INTRODUCTION I. THE BACKGROUND AND LEGAL STANDARD FOR SUE-AND-SETTLE CONSENT ORDERS A. General Consent Decree Doctrine B. Consent Decree Procedure for Government Entities C. Intervention Under Rule 24 and Joinder Under Rules 19 and 21 D. Modification II. THE EFFECT OF SUE-AND-SETTLE ON ENVIRONMENTAL POLICY A. General Application to the Environmental Context and Regulator Incentives B. Specific Application to the Environmental Context 1. Toxics Consent Decree 2. Regional Haze Consent Decrees 3. Florida Water Pollution Consent Decree 4. Greenhouse Gas Consent Decree 5. EME Homer City Generation, L.P. v. EPA III. THE NEGATIVE IMPACT OF SUE-AND-SETTLE ON COOPERATIVE FEDERALISM A. Federalism Can Improve Environmental Policy 1. Sue-and-Settle Undermines the Principles of Federalism That Currently Exist in the United States 2. Sue-and-Settle Diminishes the States' Granted Role in Setting Environmental Standards and Regulations 3. Sue-and-Settle Consent Decrees Usurp the States' Role in Federal Rulemaking B. Allowing Comments Is Ineffective C. State Intervention Is Thwarted D. Modification Is Not a Serious Option E. State Challenges in Federal Court Are Not Adequate F. Direct Impact of Leaving States Out: Low Quality and Harmful Regulations IV. PROPOSED SOLUTIONS A. Enhanced Judicial Monitoring of Sue-and Settle Consent Decrees B. Modification of F.R.C.P. 24 V. CONCLUSION INTRODUCTION
Federal environmental policy has long relied on the States to assist in the development and implementation of environmental regulations. (1) Under this "cooperative federalism," states administer federal rules but have flexibility in setting standards and enforcement priorities. (2) In recent years, environmental advocacy groups increasingly have succeeded in using a strategy of faux litigation to trample the statutory regulatory framework and to shut out the States from important policy decisions. (3) This policymaking process--called "sue-and-settle" or "suit-and-settlement" (4)--not only violates the statutory framework, but also leads to haphazard policymaking.
Environmental advocacy groups and federal regulators are using sue-and-settle to shut the States out of their statutorily created roles. The basic scenario of this so-called institutional reform litigation (5) is straightforward. An environmental advocacy group sues a federal agency, usually the Environmental Protection Agency (EPA), for failing to adequately police state action under federal environmental laws. Specifically, the advocacy group alleges that the EPA has a nondiscretionary duty to ensure that states establish certain standards and that the agency has failed to do so. In many circumstances, the EPA's alleged failure is a failure to act when states themselves miss deadlines imposed by environmental statutes. (6) After the state fails, various statutes require the EPA to impose a federal implementation plan (FIP) that the state must follow. (7) At other times though, and significantly for the purposes of this paper, it is the EPA's failings--completely independent of the States--that leads to a consent decree. (8) The EPA and the advocacy group then settle the lawsuit, without any input from the states that were responsible in the first place and are now responsible for implementing the terms of the settlement. In the settlement agreement, the EPA is required to implement its own standard if the affected states fail to develop a standard by a settlement-imposed deadline. The settlement agreement also frequently establishes the standard, or at least the nature of the standard. The settlement is then entered as a consent decree and the terms bind the EPA under court order. (9) If the consent decree is entered and the states are unable to meet the settlement's deadlines, standards, or both, the EPA issues a FIP. (10) Just like that, the states--though statutorily charged with implementing pollution controls--are circumvented and the EPA takes over and imposes FIPs.
