Hawkes Co. v. United States Army Corps of Engineers

United States Court of Appeals
For the Eighth Circuit
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No. 13-3067
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Hawkes Co., Inc., et al.
lllllllllllllllllllll Plaintiffs - Appellants
v.
United States Army Corps of Engineers
lllllllllllllllllllll Defendant - Appellee
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American Farm Bureau Federation; National Association of Home Builders;
National Mining Association; American Petroleum Institute; Utility Water Act
Group; Foundation for Environmental and Economic Progress
lllllllllllllllllllllAmici on Behalf of Appellants
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: December 11, 2014
Filed: April 10, 2015
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Before LOKEN, BRIGHT, and KELLY, Circuit Judges.
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LOKEN, Circuit Judge.
Hawkes Co., Inc. (Hawkes), wishes to mine peat from wetland property owned
by two affiliated companies in northwestern Minnesota. The United States Army
Corps of Engineers derailed that plan when it issued an Approved Jurisdictional
Determination (“JD”) that the property constitutes “waters of the United States”
within the meaning of the Federal Water Pollution Control Act (the “Clean Water
Act” or “CWA”), and therefore appellants must have a permit to discharge dredged
or fill materials into these “navigable waters.” See 33 U.S.C. §§ 1344(a), 1362(7).
Appellants brought this action seeking judicial review of the JD and now appeal the
district court’s grant of the government’s motion to dismiss their Amended Complaint.
The district court concluded that an approved JD, though the consummation of the
Corps’ jurisdictional decisionmaking process, was not a “final agency action” within
the meaning of the Administrative Procedure Act, 5 U.S.C. § 704. While the appeal
was pending, a panel of the Fifth Circuit reached the same conclusion. Belle Co.,
LLC v. U.S. Army Corps of Eng’rs, 761 F.3d 383 (5th Cir. 2014), cert. denied, 83
U.S.L.W. 3291 (U.S. Mar. 23, 2015) (No. 14-493).
We conclude that both courts misapplied the Supreme Court’s decision in
Sackett v. EPA, 132 S. Ct. 1367 (2012). Therefore, we reverse.
I.
The CWA requires a permit from the Corps to discharge dredged or fill
materials into “navigable waters,” and a permit from the Environmental Protection
Agency (or an authorized state agency) to discharge any “pollutant” into navigable
waters. See 33 U.S.C. §§ 1311(a), 1342, 1344. The statute defines “navigable
waters” to mean “the waters of the United States,” § 1362(7). This broad definition
prompted the Corps and the EPA to make “sweeping assertions of jurisdiction” over
every stream, ditch, and drain that can be considered a tributary of, and every wetland
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that is adjacent to, traditional navigable waters. Rapanos v. United States, 547 U.S.
715, 726-727 (2006) (plurality opinion).
In United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 139 (1985),
the Supreme Court held that the Corps may require permits for the discharge of fill
material into wetlands adjacent to the “waters of the United States.” But in Solid
Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, 531 U.S.
159, 166 (2001), the Court rejected the Corps’ assertion of CWA jurisdiction over
“nonnavigable, isolated, intrastate waters” where migratory birds are present. And in
Rapanos, the Court concluded that the Corps’ asserted jurisdiction over “wetlands
based on adjacency to nonnavigable tributaries” went beyond its statutory authority.
547 U.S. at 782 (Kennedy, J., concurring in the judgment). Because the Court’s
plurality and Justice Kennedy adopted different narrower tests to determine when
wetlands are “waters of the United States,” we held “that the Corps has jurisdiction
over wetlands that satisfy either . . . test” in United States v. Bailey, 571 F.3d 791, 799
(8th Cir. 2009).
