Rule2024-28866
Guidelines and Limitations for Settlement Agreements Involving Payments to Non-Governmental Third Parties
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 9, 2024
Effective
December 9, 2024
Issuing agencies
Justice Department
Abstract
This final rule adopts without change the interim final rule issued by the Department of Justice ("Department" or "DOJ") on May 10, 2022, that revoked a prohibition on the inclusion of provisions in settlement agreements directing or providing for a payment or loan to a non-governmental person or entity not a party to the dispute, subject to limited exceptions.
Full Text
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<title>Federal Register, Volume 89 Issue 236 (Monday, December 9, 2024)</title>
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[Federal Register Volume 89, Number 236 (Monday, December 9, 2024)]
[Rules and Regulations]
[Pages 97525-97538]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-28866]
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DEPARTMENT OF JUSTICE
Office of the Attorney General
28 CFR Part 50
[Docket No. OAG 177; AG Order No. 6101-2024]
RIN 1105-AB62
Guidelines and Limitations for Settlement Agreements Involving
Payments to Non-Governmental Third Parties
AGENCY: Department of Justice.
ACTION: Final rule.
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SUMMARY: This final rule adopts without change the interim final rule
issued by the Department of Justice (``Department'' or ``DOJ'') on May
10, 2022, that revoked a prohibition on the inclusion of provisions in
settlement agreements directing or providing for a payment or loan to a
non-governmental person or entity not a party to the dispute, subject
to limited exceptions.
DATES: This rule is effective December 9, 2024.
FOR FURTHER INFORMATION CONTACT: Robert Hinchman, Senior Counsel,
Office of Legal Policy, U.S. Department of Justice, telephone (202)
514-8059 (not a toll-free number).
SUPPLEMENTARY INFORMATION: The Department has established a docket for
this action on the <a href="http://www.regulations.gov">www.regulations.gov</a> site under Docket DOJ-OAG-2022-
0001. All documents in the docket are listed on the <a href="http://www.regulations.gov">http://www.regulations.gov</a> website.
I. Summary of This Rulemaking
A. Overview of This Rule
On December 16, 2020, the Department issued a regulation
prohibiting, subject to limited exceptions, the inclusion of provisions
in settlement agreements directing or providing for a payment or loan,
in cash or in kind, to any non-governmental person or entity not a
party to a dispute. Prohibition on Settlement Payments to Non-
Governmental Third Parties, 85 FR 81409 (``the December 2020 Rule'')
(adding 28 CFR 50.28). On May 10, 2022, DOJ published for public
comment an interim final rule (``IFR'') that revoked the December 2020
Rule, Guidelines and Limitations for Settlement Agreements Involving
Payments to Non-Governmental Third Parties, 87 FR 27936.
The IFR also solicited public comment on an Attorney General
memorandum posted on the DOJ website in conjunction with the IFR, the
Memorandum for the Heads of Department Components and United States
Attorneys from the Attorney General, Re: Guidelines and Limitations for
Settlement Agreements Involving Payments to Non-Governmental Third
Parties (May 5, 2022) (the ``May 2022 Memorandum''), <a href="https://www.justice.gov/d9/pages/attachments/2022/05/05/02._ag_guidlines_and_limitations_memorandum_0.pdf">https://www.justice.gov/d9/pages/attachments/2022/05/05/02._ag_guidlines_and_limitations_memorandum_0.pdf</a> (last visited Oct.
31, 2024).
This preamble responds to comments received on the IFR. As
reflected in this preamble, the Department is not making any changes to
the rule or to the May 2022 Memorandum.
That said, DOJ is using the opportunity of this final rule to
publicly announce that it will add two provisions to the section of the
Justice Manual (<a href="https://www.justice.gov/jm/justice-manual">https://www.justice.gov/jm/justice-manual</a>) addressing
third-party payments, section 1-17.000, Settlement Agreements Involving
Payments to Non-Governmental Third Parties, as discussed later in this
preamble.
B. Background Explanation for This Rule
The Department, as explained in this preamble, has concluded that
its action in May 2022 to revoke 28 CFR 50.28 and establish the current
policy continues to be appropriate. The Department has authority to
settle litigation incident to the Attorney General's power to supervise
litigation for the United States. Authority of the United States to
Enter Settlements Limiting the Future Exercise of Executive Branch
Discretion, 23 Op. O.L.C. 126, 135 (1999) (``Authority of the United
States to Enter Settlements''). The Department regularly settles civil
and criminal matters to compensate victims, redress harms, and punish
and deter unlawful conduct without the costs and delay that can
accompany trials. For decades and across Administrations, Department
components entered into settlement agreements that involved payments to
certain third parties as a means of addressing harms arising from
violations of Federal law.
It has been the consistent view of the Office of Legal Counsel
(``OLC''), acknowledged when the December 2020 Rule was promulgated,
that settlements involving payments to non-governmental third parties
can comport with the Miscellaneous Receipts Act (``MRA''), 31 U.S.C.
3302(b). See Memorandum for William P. Barr, Attorney General, from
Steven A. Engel, Assistant Attorney General, Office of Legal Counsel,
Re: Final Rule Prohibiting Settlement Payments to Non-Governmental
Third Parties at 2 (Dec. 4, 2020) (``December 2020 OLC Memo'') (citing
Application of the Government Corporation Control Act and the
Miscellaneous Receipts Act to the Canadian Softwood Lumber Settlement
Agreement, 30 Op. O.L.C. 111, 119 (2006) (``Softwood Lumber'')),
<a href="https://www.justice.gov/oip/foia-library/foia-processed/general_topics/settlement_guidelines_third_parties_2_14_23/download">https://www.justice.gov/oip/foia-library/foia-processed/general_topics/settlement_guidelines_third_parties_2_14_23/download</a> (last visited Oct.
31, 2024).
In 2017, the Attorney General issued a memorandum prohibiting
Department attorneys from entering into case resolutions in civil and
criminal matters providing for certain third-party payments. See
Memorandum for All Component Heads and United States Attorneys from the
Attorney General,
[[Page 97526]]
Re: Prohibition on Settlement Payments to Third Parties (June 6, 2017).
