costs or significant decreases in a PRP’s stock price and credit rating constitute a deprivation of property under the Due Process Clause?
  2. Does CERCLA’s UAO scheme impermissibly coerce compliance in violation of the Due Process Clause by conditioning any judicial review of a UAO upon the threat of treble damages and fines that accumulate at EPA’s sole discretion?

Given the Supreme Court’s denial of the GE petition on June 6, 2011, it is somewhat surprising that the Court granted certiorari on June 28 in the Sackett appeal where the issues to be considered are:

  1. May Petitioners seek pre-enforcement judicial review of the administrative compliance order pursuant to the Administrative Procedure Act, 5 U.S.C. §704?
  2. If not, does Petitioners’ inability to seek pre-enforcement judicial review of the administrative compliance order violate their rights under the due process clause?


Sackett v. EPA, S. Ct. No. 10-1062. In fact, that second question, which was drafted by the Court itself and not by the Sackett petitioners, is uncannily similar to the second issue raised in the GE petition. What’s going on here?

The facts in Sackett are these. Mr. and Mrs. Sackett bought a small parcel of property – roughly ½ acre – near Priest Lake, Idaho for the purpose of building a house. Although the lots on either side were undeveloped, the lots between the Sacketts’ property and the lake were developed with permanent structures, and the entire area was a built out area zoned for residential use, with sewer hookups and local building permits. The Sacketts began earth moving work with permits in hand, only to receive an order from EPA pursuant to the CWA telling them that they had illegally filled jurisdictional wetlands and that they were required not only to cease further filling but to remove the prior fill and replant the area with indigenous wetland plants. The effect of the order was to preclude any development of the Sacketts’ property.

Upon receiving the order, Mr. and Mrs. Sackett asked EPA to conduct an administrative hearing to contest whether their property in fact contained wetlands within EPA’s jurisdiction. When EPA ignored their request, the Sacketts sued EPA, challenging EPA’s exercise of jurisdiction. EPA moved to dismiss, arguing that pre-enforcement review of compliance orders is precluded by the CWA. In response, the Sackett’s argued that they were entitled to seek review of EPA’s exercise of jurisdiction under the Administrative Procedure Act (“APA”). The district court agreed with EPA, reasoning that pre-enforcement review of administrative compliance orders is barred by the Clean Water Act’s statutory scheme and that preclusion of pre-enforcement review did not violate the Sacketts’ due process rights.

On appeal, the Ninth Circuit affirmed. It held, first, that review under the APA is not available where the relevant statute precludes judicial review, and – though the CWA does not expressly preclude review of administrative compliance orders – it found a clear intent to preclude such review in the statutory scheme. In so holding, the Ninth Circuit joined the ranks of the four other circuit courts that have considered the question, as well as the majority of district courts that have ruled on the issue.

The court then considered and rejected the Sacketts’ due process argument. The Sacketts had argued that, absent pre-enforcement judicial review, their only avenue to judicial review was to defy the order and await an EPA enforcement action. That course of action, however, carries with it the risk of large daily civil penalties (up to $37,500 per day) and potential criminal sanctions as well – in short, penalties so onerous as to foreclose access to the courts as a practical matter in violation of Ex Parte Young, 209 U.S. 123 (1908), and its progeny. The Ninth Circuit nonetheless found the consequences of noncompliance with a CWA order were not so onerous as to create a constitutionally intolerable choice for two reasons:


  • First, the court concluded that the Sacketts could avoid potential penalties by applying for a permit to fill their property and then immediately appeal the agency’s permit denial to district court. Setting aside the oddity of a proceeding to contest a permit denial where the primary argument is that the agency lacked jurisdiction to issue the permit in the first place, the Court’s conclusion ignores two important practical realities – (1) EPA and the Corps of Engineers typically will not act on a permit application while a compliance order is outstanding, and (2) as the Supreme Court observed in Rapanos v. U.S., 547 U.S. 715,721 (2006), the permit application process typically takes years to conclude and costs the applicant hundreds of thousands of dollars, none of which is likely to be reimbursable even if the applicant later prevails on its jurisdictional challenge.
  • Second, the court noted that the award of civil penalties is ultimately committed to judicial, not agency, discretion and that a court must take into account a wide range of equitable factors in determining the amount of the penalty. Thus, the Ninth Circuit reasoned, the Sacketts can refuse to comply and have their day in court before any penalties are assessed. However, absent some guarantee that no penalty will be assessed where an order recipient has presented a substantial, good faith, albeit unsuccessful, challenge to the order, the fact that it will be a court, rather than EPA, that considers whether to assess potentially ruinous civil penalties offers scant comfort to folks in the Sacketts’ position.