The CWA imposes heavy civil and criminal penalties on a person who
discharges into navigable waters without a required permit, or in violation of an issued
permit. See 33 U.S.C. § 1319; Rapanos, 547 U.S. at 721. When the Corps or the EPA
finds that a person is violating the CWA’s discharge restrictions, or a permit issued
under the CWA, the agency “shall issue an order requiring such person to comply,”
as in Sackett, or bring a civil enforcement action, as in Riverside Bayview Homes and
Rapanos. See 33 U.S.C. §§ 1319(a)(3) (EPA) and 1344(s) (Corps). In Sackett, the
EPA issued an administrative compliance order against a person for depositing fill
into jurisdictional wetlands without a permit, ordering, among other remedies, that the
site be restored. The EPA persuaded the lower courts the order was not subject to
“pre-enforcement judicial review.” Applying the test for determining a final agency
action in Bennett v. Spear, 520 U.S. 154, 177-78 (1997), a unanimous Court held that
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the compliance order was a final agency action subject to immediate judicial review
under the APA:
[I]t is hard for the Government to defend its claim that the issuance of
the compliance order was just “a step in the deliberative process” when
the agency rejected the Sacketts’ attempt to obtain a hearing and when
the next step will either be taken by the Sacketts (if they comply with the
order) or will involve judicial, not administrative, deliberation (if the
EPA brings an enforcement action). 132 S. Ct. at 1373.
The question in this case is whether the Court’s application of its flexible final
agency action standard in Sackett1 should also apply in this case, where appellants
seek judicial review of an adverse JD without either completing the CWA permit
process or risking substantial enforcement penalties by mining peat and discharging
dredged or fill materials without a permit. That question requires a close look at the
allegations in their Amended Complaint.
II.
In reviewing the district court’s Rule 12(b)(6) dismissal, we accept as true the
facts alleged in the Amended Complaint. Hawkes is in the business of mining and
processing peat, a “wetland dependant” activity regulated in Minnesota through
permits issued by the Minnesota Department of Natural Resources. Pierce Investment
Co. and LPF Properties, LLC, have property interests in a 530-acre parcel in
1
The Court has consistently taken a “pragmatic” and “flexible” approach to the
question of finality, and to the related question whether an agency action is ripe for
judicial review. See Abbott Labs. v. Gardner, 387 U.S. 136, 148-50 (1967); accord
Bell v. New Jersey, 461 U.S. 773, 779 (1983); Pac. Gas & Elec. Co. v. State Energy
Res. Conserv. & Dev. Comm’n, 461 U.S. 190, 200-201 (1983).
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northwestern Minnesota that contains high quality peat near Hawkes’s existing peat-
mining operations. All three companies are owned by members of the Pierce family.
After obtaining an option to purchase the property subject to regulatory
approval, Kevin Pierce and Hawkes met with Corps and MDNR representatives to
discuss Hawkes’s plan to expand its operations to include the property, which would
extend the life of its peat mining ten to fifteen years. In December 2010, Hawkes
applied to the Corps for a CWA permit. At a January 2011 meeting, Corps
representatives urged Pierce to abandon his plan, emphasizing the delays, cost, and
uncertain outcome of the permitting process. Pierce responded that he had an option
to purchase and intended to proceed. In March, the Corps sent a letter advising it had
made a “preliminary determination” the wetland is a regulated water of the United
States and, “at a minimum,” an environmental assessment would be required. At an
April meeting, a Corps representative told Pierce a permit would take years and the
process would be very costly. During a site visit in early June, another Corps
representative told a Hawkes employee that “he should start looking for another job.”
In August, the Corps sent Hawkes a letter advising that nine additional information
items costing more than $100,000 would be needed, including hydrological and
functional resource assessments and an evaluation of upstream potential impacts. In
November, Corps representatives met with the land owner and urged that he sell the
property to a “wetlands bank,” advising that an environmental impact statement would
likely be required, delaying the issuance of any permit for several years.
Appellants challenged the Corps’ preliminary determination. In November, the
Corps provided a “draft” JD concluding the property was connected by a “Relatively
Permanent Water” (a series of culverts and unnamed streams) that flowed into the
Middle River and then into the Red River of the North, a traditional navigable water
some 120 miles away. Appellants’ wetland consultant pointed out numerous errors
in the analysis. Nonetheless, in February 2012 the Corps issued an Approved JD
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concluding the property was a water of the United States because of its “significant
nexus” to the Red River. See 33 C.F.R. §§ 320.1(a)(6), 325.9. Appellants responded
by filing a timely administrative appeal. See 33 C.F.R. §§ 331.2, 331.3, 331.6.
