Under President Donald Trump, the DOJ broke with longstanding practice and precedent by banning SEPs, nominally over concerns about constitutional and legal limits on maintaining Congressional authority over funds. These seeming concerns mask a deeper fear that SEPs could be used as slush funds for environmental groups to pursue their own agendas. Despite pre-existing safeguards such as the 2015 Environmental Protection Agency (EPA) SEP policy and court oversight, the DOJ continued to restrict and then ban the use of SEPs, and then banned that ban in an interim order issued at the end of the Trump administration to codify final rules at midnight.
With yesterday’s waiver, Attorney General Garland is now directing the DOJ to codify the use of SEPs into its formal policy (DOJ Judicial Manual at Sections 1-17.000, 5-11.105, and 9-16.325) while issuing an interim final rule to waive the to enact the prohibition of prior administration on the use of SEPs found at 28 CFR §50.28. A draft of the interim final rule is to be published here federal register on May 10, 2022 and repeals this regulation altogether. Instead of changing the ordinance, the DOJ has explained that policies on using DOJ settlements to compensate victims, recover alleged damages, and punish and deter unlawful conduct have traditionally been addressed through departmental management memoranda.
Limiting Principles for SEPs
The memorandum and draft interim final rule do not provide detailed information as to what specific types of SEPs may be acceptable under particular circumstances, nor the dollar value of any offsetting against fines or penalties; Instead, they merely state general principles. The Department’s current view is that SEPs can be properly structured to fully remedy alleged violations of environmental laws by compensating victims, repairing alleged harm, and punishing and deterring unlawful conduct, without providing an undue advantage to third parties who are not direct victims of the environmental law alleged environmental damage were still parties to the underlying enforcement action. These views do not limit SEPs to just civil matters.
The DOJ’s memorandum on reinstating SEPs announced a number of terms broadly consistent with previous SEP policies and practices:
- Settlement agreements “should precisely define the nature and scope of the SEPs that a defendant has agreed to fund.”
- SEPs must have a “strong connection to the underlying violation” of the federal statute in question and advance “at least one of the objectives” of the statute.
- The DOJ may not propose a specific third party for receipt of SEP benefits, but may reject any third party proposed by the Defendant based on objective beneficiary selection criteria set forth in a Settlement Agreement.
- The DOJ must not retain control over the execution of SEPs after settlement.
- The DOJ may not use SEPs in lieu of complying with federal government legal obligations.
- The DOJ may not use SEPs to provide funds solely for general public education or awareness projects, general research, or unrestricted monetary donations.
With an approved SEP, a defendant can expect a reduction in their overall sentences, but the amount is unclear. Under the EPA’s 2015 SEP policy, the amount of mitigation for an SEP in administrative and civil settlements was generally capped at 80% of the cost of implementing the SEP, provided that the ultimate civil penalty exceeded 10% of the economic benefit of an accused’s non-compliance is or 25% of the severity of the environmental damage (whichever is greater). How SEPs might be used in the criminal context is even more unclear, as the earlier DOJ guidelines were far more restrictive than the EPA’s civilian analogue.
While the core principles are relatively prevalent in SEP practice, the DOJ’s announcement raises two concerns. First, the Attorney General’s memorandum may make it more difficult to obtain SEP approvals for projects that involve payments (in cash or in kind) to non-governmental entities because of the approval hurdles it imposes. SEPs have been largely under ENRD and EPA approval for decades, but the new memorandum requires the approval of the Deputy Attorney General or Assistant Attorney General. That’s a tall ladder to climb within the Justice Department’s bureaucracy, making SEPs unlikely to be routinely deployed to benefit NGOs. Second, the gauntlet of the approval process and the delay in lifting the SEP ban signal a significant level of risk aversion within the DOJ towards SEPs. Of course, interested parties can challenge SEPs in individual settlements, but judges hate to interfere with resolutions, and litigation for SEPs is bipartisan, at least until the last administration — supported by an opinion from the DOJ Office of Legal Counselor in the administration of President George W .Bush as an example.
While the DOJ clearly intends to rely on SEPs to mitigate impacts on environmental justice communities — and potentially to a greater extent than before former Attorney General William Barr’s repeal of the SEP policy in 2017 — it remains to be seen how quickly SEPs will be adopted will ongoing settlement negotiations and whether SEPs in favor of non-governmental organizations will be unusual due to the procedural hurdles discussed above. Until final rulemaking is complete, the DOJ’s reliance on an interim final rule to overturn the existing SEP prohibition at 28 CFR §50.28 may be challenged or revised based on public comments solicited by the interim final rule.
Note that nothing in Attorney General Garland’s announcement limits the EPA’s ability to use SEPs in administrative settlements (or to determine its own policy as to which SEPs it, as a “customer agency,” is willing to assist in court settlements where the DOJ the EPA represents). , nor does it affect the DOJ’s use of “mitigation” measures in environmental settlements. The latter, in particular, is increasingly becoming the focus of comparisons with past claims of excessive pollution and are viewed as a form of injunctive relief, not compensation for civil penalties per se. Finally, it does not affect SEPs in state or local environmental settlements.
Stay tuned for more updates as the DOJ’s policy becomes a reality.