Argument analysis: Justices debate finality issues in Clean Water Act case
on Mar 31, 2016 at 5:33 pm
The government faced an uphill battle in Wednesday’s argument in United States Army Corps of Engineers v. Hawkes Co. As noted in my preview, the case involves the “jurisdictional determinations” (JDs) that the United States Army Corps of Engineers issues under the Clean Water Act. JDs advise landowners whether their property contains “waters of the United States” – that is, waters subject to the act’s requirements, including a potentially long and costly permitting process if the landowner wants to fill in a wetland. The question presented is whether JDs constitute final agency action within the meaning of the Administrative Procedure Act, such that parties can immediately challenge an adverse JD in court.
As the government points out, federal agencies frequently assist parties by providing informal advice or information, and those agency communications are not considered final actions for purposes of judicial review. But respondent Hawkes Co. urges that JDs are different. According to Hawkes, JDs are binding and have legal consequences, such that immediate review is appropriate under the Court’s precedents. Although a majority of Justices seemed to be inclined against the government’s position, the oral argument did suggest that the Court is interested in reaching a narrow ruling that will not disturb other agency practices.
The government, represented at the podium by Deputy Solicitor General Malcolm Stewart, began with a potentially important concession. In response to Justice Samuel Alito’s opening question, Stewart agreed that if JDs were binding on the government in subsequent proceedings, they would constitute final agency action – that is, the government would lose the case. The government’s position is that JDs do not bind it in later proceedings. But Alito, echoed by Chief Justice John Roberts, immediately identified an agency document cited in the government’s brief – a Memorandum of Agreement (MOA) between the Corps and the Environmental Protection Agency – that appears to state that JDs are binding on the government. Stewart explained that the government does not construe the MOA that way. In the government’s view, the MOA applies not to ordinary JDs, but rather to a small subset of special cases. Roberts, referring repeatedly to the MOA’s text, was unpersuaded: “I just don’t see how you can say that [the MOA] talks only about special cases.” Soon thereafter, Justice Sonia Sotomayor asked Stewart to identify “the narrowest way” to rule against the government – that is, the government’s preferred way to lose the case. Stewart identified the MOA. If the basis of the ruling was that the MOA made JDs binding, he explained, “it would be one that if the agencies wanted to fix it, they easily could, simply by issuing a new MOA clarifying their view.” And so, in the first few minutes of the argument, the Justices and the government articulated a narrow way to decide the case.
That exchange may turn out to be consequential, because much of the rest of the argument highlighted the risk that a broader ruling could disrupt valuable agency practices. Justice Elena Kagan led this line of questioning. What makes this case “very difficult,” she said, is that “all over the federal government,” agencies’ compliance offices give advice and recommendations to people who want to know the government’s view on the legality of certain conduct. The Treasury Department issues tax letters, the SEC offers advice about what securities laws allow, and so on. And “mostly we want government agencies to do these things,” because “[w]e think that this helps people, to actually know what the government thinks about particular factual situations.” Stewart argued that the JDs at issue in this case are like those other beneficial, informal forms of advice-giving, and are not judicially reviewable. He also argued that deferring judicial review of JDs until the permit process is complete is analogous to “the general resistance to interlocutory appeals in the judicial system,” noting that the “a fundamental precept of our legal system” is that “we are more worried about piecemeal litigation than about deferred litigation.” And allowing immediate review of JDs, he posited, would raise a risk of duplicative appeals.
But if the Court does not agree with Stewart that JDs are just like other forms of agency advice-giving – and many Justices seemed highly dubious of that proposition – the Court needs a way to distinguish them. One possibility is the distinctiveness of this statutory scheme. Justice Anthony Kennedy stated that “the Clean Water Act is unique in both being quite vague in its reach, arguably unconstitutionally vague, and certainly harsh in the civil and criminal sanctions it puts into practice.” Justice Stephen Breyer offered a different limiting principle, focused on how formal and elaborate the process for making JDs is. (As I noted before, JDs are based on extensive findings, are final for purposes of appeal within the agency, and remain valid for five years.) Reed Hopper, representing Hawkes Co., also mentioned formality as a way to distinguish JDs from other government advice-giving. But Kagan noted that if the Court adopted a rule that formal agency advice is subject to immediate judicial review while informal advice is not, agencies might have incentives to eschew formality – and “in making their processes less formal, also [make them] less accurate and less helpful.”
Hopper’s argument also emphasized the “no-win situation” faced by parties like his client. Upon receiving an adverse JD, he noted, the only options are “to abandon the project at great loss, or go for a permit at great cost, or subject yourself to an enforcement action at great cost.” That sort of “Hobson’s choice,” he argued, “is sufficient to get you judicial review.” But, Kagan asked, isn’t the government correct that the difficult choices a landowner faces come from the statute itself, such that the JD merely “give[s] you more information so that you can make the choices that the statute puts to you?” Under the existing legal test for final agency action, which comes from Bennett v. Spear, that sort of practical consequence would not be enough. The test requires the agency action to have a legal effect. Kennedy asked Hopper to state “the best example of a legal effect that follows from a jurisdictional determination as opposed to a practical effect.” Hopper identified the legal consequence as “[i]ncreased risk of enforcement, because the very existence of the JD constitutes prima facie evidence of a violation if one were to discharge without a permit.” Kennedy responded that “[t]hat sounds to me practical, not legal.” In response to a suggestion from Roberts, Hopper added that JDs may also affect a court’s determination of whether a violation of the act was “willful,” which can lead to more severe penalties. Kagan observed, however, that the same argument could be made for “every…piece of compliance advice that the government gives.”
In responding to Kagan, Hopper argued that JDs carry more weight than “a simple letter that may put one on notice,” because JDs are “a final, binding determination.” He also emphasized the distinctive formality of JDs. But when Kagan asked if JDs are also eligible for Chevron deference, as a formal adjudication under the APA ordinarily would be, Hopper answered that they are not formal “in that sense.” This prompted Kagan to mention a “very fine opinion by [Sixth Circuit] Judge Sutton on this question,” which opines that “the proper line to draw” in the finality context is whether the agency action is sufficiently formal to receive Chevron deference – another possible way the Court could rule, though one that would seem to favor the government here.
Before the end of the argument, Justice Ruth Bader Ginsburg asked Hopper whether the Corps could simply stop providing JDs, which are not compelled by the statute, and thereby leave regulated parties worse off. Roberts expressed his doubt that the Corps would actually do so, calling JDs a “significant enforcement tool” that allow the Corps “to exercise extraordinary leverage without going through the formal enforcement process” and “a way…to exercise their authority without effective judicial review.”
In the end, the Justices’ serious concerns about the use and effects of JDs probably do not bode well for the government. But the argument also indicates that the Court may try to avoid a broad ruling that implicates other agency practices. Such a ruling might distinguish JDs on the ground that the Clean Water Act is unique, that JDs are reached through a particularly formal process, or perhaps that the agencies’ own MOA gives JDs binding effect – the ground that the government itself said, in the opening minutes of the argument, would be the narrowest way to lose the case.