Regulators Must Give Fair Warning of Forbidden Conduct or Requirements

By: Kenneth Anspach¹

Industry subject to environmental regulation, whether from such agencies as the U.S. Environmental Protection Agency (“USEPA”), the Illinois Environmental Protection Agency (“IEPA”) and other state and local agencies, boards and entities, often finds itself subject to ambiguous or superseded statutes, rules and regulations. As a result a company may find itself subject to enforcement actions for engaging in conduct it believed to be acceptable, but which the agency interprets as prohibited. Such enforcement may have a drastic impact on the company and the persons who manage its environmental affairs. Not only is an alleged wrongdoer potentially liable for civil penalties of $50,000 per violation and $10,000 per day of violation under, e.g., the Illinois Environmental Protection Act, 415 ILCS 5/42, but the violator is also subject to criminal Class A misdemeanor prosecution pursuant to 415 ILCS 5/44 for any such violation. Given these potential civil and criminal penalties, the environmental director or engineer at that company and the environmental consultant it hires will need to know what activity is legal and what not. When that professional reads a proposed rule applicable to his or her industry, does that rule give him or her warning of the type of conduct that is prohibited? Is

the rule fairly written? If not, can it be challenged? Does the government official charged with enforcing that rule fully understand the parameters of his or her authority?
The kind of clarity needed to answer these questions is now required as a result of the recent decision of the U.S. Supreme Court in Christopher v. SmithKline Beecham Corporation (“Christopher”), 132 S. Ct. 2156, 2167 (2012), which held that “agencies should provide regulated parties ‘fair warning of the conduct [a regulation] prohibits or requires.’” This article examines the origin of this holding and how it applies to enforcement actions by the federal, state and local governments.

1. Deference to an Agency’s Interpretation of its Own Ambiguous Regulations, Once a Hallmark of Administrative Law, is no Longer Allowed Where Such Interpretation is Unwarranted.

The notion that courts will defer to an agency’s interpretation of its own ambiguous statutes, rules and regulations arose out of the case entitled Auer v. Robbins (“Auer”), 519 U.S. 452 (1997). There, police officers sought payment from the police commissioners’ board for overtime. The issue before Court was whether the police officers were exempt from the overtime under the pertinent provisions of the Fair Labor Standards Act of 1938, 29 USCS § 201 et seq. (the “FLSA”). The Court held, inter alia, that the Secretary of Labor’s salary basis test was not an unreasonable interpretation of the statutory exemption to the FLSA as it applied to public-sector employees. In so doing, it stated that, “Because Congress has not ‘directly spoken to the precise question at issue,’ we must sustain the Secretary’s approach so long as it is ‘based on a permissible construction of the statute.’” (Citations omitted.) Auer, 519 U.S. at 457.

This principle that courts would defer to the agency’s approach to construction of its governing statute or its own regulations became known as “Auer deference.” 132 S. Ct. at 2160. Auer deference has been applied in at least one environmental case, Coeur Alaska, Inc. v. Southeast Alaska Conservation Council, 129 S. Ct. 2458, 2469 (2009) where the Court deferred to USEPA’s interpretation of whether mine slurry could be discharged into a lake as fill material under the Clean Water Act (“CWA”), § 404(a), 33 U.S.C. § 1344(a) and 40 CFR § 122.3). However, in Christopher, another FLSA case, Auer deference hit a major roadblock. There, plaintiff employees worked as pharmaceutical sales representatives for the employer, a prescription drug company. The employees’ primary objective was to obtain a nonbinding commitment from physicians to prescribe particular drugs in appropriate cases. The Court determined that the employees were exempt from the FLSA’s overtime compensation requirement because they qualified as outside salesmen under the Department of Labor’s (“DOL”) regulations, 29 U.S.C. §213(a)(1) . The Court found that the DOL’s interpretation of the regulations, that a sale demanded a transfer of title, was not owed Auer deference, because the DOL never initiated any enforcement actions with respect to pharmaceutical detailers or otherwise suggested that it thought the industry was acting unlawfully.

In determining that the DOL’s interpretation of its regulations was not entitled to Auer deference, the Court stated:

• Although Auer ordinarily calls for deference to an agency’s interpretation of its own ambiguous regulation, even when that interpretation is advanced in a legal brief, *** this general rule does not apply in all cases. Deference is undoubtedly inappropriate, for example, when the agency’s interpretation is “‘plainly erroneous or inconsistent with the regulation.’ ”*** And deference is likewise unwarranted when there is reason to suspect that the agency’s interpretation “does not reflect the agency’s fair and considered judgment on the matter in question.” *** This might occur when the agency’s interpretation conflicts with a prior interpretation, *** or when it appears that the interpretation is nothing more than a “convenient litigating position,” ***or a “’post hoc rationalizatio[n]’ advanced by an agency seeking to defend past agency action against attack.” *** (Citations omitted). Christopher, 132 S. Ct. at 2166-67.
  After thusly distinguishing situations where Auer deference is inappropriate, the Court went on to set forth a legal principle that must govern administrative behavior in this context.

