Mulberry Hills Development Corp. v. United States

No. PN-89-2639 (D. Md. November 16, 1990)

The court rules that a development company failed to meet its burden for obtaining a preliminary injunction to prevent the Army Corps of Engineers from enforcing § 404 of the Federal Water Pollution Control Act (FWPCA) by means of a Federal Manual for Identifying and Delineating Jurisdictional Wetlands. The manual was adopted in January 1989, without formal notice and opportunity to comment, to provide a single interagency manual for wetlands delineation. The Corps ordered the company to cease and desist from filling wetlands and selling lots at its residential development, and the company alleged that the Corps exceeded its authority under FWPCA § 404 when it adopted the manual's substantive changes to the Corps' wetlands jurisdiction and applied its new intepretation to delimit wetlands on the company's land. The court first holds that the case is not ripe. The case is in a preliminary stage because the company has not performed a delineation on any plan and has not pursued any permit for continuing work on delineated wetlands. When a delineation is made, the company will have the opportunity to contest it. The court next holds that granting review would violate the doctrine of primary jurisdiction. Although the company concedes that some acreage is wetlands, a factual dispute remains whether additional acres are wetlands and whether they would generate hydrophytic vegetation if left unfarmed. These issues would best be decided using the agency's scientific expertise. Further, the FWPCA does not provide preenforcement review, and prior precedent that proscribes the Corps from asserting its jurisdiction in a memorandum without following rulemaking procedures is distinguishable. In this case, the company's challenge is over what portion of the disputed tract is wetlands, not whether jurisdiction is proper. The court thus holds that the company has not demonstrated a likelihood of success on the merits at this stage. Finally, the court balances the hardships to the parties and concludes that the public interest in protecting wetlands outweighs the company's potential economic injury. The company provided no evidence that its economic injury would lead to bankruptcy and should have applied for a permit to use wetlands when it began developing the land. Moreover, the wetlands may be lost by the time the case is adjudicated if the injunction is granted.

[Pleadings in this case are digested at ELR Pend. Lit. 66059 and 66063.]

Counsel for Defendants
Richard B. Stewart, Scott A. Schachter, Kimberlea Rea Cowley
Environment and Natural Resources Division
U.S. Department of Justice, P.O. Box 23986, Washington DC 20026-3986
(202) 786-4787

Jane F. Barrett, Ass't U.S. Attorney
District of Maryland, U.S. Courthouse
101 W. Lombard St., 8th Fl., Baltimore MD 21201
(301) 539-2940

Counsel for Plaintiffs
Warren K. Rich, Sharon K. Tucker, Frank E. Couper
Rich, Tucker & Rice
93 Main St., P.O. Box 589, Annapolis MD 21404
(301) 268-3090

[21 ELR 20123]

Memorandum and Order

Plaintiff, Mulberry Hills Development Corporation (Mulberry), a Maryland corporation, has filed a motion for a preliminary injunction to prevent various agencies of the United States, particularly the United States Corps of Engineers, from enforcing section 404 of the Clean Water Act, 33 U.S.C. § 1344, by means of a Federal Manual for Identifying and Delineating Jurisdictional Wetlands (the 1989 Manual) and from enforcing a cease and desist order that the Corps of Engineers issued on July 19, 1989. The parties have fully briefed the matter and argued it to the Court at a hearing for preliminary injunction on November 7, 1989. The Court has also reviewed supplemental materials submitted by the plaintiff thereafter.

Mulberry is the owner and developer of a 62-acre tract of land located in Talbot County, Maryland, known as Mulberry Mews Subdivision, which is the subject matter of this litigation. Plaintiff purchased the property on July 6, 1988, for $ 600,000. In connection with the development for the site, which is to contain 161 single family homes, the plaintiff engaged John H. Plummer and Associates, Inc. to survey the land and perform site engineering. On February 16, 1989, the subdivision plan for the 62 acres was approved by the Town of Easton and recorded among the land records on May 30, 1989. Plaintiff also received approvals from Talbot County for a soil erosion and sediment control plan and from the Maryland State Highway Administration to construct an entrance onto U.S. Route 50. It also obtained approvals from the Maryland Department of Environment for sanitary, sewer and water systems. The plaintiff did not, however, file any application with the Corps of Engineers for a permit to fill or grade wetlands as was required under the Clean Water Act.

On May 25, 1989, plaintiff entered into a contract for site grading, roadway construction and utility construction, and construction began on the tract in June 1989 with the clearing and grading for the roadway construction, utility easements and general site clearing. In the course of this work wetlands were filled and graded.

