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Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

Monday Morning Regulatory Review – 5/18/15: Snakes in the Interior; Traditional Waters of the United States; Retirement Account Fiduciary Standards; & Upcoming Discussions of Interest

Posted in Agency Authority, Judicial Review & Remedies, Regulatory Process

dawn over the capitol aocA most interesting opinion from the United States District Court for the District of Columbia preliminarily enjoined the Department of the Interior (DOI) from enforcing regulations that prohibited the interstate transportation of two species of reptiles found to be “injurious” under the Lacey Act. United States Court of Appeals for the District of Columbia Circuit last week ended one of the long-running preliminaries to the hotly contested definition of waters of the United States on a less dramatic issue of standing. The Department of Labor (DOL) indicated that it will extend the public comment period on its controversial proposed rule to impose fiduciary requirements on retirement account advisors. And finally, several near-term discussions focusing on recurrent and important regulatory issues warrant consideration.

Snakes in the Interior: The district court, in United States Association of Reptile Keepers v. Jewell, preliminarily enjoined DOI’s prohibition of interstate transportation in 2012 and 2015 final rules of the reticulated python and green anaconda because

  1. plaintiffs were likely to succeed on the merits (albeit close) in establishing that the Lacey Act only prohibits “importation” of such species into the United States and certain distinct jurisdictions within the United States, not more broadly interstate commerce;
  2. plaintiffs showed irreparable harm, economic harm to the point of bankruptcy; and
  3. the balance of equities and the public interest, which merge in cases where the relief is sought against the United States, show significantly greater potential harm to the government, but would likely favor plaintiffs if shipments of the specific snakes were not permitted to Florida or Texas (and Hawaii, which was specifically listed in the Lacey Act), where DOI had shown that introduction of the snakes would likely establish wild invasive populations.

The ultimate balancing favored plaintiffs, but the requirement that injunctive relief be narrowly tailored to remedy the specific harm required further briefing. The court thus ordered the parties to submit briefs by last Friday on whether the court should exclude transportation of reticulated pythons and green anacondas into Florida and Texas from its preliminary injunction, and whether a stay of the preliminary injunction is appropriate pending relief on appeal; the court will hold another hearing this morning on these issues.

The case is distinct and narrow, perhaps a “one off,” but has potentially great practical consequences. The decision is worth reading for the detailed structural analysis of the preliminary injunction and statutory interpretation issues addressed.

► Some critical points:

  • The court spends considerable effort on the Chevron Step 1 process of applying the traditional canons of statutory interpretation, legislative history, and the “hazardous basis” for inferring Congressional intent from the actions of a subsequent Congress through ratification or implied amendment. Interestingly, DOI drafted the relevant Lacey Act amendment and DOI’s witness before Congress described it as a limited expansion that did not include full interstate commerce coverage – a position diametrically opposite to their current regulatory and litigating position.
  • The Lacey Act is a criminal statue (codified in the Criminal Code) with a specific regulatory authorization. Substantial doubt exists whether Chevron deference applies to any such agency interpretation of a criminal statute – and this particular statute allows for regulations that (like many others) may provide no more than a subject inclusion within the criminal proscription, not an interpretation of the proscription itself.
  • The preliminary injunction is preliminary – the court recognized the difficulty of fashioning a properly limited remedy without further briefing and ordered that briefing. Another order, at least, will be forthcoming, possibly this week.

Traditional Waters of the United States: The D.C. Circuit last week ended one of the long-running preliminaries to the hotly contested definition of waters of the United States in dismissing National Association of Home Builders v. EPA. The Court of Appeals addressed the basic controversy in this case of whether the Environmental Protection Agency (EPA) and specifically the Army Corps of Engineers 2008 traditional navigability determination cognizably harmed them by making it more likely that they will need Clean Water Act (CWA) permits to discharge effluents on their land in a previous decision, dismissing that case for want of constitutional standing. In the instant case, the court held that the Association’s case for standing, although since supplemented with new declarations from members adding factual detail to their assertions of injury, is materially unchanged and thus precluded by the previous decision.

A concurrence by two judges of the panel begs the issue of rehearing en banc, noting that the court’s prior holding, which remains binding, concluded that appellants did not have standing unless and until their members were a target of an enforcement action (charging illegal discharge) or the agency issued an “approved jurisdictional determination.” The concurrence took the view that the first decision was incorrectly decided and is “quite at odds with our jurisprudence. To put it bluntly, it sticks out like a sore thumb.”   Rehearing en banc will likely be the subject of a motion and significant internal discussion.

