Federal Court Finds that Judicial Deference Does Not Mean "Do Everything Federal Entity Requests"

Challengers to the determinations of Federal agencies do not go to court on a level playing field with their governmental adversaries.  Federal courts have long taken the position that deference is properly accorded to an agency making decisions within its area of technical expertise.  That position may now be changing, at least with respect to two specific sets of legal circumstances. 

The first set of circumstances deals with settlements.  In SEC v. Citigroup Global Markets, Inc., 2011 W.L. 5903733 (S.D.N.Y.), Judge Jed S. Rakoff rejected a $285 million settlement between the Securities and Exchange Commission (“SEC”) and Citigroup which he believe had not been adequately supported.  Specifically, the Judge found the settlement was vague concerning the rationale for a charge of negligence in what was clearly a well thought out scheme of “shorting” dubious investments it had just sold to investors; the total losses suffered by investors; and the penalty amount that would have been imposed. 

In a hearing on those questions, counsel for the SEC took the position that the Judge had no business assessing the “public interest” in the settlement, as it was not part of the applicable standard of review.  The Judge firmly disagreed.  Analogizing the applicability of the public interest standard in settlements to its applicability in injunctive relief, the Court held that it could not be asked to “exercise my power and not my judgment,” particularly where Supreme Court authority held that a court cannot grant injunctive relief without considering the public interest.  Ultimately, refusing to be “a mere handmaiden to a settlement privately negotiated on the basis of unknown facts,” the Court ordered the parties to trial in July, 2012.

The second circumstances under which deference may be attenuated in the future occurs mainly in actions involving the National Environmental Policy Act, 42 U.S.C. § 4321 (“NEPA”).  In typical NEPA cases, courts give almost total deference to the adequacy of a project’s environmental review by a Federal agency that has been delegated by Congress with the authority to promulgate rules implementing Congress’ clearly expressed statutory purpose.  U.S. v. Mead Corp., 533 U.S. 218, 227-228 (2001).  However, in a very recent, untypical case, Tinicum Township, et al. v. U.S. Department of Transportation, et al., still pending in the United States 3rd Circuit Court of Appeals, the Federal agency delegated with that rulemaking and implementation power, the United States Environmental Protection Agency (“EPA”) took strong and unchanging issue with the adequacy of the review by the Federal Aviation Administration (“FAA”) of the Philadelphia International Airport Capacity Enhancement Project (“Project”).  Tinicum Township is the first, if not the only, case in which the challenger has pled that, even though FAA is the agency delegated to perform environmental review, it is EPA that deserves deference in its conclusion that the Project’s review was inadequate. 

As can be seen from the above situations, the concept of deference may be in transition.  From a specific perspective, this change could most notably affect the level of judicial review of settlements and NEPA compliance.  More generally, the transition could implicate cognizable separation of powers issues between the Executive and Judicial branches of government.
 

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