Complaints under the civil private right of action provision of the Racketeer Influenced and Corrupt Organizations Act (RICO) must allege a domestic injury to business or property to state a claim. RICO does not provide a civil private right of action for injuries suffered outside of the US.

In RJR Nabisco, Inc. v. European Community, the European Community (EC) and 26 of its member states sued RJR Nabisco in district court under the RICO private right of action statute (18 U.S.C. § 1964(c)) and state law, alleging that RJR and several criminal organizations engaged in a money laundering scheme that injured the business and property of the EC and its member states. The district court granted RJR’s motion to dismiss on grounds that RICO does not apply to racketeering activity occurring outside of the US, but the Second Circuit reversed and concluded that RICO applies.

After the Second Circuit denied RJR’s petition for rehearing en banc, the US Supreme Court granted certiorari and reversed. Noting that there is a judicial presumption against the extraterritorial application of US statutes, the Supreme Court found that this presumption was rebutted for certain substantive provisions of RICO predicated on acts that violate criminal statutes, which Congress intended to apply extraterritorially.

However, the Supreme Court concluded that RICO’s civil private right of action statute does not overcome the presumption against extraterritoriality because nothing in the statute indicates a clear congressional intent to create a private right of action for injuries suffered outside of the US. Holding that the extraterritorial application of the predicate criminal statutes confers extraterritorial jurisdiction on a separate civil private right of action statute would violate the presumption. (136 S. Ct. 2090 (2016).)

See Legal Update, US Supreme Court: Private RICO Plaintiffs Must Allege Domestic Injury to State a Claim for more on this decision.

See Practice Note, Issues in Transatlantic Litigation for more on US courts’ jurisdiction over foreign litigants.

The judgment bar provision of the Federal Tort Claims Act (FTCA), which provides that a final judgment in an FTCA suit forecloses any future suit against the individual government employees involved, does not apply to claims that are dismissed for falling within an FTCA exception, held the Supreme Court. The decision resolves a circuit split on the issue.

In Simmons v. Himmelreich, a federal prison inmate who was beaten by a fellow inmate filed suit against the US, alleging that the beating was a result of the prison officials’ negligence in housing the two inmates together. The district court granted the government’s motion to dismiss, finding that the officials’ decision of where to house inmates fell within the discretionary function exception to the FTCA. Before the first suit was dismissed, the plaintiff filed a second suit against the prison employees whose alleged negligence gave rise to the plaintiff’s claims. After dismissing the first suit, the district court granted summary judgment to the prison employees, concluding that the second suit was foreclosed by the FTCA’s judgment bar provision. The Sixth Circuit reversed.

In a unanimous decision, the Supreme Court affirmed and stated that the plaintiff’s suit against the prison employees may proceed. The Supreme Court held that a final judgment in an FTCA action dismissing a claim on the ground that relief is precluded by an FTCA exception does not bar a subsequent action against the government employees whose acts gave rise to the FTCA claim. In its reasoning, the Supreme Court explained that the FTCA’s plain text supports this conclusion. (136 S. Ct. 1843 (2016).)

See Legal Update, Supreme Court Rules on Federal Tort Claims Act’s Judgment Bar Provision for more on this decision.

Resolving a split of authority within the Southern District of New York, the Second Circuit held that federal district courts do not have subject matter jurisdiction to hear a constitutional challenge to the appointment of an administrative law judge (ALJ) presiding over a parallel SEC administrative proceeding. The respondents in the administrative proceeding may challenge the appointment only on appeal from the final decision of the SEC.

In Tilton v. SEC, the respondents filed an action against the SEC in district court soon after the SEC commenced an administrative proceeding against them. The respondents sought to enjoin the SEC’s administrative proceeding, arguing that the appointment of the presiding ALJ violated the Appointments Clause of the US Constitution. The district court granted the SEC’s motion to dismiss, finding that the SEC’s statutory scheme of administrative and judicial review implicitly precluded the court’s jurisdiction over the action.