Paradoxically, the EPA's surrendering of its discretionary authority to work cooperatively with the States leads to more, not less, control at the federal level. Thus, as a result of being sued, the agency actually has more power relative to the States. Instead of allowing the States the flexibility to experiment continually with different approaches, standards, implementation plans, and so forth, the settlement agreements between the advocacy groups and the EPA increase direct EPA control over the States. Of course, the advocacy groups that bring these suits are generally pleased with the settlements to which they agree. That both parties get what they want as a result of the filing of the lawsuit should raise some suspicion about what is actually happening. Consider the case of Defenders of Wildlife v. Perciasepe. (11) On November 8, 2010, two events occurred: (1) Defenders of Wildlife filed its complaint against EPA and (2) EPA and Defenders of Wildlife filed a consent decree and a joint motion to enter the consent decree with the court. (12) Although simultaneously filing a lawsuit and a consent decree does not necessarily imply foul play, it does illustrate how little impact states may have in the consent decree process that may ultimately dictate what a state is required to do and when it must do it.
Sue-and-settle as a policymaking procedure is highly suspect for several reasons. First, as illustrated by Perciasepe, although a sue-and-settle consent decree appears to be the natural and perhaps most cost-effective end to an adversarial process, there is reason to suspect the absence of an adversarial relationship between the settling parties. As discussed below, the parties ultimately obligated to act under the settlement are systematically excluded from the litigation.
Second, sue-and-settle does not reflect a careful weighing of priorities by expert bureaucrats. Judges are not experts in environmental matters, but sue-and-settle uses court orders to develop policy. The courts are ill-equipped to provide the cost-benefit analyses necessary to make sound policy decisions. Yet, the advocacy group and the agency cooperate to use the court system to overturn agency policy and, in the process, reallocate the regulatory resources of the agency and of the States.
Third, defenders of the current statutory framework based on cooperative federalism should view sue-and-settle as a major assault on the administrative integrity of a cooperative system. (13) Sue-and-settle effectively shuts the States out of the decisionmaking process and forces them into a subservient role as enforcers of federal court orders. Normally, states have a statutory right to establish their own regulations and come up with their own solutions before the federal regulator heavy-handedly imposes standards for them to follow. (14) At a minimum, states should be able to participate in notice-and-comment rulemaking as federal regulators implement new standards. (15) The sue-and-settle procedure, however, circumvents this process by forcing states to implement federal regulations in place of their existing standards or before they are given a full opportunity to solve their own problems. (16)
Fourth, consent orders avoid the normal notice-and-comment rulemaking process. (17) Thus, the recent windfall of sue-and-settle consent decrees has created a structure of environmental regulations that excludes essential participants. The most important excluded participants in the United States' supposed system of cooperative federalism are the States themselves. As explained in more detail below, since the seminal Toxics Consent Decree in 1976, (18) federal regulators and advocacy groups have often used consent decrees to impose standards on states that cost billions of dollars to implement, decrease jobs, and increase energy costs. (19) And all this is done without the States having any opportunity to interject or influence the decrees' terms, (20) effectively trading statutorily mandated federalism for perpetual regulation.
Fifth, proponents of greater reliance on individual state regulation--especially when the regulated activity has primarily local or state impacts--view some of the sue-and-settle cases as a dramatic expansion of federal regulation into areas that should be regulated by local or state governments. Removing states from their place as formulators of environmental regulation is problematic because it is inconsistent with a rational allocation of regulatory authority. (21) For example, the matching principle is "a guide to determining the most efficient governmental level for regulation of different types of environmental concerns" and suggests that "the size of the geographic area affected by a specific pollution source should determine the appropriate governmental level for responding to the pollution." (22) U.S. environmental policy does not strictly observe the matching principle as the federal government is frequently involved in exclusively intrastate problems, but it does partially recognize the matching principle by granting states an express statutory role in federal policy and by allowing states to participate in notice-and-comment rulemaking. Unfortunately, consent decrees undermine and even eliminate both of these state roles, resulting in an irrational allocation of authority and making the system inefficient.
The purpose of this paper is, first, to elaborate on how the sue-and-settle process in environmental institutional reform litigation distorts the regulatory process and harms states, and, second, to propose solutions. Prior work has almost exclusively analyzed how consent decrees generally harm third parties, (23) but the issue of how consent decrees harm states in the environmental context has been underanalyzed. Also, with EPA v. EME Homer City Generation, L.P. before the Supreme Court this term, this paper briefly discusses the implications of that case's disposition for consent decrees.