In 2020, through the December 2020 Rule, the Department amended its
regulations to add 28 CFR 50.28, memorializing prohibitions set forth
in the 2017 memorandum and additionally expressly prohibiting
expenditure of funds ``to provide goods or services to third parties
for Supplemental Environmental Projects.'' 85 FR 81410.
In 2022, after considering the views of the Department's components
and their experience with 28 CFR 50.28, the Attorney General concluded
that the regulations at 28 CFR 50.28 were too restrictive and should be
revoked, see 87 FR 27937, and issued an IFR revoking 28 CFR 50.28, see
87 FR 27936-38. The Attorney General determined that, when properly
tailored, agreements providing for payments to third parties are lawful
and allow the United States to more fully accomplish the goals of civil
and criminal enforcement. Id. at 27937. For example, the Department
usually seeks a penalty and injunctive relief to resolve violations of
Federal environmental statutes. However, the harms caused by these
violations, including harms to the communities most directly impacted
by them, can be difficult to redress in particular cases. Id. For
instance, in environmental enforcement cases, the Department may seek a
defendant's agreement to make third-party payments in the form of a
Supplemental Environmental Project (``SEP'') to counteract some of the
downstream effects of a violation, and often as well to prevent future
harm. Id. A SEP is a type of project or activity that a defendant
undertakes as part of the settlement of an environmental enforcement
action. As an illustration, a defendant refinery that violated its
Clean Air Act permit by emitting excess volatile organic compounds
(``VOCs'') agreed to perform a SEP to abate lead-based paint hazards in
child-occupied facilities and lower-income residences located within a
50-mile radius of the refinery, in addition to an appropriate penalty
and other relief. VOCs can accelerate the weathering and deterioration
of lead-based paint, increasing potential lead exposure. The project,
therefore, was designed to reduce a downstream harm to local residents,
exacerbated by the defendant's conduct.
The May 2022 Memorandum contains important safeguards to ensure
that case resolutions containing third-party payments are appropriately
tailored. Permissible settlements with third-party payments must
satisfy conditions that define with particularity the nature and scope
of any third-party project; require a strong connection between the
underlying violation(s) and the project; prevent the Federal Government
from proposing the selection of a particular third party to receive
payments; restrict the Federal Government's role after a settlement is
entered; require that such settlements occur before an admission or
finding of liability in favor of the United States; prohibit use of
such settlements to satisfy existing statutory obligations or to
provide additional resources to perform any activity for which a
Federal agency receives a specific appropriation; and prohibit certain
practices such as unrestricted cash donations. May 2022 Memorandum at
3. Such settlements are also subject to approval by the Deputy Attorney
General or the Associate Attorney General. Id. at 3-4.
The May 2022 Memorandum also exempts four types of payments from
these requirements, including payments providing restitution to non-
party victims to directly remedy the harm the lawsuit seeks to redress,
as well as payments for legal or professional services undertaken in
connection with the case being settled, consistent with pre-2017
practice. Id. at 4. (The exception for legal or professional services
includes payments to contractors implementing injunctive relief;
payments to monitors, arbitrators, mediators, or other neutral third
parties; and payments for other categories of legal and professional
services.) In developing the new policy, the Department sought to
address specific concerns that had been raised over such payments,
while preserving the availability of these payments as a potential
remedy when appropriate. In 2022, DOJ incorporated the terms of the May
2022 Memorandum in Justice Manual section 1-17.000.
C. Justice Manual Revisions
As part of the process of reviewing comments on the IFR and May
2022 Memorandum, the Department has determined that it will add two
provisions to the Justice Manual section 1-17.000.\1\ In particular,
the Department is sensitive to the perception that it will ``strong-
arm'' defendants to agree to third-party payments by declining to agree
to a settlement unless the defendant agrees to make one or more third-
party payments. It also recognizes the concern that the lack of public
input into the development of third-party payments, and the difficulty
of obtaining information on settlements that include such provisions,
could lead to a lack of accountability and could give rise to claims of
``cronyism'' or favoritism. As discussed in greater detail below, see
infra Part II.B.5.1, these concerns do not suggest that third-party
payments writ large are unlawful, or that a rule prohibiting third-
party payments is the only way to guard against them. Instead (and as
also discussed in greater detail throughout this preamble), the
Department has concluded that it can respond to these concerns through
the more flexible approach of making changes to the Justice Manual, a
course that preserves the benefits of third-party payments while
responding in a more surgical manner to the concerns raised.
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\1\ The Department will limit these new provisions to civil
settlements covered by the May 2022 Memorandum but not exempted
under the four circumstances described therein. Plea agreements are
always subject to court review and approval, ensuring the protection
of the public's interest and the rights of the defendant. The timing
and other process requirements of a criminal proceeding also make it
less feasible to apply these new requirements in criminal cases.
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Specifically, with respect to concerns that the Department will
``strong-arm'' defendants into agreeing to third-party payments, the
forthcoming revisions to the Justice Manual will specify that the
Department may decline to agree to settle a civil claim in the absence
of a particular remedy where the remedy in question would be available
relief were the case litigated to judgment; but that if the third-party
payment is not within the scope of the remedies the court could order,
the Department will negotiate such a payment as part of a settlement
only if the defendant expresses interest in doing so. For example, to
resolve an antitrust investigation or filed case, the Antitrust
Division may condition a settlement on the entity's agreement to divest
itself of certain assets, because that is relief the Antitrust Division
could receive if it litigated the case to judgment. See, e.g., United
States v. E.I. du Pont de Nemours & Co., 366 U.S. 316, 331 (1961); see
generally California v. Am. Stores Co., 495 U.S. 271, 280-81 (1990)
(``[I]n Government actions divestiture is the preferred remedy for an
illegal merger or acquisition.''). (Because these benefits would go to
another unrelated entity, such a condition could potentially have the
appearance of a third-party payment.) The Department believes that this
division--between relief available if the case were litigated to
judgment and relief that would not be--is an appropriate way to guard
against concerns that the Department would strong-arm defendants into
agreeing to third-party payments. In cases in which a court could order
a particular remedy but a defendant is not
[[Page 97527]]
willing to include it in a settlement, the Department has the option of
litigating the case to judgment in order to secure the relief in
question without the defendant's consent. In those cases in which a
settlement term is not backed by a possible judicial remedy in this
way, the Department is sensitive to the concern raised by commenters
and views it as preferable (although not legally required) to include
this additional safeguard to ensure that the defendant is amenable to
the relief in the form of a third-party payment.