In October 2012, the Corps’ Deputy Commanding General for Civil and
Emergency Operations sustained the appeal, concluding after detailed analysis that the
administrative record “does not support [the District’s] determination that the subject
property contains jurisdictional wetlands and waters,” and remanding to the District
“for reconsideration in light of this decision.” On December 31, 2012, the Corps
nonetheless issued a Revised JD concluding, without additional information, that there
is a significant nexus between the property and the Red River of the North, and
advising appellants that the Revised JD was a “final Corps permit decision in
accordance with 33 C.F.R. § 331.10,” which meant their administrative remedies were
exhausted. See 33 C.F.R. § 331.12.
Appellants then filed this action seeking judicial review of the Revised JD,
alleging that it does not meet either of the applicable tests for the assertion of CWA
jurisdiction established in Rapanos – the plurality’s “relatively permanent” test, or
Justice Kennedy’s “significant nexus” test. The Corps moved to dismiss the
complaint, arguing the Revised JD was not a final agency action and the issue was not
ripe for judicial review. The district court dismissed the complaint for lack of final
agency action. Hawkes Co., Inc. v. U.S. Army Corps of Eng’rs, 963 F. Supp. 2d 868,
871, 878 (D. Minn. 2013). This appeal followed.
III.
The APA provides for judicial review of a “final agency action for which there
is no other adequate remedy in a court.” 5 U.S.C. § 704. The APA “evinces
Congress’ intention and understanding that judicial review should be widely available
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to challenge the actions of federal administrative officials.” Califano v. Sanders, 430
U.S. 99, 104 (1977). When an agency action is final and, if final, appropriate for
judicial review are issues that have arisen in a variety of federal agency contexts in the
past one hundred years. See, e.g., Port of Bos. Marine Terminal Ass’n v.
Rederiaktiebolaget Transatl., 400 U.S. 62, 70-71 (1970); Rochester Tel. Corp. v.
United States, 307 U.S. 125, 132 n.11, 143-44 (1939). In Bennett, 520 U.S. at 177-78,
the Court synthesized its prior precedents on the first issue:
As a general matter, two conditions must be satisfied for agency action
to be “final”: First, the action must mark the consummation of the
agency’s decisionmaking process -- it must not be of a merely tentative
or interlocutory nature. And second, the action must be one by which
rights or obligations have been determined, or from which legal
consequences will flow.
A. Though the Corps argues otherwise, we agree with the district court (and
every court to consider the issue) that the Revised JD clearly meets the first Bennett
factor -- it was the consummation of the Corps’ decisionmaking process on the
threshold issue of the agency’s statutory authority. See Belle Co., 761 F.3d at 389-90;
Fairbanks N. Star Borough v. U.S. Army Corps of Eng’rs, 543 F.3d 586, 591-93 (9th
Cir. 2008). The regulations provide that an Approved JD “constitute[s] a Corps final
agency action.” 33 C.F.R. § 320.1(a)(6). The Corps’ Regulatory Guidance Letter No.
08-02, at 2, 5, described an Approved JD as a “definitive, official determination that
there are, or that there are not, jurisdictional ‘waters of the United States’ on a site,”
and stated that an Approved JD “can be relied upon by a landowner, permit applicant,
or other affected party . . . for five years” (quotation omitted). Jurisdictional
determinations and permitting decisions are discrete agency actions; a party may
obtain a JD without seeking a permit, and may obtain a permit without seeking an
Approved JD. Fairbanks, 543 F.3d at 593. Thus, when an Approved JD has issued,
“the process of administrative decisionmaking has reached a stage where judicial
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review will not disrupt the orderly process of adjudication.” Port of Bos., 400 U.S.
at 70-71; see Ohio Forestry Ass’n, Inc. v. Sierra Club, 523 U.S. 726, 733 (1998). The
possibility that the agency might informally reconsider its decision “does not suffice
to make an otherwise final agency action nonfinal.” Sackett, 132 S. Ct. at 1372(quotation omitted).
