EPA Announces New Policy Regarding "Sue and Settle"

Administrator Scott Pruitt announced a significant shift in EPA policy last week, making clear with his “Directive Promoting Transparency and Public Participation in Consent Decrees and Settlement Agreements” that the agency is no longer amenable to setting enforceable deadlines for EPA action through the settlement process or committing to undertake discretionary actions that are not required by statute. “Sue and Settle,” as the practice has pejoratively come to be known, occurs when a third-party sues EPA over the agency’s purported failure to issue a regulation by the date required in the underlying statute or in a manner consistent with law. Traditionally, EPA and the third-party could negotiate a settlement that requires the agency to issue a new regulation or alter an existing rule. (Longstanding Department of Justice policy prohibits EPA and other agencies from agreeing in a settlement or consent decree to a specific rulemaking outcome.)

Administrator Pruitt released a memorandum criticizing “sue and settle” and explaining the shift in policy. According to memorandum, the settlement process too often excludes the views of relevant stakeholders who may be impacted by resolution of the case, and EPA has used the settlement process as an end-run around the Administrative Procedure Act’s procedural safeguards. To that end, Administrator Pruitt’s directive lists the following procedures the agency must now follow in negotiating settlements:

1. EPA will post online any notice of intent to sue EPA within fifteen days of receipt from the potential litigant.
2. EPA will publish any complaint or petition for review of a rule in which the agency is a defendant within fifteen days of receiving service.
3. EPA will notify any state or regulated entity that may be impacted by a lawsuit within fifteen days of receiving service of the complaint or petition for review. The agency will also work to engage the affected state and/or regulated entity in the settlement process and will seek their concurrence prior to entering a settlement agreement.
4. EPA will publish a searchable, categorized list of the consent decrees and settlement agreements the agency continues to abide by within thirty days of issuance of the Directive, and the agency will continue to update the list regularly.
5. EPA is not permitted to enter into a consent decree with terms that the court would have lacked the legal authority to impose, nor may the agency enter into any consent decree or settlement agreement that turns a discretionary obligation of the agency into a mandatory duty.
6. EPA shall seek to exclude the payment of attorney’s fees and settlement costs to any petitioner or plaintiff who settles with EPA.
7. If EPA enters into a settlement agreement or consent decree pursuant to which there is a deadline by which EPA must issue a final rule, the settlement must provide sufficient time for the agency to: (1) modify its proposed rule if necessary and undergo interagency review; (2) provide adequate notice and comment on the proposal; and (3) conduct meaningful consideration of comments on the proposal.
8. EPA will post online, for review and comment by the public, all proposed consent decrees lodged in federal court and settlement agreements resolving all claims against the agency.

The import of the Directive remains unclear. Many statutes, such as the Clean Air Act, impose non-discretionary deadlines by which EPA must issue regulations and vest citizens with the ability to bring lawsuits to enforce those obligations. The Directive does not curtail the ability of citizens to bring suit but merely imposes additional procedural hurdles EPA must satisfy prior to settling such a lawsuit. Since 1986, a memorandum issued by then-Attorney General Edwin Meese has generally prohibited federal agencies from entering settlements or consent decrees that a court would lack authority to impose or that would turn discretionary duties into mandatory duties; in that respect, the new Directive seems duplicative. Equally unclear is what defense EPA will assert in litigation where it has failed to comply with a clear statutory mandate. Thus, other than lengthening the settlement process, in practice, the Directive may mostly be an indication that Administrator Pruitt’s EPA will be less inclined than previous administrations to settle litigation regarding EPA’s failure to meet statutory deadlines or comply with other statutory mandates.

Arguably the most notable shift in policy is EPA’s position that it will seek to exclude the payment of the attorney’s fees and costs of settling plaintiffs. Many environmental statutes permit courts to award attorney’s fees and costs to a prevailing or substantially prevailing party when “appropriate,” which courts have often interpreted to include parties who achieve the aims of their lawsuit through settlement. EPA appears ready to fight this general policy, which means we can expect EPA and plaintiffs to tangle more frequently over attorney’s fees in the years ahead.

EPA’s new policy provides an opportunity for regulated entities to participate in the settlement process. Although EPA has promised to contact entities that may be affected by proposed settlements, it is important for companies and industry groups to track pending lawsuits and ensure they participate in the deliberative process.