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United States v. Bailey

July 9, 2009

UNITED STATES OF AMERICA, PLAINTIFF/APPELLEE,
v.
GARY BAILEY, DEFENDANT, THIRD PARTY PLAINTIFF/APPELLANT,
v.
LAKE OF THE WOODS COUNTY, THIRD PARTY DEFENDANT/ APPELLEE.
PACIFIC LEGAL FOUNDATION, AMICUS CURIAE -- AMICUS ON BEHALF OF APPELLANT.



Appeal from the United States District Court for the District of Minnesota.

The opinion of the court was delivered by: Wollman, Circuit Judge

Submitted: February 12, 2009

Before WOLLMAN, HANSEN, and BYE, Circuit Judges.

Gary Bailey constructed a road on a parcel of wetlands in Lake of the Woods County (County), Minnesota, without obtaining a permit under Section 404 of the Clean Water Act (Act). The United States Army Corps of Engineers (Corps) ordered Bailey to restore the land to its previolation condition. Bailey refused, and the United States brought an action under Section 309(b) of the Act to enforce the restoration order and to enjoin Bailey from discharging further pollutants into the wetland. Bailey counterclaimed against the United States, alleging that the Corps did not have jurisdiction over his parcel of land and that its restoration order was arbitrary and capricious. Bailey sued the County in a third-party complaint, alleging that the County should pay to restore the land. All parties moved for summary judgment.

In a most comprehensive, thorough opinion (from which we have borrowed extensively), the district court*fn1 granted in part the United States's motion for summary judgment, finding that the Corps properly asserted jurisdiction under the Act and that its restoration order met the requirements of United States v. Sexton Cove Estates, Inc., 526 F.2d 1293 (5th Cir. 1976). United States v. Bailey, 516 F. Supp. 2d 998 (D. Minn. 2007). The district court dismissed Bailey's counterclaim against the United States and his third-party complaint against the County. Id. The district court subsequently issued a final injunction, ordering Bailey to restore the wetland at his own expense to its previolation condition. United States v. Bailey, 556 F. Supp. 2d 977 (D. Minn. 2008).

Bailey appeals, contending that the district court erred in concluding that the Corps has jurisdiction over his property, in granting summary judgment in favor of the United States, and in entering an injunction to enforce the restoration order. He also argues that the restoration order is arbitrary and capricious. We affirm.

I. Factual Background

Bailey owns a parcel of land along the western shore of the Lake of the Woods (Lake), which is located in northern Minnesota. At issue in this lawsuit is a thirteen-acre site that consists of approximately twelve acres of wetland, as defined by the Corps.

In the early 1990s, Bailey considered developing the site and received a general permit from the Corps to excavate a harbor. The permit, however, excluded fills for commercial development or residential housing. In 1993, the Corps advised Bailey that the intended harbor was located on wetland and informed him that he would need additional permits to place dredged or fill material on the site. In 1994, after Bailey and a Corps official visited the site, the Corps suggested that Bailey hire a consultant "to help you delineate this highly diverse site and prepare the required application that was previously provided to you." The harbor project was eventually abandoned.

Bailey decided to plat the site for residential development and sell the lakeside property. The development was named Sunny Beach and consisted of fourteen lots, each having approximately 100 feet of lakefront. In 1998, Bailey hired Mark LaValla to build a road through the site to provide access to the lots. Bailey did not seek any permits from the Corps before LaValla began constructing the road.

LaValla cleared a roadway sixty-six feet wide and about a quarter of a mile long, running parallel to the Lake's shoreline. LaValla dug ditches on either side of the road and used the excavated material to build up the road. Before the road was complete, on June 11, 1998, employees of the local Soil and Water Conservation District visited the site and told LaValla that the road construction was not properly permitted and that he should stop construction, which he did. On June 15, 1998, a Corps employee visited the site with Bailey and several employees from the County and the Soil and Water Conservation District and instructed Bailey to do no more work on the road. About a week later, a representative from the Environmental Protection Agency (EPA) told Bailey that the EPA would not pursue an enforcement action if Bailey stopped all work on the road until he obtained a proper permit.

