Petition for Writ of Certiorari — Peat v. Environmental Protection Agency

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Supreme “un

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No.01U L415 5 4 man | 8 2002

OPFICE Ur Ine UccAK

IN THE

Supreme Court of the Anited States

MICHIGAN PEAT, A DIVISION OF BAY-HOUSTON

TOWING COMPANY, INCORPORATED,

Petitioner,

UNITED STATES OF AMERICA, UNITED STATES

ENVIRONMENTAL PROTECTION AGENCY, AND THE REGIONAL

ADMINISTRATOR OF REGION V OF THE UNITED STATES

ENVIRONMENTAL PROTECTION AGENCY,

Respondents.

Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Sixth Circuit

PETITION FOR A WRIT OF CERTIORARI

STEVEN D. WEYHING GEORGE W. MILLER

KELLEY CAWTHORNE JOHN G. ROBERTS, JR.*

101 South Washington Square CATHERINE E. STETSON

Ninth Floor HOGAN & HARTSON L.L.P.

Lansing, Michigan 48933 555 13th Street, N.W.

(517) 371-1700 Washington, D.C. 20004

(202) 637-6575

* Counsel of Record Counsel for Petitioner

(additional counsel on inside cover)

3 WILSON-EPES PRINTING Co. INC. - 60) 780-0000 - WASHINGTON, BD: = 20001

Additional counsel for petitioner:

JOHN H. DUDLEY, JR.

BUTZEL LONG

150 West Jefferson

Suite 900

Detroit, Michigan 48226

(313) 225-7000

ARTHUR L. FORBES

Five Leisure Lane

Houston, TX 77024

(713) 932-8256

es ee,

QUESTION PRESENTED

In United States ex rel. Accardi v. Shaughnessy, 347 U.S.

260 (1954), this Court held that government actors must obey

| their own controlling procedural rules. In this case, the

Environmental Protection Agency derailed Michigan Peat’s

pending appeal of a State’s permit decision rendered under a

federally-approved Clean Water Act permit program, direct-

ing that Michigan Peat begin the permit process anew before

the Army Corps of Engineers. EPA took that action without

regard to, or authority under, the controlling federal regula-

tions, which specify when and how the agency may partici-

pate in a State-run, federally approved Clean Water Act —-

permitting process.

The question presented is whether the Sixth Circuit—in

conflict with decisions of this Court and of its sister cir- _

cuits—erred in allowing the agency to ignore its controlling

procedural regulations.

(i)

PARTIES TO THE PROCEEDINGS

AND RULE 29.6 STATEMENT

Petitioner Michigan Peat was the plaintiff and appellant

below. Michigan Peat is a division of Bay-Houston Towing

Company, Inc., a Texas corporation. No publicly held

company owns ten percent or more of Michigan Peat’s stock.

Bay-Houston Towing Company, Inc., has no parent compa-

nies, and no publicly held company owns ten percent or more

of Bay-Houston Towing Company, Inc.’s stock.

ee .

TABLE OF CONTENTS

Page

CFU TEEeD BIEN PRREISIEIIN FIED cnccccccccsrecsccesccccesecccceseecses i

PARTIES TO THE PROCEEDINGS AND

PERSE) PAD OPE PER MIIMEEIEG D cncrvcccncscesncsovesssecssnssons il

pe Re yy 3: 5 |. See nn Vv

I IE Sin cia cnkschintisbadeussbvinnsasunicnsbessian l

TTT cisiddinccesdadenatansiinisasasuininbanbhtiovensesasseeene 2

CONSTITUTIONAL PROVISION INVOLVED ... 2

TTT Asch dicen tdi uandgpenbsbeesteeniipbatthaiiianencaceses 2

PRES GO BEBE CP onccrtcencsccsvensscscccsccnses 3 ;

REASONS FOR GRANTING THE WRIT............. 14

I. THE SIXTH CIRCUIT’S DECISION

CONFLICTS WITH DECADES OF THIS

COURT’S PRECEDENT HOLDING THAT

GOVERNMENT AGENCIES MUST

STRICTLY FOLLOW THEIR

Fe RO RNs DURFEE acasnsccnisivesonicadnassnssoncanss 14

Il. THE SIXTH CIRCUIT’S DECISION

CONFLICTS WITH THE DECISIONS OF

OTHER FEDERAL COURTS OF APPEAL..... 20

Ill. THE QUESTION PRESENTED IS OF

NATIONAL SCOPE AND IMPORTANCE. .... 24

NTI lis seis iceniondahisnseeesmaicsmiarieveibibeniciaesintes 26

TABLE OF CONTENTS—Continued

Page

APPENDICES

Appendix A: Opinion of the United States i

Court of Appeals for the Sixth :

Circuit (September 18, 2001)....... la

Appendix B: Memorandum and Judgment of

the United States District Court

for the Eastern District of

Michigan (January 12, 2001)....... 2a

ct Hea nt ANS

Appendix C: Memorandum and Order of the

United States District Court for

the Eastern District of

Michigan (January 24, 2000)....... 10a

Appendix D: Opinion of the United States

Court of Appeals for the Sixth

Circuit (April 28, 1999)............... 20a

Metal ies it wou

Appendix E: Order of the United States

Court of Appeals for the Sixth

Circuit denying petition for

rehearing or rehearing en banc

(November 16, 2001)................... 33a

Appendix F: Order by Circuit Justice

Stevens extending time to file

petition for certiorari (February

Fj Ain salicdinindaanniecpthiieshcnidadiivatidins 35a

TABLE OF AUTHORITIES

CASES:

Arizona Grocery Co. v. Atchison T.&S.F. Ry., 284

eae, FIT CRT siisinsiacdiniidemAeaiiboammaudiaiaiantidedaies

Board of Curators of Univ. of Mo. v. Horowitz, 435

Shed FERRED sinisnistsniininnaseascebniniasinspteeieiaianiatii

Bragg v. West Virginia Coal Ass’n, 248 F.3d 275

(4th Cir. 2001), cert. denied, 122 S. Ct. 920

Bridges v. Wixon, 326 U.S. 135 (1945) ...cccccsccsceeesees

Carnation Co. v. Secretary of Labor, 641 F.2d 801

GE Ge BD sintesineontesitinsadccinsesnmsniiincinaiaiiecmaae

Chevron Oil Co. v. Andrus, 588 F.2d 1383 (5th

Cir.), cert. denied, 444 U.S. 879 (1979) .....cceccesceees

Clarry v. United States, 85 F.3d 1041 (2d Cir.

PID <1ssionssccndduncastinanhsinpisasinisannidiabaeaiimmncnaiaa alam tian

Dolan v. City of Tigard, 512 U.S. 374 (1994) .........00..

Edwards v. Califano, 619 F.2d 865 (10th Cir. 1980) ..

Exportal LTDA v. United States, 902 F.2d 45 (D.C.

UGE, UD a vixnsenisnsinactasennaiessnedeneisinanandgiaiaibicdaiapiaaniateeioaels

Friends of Crystal River v. EPA, 35 F.3d 1073 (6th

| RL, “URN eR RANE SM hs Cob Ne cba

Haitian Refugee Center v. Smith, 676 F.2d 1023

bk A | eg, Maun eN

- Hammond v. Lenfest, 398 F.2d 705 (2d Cir. 1968) .....

Hodel v. Virginia Surface Mining & Reclamation

Mae, SSE LB. BO CI ieeissntccctsinetstaitiasipinanniiaizasi

In Re: General Motors Corp., C.W.A.-A-0-011-93,

1997 WL 790184 (EPA 1997), pet. for rev. de-

nied, 168 F.3d 1377 (D.C. Cir. 1999)... eee

TABLE OF AUTHORITIES—Continued

CASES:

Jideonwo v. INS, 224 F.3d 692 (7th Cir. 2000) ...........

Lojeski v. Boandl, 788 F.2d 196 (3d Cir. 1986)...........

Marshal v. Lansing, 839 F.2d 933 (3d Cir. 1988).......

Monterey v. Del Monte Dunes at Monterey, Lid.,

FOG UB, GET Ce cicitsscsnncesnenisinisiiaiiansinmaanaiaginnsaaiaas

Morton v. Ruiz, 415 U.S. 199 (1974) ......cccccccceeeeeeeees

Navia-Duran v. INS, 568 F.2d 803 (1st Cir. 1977)......

New York v. United States, 505 U.S. 144 (1992).........

Palazzolo v. Rhode Island, 121 S. Ct. 2448 (2001)...

Public Interest Research Group of N. J., Inc. v.

Powell Duffryn Terminals Inc., 913 F.2d 64 (3d

Cir. 1990), cert. denied, 498 U.S. 1109 (1991)........

Service v. Dulles, 354 U.S. 363 (1957)......ccsseeeeseeeses

Solid Waste Agency of N. Cook County v. United

States Army Corps of Eng’rs, 531 U.S. 159

United States ex rel. Accardi v. Shaughnessy, 347

CD. SED CRIS cnccttertesstinenitincinnnianienssnmaiaaeiais

United States ex rel. Bilokumsky v. Tod, 263 U.S.

BAD CESS povcervesinssemmsiesnsesnesicninnimnananamaianeie

United States v. Heffner, 420 F.2d 809 (4th Cir.

EDGI) -cesrenmersursseuenscensesneninenionsnnsennasbeecenmnnsinsenbensasesi

BOT ©) ceerecescennetssennentinssnsennsinnavanntinnsninnaiianianaamntaa

United States v. Morgan, 193 F.3d 252 (4th Cir.

SETI acxsereseesenstnstnsntinceenienneeiiinieseniiaiinieAaeamaaeeae

Page

16, 17

20, 21

22, 23

Vii

TABLE OF AUTHORITIES—Continued

Page

CASES:

Virgin Atlantic Airways, Ltd. v. National Mediation

Bd., 956 F.2d 1245 (2d Cir.), cert. denied, 506

SUGETS SIN IEETIEED Anthchniccthinpinkaniiahesnduibeetanice ieee cae 20

Vitarelli v. Seaton, 359 U.S. 535 (1959) .....ccccccccececeee. 15, 16, 21

Yellin v. United States, 374 U.S. 109 (1963)............... 15, 16, 19

CONSTITUTIONAL AND STATUTORY

PROVISIONS:

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is Ue i einiadbnittsniausticbitiatanncinia bamaeniestaialinaane 2

Se ra tans ae CPN cc sdicscsnncesenesinendidininanteadsaincsbibinenices 24

ee es OF Pe I scsrccnisictsannntitnintaninsenbintinianiainaie 24

Fe is © Be Oe IE vcincsenciisntesininintnbitemnianaaianminas 3, 24

FP es Ae ie cnitenastiserntisnnbaseninsiestanteeernannncte +

ts OF I witinninsshecibintariiisiniaitimanisabidiasa tenes +

SP Geen A EP icaaicscenctenvessthicinincieinstiinidinitadlesiatiaaens 4,5

UTIs Rann SPN Scale iicaetiathiarela clear 24

Mich. Comp. Laws § 24.201 ef $€q........c.c.ccscsssseeeeeeeeee 5,19

Mich. Comp. Laws § 24.271 ...........ccccccccsscsssesceeceeseeees 5

Mich. Comp. Laws § 24.303 .................cccccsceccocecceceeees 5

Mich. Comp. Laws § 324.30301 ef S€q.....c.ccccccccsese0eee- 5

Mich. Comp. Laws § 324.30319.........ccccccccccsesseseseeeeees 5

Mich. Comp. Laws § 324.30323 .........cccceccccesseceeceeeeees 6

Mich. Comp. Laws § 324.99903 ooo... cccccccccscecesceceeees

Vili

TABLE OF AUTHORITIES—Continued

Page

REGULATIONS:

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Ps yaa ETD 6

Se 6

Re ies ST Ut cndacadsteipaidnuiaieadadonanniicieaninanhodsniindénnias 7

eae ir MII Ts icsshcuiea pat hdesicteiieieidsinslippaipamnedbalienmcioe 10, 18

Re es Se ED scncienbensosiniciunetiostacesunbtinndianeiiniien 17 :

Be cel ON Oe Ana sactncssacatniscsntosenicsusenneseenesananadss 5, 25

nL Rk Te 5, 25

ey Oe ET csbecusniinnccnissnteanhitcetnanacnsenisihinnaniitioe 5, 25 :

es ae I cacciesinstirssshsnnsinsishetiniiineusdneapesanceadindégna

ae ais Ue III castibisisicndnsnesucasticedieadtnanncnicasentataienste ey

QO CFR. § 233.53(0) oocccccsccccccsccsccscsccsseccesssssesseceseeee 18 |

a ITT cinncincctanhasiirtcsdntcandghabeintaiibchapaiiainess 18

a Ae I cinchccaissendiieaninnhatantisnagaduiabiniignicamenacdies 4,5,9, 19

ae aes He CITT sicncetienistienthcininhiindicnaniiecsincinhdhbacabiabenninistaipais 4

OTHER AUTHORITIES: i

Michigan Conservation Commission, State of

Michigan, Mem. to Director from Charles E.

