Hawkes Co. v. United States Army Corps of Engineers
Docket: Civil No. 13-107 ADM/TNL
Court: District Court, D. Minnesota; August 1, 2013; Federal District Court
On July 9, 2013, the U.S. District Court, presided over by Judge Ann D. Montgomery, addressed a motion to dismiss filed by the United States Army Corps of Engineers (the "Corps") in a case brought by Plaintiffs Hawkes Co., Inc. ("Hawkes"), Pierce Investment Co. ("Pierce"), and LPF Properties, LLC ("LPF"). The plaintiffs sought a declaratory judgment and injunctive relief against a jurisdictional determination made by the Corps under the Clean Water Act (CWA).
Pierce and LPF own a 530-acre parcel of land in Minnesota identified as a wetland due to the presence of peat. Hawkes intends to mine peat from this property for golf greens, having already initiated mining on adjacent land. The three companies are closely held and linked through family ownership, with Kevin Pierce serving as an officer in all.
The Corps has jurisdiction over "navigable waters," which include wetlands connected to such waters, as defined under the CWA and affirmed by the Supreme Court. The Corps can issue permits for discharges into these waters. Hawkes applied for a permit in December 2010 to mine peat, but following discussions with the Corps, it was indicated that the permitting process could be lengthy and costly.
In March 2011, the Corps provisionally determined that the property was connected to the Red River of the North, thus falling under CWA jurisdiction. The Corps required the plaintiffs to conduct assessments costing approximately $100,000 in connection with the permit application process. A preliminary jurisdictional determination issued by the Corps in November 2011 confirmed CWA jurisdiction over the property, which the plaintiffs contested, asserting no connection existed to "relatively permanent water."
Ultimately, the court granted the Corps' motion to dismiss the plaintiffs' action.
On February 7, 2012, the Corps issued an Approved Jurisdictional Determination (Approved JD), shifting from the "relatively permanent water" rationale to finding a "significant nexus" between the Property and the Red River of the North. This decision is the Corps' initial formal jurisdictional ruling and is subject to appeal to a Review Officer within the agency. On April 4, 2012, Plaintiffs appealed the Approved JD. On October 24, 2012, the Corps issued a decision on the appeal, rejecting several arguments from the Plaintiffs but acknowledging a failure to assess the Property's chemical, physical, and biological effects on the Red River, leading to a remand for further fact-finding. On December 31, 2012, the Corps issued a Revised Approved Jurisdictional Determination (Revised JD), reaffirming CWA jurisdiction and notifying Plaintiffs that it was the final jurisdictional decision, barring further appeals. Plaintiffs filed an action seeking review of the Revised JD on January 11, 2013.
In the legal discussion, it is noted that under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a motion to dismiss for failure to state a claim is considered by taking the nonmoving party's allegations as true and constraining the review to the pleadings. Furthermore, under the Administrative Procedure Act (APA), agency actions that are final and reviewable are subject to judicial review. For an agency action to be deemed "final," it must complete the agency's decision-making process and determine rights or obligations, leading to legal consequences. The parties agreed that judicial review via the permitting process is available per Corps regulations, but Plaintiffs contend that a jurisdictional determination itself constitutes a "final agency action."
Judicial review of jurisdictional determinations has not been recognized as a "final agency action" subject to immediate review by Eighth Circuit courts, a stance supported by several federal court decisions. For instance, the Ninth Circuit in Fairbanks N. Star Borough v. U.S. Army Corps of Eng'rs determined that while the first condition of the Bennett test was met—indicating the determination represented a culmination of the Corps' decision-making—the second condition was not satisfied because the determination did not change the parties' rights or obligations. The court reasoned that a jurisdictional determination merely states the agency's opinion without requiring compliance or defiance, and does not alter the legal or physical realities regarding the wetlands. Consequently, while it clarifies a party's position, it does not provide grounds for immediate judicial review. Importantly, the Ninth Circuit acknowledged that plaintiffs retain the ability to contest jurisdiction in appropriate contexts, such as during permit applications or enforcement actions, ensuring that they have other avenues for judicial remedy.
Plaintiffs assert that their jurisdictional determination meets the first Bennett condition for finality in the agency decision-making process, contrary to the Corps' position that such determinations are merely preliminary steps. The Corps contends that jurisdictional determinations should be seen as the starting point of the permit process, while Plaintiffs reference the Fairbanks case, which established that a jurisdictional determination signifies the culmination of the Corps' decision-making. The Plaintiffs emphasize that the Corps' regulations indicate jurisdictional determinations are final, irrespective of whether they choose to pursue a permit for their mining operation. They argue that the jurisdictional determination remains valid even if operations cease, and can only be altered by new information or a successful challenge in future permit applications. The Plaintiffs reject the Corps' view that the potential for revision renders the determination advisory, referencing the Ninth Circuit's stance that the possibility of new information does not imply a lack of finality. Additionally, Plaintiffs highlight that the Corps acknowledges jurisdictional determinations as "final agency action" under the Clean Water Act regulations, contradicting the Corps' assertion that such finality does not apply under the Administrative Procedure Act. Thus, the determination is regarded as a definitive decision, not merely an advisory opinion.