The Second Circuit affirmed. Applying the framework established by the Supreme Court in Thunder Basin Coal Co. v. Reich, the Second Circuit determined that:

( (2d Cir. June 1, 2016).)

See Practice Note, Securities Enforcement: Navigating SEC Administrative Proceedings for more on SEC enforcement actions brought in administrative proceedings.

A national bank is a citizen of only the state in which its main office is located for purposes of diversity jurisdiction, according to the Second Circuit.

In OneWest Bank, N.A. v. Melina, OneWest Bank, a national bank with its main office in California, filed a foreclosure action against Robert Melina in the US District Court for the Eastern District of New York. Melina moved to dismiss the action for lack of diversity jurisdiction, arguing that both Melina and OneWest were citizens of New York because OneWest’s principal place of business is in New York. The district court disagreed and denied the motion.

The Second Circuit affirmed, joining its sister circuits in holding that a national bank is a citizen of only the state in which its main office is located. The court explained that the main office is the office that the bank designates as its headquarters in its articles of association. A national bank is not also a citizen of the state of its principal place of business. ( (2d Cir. June 29, 2016).)

See Practice Note, Commencing a Federal Lawsuit: Initial Considerations for more on diversity jurisdiction.

The UK and the EU have two years to negotiate the terms of the UK’s withdrawal from the EU, following the recent Brexit vote. Litigants involved in cross-border litigation in Europe face some uncertainty about which aspects of cross-border litigation may change following a negotiated withdrawal. Some key issues likely to be affected include:

The Third Circuit rejected claims that a pharmaceutical company’s discount program for certain drugs sold to hospitals constituted illegal de facto exclusive dealing under Sections 1 and 2 of the Sherman Act, Section 3 of the Clayton Act, and state antitrust law.

In Eisai, Inc. v. Sanofi Aventis U.S., LLC, Eisai challenged its competitor’s (Sanofi’s) marketing program for the anticoagulant drug Lovenox, which involved price discounts based on the volume and market share of Lovenox that hospitals purchased and a clause that limited a hospital’s ability to give competing anticoagulants priority status on its formulary. Eisai alleged that the program harmed competition by preventing hospitals from replacing Lovenox with competing anticoagulant drugs and therefore constituted de facto exclusive dealing in violation of the antitrust laws.

The Third Circuit analyzed Eisai’s claims under the rule of reason and affirmed the district court’s grant of summary judgment in favor of Sanofi. Noting that the antitrust laws are concerned with the protection of competition, rather than competitors, the court found that the plaintiff did not show that Sanofi’s conduct deprived customers of the ability to make a meaningful choice. The court rejected Eisai’s argument that Sanofi’s program amounted to a bundling arrangement that foreclosed competition, even though it involved only a single product. Bundling generally involves discounted prices for the purchase of multiple products, but Eisai based its theory on the bundling of different types of demand for the same product, which the court concluded was novel and not supported by precedent.

However, the Third Circuit rejected Sanofi’s argument that its program was per se legal because its pricing practices involved above-cost prices. The court explained that the price-cost test did not apply to Eisai’s claims, which did not fundamentally relate to pricing practices. Bundling, not pricing, was the primary tool Sanofi allegedly used to exclude rivals. (821 F.3d 394 (3d Cir. 2016).)

See Legal Update, Third Circuit Upholds Pharmaceutical Loyalty Discount Program for more on this decision.

See Practice Note, Customer Loyalty Programs in the US for more on issues relating to price discounts or other financial arrangements used in return for a customer purchase commitment.

The Federal Trade Commission (FTC) won its first jury verdict in an action to enforce its Do-Not-Call (DNC) Registry rules under the Telemarketing Sales Rule (TSR). The verdict demonstrates that companies engaged in direct marketing activities should carefully review the FTC’s advertising rules, as they can face extensive liability and penalties.