Miller and H.D. Ruhl regarding Land Exchange

PO, Re COE By. POOP wensncnnstntssccaistatnncannssons 6-7

IN THE

Supreme Court of the Gnited States

No. 01-__

MICHIGAN PEAT, A DIVISION OF BAY-HOUSTON

TOWING COMPANY, INCORPORATED,

Petitioner,

UNITED STATES OF AMERICA, UNITED STATES

ENVIRONMENTAL PROTECTION AGENCY, AND THE REGIONAL

ADMINISTRATOR OF REGION V OF THE UNITED STATES

ENVIRONMENTAL PROTECTION AGENCY,

Respondents.

Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Sixth Circuit

PETITION FOR A WRIT OF CERTIORARI

Michigan Peat respectfully petitions for a writ of certiorari

to review the judgment of the United States Court of Appeals

for the Sixth Circuit in this case.

OPINIONS BELOW

The September 18, 2001, opinion of the Court of Appeals

for the Sixth Circuit is unreported and reproduced in the

appendix hereto (“App.”) at la. The January 12, 2001,

Memorandum and Judgment of the District Court are unre-

ported and reproduced at App. 3a and 7a respectively. The

January 24, 2000, Memorandum and Order of the District

Court is unreported and reproduced at App. 10a. The April

28, 1999, decision of the Sixth Circuit is reported at 175 F.3d

422 and reproduced at App. 20a.

JURISDICTION

The judgment of the Court of Appeals was entered on

September 18, 2001. App. la. On November 28, 2001, that

court denied a timely filed petition for rehearing or rehearing

en banc. App. 33a. On February 5, 2002, Justice Stevens

entered an order extending the time within which to file this

petition to and including March 18, 2002. App. 35a. The

jurisdiction of the Sixth Circuit was invoked pursuant to 28

U.S.C. § 1291. The jurisdiction of this Court is invoked

pursuant to 28 U.S.C. § 1254(1).

CONSTITUTIONAL PROVISION INVOLVED

The Fifth Amendment to the Constitution provides, in

pertinent part: “No person shall be * * * deprived of life,

liberty, or property without due process of law; nor shall

private property be taken for public use, without just com-

pensation.” U.S. Const. amend. V.

INTRODUCTION

The State of Michigan administers a federally-approved

Clean Water Act permit program, over which the Environ-

mental Protection Agency retains limited oversight authority.

Petitioner Michigan Peat applied to the State for a Clean

Water Act wetlands permit to harvest peat. After seeking

EPA’s comments and revising a draft permit to the agency’s

satisfaction, Michigan issued a final permit to Michigan Peat.

The final permit contained several onerous conditions to

which Michigan Peat objected. Michigan Peat accordingly

appealed the conditions and filed a takings claim against the

State, as Michigan’s statutes—which were expressly incorpo-

a ee ee ee ee ee Se ee

rated into the State’s Clean Water Act permitting proc-

ess—allowed.

EPA’s role in the state-administered permitting process

_ was complete when it approved the final permit. But while

Michigan Peat’s administrative appeal and takings claim

were pending, EPA purported to return Michigan Peat’s

permit application to federal control and required the com-

pany to start the Section 404 application process all over

again. EPA’s action was prohibited by its controlling

regulations, which specify when and to what extent the

agency may participate in the Clean Water Act permitting

process.

The Sixth Circuit below rejected Michigan Peat’s claims

that EPA’s action denied the company the process to which it

was entitled under the Clean Water Act’s implementing

regulations. The decision of the court of appeals conflicts

with this Court’s repeated admonition that agencies are

bound by, and must scrupulously follow, their own proce-

dural rules. The Sixth Circuit’s decision likewise conflicts

with a host of decisions from its sister circuits endorsing the

same fundamental principle.

The lower court’s decision also threatens the balance struck

by an increasing number of statutory schemes, in which

states are given broad authority to administer federally-

approved regulatory programs with strictly delimited over-

sight by the federal agency. If the Sixth Circuit’s decision is

allowed to stand, federal agencies may freely reinsert them-

selves into the States’ regulatory activities, in defiance of

their controlling regulations.

STATEMENT OF THE CASE

Background.

The Clean Water Act. The Clean Water Act, 33 U.S.C.

§ 1251 et seg., requires a permit before “dredged or fill

materials” may be discharged into the “navigable waters” of

the United States. Jd. § 1344(a); see Solid Waste Agency of

N. Cook County v. United States Army Corps of Eng’rs, 531

U.S. 159 (2001). “Navigable waters” include certain wet-

lands—“swamps, marshes, bogs, and similar areas.” 33

C.F.R. § 328.3(b).!

Section 404 of the Clean Water Act authorizes the Secre-

tary of the Army, through the Army Corps of Engineers, to

issue permits allowing the release of dredged and fill materi-

als into waterways. See 33 U.S.C. § 1344(a). Because

Congress intended the Act to “protect the primary responsi-

bilities and rights of States to * * * plan the development and

use * * * of land and water resources,” 33 U.S.C. § 1251(b),

the Act empowers the Environmental Protection Agency

(EPA) to authorize unified, State-run Section 404 permit

programs. See Michigan Peat v. EPA, 174 F.3d 422, 424

(6th Cir. 1999) (reprinted at App. D). “In short, the scheme

provides ‘one-stop shopping’ for a wetland permit.” Jd.

Michigan—which has operated its Section 404 program since

1984—and New Jersey are the only two States that have

received EPA approval of their Section 404 programs. See

40 C.F.R. § 233.70 (Michigan); id. § 233.71 (New Jersey).

EPA retains “[l]imited * * * oversight authority” over

Michigan’s Section 404 program. Friends of Crystal River v.

EPA, 35 F.3d 1073, 1075 (6th Cir. 1994). The Director of the

State’s Department of Environmental Quality must send EPA

copies of all Section 404 permit applications the Department

receives and must notify the agency of the action the De-

partment intends to take with respect to each application. 33

! See Solid Waste Agency of N. Cook County, 531 U.S. at 172-

173 (holding that Corps’ definition of “navigable waters” as

including an intrastate pond used by migratory birds exceeded its

authority under the Clean Water Act); id. at 176-177 (Stevens, J.,

dissenting) (observing that majority opinion “invalidates * * * the

Corps’ assertion of jurisdiction over all waters except for actually

navigable waters, their tributaries, and wetlands adjacent to each”).

Michigan Peat’s property is next to a county drainage ditch. The

ditch is not navigable.

U.S.C. § 1344(j). EPA has thirty days to notify the State if it

intends to comment on the application, and the agency must

submit such comments within ninety days. See id.; 40 C.F.R.

§§ 233.50(d)-(e).

If EPA objects to the proposed permit, the Director may

not issue the permit unless the permit is revised to satisfy

EPA’s objections. 33 U.S.C. § 1344(j); see 40 C.F.R.

§§ 233.50(h)-(i). Within 90 days of receiving EPA’s objec-

tions, the Director must either seek a public hearing on the

objections, 40 C.F.R. § 233.50(g), issue a permit revised to

satisfy the agency’s objections, id. § 233.50(i), or notify EPA

of its intent to deny the permit application. /d. If the State

revises the permit to EPA’s satisfaction, EPA may withdraw

its objections and the modified permit may issue as a final

permit. /d. If, within 90 days, the State Director “neither

satisfies EPA’s objections * * * nor denies the permit,” the

regulations direct that the Secretary of the Army, on behalf of

the Corps of Engineers, “shall process the permit applica-

tion.” Jd. § 233.50(j) (emphases added).

Michigan’s federally-approved Section 404 permit pro-

gram incorporates by reference several State statutes, in-

cluding Michigan’s Administrative Procedure Act (“APA”).

See 40 C.F.R. § 233.70; Mich. Comp. Laws § 24.201 et seg.

The APA provides for administrative hearings to contest final

permit decisions, see Mich. Comp. Laws § 24.271, and for

judicial review after exhaustion of administrative remedies.

See id. § 24.303.

Michigan’s Section 404 program also expressly incorpo-

rates the Goemaere-Anderson Wetland Protection Act, Mich.

Comp. Laws § 324.30301 et seg. (“Wetlands Act”). The

Wetlands Act provides that “[if] a person is aggrieved by any

action or inaction of the department, the person may request

a formal hearing on the matter involved” pursuant to the

State APA, and that any “determination, action, or inaction

by the department following the [administrative] hearing is

subject to judicial review.” Jd. § 324.30319. The Wetlands

Act also allows property owners who have been denied

permits to file takings claims “in a court of competent

jurisdiction.” Jd. § 324.30323. If a court concludes that the

permit denial constituted a taking, the court may order the

State to compensate the landowner “for the full amount of the

lost value” of the property; purchase the property from the

landowner for the full market value of the property before the

adverse permit action; or modify the terms of the permit to

“minimize the detrimental [e]ffect [on] the property’s value.”

Id. EPA reviewed and approved the State’s administrative

and judicial procedures for challenging permit decisions

before approving Michigan’s Section 404 program. See 40

C.F.R. §§ 233.10-233.11.

Michigan Peat’s Section 404 Permit Process. Michigan

Peat is in the business of harvesting peat—partly decayed

plant matter often used as potting soil or garden fertilizer.

Peat accumulates only in wetland conditions.”

Michigan Peat owns or controls peat reserves on two par-

cels of land near Minden City in Sanilac County, Michi-

gan—Minden North and Minden South. Michigan Peat has

harvested peat from the Minden North site since 1958, when

it acquired the property in a land exchange with the State of

Michigan Department of Conservation.2 Michigan Peat’s

2 In normal soil, bacteria decompose plant matter quickly;

waterlogged, anoxic wetland soil is hospitable only to anaerobic

bacteria, which break down organic material much more slowly.

The organic material that builds up over time in such conditions is

peat.

3 When it transferred the Minden property to Michigan Peat in

exchange for property along the Lake Huron shoreline, the State

acknowledged that the primary economically beneficial use of the

Minden land was for peat harvesting:

The land * * * has a dense cover of low brush and some acid-

tolerant sedges which have a low value for game and receives

comparatively little use by hunters * * *. The applicant desires

the land for removal of the peat for use in the manufacture of

commercial plant mulches and fertilizers. The main value of

the property consists of this special proposed use. [Michigan

Minden North and Minden South parcels together comprise

close to 2,800 acres, but Michigan Peat only harvests peat on

951 acres of Minden North, 749 acres of which the company

has cultivated since 1958, and 202 acres of which the com-

pany began harvesting around 1980. The Minden sites are

located near major rail and highway lines, minimizing the

expense of harvesting and bringing peat to market.

In 1991, Michigan Peat filed a Section 404 permit appli-

cation with the Michigan Department of Natural Resources,‘

to cover its historical operation and to expand its operations

to Minden South and portions of Minden North from which

peat previously had not been harvested. Under the proce-

dures set forth in Section 404 and its implementing regula-

tions, the Department issued a public notice announcing

Michigan Peat’s permit application and invited comments on

the application. See 40 C.F.R. § 233.32. No comments were

received; but after the public comment period had expired,

the State asked Michigan Peat to put its application on hold

and develop an environmental site assessment (“ESA”).

Michigan Peat agreed, and for the next two years it per-

formed studies necessary to complete an ESA, including a

hydrogeological study of the site, an endangered species

assessment, a full topographical survey of the properties,

aerial photography of the site, and a study of alternatives to

peat harvesting. Michigan Peat reactivated its permit appli-

cation in 1994.

In September 1994, EPA notified the Department of Natu-

ral Resources that it intended to comment on Michigan Peat’s

Conserv. Commission, State of Michigan, Mem. to Director

from Charles E. Miller and H.D. Ruhl regarding Land Ex-

change No. 29123 (January 20, 1958) (emphasis added). }

4 Before the Department of Environmental Quality was created

in 1995, the Department of Natural Resources was the agency

vested with authority to review Section 404 permit applications.

See Mich. Comp. Laws 324.99903.

permit application. EPA, the Army Corps of Engineers, and

the United States Fish and Wildlife Service forwarded

written comments to the State several months later. Michi-

gan Peat responded to EPA’s comments by, among other

things, submitting to the State and EPA a plan demonstrating

the extent to which previously-harvested acreage could be

“reclaimed” as wetlands.

In March 1995, the Department of Natural Resources is-

sued findings of fact on Michigan Peat’s application and

forwarded them, along with a draft permit, to EPA. EPA

formally withdrew its objections, concluding that the De-

partment’s permit “effectively addresse[d]” its concerns, Ct.

App. J.A. 251, and the Department issued a final permit

decision on Michigan Peat’s application. The Department’s

final permit decision consisted of three parts: Part I ac-

knowledged that about 750 acres of the Minden North plat

were in use before 1980, and thus that no permit was neces-

sary for continued harvesting on those acres because they

were not “under the jurisdiction of the * * * Wetland Protec-

tion Act.” Jd. at 45. Part II classified about 200 acres of

Minden North as eligible for a so-called “After-the-Fact”

permit because the acres had been brought into use after

1980, id.; and Part III denied permit authority to harvest peat

from the unopened area of Minden North—approximately

1050 acres. Part III also denied a permit to extract peat from

the entire and separate Minden South parcel—approximately

820 acres. Id.

