III. The High Costs of Sue and Settle: Recent Examples
By design, sue and settle facilitates expensive, burdensome rules. First, as described above, it allows agency officials to evade political accountability for their actions by genuflecting to a judicially enforceable consent decree that mandates their action. As a result, officials face less pressure to moderate their approaches to regulation or to consider less burdensome alternatives. This, in turn, presents the risk of collusion and still more‐burdensome rules that would be politically untenable but for a consent decree. Second, due to skirting of the notice‐and‐comment procedure, officials may not even be aware of alternatives. Third, even when alternatives do present themselves, officials may lack the time to analyze and consider them—assuming, of course, that alternative approaches are not barred altogether by one or another provision of the consent decree. In sum, it may be expected that the rules resulting from consentdecree settlements will be, on the whole, less efficient, more burdensome, and more expensive than those adopted through the normal rulemaking process.
This has been borne out in recent practice:
- EPA’s Existing Source Performance Standards for Power Plants.
EPA committed to regulate carbon dioxide emissions from new and existing power plants under Section 111 of the Clean Air Act in a 2011 agreement with environmentalist groups and states.10 The settlement provides that EPA “will” propose “emissions guidelines for GHGs from existing [power plants]” and will promulgate “a final rule that takes final action with respect to the proposed rule,” despite considerable doubt as to the agency’s legal authority to regulate at all. In particular, Section 111(d) prohibits EPA from regulating the emission of “any air pollutant…emitted from a source category which is regulated under section ,” which (following EPA’s Mercury Rule) power plants are.11 On the day the settlement was announced, David Doniger, policy director of the Natural Resources Defense Counsel, emailed Regina McCarthy, then‐Assistant Administrator for EPA’s Office of Air and Radiation and now EPA Administrator, to congratulate her, calling the settlement “a major achievement.”12 McCarthy returned the compliment, saying, “[t]his success is yours as much as mine.”13
Relying in part on the settlement agreement, EPA’s proposal included an aggressive timetable for implementation that requires states to begin major preparations now and is already affecting planning and investment decisions in the energy sector.14 According to reports, EPA’s final rule mirrors its proposal, with no legally material changes. Even so, it will take months—possibly as long as two years from the release of the initial proposal—for the courts to even preliminarily review EPA’s very questionable exertion of authority. In the meanwhile, states and utilities are being forced to make decisions regarding plant upgrades and retirements, the construction of new capacity as required by the regulation, new transmission capacity, and state legal authority. One might have expected these kinds of issues to be aired and addressed during the regulatory review process, but it was extremely abbreviated compared to that for rules of similar complexity and importance— another likely consequence of the settlement agreement’s false urgency.
In short, whether or not EPA is ultimately found to have authority to regulate existing power plants—a challenge to any final rule is inevitable—the agency will have used the settlement agreement to achieve much of what it sought to do: force the retirement of coal‐fired generation.15
- EPA’s Mercury Rule. My 2012 testimony describes the American
Nurses litigation that resulted in a consent decree requiring EPA to propose one of its most complex and expensive rules ever in a matter of months.16 Since the rule was finalized, it has been amended and corrected on multiple occasions and reconsidered by the agency in numerous respects.17 The most recent corrections were proposed in February of this year—three years after the rule was finalized.18 The legal challenges to it have been divided into a number of different proceedings, with one—alleging that in its haste EPA failed to properly consider the cost of its actions—currently before the Supreme Court.19 Whether or not the Court ultimately vacates the rule, these events demonstrate the high costs, in terms of legal and regulatory uncertainty, of the compressed timetables that can result from agency settlements.