In United States v. Corps. For Character, L.C., the FTC and the Department of Justice presented evidence during an eight-day trial showing that Forrest S. Baker III and three Utah-based companies that he controlled violated the TSR by making millions of illegal telemarketing calls to consumers while trying to sell DVDs and deceiving customers about where the proceeds from the DVD sales would go.

A federal jury returned a verdict in favor of the FTC, which included findings that the defendants:

(Jury Verdict Form, No. 11-419 (D. Utah May 25, 2016).) The actual or implied knowledge finding allows the court to assess civil penalties under the Federal Trade Commission Act, which can be up to $16,000 per violation.

See Legal Update, FTC Wins Its First Telemarketing Sales Rule Jury Verdict for more on this case.

See Practice Note, Direct Marketing for more on the TSR.

In a highly anticipated decision, the New York Court of Appeals held that the common interest doctrine for asserting attorney-client privilege applies to communications made between parties only in the context of pending or anticipated litigation under New York law. In so holding, the Court of Appeals refused to apply the doctrine to shield pre-closing communications between parties to a merger from disclosure simply on the basis of their contractual relationship.

In Ambac Assurance Corp. v. Countrywide Home Loans, Inc., Ambac filed suit against Countrywide and Bank of America Corporation (BAC), alleging that Countrywide fraudulently induced Ambac to insure payments on certain residential mortgage-backed securities. Ambac named BAC, which acquired Countrywide in 2008, as a defendant under the theory that BAC should be liable for any judgment against Countrywide as its successor-in-interest and alter ego. Ambac sought disclosure of communications between Countrywide and BAC that occurred after the signing of the merger agreement but before the merger closed.

The New York Court of Appeals reversed a lower court’s decision that pending or anticipated litigation is not a necessary element of the common interest doctrine. In its reasoning, the Court of Appeals examined the history of the doctrine under New York law and concluded that it had always been limited to situations where the benefit and necessity of sharing information are at their highest. This is the case only when the parties face litigation and must be able to share information candidly, without fear of mandatory disclosure. When the parties share only a common legal interest in a commercial transaction, they do not harbor the same necessity to protect their communications.

Although the court acknowledged that several federal courts of appeals and the Restatement (Third) of the Law Governing Lawyers have stated that pending or anticipated litigation is not required for the common interest doctrine to apply, it declined to adopt this view. Notably, New York law now departs from Delaware, which applies the common interest doctrine broadly to pre-merger communications. ( (N.Y. June 9, 2016).)

See Legal Update, New York Court of Appeals Narrows Common Interest Doctrine for Asserting Privilege over Pre-Merger Discussions for more on this decision.

See Attorney-Client Privilege and Work Product Doctrine Toolkit for a collection of resources to help counsel navigate the attorney-client privilege and the work product doctrine in federal litigation.

A recent decision of the Delaware Court of Chancery raises questions for stockholder plaintiffs over the tactic of pursuing books and records demands under Section 220 of the Delaware General Corporation Law rather than acting as a first filer on a plenary derivative claim.

In Laborers’ District Council Construction Industry Pension Fund v. Bensoussan, the Court of Chancery precluded the stockholder plaintiffs from pursuing their derivative claim against the company, lululemon athletica, inc. (Lululemon), in Delaware, after they first sought and obtained books and records from Lululemon under Section 220, on grounds of issue preclusion as a result of a ruling in a New York federal court.

On the basis of media reports of potential insider trading at the company, the Delaware plaintiffs first made a demand to inspect the company’s books and records, in compliance with the Delaware judiciary’s repeated insistence that plaintiffs avail themselves of Section 220 before commencing plenary suits. Other stockholders, however, had immediately pursued a derivative claim in federal court in New York, which was eventually dismissed because of the plaintiffs’ failure to demonstrate demand futility.