The “After-the-Fact” permit issued under Part II of the

final permit decision contained several conditions unaccept-

able to Michigan Peat, including a requirement that Michigan

Peat waive its right to appeal the permit decision or to

challenge the Department’s action as an unconstitutional

taking, id. at 55, and a constitutionally suspect exaction

requiring Michigan Peat to place land in a conservation

easement as a condition of the permit. Jd. at 49; see Dolan v.

City of Tigard, 512 U.S. 374 (1994). Michigan Peat accord-

ingly petitioned for review of the Department’s permit

decision under the State’s Administrative Procedure Act, as

incorporated by reference into Michigan’s Section 404

process. See 40 C.F.R. § 233.70.

Michigan Peat also challenged Part III of the final permit

decision—the complete prohibition against peat harvesting

on approximately 1,870 acres of the Minden properties—by

filing a regulatory takings claim against the State in the

Michigan Court of Claims, seeking damages under the

federal and state constitutions and the “takings without

compensation” provision of Michigan’s federally incorpo-

rated Wetlands Act. The case is pending before the Michi-

gan Court of Claims.

In March of 1997, hoping to ward off Michigan Peat’s

administrative challenge and takings claims, officials~ from

the State’s Department of Environmental Quality (DEQ) and

EPA jointly prepared a document they characterized as a

“Draft Process Outline for Michigan Peat permit proposal.”

Ct. App. J.A. 236. EPA and DEQ were apparently unde-

terred by the fact that Michigan Peat had no “permit pro-

posal” or application currently pending with the State; the

final permit was on appeal.

DEQ and EPA’s “outline” identified several alternative

ways in which the State and EPA could respond to Michigan

Peat’s administrative appeal and takings claims. One of the

scenarios EPA and DEQ jointly proposed was for DEQ to

“issue[ ] a [second] permit over EPA’s objection.” Under the

scenario described by EPA and DEQ, such an action would

force Michigan Peat to “apply to the Corps of Engineers to

obtain a federal [Section] 404 permit” and to “go through the

full Corps permitting process.” Jd. at 238. The document

further noted that “[i]t would take some time to get through

the federal permit process (there is no deadline for action on

an individual permit of this type), and there is no assurance

that a permit would be issued.” Jd. at 238-239. The docu-

ment also threatened federal enforcement action against

Michigan Peat if the company continued to pursue its takings

claim against the State. /d. at 238.

In June 1997, with Michigan Peat’s administrative appeal

still pending and its takings claim against the State on the

verge of trial, DEQ took, in concert with EPA, what the

Department’s Director later acknowledged was a “strategic”

action. Although DEQ no longer had an application pending

from Michigan Peat—its final permit decision was on

administrative appealt—the Department issued what it labeled

a “state only permit” for the Minden properties. Ct. App.

J.A. 240. DEQ issued the “state only permit” without public

notice, a public comment period, or a public hearing, all of

which are required before a permit may be modified, sus-

pended, or revoked. See 40 C.F.R. § 233.36.

The DEQ’s “state only permit” purported to modify the

final permit decision rendered two years earlier by allowing

Michigan Peat to expand its peat extraction operations into

all previously unmined portions of Minden North and

Minden South. The document stated, however, that issuance

of the permit “DOES NOT AUTHORIZE ANY WORK

UNDER THE AUTHORITY OF THE FEDERAL CLEAN

WATER ACT. Any work initiated on this project without

required § 404 approval may be considered a violation of

Federal law.” Ct. App. J.A. 240 (capitalization in original).

Right on cue, after DEQ issued its so-called “siate-only

permit,” EPA purported to transfer permit authority under the

Clean Water Act to the Army Corps of Engineers. See Ct.

App. J.A. 249. The Corps required Michigan Peat to start the

permit process all over again, without benefit of a ruling

from the ongoing administrative proceeding ch>'’-nging the

State’s “final” permit. As DEQ and EPA readily conceded,

that bait-and-switch was designed to force the com-

pany—after seven years of process and while appealing a

final permit decision—back to the starting line.

Michigan Peat I. In May of 1997, after Michigan Peat

received the joint “outline” suggesting that EPA and DEQ

might force the company to start the Section 404 process

again from the beginning—this time with the Army Corps of

Engineers—Michigan Peat filed suit against respondents in

federal district court. In June, after EPA announced its intent

to transfer permit authority to the Corps, Michigan Peat

amended its complaint to reflect EPA’s action and added the

State of Michigan, the DEQ, and the Director of the DEQ as

defendants.

Michigan Peat’s amended complaint alleged, among other

things, that EPA and the State had failed to accord Michigan

Peat the process it was due under the applicable Section 404

regulations, when they forced the company to start the

Section 404 permit process over again with the Corps solely

because Michigan Peat pursued the remedies to which it was

entitled under the Section 404 permit process. Michigan Peat

stated that EPA’s action raised constitutional questions

regarding executive agency adherence to its regulations, as

well as the constitutional legitimacy of strategic action by a

government agency in order to forestall pending administra-

tive and constitutional claims.

The defendants separately moved to dismiss Michigan

Peat’s claims. The District Court granted the motions,

concluding that the State defendants were immune from suit

and that the federal defendants had not taken a “final action”

subject to challenge in court. Michigan Peat v. Regional

Administrator of Region V of the United States EPA, 7 F.

Supp. 2d 896 (E.D. Mich. 1998).

On appeal, the Sixth Circuit reversed the court’s dismissal

of the federal defendants. With respect to the 1995 final

permit—the permit EPA had approved before it issued—the

court of appeals held that “the logical conclusion is that the

EPA’s action was final. Statutorily, there was nothing left

for the EPA to do once it signed off on the proposed permit.”

App. 30a (emphasis added). The Sixth Circuit also recog-

nized that Michigan Peat’s decision not to sign the final

permit allowed it to preserve its rights; “if Michigan Peat did

sign the permit it would have waived the appellate remedies

it is pursuing.” Jd.

Michigan Peat II. On remand from the Sixth Circuit, the

District Court again granted judgment for the federal defen-

dants. The District Court first concluded, after briefing on

motions for partial summary judgment, that EPA had not

acted improperly in transferring permit authority to the Corps

of Engineers while Michigan Peat’s administrative appeal

was pending before the DEQ. App. 16a-17a. The District

Court recognized that EPA’s action was perplexing, coming

as it did years after the statutory period had run for com-

menting on a permit, and with no permit application currently

pending before the DEQ. The court observed that back in

1995, the Department had “satisf[ied] the EPA’s objections”

to the proposed permit within the time period fixed by the

regulations; that EPA had subsequently withdrawn its

objections to the permit; that DEQ had issued a permit; and

that DEQ had “only later issued the state-only permit which

failed to conform to the EPA’s objections.” /d. at 16a. The

court concluded, however, that it could find “no compelling

reason to bar the transfer of authority” to the Corps—despite

the fact that there was no permit application then pending

with the DEQ over which authority could be exercised. /d.

(emphasis added).

The District Court also held that “[t]he fact that the

agreement between the EPA and MDEQ includes the provi-

sions of Michigan’s Administrative Procedures Act * * *

does not mean that the [federal] government is bound by

those proceedings.” Jd. The court concluded that while

Michigan Peat had the night to appeal the DEQ’s permit

decision, nothing prevented EPA from nevertheless transfer-

ring authority to process the permit to the Corps. /d. at 17a.

The District Court accordingly granted summary judgment

for the federal defendants on Michigan Peat’s claim that the

federal government had wrongly forced the company to

begin the permit process anew with the Corps of Engineers.

Id.

Several months later, the District Court issued a decision

on Michigan Peat’s remaining claims. App. 3a. The court

found that Michigan Peat had no right to harvest even the

749 acres of the Minden property it had worked since

1958—the area EPA and DEQ had previously conceded were

“grandfathered”—without first obtaining federal approval.

App. 5a. According to the District Court, although EPA had

withdrawn its objections to the State’s 1995 “final permit”

containing the grandfathering language, Michigan Peat’s

failure to sign the permit (which would have forfeited the

company’s appeal rights) meant that the permit had never

become “final” and binding on EPA and DEQ. /d.

Michigan Peat appealed. The company challenged the

District Court’s dismissal of its constitutional claims, again

arguing that EPA had violated Michigan Peat’s procedural

nights under the controlling Section 404 regulations when it

short-circuited Michigan Peat’s administrative appeal and

forced it to begin the permit application process anew.

Michigan Peat contended that when the federal government

established an administrative process, as it did in approving

Michigan’s Section 404 program, the government is obli-

gated to abide by that process; curtailing Michigan Peat’s

administrative procedure midway, as EPA did by transferring

authority to the Corps, denied the company the process to

which it was entitled.

A panel of the Sixth Circuit affirmed the District Court’s

decision. App. la. Michigan Peat petitioned for rehearing

and for rehearing en banc, again arguing that the government

was not permitted to thwart the Section 404 regulations, and

Michigan Peat’s appeal rights under those regulations, by

arbitrarily directing that Michigan Peat begin the application

process over again with the Corps of Engineers. The Sixth

Circuit denied Michigan Peat’s petition for rehearing and

rehearing en banc.

REASONS FOR GRANTING THE WRIT

I. THE SIXTH CIRCUIT’S DECISION

CONFLICTS WITH DECADES OF THIS

COURT’S PRECEDENT HOLDING THAT

GOVERNMENT AGENCIES MUST

STRICTLY FOLLOW THEIR

PROCEDURAL RULES.

1. Government agencies must obey their controlling pro-

cedural rules. United States ex rel. Accardi v. Shaughnessy,

347 U.S. 260 (1954). The petitioner in Accardi, a deportable

alien, had requested that his deportation order be suspended.

Regulations governing the procedure for suspending depor-

tation orders required that the Board of Immigration Appeals

exercise its discretion in deciding whether to grant suspen-

sion. The regulations provided that the Board’s decision was

final, except in certain instances where the Board was

required to refer the request to the Attorney General for final

decision—including where the Attorney General directed that

the Board refer a request to him. /d. Thus, the Attorney

General ultimately retained final authority to grant or deny a

request to suspend a deportation order, regardless of the

Board’s decision.

Before the Board considered petitioner Accardi’s request,

the Attorney General released a list of one hundred “unsa-

vory characters’—including Accardi. /d. at 264. This Court

observed that the “unsavory characters” list was distributed

to the Board with the implicit, but clear, message that those

on the list should not have their deportation orders sus-

pended. /d. The Court held that petitioner’s mghts were

violated by the Board’s failure to exercise its own discretion,

as required by the regulations outlining the deportation

procedure, and remanded the case for the Board to consider

petitioner’s application, relying on its own discretion and

without reference to the “unsavory characters” list. Jd. at

268. This Court held that the fact that the Attorney General

had final authority over the deportation decision was irrele-

ee ee ee ee ee

ee a na ee

vant: “[petitioner] may still fail to convince the Board or the

Attorney General, in the exercise of their discretion, that he is

entitled to suspension, but at least he will have been afforded

that due process required by the regulations in such pro-

ceedings.” Jd.

Accardi’s animating principle can be traced to earlier de-

cisions. In United States ex rel. Bilokumsky v. Tod, 263 U.S.

149, 155 (1923), this Court stated that “[i]t may be assumed

that one under investigation with a view to deportation is

legally entitled to insist upon the observance of rules prom-

ulgated by the Secretary pursuant to law.” See also Bridges

v. Wixon, 326 U.S. 135, 152-153 (1945) (likewise invalidat-

ing a deportation order issued without complying with all

procedural rules).

This Court has also made clear that the requirement that

agencies adhere to their own regulations applies well beyond

immigration matters. Arizona Grocery Co. v. Atchison

T.&S.F. Ry., 284 U.S. 370 (1932). Arizona Grocery involved

a challenge to an Interstate Commerce Commission ruling

awarding reparations to shippers for paying “unreasonable”

rates to carriers. /d. at 382. The ICC had determined that the

rates charged were unreasonable—even though the carriers

had charged less than the maximum allowable rate under the

ICC’s rules. /d. at 382-383. This Court held that the carriers

were entitled to rely upon the Commission’s rules regarding

the maximum allowable rates, and that if carriers charged

rates in compliance with the rules, the Commission could not

later ignore its rules and conclude that the rates were “unrea-

sonable.” /d. at 389.

This Court repeatedly, and in a variety of contexts, has

confirmed Accardi’s central holding. When an agency failed

to follow applicable procedural rules, this Court has directed

that dismissed employees be reinstated, Vitarelli v. Seaton,

359 U.S. 535 (1959), Service v. Dulles, 354 U.S. 363 (1957);

overturned a conviction for contempt of Congress, Yellin v.

United States, 374 U.S. 109 (1963); and invalidated benefits

restrictions promulgated by the Bureau of Indian Affairs,

Morton v. Ruiz, 415 U.S. 199 (1974).

In Service, the Secretary of State had absolute statutory

discretion to dismiss any Foreign Service officer whenever

the Secretary concluded it was in the interests of the United

States to do so. 354 U.S. at 370. But the Secretary had

promulgated procedures that allowed him to dismiss a

Foreign Service officer only after a reviewing board had

taken “unfavorable action” toward the employee and a

deputy undersecretary had approved the board’s action. Jd.

at 374-375. When the Secretary of State dismissed a Foreign

Service employee without complying with the procedures

that had been put in place, this Court reversed. The Court

noted that while “the Secretary was not obligated to impose

upon himself these more rigorous substantive and procedural

standards, * * * having done so he could not, so long as the

Regulations remained unchanged, proceed without regard to

them.” Jd. at 388. See also Vitarelli, 359 U.S. at 546 (rein-

stating federal employee who had been dismissed without

being provided procedural protections afforded by depart-

ment regulations).

