New EPA Lawsuit Policy Advances Trump’s Deregulatory Agenda

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends much of her time in Asia and is currently working on a book about textile artisans.

The Wall Street Journal featured a piece last week, The Trump Deregulatory Juggernaut Is Rolling, reporting some numbers that support a trend we’ve identified: the Trump administration’s success in advancing a deregulatory agenda, via agency actions, despite its failure to pass major legislation.

From the WSJ:

While the Republican machine that emerged from the 2016 election may be sputtering on other fronts, it is proving to be a juggernaut on deregulation. And as a priority for the business community, deregulation ranks right up there with tax cuts and tax reform.

Deregulation has occurred in areas including financial and environmental regulation, in the form of rolling back regulations, and setting more lax enforcement policies, as I discussed at greater length in discussed further in Financial Regulatory Rollback Proceeds). The administration is also taking further necessary steps to ensure its deregulatory approach survives by methodically and efficiently filling federal judgeships with compliant jurists (which I have discussed in Trump Nominates Seventh Round of Federal Judges.

Some Supporting Nmbers

The Journal relies on numbers produced by the U.S. Chamber of Commerce.From the WSJ:

The business group has been keeping a tally of deregulatory actions this year, and its scorecard lists 29 executive actions—executive orders by Mr. Trump or directives from his White House—to reduce regulatory requirements. In response, executive-branch agencies have issued 100 additional directives that either knock down regulations or begin a process to eliminate or shrink them.

Now, I should point out that some of these executive actions have about the same actual legal effect as issuing a press release. But some have also sparked further regulatory action at the agency level.

Where the WSJ account goes a bit astray is in crowing about 50 pieces of deregulatory legislation either introduced or currently moving through Congress. If you click through to the Chamber summary, you’ll see most of these bills have moved no further than the House.

Far more important to the deregulatory agenda is the wide use of  the Congressional Review Act (CRA), which allows Congress to use expedited procedures to overturn regulations within 60 session days of their enactment. If the President then signs the resulting CRA resolution of disapproval– which Trump did for the fifteenth time last week– the regulation is overturned, and the agency cannot revisit the subject unless and until Congress passes new authorizing legislation.

Last week’s action overturned the Consumer Financial Protection Bureau’s (CFPB) ban on mandatory arbitration clauses in consumer financial contracts (for further details, see this post, RIP, CFPB Mandatory Arbitration Ban, which also includes links to my extensive CRA coverage).

New Pruitt Policy to Foil Regulation by Litigation

EPA administrator Scott Pruitt has been a longstanding bugbear of environmentalists. In his previous role as attorney general for the state of Oklahoma– a major producer of oil and natural gas– he either filed or joined lawsuits that sought to stymie the modest pro-regulatory environmental and climate change agenda the EPA previously espoused.

Now, he’s in charge of the agency, and he defines its regulatory approach. The latest: In October, Pruitt issued a Directive Promoting Transparency and Public Participation in Consent Decrees and Settlement Agreements, October 16, 2017.

Deficiencies in the US system of regulation are somewhat compensated for by allowing for regulation by litigation. Or at least such was the case until business lobbyists succeeded in pressing through so-called legal reforms over the last couple of decade that make it much more difficult for plaintiffs to sue– and especially, file class actions– and to prevail in lawsuits.

This deliberate strategy of restricting the ability to file lawsuits to achieve remedies hasn’t been limited to Republicans, and in fact, I’ll leave it to readers to work out which junior Senator was one of a 18 Democrats to vote for the Class Action Fairness Act of 2005 (the final tally for which was 72 in favor, 26 against, with two not voting).

Regulation via litigation has managed to survive– barely– these legal reforms, and the related and necessary packing of the courts with business-friendly jurists (especially at the level of the United States Supreme Court).

As to the EPA, this will be the case no longer. According to an October 16 EPA press release:

In fulfilling his promise to end the practice of regulation through litigation that has harmed the American public, EPA Administrator Scott Pruitt issued an Agency-wide directive today designed to end “sue and settle” practices within the Agency, providing an unprecedented level of public participation and transparency in EPA consent decrees and settlement agreements.

