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July 13, 2020

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Department of Justice Eliminates Option of Third Party Payments in Settlements

On June 7, 2017, Attorney General Jeff Sessions issued a memorandum prohibiting the U.S. Department of Justice (DOJ) from directing any settlement payments to third-party, non-governmental organizations (NGOs) that were not directly harmed by a defendant’s actions. If strictly implemented, this new policy may impose significant limits on the availability of certain types of relief available in civil and criminal environmental enforcement cases.  The memorandum also raises significant questions about how the U.S. Environmental Protection Agency (EPA) will handle environmental settlements under the Trump Administration, as well as how DOJ will approach settlements resolving citizen suits.

Limiting SEPs and Organizational Community Service

On its face, the memorandum signals that DOJ intends to curtail the availability of Supplemental Environmental Projects (SEPs) and organizational community service projects involving payments to third parties. The new policy permits only payments to NGOs that “directly remed[y] … harm to the environment ….”  This standard is more stringently worded than the nexus requirement for SEPs and community service projects that EPA and DOJ have used to date.  Environmental settlements containing third-party payments will likely face greater scrutiny and higher hurdles in order to be approved.  The greater burden, coupled with the difficulties of establishing direct relationships between cause and effect in environmental cases, stands to limit certain types of relief in settlements.

Although the new DOJ policy has been hailed by some, reducing the availability of SEPs or organizational community service may negatively impact the regulated community. These alternative forms of relief—already tightly governed by existing EPA and DOJ policies—offer defendants and the government flexibility in crafting settlements.  In civil cases in particular, SEPs provide settling defendants an avenue for mitigating civil penalties and creating concrete benefits for the environment.  Certain projects are also more readily implemented by NGOs that regularly engage in habitat restoration or similar environmentally beneficial projects.

Administrative and Citizen Suit Settlements

The prohibition on third-party payments does not impact administrative settlements entered by EPA. The guidance only reaches cases that have been referred to DOJ, leaving—for the time being—some uncertainty over how EPA will evaluate SEPs requiring third-party payments. If the Sessions memorandum reflects a broader Trump Administration policy, one would expect EPA to revise its SEPs policy after a new Assistant Administrator is confirmed to run the Office of Enforcement and Compliance Assurance.

The Sessions memorandum raises further questions about whether DOJ will change its position on SEP payments in settlements of citizen suits. The policy only covers cases in which the United States is a settling party, not private enforcement actions.  However, one rationale underlying DOJ’s new position is that payments to third parties improperly divert money that should go to the Treasury.  If this concern carries over into the review of consent decrees resolving citizen suits, DOJ may begin objecting to settlements.  This risk is another reason to pay close attention to how DOJ’s new policy is implemented and elaborated upon in the coming months.

The authors gratefully acknowledge the assistance of Jeffrey Clare in the preparation of this alert.

© 2020 Beveridge & Diamond PC National Law Review, Volume VII, Number 160


About this Author

James M. Auslander Natural Resources & Project Development Attorney Beveridge & Diamond Washington, DC

James (Jamie) M. Auslander's legal practice focuses on project development, natural resources, and administrative law and litigation.

Mr. Auslander co-chairs Beveridge & Diamond’s Natural Resources and Project Development Practice Group, including its Energy Practice. He focuses on complex legal issues surrounding the development of oil and gas, hard rock minerals, renewable energy, and other natural resources on public lands onshore and on the Outer Continental Shelf. He frequently litigates appeals before federal courts and administrative bodies regarding rulemakings, permits...

Andrew C. Silton Environmental Litigation Attorney Beveridge & Diamond Washington, DC

Andrew C. Silton guides clients through complex regulatory issues and high stakes litigation arising under the nation's clean water laws.

His practice focuses primarily on issues arising under the nation’s water quality laws and spans regulatory counseling, enforcement defense, and litigation. He is currently the Deputy Chair of the firm’s Water Practice Group and represents clients from both the private and public sectors in matters arising under the Clean Water Act and state law. Drew advises clients in a variety of sectors, ranging from waste and stormwater utilities to companies in the renewable energy, information technology, oil and gas, and transportation sectors.

Drew also plays an active role in the firm's pesticide data compensation practice. He has brought multiple arbitrations to obtain compensation from competitors who have relied on clients' pesticide data to obtain registrations. Drew has also represented members of the pesticide industry in high profile administrative law litigation impacting the regulation and registration of pesticide products.

Andrew’s experience includes:

  • Counseling data center operators on a variety of obligations under the Clean Water Act relating to the discharge of wastewater and storage of petroleum products.
  • Assisting clients with the negotiation and renewal of NPDES permits.
  • Authoring amicus briefs in cases impacting the scope of the Clean Water Act and the regulation of pesticide products.
  • Scoping and executing comprehensive compliance audits.
  • Defending clients in cases of first impression brought under the Clean Water Act.
  • Defending clients in toxic tort litigation.
  • Challenging local ordinances on preemption grounds.
  • Defending clients in state and federal enforcement actions, including the negotiation of consent orders and consent decrees.

Prior to entering private practice, Drew gained experience working for the government and tackling emerging issues relating to adaptation to climate change. Immediately after graduating from Georgetown University Law Center, Drew served as a special law clerk at the United States Environmental Protection Agency (EPA) in Philadelphia, where he prepared cost recovery and enforcement actions under CERCLA and the Emergency Planning and Community Right-to-Know Act (EPCRA).