The petitioner in Yellin was convicted of contempt of

Congress for refusing to answer questions in a public hearing

before a subcommittee of the House Committee on Un-

American Activities. 374 U.S. at 111. The Committee’s

rules required that the Committee consider requests for

questioning to be held in a private executive session and that

the Committee weigh, among other things, possible damage

to the witness’s reputation caused by a public hearing. Jd. at

115-116. The petitioner had requested that his questioning

take place in a private executive session; but the Committee’s

staff director, without adhering to the rules, had denied the

request. Jd. at 112. The Supreme Court found that the

Committee’s action was at variance with its rules and that

like executive agencies, legislative committees must be “held

to observance of [their] rules.” Jd. at 114. The Court ac-

cordingly overturned petitioner’s contempt conviction; it

recognized that although the Committee might well deny the

petitioner’s request for a private hearing, he was “at least

entitled to have the Committee follow its rules and give him

consideration according to the standards it has adopted.” /d.

at 121.

In Morton, the Supreme Court struck down an unpub-

lished directive promulgated by the Bureau of Indian Affairs

declaring that only Indians living on reservations were

entitled to certain federal benefits. 415 U.S. at 231. The

Bureau’s internal procedures manual required that the BIA

publish all directives informing the public of benefits eligi-

bility requirements. See id. at 235. While the Court recog-

nized that the Bureau ultimately had authority to limit the

class of Indians entitled to benefits, the Court held that before

those limitations could take effect, the BIA “must comply

*** with its own internal procedures” and publish its

eligibility directives. /d.

2. EPA’s action in this case, and the decision of the Sixth

Circuit condoning it, cannot be reconciled with the Accardi

line of decisions. The regulations governing the Section 404

process require that EPA submit objections to a permit

application within ninety days of receiving notice from the

administering State of a pending application. 40 C.F.R.

§§ 233.50(d)-(e). The regulations further provide that the

State must, within ninety days after receiving objections or

comments from EPA, revise the permit to satisfy EPA’s

objections or deny the permit. The transfer of permit author-

ity over a pending application to the Corps of Engineers

occurs by operation of law, and only when the State Director

“neither satisfies EPA’s objections * * * nor denies the

permit.” 40 C.F.R. § 233.50(j) (emphasis added); see Friends

of Crystal River, 35 F.3d at 1079-80. Once a final permit has

issued with EPA’s approval, EPA has no further authority

over the process, and the detailed Section 404 regulations do

not provide for any further involvement by the agency.°

EPA ignored the strictures of its governing regulations in

this case. After EPA submitted comments to the State,

Michigan’s Director took the agency’s comments into

account and changed the proposed permit to satisfy EPA’s

objections. EPA at that point formally withdrew its objec-

tions, see Ct. App. J.A. 251, and Michigan issued a final

Section 404 permit. At that point—and as the Sixth Circuit

had earlier recognized in Michigan Peat K—EPA had no

further role to play; a final permit had issued. See App. 30a

(Statutorily, there was nothing left for the EPA to do once it

signed off on the proposed permit.”).

EPA, however, then created a new role for itself without

regard to its governing reguiations. While Michigan Peat’s

administrative appeal and takings action were still pending,

and with no permit application currently before the State,

EPA and the State cooked up a “new” permit—the “state-

only” permit. After Michigan issued that phantom permit,

EPA promptly arrogated authority over Michigan Peat’s

Section 404 permit application and commanded the company

to file yet another Section 404 application, this time with the

Corps. See Ct. App. J.A. 132. The agency’s machinations

scuttled Michigan Peat’s administrative appeal and takings

action and forced the company to start the Section 404

process all over again.®

5 The regulations allow EPA to suspend a state program in its

entirety, but only after consulting with the State Director, giving

public notice, and holding a public hearing. See 40 C.F.R.

§ 233.53(b)-(c). The State and EPA may also modify a final

permit decision, but only after giving notice to the permittee and

holding a hearing. See 40 C.F.R. § 233.36; supra at 10. EPA

pursued neither option here.

6 See Palazzolo v. Rhode Island, 121 S. Ct. 2448, 2459 (2001)

(noting that “[g]overnment authorities, of course, may not burden

property by imposition of repetitive or unfair * * * procedures in

order to avoid a final decision”) (citing Monterey v. Del Monte

Dunes at Monterey, Ltd., 526 U.S. 687, 698 (1999)).

i i i

ET RE CT pees SORES ee m

EPA’s renegade action took place entirely outside the

regulatory process. Michigan Peat no longer had a permit

application pending, and the State’s final permit decision—

which EPA had joined—was subject to the administrative

and judicial challenges set forth in the governing statutes and

regulations. See 40 C.F.R. § 233.70 (noting that Michigan’s

Administrative Procedures Act, Mich. Comp. Laws § 24.201

et seq., was “part of the approved State-administered pro-

gram”). As the District Court correctly noted, EPA’s reguia-

tions dictate when a permit application transfers to the Corps

by operation of law—specifically, if the State has not an-

swered EPA’s objections within ninety days of receiving

them. App. 16a. But the District Court nonetheless con-

cluded that it saw “no compelling reason to bar the transfer

of authority beyond this 90 day period.” Jd. The Sixth

Circuit summarily stated that it agreed with the District

Court’s reasoning. App. la-2a.

The “compelling reason” the District Court professed not

to find exists in the Clean Water Act regulations themselves,

and in Accardi and its progeny. The District Court and Sixth

Circuit completely ignored the protections afforded by the

Accardi doctrine; as this Court has explained, parties must be

able to rely on the reasonable expectation “that the [govern-

ment] actually does what it purports to do [—] adhere to its

own rules.” Yellin, 374 U.S at 123. The governing Section

404 regulations are quite clear; EPA’s role ends when it

withdraws objections to a permit and the permit issues. If an

applicant appeals a final permit issued by a State with EPA’s

blessing, EPA presumably may intervene in those proceed-

ings to protect its interests. But it may not, under its regula-

tions and under Accardi, short-circuit that process by yanking

the permit application from the State proceedings and forcing

an applicant to begin anew with the Corps.

II. THE SIXTH CIRCUIT’S DECISION

CONFLICTS WITH THE DECISIONS OF

OTHER FEDERAL COURTS OF APPEAL.

The other courts of appeal are uniformly lined up against

the decision of the Sixth Circuit in this case. Indeed, every

circuit to have considered the issue except the Sixth Circuit in

this case has followed Accardi’s command that administra-

tive agencies are bound by their own regulations.’ See, e.g.,

United States v. Heffner, 420 F.2d 809, 811 (4th Cir. 1969)

(“An agency of the government must scrupulously observe

rules, regulations, or procedures which it has established.

7 The majority view among the courts of appeal is that Accardi is

founded upon constitutional principles of due process. See

Jideonwo v. INS, 224 F.3d 692, 697 (7th Cir. 2000) (characterizing

Accardi as a case where the government retroactively changed

procedures in violation of due process); see also Virgin Atlantic

Airways, Ltd. v. National Mediation Bd., 956 F.2d 1245, 1251 (2d

Cir.) (Accardi based on due process), cert. denied, 506 U.S. 816

(1992); Chevron Oil Co. v. Andrus, 588 F.2d 1383, 1386 (Sth Cir.)

(same), cert. denied, 444 U.S. 879 (1979); Navia-Duran v. INS,

568 F.2d 803, 809 (ist Cir. 1977) (same); United States v.

Lockyer, 448 F.2d 417, 421 (10th Cir..1971) (same).

Some circuits have not endorsed the prevailing view. See Lo-

jeski v. Boandl, 788 F.2d 196, 199 (3d Cir. 1986) (opining that

Accardi was based on administrative law principles); Carnation

Co. v. Secretary of Labor, 641 F.2d 801, 804 (9th Cir. 1981)

(Accardi doctrine is not a constitutional doctrine). See also Clarry

v. United States, 85 F.3d 1041, 1047 (2d Cir. 1996) (stating, in

contrast to the court’s earlier opinion in Virgin Atlantic, that “the

Accardi doctrine is a judicially-evolved rule ensuring fairness in

administrative proceedings”) (internal quotations omitted). This

minority view also has been echoed by this Court in dicta. See

Board of Curators of the Univ. of Mo. v. Horowitz, 435 U.S. 78, 92

n.8 (1978) (“[B]oth Service and Accardi * * * enunciate principles

of federal administrative law rather than of constitutional law.”).

Whether Accardi is constitutionally-based or grounded in ad-

ministrative law principles, however, is beside the point; under

either formulation, EPA’s action and the Sixth Circuit’s ratifica-

tion of its action conflict with Accardi’s fundamental principle that

anaes agencies must strictly adhere to their procedural

rules.

When it fails to do so, its action cannot stand and courts will

strike it down.”) (citing Accardi, 347 U.S. 260).

In Marshal v. Lansing, 839 F.2d 933 (3d Cir. 1988), for

example, the court of appeals remanded a case back to the

Parole Commission where the Commission had failed to

provide reasons for its determination of the defendant’s

offense severity rating, as the Commission’s regulations

required. Jd. at 943. The remand did not change the sen-

tence, but was solely so the Commission could provide

specific reasons for its decision. Jd. Citing Accardi, the

court of appeals explained that “a prisoner has a right to

insure that he is being held in compliance with agency

regulations.” Jd. See also Hammond v. Lenfest, 398 F.2d

705, 715 (2d Cir. 1968) (observing, citing Service and

Vitarelli, that “a validly promulgated regulation binds the

government as much as the individuals subject to the regula-

tion; and, this is no less so because the governmental action

is essentially discretionary in nature”).

In Navia-Duran v. INS, 568 F.2d 803 (1st Cir. 1977), the

court of appeals overturned a deportation decision and

remanded the case for a new hearing that would protect the

deportee’s rights under the regulations. The Fourth Circuit

remanded an administrative order permitting medical person-

nel to forcibly treat a pretrial detainee with anti-psychotic

medication for further factfinding to ensure that the decision

was made in accordance with controlling federal regulations.

United States v. Morgan, 193 F.3d 252, 267 (4th Cir. 1999).

In Haitian Refugee Center v. Smith, 676 F.2d 1023 (Sth

Cir. 1982), the Fifth Circuit invalidated a blanket expedited-

deportation procedure that had been applied to aliens from

Haiti. Under the procedures provided by INS regulations,

when a valid asylum claim was presented, the deportation

was suspended while that claim was considered. Jd. at 1028,

1030. Under the expedited procedure for Haitians, that

regulation was not followed. Jd. at 1030. The court of

appeals noted that the fact that the INS pursued the expedited

plan in contravention of its own rules was sufficient in itself

to grant relief and require the government to comply with its

own procedures. /d. at 1041 n.28. And the Tenth Circuit has

overturned Social Security Administration benefits decisions

that were contrary to its governing regulations. Edwards v.

Califano, 619 F.2d 865, 869 (10th Cir. 1980).

Courts of appeal have adhered to the Accardi doctrine

even where no fundamental liberty (as in the deportation

cases) or property (as in this case, and Edwards) interest was

at stake. In Exportal LTDA v. United States, 902 F.2d 45

(D.C. Cir. 1990), a Chilean fruit producer appealed a deci-

sion of the Secretary of Agriculture derying the producer’s

request for a waiver of the bond requirement in a reparation

proceeding. Although the Secretary had discretion under the

governing statute to grant or deny the bond, controlling

Department of Agriculture regulations specified that the bond

“shall” be waived if the requester showed that it was the

resident of a country where no such bond was required of a

United States citizen in a similar proceeding. /d. at 49.

Noting that “[i]t is axiomatic that an agency must adhere to

its own regulations,” the court of appeals rejected the Secre-

tary’s argument that he retained discretion over the waiver

decision despite the language of the regulation and over-

turned his decision. /d. (internal quotation omitted).

This host of appellate court cases, all following the rule

laid down in Accardi, makes clear that the cure for govern-

ment action taken without regard to controlling procedural

regulations is to vacate the action and require the agency to

abide by its procedural rules. Ignoring the path set down in

all those cases, the courts below saw “no compelling reason”

for EPA to follow its controlling regulations, App. 16a, and

allowed the agency to short-circuit the process to which

- Michigan Peat was entitled.

3. The Sixth Circuit’s decision also conflicts with the

Third Circuit’s treatment of appeals procedures in another

comprehensive state/federal permit program. In Public

PP ree ee ee ee

aren ae Ho

Interest Research Group of New Jersey, Inc. v. Powell

Duffryn Terminals Inc., 913 F.2d 64 (3d Cir. 1990), cert.

denied, 498 U.S. 1109 (1991), several environmental groups

sued a storage facility operator for violating certain condi-

tions of its Clean Water Act permit. The facility operator

defended in part by claiming that several requirements in its

permit had been inadvertently included and should not be

given legal effect. /d. at 77. The Third Circuit held that the

operator could not collaterally attack the permit’s terms;

rather, it should have appealed those conditions in the forum

set forth by state law and incorporated into the federal

permitting program. See id. at 78 & n.26.?

