JURIST Guest Columnists Brian T. Hodges and Damien M. Schiff of Pacific Legal Foundation discuss whether a landowner can seek judicial review of a jurisdictional determination under the Clean Water Act …

The US Supreme Court is set to hear arguments in a Clean Water Act (CWA) case that will have broad ramifications for property owners across the nation. At issue in US Army Corps of Engineers v. Hawkes Co., Inc., is whether a landowner can challenge a so-called “jurisdictional determination” in federal court without first having to obtain a CWA permit. A jurisdictional determination is an administrative decision issued by the Army Corps of Engineers as to whether the landowner’s property is subject to the Corps’ jurisdiction under the CWA. According to the Corps, the decision constitutes a “definitive, official determination that there are, or that there are not, jurisdictional ‘waters of the United States’ on a site.”

At first blush, it would seem obvious that a jurisdictional determination would qualify as an appealable final agency decision under the Administrative Procedure Act (APA). After all, as the Eighth Circuit Court of Appeals held in Hawkes, the determination is conclusive regarding the presence of jurisdictional waters on the land, and fixes the owner’s rights and obligations under the CWA.

But it is never that easy, is it?—particularly when dealing with federal environmental regulations. Both the Fifth and Ninth Circuit Courts of Appeals reached contrary conclusions in Fairbanks N. Star Borough v. US Army Corps of Eng’rs and Belle Co., LLC v. US Army Corps. of Eng’rs. In those cases, the courts held that the landowner would have to obtain a permit decision before challenging the underlying decision that the property was subject to CWA jurisdiction.

Whether or not a parcel of land is subject to the CWA is more than just a regulatory hassle. It is an extremely expensive and time consuming process. In Rapanos v. US, the Supreme Court estimated that the “average applicant for an individual permit spends 788 days and $271,596 in completing the process, and the average applicant for a nationwide permit spends 313 days and $28,915—not counting costs of mitigation or design changes.” What’s more, the Rapanos court noted that, if interpreted broadly, CWA jurisdiction could reach “every stream, ditch, and drain that can be considered a tributary of, and every wetland that is adjacent to, traditional navigable waters.”

In December 2015, the Supreme Court granted review of Hawkes. The Court is scheduled to hear the case in early Spring 2016.

Jurisdictional Determinations

The JD procedure is a helpful tool for the regulated public. Through this process, a landowner is informed early in the development process whether a CWA permit will be required. But what happens when the landowner disagrees with the JD? Regulations promulgated by the Corps provide an administrative appeal process for JDs. But the Corps rules only allow one level of appeal, usually to the Corps division engineer. And that determination is considered final and binding. Typically, judicial review of agency action is available under the APA so long as that action is “final.” The US Supreme Court, in Bennet v. Spear, explained that the APA’s authorization of judicial review of “final agency action” is limited to an agency action that both marks the consummation of the agency’s decision-making process, and produces legal consequences:

As a general matter, two conditions must be satisfied for agency action to be “final”: First, the action must mark the consummation of the agency’s decisionmaking process—it must not be of a merely tentative or interlocutory nature. And second, the action must be one by which rights or obligations have been determined, or from which legal consequences will flow.

The second question will be at issue when the Supreme Court hears arguments in Hawkes.

Until Hawkes, the consensus among the lower courts was that, although a JD does amount to the consummation of the agency decision making process, it does not constitute a final action by which obligations are determined or from which legal consequences flow. Likewise, the Corps itself has long said that a JD is not a final decision for the purpose of APA review, notwithstanding that the Corps’ own regulations refer to a JD as “Corps final agency action.” The common rationale running among these decisions is that a JD’s issuance does not change the legal rights or obligations of either the landowner or the Corps, and therefore a JD cannot constitute final agency action.

Sackett and APA Review

The US Supreme Court’s recent decision in Sackett v. EPA significantly changed the legal landscape for APA review. In that case, property owners Mike and Chantell Sackett bought a small parcel of property in a residential neighborhood. The Sacketts obtained a county permit to build their family home and started laying gravel. But then the Environmental Protection Agency (EPA), without hearings or notice, claimed the property contained federal “wetlands”—and ordered them to restore the property under the threat of astronomical fines.

With good reason to believe the land did not contain any wetlands, the Sacketts wanted to contest EPA’s claim. But EPA denied their request for a hearing—and the Ninth Circuit ruled they had no right to immediate judicial review. Instead, it held that they would first have to go through a years-long “wetlands” permit process, the cost of which could easily eclipse the value of their land. The court’s decision was not surprising however. At that time, every circuit court to have addressed that question had held that landowners could not immediately appeal compliance orders. See Laguna Gatuna, Inc. v. Browner; S. Ohio Coal Co. v. Office of Surface Mining, Reclamation, & Enforcements; Rueth v. EPA; S. Pines Assocs. v. United States.

The Supreme Court unanimously reversed the Ninth Circuit and overturned decades of case law prohibiting judicial review of compliance orders. Relying on Bennett, the court explained the compliance order marked the consummation of the agency’s decision making process because it included a jurisdictional determination—which was the predicate for EPA’s finding of a violation—and subjected the Sacketts to potential fines in the tens of thousands of dollars per day if they did not comply with the EPA’s demands. And significantly, the order’s findings and conclusions were not subject to further agency review. Thus, the court held that a jurisdictional decision issued through a compliance order is “final” and subject to judicial review under the APA.

