Reply Brief — Costle v. Pacific Legal Foundation

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No. 78-1472

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Iu the Supreme Court of the United States

OCTOBER TERM, 1978

DouGLas M. CosTLE, ADMINISTRATOR,

ENVIRONMENTAL PROTECTION AGENCY,

PETITIONER

Vv.

PACIFIC LEGAL FOUNDATION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

REPLY MEMORANDUM FOR PETITIONER

WADE H. MCCREE, JR.

Solicitor General

Department of Justice

Washington, D.C. 20530

INDEX

CITATIONS

Cases: Page

Denver Union Stock Yard Co. v. Produc-

ers Livestock Marketing Ass’n, 356 U.S.

EER: __... ie

FPC v. Texaco, Inc., 377 U.S. 38 .-.............

National Independent Coal Operators’ As-

sociation v. Kleppe, 423 U.S. 388 .......... 4

Pacific Legal Foundation v. Quarles, 440

F. Supp. 316, appeal pending, No. 77-

A) Ec 7

United States v. Storer Broadcasting Co.,

a veniccncncaunansssntience 4

—

Statutes and regulations:

Administrative Procedure Act; 5 U.S.C.

551 et seq.:

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8”:

Federal Clean Water Act, Section 402 (a)

(1), 83 U.S.C. 1842(a) (1) -...22.222.2...

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Statutes and regulations—Continued

40 C.F.R. 125.86 (¢) (1) (ii) seoseesecsoeeeeone-

AO C.F.R. 125.36 (¢) (2) -.-ccus-secvessesseeee-ooe-

40 C.F.R. 125.36(m)

Pa

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Iu the Supreme Court of the United States

OCTOBER TERM, 1978

No. 78-1472

DouGLAS M. COSTLE, ADMINISTRATOR,

ENVIRONMENTAL PROTECTION AGENCY,

PETITIONER

v.

PACIFIC LEGAL FOUNDATION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

REPLY MEMORANDUM FOR PETITIONER

1. The essence of this case is that the Environ-

mental Protection Agency issued regulations stating

the conditions under which it would hold an APA-

type adjudicatory hearing before issuing, denying,

modifying, or revoking a National Pollutant Dis-

charge Elimination System permit. Respondent Kil-

(1)

2

roy requested an “adjudicatory hearing” but failed

to satisfy a prerequisite for such a hearing under

the regulations—he did not identify any material

issue of fact as to which an evidentiary hearing was

appropriate. EPA, therefore, did not hold such a

hearing. Notwithstanding Kilroy’s failure to satisfy

this administrative requirement, the court of appeals

held that Kilroy was denied an “opportunity for pub-

lic hearing” within the meaning of Section 402(a)

(1) of the Federal Clean Water Act, 33 U.S.C. 1842

(a)(1). The court held that EPA must routinely

hold adjudicatory hearings when NPDES permits are

issued, denied, revoked or modified—even in the ab-

sence of a request for a hearing—except when such

hearings would be “futile,” and that EPA may not

limit adjudicatory hearings to those circumstances

defined in its regulations.

The issue presented in this case, therefore, is

whether EPA’s regulations (40 C.F.R. Part 125)

provide a sufficient “opportunity for public hearing”

within the meaning of Section 402(a) (1) of the Act,

33 U.S.C. 1342(a) (1). As set forth in more detail

in our petition (at pages 3-4), those regulations pro-

vide for three types of “hearings”: (1) a “legislative-

type” hearing at which interested persons may sub-

mit information and comments to the agency, 40

C.F.R. 125.34; (2) an “adjudicatory” hearing for the

trial-type determination of “material issues of fact

relevant to the questions of whether a permit should

be issued, denied or modified,” 40 C.F.R. 125.36(b),

(c); and (3) a procedure for the submission to and

3

determination by the agency of any issue of law con-

cerning the issuance, revocation, denial or modifica-

tion of permits. 40 C.F.R. 125.36(m).

