The U.S. Supreme Court is releasing the normal complement of rulings during its 2012 term and, interestingly, a decision rendered in mid-March appears to have the greatest impact upon the pyrotechnics industry.
Upon considering the issues, a unanimous court curbed the government’s power to enforce the Clean Water Act (the “CWA”), by ruling that a landowner can challenge compliance orders in court before the Environmental Protection Agency can compel remedies and impose fines. This type of challenge is described as a ‘pre-enforcement’ challenge. The facts before the Supreme Court involved the planned construction of a lake-side vacation home in Idaho that was to be situated upon property that the EPA had classified as a protected wetland; and, as a consequence, the EPA ordered that all ‘fill’ be removed to restore the land to its original condition. The compliance order that the EPA issued to the landowner had threatened fines approaching $75,000 per day.
The landowner challenged the EPA’s compliance order by filing a pre-enforcement lawsuit. The complaint seeks review under the Administrative Procedure Act, and alleges that enforcement without judicial review is a violation of procedural Due Process rights. The lower court dismissed the lawsuit by determining that the CWA precludes pre-enforcement remedies. Instead, the lower court ruled that the time to challenge the EPA’s designation is only appropriate, or ripe, when the EPA comes into court to enforce its compliance order. The lower court’s ruling that the EPA must commence the dispute also suggests that the landowner has no standing to challenge the EPA in court in the context of a pre-enforcement action. In sum, the lower court determined that, unless and until the EPA files a lawsuit to enforce the terms, conditions and penalties of a compliance order, the dispute is not ripe and the landowner lacks standing.
Upon appeal, the U.S. Supreme Court, per Justice Scalia, unanimously ruled that the right to challenge the compliance order is neither dependent, nor conditioned, upon the EPA’s attempt to enforce compliance. Under the analysis of the Supreme Court, the compliance order constitutes a final agency action, and the Administrative Procedure Act authorizes lawsuits against “final agency actions”. This determination clears the way to ‘pre-enforcement’ actions. Justice Scalia’s opinion for the Court also highlights the fact that the Administrative Procedure Act creates a presumption in favor of judicial review, albeit rebuttable; and, here, the presumption was not sufficiently rebutted (by the government). For these two main reasons (finality and no persuasive rebuttable proof), the Supreme Court went on to rule in favor of the landowner’s right to pursue the pre-enforcement action in lower court.
Accordingly, the Supreme Court reversed the decision of the lower court and the matter has, presumably, been remanded to a lower court for further hearing and determination sometime in 2012. It is important to note that, in this sense, the landowner hardly ‘won’. Nonetheless, the lower court will now have to consider the merits of the substantive assertions related to the EPA’s classification of wetlands status, and the court will be constrained to award the EPA only relief if the agency has diligently done its due diligence. Substance will ultimately prevail over procedure.
The value of this U.S. Supreme Court decision is that the EPA must get the reasoning underlying its compliance orders right from the outset; and by doing so, this should have the effect of increasing the agency’s odds of defeating any court challenge to its compliance order or agency process on the merits. The value to the individual is even greater, to the extent that those who truly believe that the EPA has made a mistake will have the opportunity to test the sufficiency of the compliance order without first violating its terms and conditions and without exposing oneself to even greater penalties and punishment.
In the context of the pyrotechnics industry, the ruling is a helpful guide relating to concerted efforts of regulators to implement CWA standards over pyrotechnics. For example, in the United States, San Diego, California, has already instituted a permit process pursuant to the CWA guidelines and, significantly, with EPA blessing; Madison, Wisconsin is also evaluating similar regulations. The Supreme Court decision also highlights the importance and value underlying swift and comprehensive challenges to overbroad and unwarranted regulation by seeking judicial review at the pre-enforcement stage of the proceedings. In many respects, the following legal maxim is most appropriate: Equity aids the vigilant not those who slumber on their rights.
The Supreme Court ruling also lifts the cloud over the risks, consequences, and notoriety, commonly associated with legal challenges to agency determinations. Each of these factors present real deterrents that, unavoidably, influence the decision-making process (of the target of the compliance order) regarding whether or not to challenge the compliance order by seeking judicial review. One of the EPA’s most potent tools in its toolbox is, regrettably, the leverage associated with the specter of punishing fines and penalties that may accrue from date of issuance of a certain compliance order to the date of judicial review and determination.
It is common knowledge that the EPA has been expanding its powers with the approval of the current Administration, and the EPA appears to be encouraging, if not actively supporting, the efforts of certain constituents who seek to apply CWA regulation to pyrotechnics. Of course, the Supreme Court’s recent ruling indicates that any such action would ultimately implicate issues of procedural due process and substantive due process.
In conclusion, the Supreme Court has ruled that procedural due process protections will likely apply to the pyrotechnics industry in connection with any pre-enforcement challenge in response to a compliance order issued pursuant to the CWA in connection with pyrotechnics. It also stands to reason that, upon consideration of the merits of CWA regulation of pyrotechnics, the Supreme Court will also protect the pyrotechnics industry’s substantive Due Process rights as well.