B. The district court concluded that the Approved JD does not satisfy Bennett’s
second factor because it is not an agency action “by which ‘rights or obligations have
been determined,’ or from which ‘legal consequences will flow.’” In Sackett, the EPA
compliance order required petitioners to restore property they had altered without a
permit and subjected them to the risk of $75,000 per day in penalties if they chose to
disobey. By contrast, the district court reasoned, appellants “face no such obligations
or changes in their rights as a result of their jurisdictional determination.” They “may
pursue a permit without a disadvantage.” 963 F. Supp. 2d at 876-77.
1. In our view, this analysis seriously understates the impact of the regulatory
action at issue by exaggerating the distinction between an agency order that compels
affirmative action, and an order that prohibits a party from taking otherwise lawful
action. Numerous Supreme Court precedents confirm that this is not a basis on which
to determine whether “rights or obligations have been determined” or that “legal
consequences will flow” from agency action.
-- In Bennett, the Court held that a Fish and Wildlife Service biological opinion
satisfied the second factor because it required the Bureau of Reclamation to comply
with its conditions and thereby had “direct and appreciable legal consequences.” 520
U.S. at 158, 178. Though not self-executing, the biological opinion was mandatory.
Likewise, here, the Revised JD requires appellants either to incur substantial
compliance costs (the permitting process), forego what they assert is lawful use of
their property, or risk substantial enforcement penalties.
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-- In Abbott Laboratories, the Court held that prescription drug labeling
regulations were a final agency action subject to pre-enforcement judicial review
because they “purport to give an authoritative interpretation of a statutory provision”
that puts drug companies in the dilemma of incurring massive compliance costs or
risking criminal and civil penalties for distributing “misbranded” drugs. 387 U.S. at
152-53.
-- In Frozen Food Express v. United States, 351 U.S. 40 (1956), plaintiff sought
judicial review of an Interstate Commerce Commission order declaring that certain
agricultural commodities were not exempt from regulations requiring carriers to
obtain a permit to transport. Id. at 41-42. As in this case, the order “would have
effect only if and when a particular action was brought against a particular carrier.”
Abbott Labs., 387 U.S. at 150. The Court nonetheless held the order reviewable
because the “determination by the Commission that a commodity is not an exempt
agricultural product has an immediate and practical impact”; it “warns every carrier,
who does not have authority from the Commission to transport those commodities,
that it does so at the risk of incurring criminal penalties.” Frozen Food Express, 351
U.S. at 43-44. Here, the Revised JD is a determination regarding a specific property
that has an even stronger coercive effect than the order deemed final in Frozen Food
Express, which was not directed at any particular carrier. In Port of Boston, 400 U.S.
at 70-71, the Court rejected as having “the hollow ring of another era” the contention
that an “order lacked finality because it had no independent effect on anyone,” citing
Frozen Food Express.
-- In Columbia Broadcasting System v. United States, 316 U.S. 407 (1942), the
Court held that FCC regulations barring the licensing of stations that enter into
network contracts, though not self-executing, were subject to immediate review. “It
is enough that, by setting the controlling standards for the Commission’s action, the
regulations purport to operate to alter and affect adversely appellant’s contractual
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rights and business relations with station owners whose application for licenses the
regulations will cause to be rejected.” Id. at 422. Here, the Revised JD alters and
adversely affects appellants’ right to use their property in conducting a lawful business
activity. The adverse effect is caused by agency action, not simply by the existence
of the CWA. Though the Revised JD is not-self-executing, “the APA provides for
judicial review of all final agency actions, not just those that impose a self-executing
sanction.” Sackett, 132 S. Ct. at 1373.
2. The Corps argues, and the district court further concluded, that the Revised
JD is not a final agency action “for which there is no other adequate [judicial]
remedy,” 5 U.S.C. § 704, because appellants have two other adequate ways to contest
the Corps’ jurisdictional determination in court -- complete the permit process and
appeal if a permit is denied, or commence peat mining without a permit and challenge
the agency’s authority if it issues a compliance order or commences a civil
enforcement action. These other CWA remedies were held not to preclude judicial
review of the EPA compliance order in Sackett, 132 S. Ct. at 1372.