As to claims that information about settlements that include third-
party payments is not readily available and that such settlements are
concluded without adequate participation from the public, the
Department will add a provision to the existing Justice Manual
requirements that would provide additional opportunities for the public
to participate in certain civil settlements.\2\
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\2\ Existing laws require public disclosure of settlement terms
in certain circumstances. The Antitrust Procedures and Penalties
Act, codified at 15 U.S.C. 16(b)-(h), provides for a notice-and-
comment process before a consent decree can be finalized in civil
antitrust cases. The Clean Air Act includes a similar requirement,
42 U.S.C. 7413(g), as do laws relating to cleanup and control of
hazardous materials. See 42 U.S.C. 9622(d)(2) and (i); 42 U.S.C.
6973(d); see also 28 CFR 50.7 (providing for a notice-and-comment
process in civil ``actions to enjoin [the] discharges of
pollutants.''). Where legal requirements such as these do not apply,
and to minimize disrupting or delaying the resolution of a wide
range of routine matters, the Department will limit the Justice
Manual requirement to cases involving a third-party payment that a
court could not order in law or in equity. Where a court could order
such relief, the public is already on notice that it might do so.
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II. Public Comments on the IFR and May 2022 Memorandum
A. Summary of Public Comments
The comment period for the IFR and the May 2022 Memorandum closed
on July 11, 2022, and the Department received 16 public comments.\3\
The comments express both support for and opposition to the IFR and May
2022 Memorandum. DOJ is exercising its discretion to respond to public
comments here.
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\3\ <a href="http://Regulations.gov">Regulations.gov</a> contains seventeen comments, one of which is
a superseded version of a comment omitted from review at the request
of the commenter. <a href="http://FDMS.gov">FDMS.gov</a> contains one additional document, which
is not a comment on the IFR and May 2022 Memorandum.
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B. Response to Comments
1. Applicability of the MRA
Comments: According to some commenters, under the 1980 OLC opinion
Effect of 31 U.S.C. Sec. 484 on the Settlement Authority of the
Attorney General, 4B Op. O.L.C. 684 (1980) (``Effect of 31 U.S.C. Sec.
484''), money available to the United States is constructively received
and must be directed to the U.S. Treasury to comply with the MRA. Those
commenters argue that any deviation from this result, such as an agency
directing settlement money to a non-governmental third party, is a
violation of that requirement. In particular, some commenters claim
that SEPs are a violation of the MRA because the money used for them is
public and the value of the SEP is exchanged, without congressional
authorization, for a proportional reduction in the ultimate civil
penalty that could have been payable to the U.S. Treasury. And still
others contend that private defendants violate 31 U.S.C. 3302(c) by
making third-party payments pursuant to settlements.
One commenter states that DOJ fails to explain why it applies the
doctrine of constructive receipt from tax law cases (requiring the
Government to exercise substantive control over the funds without
significant limitation) to this context and argues that the Department
has ``cherry-picked a version of constructive receipt in an attempt to
thwart equity.''
Several commenters claim that SEPs are illegally diverted penalties
except for the two instances in which SEPs are expressly authorized by
statute: 42 U.S.C. 16138, which grants the Executive Branch permission
to seek SEPs related to diesel emissions reductions; and 42 U.S.C.
7604(g)(2), which gives courts discretion to order that penalties
received under the citizens suit provision of the Clean Air Act be used
to fund beneficial mitigation projects that are consistent with that
Act and enhance the public health or the environment, up to $100,000.
Commenters assert that Congress's enactment of these provisions
indicates that Congress views these types of payments as otherwise
impermissible.
One commenter argues that the 2006 Softwood Lumber OLC opinion is
not persuasive and, even if it were, the commenter claims that it would
not authorize SEPs, which the commenter claims are designed entirely to
exchange monetary penalties destined for the Treasury for a particular
project. This commenter also suggests that caselaw supporting the
legality of these payments cannot be reconciled with subsequent Supreme
Court decisions and statutory provisions related to diesel emissions
projects and citizens suits under the Clean Air Act, and cites
Comptroller General/U.S. Government Accountability Office (``GAO'')
opinions as supportive. Commenters further invoke a memorandum authored
by then-Assistant Attorney General for ENRD Jeffrey Bossert Clark,
Supplemental Environmental Projects (``SEPs'') in Civil Settlements
with Private Defendants (Mar. 12, 2020) (``Clark Memorandum''), in
support of their view that third-party settlements (and SEPs in
particular) violate the MRA.
Other commenters cite with approval the OLC view (reflected in the
May 2022 Memorandum) that settlement-funded projects do not violate the
MRA if they are executed prior to a finding of the defendant's
liability and if the United States does not retain control over the
projects following settlement except for purposes of oversight of the
settlement. Citing U.S. Environmental Protection Agency Supplemental
Environmental Projects Policy 2015 Update (Mar. 10, 2015) (``2015 SEP
Policy''), commenters make the point that SEPs are not substitutes for
monetary penalties because settlements that include a SEP must always
include a settlement penalty that recoups the economic benefit a
violator gained from noncompliance with the law, as well as appropriate
penalties that reflect the environmental and regulatory harm caused by
the violations. These commenters state that SEPs are a factor to
consider in making the decision to settle and on what terms to settle.
By confusing SEPs with penalties or diversions of Treasury funds, these
commenters argue, the previous Administration misconstrued decades of
Federal practice.