In July 1989 Alexander Dolgos, an employee in the Baltimore District Army Corps of Engineers, performed a field review of Mulberry Mews Subdivision. Using a "three parameter approach," i.e. evaluating the three parameters of soil conditions, hydrology and types of vegetation, he determined that a portion of Mulberry Mews constituted wetlands. He observed on the site sweetgum, red maple, blackgum and willow oak which are "facultative" wetlands [21 ELR 20124] species andcattails which are "obligate" wetlands species. He observed standing water and saturated soil conditions throughout the site and had a U.S. Department of Agriculture scientist perform a soil test which revealed hydric soils which were identified as "Pocomoke and Fallsington Series." These wetland portions of the tract that he observed were adjacent to the headwaters of the Tanyard Branch, a tidal tributary of the Tred Avon River, which flows into the Choptank River and on to the Chesapeake Bay. Mr. Dolgos also observed that fill had been placed on a portion of the wetlands that he identified and that a portion had been graded.

After his review of the property, Mr. Dolgos notified plaintiff of his findings and arranged with Mr. Plummer, the president of Mulberry, to walk the site. On July 20, Mr. Dolgos and Mr. Plummer in fact walked the site, and Mr. Dolgos pointed out wetlands. Mr. Plummer was informed that he would have to make an application for a wetlands permit under 33 U.S.C. § 1344 which would first require him to delineate the wetlands on the site. Mr. Dolgos handed Mr. Plummer a cease and desist letter dated July 19, 1989, which provided in relevant part:

A recent field investigation disclosed that fill material has been placed on wooded non-tidal wetlands . . . .

Records in this office indicate that neither a Department of the Army permit nor a letter of permission authorizing this work was issued by this office. The placement of fill material in Waters of the United States or an adjacent wetlands without prior approval of plans by the Department constitutes a violation of Section 404 of the Clean Water Act.

No further work is to be performed at this or any other location in a waterway or on wetlands without compliance with the laws . . . .

Following the meeting between Mr. Dolgos and Mr. Plummer, Mr. Plummer retained an environmental consultant, Mr. Rod Schwarm, who called Mr. Dolgos and the two of them walked the site on July 25. At that time it was agreed that Mr. Schwarm would delineate the boundaries of the wetlands and depict them on a plan after which the delineation would be verified by the Corps of Engineers. Such a delineation was necessary before an application for permit could be processed.

Apparently, during the discussion Mr. Dolgos instructed that the delineation should be made by referring to the 1989 Manual. Mr. Dolgos is reported to have told Mr. Schwarm that under the 1989 Manual as applied to the general area jurisdictional wetlands generally followed the 58-foot contour on the topographic map. When the wetlands are delineated in that fashion, some 21 acres of the 62-acre tract would constitute wetlands. Approximately 7 of these 21 acres were fields that up to approximately a year earlier had been farmed with soy beans, wheat and corn. Evidence was presented that it had been farmed for at least 30 years and longer. These seven acres of farmland present at least two of the three parameters for defining wetlands, i.e. hydrology and soil type. Whether the third, i.e. hydrophytic vegetation is present is disputed. The government contends that hydrophytic plants are emerging since the farming ceased and that if left to its natural state, the hydrology and the soil conditions would give rise to the reoccurrence of hydrophytic vegetation. Plaintiff contends that these seven acres contain only clover.

Other than the informal discussion between Mr. Plummer and Mr. Dolgos on July 25, 1989, that "generally" wetlandslie below the 58 foot topographic line, no delineation has been made to date by either party of those portions of the 62-acre tract which are wetlands. Likewise, no application for a permit to fill or grade wetlands has been filled.

The core of plaintiff's claims in this case centers around the 1989 Manual adopted by four federal agencies to guide its employees as to the delineation of wetlands. The plaintiff urges that the Manual is not simply an interpretive tool, as contended by the United States, but that it changed the rules for defining wetlands without notice and the other procedures required by the Administrative Procedure Act (APA), 5 U.S.C. § 551, et seq., for rulemaking.

In particular, the plaintiff argues that the 1989 Manual relaxed the definition of wetlands so that only two of the three criteria established by regulation are necessary to characterize land as wetlands if the property has been disturbed by human agency. The plaintiff argues that under the definition of the 1989 Manual perhaps 50 percent of the Eastern Shore of Maryland, including farmlands, could be defined as wetlands. Plaintiff contends that if the 1987 Manual, which preceded the 1989 Manual, were applied, the delineation would be different, and the wetland area on its property would be more in the neighborhood of 14 acres. The plaintiff agrees that the property contains wetlands and that it illegally filled and graded wetlands.

