July 11, 2016

Hawkes decision already having effects beyond the Clean Water Act

By M. Reed Hopper Senior Attorney

The decision of the U.S. Supreme Court in Army Corps of Engineers v. Hawkes, was not about the scope of the Clean Water Act, as some suppose.  PLF is litigating that question in another case wherein the Corps and EPA have proposed an unprecedented and sweeping definition of the “waters of the United States” subject to complete federal control under the Act. Rather, Hawkes was about whether property owners have the right to challenge agency claims of jurisdiction over local lands when the property owner disagrees with the agency determination.  On that question, Hawkes gave landowners an important and resounding victory.  For the first time in four decades, the High Court unanimously ruled Jurisdictional Determinations (i.e. wetland delineations) issued by the Corps could be contested in court.  This meant the Corps would have to prove the Clean Water Act covered a particular parcel before imposing strict regulatory burdens on landowners who challenge agency overreaching.

Standing alone, this is a significant precedent.  Hawkes gave millions of landowners nationwide the power to defend themselves against overzealous enforcement of one of the most intrusive laws in American history.  But no sooner was the decision issued, at the end of May, than legal pundits started wondering if Hawkes would be limited to the Clean Water Act or extended to other laws. That question has now been answered.

Hawkes turned on an interpretation of a term in the Administrative Procedure Act (APA).  The APA only authorizes judicial review of “final agency action.”  In Hawkes, the Corps argued Jurisdictional Determinations were not “final” because they had no legal consequences and could not be reviewed in a court of law.  In other words, landowners and the courts would just have to accept the Corps’ determination that a particular parcel of land had “waters of the United States” subject to federal regulation under the Clean Water Act.  But the entire Supreme Court disagreed.  Among other things, the justices held Jurisdictional Determinations had the legal consequence of changing the landowner’s potential liability under the Clean Water Act and such determinations are, therefore, “final agency action” and reviewable in court.

Just recently, two Circuit Courts of Appeals have applied Hawkes in other contexts expanding the scope of the APA to allow judicial review of other types of agency actions.

The first case is Rhea Lana v. Department of Labor.  In that case, the Department sent Rhea Lana an “advisory letter” stating that back wages were due Rhea Lana sales people and warning that failure to comply could subject Rhea Lana to increased penalties under the Fair Labor Standards Act for a knowing and willful violation.  We made a similar argument in Hawkes; that once landowners are put on notice by a Jurisdictional Determination that their property is subject to the Clean Water Act, any violation of the Act (such as by discharging a pollutant to covered waters without a federal permit) will increase the landowners’ potential liability for a knowing and willful violation. The Supreme Court accepted this as a legal consequence and so did the D.C. Circuit Court in Rhea Lana:

The exposure to willful-violation penalties apparently resulting from receipt of such advice would be a legal consequence within the meaning of Bennett v. Spear, just as exposure to double penalties made EPA’s compliance order legally consequential in Sackett. The Supreme Court’s decision this week in Hawkes further supports that result. There, the Court concluded that jurisdictional determinations issued by the Army Corps of Engineers have legal consequences under Bennett, because negative jurisdictional determinations “limit[ ] the potential liability a landowner faces for discharging pollutants without a permit,” while positive determinations “den[y] … [a] safe harbor” from administrative enforcement proceedings. Hawkes Co., 136 S.Ct. at 1814. The DOL letter at issue here, like the jurisdictional determination in Hawkes, has the kind of “direct and appreciable legal consequences” on potential liability that count for purposes of finality. Id. at 1814 (internal quotation marks omitted).

The second case is Texas v EEOC, in which the Equal Employment Opportunity Commission issued a hiring guidance document setting forth the standard by which disparate impact hiring practices would be measured.  As in Rhea Lana and in Hawkes, the Government argued the agency action was simply advisory and therefore not “final” under the APA.  But the Fifth Circuit disagreed. After a detailed analysis of Hawkes, the court held:

“[L]egal consequences” are created whenever the challenged agency action has the effect of committing the agency itself to a view of the law that, in turn, forces the plaintiff either to alter its conduct, or expose itself to potential liability. In Hawkes Co., this agency action was the issuance of a JD asserting that the plaintiff’s land was subject to the CWA’s permitting requirements, thus depriving the plaintiff of the agency-created safe harbor and forcing the plaintiff to submit to the agency’s view or risk liability. Here, it is the EEOC’s promulgation of the Guidance, which offers regulated entities a safe harbor from DOJ referral, and thus ultimately from liability, only if employers alter their hiring policies to comply with the Guidance’s directives.

These cases are also significant.  Relying on Hawkes, they provide far-reaching precedent for a broad application of the APA giving regulated persons and entities the power to challenge a wide variety of agency action.  These cases can be cited as direct or persuasive authority that, under Hawkes, so-called “advisory” or “warning” letters may be subject to judicial review under the APA if they affect a party’s potential liability.  And, that agency “guidance” documents may also be subject to judicial review if they interpret the law or affect the rights or liability of regulated parties.

Just six weeks after issuance, Hawkes is already changing federal jurisprudence across the Country for the benefit of the regulated public.  It may turn out that Hawkes‘ legacy goes way beyond the Clean Water Act.

What to read next