Response: The Department appreciates commenters' statements that
settlement-funded projects do not violate the MRA if they comply with
the criteria set forth in Softwood Lumber; and that agreeing to SEPs as
part of settlement agreements is consistent with those criteria.
The Department disagrees with commenters' contention that any
settlement that includes a payment to a non-government third party
violates the MRA and continues to conclude that the MRA permits such
settlements in certain circumstances. The MRA requires that ``an
official or agent of the Government receiving money for the Government
from any source shall deposit the money in the Treasury as soon as
practicable without deduction for any charge or claim.'' 31 U.S.C.
3302(b). The funds paid under these types of settlements, however, are
not ``drawn from the Treasury'' and have not been ``receiv[ed] . . .
for the Government'' by the United States.
Consistent with authoritative OLC opinions and advice, the
Department
[[Page 97528]]
has long understood that the MRA applies when an official or agent of
the Government either actually or ``constructively'' receives money for
the Government. See Effect of 31 U.S.C. Sec. 484, 4B Op. O.L.C. at
688. ``The doctrine of constructive receipt will ignore the form of a
transaction in order to get to its substance,'' and the Department has
accordingly concluded that a Federal agency will be considered to be in
``constructive receipt'' of money ``if a federal agency could have
accepted possession and retains discretion to direct the use of the
money.'' Id.
To ensure that a settlement including payment to a third party does
not violate the MRA through constructive receipt, OLC has
``consistently advised that (1) the settlement be executed before an
admission or finding of liability in favor of the United States; and
(2) the United States not retain post-settlement control over the
disposition or management of the funds or any projects carried out
under the settlement, except for ensuring that the parties comply with
the settlement.'' Softwood Lumber, 30 Op. O.L.C. at 119; see also id.
at 119-20 (citing past precedent, including Effect of 31 U.S.C. Sec.
384). ``If these two criteria are met, then the governmental control
over settlement funds is so attenuated that the government cannot be
said to be `receiving money for the Government' '' under the MRA. Id.
The May 2022 Memorandum also does not implicate anti-augmentation
concerns, which the Comptroller General decisions cited by commenters
invoke in addition to the MRA. See also Applicability of the
Miscellaneous Receipts Act to an Arbitral Award of Legal Costs, 42 Op.
OLC 1, 3 (2018) (``[A]n agency may not augment its appropriations from
outside sources without statutory authority''). The May 2022 Memorandum
specifies that settlements may not ``be used to satisfy the statutory
obligation of the Justice Department or any other federal agency to
perform a particular activity. Nor shall any such settlement provide
the Justice Department or any other federal agency with additional
resources to perform a particular activity for which the Justice
Department or any other federal agency, respectively, receives a
specific appropriation.'' May 2022 Memorandum at 3.
Thus, as stated in the May 2022 Memorandum, ``[i]t has been the
consistent view of the Office of Legal Counsel, including in 2020 when
the Justice Department's current regulation [now-revoked 28 CFR 50.28]
was promulgated, that settlements involving payments to non-
governmental third parties, if properly structured, do not violate the
Miscellaneous Receipts Act.'' Id. at 1. In support of this statement,
the May 2022 Memorandum cites the OLC memorandum approving the now-
revoked December 2020 Rule for form and legality, which recognized the
longstanding position of the Department that properly structured
settlement agreements do not violate the MRA. December 2020 OLC Memo at
2. This memorandum stated that the rule was ``consistent with the
policy underlying the MRA--that Congress, and not the agency, should
determine when government resources may be spent on behalf of third
parties.'' Id. But it elaborated that the rule ``does not reflect an
interpretation of the statute itself and thus prohibits certain
payments to third parties that this Office has concluded that the MRA
otherwise allows,'' id., as detailed in the cited Softwood Lumber OLC
opinion. And the May 2022 Memorandum explicitly incorporates the two
criteria that Softwood Lumber identifies--the ``settlement must be
executed before an admission or finding of liability in favor of the
United States, and the Justice Department and its client agencies must
not retain post-settlement control over the disposition or management
of the funds or any projects carried out under any such settlement,
except for ensuring that the parties comply with the settlement.'' May
2022 Memorandum at 3.
To the extent that commenters disagree with the Softwood Lumber
opinion or believe it inapplicable, they do not offer authoritative
judicial precedents or similar authoritative sources meaningfully
undercutting its reasoning or its support for the current Department
policy as set forth in the May 2022 Memorandum. Softwood Lumber remains
applicable to this context, for several reasons.
First, Comptroller General opinions cited by commenters were
addressed in the Softwood Lumber opinion itself, which noted that
concerns in those matters were ``inapposite'' because the MRA is
inapplicable where there has been no constructive receipt of money for
the Government. 30 Op. O.L.C. at 121. (The same rationale applies to
other GAO documents one commenter cites.) \4\ The Department did not
depart from that principle in the December 2020 Rule. Moreover, the
Department has incorporated in some of the restrictions in the May 2022
Memorandum measures that address some of the other concerns raised in
those Comptroller General opinions. The May 2022 Memorandum also
explicitly incorporates the two criteria set forth in the Softwood
Lumber OLC opinion--the ``settlement must be executed before an
admission or finding of liability in favor of the United States, and
the Justice Department and its client agencies must not retain post-
settlement control over the disposition or management of the funds or
any projects carried out under any such settlement, except for ensuring
that the parties comply with the settlement.'' May 2022 Memorandum at
3. Moreover, in all events, decisions of GAO and the Comptroller
General ``are not binding on Executive Branch agencies''; instead,
``the opinions of the Attorney General and th[e] Office [of Legal
Counsel] are controlling.'' Prioritizing Programs to Exempt Small
Businesses From Competition in Federal Contracts, 33 Op. O.L.C. 284,
302 (2009).
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\4\ The Department also notes that these Comptroller General
decisions did not address the MRA's applicability when the Federal
Government does not ``retain post-settlement control over the
disposition or management of the funds or any projects carried out
under any such settlement, except for ensuring that the parties
comply with the settlement.'' Softwood Lumber, 30 Op. O.L.C. at 119.