At this point the plaintiff is willing to stop work on the 14 acres, but it wants to proceed on the seven acres that it contends is added as wetlands by virtue of the 1989 Manual, which it contends was illegally adopted. It contends that as to the seven acres the only issue is whether the Manual is a properly adopted rule under 5 U.S.C. § 553, which is a question of law that can be and should be resolved by the Court at this time.

In response to the motion for a preliminary injunction the government argues that the issues are not ripe and to rule now would violate the agency's primary jurisdiction. The government notes that under any standard, whether under the 1989 Manual, the 1987 Manual or the regulations adopted under the Clean Water Act, it has jurisdiction over wetlands on this tract. It has observed fill and grading on wetlands, which violates the Clean Water Act because no permit was obtained. The government contends that once jurisdiction is established, the wetlands must be delineated from uplands, which is an agency process that has not yet taken place. In the process of delineation, the parties can argue as to the proper method of defining wetlands and the legality of the 1989 Manual. While the government contends that it would be inappropriate for the Court to adjudicate the appropriateness of the 1989 Manual at this time or to determine the jurisdiction of the agency over the wetlands, it contends that its 1989 Manual falls within the exception of rulemaking procedures set forth in 5 U.S.C. § 553(b)(3)(A) which provides that the procedures do not apply to "interpretive rules, general statements of policy, or rules of agency organization, or procedure, or practice; . . ."

In arguing that the proceeding is not ripe for decision in the courts, the government notes that there has been no final agency action, and for the Court to assume jurisdiction now would be interfering with the agency process in violation of the doctrine of primary jurisdiction. The government also argues that the plaintiff is not entitled to pre-enforcement review of agency procedures, and to allow review now would deprive the agency of its discretion in enforcement. Finally, the government argues that in balancing the hardships, the plaintiff would only suffer financial loss whereas if the injunction were issued, the environment would be permanently and irretrievably altered.

In considering plaintiff's motion for a preliminary injunction, the plaintiff must demonstrate that it has met the criteria set forth in Blackwelder Furniture Co. v. Seilig Mfg. Co., 550 F.2d 189 (4th Cir. 1976). In that case, the Fourth Circuit articulated the proper equitable elements that must be proven by the plaintiffs to succeed on a motion for preliminary injunction: (1) plaintiff must make a strong showing that it is likely to prevail on the merits of the case; (2) plaintiff must demonstrate that it will suffer irreparable injury if a preliminary injunction does not issue; (3) the Court must consider whether issuance of the injunction would substantially harm other interested parties; and (4) the Court must consider the public interest in the subject matter. Blackwelder instructed that the "strong showing" of likelihood of success is balanced with the probability of irreparable injury. Thus, the greater the probability of irreparable injury, the less likelihood of success the plaintiff must show. Conversely, if the plaintiff cannot show a great probability of irreparable injury, the importance of the likelihood of success increases. Blackwelder directed that consideration of whether a preliminary injunction should issue would depend on "flexible interplay" of the factors. Id. at 196.

Applying the four factors to this case, the plaintiff has not shown that he is likely to succeed on the issues in the present posture of this case. The defendants concededly have jurisdiction over the wetlands on plaintiff's property, wetlands that have not been delineated and the delineation of which is subject to factual dispute. It is also undisputed that the plaintiff has filled and graded lands that are concededly wetlands without a permit in violation of 33 U.S.C. § 1344. Under any applicable procedure that could be followed at this point, whether an application for a permit is pursued or whether an enforcement action of the cease and desist order is pur- [21 ELR 20125] sued, the status of the case is a preliminary stage in the agency's proceedings. The plaintiff has not performed a delineation on any plan and has not pursued any permit for continuing work on lands delineated as wetlands. Likewise, the agency has not performed any delineation and has not been requested to. On the contrary, the plaintiff has ordered that the defendants stay off the property except pursuant to a discovery procedure under the federal rules. At the very minimum, a delineation of where the wetlands lie would have to be made and the plaintiff would have to have the opportunity to contest that delineation under whatever standard is used. While the plaintiff concedes that 14 acres are wetlands, there are factual disputes whether the additional seven acres are wetlands. Even applying the criteria established by the 1987 Manual or by the applicable regulations in the absence of any manuals, there is a factual dispute whether the seven acres left unfarmed would generate hydrophytic vegetation. The Court is unable to say at this point whether that process would result in the need for any court action. For the Court now to become embroiled in the agency process would violate principles of ripeness and primary jurisdiction. See Abbott Laboratories v. Gardner, 387 U.S. 136, 148-49 (1967); Avoyelles Sportsmen's League,Inc. v. Marsh, 715 F.2d 897, 919 [13 ELR 20942] (5th Cir. 1983). This would be particularly inappropriate in circumstances where the issues necessary for an agency determination are interlaced with significant scientific expertise which the agency possesses.

