On March 21, 2012, the United States Supreme Court unanimously rejected the existing prohibition against judicial review of Environmental Protection Agency (“EPA”) administrative compliance orders issued under the Clean Water Act (“CWA”). This decision is significant in that property owners may now immediately seek judicial relief of an order rather than having to choose between complying with the order, potentially incurring unnecessary costs, or waiting for EPA to bring an enforcement action, accruing large penalties in the meantime. The repercussions of the decision are yet to be determined but it raises several questions, such as its effect on state and local environmental compliance orders and enforcement actions.

This case arose when the Sacketts, a couple that owns a parcel of land near Priest Lake in Idaho, filled in a portion of the parcel with dirt and rock in preparation for construction of a house. About six months later, the EPA issued a compliance order finding that the Sacketts had violated the CWA because their property was considered wetlands and therefore the discharge of fill material onto the land without a permit was prohibited. The order directed the Sacketts to immediately restore the property and also warned that failure to comply with the order subjected them to civil penalties of up to $37,500 per day, and up to $75,000 per day should the EPA prevail in an enforcement action.

The Sacketts sought a hearing with the EPA to challenge the finding that the property is subject to the CWA. After EPA refused to grant a hearing, the Sacketts brought an action in federal district court in Idaho, alleging that the compliance order was arbitrary and capricious giving rise to a claim under the United States Administrative Procedure Act (the “APA”) and that the compliance order violated their right to due process under the federal Constitution. The district court dismissed the action for lack of subject matter jurisdiction, holding that the CWA precludes judicial review of pre-enforcement compliance orders. The Sacketts appealed from the decision and the Ninth Circuit Court of Appeals affirmed. The Ninth Circuit agreed that the CWA precludes judicial review of compliance orders and that the Sacketts’ due process rights were not violated because judicial review was available once EPA brought a civil enforcement action to enforce the compliance order, or the Sacketts could apply for a permit to fill their property, the denial of which would be reviewable in federal court. In addition, the Ninth Circuit found that due process was not violated because the potential penalties, which the Sacketts argued foreclosed the option of waiting for EPA to bring an enforcement action, would be determined by the court based on several equitable factors. The Sacketts sought review of the Ninth Circuit’s decision by the Supreme Court, which was granted.

Because the Sacketts’ claim was brought pursuant to the APA, the Supreme Court first considered whether the administrative compliance order was a “final agency action,” such that it would be subject to judicial review under the APA. The Court found that the order was final because it “has all the hallmarks of APA finality that our opinions establish.” The order legally obligated the Sacketts to restore their property, exposed them to double penalties in a future enforcement proceeding and marked the “consummation” of the agency’s decisionmaking process. In addition, the Sacketts had “no other adequate remedy in a court,” as required by the APA, because they could not themselves initiate a civil action but had to “wait for the agency to drop the hammer,” potentially accruing up $75,000 in penalties in each day.

Next, the Court considered whether the CWA precluded judicial review under the APA. It found that neither the express language nor the intent of the CWA precluded review. The Court rejected EPA’s argument that allowing judicial review of compliance orders would undermine the agency’s choice under the CWA between issuing an administrative order and bringing a civil enforcement action, because, in the Court’s view, there are “eminently sound reasons other than insulation from judicial review why compliance orders are useful,” such as resolving issues through voluntary compliance. The Court concluded that allowing judicial review where the recipient does not choose voluntary compliance is consistent with this function. The Court also rejected EPA’s arguments that there is a presumption that compliance orders are not subject to judicial review because the CWA expressly provides for judicial review in other instances, and that EPA would be less likely to use compliance orders if they are subject to judicial review thereby eliminating their intended efficiencies. The Court found that “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.” Thus, the Court reversed the Ninth Circuit and held that the compliance order is final agency action for which there is no other adequate remedy other than APA review and that the CWA does not preclude that review.

Justice Ginsberg filed a concurrence in which she characterized the Court’s decision as limited to whether the Sacketts could immediately challenge EPA’s jurisdictional authority over their property in federal court, and not addressing the question of whether the Sacketts could challenge the terms and conditions of the order at the pre-enforcement stage. Justice Alito also filed a concurrence challenging Congress to “provide a reasonably clear rule regarding the reach” of the CWA. He wrote that for the past 40 years, Congress has done nothing to resolve the ambiguity in the meaning of the “waters of the United States” and EPA has not promulgated a rule providing a clear and sufficiently limited definition, such that there is no predictability for property owners as to jurisdiction, but only case-by-case determinations made by EPA field staff.

The Supreme Court’s decision is narrowly drawn and could be interpreted to be limited to jurisdictional challenges under the CWA, and thus its implications may not be as far-reaching as it seems at first glance. The decision would not affect orders issued pursuant to statutes where pre-enforcement judicial review is expressly prohibited, such as the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), but plaintiffs likely will now challenge orders issued pursuant to statutes such as the Resource Conservation and Recovery Act (“RCRA”) and the Clean Air Act (“CAA”), which do not expressly prohibit pre-enforcement judicial review. There also could be implications for state and local environmental statutory schemes. As a practical matter, it seems that property owners will take advantage of this new avenue for relief if the costs of compliance are great and they have sound legal reasons to believe that the order was issued in error.

The full text of the Court’s decision can be found here.