Moreover, all those decisions involved administrative agencies with
statutory authority to both impose and also settle administrative
penalties--a situation distinct from that addressed by the
Department's May 2022 Memorandum and IFR. And those decisions
focused on concerns raised when agencies enter settlements under
which third parties carry out actions within the agencies' own
statutory responsibilities, and with no nexus to the underlying
violations--concerns that, again, the May 2022 Memorandum and the
IFR address.
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Second, the Softwood Lumber opinion does not, contrary to
commenters' views, limit its understanding of the criteria for
consistency with the MRA to its own facts or to the specific examples
it cites. It instead articulates the two criteria for compliance
broadly and refers to them as ``general principles'' applicable
regardless of whether the United States is a plaintiff or defendant. 30
Op. O.L.C. at 120. See also December 2020 OLC Memo at 2 (citing
Softwood Lumber for the principle that the MRA generally permits
``certain payments to third parties'').
Third, it is irrelevant that one commenter deems unpersuasive two
circuit-level decisions sometimes invoked to support the legality of
settlement payments--Public Interest Research Group v. Powell Duffryn
Terminals, Inc., 913 F.2d 64, 81 (3d Cir. 1990), and Sierra Club v.
Electronic Controls Design, 909 F.2d 1350, 1354 (1990). Softwood Lumber
does not rely on these decisions. The commenter, moreover, criticizes
these decisions in part on the ground that ``Congress has subsequently
indicated that SEPs (and thus all Third-Party Payments) violate
[[Page 97529]]
the MRA'' and the Anti-Deficiency Act (``ADA'') ``absent explicit
congressional authorization,'' referring to Congress's express
authorization of SEPs in 42 U.S.C. 16138. The Department disagrees with
the commenter's reading of that provision, for reasons given below.
Finally, the commenter claims that Kokesh v. SEC, 137 S. Ct. 1635
(2017), clarified that what constitutes a ``penalty'' is a functional
inquiry. Kokesh, however, held that monetary disgorgement ordered by
the SEC constitutes a penalty within the meaning of 28 U.S.C. 2462. Id.
at 1641-45. Kokesh did not involve a settlement, and it is not relevant
to when money paid under a settlement is received by the Federal
Government under the MRA.
Fourth, when commenters contend that private defendants violate 31
U.S.C. 3302(c) by making third-party payments pursuant to settlements,
they assume that funds in the hands of private defendants are ``public
money'' subject to the MRA. Under Softwood Lumber, however, such funds
are not public monies. And the commenters' argument improperly
conflates funds in the hands of private litigants, before any
determination of liability, with penalties imposed after trial that may
in some circumstances constitute public money. See Pub. Int. Rsch.
Grp., 913 F.2d at 81 n.32 (noting that section 3302(c)(1) applies to
penalties imposed after a trial, but recognizing that outside of
penalties, ``a [private] party may compromise its claim however it sees
fit''); United States v. Smithfield Foods, Inc., 982 F. Supp. 373, 374
(E.D. Va. 1997) (finding with respect to a Clean Water Act penalty
imposed after a trial that ``a penalty, which is imposed pursuant to a
federal statute, in a suit brought by the federal government, . . .
constitutes `public money.' As such, it must be deposited with the
Treasury, in accordance with the Miscellaneous Receipts Act, unless
otherwise specified by Congress'').
Fifth, the Attorney General has not ``cherry-picked'' a favorable
definition of ``constructive receipt'' to avoid violation of the MRA.
To the contrary, the 1980 OLC opinion cited by the commenter applied
the doctrine of ``constructive receipt'' as a ``practical'' constraint
to guard against elevating form over substance in evaluating whether a
settlement violated the MRA. Effect of 31 U.S.C. 484, 4B Op. O.L.C. at
688. In addition, as the comment itself acknowledges, there is no
definitive version of the constructive receipt doctrine that is clearly
applicable to the types of settlements at issue here and that differs
from the Department's approach. Moreover, as Effect of 31 U.S.C. 484
notes, the Department and Federal agencies had previously applied the
same definition in other contexts, including to conclude that an
individual in some circumstances does not ``accept'' funds when the
individual does not retain control over the disposition of those funds.
Id. at 688 n.11. That further undercuts the argument that the
Department has chosen a particular version of the doctrine in order to
permit circumvention of the MRA.
The Department also disagrees with the assertion that 42 U.S.C.
16138 (enacted in 2008) undercuts the legality of payments to third
parties. That provision addresses EPA's authority to accept diesel
emissions reduction SEPs. The commenter broadly states that the ``clear
implication'' of this provision is that diesel emission SEPs (and
accordingly all third-party payments) violate the MRA and the ADA
absent express congressional authorization. But this claim ignores the
text, context, and history of section 16138, which make clear that
Congress enacted the 2008 provision to address a narrow concern that
EPA then believed had newly arisen from Congress's express
appropriations for diesel retrofit projects.
As an initial matter, nothing in the text of section 16138
indicates that it broadly prohibits the Federal Government from
entering into settlement agreements that include payments to third
parties. On the contrary, by its terms, it provides that the EPA ``may
accept . . . diesel emissions reduction Supplemental Environmental
Projects'' that meet certain criteria ``as part of a settlement of any
alleged violates of environmental law.'' 42 U.S.C. 16138. To the extent
that the commenter relies on the interpretive cannon expressio unius
est exclusio alterius--that expressing one item of an associated group
or series excludes another--that canon applies ``only when
circumstances support a sensible inference that the term left out must
have been meant to be excluded.'' NLRB v. SW Gen., Inc., 580 U.S. 288,
302 (2017) (quotation marks and brackets omitted). Here, it is not
``sensible'' to ``infer[ ],'' id., that Congress intended to disrupt
the Federal Government's long-standing practice of entering into
settlement agreements that include third-party payments from a
provision that authorizes the Federal Government to agree to one such
type of agreement--i.e., those that include ``diesel emissions
reduction Supplemental Environmental Projects,'' 42 U.S.C. 16138.