Background on Hawkes

In Hawkes, Minnesota business owners sought permission to harvest 530 acres of swampland for peat moss used in landscaping. The owners conceded from the beginning that the swampland amounted to wetlands by definition. However, under the Supreme Court decision in Rapanos, only wetlands that are adjacent to a permanent water body, or which have a “significant nexus” with traditional navigable waters, are subject to federal jurisdiction under the Clean Water Act. Since the nearest river sat 120 miles away, and no water bodies connected the swampland to the river, nobody could reasonably find these wetlands subject to federal jurisdiction.

Regardless, the Corps issued a JD concluding that the swamp was a federal wetland subject to the CWA, without first demonstrating the requisite connection to traditional navigable waters. Hawkes sought to challenge the determination in court, arguing that, like the compliance order in Sackett, the JD represented the consummation of the Corps’ decision making process and had immediate legal consequences.

The trial court rejected Hawkes’ challenge, holding that the landowner had three options: 1) abandon the project and, perhaps, the business; 2) seek an arguably unnecessary federal permit at a cost of over $270,000; or 3) go forward without a permit risking civil fines of up to $37,500 per day and/or criminal sanctions including imprisonment.

None of the trial court’s options was viable—let alone realistic—so, Hawkes appealed to the Eighth Circuit. Relying on Sackett, the Eighth Circuit held that JDs are final agency actions subject to immediate challenge in court. The court explained that each of the trial court’s three “alternatives” was, in actuality, a legal consequence of the agency’s decision that the property was subject to the CWA that could coerce landowners from exercising their lawful rights:

Absent immediate judicial review, the impracticality of otherwise obtaining review, combined with the uncertain reach of the Clean Water Act and the draconian penalties imposed for the sort of violations alleged in this case … leaves most property owners with little practical alternative but to dance to the EPA’s [or to the Corps’] tune. In a nation that values due process, not to mention private property, such treatment is unthinkable. [citations and quotation marks omitted]

Simply put, the Eighth Circuit held that fundamental concepts of due process require that landowners have the opportunity to challenge a JD before having to suffer the legal and financial consequences of such a determination.

Conclusion

Like Sackett, the resolution of the Hawkes case will likely turn on the “legal effect” prong of Bennett and an evaluation of the direct and immediate consequences of a JD upon the landowner. The JD in Hawkes is, in fact, an adjudicative decision that applies the law to the specific facts of this case and is legally binding on the agency and the landowner, thereby fixing a legal relationship. Questions of reviewability of EPA and Corps actions under the CWA have been in the federal courts for decades. For a host of reasons, before Sackett, and now Hawkes, the courts had consistently held that APA review is unavailable for these types of action. The Supreme Court in Sackett, however, changed the trajectory of administrative law. The decision in Hawkes will show whether the court will continue down a path that recognizes the need to protect due process and basic fairness, and to cabin the power of administrative agencies.

Also weighing in favor of Hawkes is the court’s demonstrated pragmatism of late. Surely, both the regulated public and the Corps have strong interests in ascertaining the extent of CWA jurisdiction as early as possible. For the landowner, finding out whether jurisdiction is present helps to avoid the costs of litigating unnecessarily over jurisdiction. For the Corps, an early judicial determination regarding jurisdiction helps to focus the agency’s enforcement efforts. There is no reason to expend manpower and resources in a prolonged permit or enforcement proceeding if CWA jurisdiction is absent. Agency resources could instead be directed to those cases where jurisdiction has been judicially determined to be present. Moreover, because JDs are not typically issued within the context of an enforcement action, and are not a necessary prelude to such an action, judicial review would not hamper the Corps’ administration of the CWA.

Indeed, the question whether or not to allow review of a JD is reminiscent of the court’s recent discussion of administrative appeal rights in Horne v. Department of Agriculture. In that case, the government had argued that the courts lacked jurisdiction to hear a defense predicated in the Takings Clause on appeal from an administrative enforcement order (demanding that the Hornes pay the government the value of property it had demanded that the family surrender). The court rejected that argument, explaining that “when a party raises a constitutional defense to an assessed fine, it would make little sense to require the party to pay the fine in one proceeding and then turn around and sue for recovery of that same money in another proceeding.” The same pragmatism should compel the court to find a JD reviewable immediately, rather than requiring the owner to undergo an extremely costly and time consuming permit process that may be wholly unwarranted.

Brian T. Hodges is a Principal Attorney at the Pacific Legal Foundation and the Managing Attorney of the Foundation’s Northwest Center. He concentrates his practice on representing property owners, with a focus on Takings and Due Process litigation. PLF represents the landowners in Hawkes. Hodges is the author of several articles concerning property rights.

Damien M. Schiff is a Principal Attorney with and member of Pacific Legal Foundation’s Environmental Law Practice Group, and successfully litigated Sackett in the Supreme Court of the United States, as well as litigated cases in federal district courts and circuit courts of appeals concerning the Endangered Species Act and Clean Water Act, and other state and federal environmental laws.

Suggested Citation: Brian T. Hodges and Damien M. Schiff, United States Army Corps Of Engineers v. Hawkes Co: Can a Landowner Seek Judicial Review of a Jurisdictional Determination Under the Clean Water Act?, JURIST – Professional Commentary, December 29, 2015, http://jurist.org/hotline/2015/12/hodges-schiff-clean-water-act.php.