“The days of regulation through litigation are over,” said EPA Administrator Scott Pruitt. “We will no longer go behind closed doors and use consent decrees and settlement agreements to resolve lawsuits filed against the Agency by special interest groups where doing so would circumvent the regulatory process set forth by Congress. Additionally, gone are the days of routinely paying tens of thousands of dollars in attorney’s fees to these groups with which we swiftly settle.”

Over the years, outside the regulatory process, special interest groups have used lawsuits that seek to force federal agencies – especially EPA – to issue regulations that advance their interests and priorities, on their specified timeframe. EPA gets sued by an outside party that is asking the court to compel the Agency to take certain steps, either through change in a statutory duty or enforcing timelines set by the law, and then EPA will acquiesce through a consent decree or settlement agreement, affecting the Agency’s obligations under the statute.

More specifically, EPA either commits to taking an action that is not a mandatory requirement under its governing statutes or agrees to a specific, unreasonable timeline to act. Oftentimes, these agreements are reached with little to no public input or transparency. That is regulation through litigation, and it is inconsistent with the authority that Congress has granted and the responsibility to operate in an open and fair manner.

What does this mean? Allow me to turn to another WSJ piece, New EPA Settlements Policy Has Lawyers Bracing for Long Disputes, for some further facts and context. The WSJ notes that Pruitt’s policy mirrors U.S. Chamber of Commerce recommendations:

The new posture follows an order by EPA Administrator Scott Pruitt that environmental groups say will complicate settlements when plaintiff lawyers sue the agency for habitually failing to issue regulations on schedule.

The directive, released this month, requires the agency to seek the participation of affected industries and states in settlement negotiations. Environmental groups say the policy will drag out what should be easily negotiated deals.

Experts attributed the EPA’s regulatory tardiness to a lack of resources from Congress, intense lobbying by industry groups and activists and a belabored process meant to fortify regulations against increasingly frequent legal challenges. “Creating a rule in 1980 was much easier,” said Justin Pidot, a former Justice Department lawyer who handled EPA cases.

The order also instructs the EPA to avoid agreements that pay the legal fees of environmental groups, potentially forcing them to litigate to recoup their costs or forgo them entirely.

Let me provide a bit more context.  These sue and settle practices that Pruitt laments– which allows outside environmental groups to force the EPA to update its standards– seem consistent with what Congress had in mind during the high-water mark of federal environmental regulation (my emphasis):

In the 1970s and 1980s, when Congress enacted modern environmental laws, lawmakers knew they would need constant tinkering to keep pace with new health science and technology. So they ordered the EPA to revise its standards periodically and gave citizens the power to sue the agency when it failed to meet its deadlines—which is most of the time, environmental lawyers said.

“It became fairly common for the agency to wait until they were sued to start working on the rules,” said Patrice Simms, a former EPA lawyer who is now vice president of litigation for Earthjustice, an environmental law group. “They’ve always settled, because it’s the only rational thing to do. These are cases where the agency is plainly in violation of the law.”

So, Congress deliberately created procedures that would force the EPA to update its regulatory regime– and that would rely on outsiders to keep the agency honest. This has become more important as Republicans have pursued a policy of deliberately underfunding most non-defense federal activities (see for example, my very recent discussion of how this policy applies to other agencies, such as the SEC, SEC Soon to Have Five Sitting Commissioners; Budget Constraints Will Stymie Enforcement).

Note that the Pruitt policy also aims at attorneys. Failing to pay attorneys means the suits won’t be brought. So, no payment, no lawsuit– and the public will be wholly dependent on Pruitt’s EPA, buttressed by state regulators, to set priorities, enact regulations, and protect the environment.

The Bottom Line

And one final point: the consequences of Pruitt’s policy shift might not just be limited to breathing dirtier air, drinking filthier water, or experiencing other environmental depredations. Over to the WSJ again:

Mr. Pruitt’s directive could serve as a pilot project for the rest of the federal government. The House of Representatives on Wednesday passed legislation introduced by Rep. Doug Collins (R., Ga.) that would etch much of Mr. Pruitt’s order into law and would apply to all federal agencies. [Jerri-Lynn here: A link to this legislation can be found here.]

That’s just what we need: agencies controlled by Trump minions, and further restrictions put in place to make it even more difficult for pro-regulatory outsiders to bring pressure to bear on the federal government.