On June 17, 1998, Bailey filed a Local-State-Federal Project Notification Form with the County wherein he proposed building an access road for logging on the site. Bailey believed that his application would be accepted, and he alleges that an official from the Soil and Water Conservation District told him that the Corps would approve the permit and that he should finish the road. Without waiting for a decision on his application, Bailey instructed LaValla to finish work on the access road. LaValla completed the road, topping the roadbed with 2000 square yards of gravel.

The Corps received a copy of Bailey's notification form on August 17, 1998, and treated it as an after-the-fact application for a permit under Section 404 of the Act. On September 17, 1998, after the road was complete, the Corps notified Bailey in writing that the work was done in violation of the Act, that his permit was incomplete, that no additional work should be done on the road without a permit, and that if his permit was ultimately denied, he would be required to restore the land to its previous condition.

Bailey intended to dedicate the road to the County so that the road would become public and be maintained by the County. Accordingly, the road had to be built to meet the County's road specifications. Bailey requested that the road be inspected, and by letter dated September 16, 1998, the County's highway engineer informed Bailey of his inspection and of certain improvements that were required to bring the road into compliance with County road standards. The highway engineer sent a second letter in November 1998, detailing specific recommendations and requiring that a $10,000 bond be posted to ensure that the road met County standards. In the spring of 1999, Bailey hired LaValla to complete the improvements, which included adding approximately 530 square yards of gravel to the road and replacing the culverts with new pipe. LaValla completed the work on the road that summer.

While the road was being completed, Bailey was also preparing to plat the site. In October 1998, shortly after he received the notice of violation from the Corps, Bailey filed an application with the County to plat fourteen residential lots on the site. The County's environmental services director recommended the approval of the Sunny Beach plat, and the County's board of commissioners approved the plat on December 22, 1998. Upon approval of the plat, the road became a public road, although the County disputes the nature and extent of its property rights.

On June 12, 2001, the Corps denied Bailey's Section 404 permit application.*fn2 On October 22, 2001, after a period of public notice and comment, the Corps ordered Bailey to restore the property at his own expense. The restoration order required Bailey to (1) remove the dredged and fill material used in construction of the road; (2) fill in the ditches with native, loamy soils; (3) seed the restored area with a specified seed mixture; and (4) control certain weed species for three years following restoration. Bailey refused to comply with the restoration order, and the United States brought this enforcement action.

Summary judgment was granted in favor of the United States, and Bailey was ordered to submit a proposed restoration plan. Bailey, 516 F. Supp. 2d at 1021. After an unsuccessful appeal to this court, Bailey submitted a proposed plan. The United States objected and submitted its own proposed plan. The district court ordered Bailey to restore the site at his own expense to its previolation condition in compliance with the restoration order the Corps issued on October 22, 2001. Bailey, 556 F. Supp. 2d at 983-84.

II. Issues on Appeal

Bailey raises the following arguments on appeal: (1) that the district court erred in applying Justice Kennedy's opinion in Rapanos v. United States, 547 U.S. 715 (2006), to determine whether the Corps had jurisdiction over the site and that even if Justice Kennedy's opinion controls, the Corps has failed to show that the wetland has a significant nexus to or is adjacent to the Lake of the Woods; (2) that the Corps' denial of the after-the-fact permit and its restoration order are arbitrary and capricious; and (3) that the district court abused its discretion when it approved the restoration plan.

A. Summary Judgment and the Corps' Jurisdiction under the Act

Congress enacted the Clean Water Act in 1972 "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters." 33 U.S.C. § 1251. The Act prohibits the discharge of any pollutant from any point source into navigable waters of the United States without a proper permit from the Secretary of the Army (through the Corps) or from the EPA. §§ 1311, 1342, 1344. The Corps and the EPA share responsibility for implementing and enforcing the Act's permit scheme for the discharge of pollutants into navigable waters, and the extent of the Corps' jurisdiction has been hotly contested in cases around the country. Bailey concedes that the gravel and fill he placed on the site to build the road constitute pollutants and that those pollutants were discharged from a point source. Bailey also concedes that he did not ...


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