In this case, the contention ignores the prohibitive cost of taking either of these
alternative actions to obtain judicial review of the Corps’ assertion of CWA
jurisdiction over the property. First, as a practical matter, the permitting option is
prohibitively expensive and futile. The Supreme Court reported in Rapanos, 547 U.S.
at 721, that the average applicant for an individual Corps permit “spends 788 days and
$271,596 in completing the process.” Moreover, the Amended Complaint alleged that
the Corps’ District representatives repeatedly made it clear to Kevin Pierce, to a
Hawkes employee, and to the landowner that a permit to mine peat would ultimately
be refused. In our view, this alone demonstrates that the second Bennett factor is
satisfied. Moreover, even if appellants eventually complete the permit process, seek
judicial review of the permit denial, and prevail, they can never recover the time and
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money lost in seeking a permit they were not legally obligated to obtain. Cf. Iowa
League of Cities v. EPA, 711 F.3d 844, 868 (8th Cir. 2013).
Second, appellants’ other option -- commencing to mine peat without a permit
and await an enforcement action -- is even more plainly an inadequate remedy.
Appellants “cannot initiate that process, and each day they wait for the agency to drop
the hammer, they accrue” huge additional potential liability. Sackett, 132 S. Ct. at
1372. Because appellants were forthright in undertaking to obtain a permit, choosing
now to ignore the Revised JD and commence peat mining without the permit it
requires would expose them to substantial criminal monetary penalties and even
imprisonment for a knowing CWA violation. Thus, like the compliance order at issue
in Sackett, the Revised JD increases the penalties appellants would risk if they chose
to begin mining without a permit. See 33 U.S.C. § 1319(c).
The prohibitive costs, risk, and delay of these alternatives to immediate judicial
review evidence a transparently obvious litigation strategy: by leaving appellants with
no immediate judicial review and no adequate alternative remedy, the Corps will
achieve the result its local officers desire, abandonment of the peat mining project,
without having to test whether its expansive assertion of jurisdiction -- rejected by one
of their own commanding officers on administrative appeal -- is consistent with the
Supreme Court’s limiting decision in Rapanos. For decades, the Corps has
“deliberately left vague” the “definitions used to make jurisdictional determinations,”
leaving its District offices free to treat as waters of the United States “adjacent
wetlands” that “are connected to the navigable water by flooding, on average, once
every 100 years,” or are simply “within 200 feet of a tributary.” Rapanos, 547 U.S.
at 727-28, quoting a GAO report. The Court’s decision in Sackett reflected concern
that failing to permit immediate judicial review of assertions of CWA jurisdiction
would leave regulated parties unable, as a practical matter, to challenge those
assertions. The Court concluded that was contrary to the APA’s presumption of
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judicial review. “[T]here is no reason to think that the Clean Water Act was uniquely
designed to enable the strong-arming of regulated parties into ‘voluntary compliance’
without the opportunity for judicial review -- even judicial review of the question
whether the regulated party is within the EPA’s jurisdiction.” 132 S. Ct. at 1374.
In our view, a properly pragmatic analysis of ripeness and final agency action
principles compels the conclusion that an Approved JD is subject to immediate
judicial review. The Corps’s assertion that the Revised JD is merely advisory and has
no more effect than an environmental consultant’s opinion ignores reality. “[I]n
reality it has a powerful coercive effect.” Bennett, 520 U.S. at 169. Absent immediate
judicial review, the impracticality of otherwise obtaining review, combined with “the
uncertain reach of the Clean Water Act and the draconian penalties imposed for the
sort of violations alleged in this case . . . leaves most property owners with little
practical alternative but to dance to the EPA’s [or to the Corps’] tune.” “In a nation
that values due process, not to mention private property, such treatment is
unthinkable.” Sackett, 132 S. Ct. at 1375 (Alito, J., concurring). We conclude that
an Approved JD is a final agency action and the issue is ripe for judicial review under
the APA.2
The judgment of the district court is reversed and the case is remanded for
further proceedings not inconsistent with this opinion.
2
The question of ripeness “turns on ‘the fitness of the issues for judicial
decision’ and ‘the hardship to the parties of withholding court consideration.’” Pac.
Gas & Elec. Co., 461 U.S. at 201, quoting Abbott Labs., 387 U.S. at 149. The issues
of ripeness and final agency action are distinct, but in this case, our analysis of the
final agency action factors in Bennett resolves the ripeness issue as well.