- EPA’s Brick MACT Rule. A consent decree entered to settle a lawsuit that the Sierra Club brought against the EPA committed the agency to propose and finalize National Emissions Standards for Hazardous Air Pollutants for brick manufacturers on an aggressive timetable. That rule was subject to a lengthy reconsideration and then ultimately vacated, and EPA (pursuant to another consent decree with the Sierra Club) has proposed a replacement that the agency estimates will be substantially more expensive and that may impose new compliance obligations on sources that already made substantial expenditures to comply with the first rule. In testimony before this Subcommittee, the President of the Columbus Brick Company, a small business in Columbus, Mississippi, explained that his industry was excluded from settlement discussions regarding timing issues and that the agency lacks the time to consider flexible alternatives that may ease compliance burdens.20
- Endangered Species Listing. In two settlements executed in September 2011, the Fish and Wildlife Service agreed to make listing determinations for 251 species by September 2016 in an order negotiated with two environmentalist groups, Wildearth Guardians and Center for Biological Diversity.21 In so doing, the agency abandoned its statutory authority to determine that an endangerment finding is warranted, but precluded by higher listing priorities—a status that allows public agencies, private landowners, and other interested parties to take actions to reduce threats and gather data so as to reduce the likelihood of a listing or, at the least, to undertake long‐range planning with awareness of possible listings.22 Rather than rely on the best available science and its own judgment to set priorities in an open and transparent manner, the agency instead deferred to these private parties, both in the timing and the substance (by excluding “warranted but precluded” determinations) of its decisions.
Some would wave away these examples—as well as those in my 2012 testimony and 2014 Heritage Foundation monograph23—as saying little about the impact of settlement agreements. On the facts, that is a difficult position to maintain. Each of these examples illustrates how settlements can affect agency priorities and, in certain instances, the substance of their decisions. Even a recent Government Accountability Office report that claimed, based on comments by EPA staff, that settlements have only a “limited” impact on EPA rulemaking recognized that they do “affect the timing and order in which rules are issued”—in other words, the agency’s priorities.24 With statutes as capacious as the Clean Air Act and Endangered Species Act, agency priorities determine the regulatory agenda.
Agency priorities are particularly important now, in the waning days of the Obama presidency. This administration has been aggressive in the pursuit of its policy goals through non‐legislative means, upsetting settled understandings regarding executive power and statutory constructions to implement policies that it has been unable to convince Congress to enact.25 The agency officials responsible for carrying out this agenda have every incentive to attempt to force it on their successors through the use of settlements and consent decrees. There is precedent: in its final months, the Carter Administration entered into settlements that served to tie the hands of Reagan Administration officials on major policy question, including construction of public works, issuance of environmental regulations targeting particular industries, and education funding, among others.26 Vigorous oversight is necessary to ensure that the next administration, which may have very different priorities than this one, is not stymied in its ability to exercise its policy discretion and is not bound by its predecessor’s unwise policy choices.
IV. Opportunities for Reform
Congress can and should adopt certain common‐sense policies that provide for transparency and accountability in settlements and consent decrees that compel future government action. Any legislation that is intended to address this problem in a comprehensive fashion should include the following features, with respect to settlements that commit the government to undertake future action that affects the rights of third parties:
- Transparency. Proposed settlements should be subject to the usual notice and comment requirements, as is generally the case under the Clean Air Act.27 To aid Congress and the public in its understanding of this issue, agencies should be required to make annual reports to Congress on their use of settlements. In addition, Treasury should be required to report the details of cases that result in payments by the
- Robust Public Participation. As in any rulemaking, an agency or department should be required to respond to the issues raised in public comments on a proposed settlement, justifying its policy choices in terms of the public interest; failure to do so would prevent the court from approving the consent decree. These comments, in turn, would become part of the record before the court. Parties who would have standing to challenge an action taken pursuant to a settlement should have the right to intervene in a lawsuit where one may be lodged. As described below, these interveners should have the right to demonstrate to the court that a proposed settlement is not in the public interest.
- Sufficient Time for Rulemaking. The agency should bear the burden of demonstrating that any deadlines in the proposed decree will allow it to satisfy all applicable procedural and substantive obligations and further the public interest.
- A Public Interest Standard. Especially for settlements that concern future rulemaking, those parties in support of the settlement should bear the burden of demonstrating that it is in the public interest. In particular, they should have to address (1) how the proposed settlement would affect the discharge of other uncompleted nondiscretionary duties; and (2) why taking the regulatory actions required under the settlement, to the delay or exclusion of other actions, is in the public interest. The court, in turn, before ruling on the motion to enter the settlement, would have to “satisfy itself of the settlement’s overall fairness to beneficiaries and consistency with the public interest.”29
- Accountability. Before the government enters into a settlement that affects the rights of third parties, the Attorney General or agency head (for agencies with independent litigating authority) should be required to certify that he has reviewed the decree’s terms, found them to be consistent with the prerogatives of the Legislative and Executive Branches, and approves them. In effect, Congress should implement the Meese Policy,30 consistent with the Executive Branch’s discretion, by requiring accountability when the federal government enters into consent decrees or settlements that cabin executive discretion or require it to undertake future actions.
