Greater Detroit Resource Recovery Authority and Combustion Engineering v. The United States Environmental Protection Agency , 916 F.2d 317 ( 1990 )

KRUPANSKY, Circuit Judge,

dissenting.

By a stroke of legal legerdemain, the panel majority has divested the district court of its jurisdiction over an original action for declaratory and injunctive relief by conjuring the illusion that an equivocal, advisory letter from the Environmental Protection Agency constituted a final agency order reviewable only in this court pursuant to section 307(b)(1) of the Clean Air Act, 42 U.S.C. § 7607(b)(1) (section 307(b)(1)). Accordingly, I respectfully dissent.

The majority’s opinion correctly notes that judicial review of all final actions of the Administrator of the Environmental Protection Agency (EPA) are cognizable in the first instance in the federal courts of appeals. Fatal to the validity of its disposition in this case, however, is its mischarac-terization of the EPA’s May 20, 1986 letter to the Michigan Department of Natural Resources (MDNR) as final agency action within the meaning of section 307(b)(1).

By its terms, the May 20, 1986 letter from EPA regional administrator Adamkus to the MDNR stated that only a “provisional determination” had been made “that the State did not implement the PSD program with respect to the application and permit (Michigan Department of Natural Resources Permit #468-83) for the City of Detroit Resource Recovery Facility (RRF)” and that the resource recovery facility’s permit had been issued in contravention of the PSD delegation agreement. The letter further noticed that a “final determination” to revoke or uphold the permit (as distinct from EPA delegation to MDNR of authority to issue PSD permits) would not be forthcoming until a period of public comment had expired. The majority, having acknowledged this concise and unambiguous language, circumvents its implications in arriving at its factually unsupported conclusion that the letter represented “final agency action” against the RRF’s duly issued construction permit, judicial review of which would lie, in the first instance, exclusively with this court.

Resolution of the jurisdictional issues joined in this appeal hinges on an interpretation of the EPA letter of May 20, 1986. The interpretation of the letter, in turn, rests on analyzing the subtleties of its composition.

It is noteworthy that the terms “revocation of PSD delegation” to the State of Michigan and “the revocation of the RRA permit” are not synonymous. The syntax of the letter addresses two separate and distinct mutually independent actions, neither of which were “final” within the meaning of section 307(b)(1).¹ As the panel majority recognizes, the May 20 letter informed appellees that “the PSD delegation is revoked with respect to the Detroit RRF until further notice,” thus allowing the EPA to exercise future control over the duly issued construction permit held by the GDRRA, which future control was not intended to be exercised, if at all, until the unspecified time at which a notice of the proposed revocation of RRF permit #468-65 had been published in the Federal Register.

The thrust of a second course of threatened action announced in the letter was the conduct of future EPA proceedings, as reflected in EPA’s “provisional determination” that it “intends to propose that this permit be revoked.” This course of action was, by its terms, non-final: “This provisional determination does not prejudice the U.S. EPA with respect to the final determination which will be made after public comments have been considered on the proposal to revoke the permit,” a permit that had already been issued to the GDRRA, symbolizing EPA’s approval of the project as designed, which approval was the RRF’s sine qua non, and which induced GDRRA to issue and market bonds to fund the project, execute construction contracts, undertake actual construction and otherwise materially alter its position.

The record and arguments reflect that the May 20, 1986 “provisional determination” had an explosive effect on the project. The letter immediately halted construction of the RRF, a half billion dollar project; undermined the economic viability of the funded financing of the development by raising the spectre of additional, significant costs on the project, including, but not limited to, the cost of redesigning the facility to accommodate the installation of acid scrubbers, which were intentionally excluded from the RRF’s original designs and specifications without EPA objection; virtually eliminated the primary and secondary markets for the half billion dollars of bonds issued to finance the construction; and occasioned an unscheduled and unforeseen regulatory delay that imposed upon the Greater Detroit Resource Recovery Authority (GDRRA) an eruption of unfunded interest obligations in an amount approximating $10,800,000, already accrued over the ninety day period² during which EPA had refused to take any action to resolve the impasse occasioned by the letter.