The history and context of section 16138 confirm this conclusion.
As the Senate report accompanying the legislation states, SEPs had
historically ``been an important funding stream for diesel retrofit
projects.'' S. Rep. No. 110-266, at 2 (2008). The report notes that
SEPs are ``projects [that] are undertaken by a defendant as part of a
settlement in an environmental enforcement action . . . . They
specifically do not include actions which a defendant is otherwise
legally required to perform. So they generate environmental and public
health benefits that would not have occurred without the settlement.''
Id. However, after Congress first funded the diesel retrofit program in
2005, the report continues, ``EPA apparently . . . concluded that the
Agency generally should cease funding diesel retrofit projects via
SEPs. EPA believes that allowing diesel retrofits to be funded by SEPs
once Congress has specifically appropriated monies for that purpose
could violate the Miscellaneous Receipts Act.'' Id. The Senate report
explains that the new provision was ``intended to clarify that Congress
did not intend the funding of the Diesel Emissions Reduction Act to
affect EPA's ability to enter into SEPs that fund diesel retrofit
projects.'' Id. Rather, ``Congress never intended the Diesel Emissions
Reduction Act to limit EPA's ability to negotiate additional diesel
retrofit projects as part of enforcement settlements.'' Id. at 3.
This history makes clear that Congress enacted the 2008 provision
to address the narrow concern that, at the time, EPA believed had
arisen from Congress's express appropriations in 2005 for diesel
retrofit projects. Congress clarified that it had ``never intended'' to
limit EPA's ability to negotiate SEPs when it funded the diesel
retrofit program. Id. Neither the text nor the history or context of
how section 16138 came about suggest that Congress understood SEPs to
violate the MRA as a general matter. To the contrary, Congress was
aware of EPA's and the Department's practice of using SEPs in
environmental enforcement settlements and enacted this provision to
support that practice and ensure that diesel retrofit projects would
continue to be included. See S. Rep. No. 110-266, at 2.\5\
---------------------------------------------------------------------------
\5\ Indeed, as one recent article put it, ``there is no evidence
in the text or legislative history of the 2008 . . . amendment to
show that Congress intended for the amendment to preclude EPA from
accepting SEPs absent clear congressional authorization.'' Daniel
Alvarez et al., Clearing the Air on Supplemental Environmental
Projects, 54 Env't L. Rep. 10382, 10394 (2024).
---------------------------------------------------------------------------
[[Page 97530]]
The Department also disagrees with the same commenter's argument
that 42 U.S.C. 7604(g)(2) undercuts the legality of payments to third
parties in settlements, including SEPs. That provision allows a court
to order that up to $100,000 of a penalty award in a citizen suit
brought under the Clean Air Act to be used for ``beneficial mitigation
projects which are consistent with'' the Clean Air Act and ``enhance
the public health or the environment'' in lieu of being deposited in
the U.S. Treasury. 42 U.S.C. 7604(g)(2). Like 42 U.S.C. 16138, nothing
in the text of section 7604(g)(2) suggests that, in adopting that
provision, Congress intended to upend the practice of agreeing to
third-party payments as part of settlement agreements. Nor is that a
``sensible inference,'' SW Gen., 580 U.S. at 302; section 7604(g)(2) is
limited to cases brought by private citizens to abate pollution under
the Clean Air Act and authorizes courts to order certain environmental
projects in lieu of penalties--authority that, absent this provision,
courts would lack.
The history of that provision confirms its limited scope. Section
7604(g)(2) was adopted as part of the Clean Air Act Amendments of 1990,
Public Law 101-549, tit. VII, sec. 707, 104 Stat. 2399, 2682-83. One
provision of that law, codified at 42 U.S.C. 7604(g)(1), created a
special fund into which penalties imposed in Clean Air Act citizen suit
actions ``shall be deposited''; the very next subsection, section
7604(g)(2), then provided that ``notwithstanding paragraph (1)'' courts
had the authority to instead order the use of such civil penalty monies
for beneficial mitigation projects. The close connection between these
subsections--including the fact that section 7604(g)(2) twice cross-
references section 7604(g)(1)--further indicates that section
7604(g)(2) was directed specifically to judicial remedies in citizen
litigation under the Clean Air Act.\6\ Congress's decision to authorize
a court to order certain defined projects in the limited context of
these private suits after a court determination of liability and
penalty assessment has no bearing on the Government's authority to seek
appropriate relief in a settlement.
---------------------------------------------------------------------------
\6\ The two provisions were closely linked in the legislative
history of the 1990 Clean Air Act Amendments. The conference report
describes the two provisions together in a single sentence, stating
that ``[t]he House amendment establishes a special treasury fund
similar to the one created in the Senate bill, and also authorizes
courts in citizen suits to order that penalties be used in
beneficial mitigation projects'' and noting that ``[t]he conference
agreement adopts the House position.'' Congressional Research
Service, A Legislative History of the Clean Air Act Amendments of
1990, at 946 (1993). Again, nothing here suggests that Congress
intended to upend the practice of agreeing to third-party payments
as part of settlement agreements.
---------------------------------------------------------------------------
In addition, the Department disagrees with commenters who contend
that a third-party payment in the form of a SEP amounts to an agreement
to trade back part of the penalty that would constitute public money
subject to the MRA. Such trading back of penalties for third-party
payments is not authorized by this rule or the May 2022 Memorandum. To
the extent commenters suggest that such trade backs are permissible
under the 2015 SEP Policy, the Department notes that while that policy
is beyond the scope of this rulemaking, it also does not authorize such
trade backs. Nor does the Government violate the MRA simply because it
settles a penalty claim that, if pursued to judgment, would have
yielded public money subject to the MRA. Instead, the factors outlined
in Softwood Lumber identify when the Government has constructively
received money under the MRA.