- Flexibility. Finally, Congress should act to ensure that settlements do not freeze into place a particular official’s or administration’s policy preferences, but afford the government reasonable flexibility, consistent with its constitutional prerogatives, to address changing circumstances. To that end, if the government moves to terminate or modify a settlement or consent decree on the grounds that it is no longer in the public interest, the court should review that motion de novo, under the public interest standard articulated above.
These principles are reflected in the Sunshine for Regulatory Decrees and Settlements Act, H.R. 712 and S. 378. That bill represents a leap forward in transparency, requiring agencies to publish proposed settlements before they are filed with a court and to accept and respond to comments on proposed settlements. It also requires agencies to submit annual reports to Congress identifying any settlements that they have entered into. The bill loosens the standard for intervention, so that parties opposed to a “failure to act” lawsuit may intervene in the litigation and participate in any settlement negotiations. Most substantially, it requires the court, before approving a proposed consent decree or settlement, to find that any deadlines contained in it allow for the agency to carry out standard rulemaking procedures. In this way, the federal government could continue to benefit from the appropriate use of settlements and consent decrees to avoid unnecessary litigation, while ensuring that the public interest in transparency and sound rulemaking is not compromised.
Other proposed legislation focuses on settlements under specific statutory regimes. For example, the Endangered Species Act (ESA) Settlement Reform Act31 would amend the ESA to provide, in cases seeking to compel the Fish and Wildlife Service to make listing determinations regarding particular species, many of the procedural reforms contained in the Sunshine for Regulatory Decrees and Settlements Act, such as broadening intervention rights to include affected parties and allowing them to participate in settlement discussions. In addition, as particularly relevant in this kind of litigation, the bill would require that notice of any settlement be given to each state and county in which a species subject to the settlement is believed to exist and gives those jurisdictions a say in the approval of the settlement. In effect, this proposal would return discretion for the sequencing and pace of listing determinations under the ESA to the Fish and Wildlife Service, which would once again be accountable to Congress for its performance under the ESA.
Similarly, the Reducing Excessive Deadline Obligations Act of 2013,32 which was introduced in the last Congress and passed the House, would have amended the Resource Conservation and Recovery Act to remove a nondiscretionary duty that EPA review and, if necessary, revise all current regulations every three years and the Comprehensive Environmental Response Compensation and Liability Act to remove a 1983 listing deadline that has never been fully satisfied.33 The effect of these amendments would have been to reduce the opportunity for citizen suits seeking to set agency priorities under these obsolete provisions.
These bills suggest that, rather than proceeding in a piecemeal fashion, Congress may wish to consider a more comprehensive approach that limits the ability of third parties to compel Executive Branch action. Suing to compel an agency to act on a permit application or the like is different in kind from seeking to compel it to issue generally applicable regulations or take action against third parties. As Justice Anthony Kennedy has observed, “Difficult and fundamental questions are raised” by citizen‐suit provisions that give private litigants control over actions and decisions (including the setting of agency priorities) “committed to the Executive by Article II of the Constitution of the United States.”34 Constitutional concerns aside, at the very least, the ability to compel agency action through litigation and settlements gives rise to the policy concerns identified above, suborning the public interest to special interests and sacrificing accountability.
The sue‐and‐settle phenomenon is facilitated by the combination of broad citizen‐suit provisions with unrealistic statutory deadlines that private parties may seek enforced through citizen suits. According to William Yeatman of the Competitive Enterprise Institute, “98 percent of EPA regulations (196 out of 200) pursuant to [Clean Air Act] programs were promulgated late, by an average of 2,072 days after their respective statutorily defined deadlines.”35 Furthermore, “65 percent of the EPA’s statutorily defined responsibilities (212 of 322 possible) are past due by an average of 2,147 days.”36 With so many agency responsibilities past due, citizen‐suit authority allows specialinterest groups (whether or not in collusion or philosophical agreement with the agency) to use the courts to set agency priorities. Not everything can be a priority, and by assigning so many actions unrealistic and unachievable nondiscretionary deadlines, Congress has inserted the courts into the process of setting agency priorities, but without providing them any standard or guidance on how to do so. It should be little surprise, then, that the most active repeat players in the regulatory process—the agency and environmentalist groups—have learned how to manipulate this situation to advance their own agendas and to avoid, as much as possible, accountability for the consequences of so doing.
