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Orchard Hill Building Co. v. United States Army Corps of Engineers

United States Court of Appeals, Seventh Circuit

June 27, 2018

Orchard Hill Building Company, doing business as Gallagher & Henry, Plaintiff-Appellant,
United States Army Corps of Engineers, Defendant-Appellee.

          Argued May 29, 2018

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:15-cv-06344 - John Robert Blakey, Judge.

          Before Bauer, Barrett, and St. Eve, Circuit Judges.

          St. Eve, Circuit Judge.

         This case concerns just shy of 13 acres of wetlands, which lie in a south-suburban plot of land called the Warmke parcel. Orchard Hill Building Company purchased the Warmke parcel in 1995 with plans for a large-scale residential development. Not wanting to run afoul of the Clean Water Act, Orchard Hill requested a determination from the United States Army Corps of Engineers that the wetlands (or the "Warmke wetlands") were not jurisdictional "waters of the United States." The Corps decided that they were, and Orchard Hill has spent the last 12 years challenging that decision. We find that the Corps has not provided substantial evidence of a significant nexus to navigable-in-fact waters, and therefore vacate and remand with instructions that the Corps reconsider its determination.

         I. Background

         A braid of regulatory, judicial, and administrative events led to the Corps' final claim of jurisdiction over the Warmke wetlands. We start at the beginning.

         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(a). One of the Act's primary means to that end is its general prohibition on polluting "navigable waters," which it defines as "waters of the United States." Id. §§ 1311(a), 1362(7), (12). The Act imposes significant criminal and civil penalties for such pollution, id. §§ 1319(c), (d), and obtaining a permit to build on or near such waters can be a lengthy and costly process. Ye t the Act does not define what constitutes "waters of the United States." See, e.g., United States v. Krilich, 209 F.3d 968, 970 (7th Cir. 2000).

         That job falls to the Corps of Engineers and the Environmental Protection Agency-and it has proven "a contentious and difficult task." Nat'l Ass'n of Mfrs. v. Dep't of Def., 138 S.Ct. 617, 624 (2018); see also 33 C.F.R. § 328.3 (the Corps' definition of waters of the United States); 40 C.F.R. § 122.2 (the EPA's definition of waters of the United States). To take a recent example, the agencies' attempt in 2015 to redefine the statutory phrase resulted in a new administration's swift overhaul and a slew of litigation. See generally Nat'l Ass'n of Mfrs., 138 S.Ct. at 625-27; Executive Order 13778: Restoring the Rule of Law, Federalism, and Economic Growth by Reviewing the "Waters of the United States" Rule, 82 Fed. Reg. 12, 497 (Feb. 28, 2017); Definition of "Waters of the United States"-Addition of an Applicability Date to 2015 Clean Water Rule, 83 Fed. Reg. 5, 200 (Feb. 6, 2018); James Conrad, Wetlands Jurisdiction, Env. Sci. Deskbook § 9:1 (2018). This case, however, concerns the Corps' definition of waters of the United States as it existed before 2015. See Schaefer v. Walker Bros. Enters., 829 F.3d 551, 558 (7th Cir. 2016).

         The Corps defined waters of the United States broadly to include waters "subject to the ebb and flow of the tide," "rivers" that could be used for interstate recreation or commerce, "tributaries" of such waters, and-most importantly here- "wetlands adjacent to" other waters of the United States, including tributaries. 33 C.F.R. §§ 328.3(a)(1)-(7) (1994).[1] There was (and is) an exemption, though, for "prior converted cropland." Id. § 328.3(8). The Corps considers "prior converted cropland" to mean wetlands "manipulated … and cropped" before 1985 (when Congress enacted the "Swampbuster" program, which denies benefits to farmers who use wetlands for farming), but not abandoned of farming use for five or more years.[2] See Proposed Rule for the Clean Water Act Regulator Programs of the Army Corps of Engineers and the Environmental Protection Agency (Proposed Rule), 57 Fed. Reg. 26, 894, 26, 897-26, 900 (June 16, 1992); Clean Water Act Regulatory Programs (Final Rule), 58 Fed. Reg. 45, 008, 45, 031-45, 034 (Aug. 25, 1993).

         Despite, or perhaps because of, those definitions, "[i]t is often difficult to determine whether a particular piece of property contains waters of the United States." U.S. Army Corps of Eng'rs v. Hawkes Co., 136 S.Ct. 1807, 1812 (2016). But concerned landowners need not risk fines or endure the permit-application process before deciding whether to build on or alter their property. They can instead seek a "jurisdictional determination" from the Corps as to whether their property contains waters of the United States. 33 C.F.R. §§ 320.1(a)(6), 325.9, 331.2.

         Orchard Hill was such a landowner. In 1995, it completed its purchase of the Warmke parcel, a 100-acre former farmland located in Tinley Park, Illinois. Orchard Hill then received permits to build a two-phase residential development on the parcel. The first phase started in 1996, and over the next seven years, Orchard Hill constructed more than a hundred homes. Construction altered the area's water drainage, and about 13 acres pooled with rainwater and grew wetland vegetation. Before starting the second phase and building on those acres-the Warmke wetlands-Orchard Hill sought a jurisdictional determination from the Corps in 2006.

         "The history of the Warmke [wetlands] jurisdictional determination can be described as lengthy, contentious and complex," as a Corps district engineer aptly put it.[3] The Warmke wetlands, like all of the Warmke parcel, are surrounded by residential development. The closest navigable water (as that phrase is literally understood, meaning navigable-in-fact) is the Little Calumet River, which is 11 miles away. In between the Warmke wetlands and the Little Calumet River are man-made ditches, open-water basins, sewer pipes, and the Midlothian Creek-a tributary of the Little Calumet River. The assigned district engineer determined the Warmke wetlands were adjacent to that tributary, and thus waters of the United States. See 33 C.F.R. §§ 283.3(a)(5), (7). That determination rested on the fact that the Warmke wetlands drained, by way of sewer pipes, to the Midlothian Creek. Orchard Hill appealed that decision, pursuant to its regulatory right. See id. §§ 331.6(a), 331.7(a), 331.3(a)(1).

         While that appeal was pending, the Supreme Court issued a landmark decision paring back the Corps' jurisdictional reach. Rapanos v. United States, 547 U.S. 715 (2006), involved two consolidated appeals from decisions upholding jurisdictional determinations. Both cases posed the question: When do wetlands that are not adjacent to waters that are navigablein-fact constitute waters of the United States? Rapanos did not produce a majority opinion, and without one to definitively answer the question, we have held that Justice Anthony Kennedy's concurrence controls. United States v. Gerke Excavating, Inc., 464 F. 3 d 723, 724-25 (7th Cir. 2006) (per curiam); see also N. Cal. River Watch v. City of Healdsburg, 496 F. 3 d 993, 999-1000 (9th Cir. 2007); United States v. Robison, 505 F.3d 1208, 1221 (11th Cir. 2007).[4]

         Justice Kennedy decided that a wetland's adjacency to a tributary of a navigable-in-fact water is alone insufficient to make the wetland a water of the United States. Instead, "the Corps' jurisdiction over [such] wetlands depends upon the existence of a significant nexus between the wetlands in question and ...

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