What NFIB Legal Center is Doing to End to Sue-and-Settle Lawsuit Abuse

Date: April 06, 2017

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Since the mid-90s, environmentalists have used a creative sue-and-settle strategy that has allowed radical environmentalist groups to push their agenda through the Environmental Protection Agency or the Department of Interior’s Fish & Wildlife Service. The tactic is simple enough. The environmental group sues and immediately offers to settle if the federal agency agrees to initiate rulemaking to tighten or expand environmental controls—which usually means more regulations to hurt small business owners. This tactic became even more popular with the Obama Administration.

Now under the Trump Administration the political landscape is certainly different. If served with such a lawsuit and an offer to settle, one would expect EPA and Fish & Wildlife officials to respond with a motion to dismiss. Rather than immediately capitulating, the Trump Administration would likely stand its ground, and would not agree to promulgate burdensome new rules unless forced by a court. But of course, it is only a matter of time—how long, no one knows—until the pendulum swings the other way and extremist environmentalists have their man (or woman) in the White House. And when that happens we can surely expect a revival of sue-and-settle tactics.

The sue-and-settle strategy is cleverly disguised as an adversarial proceeding, when crusading federal bureaucracies may be all too willing to agree to initiate new rulemaking, and only feigning some semblance of legal resistance. To be sure, once hit with a lawsuit to initiate new rulemaking an environmentally aggressive administration may well take the view that it has no choice but to tighten the regulatory knot a little more. This is exactly what the agency may want to do already. So, a lawsuit from NRDC or Sierra Club may simply serve as a convenient excuse—i.e., a friendly nudge to move up this regulatory priority.

In our legal system any party with standing should have access to the courts and have an opportunity to have legal issues resolved; however, that presumes that we’re talking about a truly adversarial conflict. In any event, there is something perverse in these sue-and-settle cases precisely because—in agreeing to promulgate new rules—the suit is resolved in a way that is manifestly contrary to the interests of the regulated community. So one should think that potentially regulated entities, or the National Federation of Independent Business speaking on behalf of small business more generally, should at least have opportunity to weigh-in to oppose the terms of such a settlement. But, those settlement agreements are inevitably hammered out without any opportunity for public input in private closed door meetings. Therefore, the only way for a small business, or NFIB, to have its concerns heard in a case like this is to intervene to have a seat at the negotiating table. And certainly, if the federal defendant is unwilling to defend the law as written, then regulated entities should have an opportunity to do so—i.e., to mount a defense against calls for new environmental rules.

And it is important to understand that such battles may be more easily won at this stage. This is because—if an agency actually moves forward with pronouncing new rules, it will generally receive deference on its new found interpretation of the statutory text. We explain that problem in more depth in our recent post discussing the “Chevron doctrine.”

But unfortunately, the D.C. Circuit—where most of these cases are heard—takes the view that regulated entities may not intervene in an ongoing lawsuit unless they can demonstrate standing. This is problematic because this will often shut-out the regulated community entirely, which virtually assures that environmental activists will succeed in obtaining an agreement for new rules when they have a “friend” in the White House. The trouble is that it is sometimes difficult to prove standing when it is unclear what final action the agency might take if it should initiate new rulemaking.

As we argued in a brief filed this week in the Supreme Court, intervenors should not have to prove standing. For one, the Federal Rules of Civil Procedure do not impose a standing requirement on intervenors—only a requirement that they must have a general interest in the potential outcome of the lawsuit. And as a matter of law, Article III of the Constitution only imposes standing requirements on the plaintiff. As such, we are hoping that the Supreme Court will clarify that standing is not a requirement for intervention. Such a decision would at least allow regulated entities an opportunity to interject and oppose settlement agreements that may prove problematic for small business.

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