The Court of Chancery, applying New York law on issue and claim preclusion, determined that the Delaware action was barred because of the dismissal of the New York plaintiffs’ virtually identical derivative claim. The Court of Chancery rejected the Delaware plaintiffs’ argument that even if the underlying demand futility issue were identical, they should still be allowed to pursue their claim on the grounds that the New York action was not pursued with due diligence and reasonable prudence. The Court of Chancery explained that while Delaware courts prefer plaintiffs to first pursue a books and records claim before filing a derivative complaint, the failure to do so does not, in and of itself, establish inadequate representation for purposes of avoiding a finding of collateral estoppel. ( (Del. Ch. June 14, 2016).)

The Bensoussan case mirrors the earlier Court of Chancery ruling in In re Wal-Mart Stores, Inc. Delaware Derivative Litigation, which also gave preclusive effect to a decision by a federal district court outside of Delaware under similar circumstances.

See Article, Expert Q&A: Stockholder Inspection Demands for more on the status and scope of stockholder inspection rights under Section 220 of the Delaware General Corporation Law.

The Sixth Circuit held that ERISA does not preempt a Michigan law imposing a tax on claims involving health care payments, including claims paid by ERISA group health plans. The decision addresses a recent Supreme Court case holding that ERISA preempted a state health care reporting law.

Self-Insurance Institute of America, Inc. v. Snyder involved a challenge to a Michigan law that subjected ERISA group health plans and third-party administrators to a 1% tax for services rendered in Michigan for Michigan residents. Entities subject to the tax also must submit quarterly returns to the state and maintain accurate and complete records regarding the tax. The plaintiff argued that the law was preempted by ERISA, which generally supersedes state laws to the extent they relate to an employee benefit plan.

The Sixth Circuit affirmed the district court’s conclusion that the Michigan law was not preempted by ERISA. However, this decision was vacated by the Supreme Court following its March 2016 ruling in Gobeille v. Liberty Mutual Insurance Co., which held that ERISA preempted a Vermont law requiring health insurers and self-funded health plans to report to the state information related to health care claims and services.

On remand from the Supreme Court, the Sixth Circuit again affirmed the district court’s dismissal of the suit. The Sixth Circuit acknowledged that the Gobeille decision emphasized that reporting, disclosure, and recordkeeping are central to, and essential parts of, uniform plan administration under ERISA. However, the Sixth Circuit noted a distinction between state laws that directly regulate integral aspects of ERISA plan administration and those that touch on these aspects only incidentally. The Sixth Circuit reasoned that the Michigan law:

( (6th Cir. July 1, 2016).)

See Legal Update, State Health Claims Tax Law Survives ERISA Preemption Challenge, Once Again for more on this decision.

See Practice Note, ERISA Litigation: Preemption of State Laws for more on ERISA’s preemption provision, including how the provision applies to some of the more common state laws that govern employee benefit plans.

The US Bankruptcy Court for the Southern District of New York recently held that certain midstream oil and gas gathering contracts did not convey an interest in real property, and therefore could be rejected as executory contracts in a bankruptcy proceeding.

In In re Sabine Oil & Gas Corp., Sabine (an oil and gas production company) sought to reject its oil and gas gathering contracts with certain pipeline operators after filing for Chapter 11 bankruptcy. The court issued a non-binding ruling that the contracts did not convey an interest in real property under Texas law, and therefore could be rejected as executory contracts in a bankruptcy proceeding under section 365(a) of the Bankruptcy Code. Sabine then filed an adversary proceeding seeking a declaratory judgment that the covenants contained in the contracts did not run with the land and are therefore subject to rejection by a debtor.

In a final binding ruling, the court concluded that the gathering contracts did not run with the land under Texas law, either as real covenants or as equitable servitudes, and granted Sabine’s motion for summary judgment. The court found, among other things, that:

(550 B.R. 59 (Bankr. S.D.N.Y. 2016).) This decision might prompt more oil and gas production companies to file for bankruptcy considering persistent low oil prices. Debtors might strategically use the ability to reject gathering contracts in bankruptcy to eliminate burdensome obligations.

