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Sackett v. EPA: Shifting the Administrative Calculus

By Kenneth Anspach – December 3, 2013


In the U.S. Supreme Court’s recent decision in Sackett v. Environmental Protection Agency,132 S. Ct. 1367, 182 L. Ed. 2d 367 (2012), the Court held that a person who had been issued an administrative order directing compliance with section 309(a)(3) of the federal Clean Water Act, 33 U.S.C. § 1319(A)(3), can challenge that order pursuant to section 704 of the federal Administrative Procedure Act, 5 U.S.C.S. § 704. Commentators on the ruling have stated that “the decision is a victory for individual rights not only because it establishes the right of judicial review for compliance orders, but also because it reduces the incentive for agencies to adopt cavalier positions when threatening individuals with ruinous fines.” Damien M. Schiff & Luke A. Wake, “Leveling the Playing Field in David v. Goliath: Remedies to Agency Overreach,” 17 Tex. Rev. L. & Pol. 97.


The Sackett Ruling and Its Significance as a Departure from Prior Decisional Law
In Sackett the U.S. Environmental Protection Agency (EPA) issued a compliance order that accused the owners of depositing fill materials on a residential lot they owned, stating that the owners engaged in the discharge of pollutants into a navigable waterway without a permit, in violation of section 301 of the Clean Water Act, 33 U.S.C § 1311. The order further directed the owners to restore the site in accordance with an EPA-created restoration work plan. The EPA denied the owners’ request for a hearing, and the owners sued the EPA, claiming that the EPA acted arbitrarily and capriciously in violation of 5 U.S.C. § 706(2)(A), and violated their right to due process of law, when it issued the compliance order. The Supreme Court found that the owners could bring a civil action under section 704 of the federal Administrative Procedure Act (APA), 5 U.S.C.S. § 704, to challenge the EPA’s order. That statute allowed judicial review of final agency actions for which there was no other adequate remedy in a court. The Court noted that The EPA’s compliance order was a final order, such that review under 5 U.S.C.S. § 704 was appropriate, and that there was nothing in the Clean Water Act that prohibited such judicial review.


In holding that the compliance order was reviewable under section 704 of the APA, the Court examined what constituted a “final” agency decision and found that an order is “final” when it has the “hallmarks of . . .finality.” These hallmarks include that the rights and obligations of the regulated party are determined, that legal consequences such as fines flow from the order, and that the order marks the “‘consummation’ of the agency’s decisionmaking process.” Finally, the Court also noted that “[n]othing in the Clean Water Act expressly precludes judicial review under the APA or otherwise.” Sackett, 132 S. Ct. at 1372.


Prior to the Supreme Court’s decision in Sackett, agency compliance orders such as involved here were deemed unreviewable until enforcement proceedings were instituted by the EPA. See, e.g., Sackett v. United States EPA, 622 F.3d 1139, 1143 (9th Cir. 2010), rev’d, 132 S. Ct. 1367 (2012); see also Laguna Gatuna, Inc. v. Browner, 58 F.3d 564 (10th Cir. 1995); S. Ohio Coal Co. v. Office of Surface Mining, Reclamation & Enforcement, 20 F.3d 1418 (6th Cir. 1994); S. Pines Assocs. v. United States, 912 F.2d 713 (4th Cir. 1990); Hoffman Grp., Inc. v. EPA,902 F.2d 567 (7th Cir. 1990). These courts had determined that a party-respondent who received a compliance order that he or she believed to be unlawful had only two unpalatable options: either ignore the order and risk incurring heavy civil penalties of as much as $75,000 per day in the event that the EPA brought an action to enforce the compliance order, or submit to the EPA’s unilateral order. What was revolutionary about the Court’s decision in Sackett was that a party-respondent no longer faced this Hobson’s choice. That party may now obtain judicial review of an order he or she believes is unlawful without having to wait for the EPA to take the initiative and without incurring ruinous penalties.


The ruling in Sackett was grounded in a jurisdictional issue, i.e., whether there was “judicial review of the question whether the regulated party is within the EPA’s jurisdiction.” Sackett, 132 S. Ct. at 1374 (Ginsburg, J., concurring.) The Court expressly did not decide the underlying issue of whether the Sacketts had violated section 301 of the Clean Water Act, 33 U.S.C § 1311, which is a “question [that] remains open for another day and case.” Sackett, 132 S. Ct. at 1374 (Ginsburg, J., concurring.)


Violation Notices Issued by the Illinois EPAAre Reviewable
Because Sackett was a decision interpreting federal environmental law (the Clean Water Act) within the context of federal administrative law (the APA), whether it will have a direct impact up Illinois state administrative law, particularly in the environmental arena, is yet to be seen. This is so particularly because “federal court decisions do not constitute binding precedent” on Illinois state courts. I.C.S. Ill., Inc. v. Waste Mgmt. of Ill., Inc., 403 Ill. App. 3d 211, 931 N.E.2d 318 (Ill. App. Ct. 1st Dist. 2010).