The Third Circuit thus held that the only avenue for ap-

pealing a permit decision in a federal/state Clean Water Act

permit program is the state procedure adopted under EPA

regulations. But the Sixth Circuit below exempted the

opposite party—the government—from the same strictures,

essentially holding that the state appeals process is a formal-

ity that EPA can nullify at any time simply by transferring

permit authority to the Corps. That ruling subjects entities

seeking Section 404 permits in Michigan to a classic whip-

saw. An applicant must pursue the federally-approved state

administrative appeal in order to preserve any objections to

final permit. But those procedures offer no promise of relief:

at any time, EPA can simply create a new permit process and

require the applicant to start the process again. Accardi—and

the host of cases that followed it—forbid that result. Federal

regulations apply evenhandedly; both private parties and the

8 The permit at issue was issued not under section 404, but

under section 402, which governs National Discharge Elimination

System (NPDES) permits. See 913 F.2d at 68.

9 EPA itself has said as much about Michigan’s appeal proce-

dures. See Jn Re: General Motors Corp., C.W.A.-A-0-011-93,

1997 WL 790184 (EPA Dec. 24, 1997) (if permit holder wishes to

challenge conditions of a permit issued under Michigan’s unified

permit process, it must pursue appeal according to the state

procedures), pet. for rev. denied, 168 F.3d 1377 (D.C. Cir. 1999).

government are bound by their terms. The Sixth Circuit’s

decision conflicts with that fundamental principle.

Ill. THE QUESTION PRESENTED IS OF

NATIONAL SCOPE AND IMPORTANCE.

The Sixth Circuit’s decision threatens to undermine the

delicate balance of power struck between state governments

-and the federal government under the Clean Water Act and

other similar statutes. Statutes articulating the principle of

“cooperative federalism,” Hodel v. Virginia Surface Mining

& Reclamation Ass'n, 452 U.S. 264, 289 (1981), by which

States may submit full-blown regulatory programs for federal

approval—essentially sharing authority over federally-run

programs—have become increasingly common, particularly

in the environmental field. See New York v. United States,

505 U.S. 144, 167-168 (1992) (noting “numerous federal

statutory schemes” of this nature, including the Clean Water

Act, 33 U.S.C. § 1251 et seq., the Occupational Safety and

Health Act, 29 U.S.C. § 651 et seg., the Resource Conserva-

tion and Recovery Act (RCRA), 42 U.S.C. § 6901 et seq.,

and the Alaska National Interest Lands Conservation Act, 16

U.S.C. § 3101 et seq.); see also, e.g., Bragg v. West Virginia

Coal Ass'n, 248 F.3d 275, 288 (4th Cir. 2001) (noting

“cooperative federalism” of Surface Mining Control and

Reclamation Act of 1977 (SMCRA), 30 U.S.C. § 1201 ef

seq., whereby “responsibility for the regulation of surface

coal mining * * * is shared between the U.S. Secretary of the

Interior and State regulatory authorities”), cert. denied, 122

S. Ct. 920 (2002). The balance struck by these and other

statutes is achieved by an understanding that if the States’

regulatory and procedural protections pass federal muster, the

States may control their own processes, with only limited

involvement on the part of the federal agency. See New

York, 505 U.S. at 167 (observing that “cooperative federal-

ism” arrangements allow States “the choice of regulating

* * * activity according to federal standards”).

eA ers wc SAB thot SU Aaa ea

©.

Here, however, the federal agency circumvented the state

administrative appeal procedures it had specifically approved

and to which it was bound, preferring instead to return

Michigan Peat’s Section 404 application to its own turf. That

was not just a violation of the Section 404 regulations; it was

a striking incursion by the federal government into the

State’s domain. Cf Solid Waste Agency of N. Cook County,

531 U.S at 173 (Court would not endorse agency’s interpre-

tation of statute “where the administrative interpretation

alters the federal-state framework by permitting federal

encroachment upon a traditional state power”).

In this instance, the incursion came with Michigan’s ac-

quiescence, to be sure; but there is no comfort to be taken in

that. The lower courts’ decisions did not turn on whether the

State agreed with EPA or not, and nothing in the decisions

limits the federal government’s authority to arrogate a

formerly state-run process to itself only where the state

accedes to the action. After the Sixth Circuit’s decision,

whenever a federal agency is dissatisfied with either the

State’s processing of a particular permit application, or the

likely outcome of an administrative appeal, the agency can

simply take over the reins, even where—as here—controlling

regulations limit the agency’s involvement in the permitting

process. See 40 C.F.R. §§ 233.50(g)-(j).

It does not take much imagination to forecast the result of

such a capricious system: what incentive would states

possess to steer their own programs if the federal government

could, at any time, regardless of the procedures set forth in

the regulations, step in and seize control of the process? If

the Sixth Circuit’s decision is allowed to stand, the balance

so well-struck in an increasing number of environmental

statutes—a balance between uniform administration of

federal standards and respect for state prerogatives—will be

dramatically altered.

CONCLUSION

For the foregoing reasons, the petition should be granted

and the judgment below reversed.

Respectfully submitted,

Of Counsel:

STEVEN D. WEYHING GEORGE W. MILLER

KELLEY CAWTHORNE JOHN G. ROBERTS, JR.*

101 South Washington Square CATHERINE E. STETSON

Ninth Floor HOGAN & HARTSON L.L.P.

Lansing, Michigan 48933 555 13th Street, N.W.

(517) 371-1700 Washington, D.C. 20004

(202) 637-6575

JOHN H. DUDLEY, JR.

BUTZEL LONG Counsel for Petitioner

150 West Jefferson

Suite 900

Detroit, Michigan 48226

(313) 225-7000

ARTHUR L. FORBES

Five Leisure Lane

Houston, TX 77024

(713) 932-8256

* Counsel of Record

APPENDICES

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

No. 01-1154

MICHIGAN PEAT,

Plaintiff-Appellant,

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY; UNITED STATES OF AMERICA; REGIONAL

ADMINISTRATOR OF REGION V OF THE UNITED

STATES ENVIRONMENTAL PROTECTION AGENCY,

Defendants-Appellees.

DECIDED: September 18, 2001

Before MARTIN, Chief Judge; NELSON, Circuit Judge;

and RICE, District Judge.*

PER CURIAM. We explained the complicated factual,

statutory, and procedural history of this case in Michigan

Peat v. U.S. E.P.A., 175 F.3d 422 (6th Cir. 1999) (Michigan

Peat I). On remand from that decision, the district court

* The Honorable Walter Herbert Rice, Chief United States

District Judge for the Southern District of Ohio, sitting by

designation.

Ree Tbe oho CORES

granted summary judgment to the Environmental Protection

Agency, concluding that the Agency’s withdrawal of its

objections to the draft permit was not a final and binding

determination that 749 acres of wetlands owned by Michigan

Peat are exempt from certain provisions of the Clean Water

Act. The district court determined that the 749 acres

currently are not exempt and that Michigan Peat does not

hold a state license to mine peat.' We have reviewed the

reasoning of the district court and now AFFIRM.

' The Environmental Protection Agency also has instituted an

enforcement action against Michigan Peat. On February 21, 2001,

Michigan Peat filed an emergency motion to this Court requesting

a stay in the enforcement action. We denied Michigan Peat’s

motion, and on May 11, the district court entered an interim order

enjoining Michigan Peat from discharging any pollutant until the

Army Corps of Engineers issues it a Section 404 permit.

APPENDIX B

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Case No. 97-72336-DT

MICHIGAN PEAT, a division of Bay-Houston Towing Co.,

Plaintiff,

REGIONAL ADMINISTRATOR OF REGION V OF THE

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY, UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY, and UNITED STATES OF

AMERICA,

Defendants.

January 12, 2001

MEMORANDUM*

HON. AVERN COHN

+ ° ° . °

This is a revised statement of the reasons given on the record

for dismissing this case. To the extent this statement differs from

the record, this statement states the reasons.

The background of the matter before the Court is -

described in the decision dismissing the case, 7 F. Supp. 2d

896 (E.D. Mich. 1998), the Court of Appeals decision

reversing that dismissal, 174 F.3d 422 (6th Cir. 1999), and

the Memorandum and Order of January 24, 2000.

Parenthetically, the Memorandum and Order is

miscaptioned — the state defendants are not parties to the

case.

The Court of Appeals decision was a narrow one.

Michigan Peat reads too much into it. The Court of Appeals

simply said that the sign-off by the Environmental Protection

Agency (EPA) on the draft permit was final agency action

and that this Court had subject matter jurisdiction. The Court

of Appeals did not comment on the merits of the complaint.

Michigan Peat also reads too much into footnote 1 of the

Court of Appeals decision, 175 F.3d at 424, when it said,

In the most simplistic terms, the section 404 program

administered by a state “suspends” the federal program

because the state’s own program is environmentally

sound.

The Court of Appeals did not say that the state program

supersedes the federal program.

EPA’s final agency action was merely to agree to the text

of the draft permit. The draft permit, however, was subject to

limitations and conditions. If any limitation or condition of

the draft permit was changed, there was no longer agreement

on the part of EPA. Michigan Peat’s refusal to sign the draft

permit effectively meant that there was no permit.

Michigan Peat’s administrative appeal under Michigan’s

Administrative Protection Act is an effort to change the

limitations and conditions of the draft permit. If Michigan

Peat is successful in the administrative appeal, the end result

will be a recommendation to the director of Michigan’s

Department of Environmental Quality (DEQ). If the director

accepts any changes recommended _ through _ the

administrative proceeding, the permit which issued will

contain different limitations and conditions than those to

which EPA consented. Effectively, Michigan Peat will not

have a valid permit because EPA did not have approve it.

The refusal to sign the draft permit vitiated the EPA’s

consent.

Whether Michigan Peat can “cherry-pick” the draft permit

by appealing only certain of its conditions and limitations is

irrelevant. EPA made clear in its consent to the draft permit

that Michigan Peat could not “cherry-pick” its limitations and

conditions.

Further, the grandfathering issue is a red herring. Initially,

Michigan Peat did not request a finding that the 749 acres be

grandfathered. The “finding” in the March 21, 1995 DEQ

letter accompanying the draft permit that the 749 acres was

grandfathered was gratuitous. There is no basis in Michigan

law for grandfathering any particular parcel of land.

Footnote 3 of page 3 of the DEQ’s Prehearing Statement in

ontested Case Number 94-08-0342, (the _ state

administrative proceeding), references the 749 acres being

grandfathered, and _ specifically _ states: “This legal

determination by Mr. Zbiciak is incorrect.”

The statement by the DEQ that the legal determination of

grandfathering was incorrect should have been called to the

Court’s attention. In any event, the statement is confirmation

of the finding that there is no grandfather provision in

Michigan law.

Michigan Peat appears to argue that EPA either abdicated

its authority to enforce federal law or by delegation agreed

that state law would supercede [sic] federal law. To state the

proposition answers itself. If, in fact, state law contains a

grandfather provision, then the state regulatory program is

more limited than the federal program and the agreement to

give the state authority to enforce its program in lieu of the

federal program was improper because it would mean that

there is less regulation under state law than there is under

federal law.

Finally, the Court has made two errors for which it accepts

responsibility. In dismissing the case, 7 F. Supp. 2d at 898, it

said

The final permit decision specifically acknowledged that

the 749 acres of Minden North were mined for peat prior

to 1980, and therefore neither the state nor federal

government had jurisdiction over them pursuant to § 404

of the CWA.

Including the word “federal” was incorrect.

In the Memorandum And Order of January 24, 2000 ai p.6,

it said:

A further proceeding is therefore required to determine

whether the parties agreed that the 749 acres were exempt

from regulation.

It should have framed the issue as:

whether the 749 acres were exempt from regulation

There is nothing in the Clean Water Act, 33 U.S.C. § 1251,

et seq., or in the delegation to the state under section 404(a),

40 C.F.R. § 233.70, to exempt from regulation the 749 acres

because Michigan’s Wetlands Protection Act, M.C.L.

§324.30301 et seg., was enacted subsequent to the date this

acreage was first harvested.

An appropriate order and judgment will be separately

entered.

/s/

AVERN COHN

Dated: January 12, 2001

Detroit, Michigan

}

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Case No. 97-72336-DT

MICHIGAN PEAT, a division of Bay-Houston Towing Co.,

’ Plaintiff,

. REGIONAL ADMINISTRATOR OF REGION V OF THE

i UNITED STATES ENVIRONMENTAL PROTECTION

‘ AGENCY, UNITED STATES ENVIRONMENTAL

; PROTECTION AGENCY, and UNITED STATES OF

AMERICA,

Defendants.