Finally, the Department notes that the Clark Memorandum--which
commenters cited in connection with this topic and for purposes of
other topics--has been withdrawn and was not adopted more broadly by
the Department. See Memorandum for ENRD Section Chiefs and Deputy
Section Chiefs from Deputy Assistant Attorney General Jean E. Williams,
Env't & Nat. Res. Div., U.S. Dep't of Just., Withdrawal of Memoranda
and Policy Documents (Feb. 4, 2021), <a href="https://www.justice.gov/enrd/page/file/1364716/dl">https://www.justice.gov/enrd/page/file/1364716/dl</a> (last visited Oct. 31, 2024). Any related memoranda to
the withdrawn Clark Memorandum and associated litigation filings also
were not adopted more broadly by the Department. The Department has
also addressed arguments made in the Clark Memorandum (which several
commenters have repeated) elsewhere in this document.
2. The Anti-Deficiency Act
Comments: Some commenters state that the ADA, 31 U.S.C. 1341, was
enacted to implement the Appropriations Clause of the U.S.
Constitution. According to these commenters, it is a violation of the
ADA for a settlement agreement to divert any funds from the U.S.
Treasury into private hands without congressional authorization.
Other commenters state that there is no violation of the ADA
because in these settlements, the Federal Government never received any
funds to expend without congressional appropriation.
Response: The Department agrees that settlements that include
third-party payments do not violate the ADA. The ADA generally
prohibits any expenditure or obligation of public money exceeding an
amount ``available in an appropriation or fund for the expenditure or
obligation. . . .'' 31 U.S.C. 1341(a)(1)(A). As discussed above, see
supra Part II.B.1, where a settlement is ``executed before an admission
or finding of liability in favor of the United States'' and where the
United States does not ``retain post-settlement control over the
disposition or management of the funds or any projects carried out
under any such settlement, except for ensuring that the parties comply
with the settlement,'' the Government has not `` `received money for
the Government.' '' Softwood Lumber, 30 Op. O.L.C. at 119 (quoting 31
U.S.C. 3302(b)). In such settlements, no Government official or
employee expends public money or creates an obligation of the
Government.
3. Constitutionality of the Department's Actions
Comments: Multiple commenters state that the power to tax and the
power to spend are granted only to Congress under Article I of the
Constitution. They state that under the Appropriations Clause, only
Congress has the authority to direct how Federal dollars are spent, and
that body enacts annual appropriations measures mandating how Federal
agencies do so. These commenters contend that the long-standing
practices of the Department reflected in the May 2022 Memorandum
circumvent these constitutional obligations. Additionally, commenters
argue that through these settlements, DOJ is usurping the role of the
legislature, without clear direction from Congress to do so. One
commenter also claims that SEPs and similar payments to third parties
use ``lawful enforcement authority to extract unlawful settlements,''
which, in the commenters' view, is inconsistent with the requirement in
Article II of the Constitution that ``the executive take Care that the
Laws be faithfully executed.''
Response: Third-party settlements entered into consistent with
Softwood Lumber and the May 2022 Memorandum are consistent with the
Constitution, as well as the MRA. The Constitution provides that ``[n]o
Money shall be drawn from the Treasury, but in Consequence of
Appropriations made by Law,'' U.S. Const. art. I, sec. 9, cl. 7, and
that ``[t]he Congress shall have
[[Page 97531]]
Power . . . to pay the Debts and provide for the common Defence and
general Welfare of the United States,'' id. art. I, sec. 8, cl. 1. In
such settlements, no money is ``drawn from the Treasury.'' Nor does
Congress's authority to provide for the ``general Welfare'' preclude
the Executive Branch from settling litigation on terms that are
otherwise consistent with applicable law.
The MRA helps ``preserve[ ] Congress's constitutional control over
the expenditure of public funds.'' Applicability of the Miscellaneous
Receipts Act to an Arbitral Award of Legal Costs, 42 Op. O.L.C. _, at
*3 (Mar. 6, 2018). Similar to how the Framers of the Constitution
limited the Appropriations Clause's commands to ``Money . . . drawn
from the Treasury,'' Congress limited the MRA to ``money'' ``receiv[ed]
. . . for the Government.'' And as discussed above in the responses to
commenters, see supra Parts II.B.1 and II.B.2, funds paid under
settlements that include third-party payments are not ``drawn from the
Treasury'' and have not been ``receiv[ed] . . . for the Government'' by
the United States. Commenters are also incorrect that the May 2022
Memorandum circumvents the Appropriations Clause and the MRA; on the
contrary, the May 2022 Memorandum goes beyond what the Appropriations
Clause and the MRA require. See May 2022 Memorandum at 2-4. To the
extent the constitutional arguments of commenters also rely on their
interpretation of the MRA or ADA, the Department addresses those
arguments above.
Moreover, appropriately structured third-party payments are
consistent with the discretion the Constitution accords the Executive
Branch in enforcing the statutes enacted by Congress, which--absent a
limitation by Congress--includes the authority to resolve claims by
settlement on appropriate terms. Authority of the United States to
Enter Settlements, 23 Op. O.L.C. at 135 (``The settlement power is
sweeping, but the Attorney General must still exercise her discretion
in conformity with her obligation to `enforce the Acts of Congress.' ''
(citation omitted)). While the Take Care Clause can impose certain
limitations on that power, see id. at 138, the commenter offers no
explanation for why all third-party settlements violate that provision
beyond the conclusory statement that they ``obviously'' do.
4. Revocation of the December 2020 Rule and Issuance of the May 2022
Memorandum as Arbitrary and Capricious
Comments: Several commenters argue that the revocation of the
December 2020 Rule is arbitrary and capricious or not grounded in law,
or otherwise claim that DOJ lacks sufficient bases to justify the
action. They argue that DOJ's conclusion that the December 2020 Rule is
``more restrictive and less tailored than necessary,'' 87 FR 27937,
does not support repealing the entire rule. They further argue that the
Department's statement that settlement policies ``have traditionally
been addressed through memoranda,'' id., is not sufficient to justify
repeal.