It is also the case that in Illinois, under the exhaustion-of-administrative-remedies doctrine, a party must first pursue all administrative remedies provided by statute before seeking review in the courts. People v. NL Indus., 152 Ill. 2d 82 , 94, 604 N.E.2d 349, 354 (1992). Requiring the exhaustion of remedies allows the administrative agency to fully develop and consider the facts of the cause before it, allows the agency to utilize its expertise, and allows the aggrieved party to ultimately succeed before the agency, making judicial review unnecessary. Castaneda v. Ill. Human Rights Comm., 132 Ill. 2d 304, 308, 547 N.E.2d 437, 439 (1989). The doctrine also helps protect agency processes from impairment by avoidable interruptions, allows the agency to correct its own errors, and conserves valuable judicial time by avoiding piecemeal appeals.


For some time, Illinois courts have been grappling with the issue of reviewability of the issuance by the Illinois Environmental Protection Agency (IEPA) of the statutory equivalent of the U.S. EPA’s compliance order, which was the subject of the Sackett ruling. In particular, the issue concerns whether the issuance of a violation notice by the IEPA pursuant to section 31(a)(1) of the Illinois Environmental Protection Act, constitutes a final order such that it is subject to judicial review.


Section 31(a)(1) provides that the IEPA shall issue a violation notice upon becoming aware of a violation of the Illinois Environmental Protection Act. For alleged violations that remain the subject of disagreement between the IEPA and the party-respondent following the IEPA’s fulfillment of the requirements of section 31(a)(1), under section 31(b) of the Illinois Environmental Protection Act, the IEPA must serve another notice stating it intends to pursue legal action. Then, under section 31(c) of the Illinois Environmental Protection Act , once the requirements of subsections (a) and (b) have been fulfilled, the Illinois attorney general or state’s attorney of the county in which the alleged violation occurred may file suit against that party-respondent.


Is judicial review of the receipt of a violation notice available where no suit has been filed against the alleged violator under section 31(c) of the Illinois Environmental Protection Act? This question is the same as that addressed by the U.S. Supreme Court in Sackett, but on the state level. Whether judicial review is provided by statute for the issuance of a violation notice is governed by the Administrative Review Law, Article III of the Code of Civil Procedure, 735 Ill. Comp. Stat. 5/301 et seq. Section 3-102 of the Code of Civil Procedure provides that the Administrative Review Law “govern[s] every action to review judicially a final decision of any administrative agency where the Act creating or conferring power on such agency, by express reference, adopts the provisions of Article III of this Act.”


Such express adoption of the Administrative Review Law is set forth at section 41(a) of the Illinois Environmental Protection Act. There, the statute has adopted the provisions of the Administrative Review Law, but seemingly only for certain aggrieved parties. In other words, such review is specifically allowed for “any party to a Board hearing, any person who filed a complaint on which a hearing was denied, any person who has been denied a variance or permit under this Act, any party adversely affected by a final order or determination of the Board, and any person who participated in the public comment process under subsection (8) of Section 39.5 of this Act.”


Query, then, whether judicial review is available for a party receiving a violation notice, given that such party is not listed under 415 Ill. Comp. Stat. 5/41(a)? Certainly, such a party cannot be found in the list of those for which judicial review is explicitly set forth therein. Therefore, does that party need to wait for judicial review until if and when the attorney general files suit against it under section 31(c) of the Illinois Environmental Protection Act? With few exceptions, circuit courts have original jurisdiction over all justiciable matters. (Ill. Const. 1970, art. VI, § 9.) People v. NL Indus., 152 Ill. 2d at 96. While the legislature generally cannot deprive courts of this jurisdiction, an exception arises in administrative actions. Because it establishes administrative agencies and statutorily empowers them, the legislature may vest exclusive jurisdiction in the administrative agency. The exhaustion-of-remedies doctrine is applied only where the agency has exclusive jurisdiction to hear an action. In People v. NL Industries, 152 Ill. 2d at 96–97, the court found that the courts had concurrent jurisdiction with the Illinois Pollution Control Board to hear cost-recovery actions under section 22.2 of the Illinois Environmental Protection Act. If an exception to the administrative process may be made in that instance, may it not also be made in the instance of judicial review of a violation notice?


Are there other situations, such as under section 31(a)(1), where the courts countenance deviations from the exhaustion doctrine? While Illinois courts generally require strict compliance with this doctrine, they recognize several exceptions. Castaneda, 132 Ill. 2d at 308–9. An aggrieved party may seek judicial review of an administrative decision without complying with the exhaustion-of-remedies doctrine where a statute, ordinance, or rule is attacked as unconstitutional on its face; where multiple administrative remedies exist and at least one is exhausted; where the agency cannot provide an adequate remedy or where it is patently futile to seek relief before the agency; where no issues of fact are presented or agency expertise is not involved; where irreparable harm will result from further pursuit of administrative remedies; [5]  or where the agency’s jurisdiction is attacked because it is not authorized by statute.