Specifically, the Court stated:

• To defer to the agency’s interpretation in this circumstance would seriously undermine the principle that agencies should provide regulated parties “fair warning of the conduct [a regulation] prohibits or requires.” (Emphasis added.) Gates & Fox Co. v. Occupational Safety and Health Review Comm’n, 790 F.2d 154, 156, 252 U.S. App. D.C. 332 (CADC 1986) (Scalia, J.). Christopher, 132 S. Ct. at 2167.

Thus, the Court found that regulated parties are entitled to fair warning of the conduct a regulation prohibits or requires. Where, as here, the agency failed to provide “fair warning of the conduct a regulation prohibits or requires” the Court found the agency’s “interpretation neither entitled to Auer deference nor persuasive in its own right” and simply refused to enforce it. Christopher, 132 S. Ct. at 2167.

1. The Requirement that Agencies Give Regulated Parties “Fair Warning of the Conduct a Regulation Prohibits or Requires” is Equally Applicable in both the Federal and State Administrative Context.
2. The Principle of “Fair Warning” is Grounded in the Due Process Clauses of the Fifth and Fourteenth Amendments to the U.S. Constitution.

That agencies must provide “fair warning of the conduct a regulation prohibits or requires” is rooted in the due process clauses of the Fifth² and Fourteenth Amendments³ to the U.S. Constitution. That was the finding in Gates & Fox Co. v. Occupational Safety and Health

Review Commission, 790 F.2d 154, 156 (D.C. Cir. 1986), cited in Christopher at 132 S. Ct. at 2170, which stated, “Where the imposition of penal sanctions is at issue, however, the due process clause prevents that deference from validating the application of a regulation that fails to give fair warning of the conduct it prohibits or requires.” (Emphasis added.)

Indeed, in the same term that the Court decided Christopher, it decided in FCC v. Fox Television Stations, Inc. (“Fox”), 132 S. Ct. 2307, 2317-18 (2012), that the due process clause of the Fifth Amendment precludes the Federal Communications Commission from punishing Fox for its broadcasting of “fleeting expletives,” because the regulations did not give Fox “fair notice” that such conduct could subject it to punishment. Fox, 132 S. Ct. at 2317. The Court specified that:

• A fundamental principle in our legal system is that laws which regulate persons or entities must give fair notice of conduct that is forbidden or required. *** “[A] statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application, violates the first essential of due process of law” ***…This requirement of clarity in regulation is essential to the protections provided by the Due Process Clause of the Fifth Amendment*** It requires the invalidation of laws that are impermissibly vague. A conviction or punishment fails to comply with due process if the statute or regulation under which it is obtained “fails to provide a person of ordinary intelligence fair notice of what is prohibited, or is so standardless that it authorizes or encourages seriously discriminatory enforcement.” *** (Citations omitted; emphasis added.) Fox, 132 S. Ct. at 2317.

That “fair warning” or “fair notice” is rooted in the principles of the U.S. Constitution, Fifth and Fourteenth Amendments renders the principle equally applicable to state and local agencies interpreting their own governing statutes, and their own rules and regulations.

1. Illinois is Inconsistent in its Application of “Fair Warning” and “Fair Notice” Principles.

The principle that government action must be preceded by “fair warning or “fair notice” is well-known at the state level. Thus, in Illinois, it is well settled that a statute is unconstitutionally vague and violates due process if it fails to give a person of ordinary intelligence fair notice that his contemplated conduct is forbidden by the statute or if there is an absence of standards restricting the discretion of governmental authorities who apply the law. East St. Louis Federation Of Teachers, Local 1220, American Federation Of Teachers, AFL-CIO v. East St. Louis School District No. 189 Financial Oversight Panel, 178 Ill. 2d 399, 425 (1997). The terms of a statute cannot be so ill defined that their meaning may be determined at whim rather than by objective criteria. Id. A statute’s terms must serve as a guide to those who must comply with the statute. Id.