See Legal Update, In re Sabine: Binding Ruling Authorizing Rejection of Midstream Oil & Gas Agreements for more on this decision.

See Practice Note, Executory Contracts and Leases in Bankruptcy: Strategies for Non-Debtors for strategic drafting techniques non-debtors can use to improve and protect their positions under executory contracts and leases.

The Patent Act gives district courts discretion to award enhanced damages for willful patent infringement under 35 U.S.C. § 284 based on the particular circumstances of each case, held the Supreme Court. The decision overturns the Federal Circuit’s two-part test for enhanced damages articulated in In re Seagate Technology, LLC.

In Halo Electronics, Inc. v. Pulse Electronics, Inc., the Supreme Court vacated the Federal Circuit’s ruling in Seagate. The two-prong test in Seagate required a plaintiff to show by clear and convincing evidence that:

In rejecting this test, the Supreme Court concluded that:

The Supreme Court explained that enhanced damages are limited to egregious cases of misconduct beyond typical infringement. Additionally, appellate review of an enhanced damages award should be based on the abuse of discretion standard rather than the three-part appellate review framework adopted by the Federal Circuit. (136 S. Ct. 1923 (2016).)

See Legal Update, Supreme Court Overrules Federal Circuit, Holding that Seagate Is Inappropriate for Enhanced Damages Determination for more on this decision.

See Practice Note, Patent Litigation: Willful Infringement for more on willful infringement claims and practical considerations for patent litigants.

The objective reasonableness of a losing party’s claims or defenses is an important, but not a dispositive, factor in a district court’s determination of whether to award attorneys’ fees in a copyright infringement case.

In Kirtsaeng v. John Wiley & Sons, Inc., Kirtsaeng, the prevailing party in a copyright infringement action, petitioned the district court for more than $2 million in attorneys’ fees. The district court, following Second Circuit precedent, gave controlling weight to the objective reasonableness of the losing party’s claims and denied the petition. The Second Circuit affirmed.

On appeal, the Supreme Court vacated the Second Circuit’s decision and remanded the case to the district court. The Supreme Court held that district courts may give substantial weight to the objective reasonableness of the losing party’s position in assessing attorneys’ fee awards, but noted that:

The Supreme Court explained that the broader test formulated in Fogerty would better promote useful copyright litigation than a single-factor objective reasonableness test by encouraging parties with strong legal positions to stand on their rights, while deterring weakly positioned parties from proceeding with litigation. (136 S. Ct. 1979 (2016).)

See Legal Update, Supreme Court: Objective Reasonableness Is a Material, But Not Dispositive, Factor in Copyright Attorneys’ Fee Awards for more on this decision.

See Practice Note, Copyright Infringement Claims, Remedies, and Defenses for more on copyright infringement actions.

The Supreme Court recently resolved two significant issues in inter partes review (IPR) proceedings before the Patent Trial and Appeal Board (PTAB) under the Leahy-Smith America Invents Act (AIA).

The dispute in Cuozzo Speed Technologies, LLC v. Lee arose out of the first IPR proceeding filed under the AIA, where the PTAB had invalidated Cuozzo’s patent claims as obvious and denied its motion to amend them. Cuozzo appealed to the Federal Circuit, arguing that the PTAB improperly instituted IPR and applied the wrong standard in interpreting the claims. The Federal Circuit rejected both arguments, and the Supreme Court granted certiorari.

The Supreme Court held that the AIA authorized the US Patent and Trademark Office (USPTO) to issue a regulation directing the PTAB to apply the “broadest reasonable interpretation” (BRI) claim construction standard in IPR proceedings, rather than the “ordinary meaning” standard used by district courts. The court determined that imposing the BRI standard was a reasonable exercise of the USPTO’s rulemaking authority under the AIA, and that the BRI standard will protect the public from overbroad patent claims.