The courts have found other similar deviations from the exhaustion doctrine under the Illinois Environmental Protection Act. Thus, where the constitutionality of Illinois Pollution Control Board rules issued under the Illinois Environmental Protection Act have been in issue, the courts have held that reviewability is not limited by 415 Ill. Comp. Stat. 5/41(a). See Cent. Ill. Pub. Serv. Co. v. Pollution Control Bd., 36 Ill. App. 3d 397, 402–3 (Ill. App. Ct. 5th Dist. 1976). Thus, at least to the extent that the constitutionality of a board rule is at issue, reviewability is not limited by 415 Ill. Comp. Stat. 5/41(a).


If that is so, then what other causes of action may allow for such judicial review? The issue of whether such review was allowable for a section of the Illinois Environmental Protection Act similar in nature to section 31(a)(1)—i.e.,section 4(q) of the Illinois Environmental Protection Act—was addressed in National Marine v. Illinois EPA, 159 Ill. 2d 381 (1994). In National Marine, the IEPA issued a pre-enforcement notice to the landowner under what is now denominated as section 4(q) of the act, which is similar in effect to a violation notice under section 31(a)(1), informing the landowner of its potential liability for a release of a hazardous substance on its property.


The landowner brought suit against the IEPA, seeking a declaration of the unconstitutionality of section 4(q) of the Illinois Environmental Protection Act and issuance of a writ of certiorari to review the IEPA’s record and to quash the notice. The court held that the circuit court properly dismissed the entire complaint because the claim was premature and not ripe for judicial resolution, and because allowing the landowner judicial review at this preliminary stage in the administrative process would have thwarted the legislative intent and statutory scheme. It found that pre-enforcement review of the issuance of a section 4(q) notice was not available to a notice recipient, regardless of the form of relief sought.


While the issuance of a 4(q) notice was deemed not reviewable, the issue of judicial review of a violation notice was directly addressed by the court in Alternate Fuels, Inc. v. Director of the Illinois EPA, 215 Ill. 2d 219 (2004). In Alternate Fuels, the IEPA issued a violation notice under section 31(a)(1) of the Illinois Environmental Protection Act, for the company’s failure to secure a permit to burn alternate fuel at one of its plants. When the parties could not agree on whether the alternate fuel was “waste” under the Illinois Environmental Protection Act, the company sought a declaration of rights pursuant to section 2-701 of the Code of Civil Procedure, Declaratory Judgments. The declaration of rights the company sought was whether a business that has been issued a violation notice under section 31(a) of the Illinois Environmental Protection Act, for failure to secure a permit as allegedly required by the Illinois Environmental Protection Act, may bring a declaratory action to test the validity of the violation notice and for attorney fees under the Illinois Administrative Procedure Act, 5 Ill. Comp. State. 100/1-1, based on the agency’s allegedly impermissible rulemaking. The parties cross-appealed the summary judgment granted by the trial court, and affirmed by the appellate court, for the company on the declaratory action and for the IEPA on attorney fees.


The IEPA argued that the declaratory action was not justiciable or ripe for review and that the fuel was “discarded material” under the Illinois Environmental Protection Act’s definition of waste. In determining whether the claim was justiciable, the court construed section 2-701, finding that the plaintiff’s challenge to the issuance of the violation notice was both ripe and justiciable because an actual controversy existed fit for judicial decision, and hardship would result if the declaratory action was not resolved. Because the fuel was recycled, it was not “discarded” and was not “waste” that would require a permit. The IEPA’s interpretation of “discarded material” was not a statement of general applicability, so no rulemaking occurred to trigger the right to fees. Accordingly, the court affirmed the trial court’s granting of summary judgment to the plaintiff.


In so ruling the court distinguished National Marine on the basis, inter alia, that in Alternate Fuels, no writ of certiorari was sought, and that nothing in the plaintiff’s suit prevented the IEPA from referring the matter to the attorney general under section 31(c) of the act.


Conclusion
In Sackett the U.S. Supreme Court held that a person who had been issued an administrative order directing compliance with section 309(a)(3) of the federal Clean Water Act, 33 U.S.C. § 1319(A)(3), can challenge that order pursuant to section 704 of the federal Administrative Procedure Act, 5 U.S.C.S. § 704. Consistent with the Sackett decision, the Illinois Supreme Court in Alternate Fuels held that the issuance of a violation notice directing compliance under section 31(a)(1) of the Illinois Environmental Protection Act is properly the subject of judicial review pursuant to section 2-701 of the Code of Civil Procedure, Declaratory Judgments.


Keywords: environmental litigation, Sackett, EPA, CWA, Clean Water Act, National Marine


Kenneth Anspach is an attorney in Chicago, Illinois, and is cochair of the Insurance Subcommittee of the Environmental Litigation Committee of the Section and cochair of the Environmental Subcommittee of the Insurance Coverage Litigation Committee.


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