Each type of hearing has its own prerequisites. A

legislative-type hearing is required only when the re-

gional administrator finds that there is enough public

interest in the proposed action, after public notice,

to warrant such a hearing, 40 C.F.R. 125.34. An

adjudicatory hearing is required only if an interested

party presents a request for an adjudicatory hearing

which states with particularity the reasons for the

request and the factual issues to be considered (40

C.F.R. 125.36(b) (1), (b)(2)), and the regional ad-

ministrator determines that the request “[s]ets forth

material issues of fact relevant to the questions of

whether a permit should be issued, denied or modi-

fied.” 40 C.F.R. 125.386(c) (1) (ii). Determinations

of issues of law are made only upon request by an

interested party who sets forth the legal ground for

objection to the agency actions. 40 C.F.R. 125.36

(m).

In the present case, the agency determined, after

public notice, that a legislative-type hearing was not

warranted. The agency held no adjudicatory hearing

because no one tendered a request presenting mate-

rial issues of fact. Kilroy filed a “request for an

adjudicatory hearing” but the only two issues raised

were questions of law, not of fact. The agency con-

sidered the issues and resolved them on the merits

against Kilroy. The court of appeals did not disturb

EPA’s decision not to hold a legislative-type hearing.

4

Neither did it question EPA’s resolution of the issues

of law tendered by Kilroy.

This holding, as explained in our petition (at pages

13 to 16), conflicts with National Independent Coal

Operators’ Association v. Kleppe, 423 U.S. 388, 397-

398 (1976). There, the Court held that a statutory

“opportunity for hearing” does not require an “auto-

matic” hearing. The hearing may be keyed to a

request. The Court has also held that an agency may

establish reasonable prerequisites for granting a

hearing and “barring at the threshold those who [do

not] measure up to them.” FPC v. Texaco, Inc., 377

U.S. 38, 39 (1964); Denver Union Stock Yard Co.

v. Producers Livestock Marketing Ass’n, 356 U.S.

282, 287 (1958); United States v. Storer Broadcast-

ing Co., 351 U.S. 192 (1956). The requirement that

parties file requests setting forth material factual

issues is a reasonable prerequisite to granting an

adjudicatory hearing. A rule mandating routine ad-

judicatory hearings, as we have explained, would im-

pose an undue burden on the agency (Pet. 16-17).

2. Respondents Kilroy and Pacific Legal Founda-

tion (PLF) contend that certiorari should be denied

for several reasons, which deserve reply. They con-

tend (PLF Br. 6-7)* that EPA failed to provide them

with adequate notice of the proposed extension. They

assert that “Kilroy did not see the notice published

1“PLF Br.” refers to the brief in opposition filed by PLF

and Kilroy.

5

in the Los Angeles Times” and “neither PLF nor

Kilroy received actual notice of the proposed action.” *

The adequacy of the newspaper notice, however, is

not presented by the circumstances of this case. That

issue would arise only if the court of appeals had re-

manded for a legislative-type hearing on the theory

that the public had not been given sufficient warning

of EPA’s proposed extension of the permit. Respond-

ents had sufficient notice to make a request for an

adjudicatory hearing and they in fact did so, although

the request was limited to legal issues. That the re-

quest was made and that EPA considered it on its

merits eliminate any issue concerning the sufficiency

of the notice for purposes of this case.*

3. Respondents also contend (PLF Br. 8-9) that

Kilroy’s request posed more than issues of law and

also presented the factual issue whether the “ ‘record

developed’ ” was inadequate to issue the permit. Aside

from the fact that respondents do not, even now,

identify specific factual deficiencies in the record, it

is all too plain that the request raised only two issues

of law. Kilroy’s original request tendered two “is-

sues to be raised.” One of these concerned whether

2 Respondents carefully avoid stating that PLF did not see

the newspaper notice. We assume for purposes of argument

only that PLF did not see the newspaper notice.

3 For the same reason, it is immaterial that respondents

had “to file a Freedom of Information Act request” to deter-

mine the status of the extension proceedings (PLF Br. 6).

Whatever information respondents lacked was cured by the

time the request for an adjudicatory hearing was made.

6

it was proper to extend the permit while an environ-

mental impact statement was in preparation for

EPA’s decision to fund the interim sludge project

(Pet. App. 26a). This is a legal matter.

The other issue was phrased as ‘whether the pro-

cedures used and the record developed were adequate

[for the] issuance of an NPDES permit.” This, how-

ever, was but a restatement of respondent’s conten-

tion that the action taken was an “issuance” rather

than an “extension” of a permit.* Any doubt on this

score was eliminated when Kilroy, represented by

PLF, restated the two issues that he desired to raise

(Pet. App. 3la-32a) :

Requestor of the adjudicatory hearing, John B.