These consequences, coupled with the EPA’s continued refusal to withdraw its letter³ or, in the alternative, to issue a final appealable order or, at the very least, to commence formal agency action to provide the necessary forum for the appellants to exhaust their administrative challenges preliminary to perfecting a petition for judicial review in an appropriate circuit court pursuant to section 307(b)(1), left the appellants without any available and adequate remedy at law to purge the project of the cascading irreparable injury precipitated by the threatening letter of May 20, 1986, and forced appellants to resort to original actions for declaratory and injunctive relief.

After three months of futility in pursuing a final agency order to resolve the impasse, appellants commenced an original action in the United States District Court for the Eastern District of Michigan for declaratory and injunctive relief demanded by the public interest in salvaging the project from the irreparable injury resulting from the EPA’s calculated nonfea-sance.

The EPA conceded before the district court that it had no evidence of fraud or misrepresentation either by the MDNR in issuing Resource Permit #468-85 or by the GDRRA in applying for and initially acquiring the permit, or of any subsequent breach of the permit’s conditions. The EPA further admitted that it had no express statutory authority to revoke the permit, but argued that its authority could be inferred from the absence of an express statutory prohibition against such action. The trial court refused to indulge the EPA’s argument for implied “inherent” authority, and granted appellees’ motion for summary judgment and dismissed the EPA’s cross motion for similar relief. The trial judge, in a narrowly crafted opinion, noted that:

Congress provided a complex review procedure before a permit is granted. Congress also specifically regulated when and how the EPA could revoke a state’s delegated authority if it found that the state was not properly implementing its authority. Congress also provided means whereby the EPA could revoke or suspend a permit it had issued if a permittee violated any term or condition of the permit, or if a permittee misrepresented, inaccurately described, or failed to disclose any material fact in the permit application. 40 C.F.R. 22.13. However, revocation under this section is not permitted until a trial on the issues is concluded.

IT IS ORDERED that plaintiffs’ motion for summary judgment be granted and that defendants’ motion to dismiss or, in the alternative, for summary judgment, be denied.

IT IS FURTHER ORDERED that defendants are enjoined from any action or attempt to revoke this permit on the basis solely of any evidence now discovered and facts known as of this date. This order does not preclude the EPA, based on additional evidence previously not available, new information, and/or new legislation, from doing what is appropriate or required at that time.

The trial court’s tailored disposition immediately removed the cloud upon the construction and financing of the RRF and permitted development of the facility to go forward unhampered by costly delays, without impeding the EPA from properly initiating and timely pursuing future proceedings against either the MDNR to revoke its delegated PSD authority or against the GDRRA directly to revoke permit # 468-85 for causes within the parameters prescribed by existing congressional enabling legislation and associated regulations.

The EPA elected not to pursue an appeal and abandoned all efforts to proceed either against MDNR and its delegated PSD authority or against permit # 468-83.

This brief historical resume of the proceeding below affords a necessary backdrop for a disposition of the threshold jurisdictional issue confronting this appellate review and exposes the achilles heel of the panel majority’s reasoning in support of its resolutions. To conclude, as the panel majority does, after recognizing the distinction between revoking delegation of PSD authority to the State of Michigan MDNR and revoking permit # 468-83 issued to the GDRRA, that the letter “arguably constituted a final action,” is an unrealistic and obfuscatory interpretation of the document. The conflict in the panel majority’s reasoning is reflected in its opinion wherein it concedes that the letter, as it concerned the permit (as opposed to the permit delegation), did not constitute a final appeal-able order. See supra note 1.

