Don’t Miss the Memo: Recent Cases Clarify When Agency Guidance Documents Can be Challenged

But whether new guidance memos benefit or harm industry, they can often raise as many questions as they answer, with businesses left to wonder what legal effect an agency policy statement has and whether it can be challenged in court. These questions can hamper long-range planning by increasing regulatory uncertainty. Two recent cases help clarify when agency guidance should be considered a “final agency action” and how and when guidance can be challenged in court.

The first case, NRDC v. Jorjani, No. 18-cv-4596 (S.D.N.Y. July 31, 2019) — which we have written about before — involves a December 2017 memo issued by the Department of the Interior (DOI). The memo reversed the DOI’s interpretation of the Migratory Bird Treaty Act, reducing legal exposure for wind energy facilities and other projects that “incidentally” capture, injure, or kill migratory birds. Environmental groups and several states challenged the memo under the Administrative Procedure Act. In July, the U.S. District Court for the Southern District of New York denied the DOI’s motion to dismiss the challenge. The court held that the DOI’s memo was a “final agency action” because it “represented the consummation of the agency’s decision-making process” and had “direct and appreciable” legal consequences. Specifically, the memo prevented DOI employees from bringing enforcement actions against certain activities that capture, injure, or kill migratory birds. Therefore, the court ruled that it will allow the states and environmental groups to challenge the memo on its merits.

The second case, Calif. Comm. Against Toxics v. EPA, No. 18-1085 (D.C. Cir. Aug. 20, 2019), involves an Environmental Protection Agency (EPA) guidance memo that we addressed last January. That memo reversed the EPA’s “once in, always in” regulation of sources of hazardous air pollutants, allowing businesses to reduce their regulatory burden if they reduce their emissions. Again, states and environmental groups challenged the shift in agency policy. In August, however, the U.S. Court of Appeals for the D.C. Circuit dismissed the suit, holding that the memo was not a “final agency action” and therefore could not be challenged. Applying the same factors noted above, the D.C. Circuit found that, while the EPA’s memo “represented the consummation of the agency’s decision-making process,” it did not have “direct and appreciable legal consequences” and, therefore, could not be challenged. This is because, under the Clean Air Act, any loosening of the regulation of emissions may occur only through the Title V permit process. In other words, states and environmental groups, the court held, must wait for EPA’s policy to actually be implemented in the permitting process before they may challenge it.

Under the current federal deregulatory regime, informal agency memos can bring much needed relief to highly-regulated industries by quickly changing the interpretation of environmental rules. But businesses have to know when and how guidance memos will face legal challenge before they can account for regulatory relief in their long-term plans. While states’ and environmental groups’ efforts to block Trump administration policy shifts threaten to erase favorable regulatory developments for business, these suits are also helping to clarify the law regarding when and how agency action can be challenged.