The Supreme Court also confirmed that the AIA bars judicial review of PTAB decisions to institute IPR, where a patent owner challenges the PTAB’s determination that the IPR petition satisfies the requirements for instituting IPR under 35 U.S.C. § 314(a). Significantly, the Supreme Court did not categorically preclude review of all PTAB institution decisions following a final decision, noting that judicial review may be appropriate where either:

(136 S. Ct. 2131 (2016).)

See Legal Update, Supreme Court Affirms Federal Circuit in Cuozzo, Upholding USPTO Procedure in IPR Proceedings for more on this decision.

See PTAB Proceedings Toolkit for a collection of resources designed to assist counsel with PTAB proceedings.

A defendant in an action under Title VII of the Civil Rights Act of 1964 (Title VII) may be awarded attorneys’ fees as a prevailing party even without obtaining a favorable ruling on the merits, according to the Supreme Court. Its decision clarifies the definition of prevailing party and expands the ability of Title VII defendants to recover attorneys’ fees when the plaintiff’s claim was frivolous, unreasonable, or groundless.

CRST Van Expedited, Inc. v. EEOC involved a Title VII lawsuit filed by the Equal Employment Opportunity Commission (EEOC) against the trucking company CRST, alleging that CRST subjected multiple drivers to sexual harassment. The Eighth Circuit upheld the district court’s dismissal of most of the EEOC’s claims, including claims brought by the EEOC on behalf of 67 women, based on the EEOC’s failure to satisfy its presuit obligations to investigate and conciliate. After remand, the district court ultimately awarded CRST over $4 million in attorneys’ fees. The Eighth Circuit reversed, finding that CRST did not receive a favorable determination on the merits and was not a prevailing party. CRST appealed and the Supreme Court granted certiorari.

Reversing the Eighth Circuit’s decision, the Supreme Court concluded that a defendant may be a prevailing party when a plaintiff’s Title VII litigation is disposed of for non-merits-based reasons. The Supreme Court explained that:

The Supreme Court remanded the case to the Eighth Circuit, in part to determine whether a defendant must obtain a preclusive judgment to be a prevailing party. (136 S. Ct. 1642 (2016).)

See Legal Update, SCOTUS: Defendant May Be Awarded Attorneys’ Fees as Title VII Prevailing Party Without a Ruling on the Merits for more on this decision.

See Practice Note, Conciliation with the EEOC for more on the EEOC’s obligation to conciliate charges.

The limitations period for a public employee’s discrimination claim under Title VII alleging constructive discharge does not begin running until after the employee resigns, held the Supreme Court. The decision resolves a circuit split on the issue.

In Green v. Brennan, Green claimed that he was denied a promotion within the US Postal Service because of his race. After Green complained, his supervisors accused him of delaying mail delivery (a criminal offense) and, in December 2009, Green signed an agreement under which the Postal Service agreed not to pursue criminal charges against Green in exchange for his promise to either retire or take a new position. Green chose to retire and submitted his resignation documents on February 9, 2010. Green contacted an Equal Employment Opportunity (EEO) counselor 41 days later to report his unlawful constructive discharge and ultimately filed a lawsuit in district court.

The district court granted the Postal Service’s summary judgment motion. The Tenth Circuit affirmed, finding that the 45-day period for Green to contact the EEO counselor began running when the agreement was signed, not when Green submitted his resignation (see 29 C.F.R. § 1614.105(a)(1)).

The Supreme Court vacated the Tenth Circuit’s decision, concluding that for a federal employee alleging constructive discharge under Title VII, the 45-day limitations period begins running only after the employee resigns, not after the employer’s last discriminatory act. The Supreme Court reasoned that the relevant statutory language, “the matter alleged to be discriminatory,” is ambiguous with respect to constructive discharge claims and relied on canons of interpretation. Looking to the standard rule for limitations periods, the Supreme Court concluded that a resignation is part of a complete and present cause of action in a constructive discharge claim. (136 S. Ct. 1769 (2016).)