The Illinois Pollution Control Board (the “Board”) is no stranger to the concept of “fair notice.” In EPA v. Rosenbalm, PCB No. 71-299, 1973 Ill. ENV LEXIS 2 (January 16, 1973), in addressing pleadings that had been amended subsequent to the filing of the initial complaint to add new violations that allegedly occurred post-complaint, the Board stated:

• …[W]e caution the Agency and its representatives to avoid unfair, omnibus pleadings which either intend to sweep within its purview prospective violations which may occur subsequent to the filing of the complaint, or are so vague and indefinite as to fail to give the Respondent fair notice of the specific dates of alleged infractions of the law so as to enable him to properly prepare a defense.

On the other hand, the Board declined to apply the concept of “fair notice” in People of the State of Illinois v. Sheridan-Joliet Land Development, LLC et al., PCB No. 13-19 and PCB No. 13-20. There the State has sought to enforce amended and superseded regulations against the respondents, which respondents argued was being done without the type of “fair notice” that was the subject of Christopher and Fox. The State brought a Complaint against respondents that alleged violations of various purported provisions of the Illinois Environmental Protection Act

(the “Act”), 415 ILCS 5/1 et seq. and, specifically, 415 ILCS 5/22.51, entitled Clean Construction or Demolition Debris Fill Operations (“CCDD”). The Complaint alleged that these purported violations, in turn, stemmed from alleged violations of purported “Section 1100.205(a)(b)(c) of the Board CCDD Regulations, 35 Ill. Adm. Code 1100.205(a)(b)(c), [and (h)].” However, respondents asserted in a Motion to Strike and Dismiss that there was no “Section 1100.205(a)(b)(c) [and (h)] of the Board CCDD Regulations, 35 Ill. Adm. Code 1100.205(a)(b)(c) [and (h)].” That was so because, as the respondents argued, the Board CCDD Regulations had been amended as of August 27, 2012 and once the new rules became effective they supplanted and superseded the previous rules, including those under which these allegations of the Complaint were brought, purported §§ 1100.205(a)(b)(c) and (h) of the Board CCDD Regulations, 35 Ill. Adm. Code 1100.205(a)(b)(c) and (h). Thus, when the Complaint, which was filed subsequent to August 27, 2012, sought to charge respondents with purported violations of Board CCDD Regulations, such Complaint, according to respondents, could only allege violations of regulations that actually appear “on the books.” Yet, as respondents pointed out, it patently did not do so.

In its Order dated August 8, 2013 denying the Motion to Strike and Dismiss on this basis, at page 23, the Board disagreed with respondents’ argument, stating:

• The Board also disagrees with respondents that the Agency and the Board had to give prior notice to the regulated community that the pre-amendment CCDD regulations would be enforceable. Reply Dis. (19) at 5; Reply Dis. (20) at 5. The relevant period is when the alleged violations occurred, not when respondents were sued for enforcement. At that time, the pre-amendment CCDD regulations were still in effect and “on the books.”7 Respondents do not contend that the pre-amendment version of Section 1100.205 of the Board’s CCDD regulations was ambiguous or that they did not understand it to apply to them at the time of the alleged violations. Moreover, respondents, like any citizen, are “presumptively charged with knowledge of the law.” Atkins v. Parker, 472 U.S. 115, 130 (1985). Thus, at the relevant time, respondents, like any other entity regulated under the CCDD regulations, had “fair warning of the conduct” the CCDD rules then in effect required. Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156, 2167 (2012) (internal quotation marks omitted).

Thus, the Board ruled that the State was not precluded from enforcing regulations that had been subsequently amended and superseded, because, at the time of the alleged violation, respondents “had ‘fair warning of the conduct’ the CCDD rules then in effect required.”

1. Michigan Recognizes the “Fair Warning” and “Fair Notice” Principles.

The State of Michigan views agency interpretation of statutes and regulations through the lens of “fair warning” and “fair notice.” In People v. Kircher, 2008 Mich. App. LEXIS 1627, an unpublished opinion, the Court of Appeals of Michigan considered a constitutional challenge to defendant’s conviction for a discharge of a substance into the waters of the state that endangered the public health, safety, and welfare contrary to the provisions of MCL 324.3109 in violation of MCL 324.3115(2) and MCL 324.3115(4). Defendant’s convictions arose from the discharge of raw sewage into a catch basin or storm drain.

The court considered defendant’s challenge to MCL 324.3109 on the grounds that it was “constitutionally void for vagueness.” The court noted that “A statute may be unconstitutionally vague on any of three grounds” including whether “it fails to provide fair notice of the conduct proscribed.” (Emphasis added.) In denying the constitutional challenge the court found as follows:

• [D]efendant’s actions in discharging raw sewage into a state water body constituted a discharge of a substance that was or could be injurious to human health. The statute at issue is not void for vagueness when the meaning of the statute’s terms as defined by the dictionary demonstrates that defendant’s conduct fell within the statutory prohibitions.