Kilroy, proposed to raise two basic issues:

1. Whether there is authority under either the

applicable statutes or regulations to extend the

expiration date of an existing National Pollutant

Discharge Elimination System (NPDES) per-

mit, or whether the action taken by EPA with

regard to Permit No. CA0109991 was the is-

suance of a new permit; and

2. Whether EP“ should require that a per-

mittee go forward with a project contained in

an NPDES compliance schedule when that proj-

ect is being studied in an environmental impact

*The request also stated that a “reason for the request”

was because “the procedures for issuance of an NPDES per-

mit pursuant to 40 CFR Section 125.2 et seq. were not fol-

lowed, there are no provisions in the regulations for the ex-

tension of the expiration of an NPDES permit” (Pet. App.

26a; emphasis added).

7

statement (EIS) pursuant to the requirements

of the National Environmental Policy Act

(NEPA), 42 U.S.C. §§ 4832 et seqg., and Federal

Water Pollution Control Act (FWPCA), 33

U.S.C. 1281, et seq.

Neither of these issues poses any factual question.

Under these circumstances, the regional administra-

tor properly determined that the request raised only

legal issues.°

4. For similar reasons, respondents’ attempt to

distinguish Kleppe (PLF Br. 4) is unconvincing.

First, respondents note that in Kleppe, the coal op-

erators had actual notice from the agency of the pro-

posed assessment, whereas EPA used “constructive

5In a related attempt to excuse their failure to raise ma-

terial issues of fact, respondents argue (PLF Br. 8-9) that

“EPA was well aware that PLF and Kilroy had substantial

concerns about the environmental impact of the actions re-

quired in the permit” because in another lawsuit EPA had

agreed that it and the City of Los Angeles would prepare an

environmental impact statement concerning EPA’s decision

to fund the Hyperion Interim Sludge Project. Any such gen-

eral “awareness,” however, is no substitute for a specific re-

quest by respondents identifying concrete factual issues that

deserve resolution, as required by 40 C.F.R. 125.36(b) (2).

EPA was not required to speculate concerning whether re-

spondents desired to have unspecified factual issues resolved

as well as the legal issues they tendered. To the contrary,

EPA was justified in concluding that the respondents’ con-

tentions in related litigation were adequately reflected in the

legal issue, posed by Kilroy in this request, whether the on-

going preparation of the EIS required a postponement of any

decision to extend the permit. See Pacific Legal Foundation

v. Quarles, 440 F. Supp. 316 (C.D. Cal. 1977), appeal pending,

No. 77-3844 (9th Cir.) (treating dispute between PLF and

agency as one of law).

8

notice” in the form of a newspaper advertisement.

As explained above, however, this difference is wholly

immaterial since Kilroy had sufficient actual notice

to file “a request for an adjudicatory hearing” and

EPA determined the issues raised on the merits. Any

deficiencies in the newspaper notice cannot excuse

respondents’ failure to include factual issues among

the issues raised in the request.

Second, they contend (PLF Br. 4) that Kleppe is

different because, there, the regulations expressly pro-

vided that the failure to request a hearing would con-

stitute a waiver of the hearing, whereas EPA’s regu-

lations do not contain a similar provision. This dis-

tinction vanishes upon even a casual reading of EPA’s

regulations which provide that “if the itegional Ad-

ministrator determines that the request fails to meet

the requirements of [the provisions which require

material issues of fact to be specifically identified]

he shall deny the request” (emphasis added). 40

C.F.R. 125.36(c) (2).

Third, respondents contend (PLF Br. 4) that the

coal operators in Kleppe failed to file a timely request,

whereas Kilroy did but the request was “denied”

anyway. EPA, however, denied Kilroy’s request on

the merits—by ruling against his legal objections.

EPA did not deny the request for untimeliness.

Fourth, in a similar vein, respondents argue (id.

at 4-5) that no request at all was filed in -Kleppe,

whereas respondent Kilroy did make a request in

this case but it was “denied.” EPA’s “denial” of an

evidentiary hearing, however, was due wholly to Kil-

roy’s failure to specify a material issue of fact, as

9

required by the regulations. In sum, Kleppe holds

that a statutory opportunity for a hearing may be

keyed to request. There is no reason to adopt a dif-

ferent rule under Section 402 (a) (1).