Two potential solutions suggest themselves. First, a deadline that Congress does not expect an agency to meet is one that ought not to be on the books. If Congress wants to set priorities, it should do so credibly and hold agencies to those duties through oversight, appropriations, and its other powers. In areas where Congress has no clear preference as to timing, it should leave the matter to the agencies and then hold them accountable for their decisions and performance. What Congress should not do is empower private parties and agencies to manipulate the litigation process to set priorities that may not reflect the public interest while avoiding the political consequences of those actions. To that end, Congress should seriously consider abolishing all mandatory deadlines that are obsolete and all recurring deadlines that agencies regularly fail to observe.37
Second, Congress should consider narrowing citizen‐suit provisions to exclude “failure to act” claims that seek to compel the agency to consider generally applicable regulations or to take actions against third parties. As a matter of principle, these kinds of decisions regarding agency priorities should be set by government actors who are accountable for their actions, not by litigants and not through abusive litigation.
Settlements that govern the federal government’s future actions raise serious constitutional and policy questions and are too often abused to circumvent normal political process and evade democratic accountability. Congress can and should address this problem to ensure that such consent decrees are employed only in circumstances where they advance the public interest, as determined by our public institutions, not special interests.
I thank the subcommittee for the opportunity to testify on these important issues.
1See generally The Use and Abuse of Consent Decrees in Federal Rulemaking: Hearing before the Subcommittee on the Courts, Commercial and Adminis‐ trative Law, Committee on the Judiciary, United States House of Representa‐ tives, 112th Congress (Feb. 3, 2012), available at http://judiciary.house.gov/_files/hearings/Hearings%202012/Grossman%2002032012.pdf (written testimony of Andrew M. Grossman, Visiting Legal Fellow, The Heritage Foundation) [hereinafter “2012 Testimony”].
2 U.S. Chamber of Commerce, Sue and Settle: Regulating Behind Closed Doors (2013), at 14.
3 Frank Easterbrook, Justice and Contract in Consent Judgments, 1987 U. Chi. L. Forum 19, 33–34 (1987).
4See, e.g., Margo Schlanger, Against Secret Regulation: Why and How We Should End the Practical Obscurity of Injunctions and Consent Decrees, 59 DePaul L. Rev. 515 (2010). Such concerns may be overblown, however, when they concern settlements between private parties or settlements with the government that predominantly affect private rights.
5Id. at 516.
6FCC v. Fox Television Stations, 129 S. Ct. 1806 (2009).
7Citizens for a Better Envt. v. Gorsuch, 718 F. 2d 1117, 1136 (D.C. Cir. 1983) (Wilkey, J., dissenting).
8See 2012 Testimony, supra n.1, at 6–10.
9Id. at 1136–37.
10 Settlement Agreement ¶¶ 1–4, EPA-HQ-OGC-2010–1057-0002.
11 42 U.S.C. § 7411(d)(1).
12 Email from David Doniger to Regina A. McCarthy (Dec. 23, 2010, 6:30 pm EST).
13 Email from Regina A. McCarthy to David Doniger (Dec. 23, 2010, 8:19 pm
14 79 Fed. Reg. 34,830 (June 18, 2014).
15See generally David B. Rivkin, Jr., Mark DeLaquil, and Andrew Grossman, Does EPA’s Clean Power Plan Proposal Violate the States’ Sovereign Rights?, Engage, June 15, 2015, available at http://www.fed-soc.org/publications/detail/does-epas-clean-power-plan-p…. See also Comment from the Attorneys General of the States of Oklahoma, West Virginia, Nebraska, Alabama, Florida, Georgia, Indiana, Kansas, Louisiana, Michigan, Montana, North Dakota, Ohio, South Carolina, South Dakota, Utah and Wyoming on Proposed EPA Carbon Pol‐ lution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, Docket ID No. EPA–HQ–OAR–2013–0602, available at http://www.ok.gov/oag/documents/EPA%20Comment%20Letter%20111d%2011–24-2014.pdf.
16 2012 Testimony, supra n.1, at 10–12.
17 William Yeatman, This Month in Sue and Settle, Feb. 19, 2015, http://www.globalwarming.org/2015/02/19/this-month-in-sue-and-settle/.
18 80 Fed. Reg. 8,442 (Feb. 17, 2015).