Thus, the court considered, but rejected, the constitutional challenge to the statute.

The Court of Appeals of Michigan similarly rebuffed a “fair notice” challenge to Yankee Springs Township’s so-called anti-funneling ordinance and riparian-lot-use regulations barring defendant’s access from his waterfront lot to a local lake in Township of Yankee Springs v. Fox, 264 Mich. App. 604 (2004). Defendant contended that the riparian-lot-use regulations were void for vagueness because the regulations did not provide fair notice of the conduct proscribed. The pertinent regulation provided that each “parcel of land shall contain at least 70 lineal feet of water frontage…for each dwelling unit or each single-family unit.” 264 Mich. App. At 608. Because at least eight families with nonwaterfront dwellings owned one-eighth interests in defendant’s lot, and because the lot had only 103 feet of water frontage, the court found that the riparian-lot-use regulations validly prohibited the use of the lot as access property and that the ordinance was not void for vagueness.

On the other hand, in West Bloomfield Charter Township v. Karchon, 209 Mich. App. 43 (1995), the court upheld a constitutional challenge to woodlands ordinances the township sought to enforce against the defendants. The court found that an ordinance does not provide fair notice of proscribed conduct if it either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application. That is, an ordinance must be sufficiently clear and definite as to give those reading it fair notice of prohibited conduct. On that basis, the court held that the ordinances’ definition of the terms “woodland” and “woodland edge” were unconstitutionally vague.

1. Wisconsin Recognizes the “Fair Warning” and “Fair Notice” Principles.

The State of Wisconsin also applies the principle of “fair warning” and “fair notice” when considering agency interpretation of statutes and regulations. In State of Wisconsin v. Perry Printing Corporation, 128 Wis. 2d 554 (1985), an unpublished opinion, the State challenged a judgment of the Circuit Court for Jefferson County, Wisconsin that dismissed its claims that defendant corporation violated Wis. Admin. Code § 154.11(6) by emitting solvent emission from its plant presses, and that denied injunctive relief against future violations. The corporation cross-appealed challenging the constitutionality of § 154.11(6). In finding a violation of Wis. Admin. Code § 154.11(6), the Court found that:

• Wisconsin Adm. Code sec. 154.11(6) gives fair notice of what is prohibited and includes fair standards for enforcement. The opacity limits are specific. … (Emphasis added.)

On that basis the court reversed the dismissal entered by the Circuit Court, although it refused to reverse the denial of injunctive relief against future violations.

Conclusion

As a result of the recent decision of the U.S. Supreme Court in Christopher v. SmithKline Beecham Corporation (“Christopher”), 132 S. Ct. 2156, 2167 (2012), administrative interpretations of statutes, rules and regulations must be tempered by the Court’s holding that “agencies should provide regulated parties ‘fair warning of the conduct [a regulation] prohibits or requires.’” That “fair warning” or “fair notice” is rooted in the principles of the U.S. Constitution, Fifth and Fourteenth Amendments renders the principle equally applicable to state and local agencies interpreting their own governing statutes, and their own rules and regulations. Yet, one still finds that administrative bodies, at least in Illinois, can be inconsistent in their application of the principle of “fair warning” or “fair notice” when considering agency interpretation and enforcement of statutes and regulations. Accordingly, government officials, environmental directors, engineers and consultants must continue to be vigilant to understand what activity is legal and what not.

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¹Kenneth Anspach is an attorney in Chicago, Illinois where he concentrates in environmental law and insurance coverage on behalf of policyholders. He is the author of numerous articles on the subject of environmental law and insurance coverage, including the treatise, Environmental Law and Insurance Handbook, published by West Group in 1997. He is Co-Chair of the Insurance Subcommittee of the Environmental Litigation Committee of the Section on Litigation of the American Bar Association and Co-Chair of the Environmental Subcommittee of the Insurance Coverage Litigation Committee of the Section on Litigation of the American Bar Association. He is also a mediator for the Chancery Division of the Circuit Court of Cook County and past Chair of the Civil Practice Committee of the Chicago Bar Association. He may be contacted at (312) 407-7888 or ken@anspachlawoffice.com.
²USCS Const. Amend. 5: “No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” (Emphasis added.)
³USCS Const. Amend. 14, § 1: “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” (Emphasis added.)
⁴The author of this article and presentation is counsel for respondents in each of these cases. Complete copies of the motions and briefs discussing the issues raised in these cases, including the positions taken by the State of Illinois with respect thereto, as well as the Board’s August 8, 2013 Order denying respondents’ Motion to Strike and Dismiss, can be found at www.ipcb.state.il.us..