January 12, 2001

: Biba Ne a St ag nat hy as tained tab) Ala anos

JUDGMENT IN A CIVIL CASE

HON. AVERN COHN

This action came on for hearing before the Court. The

issues have been duly heard and briefed. The Court

concludes as follows:

aa oe eo are

X 1. At no time did the parties reach an agreement that the

: 749 acres of the Minden Bog, which plaintiff

Michigan Peat (Michigan Peat) began harvesting prior

to October 1, 1980, were exempt from regulation

regardless of the other issues relating to the permit

application. Whether or not there was an agreement

is irrelevant. The Clean Water Act (CWA) does not

provide for grandfathering specific acres nor does the

Michigan Wetlands Protection Act.

2. Nothing in the action by the State of Michigan in

offering the March 1995 proposed permit to Michigan

Peat, nor the proposed permit itself, served to waive

the application of CWA section 404 to Michigan

Peat’s peat harvesting activities from the time the

CWA became effective.

3. Defendant United States Environmental Protection

Agency (EPA) is not bound by its conditional

withdrawal of objection to the March 1995 proposed

permit as a consequence of Michigan Peat’s failure

[to] sign the draft permit and agree to its conditions

and limitations.

4. The Court incorporates by reference the conclusions

stated in the January 24, 2000 Memorandum and

Order Denying Plaintiffs Motion for Partial

Summary Judgment as to Count I and Granting In

Part and Denying In Part Defendants’ Cross-Motion

for Summary Judgment as to Count I. As to the

remaining counts in the Complaint (Counts II-VIII),

they are restatements of Count I and/or have

previously been dismissed.

Therefore, it is ORDERED AND ADJUDGED | that

plaintiff take nothing and receive no declaratory or other

relief; and that final judgment is entered in favor of

defendants Regional Administrator of Region V of the

United States Environmental Protection Agency, United

States Environmental Protection Agency, and United States

of America on the complaint.

/s/

AVERN COHN

Dated: January 12, 2001

Detroit, Michigan

10a

APPENDIX C

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Case No. 97-72336

MICHIGAN PEAT, a division of Bay-Houston Towing Co.,

Inc.

Plaintiff,

REGIONAL ADMINISTRATOR OF REGION V OF THE

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY, UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY, and UNITED STATES OF

AMERICA,

Defendants.

MEMORANDUM AND ORDER DENYING

PLAINTIFF’S MOTION FOR PARTIAL SUMMARY

JUDGMENT AS TO COUNT I AND GRANTING IN

PART AND DENYING IN PART DEFENDANTS’

CROSS-MOTION FOR SUMMARY JUDGMENT AS

TO COUNT I

HON. AVERN COHN

lla

I. Introduction

Plaintiff, Michigan Peat, a division of Bay-Houston

Towing Co., is suing defendants the United States of

America, the United States Environmental Protection Agency

(EPA), the Regional Administrator of Region V of the EPA

(Region V Administrator), the State of Michigan, the

Michigan Department of Environmental Quality (MDEQ)

and the Director of the MDEQ (Director), seeking

declaratory relief. The background of this action is set forth

in the Court’s prior memorandum and order granting

defendants’ motion to dismiss on procedural grounds,

7 F.Supp.2d 896 (E.D. Mich. 1998), and the decision of the

Court of Appeals for the Sixth Circuit reversing it, 175 F.3d

422 (6th Cir. 1999). Before the Court are cross-motions for

summary judgment as to Count I only of the complaint. Bay-

Houston seeks a declaration that:

1. The March 1995 § 404 permit decision is final and

binding on the federal defendants;

2. The final permit decision determined that 749 acres

were opened for peat harvesting prior to 1980 and

activity on these acres does not require a § 404

permit; and

3. Michigan Peat has a right to administratively appeal

the conditions of the permit issued for an additional

202 acres, and the right to continue operations on the

202 acres pending resolution of its administrative

appeal.

The government seeks summary judgment on these same

issues, and to the remaining declarations sought by Bay-

Houston in Count I that:

1. Bay-Houston’s permit process, including its

administrative appeal and takings case, complies with §

404;

2. the transfer of permitting authority back to the Army

Corp of Engineers (Corp) was illegal; and

12a

3. Michigan Peat’s conduct fully complies with the §404

program for the State of Michigan.

For the reasons that follow, Michigan Peat’s motion will be

denied and defendants’ motion will be granted in part and

denied in part.

II. Summary Judgment Standard

Summary judgment will be granted when the moving

party demonstrates that there is “no genuine issue as to any

material fact and that the moving party is entitled to a

judgment as a matter of law.” Fed-:R.Civ.P. 56(c). There

is no genuine issue of material fact when “the record taken

as a whole could not lead a rational trier of fact to find for

the non-moving party.” Matsushita Elec. indus. Co., Ltd.

v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89

L.Ed.2d 538 (1986). The Court must decide “whether the

evidence presents a sufficient disagreement to require

submission to a [finder of fact] or whether it is so one-

sided that one party must prevail as a matter of law.” Jn re

Dollar Corp., 25 F.3d 1320, 1323 (6th Cir. 1994) (quoting

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52,

106 S.Ct. 2505, 91 L-Ed.2d 202 (1986)). In so doing, the

Court “must view the evidence in the light most favorable

to the non-moving party.” Employers Ins. of Wausau v.

Petroleum Specialties, Inc., 69 F.3d 98, 101 (6th Cir.

1995).

III. March 1995 Permit Decision

Bay-Houston argues that the § 404 permit the MDNR

issued in March 1995 — to which the EPA initially objected

and later withdrew its objections — allows it to continue

harvesting without a permit. The permit decision

grandfathered 749 acres historically mined in Minden

North prior to October 1, 1980, and declared them outside

the regulation of the Goemaere-Anderson Wetland

Protection Act. Bay-Houston appealed the other portions

of the permit which allowed an “after-the-fact” permit for

202 acres and disallowed harvesting of other acreage

which had never been harvested. Presumably in order to

13a

preserve its right of appeal, Bay-Houston did not sign the

permit. Bay-Houston says the decision of the Sixth Circuit

settles the question because the court “deemed the March 21,

1995 permit decision a final agency action under § 404.”

The Sixth Circuit reversed this Court’s decision that

Michigan Peat could not challenge the EPA’s decision

denying it a permit because the EPA had not yet taken a

“final agency action” in that it had not filed an enforcement

action. See Crystal River v. United-States Envtl. Protection

Agency, 35 F.3d 1073 (6th Cir. 1994). The Sixth Circuit

reversed on the ground that the EPA’s decision to withdraw

its objections to the 1995 permit was a final decision even

though an enforcement action had not been filed. Regarding

Michigan Peat’s failure to sign the permit, the Sixth Circuit

stated: “[w]hile it is true that the 1995 permit specifically

stated that it was not final or valid until signed and accepted

by the permittee and returned to the MDEQ, the logical

conclusion is that the EPA’s action was final” because

“[s]tatutorily, there was nothing left for the EPA to do once it

signed off on the proposed permit.” 175 F.3d at 428.

The Sixth Circuit’s decision that the EPA had taken final

action does not mean that the permit was final. Although the

Sixth Circuit held that the EPA’s conditional withdrawal of

objections was a reviewable final agency action, it made no

comparable finding of finality as to the March 1995 permit

itself. Although there was nothing left for the EPA to do,

there was something left for Michigan Peat to do. Michigan

Peat had to sign the permit within the specified time, and

therefore to accept its conditions. Administratively appealing

the permit did not make it effective. In addition to the EPA’s

power to object to an MDEQ permit decision, under

Michigan law a challenged permit is not deemed final until

the outcome of the hearing is determined. MCL

§ 324.30307. Nothing in the Sixth Circuit’s decision

Suggests otherwise and Bay-Houston has cited no authority

for the position that it could accept the permit and operate

under it without signing it and while administratively

appealing it.

This does not resolve the question of the 749 acres which

Bay-Houston argues the EPA determined were simply not

subject to regulation and therefore did not require a permit.

The government responds that this was part and parcel of the

entire permit and Bay-Houston had to accept all of the

provisions of the permit or none of them.- It points out that

under its regulations the acreage would not qualify for

grandfathering, 40 Fed. Reg. 31,320, 31,326 (July 25,1975)

(codifying 33 CFR § 209.120(e)(2)(iii) (1975)) (because

grandfathering extends to discharges completed before

specified dates, not to acreage), and that the EPA only agreed

to this provision to assure the other conditions of the permit.

Specifically, the “after-the-fact” permit required remediation

of not only the 202 acres, but the 749 grandfathered acres as

well. See Condition N. Remediation was the government’s

principal concern.

The 749 acres raise a triable issue. The cover letter to the

permit and the permit itself, allow a finder of fact to conclude

that the permit applies only to harvesting the 202 acres.

According to the cover letter, the 749 acres did not require a

permit because they were grandfathered. Similarly, the

remaining unharvested acreage was not included in the

permit because it was considered unharvestable. The permit

itself — what required signature by Bay-Houston — applied

only to the 202 acres. The only signature line appears on the

permit; there is no signature line on the cover letter. The

permit does discuss reclamation of the 749 acres, but this

does not necessarily mean that the grandfather clause is part

of the permit; it could simply mean that reclamation of the

749 acres was a condition to harvesting the 202 acres. While

the cover letter does discuss that signature of the permit

requires the applicant to agree[] to accept and comply with

all limitations (conditions) and terms of the permit,” this

Statement refers only to the previous paragraph which

concerns only the 202 acres, not the 749 grandfathered acres.

This is further made clear by the statement in the preceding

paragraph: “Please be advised that failure to accept the

permit leaves the company with no authorization to extract

peat within the areas opened since October 1, 1980.” No

iSa

mention is made of the 749 acres harvested prior to

October 1, 1980. A further proceeding is therefore required

to determine whether the parties agreed that the 749 acres

were exempt from regulation regardless of the other issues

relating to the permit application.

IV. Settlement Agreement

Bay-Houston also filed a takings action against the State,

MDNR, and its director, which is pending in the Michigan

Court of Claims. -A settlement agreement reached in that

action in June 1995 allows Bay-Houston to continue

harvesting on the 202 acres during the pendency of the action.

In addition to arguing that Bay-Houston is bound by the 1995

permit decision, Bay-Houston argues that the EPA is bound

to the MDNR’s stipulation to allow interim harvesting on the

202 acres.

The EPA cannot be bound by the settlement agreement

reached in the takings action between the State and Michigan

Peat. The agreement is a settlement of the takings case to

which the EPA is not a party.

Even if the agreement somehow also relates to the

administrative appeal, the EPA is still not bound by it.

While the state and the EPA are “partners” in the § 404

NPDES program, Bay-Houston cites no authority for its

position that the state can bind the EPA in a separate action

to which the EPA is not a party. See United States v. Ford

Motor Company, 814 F.2d 1099 (6th Cir. 1987) (Refusing to

bind the EPA to state court judgment in Clean Air Act case

where the EPA was not a party to the state action). The

“partnership” between the state and the EPA does not obviate

the federal government’s oversight jurisdiction. The 1977

conference report that accompanied newly-enacted §§ 404(g)

through (j) states:

The conferees wish to emphasize that such a State

program is one which is established under State law

which functions in lieu of the Federal program. Jt is not a

delegation of Federal authority.

MCRL RS: la al

l6a

H.R. Conf. Report 95-830, at 104 (1977), reprinted in 3 A

Legislative History of the Clean Water Act of 1977, at 288

(Comm. Print 1978) (emphasis added). As discussed by the

Court in its prior decision, 7 F.Supp.2d at 897-98, and

recognized by the Sixth Circuit in its decision, 175 F.3d at

n.1, the § 404 NPDES program does not give all authority to

the state.

V. Transfer of Permit Authority to the Army Corps of

Engineers

The government seeks summary judgment as to the claim

that it improperly transferred § 404 regulatory authority from

the MDNR to the Corps when MDNR unilaterally issued a

state-only § 404 permit. The Court has previously discussed

the § 404 permitting process, including that under § 404()) of

the CWA the authority to issue § 404 permits is transferred

from a state back to the Corps as a matter of law wherever

a state has failed within the time prescribed by law to

amend its proposed permit to conform to objections raised

by the EPA. 33 U.S.C. § 1344(Q). Friends of Crystal

River v. EPA, 35 F.3d 1073, 1080 (6th Cir. 1994). While it

is true that the State here did satisfy the EPA’s objections

during the 90 day period as to-the March 1995 permit, and

only later issued the state-only permit which failed to

conform to the EPA’s objections, there is no compelling

reason to bar the transfer of authority beyond this 90 day

period. The state-only permit constituted a second permit

decision. In addition, the circumstances here — the State

recently suffering a huge verdict against it in a takings

case and consequently taking a guarded approach to Bay-

Houston’s takings action — are. unusual. If anything,

however, these circumstances demonstrate the reason why

Congress provided for continued federal oversight over the

§ 404 process.

The fact that the agreement between the EPA and MDEQ

includes the provisions of Michigan’s Administrative

Procedures Act (MAPA), MCL § 24.201, et seq., 40 CFR

§ 233.70(a), does not mean that the government is bound

by those proceedings. As discussed, “[t]he Section 404

17a

scheme does not usurp the state’s authority to issue a

permit under state law.” 175 F.3d at 425. Michigan Peat

had the right to administratively appeal MDEQ’s decision,

and MDEQ had the authority to issue a state-only permit.