5. Respondents argue (PLF Br. 10-11) that we

have exaggerated the burden of the court of appeals’

decision. Respondents concede, as they must, how-

ever, that the “effect of the decision of the court of:

appeals is to require that EPA support a refusal to

provide an adjudicatory hearing with a record which

demonstrates ‘that the material facts supporting the

decision are not subject to dispute’” (id. at 10-11).

This is severe encugh, fox it permits any interested

party to do nothing more than make a bare request

for an adjudicatory hearing without specifying the

material issues of fact which require resolution; if

the bare request is denied, the agency must show on

judicial review that no genuine dispute exists over

any fact that “supports” the decision.

But the court’s opinion goes further. It also re-

quires an adjudicatory hearing—even when no re-

quest is made—unless the agency can show that a

hearing would be “futile” or “serve absolutely no pur-

pose” (Pet. App. 20a). The court stated (2d. at 18a-

20a):

The Administrator misconceives the showing

that must be made to demonstrate that adequate

opportunity for a hearing has been given. The

necessity for a hearing turns not only on the

vigor with which interested parties clamor for one,

but also on whether a showing has been made

demonstrating that a hearing is unnecessary.

- * e S €

10

The fact that no one requested a hearing prior to

the decision is appropriately considered in this

analysis, but it is not decisive. It must be shown

that the material facts supporting the decision

are not subject to dispute. We realize that this

is a not inconsiderable burden to place on the

agency, but it is appropriate in view of the

strong policy in favor of holding public hearings

before an adjudicative decision is made.

Respondents argue (PLF Br. 11) that the require-

ment that hearings be held routinely is no more

burdensome than the agency’s regulations which al-

ready require a public hearing, even in the absence

of a specific request, where the agency finds “sig-

nificant public interest” in the proposed action. See

40 C.F.R. 105.7(c) and 125.34(a). These provisions,

however, apply only to legislative-type hearings, not

adjudicatory hearings. Adjudicatory hearings, in con-

trast, are required under the regulations only when

specific requests presenting material issues of fact

are filed. and—etherwise enied= See 40 C.F.R.

125.36.

In sum, the requirement that the agency routinely

conduct adjudicatory hearings* for every issuance,

revocation, denial or modification of an NPDES per-

mit (except in the rare case where such a hearing

would serve “absolutely no purpose”) will severely

* The court of appeals repeatedly stated that EPA was re-

quired to hold an adjudicatory, fact-finding, evidentiary, trial-

type proceeding with all the protections of the Administrative

Procedure Act, 5 U.S.C. 554, 556-557 (see Pet. App. 17a,

18a, 20a & n.4, 22a).

11

disrupt the NPDES program and erroneously divert

scarce agency resources to what, in most cases, will be

an unilluminating and time-consuming waste.’

For these reasons, as well as those set forth in our

petition, we respectfully submit that the petition for

certiorari should be granted.

WADE H. MCCREE, JR.

Solicitor General

May 1979

7 Respondent City of Los Angeles essentially contends (Br.

for Resp. 14) that, had it been aware of the terms and con-

ditions of its 1975 permit, it would have requested an adju-

dicatory hearings. Respondent acknowledges that it must

satisfy independently both the federal and the state discharge

requirements but claims that it believed the federal compli-

ance schedule was changed in 1976 by a joint EPA-state per-

mit to conform to the more lenient state schedule (Br. for

Resp. 6). The joint permit only stated, however, that the state

compliance schedule had been modified. It extended the 1975

federal permit without modification of the federal schedule.

The 1977 notice stated that EPA proposed to extend its own

1975 permit without other modification. No reasonable basis

existed for believing the federal compliance schedule had been

altered. If there was any basis for confusion, respondent took

no action to clear it up before allowing EPA to proceed to

extend the 1975 permit. In any event, the court of appeals did

not rely on any confusion concerning the precise dates of the

compliance schedule in ruling that EPA must routinely hold

adjudicatory hearings.

W 0. S. GOVERNMENT PRINTING OFFICE; 1979 294339 403