Green Investigations Are Here: U.S. Department of Justice Turns Towards Environmental Enforcement Actions, Deprioritizes Compliance Assistance
Washington, D.C. (January 4, 2022) - Two high-ranking Department of Justice (DOJ) officials announced that the Biden Administration is prioritizing environmental regulatory enforcement over compliance assistance. Todd Kim, Assistant Attorney General for the DOJ’s Environment and Natural Resources Division (ENRD), and Deborah Harris of the DOJ’s Environmental Crimes Section, indicated in mid-December 2021 that companies and individuals should expect more “vigorous enforcement,” with an emphasis on criminal enforcement. This new policy is in contrast to the Environmental Protection Agency’s (EPA) Office of Enforcement and Compliance Assurance (OECA)'s previous emphasis on compliance and pollution mitigation instead of enforcement actions under the prior administration.
DOJ’s new policy of promoting enforcement actions is consistent with the Biden Administration’s overall efforts to prioritize environmental justice. In April 2021, as explained in a previous Lewis Brisbois Client Alert, OECA released two memoranda directing enforcement teams to consider a variety of tools to resolve enforcement actions, including increased inspections, restitution, and reparation for victims of environmental crimes and overstepping state regulators where necessary.
As a preliminary matter, this of course raises questions about the extent of EPA’s legal authority for imposing reparation and restitution remedies for past environmental harm through an environmental enforcement action, or for sidestepping the enforcement decisions of state authorities. The U.S. Supreme Court’s April 2021 unanimous decision in AMG Capital Management, LLC, v. Federal Trade Commission struck down the Federal Trade Commission’s long-assumed power to require restitution, and should give pause to bold attempts to impose similar remedies where statutory authority is unclear.
Regardless, the DOJ announcements warn of an increased emphasis on criminal enforcement, including jail time for individuals responsible for criminal conduct and corporate malfeasance, throughout a business’ entire supply chain. Kim explained that a corporation must exercise “due care” throughout its supply chain. If supplies originate from a criminally tainted source, “then [ENRD] will consider the criminal responsibility of all parts of that supply chain.” Kim also warned of the DOJ utilizing non-environmental “related [criminal] charges,” including smuggling, conspiracy, false statements, and money laundering.
The question then becomes what is the due care standard and how should a corporate actor evaluate such a standard in the context of criminal and civil law.
Referencing the Lacey Act, 16 U.S.C. §§ 3371 et seq., which prohibits illegally harvested plants and their products including timber, Kim stated:
“A corporate actor can be held responsible where it knew, or in the exercise of due care should have known, that that there is unlawfully-sourced timber in its supply chain. There is no single protocol for satisfying this ‘due care’ obligation. The prohibition is fact-based and cannot be evaded by simply obtaining a piece of paper saying the wood is legal. Rather, to satisfy its legal obligations, a company can determine itself the most efficient manner of ensuring legality in its particular sector and supply chain.”
Kim commented that “A corporation would be well advised to protect itself and its investments by exercising due care over its supply chain in light of the prospect of criminal sanction; the potential seizure and forfeiture of illegally-sourced timber, goods, vessels and other equipment; and the unavailability of an innocent owner defense.”
Requiring corporate actors to proactively monitor their business relationships to avoid possible civil and criminal penalties is not unique. Parallels to the Lacey’s Act “due care” standard can be found in the due diligence standards placed upon financial institutions to ensure compliance with OFAC rules and regulations.
As a result of DOJ’s additional scrutiny and intent to pursue enforcement actions, businesses should consider proactive approaches in examining their own compliance with environmental and related statutes, including procedures for reporting accidents and possible violations.
Lewis Brisbois lawyers are well-suited to assist companies examine their own internal environmental compliance records and help obtain compliance assistance when necessary. Contact the authors of this alert to learn more. Visit our Environment, Land, and Natural Resources Law Practice page for additional alerts in this area.
Karen C. Bennett, Partner
R. Morgan Salisbury, Partner
Sean P. Shecter, Partner
Rose Quam-Wickham, Associate