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KELLY, Circuit Judge, concurring.
I view whether a JD is reviewable under the APA as a close question. In
Sackett, the Supreme Court concluded that a compliance order issued by the EPA
“severely limits [petitioners’] ability to obtain a permit for their fill from the Army
Corps of Engineers [because] [t]he Corps’ regulations provide that, once the EPA has
issued a compliance order with respect to certain property, the Corps will not process
a permit application for that property unless doing so ‘is clearly appropriate.’” Sackett
v. EPA, 132 S. Ct. 1367, 1372 (2012) (internal citation omitted) (quoting 33 C.F.R.
§ 326.3(e)(1)(iv)).3 The record in the present case does not reveal that a similar
impediment to receiving a permit exists once a JD has been issued. In Sackett, the
Corps had a published policy regarding the decreased likelihood of receiving a permit;
here, the record includes case-specific facts, such as informal comments made by
Corps representatives, suggesting that a permit application made by Hawkes might be
“futile.” See Majority Opinion, supra, slip op. at 10. However, I question how much
weight should be given to the futility of the permit application for an individual
applicant, or the time and cost spent applying, in determining whether or not the JD
constitutes a final agency action. If a JD is a final agency action, an applicant who is
likely to obtain a permit would still be in a position to seek judicial review of the JD.
Similarly, it must be the case that were the Corps to take steps to make the permit
process both more efficient and less costly, the reviewability of the JD would not
change.
3
“No permit application will be accepted nor will the processing of an
application be continued when the district engineer is aware of enforcement litigation
that has been initiated by other Federal, state, or local regulatory agencies, unless he
determines that concurrent processing of an after-the-fact permit application is clearly
appropriate.” 33 C.F.R. § 326.3(e)(1)(iv)
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I also note other differences between the compliance order in Sackett and the
JD in the present case. A compliance order, once issued, begins the accumulation of
penalties (potentially doubled) for each day the landowner remains in violation. Id.A JD, however, has no such penalty scheme. Indeed, 33 U.S.C. § 1319(d), the CWA’s
enforcement section on civil penalties, makes no mention of JDs. While the existence
of a JD may affect a court’s assessment of a party’s “good faith” while determining
civil penalties, I agree with the other courts that have considered this issue that any
penalties resulting from a JD are far more “speculative” than those threatened in
Sackett. Belle Co., LLC v. U.S. Army Corps of Eng’rs, 761 F.3d 383, 392 (5th Cir.
2014); see also, Fairbanks N. Star Borough v. U.S. Army Corps of Eng’rs, 543 F.3d
586, 595 (9th Cir. 2008). The Appellants fail to point to a single case in which
increased civil penalties were levied against a party for ignoring a JD.
Despite these dissimilarities with the circumstances in Sackett, I agree that
Hawkes is left without acceptable options to challenge the JD, absent judicial review.
Hawkes’s choice is to either (1) follow through on their peat-mining plans until either
the EPA issues a compliance order or the Corps commences an enforcement action,
to both of which Hawkes could raise lack of CWA jurisdiction as a defense; or (2)
apply for a permit (on the grounds that no permit is required) and, if the application
is denied, appeal the denial in court. But what happens if Hawkes is, after all, granted
a permit yet maintains it never needed one in the first place? It must decline the
permit and challenge the original jurisdiction in court. This roundabout process does
not seem to be an “adequate remedy” to the alternative of simply allowing Hawkes to
bring the jurisdictional challenge in the first instance and to have an opportunity to
show the CWA does not apply to its land at all.
In my view, the Court in Sackett was concerned with just how difficult and
confusing it can be for a landowner to predict whether or not his or her land falls
within CWA jurisdiction—a threshold determination that puts the administrative
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process in motion. This is a unique aspect of the CWA; most laws do not require the
hiring of expert consultants to determine if they even apply to you or your property.
This jurisdictional determination was precisely what the Court deemed reviewable in
Sackett. See Sackett, 132 S. Ct. at 1374–75 (Ginsburg, J., concurring). Accordingly,
I concur in the judgment of the court.
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