The Court also believes that the Clean Water Act does not provide pre-enforcement review. See City of Baton Rouge v. EPA, 620 F.2d 478, 480 n.3 [10 ELR 20546] (5th Cir. 1980).

The plaintiff argues that the Court should at least consider the applicability of the 1989 Manual and declare its illegality to facilitate the agency process. The Court was assured by counsel for the plaintiff that if the 1989 Manual were not being followed, there would be no issues of dispute before the agency. The plaintiff urges that the issue on the 1989 Manual is simply a question of law to be determined by the Court, relying on the decision of Tabb Lakes, Ltd. v. United States, 715 F. Supp. 726 [19 ELR 20672] (E.D. Va. 1988), aff'd __ F.2d __ (4th Cir. 1989).

The holding in Tabb Lakes, however, is not applicable to this case. The issue there was whether the agency had jurisdiction over the land. The basis on which the agency asserted jurisdiction was a memorandum issued by the government without following procedures of the APA, 5 U.S.C. § 553. The entire issue presented to the court there was whether in determining the jurisdiction the memorandum of the agency was adopted in conformity with rulemaking requirements.

In the case before this Court, the agency concededly has jurisdiction. Moreover, the plaintiff concedes that it has violated the Clean Water Act. What plaintiff wants to do is to remove portions of the land from jurisdiction and proceed with development on that part without pursuing the agency process. The difficulty with this is that once the agency has jurisdiction, it must be given the opportunity to delineate the wetlands. This case is not a case of whether jurisdiction is proper as was presented in Tabb Lakes. Rather, the entire dispute here is what portion of the 62-acre tract is wetlands. In determining what portion is wetlands, factual questions will undoubtedly arise whether the parameters justifying wetlands have been satisfied at the site and what factors are to be considered. In the context of this delineation, the plaintiff will undoubtedly present his argument as to the appropriate criteria to apply and will certainly contend that the 1989 Manual is inappropriate.

For the reasons given, the Court believes that success on the merits at this stage of the proceedings is unlikely. Against this finding the Court must neverthless balance the hardships.

Plaintiff has alleged no more than economic injury if the injunction is not granted. At the hearing it urged that the economic injury could lead it to bankruptcy, although there was no specific evidence to support that contention. Nevertheless, such injury can be redressed in a court of law. See e.g. Sampson v. Murray, 415 U.S. 61 (1974). In this context the Court must consider the fact that the development of the property began almost a year ago at a time when plaintiff should have given consideration to making application for a permit to use wetlands. In the face of the concession that wetlands exist on the 62-acre tract and that the plaintiff has never filed an application for a permit to disturb the wetlands, it is bold for the plaintiffs to enter court almost a year later and argue that it is now going to be finally damaged by delay in resolving the issues now at the agency level.

The government, on the other hand, has alleged that if the injunction is granted and plaintiff is allowed to continue developing the land in question, the wetlands may be lost by the time the case is adjudicated. In Amoco Prod. Co. v. Village of Gambell, 480 U.S. 531, 545 [17 ELR 20574] (1987), the Supreme Court instructed that where injury to the environment is sufficiently likely, "the balance of harms will usually favor the issuance of an injunction to protect the environment." The Court in Amoco Products further noted that the "public interest" plays an important role in the balancing of the equities. 480 U.S. at 545. Here, the plaintiff argues that the public interest lies in having the Manual declared invalid. The Court is persuaded, however, by the defendant's view that the public interest as reflected in the purposes of the Clean Water Act is to protect the wetlands to the extent that they exist.

In balancing the likelihood of success, the harm to the plaintiff, the failure of the plaintiff in having taken action earlier, and the potential harm to the environment, the Court is persuaded that plaintiff has failed to meet its burden to obtain a preliminary injunction, and accordingly the motion for preliminary injunction will be denied.

For the foregoing reasons, it is hereby ORDERED this 14th day of November, 1989, by the United States District Court for the District of Maryland, that:

1. The motion of plaintiff for a preliminary injunction is hereby denied;

2. The Clerk of the Court is directed to mail a copy of this Memorandum and Order to all counsel of record.