None of this changes the provision under 40 CFR § 233.30

that if the state does not satisfy the EPA’s objections or

deny the permit, authority to process the § 404 permit is

transferred to the Corps. The government is therefore

entitled to summary judgment on this claim.

VI. License

Michigan Peat argues that it is operating under a license

granted by the State of Michigan by agreement on

February 7, 1958 and by warranty deed on June 7, 1962. The

MAPA allows a licensee to continue operating during the

pendency of an administrative appeal. Michigan Peat argues

that the agreement granted it a license and that it has the right

to continue to perform under this license during the pendency

of its administrative appeal of the °95 permit decision. A

license is defined under the MAPA to include “the whole or

part of an agency permit, certificate, approval, registration,

charter or similar form of permission required by law... .”

MCL § 24.205(1). “This broad definition under the [MAPA]

evidences a legislative intent to include practically any form

of permission required by law.” Bois Blanc Island Twp v.

NRC, 158 Mich. App. 239, 242 (1987). In other words, a

license is “permission by a competent authority to do an act

which, without such permission would be illegal.” Westland

Convalescent Center v. Blue Cross & Blue Shield of

Michigan, 414 Mich. 247, 272 (1982).

The agreement and the warranty deed, however, have

nothing to do with licensing. Under the 1958 agreement,

Michigan Peat was to enter into a land contract with private

persons to purchase certain tax reverted lands in Tuscola

County, Michigan, and thereafter exchange these lands with

the Department of Conservation in exchange for 1,280 acres

of wetlands within the Minden Bog. The agreement stated

that “[d]uring [the] period” of the land contract, Michigan

Peat “shall have the right to remove peat from the said land,

18a

provided such removal shall be limited to an area not to

exceed 500 acres” and “to erect buildings, lay roads and rail

tracts and dig ditches on the said land.” Michigan Peat paid

off the land contract and, on June 7, 1962, executed a

warranty deed conveying the Tuscola County lands to the

MDNR and in turn, received a quitclaim deed conveying

Minden North to it. The Minden North deed reserved to the

State all mineral rights “provided that muck, peat, and earth

shall be excepted from this reservation of minerals... .”

This real estate transaction has nothing to do with

regulatory agency permitting. The Department of

Conservation was a party to a real estate transaction, and

bargained for the rights it had in that capacity. Effectively it

allowed Michigan Peat to diminish the value of the property

during the term of the land contract by mining peat. Once

the land contract on the Tuscola County property was paid

off, the Department of Conservation gave Michigan Peat a

deed in which it reserved its mineral rights and specified that

peat was not one of their rights. Peat was dealt with as a

resource, not an environmentally regulated object.

Michigan Peat relies on Bois Blanc Island Twp., supra.

There, several of the plaintiffs obtained land use permits

under a predecessor statute to the Solid Waste Management

Act, but none were licensed under the current act. The

Michigan Court of Appeals held that the land use permits

constituted “licenses” under the MAPA. The sanitary landfill

permits were in the nature of a land-use permit, permitting

the plaintiffs to use state land for a specific purpose, here as a

sanitary landfill site.

Bois Blanc Island Twp. does not apply here. The “license”

in that case was an agency-issued permit. Here the purported

“licenses” are a real estate agreement and a deed. The

Department of Conservation did not exercise its regulatory

power to issue a permit as it did in Bois Blanc Island Twp.

The Department of Conservation acted instead as a property

owner — it sold property it owned, including the right to |

deplete a natural resource on the property. Michigan Peat’s

rights are those of a buyer of property, and any recourse it

may have against the MDNR as a seller is based in property

law. The agreement and deed therefore did not allow

Michigan Peat to harvest peat without a § 404 permit.

VII. Conclusion

The MDEQ administrative appeal and the state takings

actions are remedies Bay-Houston has against the State. If

the State was the barrier between Bay-Houston and a § 404

permit, these remedies would settle the matter. Now the

principal barrier is the EPA. The EPA has oversight

jurisdiction and the EPA has objected to the state-only

permit. For the reasons stated, Michigan Peat’s motion for

partial summary judgment as to Count I is DENIED and

defendants’ cross-motion is GRANTED IN PART AND

DENIED IN PART. The Deputy Clerk will schedule a status

conference regarding further proceedings. The fact issue

which continues in the case as to Count I is whether the

parties agreed that the 749 acres were exempt from

regulation regardless of the other issues relating to the permit

application.

SO ORDERED.

/s/

AVERN COHN

Dated: January 24, 2000

Detroit, Michigan

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APPENDIX D

No. 98-1595

UNITED STATES COURT OF APPEALS,

SIXTH CIRCUIT

MICHIGAN PEAT, A DIVISION OF

BAY-HOUSTON TOWING COMPANY,

Plaintiff-Appellant,

—

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY; United States of America; Regional

Administrator of Region V of the United States

Environmental Protection Agency, State of Michigan;

Michigan Department of Environmental Quality; Director of

Michigan Department of Environmental Quality,

Defendants-Appellees.

Argued Feb. 2, 1999.

Decided April 28, 1999.

Before: SILER, BATCHELDER, and COLE, Circuit

Judges.

OPINION

SILER, Circuit Judge.

Plaintiff, Michigan Peat, a division of Bay-Houston

Towing Co., filed a declaratory action against defendants, the

United States of America, the United States Environmental

Protection Agency (“EPA”), the Regional Administrator of

Region V of the EPA (“Region V Administrator’), the State

of Michigan, the Michigan Department of Environmental

2la

Quality (“MIDEQ”), and the Director of the MIDEQ

(“Director”), generally seeking a finding that defendants

(1) acted contrary to the regulations and statutory law that

govern the unified Clean Water Act (“CWA”) Section 404

program, and (2) violated Michigan Peat’s constitutional

rights. The district court dismissed the action against the

federal defendants for lack of subject-matter jurisdiction and

dismissed the action against the state defendants on grounds

that the suit was barred by the Eleventh Amendment. For the -

following reasons, we AFFIRM the dismissal of the action

against the state defendants and REVERSE the dismissal of

the action against the federal defendants.

BACKGROUND

Statutory Framework

The CWA was enacted “to restore and maintain the

chemical, physical, and biological integrity of the Nation’s

waters.” 33 U.S.C. § 1251(a). It prohibits the discharge of

any pollutant into the navigable waters of the United States

except when authorized by a permit or exception spelled

out in the Act. See 33 U.S.C. § 1311(a). Wetland areas

are considered navigable waters for purposes of applying

the Act. See United States v. Riverside Bayview Homes,

Inc., 474 U.S. 121, 106 S.Ct. 455, 88 L.Ed.2d 419 (1985).

Section 404 of the CWA authorizes the Secretary of the

Army, acting through the United States Army Corps of

Engineers (“Corps”), to issue permits allowing the release of

dredged and fill matter into the waterways subject to the

terms and procedures set forth in the CWA. See 33 U.S.C.

§ 1344(a). The CWA empowers the EPA to authorize a

unified wetlands permitting program which gives a state the

authority to render a comprehensive federal/state wetland

permit decision with the federal government playing the role

of the overseer in the consideration of permit applications.

See 33 U.S.C. §§ 1344(g)-(m); 40 C.F.R. §§ 233.10-233.16,

233.53. In short, the scheme provides applicants with “one

22a

stop shopping” for a wetland permit.' Under the Section 404

program, the EPA retains full enforcement authority. See 33

U.S.C. § 1344(n). To date, only Michigan and New Jersey

have been approved to operate the Section 404 scheme. See

40 C.F.R. §§ 233.70, 233.71. Michigan has been operating

its program for 13 years, currently through the MIDEQ. See

40 C.F.R. § 233.70.

In order to obtain a permit to engage in activity within a

wetland in Michigan, an applicant must proceed through the

prescribed permit process. See 40 C.F.R. § 233.30. A brief

outline of the steps in the application process follows:

1. An applicant must file an application with the

Director of the MIDEQ.

2. Once the application is deemed complete, the MIDEQ

must issue a public notice announcing the opportunity to

request a public hearing.

a. The minimum time for public notice is 30 days during

which interested parties may express their views concerning

the application.

b. Any interested person may request a public hearing,

which will be held at the MIDEQ’s discretion.

3. The MIDEQ must promptly send the EPA a copy of

the application.

4. Within 10 days of its receipt of the application, the

EPA must forward the application to the Corps, the United

States Fish & Wildlife (“USFW”), and the National

Management Forestry Service (“NMFS”).

' In the most simplistic terms, the Section 404 program

administered by a state “suspends” the federal program in that

particular state because the state’s own program is environmentally

sound. See 33 U.S.C. §§ 1344(g)(1), 1344(h\(2)(A). The Section

404 program does not allot all the power to the state or to the

federal government, but rather the two share joint control. In

essence, they are partners.

23a

a. These agencies must advise the EPA of their desire to

comment on the application within 15 days of their receipt of

the application.

b. If these agencies desire to comment, they must submit

their comments to the EPA within 50 days of their receipt of

the application.

5. Within 30 days of its receipt of the application, the

EPA must indicate to the MIDEQ in writing whether it will

comment on the application.

a. If the EPA declines to comment, the MIDEQ may

issue a permit after the close of the public comment period

upon (1) reviewing the application for compliance with

designated environmental criteria, and (2) considering all

comments received. The MIDEQ’s determinations regarding

each application must be in writing and the basis thereof

must be outlined.

6. Within 90 days of its receipt of the application, the

EPA must provide its written comments and issue objections

to the permit request.

a. Ifthe EPA timely objects, the State shall not issue the

proposed permit unless it modifies the permit in accordance

with the EPA’s comments.

b. If the State does not satisfy the EPA’s objections or

deny the permit, authority to process the Section 404 permit

is transferred to the Corps.

c. In cases where the EPA objects to the issuance of a

permit, within 90 days after the propoundment of any

objections by the EPA and after discussions with the Director

of the MIDEQ, the EPA may withdraw its objections and a

final permit decision may issue.

d. If the EPA’s objections are not timely, the State may

not issue a permit, but must forward the application to the

Corps.

24a

7. Based on whether 6(a), (b), (c) or (d) occurs, a permit

may or may not issue. See 33 U.S.C. § 1344(j); 40 C.F.R.

§§ 233.30-53. .

The Section 404 scheme does not usurp the state’s

authority to issue a permit under state law.

Facts

Michigan Peat engages in business activities which include

the extraction of peat. It owns and controls two

noncontiguous parcels of land in Minden, Sanilac County,

Michigan, referred to as Minden North and Minden South and

situated within a wetland area known as the Minden Bog. The

Minden North parcel is approximately 2,000 acres and the

Minden South parcel comprises approximately 819 acres.

Since 1958, Michigan Peat has extracted peat from a portion

of the Minden North site.

In 1991, Michigan Peat filed a wetland permit application

under the Section 404 program which would authorize it to

discharge dredged or fill materials and to conduct related

activities at the Minden tracts. Midway through the

application process, the State of Michigan requested that

Michigan Peat place its then incomplete application on hold

and develop an environmental site assessment (“ESA”).

Michigan Peat complied; it developed an ESA from 1992-

1994. In September 1994, Michigan Peat renewed its permit

application to expand its operations to Minden South and to

the unopened portions of Minden North. Specifically,

Michigan Peat requested (1) a definition concerning the extent

of the peat mining areas which were opened prior to

October 1, 1980, (2) an after-the-fact authorization for areas

where peat mining was initiated after October 1, 1980, and

(3) authorization to expand the peat removal operations into an

additional 1,792 acres of previously unmined wetlands.

Thereafter, the EPA reviewed Michigan Peat’s application

and on October 6, 1994 notified the MIDEQ Section 404

Director that it intended to comment. The EPA forwarded its

written comments, as well as those of the Corps and the

25a

USFW, to the MIDEQ on December 23, 1994. The EPA

objected to the permit application which sought permission to

expand mining from 951 to all 2,819 acres of the facility.

Michigan Peat responded to the EPA’s objections. The

MIDEQ and the EPA discussed the latter’s objections and

created a revised draft permit. With its concerns addressed by

the new draft permit, on March 21, 1995 the EPA withdrew its

objections.? Thereafter, the MIDEQ tendered a proposed

permit to Michigan Peat along with a letter which outlined the

proposed permit. The letter read in part:

Approximately 749 acres of the bog [Minden North]...

were impacted prior to October 1, 1980 and therefore do

not fall under [our] jurisdiction.

Approximately 202 acres of the bog [Minden North] have

been impacted from October 1, 1980 to the present... .

[A]n after the fact permit can be issued for the 202-acre

area if the applicant agrees to accept all conditions shown

on the attached permit. Please be advised that failure to

accept the permit leaves the company with no

authorization to extract peat within the areas opened since

October 1, 1980.

Attached you will find a modified permit for continuation

of peat mining in areas defined in the paragraph above.

This permit is not valid until it is signed by the permittee.

The applicant is requested to fully review the limitations

(conditions) and terms of the permit. Upon agreeing to

accept and comply with all limitations (conditions) and

terms of the permit, the applicant must sign, date, and

return it to this office. The signed permit must be

2 The EPA’s letter to the MIDEQ stated:

The State’s draft permit effectively addresses concerns

previously raised by EPA and, on that basis, | am withdrawing

our objection in accordance with provisions of 40 C.F.R.

