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

United States District Court, N.D. Illinois, Eastern Division

September 19, 2017

ORCHARD HILL BUILDING COMPANY, Plaintiffs,
v.
UNITED STATES ARMY CORPS OF ENGINEERS, Defendants.

          MEMORANDUM OPINION AND ORDER

          JOHN ROBERT BLAKEY UNITED STATES DISTRICT JUDGE.

         This case is before the Court on cross motions for summary judgment. For the reasons explained below, the Court denies Plaintiff's motion for summary judgment [40] and grants Defendant's motion [55]. The Court also denies Plaintiff's motion to strike [32].

         I. FACTUAL BACKGROUND

         Orchard Hill Building Company, d.b.a. Gallagher & Henry (“G&H”), acquired title to a 100-acre parcel of property (referred to as the “Warmke Parcel”) in 1995 for the purpose of developing residential housing. Soon thereafter, the Village of Tinley Park executed an annexation agreement and passed a zoning ordinance allowing G&H to develop the entire Warmke Parcel. Record [30] at 65.

         The Warmke Parcel was divided into three sections. Twenty-five acres on the southern portion of the property were to be developed as a 168-unit townhome neighborhood. Sixty-one acres on the northern portion were to be developed as a 169-unit single-family neighborhood. The remaining section, situated between the townhome community to the south and the single-family community to the north, was designed to function as a storm water detention area to serve the two neighborhoods. The water detention area was to be constructed concurrent with the development of the townhomes on the southern portion of the property. Id.

         The entire development was scheduled to take place in two phases. Id. at 66. The townhomes, storm water detention area, and sewer and water infrastructure necessary to serve both neighborhoods were to be constructed during Phase I. After Phase I was developed and the townhomes substantially sold, Phase II was scheduled to commence, during which the 169 single-family homes were scheduled to be built. Id.

         G&H began Phase I construction in early 1996, and the first sales of townhomes took place in 1997. From 1998 until 2005, 132 townhomes were built and sold at a rate of 16.5 per year. Id. The development plan was on target to begin construction of the Phase II single-family homes as scheduled, but the plan abruptly halted on November 17, 2006, when the United States Army Corps of Engineers designated approximately 13 acres of the undeveloped property as “wetlands” and asserted jurisdiction to regulate them.[1] Id. at 67.

         The wetlands in question are on the northern portion of the property, the section designated for Phase II development. They drain south through a ditch into an open water detention pond and then east into another open pond. From there, they flow north via storm sewer pipe into a third open water pond, and then into Midlothian Creek, a stream that flows directly to the Little Calumet River, a traditional navigable water. Record [30] at 16, 19, 24. The wetlands had been converted to farming operations prior to December 23, 1985, but farming stopped in 1996 and has not resumed. Wetland conditions returned sometime thereafter. Id. at 14.

         II. RELEVANT STATUTORY AND REGULATORY PROVISIONS

         A. The Clean Water Act

         The Corps asserted jurisdiction pursuant to the Clean Water Act (“CWA”), which prohibits discharging any “pollutant” into “navigable waters” without a permit. 33 U.S.C. §§ 1311(a), 1362(12). “Navigable waters” are defined in the CWA as “waters of the United States.” 33 U.S.C. § 1362(7). Although the phrase “waters of the United States” is not defined in the statute, it is defined in the regulations promulgated by the Corps pursuant to the CWA.

         The Corps' regulations define “waters of the United States” in seven categories: (1) traditional navigable waters; (2) interstate waters; (3) other waters, the use, degradation, or destruction of which could affect interstate commerce; (4) impoundments of jurisdictional waters; (5) tributaries of waters identified in (1) through (4); (6) the territorial seas; and (7) wetlands adjacent to waters identified in (1) through (6). 33 C.F.R. § 328.3(a)(1)-(7) (1987).

         In Rapanos v. United States, the Supreme Court reviewed this regulatory definition of waters of the United States as it applied to wetlands. 547 U.S. 715 (2006). In a plurality opinion authored by Justice Scalia, the Court adopted the “relatively permanent” standard, holding that “waters of the United States” includes “relatively permanent, standing or continuously flowing bodies of water” that are connected to traditional navigable waters. As the Seventh Circuit noted United States v. Gerke Excavating, Inc., 464 F.3d 723 (7th Cir. 2006), however, the Court could not agree on the scope of federal authority over wetlands. Justice Scalia believed that wetlands fell within the scope of the CWA only when the Army Corps of Engineers could show: “first, that the adjacent channel contains a ‘water of the United States' (i.e., a relatively permanent body of water connected to traditional interstate navigable waters); and second, that the wetland has a continuous surface connection with that water, making it difficult to determine where the ‘water' ends and the ‘wetland' begins. 547 U.S. at 742. Justice Kennedy, in a concurring opinion, wrote that the Corps' jurisdiction over wetlands “depends upon the existence of a significant nexus between the wetlands in question and the navigable waters in the tradition sense.” Id. at 779. For a nexus to be “significant” in this context, the wetlands must “either alone or in combination with similarly situated lands in the region significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as ‘navigable.'” Id. at 780. In Gerke, the Seventh Circuit adopted Justice Kennedy's more narrow approach to federal authority. As a result, this Court follows suit.