The Plaintiffs' Revised Jurisdictional Determination (JD) from the Corps does not define their rights or obligations, thus failing the second Bennett condition for final agency action. While Plaintiffs assert that the JD has practically limited their options regarding mining—either proceeding with potential liability, undergoing a costly permitting process, or abandoning their plans—the Corps contends that jurisdictional determinations merely delineate boundaries for future decisions without altering legal obligations. The Revised JD does not compel any action from the Plaintiffs and does not change the property’s classification as a wetland connected to navigable waters, nor does it modify existing legal standards under the Clean Water Act (CWA). Plaintiffs would still face the same fundamental decisions regardless of the JD.
Furthermore, Plaintiffs argue that the Supreme Court's ruling in Sackett v. EPA undermines prior cases like Fairbanks. In Sackett, the EPA issued a compliance order stating that the petitioners' property was under CWA jurisdiction, mandating them to restore the land and provide access for EPA inspections, thus establishing their legal obligations. The Court ruled that this compliance order marked the end of the EPA's decision-making and determined the petitioners' rights and obligations, distinguishing it from the Corps' JD as a final agency action subject to judicial review. The compliance order also complicated the petitioners’ ability to obtain a permit, supporting the argument that it had significant legal consequences.
Plaintiffs assert that the Revised Jurisdictional Determination (JD) qualifies as a "final agency action" akin to the compliance order in Sackett, advocating for an extension of Sackett's principles to all Clean Water Act (CWA) jurisdictional determinations. The Corps contends that prior case law correctly distinguishes between jurisdictional determinations and compliance orders, asserting that Sackett is inapplicable. While the jurisdictional determination meets the first Bennett condition, it diverges from the compliance order in Sackett regarding the second condition. The compliance order imposed significant obligations on the petitioners, including restoration of property and potential penalties of up to $75,000 per day for non-compliance. In contrast, the jurisdictional determination does not create such obligations or expose Plaintiffs to immediate liability. Plaintiffs argue that the risk of liability from mining without a permit indicates a material change in their legal obligations, similar to Sackett; however, the compliance order in Sackett initiated a clear liability timeline absent in this case. The jurisdictional determination does not restrict Plaintiffs' ability to pursue a permit, which they can do without facing disadvantages. Although the permit process may be costly and lengthy, it is considered a legitimate means for judicial review under the CWA. The law recognizes the administrative process's inherent challenges as part of the overall legal framework.
Judicial remedies were evaluated in light of the Bennett conditions and the adequacy of existing options for the petitioners seeking to alter wetlands under the Clean Water Act (CWA). Two primary methods for judicial review were identified: (1) proceeding with development without consulting the Corps or EPA, risking enforcement action and penalties, which the Sackett case deemed inadequate; and (2) applying for a Corps permit, which, if denied, allows for subsequent legal action. However, Sackett found this option insufficient due to an existing EPA compliance order. In contrast, the current plaintiffs have greater flexibility; they are not accumulating liability while awaiting proceedings and can initiate their own process to seek judicial review. Additionally, if they choose to mine without a permit and receive a compliance order, they may seek immediate judicial review based on Sackett's precedent. Thus, because the Revised JD does not meet the Bennett conditions and the plaintiffs have adequate court remedies, the determination is considered non-reviewable at this stage. The court concluded by granting the defendant's motion to dismiss and dismissing all claims in the amended complaint.
Jurisdiction under the Clean Water Act (CWA) requires a wetland to connect with a "traditionally navigable water." This connection's nature stems from the Supreme Court's decision in Rapanos v. United States, where a plurality opinion stated that such jurisdiction necessitates a connection via "relatively permanent, standing or continuously flowing bodies of water." Conversely, Justice Kennedy's concurring opinion posited that a "significant nexus" to navigable waters suffices for jurisdiction. The Eighth Circuit has affirmed that either standard can establish CWA jurisdiction. The Environmental Protection Agency (EPA) and the Army Corps of Engineers (Corps) have indicated their intent to apply both tests for jurisdiction. The regulatory framework, according to 33 C.F.R. § 331.12, maintains that administrative remedies are not exhausted until a final permit decision is made. The case of Belle clarified that jurisdictional determinations are not as binding as compliance orders, although Plaintiffs contest this interpretation, arguing that Sackett should apply. The EPA and Corps possess concurrent authority to enforce the CWA, with the EPA able to issue binding compliance orders enforceable through court actions. Historically, parties subject to compliance orders had no recourse until the EPA initiated civil enforcement. Both Sackett and Fairbanks recognize that a compliance order and a jurisdictional determination complete their decision-making processes. The potential for an agency to revise its decision does not affect the finality of an agency action. Plaintiffs expressed concern that proceeding without a permit after the Corps's jurisdiction determination could lead to harsher penalties or criminal liability, indicating bad faith. However, this risk does not alter the party's rights or obligations and is not deemed a legal consequence of the jurisdictional determination.