When read in context, the letter (which was addressed only to the MDNR without a copy to the GDRRA) may have been arguably interpreted as notice to the State of Michigan MDNR of immediate revocation of future EPA delegated PSD authority. However, it would require convolution of any logical interpretation of the letter to characterize it as a final order directed to the GDRRA noticing it of an immediate revocation of its duly approved and issued construction permit, the conditions of which had admittedly not been breached. At best, as it applied to the RRF permit, the letter constituted a “provisional determination” that “USEPA ... intends to propose that this permit be revoked.” Even as applied to the delegation of permit authority, the EPA’s “decision” was non-final because the revocation was effective only “until further notice.” Consequently, by its terms the letter announced an intended future course of action that was non-final.

In sum, it was the overt refusal of the EPA, in the first instance, to issue a final order concerning the RRF permit and, in the second instance, to provide an administrative forum in which to resolve the questions broached by the May 20 letter — which forum, in turn, would have provided the platform for direct appeal to a circuit court pursuant to section 307(b)(1) of the Clean Air Act — that supported the original jurisdiction of the district court to entertain this action for declaratory and injunctive relief.

Because the May 20, 1986 letter did not, under any reasonable interpretation, constitute “final agency action,” district court jurisdiction over the original action for equitable relief was not barred by the otherwise exclusive jurisdictional scheme provided in section 307(b)(1), because that provision, by its terms, applies only to petitions for review from “final agency action[s] of the Administrator.”⁴

The majority and concurring opinions question the district court’s jurisdiction by suggesting that the appellees were in error for failing to exhaust their administrative remedies. The doctrine of exhaustion is of no relevance in this case, where the EPA refused to issue a final order, thereby denying appellants an adequate remedy at law by depriving them of a forum in which to arrive at a “final order,” the existence of which was a prerequisite to judicial review under section 307(b)(1). See GDRRA v. EPA, 677 F.Supp. 521, 526 (E.D.Mich.1987) (after issuing the May 20, 1986 letter, the EPA “did nothing” to resolve the dispute about the permit’s validity).

The doctrine of exhaustion of administrative remedies is intended to preclude judicial consideration of cases in which “the process of administrative decision-making is still at a stage where the intervention of judicial review will ‘disrupt the orderly process of adjudication.' ” Nat’l Automatic Laundry and Cleaning Council v. Shultz, 443 F.2d 689, 700-01 (D.C.Cir.1971) (quoting Port of Boston Marine Terminal Assoc. v. Rederiaktiebolaget Transatlantic, 400 U.S. 62, 71, 91 S.Ct. 203, 209, 27 L.Ed.2d 203 (1970)).

Exhaustion is generally required as a matter of preventing premature interference with agency processes, so that the agency may function efficiently and so that it may have an opportunity to correct its own errors, to afford the parties and the courts the benefit of its experience and expertise, and to compile a record which is adequate for judicial review.

Weinberger v. Salfi, 422 U.S. 749, 765, 95 S.Ct. 2457, 2467, 45 L.Ed.2d 522 (1975). Because the EPA intentionally refused to institute an “orderly process of adjudication” with respect to GDRRA’s facility, the doctrine of exhaustion has no bearing upon this case.

Moreover, the EPA letter of May 20, 1986 and its immediate volatile effects, coupled with EPA’s premeditated resolve not to implement orderly administrative procedures so as to afford appellees access to available adequate remedies at law, made this agency-induced controversy ripe for adjudication in the district court.⁵ Under the pronouncements of the Supreme Court in Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967), an administrative matter is “ripe” for adjudication in federal court if: 1) the issues joined are susceptible to judicial determination; and 2) the party seeking review would be subject to hardship in the absence of judicial intervention. Id. at 153, 87 S.Ct. at 1517. Both of the Abbott Laboratories criteria are fully satisfied in the case at bar because: 1) it was not beyond the competence of the district court to determine whether the EPA was statutorily justified in failing to take further action subsequent to issuance of the May 20, 1986 letter;⁶ and 2) in the absence of relief from the district court there was simply no legal recourse available to the appellees to protect the project and the public interest from suffering substantial financial and logistical injury in light of the EPA’s refusal to take action necessary to finalize its order.