Turning to the substance, which the court did not, the traditional navigability determination – wide enough, deep enough, and with sufficient flow as to be traditionally navigable – is a separate basis for agency jurisdiction. The more volatile preliminary jurisdictional determination reflects the agency’s judgment about whether and to what extent a property contains jurisdictional waters, and hence is or is not subject to regulatory jurisdiction under the CWA. An approved jurisdictional determination is a considered statement of the agency’s view of and announces the agency’s official determination whether or not the parcel contains either traditional navigable waters, or features with a significant nexus to traditional navigable waters. The jurisdictional issue writ large nonetheless is well described by the panel:

Precisely which watery – or even intermittently wet – landscape features count as the “waters of the United States” for purposes of [CWA] jurisdiction is not always immediately obvious. The variability of natural geography, and the myriad ways that water runs, washes, trickles, seeps, or gushes, complicate the task of giving specificity to “waters of the United States” under the [CWA]. Landowners like Home Builders’ members may often be uncertain whether to undertake the cost and inconvenience of seeking a [CWA] permit or whether, conversely, they might safely dredge, fill, and discharge without one. A bright-line rule certainly would make things clearer for landowners like Home Builders, but the Act contains no such rule.

The contemporary regulatory issue of creating that “bright line” rule could affect all landowners and litigation will proceed nonetheless.

► The panel notes the existence of the intercircuit conflict over whether landowners may seek immediate judicial review of an approved jurisdictional determination, other than within a challenge to a compliance order, permit denial, or other action applying that determination. The panel notes that the Fifth Circuit and Ninth Circuit have determined that the approved jurisdictional determination is not judicially reviewable, while the Eighth Circuit has, by contrast, recently held that an approved jurisdictional determination, even without more, is subject to immediate judicial review. The panel expressed no view on the issue, but that issue is rather unavoidable, either in the scoping and procedures of the final rules currently under executive and interagency review by the Office of Management and Budget, or upon review by the United States Supreme Court (SCOTUS), or both.

Retirement Account Fiduciary Standards: Responding to numerous requests – including significant pressure from both sides of the aisle in Congress – DOL has advised that it will extend the 75-day public comment period on the Definition of the Term “Fiduciary”; Conflict of Interest Rule – Retirement Investment Advice proposed rule by an additional 15 days (not the requested 45 days), but that understates the total time for public input. DOL has scheduled public hearings. The proposed rule and its multiple addenda would change the scope of retirement advisor’s duties from a suitability standard to the much higher fiduciary standard, and alter the conflict of interest limitations on outside fees.

Numerous reports suggest that the notice to be published in the Federal Register will indicate that DOL will hold public hearings during the week of Aug. 10, and will accept responsive comments thereafter – the exact contours await a formal filing. The total public comment period, including public hearings and post-hearing responsive comments (perhaps narrowing the population as it progresses) could total 140 days.

DOL announced with the proposed rule its plan to hold a hearing within 30 days of the close of the original comment period, and consistent with its prior (now withdrawn) proposed rule, DOL announced its intention to reopen the comment period following the hearing and publication of the hearing transcript.

► The notice of extension of the public comment period and its details have not been published in the Federal Register or filed for public inspection as of this date and, therefore, could change. The critical aspect of the extension will be how DOL structures the initial comments, hearing, and post-hearing comment process – some agencies have developed refined systems for narrowing issues while others may narrow participants. Given the broad impact of the rule – which some have already argued could impose greater costs on retirement plans and plan participants – DOL should continue an open, non-exhaustion comment system because an initial comment may illuminate late in the process new issues that could not be easily anticipated by other interested parties and issue exhaustion might be counterproductive.

Upcoming Discussions of Interest: Two upcoming events deserve attention.

Tomorrow, the Washington Legal Foundation (WLF) will host a panel discussion on the recurring topic of Science and Federal Regulation: Is the Office of Management and Budget an Effective Gatekeeper? The dynamic between scientific research and other policy inputs, particularly in the realm of executive and interagency review before the OMB increasingly pervades the regulatory process and this discussion may be lively.

The Administrative Conference of the United States (ACUS) last week published its plenary meeting agenda in the Federal Register. The ACUS plenary session to be held on June 4, 2015, will focus on two sets of recommendations that deserve reading:

Issue Exhaustion in Preenforcement Judicial Review of Administrative Rulemaking, and an accompanying report; and

Promoting Accuracy and Transparency in the Unified Agenda, and an accompanying report.