         B. Prior Converted Cropland Exemption

         Corps regulations contain various exemptions to the CWA's prohibition on discharges into waters of the United States based upon the nature or use of the land. Specifically, Corps regulations specify that “prior converted cropland” is not a water of the United States and therefore the CWA discharge prohibitions do not apply to such land. 33 C.F.R. § 328.3(a)(8). Upon the adoption of this regulation, the Corps clarified that “prior converted cropland” refers to wetlands that were manipulated for farming purposes before December 23, 1985. The exemption does not apply to areas where farming has been abandoned for five consecutive years and where wetland characteristics have returned. 58 Fed. Reg. 45008, 45034 (Aug. 25, 1993).

         III. PROCEDURAL BACKGROUND

         Regulations promulgated by the Corps authorize a District Engineer to make a jurisdictional determination as to whether an area is a water of the United States and thus within the Corps' regulatory jurisdiction pursuant to the CWA. 33 C.F.R. §§ 320.1(a)(6), 325.9. Once a jurisdictional determination has been made by a District Engineer, there is a single level of administrative appeal to the Division Engineer. Id. § 331.3(a)(1). The appeal is initiated when an affected party submits a Request for Appeal, but the administrative appeal “is limited to the information contained in the administrative record by the date of the NAP [Notification of Appeal Process].” Id. §§ 331.6(a), 331.7(f). The NAP is a fact sheet that accompanies the jurisdictional determination and that explains the administrative appeal process. Neither party to the appeal may present new information, but either party may “interpret, clarify or explain issues and information contained in the record.” Id. § 331.7(f).

         If the Division Engineer determines that an appeal is without merit, his letter, which advises the applicant that the appeal is without merit and confirms the District Engineer's initial decision, becomes the final Corps decision. Id. § 331.10(a). If, however, the Division Engineer determines that the appeal has merit, he may remand the matter to the District Engineer with instructions to correct procedural errors or to “reconsider the decision where any essential part of the district engineer's decision was not supported by accurate or sufficient information, or analysis, in the administrative record.” Id. § 331.9(b). In the case of remand, the District Engineer's decision, made pursuant to the remand from the Division Engineer, becomes the final Corps decision is Id. § 331.10(b).

         A. First Jurisdictional Determination

         In this case, the Chicago District Engineer issued an initial jurisdictional determination on November 17, 2006, concluding that approximately 13 acres of wetlands on the Warmke Parcel are “waters of the United States” subject to regulation under the CWA. Record [30-5] at 19. Significant to the District Engineer's decision was the fact that the identified wetlands drain via a storm sewer pipe “to Midlothian Creek which is a tributary to the Little Calumet River, a navigable water.” Id. G&H administratively appealed that decision to the Division Engineer, arguing that the November 2006 jurisdictional determination failed to apply Rapanos. The Division Engineer agreed and remanded the jurisdictional determination to the District Engineer with instructions to reconsider its decision in light of Rapanos. Id. at 1-2.

         B. Second Jurisdictional Determination

         The District Engineer issued a second approved jurisdictional determination in October 2010, applying Rapanos and concluding that jurisdictional waters encompass the Warmke Property because there is a significant nexus to the navigable Little Calumet River. Record [30-3] at 3-4. The District Engineer's decision was based upon a finding that the wetlands in question drained into Midlothian Creek, establishing a “physical hydrologic connection” to the navigable Little Calumet River. Id. at 3. This “significant nexus” enables “pollutants, floodwaters, nutrients and organic carbon to transport from the onsite wetland to the navigable water, ” significantly affecting “the chemical, physical and biological integrity of the Little Calumet River, a traditional navigable water.” Id. G&H filed a second administrative appeal in January 2011, arguing that the District Engineer erred in finding a significant nexus and in concluding that the property was not exempt as prior converted cropland. Record [30-2] at 75-77. The Division Engineer determined that the second administrative appeal was without merit in June 2011. Id. at 67-74.

         C. Third Jurisdictional Determination and Final Remand

         In July 2011, G&H asked the Corps to reconsider its previous appeal decision because of the 1993 prior converted cropland designation excluding the parcel from CWA jurisdiction. Id. at 27-32. The Corps agreed to reconsider the decision and the District Engineer issued a third jurisdictional determination on March 26, 2012, affirming the prior decision. Record [30-1] at 75-77. Although the District Engineer recognized that the property had previously been used for agricultural activities, she determined that those activities had ceased by the fall of 1996, that the “wetland areas have not been farmed for 15 consecutive years and wetland conditions have returned.” Id. at 76. G&H filed a third administrative appeal to the Division Engineer on May 24, 2012, arguing that the District Engineer's significant nexus determination was not supported by sufficient evidence. Id. at 64-73. The Division Engineer issued its review of the appeal on May 9, 2013, concluding that the appeal had merit “because the District [Engineer] failed to provide the requisite explanation for its significant nexus determination.” Id. at 48. The Division Engineer remanded the appeal to the District Engineer with instructions “to include sufficient documentation to support its decision” and “to follow procedures set forth in the 2008 Rapanos Guidance.” Id. at 48, 52.

         Upon remand the District Engineer issued a new jurisdictional determination on July 19, 2013, again concluding that there is a significant nexus to the Little Calumet River, a traditional navigable water, placing the property within the protection of the CWA. Id. at 11. The District Engineer concluded that the relevant wetlands “drain via surface and subsurface connection to Midlothian creek, a perennial stream tributary to the navigable Little Calumet River, ” significantly affecting-alone and in combination with other wetlands in the area-the chemical, physical and biological integrity of the river. Record [30-1] at 11. The District Engineer determined that this impact constitutes a significant nexus under Rapanos. In reaching this decision, the District Engineer provided additional “significant nexus documentation” in an eleven-page document titled “Warmke Site Wetland Functions and Benefits to ...


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