233.50(j), on condition than the final permit not differ

materially from this draft. If there are substantive changes to

this draft decision by MDNR, we would need to review these

changes to determine whether or not they are material to us.

26a

received by this office no later than 15 days from the date

of this letter.

[T]he portion of your application proposing expansion of

the peat removal operation into the unmined area of the

Minden Bog [to wit—the remainder of Minden North,

approximately 1049 acres, and the entire Minden South

parcel, approximately 819 acres] is hereby denied.

The permit also set forth which lands Michigan Peat could

impact and outlined the limitations (conditions) imposed on

Michigan Peat upon acceptance of the proposed permit. Just

above the signature line, the permit read: “This permit shall

become valid on the date of signature by the permittee. Upon

signing by the permittee, a copy of the signed permit must be

returned to the [MIDEQ].” Michigan Peat did not sign and

return the tendered permit.

Rather, Michigan Peat decided to accept Part I of the

decision, but to contest Parts II and III in two different

forums. Pursuant to Michigan’s Administrative Procedures

Act, MICH. COMP. LAWS § 24.201 et seg. (“APA”),°

Michigan Peat initiated a state administrative appeal of

Part II of the permit, the after-the-fact permit subject to

conditions. Part II of the permit contained several conditions

unacceptable to Michigan Peat, to wit—{1) a requirement

that Michigan Peat place land in a conservation easement in

order to utilize the permit, (2) a complete waiver

requirement, and (3) an indemnification requirement for the

benefit of the State of Michigan. Concurrently, Michigan

Peat filed an action against the MIDEQ in the Michigan

Court of Claims asserting federal and state takings claims

based on Part III of the permit decision, the complete

prohibition against peat harvesting on approximately 2,000

> The APA contains a provision that allows a business activity

of a continuing nature operating under a previous license or charter

to continue to operate while appealing a permit decision. See

MICH. COMP. LAWS § 24.291.

27a

acres of Michigan Peat’s property. Shortly after the state suit

was filed, the parties entered a joint stipulation, which

allowed Michigan Peat to continue operating on the 951

acres of the Minden facility that the MIDEQ had authorized

in Part I of its proposed permit.

On June 6, 1997, the MIDEQ Director issued Michigan

Peat a state-only permit which granted Michigan Peat

authorization under ail applicable state wetland laws to

extract peat on 2,819 acres of the company’s Minden parcels,

subject to certain restrictions. The permit stated that it

modified the March 21, 1995 permit decision by allowing the

expansion of peat extraction into all previously unmined

portions of Minden North and Minden South. The permit

concluded with the following caveat:

ISSUANCE OF THIS PERMIT DOES NOT

AUTHORIZE ANY WORK UNDER THE

AUTHORITY OF THE FEDERAL CLEAN WATER

ACT. Any work initiated on this project without required

§ 404 approval may be considered a violation of Federal

Law. For further information, contact the United States

Environmental Protection Agency, Region 5.

The cover letter which accompanied the state permit

suggested that Michigan Peat contact the Corps for federal

authorization.

On June 18, 1997, the EPA wrote the MIDEQ (with a copy

to Michigan Peat) in response to the issuance of the state

permit. The EPA observed that the state permit differed

greatly from the proposed Section 404 permit, which it

contended had been rejected by Michigan Peat by its refusal

to sign and return it and by its dual challenges to it and thus

had never become effective. Additionally, the EPA

articulated that it had objected to earlier proposals to

authorize certain activities encompassed in the new state

permit and reiterated its previously-stated objections.

Finally, the EPA concluded that because the MIDEQ had

failed to issue a final permit which satisfied the EPA’s

;

}

28a

objections, authority to process Michigan Peat’s permit

application rested with the Corps by operation of law.

On June 23, 1997, the Corps advised Michigan Peat that it

would handle the Section 404 permitting procedure with

regard to the Minden parcels and would begin its process

upon receipt of a complete application.

Course of Proceedings

Prior to the issuance of the state-only permit, on May 16,

1997, Michigan Peat filed for declaratory relief in federal

court specifically seeking a determination that: (1) Michigan

Peat’s conduct fully complies with the Section 404 program

for the State of Michigan; (2) Michigan Peat’s permit

process, including the appellate and takings remedies

pursued by Michigan Peat fully comply with and are a part of

the Section 404 program; (3) the federal government is

bound by the March 1995 permit decision; (4) a state court

order be entitled to full faith and credit; (5) the EPA is barred

by estoppel from modifying Michigan’s approved permit

program and circumventing the permit process; (6) the EPA’s

express threats to circumvent the CWA and its promulgated

regulations including its demand that Michigan Peat stay or

dismiss its constitutional and statutory takings claims,

constitute denial of Michigan Peat’s procedural and

substantive due process rights under the U.S. Constitution;

(7) the EPA’s effort to modify the program and circumvent

the permit process constitutes an impairment of contract in

violation of Article I, section 10, clause 1 of the US.

Constitution; (8) Michigan Peat’s harvesting activities are

exempt from regulation under Michigan’s Section 404

program; (9) the disparate treatment of Michigan Peat under

the delegated program constitutes a violation of the equal

protection clause of the U.S. Constitution; and (10) the state-

only permit does not modify the 1995 permit decision and

does not strip Michigan Peat of its appellate rights and

remedies under the Section 404 program. Subsequently, the

district court dismissed the claims asserted against the state

defendants based on their Eleventh Amendment immunity,

and dismissed the claims asserted against the federal

29a

defendants for lack of subject-matter jurisdiction over suits

for pre-enforcement relief.

DISCUSSION

The district court erred by dismissing Michigan Peat’s

action against the federal defendants.

We review questions of subject-matter jurisdiction

de novo. See Friends of the Crystal River v. United

States Envtl. Protection Agency, 35 F.3d 1073, 1077 (6th

Cir. 1994).

Michigan Peat argues that the issuance of the March 21,

1995 permit was a final agency action and therefore subject

to judicial review. On the other hand, the federal

defendants contend that the issuance of the proposed permit

was not a final agency action and therefore not subject to

judicial review. Michigan Peat correctly cites Friends of

the Crystal River, a case invoiving the CWA Section 404

program in Michigan. In that case, this court recognized the

difference between challenges to final agency actions and

challenges to preenforcement actions and stated that the

latter are not subject to judicial review while the former are

subject to judicial review. Jd. at 1077-78.

The federal defendants’ reliance on Southern Ohio Coal

Co. v. Office of Surface Mining, Reclamation, and

Enforcement, 20 F.3d 1418, 1426-27 (6th Cir. 1994), is

misplaced. In that case, this circuit followed the lead of the

Fourth and Seventh circuits which previously found that

“district courts lack jurisdiction to review compliance

orders prior to the commencement of enforcement

proceedings.” Jd. (citing Southern Pines Assocs. v. United

States, 912 F.2d 713, 716 (4th Cir. 1990), and Hoffman

Group Inc. v. Envtl. Protection Agency, 902 F.2d 567, 569

(7th Cir. 1990)). Southern Ohio Coal Co. involved an

emergency situation constituting a violation of an existing

Section 402 permit. Plaintiff in that case challenged the

EPA’s pre-enforcement emergency response activity, not a

final agency action.

30a

The outcome of this issue turns on whether the EPA

committed a final agency action. In the case at bar, the

federal defendants timely voiced their objections throughout

the application process, but ultimately withdrew them and

agreed to the proposed 1995 permit that the MIDEQ sent to

Michigan Peat. While it is true that the 1995 permit

specifically stated that it was not final or valid until signed

and accepted by the permittee and returned to the MIDEQ,

the logical conclusion is that the EPA’s action was final.

Statutorily, there was nothing left for the EPA to do once it

signed off on the proposed permit. Moreover, if Michigan

Peat did sign the permit it would have waived the appellate

remedies it is pursuing. Therefore, the district court erred in

finding that it did not have subject-matter jurisdiction over

the final agency action.’

The district court did not err by dismissing Michigan

Peat’s action against the state defendants.

We review questions involving the Eleventh Amendment

de novo as they are issues of law. See Timmer v. Michigan

Dep't of Commerce, 104 F.3d 833, 836 (6th Cir. 1997).

The district court correctly found that the Eleventh

Amendment shields Michigan and the MIDEQ from

Michigan Peat’s claims. First, Congress has not abrogated

Michigan’s immunity. See Franks v. Kentucky Sch. for the

Deaf, 142 F.3d 360, 363 (6th Cir. 1998) (holding that the

* The federal defendants contend that Michigan Peat’s

complaint and amended complaint are mooted by the EPA’s filing

of an enforcement action against Michigan Peat in the United

States District Court for the Eastern District of Michigan in June

1998. The federal defendants rely on the theory of “prudential

mootness.” See Southern Utah Wilderness Alliance v.

Smith, 110 F.3d 724, 727 (10th Cir. 1997). Acceptance of

defendants’ argument turns on a finding that the enforcement

action will resolve the claims raised by Michigan Peat in the

underlying action. A review of Michigan Peat’s amended

complaint indicates that this is simply not the case. Accordingly,

this court finds that Michigan Peat’s appeal is not moot. Maybe

the two cases can be consolidated on remand of this case.

31a

only remaining authority under which Congress can

abrogate Eleventh Amendment immunity is section 5 of the

Fourteenth Amendment). Clearly, Congress has not

attempted to abrogate the states’ Eleventh Amendment

Immunity by enacting the CWA which was promulgated

under Article | powers, not pursuant to the Fourteenth

Amendment. Second, Michigan has not unequivocally

waived its Eleventh Amendment immunity. See Edelman v.

Jordan, 415 U.S. 651, 673, 94 S.Ct. 1347, 39 L.Ed.2d 662

(1974) (requiring that such a waiver be “unequivocally

expressed”). The fact that Michigan volunteered to involve

itself in the Section 404 program does not constitute consent

to be sued in federal court. As neither of the only two

circumstances exist in which Eleventh Amendment

immunity may be waived, the state defendants are protected

by the Eleventh Amendment. See Thiokol Corp. v.

Michigan Dep't of Treasury, 987 F.2d 376, 381 (6th Cir.

1993).

The district court was correct in finding that Michigan

Peat may not sue the Director of the MIDEQ under the

doctrine of Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52

L.Ed. 714 (1908). While the district court followed Jdaho

v. Coeur d'Alene Tribe of Idaho, 521 U.S. 261, 268-278,

117 S.Ct. 2028, 138 L.Ed.2d 438 (1997),° an additional

reason for shielding the Director from Michigan Peat’s

claims in federal court is that Michigan Peat failed to allege

that the Director has individually taken actions which

constitute continuing violations of federal law.

Accordingly, the district court’s dismissal of Michigan

Peat’s claims against the state defendants based on the

> The district court found that Michigan Peat “has not shown

lack of a ‘state forum available to vindicate federal interests’ and

does not seek ‘prospective relief based on federal violations’ to

vindicate a federal right.” While Michigan Peat contends that it

seeks to prevent future negative consequences flowing from legal

recognition of the issuance of the state-only permit, in actuality, to

cure the “future consequences” of the past act, the court must

address the past act, to wit--the June 1997 permit.

32a

Eleventh Amendment immunity bar is AFFIRMED and the

district court’s dismissal of Michigan Peat’s claims against

the federal defendants based on the lack of subject-matter

jurisdiction is REVERSED. This case is REMANDED for

further proceedings in accordance with this opinion.

33a

APPENDIX E

01-1154

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Filed November 16, 2001

MICHIGAN PEAT,

Plaintiff-Appellant,

¥.

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY, ET AL.,

Defendants-Appellees.

Nov. 16, 2001

BEFORE: MARTIN, Chief Judge; NELSON, Circuit

Judge; and RICE,* District Judge.

ORDER

The court having received a petition for rehearing en

banc, and the petition having been circulated not only to the

original panel members but also to all other active judges of

this court, and no judge of this court having requested a

vote on the suggestion for rehearing en banc, the petition for

rehearing has been referred to the original panel.

The panel has further reviewed the petition for rehearing

and concludes that the issues raised in the petition were

* Hon. Walter H. Rice, Chief United States District Judge for the

Southern District of Ohio, sitting by designation.

34a

fully considered upon the original submission and decision

of the case. Accordingly, the petition is denied.

ENTERED BY ORDER OF

THE COURT

/s/

Leonard Green, Clerk

35a

APPENDIX F

SUPREME COURT OF THE UNITED STATES

OFFICE OF THE CLERK

Washington, D.C. 20543-0001

February 5, 2002

Mr. John G. Roberts Jr.

Hogan & Hartson

555 13th Street, N.W.

Washington, D.C. 20004

Re: Michigan Peat

v. Environmental Protection Agency, et al.

Application No. 01A580

Dear Mr. Roberts:

The application for an extension of time within which to

file a petition for a writ of certiorari in the above-entitled

case has been presented to Justice Stevens, who on February

5, 2002, extended the time to and including March 18, 2002.

This letter has been sent to those designated on the

attached notification list.

Sincerely,

WILLIAM K. SUTER

Clerk

By /s/ Ruth Jones

RUTH JONES

Assistant Clerk

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.