19Michigan v. Environmental Protection Agency, No. 14–46.
20 Hearing on H.R. 1493, the “Sunshine for Regulatory Decrees and Settle‐ ments Act of 2013,” June 5, 2013 (written testimony of Allen Puckett III), available at http://judiciary.house.gov/_files/hearings/113th/06052013/Puckett%2006052013.pdf.
21 Stipulated Settlement Agreement re Wildearth Guardians, In re Endangered Species Act Section 4 Deadline Litigation, No. 10–377 (D.D.C.); Stipulated Set‐ tlement Agreement re Center for Biological Diversity, In re Endangered Species Act Section 4 Deadline Litigation, No. 10–377 (D.D.C.).
22See generally 16 U.S.C. § 1533; Endangered and Threatened Wildlife and Plants; Review of Native Species That Are Candidates for Listing as Endangered or Threatened; Annual Notice of Findings on Resubmitted Petitions; Annual Description of Progress on Listing Actions, 76 FR 66369, 66370–71 (Oct. 26, 2011) (describing listing process).
23 Andrew M. Grossman, Regulation Through Sham Litigation: The Sue and Settle Phenomenon, Heritage Foundation Legal Memorandum No. 110, Feb. 25, 2014.
24 U.S. Government Accountability Office, Impact of Deadline Suits on EPA’s Rulemaking Is Limited, December 2014.
25See generally Examining the Proper Role of Judicial Review in the Regulato‐ ry Process: Hearing before the Senate Subcommittee on Regulatory Affairs and Federal Management of the Committee on Homeland Security and Gov‐ ernmental Affairs, Apr. 28, 2015 (written testimony of Andrew M. Gross‐ man), at 22–25, available at https://object.cato.org/sites/cato.org/files/pubs/pdf/grossman_-_judicial_review_testimony.pdf (describing aggressive statutory interpretations under the Obama Administration)
26See 2012 Testimony, supra n.1, at 6–10.
27 Clean Air Act § 113(g), 42 U.S.C. § 7413(g). Note that this provision, how‐ ever, does not require EPA to respond to comments, only that, “as appropri‐ ate,” it “shall promptly consider” them.
28 To that end, the Judgment Fund Transparency Act, H.R. 1669, would re‐ quire Treasury to publish the following for each disbursement from the Judg‐ ment Fund:
- The name of the specific Federal agency or entity whose ac‐ tions gave rise to the claim or judgment.
- The name of the plaintiff or claimant.
- The name of counsel for the plaintiff or claimant.
- The amount paid representing principal liability, and any amounts paid representing any ancillary liability, including at‐ torney fees, costs, and interest.
- A brief description of the facts that gave rise to the claim.
- A copy of the original or amended complaint or written claim, and any written answer given by the Federal Govern‐ ment to that complaint or claim.
- A copy of the final action by a court regarding the claim (whether by decree, approval of settlement, or otherwise), or of the settlement agreement in any action not involving a court.
- The name of the agency that submitted the claim.
A companion bill, S. 350, has been introduced in the Senate.
29United States v. Trucking Employers, Inc., 561 F.2d 313, 317 (D.C. Cir. 1977) (internal quotation marks and citation omitted).
30 Memorandum from Edwin Meese III Regarding Department Policy Re‐ garding Consent Decrees and Settlement Agreements, Mar. 13, 1986.
31 H.R. 585; S. 293.
32 H.R. 2279 (113th Cong.).
33See generally Reducing Excessive Deadline Obligations Act of 2013, House Report 113–179 (113th Cong.).
34Friends of the Earth, Inc. v. Laidlaw Envt’l Servs. (TOC), Inc., 528 U.S. 167, 197 (2000) (Kennedy, J., concurring).
35 William Yeatman, EPA’s Woeful Deadline Performance Raises Questions about Agency Competence, Climate Change Regulations, “Sue and Settle,” July 10, 2013, http://cei.org/sites/default/files/William%20Yeatman%20-%20EPA%27s%20Woeful%20Deadline%20Performance%20Raises%20Questions%20About%20Agency%20Competence.pdf.
37 One commentator endorses allowing agencies to set their own non‐binding deadlines, subject to congressional oversight. Alden F. Abbott, The Case Against Federal Statutory and Judicial Deadlines: A Cost‐Benefit Appraisal, 39 Admin. L. Rev. 171, 200–02 (1987).