A Quiet Victory for the Rule of Law: Supreme Court Makes it Easier for Property Owners to Challenge Federal Regulatory Power

It may have seemed like a quiet decision day at the Supreme Court, with the Court issuing only one opinion in an argued case. But for those who value property rights and the rule of law, Tuesday's decision in U.S. Army Corps of Engineers v. Hawkes is cause for celebration.

In Hawkes, the Court unanimously held that property owners seeking to develop their land can immediately seek judicial review of a determination by the U.S. Army Corps of Engineers that their property contains "waters of the United States" and is thus subject to federal regulation under the Clean Water Act. It is an important victory for the Pacific Legal Foundation (which litigated the case) and for landowners everywhere who seek to avoid a Hobson's choice between going through a costly, time-consuming permitting process with an unknown outcome or facing civil and criminal penalties for pursuing their development projects without the government's permission.

Some legal background: The federal Clean Water Act makes it illegal to "discharge" a "pollutant" into the "waters of the United States" without a federal permit. These terms have been broadly construed--depositing soil, dirt or clean fill materials may constitute the "discharge" of a "pollutant" and "waters of the United States" has been defined by the Army Corps to include not only streams, oceans and lakes but also (among other things) "mudflats, sandflats, wetlands, sloughs, prairie potholes, wet meadows, playa lakes, or natural ponds, the use, degradation or destruction of which could affect interstate or foreign commerce." Prohibited discharges carry substantial civil and criminal penalties--unless one secures a permit.

Owing to the breadth of the federal government's claims of regulatory power, would-be land developers are often fundamentally uncertain whether pursuing their projects will put them on the wrong side of the law. They have limited options: (1) chance it, and develop their land without a federal permit (thus exposing themselves to liability); (2) make their way through an expensive and extensive permitting process; or (3) (in connection with the permitting process or independently) seek a jurisdictional determination (JD) from the Army Corps in order to find out whether federal regulators believe a permit is required. If they choose (3) and the Corps states that a permit is not required, would-be developers enjoy a five-year safe harbor from liability. If the Corps states that a permit is required, they must obtain one or face penalties for any prohibited discharges.

What happened in Hawkes? Hawkes Co., a mining company, sought to mine peat--an organic material that forms in waterlogged grounds and is used for soil improvement and burned as fuel--on a 530-acre tract of land owned by two affiliated companies. The tract included wetlands believed to contain peat suitable for use in golf greens. After obtaining an option to purchase the property subject to regulatory approval, Hawkes applied to the Corps for a Section 404 permit--a specialized "individual" permit that authorizes "the discharge of dredged or fill material into the navigable waters at specified disposal sites."

In the course of the application process, Hawkes received an "approved" (as distinct from "preliminary") JD stating that the property contained "waters of the United States" because its wetlands had a "significant nexus" to the Red River of the North, located some 120 miles away. One study found that the average applicant for the individualized permit sought by Hawkes "spends 788 days and $271,596 in completing the process," without "counting costs of mitigation or design changes," and absent the permit, Hawkes would expose itself to prosecution for mining peat on the property at issue. (During a site visit, a Corps representative helpfully told a Hawkes employee that "he should start looking for another job.").

But when the companies sought judicial review of the JD, the district court dismissed their claims for want of jurisdiction, holding that the JD was not "final agency action for which there is no other adequate remedy in a court, as required by the Administrative Procedure Act prior to judicial review." A panel of the U.S. Court of Appeals for the Eighth Circuit reversed, stating that "the Corps's assertion that the Revised JD is merely advisory and has no more effect than an environmental consultant's opinion ignores reality," specifically, "the impracticality of otherwise obtaining review," "the uncertain reach of the Clean Water Act" and "the draconian penalties imposed for the sort of violations alleged in this case." Drawing upon Justice Samuel Alito's concurrence in Sackett v. EPA (2012) (another case litigated by PLF), the panel affirmed that "[i]n a nation that values due process, not to mention private property, such treatment is unthinkable."

The Supreme Court unanimously ruled in Hawkes' favor. Writing for the Court, Chief Justice John Roberts examined the government's arguments that the JD was not a final agency action and that, even if it were, there were adequate alternatives to APA review in court. Neither argument stood up under careful scrutiny. Applying a two-pronged test for finality set forth in Bennett v. Spear (1997), Roberts explained that approved JDs (1) "mark[] the consummation" of the Corps' decisionmaking process and (2) have "direct and appreciable legal consequences." Concerning (1), he noted that approved JDs are issued after "extensive factfinding" and are "typically not revisited." Concerning (2), he emphasized that approved JDs "will generally bind the Corps for years" and "[u]nder a longstanding memorandum of agreement between the Corps and EPA, [they] will also be 'binding on the Government and represent the Government's position in any subsequent Federal action or litigation concerning that final determination.'" Thus, he concluded, an approved JD that states that someone's property does not contain jurisdictional waters "creat[es] a five-year safe harbor from such proceedings for a property owner." By contrast, an approved JD that state that someone's property does contain jurisdictional waters "not only deprives respondents of a five-year safe harbor from liability under the Act, but warns that if they discharge pollutants onto their property without obtaining a permit from the Corps, they do so at the risk of significant criminal and civil penalties."

The Court took a similarly fact-sensitive, realistic approach to the question whether adequate alternatives existed to APA review in court. Roberts forcefully rejected the government's proffered alternatives--"discharge fill material without a permit, risking an EPA enforcement action during which they can argue that no permit was required, or apply for a permit and seek judicial review if dissatisfied with the results"--as inadequate, highlighting the nature of the risks and the associated costs and uncertainty entailed by each alternative. To the Corps' argument that property owners should consider themselves fortunate, since "[i]f the Corps had never adopted its practice of issuing standalone jurisdictional determinations upon request," property owners could only seek review "in an enforcement action or at the end of the permitting process," Roberts responded thus: "True enough. But such a 'count your blessings' argument is not an adequate rejoinder to the assertion of a right to judicial review under the APA."

There is no easy way to say it: Federal executive agencies routinely exercise powers that are delegated in the Constitution exclusively to the legislative and judicial branches of the federal government, to the extent that they are delegated to the federal government at all. The Supreme Court bears a great deal of responsibility for this status quo. It has not only acquiesced in but facilitated the expansion of unconstitutional administrative power by (among other things) fashioning doctrines of judicial deference that require judges to abdicate their Article III duty to exercise independent judgment and deprive litigants of their due process rights to unbiased, impartial adjudication when assertions of regulatory power are challenged in court. In such circumstances, proponents of constitutionally limited government must, well, count their blessings, even as they advocate consistent judicial engagement--truly impartial, fact-sensitive judicial inquiry into the lawfulness of the government's true ends and means--in all contexts in which government officials assert power over private citizens and their property. In Hawkes, they have received such a blessing.