Although this decision involves a public sector employee and the applicable 45-day statute of limitations for federal employees, the majority and concurring opinions noted that the statutory language applicable to private sector employees’ time to file a discrimination claim is similar to the federal regulation. Therefore, the decision likely applies with equal force to the statute of limitations applicable to constructive discharge claims brought by private sector employees.

See Legal Update, SCOTUS: Clock for Constructive Discharge Begins Running After Employee Resigns for more on this decision.

See Practice Note, Discrimination in Federal Public Employment: Federal Sector EEO Program for more on the federal sector discrimination complaint process.

The Seventh and Eighth Circuits recently reached differing conclusions on the enforceability of mandatory employee arbitration agreements that contain class or collective action waivers. The circuit split may lead to forum shopping or a Supreme Court decision on the issue.

In Cellular Sales of Missouri, LLC v. NLRB, the Eighth Circuit rejected the National Labor Relations Board’s (NLRB’s) position and held that mandatory arbitration agreements with class action waivers do not necessarily violate Section 8(a)(1) of the National Labor Relations Act (NLRA). The decision aligns with the Fifth Circuit’s holdings in Murphy Oil USA, Inc. v. NLRB and D.R. Horton, Inc. v. NLRB. However, the Eighth Circuit concluded that the specific agreement at issue was unlawful because employees would reasonably construe it to restrict their rights to file charges with the NLRB. ( (8th Cir. June 2, 2016).)

By contrast, in Lewis v. Epic Systems Corp., the Seventh Circuit created the circuit split by holding that mandatory arbitration agreements with class or collective action waivers violate Sections 7 and 8 of the NLRA. The court determined that nothing in the Federal Arbitration Act (FAA) saves this type of collective action ban, and there is no conflict between the NLRA and the FAA. ( (7th Cir. May 26, 2016).)

See Legal Updates, Seventh Circuit Pans Arbitration Pact with Class Action Waivers Based on NLRA, Creates Circuit Split and Eighth Circuit Rejects NLRB Position that Arbitration Agreement Class Waivers Violate NLRA But Finds Agreement Unlawful for more on these decisions.

See Practice Note, Employee Rights and Unfair Labor Practices Under the National Labor Relations Act for more on employee rights under Section 7 of the NLRA.

Following a Supreme Court decision, landowners can now seek judicial review of an Army Corps of Engineers (Corps) jurisdictional determination (JD) on whether waters constitute “waters of the US,” which triggers permitting requirements under the Clean Water Act (CWA).

Under the CWA, landowners must obtain a Section 404 permit from the Environmental Protection Agency if a project might discharge into, fill, or impact waters of the US. The Corps allows owners to obtain a standalone JD on whether a property contains waters of the US. If so, the owner must pursue a Section 404 permit before discharging a pollutant.

Historically, if an owner disagreed with the determination that property contains waters of the US, the owner had to go through the Section 404 permitting process before it could challenge the validity of the JD. In U.S. Army Corps of Engineers v. Hawkes Co., however, the Supreme Court held that an approved JD is a final agency action under the Administrative Procedure Act, meaning that the JD can be judicially reviewed. (136 S. Ct. 1807 (2016).)

This decision is a significant development for landowners that disagree with an approved JD finding that the waters at issue are waters of the US. The Section 404 permitting process is long and expensive, and it is often difficult to determine whether the waters in question are waters of the US. The ability to challenge a JD before applying for a Section 404 permit provides a judicial avenue of review before undergoing the permitting process.

Landowners and their counsel should consider requesting a JD when undertaking a project that might impact wetlands or other water bodies, and should note that this holding is limited to approved JDs.

See Legal Update, US Supreme Court Allows for Pre-Permit Judicial Review of Clean Water Act Jurisdictional Determinations for more on this decision.

See Practice Note, Environmental Law: Overview for information on the environmental regulatory framework and major environmental statutes that impact businesses, and the types of liability imposed on violators of these laws and regulations.