CHAPTER 10 EQUITABLE DEFENSES AGAINST THE GOVERNMENT IN THE NATURAL RESOURCES AND ENVIRONMENTAL LAW CONTEXT

• Jurisdiction: United States

Natural Resources & Environmental Administrative Law and Procedure
(Nov 1999)
CHAPTER 10
EQUITABLE DEFENSES AGAINST THE GOVERNMENT IN THE NATURAL RESOURCES AND ENVIRONMENTAL LAW CONTEXT
Mary V. Laitos
Danielle V. Smith ¹
Welborn Sullivan Meck & Tooley, P.C.
Denver, Colorado

[Page 10-1]

INTRODUCTION

When the government brings an action against a private citizen or entity, possible defenses include (i) estoppel; (ii) delay-based defenses such as laches, waiver and unclean hands and (iii) statutes of limitations. Estoppel, laches, waiver and unclean hands are all equity based defenses and, as such, are grounded upon notions of fairness. Despite that foundation, courts are reluctant to allow the application of equitable defenses against the government when their application would defeat the public interest, even if the result confers an unfair advantage onto the government. Courts exercise their equitable discretion to decide whether and for what reasons equitable defenses may be successfully asserted against the government.² Although different courts rely on varying policy considerations, courts generally define the public interest very broadly, making it difficult to successfully prevail on these defenses against the government.

A private party has a better chance of asserting a statute of limitations defense against the government than an equitable defense. That is because Congress has acted to legislate in this area, so separation of powers is not of concern. The legal analysis for statute of limitations is also distinguishable because it invokes statutory construction principles. The ambiguities inherent in general statutes of limitation, intended to cover an enormous array of governmental agency claims, can cause significant or impossible hurdles for the practitioner to overcome.

[Page 10-2]

This paper discusses these defenses and provides suggestions to the practitioner asserting them. The discussion is intended to offer guidance to practitioners defending against government actions. It does not constitute an exhaustive analysis of all the issues or cases involved in the application of equitable defenses against the government. Instead, the discussion sets forth general principles and highlights cases in the natural resources and environmental law context which illustrate these principles. Although the focus of this paper is on suits involving the federal government and its agencies, actions involving states and state agencies are discussed as well.

THE GENERAL PROHIBITION AGAINST APPLYING ESTOPPEL AGAINST THE GOVERNMENT

I. Introduction

Estoppel is a doctrine based on principles of fair dealing.³ It prevents a party from assuming inconsistent positions to the detriment of another party.⁴ The doctrine of estoppel is a response to the unfairness inherent in denying a party some benefit after the party has reasonably relied on the misrepresentations of an adverse party.⁵ In order to successfully assert the defense of estoppel, a party must show: (i) the government had knowledge of the facts; (ii) the government intended that its conduct be acted upon or acted in a manner so that the party asserting the defense had a right to believe it so intended; (iii) the party asserting the defense was

[Page 10-3]

ignorant of the true facts; and (iv) that party relied on the government's conduct to his or her detriment.⁶

The argument for applying estoppel against the government is supported by two equitable goals. First, the government should be prevented from taking unconscionable advantage of its own wrong. Second, the government should be prevented from asserting legal rights where such an assertion would work a fraud or injustice on a private party acting in good faith.⁷

Asserting a successful estoppel defense against the government is, to say the least, difficult. It is well-settled in Supreme Court precedent that "equitable estoppel will not lie against the Government as it lies against private litigants."⁸ While the Supreme Court has never placed a definitive bar upon the application of estoppel against the government, its consistent reversal of the application of the doctrine against the government has not been encouraging to defendants. Rather, estoppel against the government is applied "with great reluctance."⁹

As discussed below, courts have used various tools to analyze whether estoppel should lie against the government, including (i) public policies such as the separation of powers doctrine and a balancing test of the public and private interest; (ii) a strict analysis of whether the defendant suffered detriment and whether defendant's reliance on the government was reasonable; (iii) whether the government engaged in affirmative misconduct; and (iv) whether the government was acting in its proprietary or sovereign capacity.