In sum, in this case appellees were confronted with a quandary provoked by an EPA threat that devastated expectations in the construction and completion of a massive public works facility. The EPA “did nothing” to usher the situation into a posture of final resolution, but intentionally and irreparably injured the appellants and the public interests they served by refusing to issue a final order resolving the questions raised in the May 20, 1986 letter, thereby depriving appellants of an adequate remedy at law.

Accordingly, I respectfully dissent from the majority disposition that the district court did not have jurisdiction over the underlying litigation, and would further conclude that the district court’s finding of bad faith under the EAJA was not clearly erroneous, and that the award of attorneys’ fees therefore must be affirmed. See Bergman v. United States, 844 F.2d 353, 357 (6th Cir.1988) (award of fees under bad faith exception to American Rule reversible only if finding of bad faith is clearly erroneous).

1 . The panel majority appears to conclude that the letter announced a decision that was final, in part, and non-final, in part. With respect to the revocation of the MDNR’s delegated PSD authority, the majority finds that this was "arguably ... final action." With respect to revocation of the RRF's permit, the majority notes that [t]he letter ... conveyed the intent of the EPA to commence proceedings to investigate the revocation of the permit.... This action did not have the effect of revoking the permit or even of instituting proceedings necessary to revoke the permit. This portion of the letter did not constitute final agency action.

(emphasis added).

2 . Calculated at a conservative interest rate of 8.5% on a half billion dollar obligation.

3 . It is correct, as the majority relates, that virtually on the eve of trial — more than two months after the appellants commenced their action in the district court seeking injunctive relief from the disastrous effects of the May 20, 1986 letter, which avalanched as a result of the EPA’s adamant refusal to rescind the letter during the intervening four months — and not until appellants' probability of success in pursuing injunc-tive relief became apparent from damaging evidence produced under subpoena concerning the lack of a factual basis for challenging the validity of the permit, that the EPA withdrew its letter (in what appellees characterize as an attempt to moot the controversy), but rejected a proposed consent decree under which it would be foreclosed from initiating repetitious action calculated to evade review. The district court removed that contingency in its narrowly tailored disposition.

4 . Even if the letter could be read to constitute a final action of the EPA, the district court’s jurisdiction would have been proper under the exception created in Leedom v. Kyne, 358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958), an exception that the majority opinion (insofar as it posits that the letter comprehended a final action) erroneously concludes would not apply to the case at bar. Although the Leedom exception has always been construed as a narrow one, the facts of this case nevertheless fully justify its application. As in Leedom, id. at 190, 79 S.Ct. at 184, to deprive appellees in this case of recourse to the original jurisdiction of the district court "would mean 'a sacrifice or obliteration of a right which Congress’ ” had conferred upon them in the Administrative Procedures Act. See 5 U.S.C. § 555(b) (agencies required to conduct business and resolve matters before them "within a reasonable time”). Moreover, as in Leedom, the otherwise exclusive "review" provision of section 307(b)(1) presented no obstacle to district court jurisdiction because "this suit [was] not one to ‘review,’ in the sense that term as it is used in the [Clean Air] Act, a decision of the [EPA] made within its jurisdiction.” Leedom, 358 U.S. at 188, 79 S.Ct. at 184.

5 . The principle of exhaustion is closely correlated with the principle of "ripeness" in the administrative context. See Nat’l Automatic Laundry and Cleaning Council v. Shultz, 443 F.2d 689, 692 (D.C.Cir.1971) (prerequisites to judicial review of administrative actions — such as standing, ripeness and exhaustion — “are separable ... but ... are intermeshed in the overall determination of the appropriate occasion for judicial review").

6 . See New York State Ophthalmological Soc. v. Bowen, 854 F.2d 1379, 1386 (D.C.Cir.1988), cert. denied, - U.S. -, 109 S.Ct. 2448, 104 L.Ed.2d 1003 (1989) (“A controversy is ripe if further administrative process will not aid in the development of facts needed by the court to decide the question it is asked to consider.").