Supreme Court Rules Jurisdictional Determinations Are Immediately Reviewable Final Agency Action

In a decision issued on May 31, the Supreme Court ruled that jurisdictional determinations (JD) issued by the Army Corps of Engineers are considered final agency action immediately available for judicial review.  While not dealing with financial services, the Court’s ruling on the ability to challenge administrative decisions is a key ruling for all companies dealing with the zealous manner in which regulators today are pursuing their regulatory prerogatives.

In United States Army Corps of Engineers v. Hawkes Co., the plaintiffs sought immediate appeal of an Army Corps JD concluding that wetlands on their property were subject to regulation under the Clean Water Act. The government argued that the JD was not reviewable because it was not final agency action within the meaning of the Administrative Procedure Act (APA).

The Court ruled that the JD was final and, thus, reviewable. Following the two-pronged finality test in Bennett v. Spear, the court found that the JD: (1) marked the consummation of the agency’s decision-making process, and (2) was an action “by which rights or obligations have been determined, or from which legal consequences will flow.” The parties conceded—and the Court agreed—that the first prong was satisfied. The Court relied primarily on a Memorandum of Agreement (MOA) between the Corps and the Environmental Protection Agency to uphold the second prong. The MOA stated that “final determinations” made pursuant to the MOA “will be binding on the Government and represent the Government’s position in any subsequent Federal action or litigation concerning that final determination.” This provision establishes a liability limit for the five-year safe harbor period of a negative JD. Thus, an approved JD might deprive respondents of a five-year safe harbor from liability. The Court read this as a legal consequence sufficient to satisfy the second prong of the finality test.

To bolster its decision that the second prong was satisfied, the Court also briefly discussed the practical consequences of the JD. In effect, JDs warn property owners that if they do not obtain a permit to use their waters as they wish, they might incur significant penalties. In Frozen Food Express v. United States, an order was deemed final when it warned parties of significant penalties but did not regulate their conduct directly. By analogizing the case at bar to Frozen Food, the Court seemed to suggest that the type of warning contained in the JD might be enough to satisfy Bennett on its own.

The Court rejected the government’s argument that Congress did not intend to make judicial review available before the Corps’ ultimate permit decision, since the Clean Water Act does not mention JDs. The Court held that the Act’s silence regarding JDs bars inferences regarding legislative intent, especially in light of the presumption of reviewability. Further, the Court wrote that the mere fact that the agency was not required to provide JDs was insufficient to overcome the right to judicial review under the APA.

Last, the Court rejected the government’s argument that the plaintiffs must wait until the agency brings an enforcement proceeding against them before they may challenge the agency’s action. Citing Abbott Laboratories v. Gardner, the Court reaffirmed that “parties need not await enforcement proceedings before challenging final agency action where such proceedings carry the risk of serious criminal and civil penalties.”