Against this backdrop, the Supreme Court granted certiorari. There had been some indication in recent decisions that the Court was interested in revisiting Ex Parte Young, which has received scant attention in many decades. See, e.g., Free Enterprise Fund v. Public Accounting Oversight Board, 130 S. Ct. 3138, 3151 (2010) (“[w]e normally do not require plaintiffs to ‘bet the farm by taking the violative action’ before ‘testing the validity of the law,’” citing Ex Parte Young). But why this case and not GE’s challenge to CERCLA’s UAO provisions? Two differences between the CWA and CERCLA may provide an explanation. First, section 106(b)(1) of CERCLA permits imposition of penalties for violations of a UAO only where the violation (or failure to comply) is willful and “without sufficient cause.” The CWA contains no similar “defense”, which the government argued in the GE case was a constitutionally significant escape clause under Ex Parte Young. Second, Section 106(b)(2) of CERCLA gives a UAO recipient who chooses to comply with an unlawful order the opportunity to seek reimbursement of its costs of compliance, at least in certain circumstances. Again, the CWA contains no such provision, and again the government argued in the GE case that the reimbursement provision had constitutional significance. Whether or not those differences do, indeed, rise to constitutional significance, it is true that they would have made the constitutional analysis in the GE case more complicated than in Sackett.

Of course, the Court may well avoid the due process issue in Sackett by ruling that the CWA does not preclude pre-enforcement review. Should it reach the due process issue and decide in favor of petitioners, however, its opinion will bear close examination, as it may have significant implications for recipients of administrative compliance orders under CERCLA, the Clean Air Act, and many other statutes.

Watch this space.


Posted on February 1, 2011 by Donald Fowler

Over the past three decades, EPA has issued more than 1,700 CERCLA UAOs to roughly 5,400 PRPs ordering the performance of response actions at CERCLA sites costing in aggregate in excess of $5 billion. Only a small handful of those orders, however, have ever been challenged in court, and vanishingly few have been subject to any independent third party review whatsoever.


Why is that? Well, as even EPA might agree, it is not because the Agency is infallible. No, the reason for EPA’s essentially unreviewed exercise of its UAO authority is the CERCLA statute itself, which (a) by operation of Section 113(h), precludes any challenge to a UAO order until the ordered response action has been completed (typically many years later at an average cost of $4 million dollars) and (b) by operation of Sections 106 and 107, subjects any PRP who elects to defy a UAO to treble punitive damages and additional penalties of $37,500 per day, which accumulate until EPA, at its sole discretion, brings an enforcement action.

In this regard, CERCLA is an outlier in administrative law. Though instances are common where federal statutes give agencies the power to issue administrative orders, virtually every other comparable scheme affords recipients of such orders either a prior hearing or the prompt opportunity for independent review after the order is issued. CERCLA, of course, provides neither.


So what justifies this unusual approach? It has been suggested on occasion that due process must be dispensed with because UAOs are needed to address emergency conditions. They can only be issued, after all, where an imminent and substantial endangerment to public health or the environment is shown. There are two problems with that rationale, however. First, the courts have largely upheld EPA’s position that “imminent and substantial endangerment” doesn’t really mean “imminent” or “substantial” – there really is no site involving a hazardous substance and a release (actual or threatened) that doesn’t meet the statutory criteria for UAO issuance. Second, as EPA has conceded in litigation, the fact is that EPA doesn’t issue UAOs in true emergencies; in those circumstances, it does the work itself and seeks to recover its costs later.


Okay, so even if true emergencies are not implicated, it’s still the case that EPA has a need to act quickly and that allowing pre- (or prompt post-) issuance review would unduly impede cleanup of hazardous sites, right? Well, as it turns out, that’s not true, either. Analysis of EPA’s CERCLIS database reveals an average 8-year lag-time between identification of a site and issuance of a UAO and a 4-year lag between remedy selection and UAO issuance. Obviously, there’s plenty of time in the system for a little due process.


So why haven’t past procedural due process challenges to this UAO scheme (and there have been a number of them) succeeded? The courts that have rejected those challenges have commonly concluded that the challenging PRPs couldn’t show a pre-hearing deprivation of property, as is required to trigger Fifth Amendment protections. Those courts reasoned that a PRP could simply refuse to comply with and wait for EPA to sue to enforce the UAO, and in that event would suffer no pre-hearing deprivation of property since penalties and damages could only be awarded following a court hearing.


Though the conclusion is facially appealing, its fallacy is demonstrated by the record of the most recent constitutional challenge brought by GE. There, following extensive discovery from EPA and expert testimony on both sides, GE was able to demonstrate empirically that a PRP that elected to defy a UAO would be immediately punished by the equity and capital markets, which would recognize the massive contingent liability such defiance would create and account for it by lowering the PRP’s stock value and increasing its cost of financing, with consequent impacts on its ability to bid for new projects or to hire additional employees, among other things. Indeed, although he took issue with GE’s assessment of the magnitude of the impact, even EPA’s economic expert agreed that defiance would occasion such harmful effects and that they would be significant. And the District Court agreed, as well, that defiance would not avoid a deprivation of property, though it ultimately ruled against GE on the basis that the burden to EPA of providing hearings outweighed the private party interests favoring such hearings.


On appeal the D.C. Circuit rejected the district court’s finding of a pre-hearing property deprivation, however, and ruled instead that such harmful impacts did not involve constitutionally protected property rights and so dismissed GE’s constitutional challenge on that predicate ground without reaching the District Court’s balancing analysis. The potential implications of that holding – which GE believes is inconsistent with Supreme Court precedent – extend well beyond CERCLA confines, and so GE has sought certiorari review.  The government’s response to GE’s petition is due February 4.

Stay tuned.