Supreme Court Case Highlights Need for Regulatory Challenge Flag

The U.S. Supreme Court’s willingness to take the case of a family that was sanctioned for filling a wetland on its property could signal rising judicial concern about whether environmental agencies are overstepping their bounds, writes LeClairRyan attorney James A. Kosch in a Feb. 13 column published by CorporateComplianceInsights.com.

In the column (“Will Regulated Corporations Earn the Right to Throw a Red Challenge Flag?”), the veteran environmental attorney outlines how provisions of key regulations—including the Clean Water and Clean Air acts—have been interpreted to mean that regulated parties have no right to go to court and challenge expensive and difficult directions handed to them by the EPA or other agencies.

Kosch, a Newark-based shareholder in LeClairRyan’s Tort Defense Practice and a director of the New Jersey State Bar Association’s environmental law section, likens the situation to the National Football League back when coaches had no ability to throw a red flag and challenge close calls on the field. Today, regulated citizens and companies “must often undertake extremely expensive response actions that may make little or no economic, scientific or technical sense,” he writes. “The regulated party is further constrained into unwilling compliance because the same statutes provide for draconian civil penalties of $25,000 or more for each day [the regulated party] remains out of compliance.”

However, the U.S. Supreme Court recently heard oral arguments in the case of Sackett v. EPA, No. 10-1062, in which an Idaho couple decided that enough was enough and took their case all the way to the top. As Kosch explains, the Sacketts had planned to build a home on a half-acre parcel they owned. Prior to construction, they filled in what the EPA later claimed was a wetland. The EPA issued an administrative compliance order asserting that the Sacketts had violated the Clean Water Act. The couple was ordered to remove the fill material, restore the supposed wetland to its original condition and take other action or face penalties of nearly $40,000 a day.

While it will be months before the Court’s decision is reported, the case might well indicate a growing concern in the judiciary that the due process rights of the regulated community are under threat, even in matters as ordinary as the Sacketts’ project, Kosch writes. It might also signal a growing willingness of property owners and companies to assert their right to throw the red challenge flag at perceived regulatory excesses.

In football, the refs repeat a timeworn phrase each time they announce the results of a challenge: “Based on further review, the ruling on the field …” If the Sackett family does win, agencies will have more incentive to act reasonably and regulated entities might just gain the ability to mount a challenge. “After that scarlet challenge flag flies through the air,” Kosch writes in the conclusion to the piece, “a court might find that, ‘upon further review,’ regulators have been arbitrary and capricious.”

Read the full column at http://www.corporatecomplianceinsights.com/will-regulated-corporations-earn-the-right-to-throw-a-red-challenge-flag/