II. Public Policies Enforced in Government Estoppel Cases

A. Separation of Powers

1. Introduction

One of the responsibilities of the federal judiciary is to maintain the separation of powers among the three branches of government. In estoppel cases involving the government, courts are concerned with invading the legislative province of Congress by allowing "government

[Page 10-4]

employees to `legislate' by misinterpreting or ignoring an applicable statute or regulation."¹⁰ In validating unauthorized "legislation" that is contrary to the governing law, courts are infringing upon Congress' exclusive constitutional authority to make law.¹¹ The importance of the separation of powers to the operation of a limited government, often leads a court to reject a claim for estoppel when a party is seeking to estop the enforcement of a statute or regulation.¹²

The concern for the separation of powers has been a decisive factor in many lower court decisions.¹³ Although the Supreme Court has recognized that its refusal to invade the legislating authority can sometimes result in a serious hardship to the party who relied on the misinformation supplied by the government agent,¹⁴ it has stated that "not even the temptations of a hard case' will provide a basis for ordering recovery contrary to the terms of the regulation, for to do so would disregard `the duty of all courts to observe the conditions defined by Congress.'"¹⁵ Thus, the separation of powers concern permits the use of the estoppel defense only in cases where "it does not interfere with underlying government policies or unduly undermine the correct enforcement of a particular law or regulation."¹⁶

2. Application of the Separation of Powers Doctrine: Unauthorized Governmental Action

a. Unauthorized Payments

Courts enforce the separation of powers doctrine through a rejection of an equitable defense when the result would compel governmental action unauthorized by the legislature. For example, the Supreme Court has consistently refused to apply estoppel when it would require the government to make payments which have not been authorized by the government. The

[Page 10-5]

Supreme Court recently drew a bright line in this area by stating: "[T]he equitable doctrine of estoppel cannot grant respondent a money remedy that Congress has not authorized."¹⁷

b. Unauthorized Acts of Individual Government Officials

Courts have also enforced the separation of powers doctrine by refusing to apply estoppel when the result would be that misdeeds and unauthorized acts of individual government officials would compel governmental action unauthorized by Congress.¹⁸ In the seminal case of Utah Power & Light Co. v. United States, 243 U.S. 389 (1917), a utility company argued that the government should be estopped from objecting to the improvements it had made on public land without a permit or license from the Secretary of Interior or the Secretary of Agriculture because government officials had assured the company that no permits or licenses were necessary. The Court rejected the argument, stating:

[I]t is enough to say that the United States is neither bound nor estopped by acts of its officers or agents in entering into an arrangement or agreement to do or cause to be done what the law does not sanction or permit...[N]eglect of duty on the part of officers of the government is no defense to a suit by it to enforce a public right or protect a public interest.¹⁹

More recent cases have continued to follow the precedent of Utah Power. For example, in Christmann & Welborn v. Dept. of Energy, 773 F.2d 317, 320 (T.E.C.A. 1985), the court held that statements of a Department of Interior employee regarding mandatory petroleum price regulations could not bind the government where the regulations provided that agency interpretation must be in writing.

The corollary to the rule that unauthorized acts cannot bind the government is that agents who are acting within their authority may bind the government.²⁰ The case of United States v. Eaton Shale Co., 433 F. Supp. 1256 (N.D. Colo. 1977), illustrates this point. In Eaton Shale, the government brought a suit to invalidate and cancel a patent based upon oil shale placer mining claims that it had mistakenly issued more than twenty-one years earlier. The court found that the government was estopped from asserting its claim based on the fact that when the patent was

[Page 10-6]

issued, the government agency had acted within its authority and in accordance with its prescribed duties.²¹

c. Unauthorized Acts of Individual Government Officials: The State Context

In the state context, courts are also reluctant to apply estoppel when the acts of individual governmental officials would compel governmental action unauthorized by law. For example, in Natural Resources and Environmental Protection Cabinet v. Kentucky Harlan Coal Co., Inc., 870 S.W.2d 421 (Ky. 1994), the Natural Resources and Environmental Protection Cabinet issued a notice of compliance to the operator of a coal washing plant in 1981 for illegally dumping processing waste outside...