Commenters assert that the Department placed the prior policy in
regulations and that failing to do so here is a ``bad system of
management'' because there is ``no central repository'' where the
public and officials could locate memos governing the agency. One
commenter states further that the May 2022 Memorandum describing the
Department's new policy cites to an OLC memorandum that has not been
produced via a Freedom of Information Act (``FOIA'') request and so
itself is not available to the public.
Response: It is well-established that ``[a]gencies are free to
change their existing policies as long as they provide a reasoned
explanation for the change.'' Encino Motorcars, LLC v. Navarro, 579
U.S. 211, 221 (2016). ``When an agency changes its existing position,
it `need not always provide a more detailed justification than what
would suffice for a new policy created on a blank slate.' '' Id.
(quoting FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515
(2009)). ``But the agency must at least `display awareness that it is
changing position' and `show that there are good reasons for the new
policy.' '' Id. (quoting Fox Television Stations, 556 U.S. at 515). The
IFR and the May 2022 Memorandum describe sound reasons for the
revocation of 28 CFR 50.28 and a change in policy. Appropriately
tailored ``agreements providing for payments to third parties are
lawful and allow the United States to more fully accomplish the primary
goals of civil and criminal enforcement: Compensating victims,
remedying harm, and punishing and deterring unlawful conduct.'' 87 FR
27937. ``For example, the harms caused by violations of Federal
environmental statutes . . . can be difficult to redress directly in
particular cases''; and in such circumstances, third-party payments
(including SEPs) can ``help achieve an enforcement action's goals.''
Id. Please see the other responses in this document to comments raising
specific legal and policy concerns, especially Parts II.B.1 and 5, that
underscore the reasons the Department changed policy.
Turning to the question of the form of the new policy, the
Department observes that the previous Administration itself recognized
that 28 CFR 50.28 was `` `limited to agency organization, management,
or personnel matters'. . . .'' 85 FR 81410 (citing 5 U.S.C. 553(a)(2),
(b), and (d)). The same is true with respect to the IFR and with
respect to this final rule. In such areas, Federal agencies have
flexibility as to how they act and memorialize their actions. Cf. Perez
v. Mortg. Bankers Ass'n, 575 U.S. 92, 101 (2015) (``Because an agency
is not required to use notice-and-comment procedures [under the APA] to
issue an initial interpretive rule, it is also not required to use
those procedures when it amends or repeals that interpretive rule.'').
Moreover, as the IFR states in announcing the revocation of 28 CFR
50.28, DOJ policies addressing the goals of settlements have
``traditionally'' been announced in memoranda. 87 FR 27937. Also of
note, the previous Administration did not undertake a notice-and-
comment rulemaking process; instead, it promulgated 28 CFR 50.28 as an
immediately effective final rule. Likewise, in 2022, DOJ revoked this
provision as an interim final rule and released simultaneously the May
2022 Memorandum and posted it to the DOJ website. See <a href="https://www.justice.gov/media/1221546/dl?inline=">https://www.justice.gov/media/1221546/dl?inline=</a> (last visited Oct. 31, 2024).
At its discretion, the Department took the further step of requesting
public comment as to those actions and is responding to significant
submitted public comments in this final rule.
In response to the commenter who suggests that a memorandum is not
appropriate because of the lack of a ``central repository'' for
Department policy and states that the policy should be in the Justice
Manual or Code of Federal Regulations, the Department notes that the
memorandum is reflected in the Justice Manual, which is publicly
available on the <a href="http://Justice.gov">Justice.gov</a> website. See Settlement Agreements
Involving Payments to Non-Governmental Third Parties, section 1-17.000.
Including these provisions in the Justice Manual is preferable because
Justice Manual provisions can be readily amended, allowing the
Department to adjust the guidance governing additional circumstances
and fact patterns as needed. The Justice Manual governs the litigation
practices of the Department
[[Page 97532]]
and is followed by Department litigators; a regulation is not needed
for this purpose. Further, the Department has announced with this
notice that it will make changes to these Justice Manual provisions,
demonstrating the benefits of this approach.
Finally, as to the question of the release under FOIA of December
2020 OLC Memo, which is referenced in footnote two of the May 2022
Memorandum, DOJ did release this document (posted on February 16, 2023)
and it is available in the FOIA Reading Room at <a href="https://www.justice.gov/oip/foia-library/foia-processed/general_topics/settlement_guidelines_third_parties_2_14_23/download">https://www.justice.gov/oip/foia-library/foia-processed/general_topics/settlement_guidelines_third_parties_2_14_23/download</a> (last visited Oct.
31, 2024).
5. The Attorney General's Guidelines and Limitations as Public Policy
5.1. Examples of Past Department of Justice Conduct as a Basis for Not
Revoking the December 2020 Rule and Issuing the May 2022 Memorandum
Comments: Some commenters state that during the Clinton, Bush, and
Obama Administrations, the Department entered into settlement
agreements containing third-party payments that violated the statutory
and constitutional provisions discussed in the previous topics; and
further stated that these settlement agreements reflect bad public
policy. Examples offered include settlements with financial
institutions following the 2008-09 financial crisis; settlements
addressing ``housing counseling assistance'' programs; cy pres
settlements in other consumer and civil rights cases; and settlements
in environmental cases. Commenters argued that these settlements
demonstrate that case resolutions will lead to favoritism or
``cronyism.'' Several commenters further asserted that Congress
declined to enact funding for some programs where similar activities
were subsequently at least partially funded through third-party
payments. Commenters also alleged that the Federal Government ``strong-
armed'' defendants in some of these settlements to make payments to
politically favored entities. Requiring defendants to donate to
activist groups selected by the Department, they argue, raises serious
legal and ethical issues, erodes public trust, and is analogous to
``corruption.'' Commenters also expressed concern about the ``lack of
transparency'' surrounding third-party payments, and about decisions
made by ``unaccountable bureaucrats.''
Response: Some of the points raised by commenters do not relate to
the substance of the action on which the Department is seeking comment.
For example, cy pres class action settlements are expressly outside the
scope of the Department's action. See May 2022 Memorandum at 1 n.2.
A general prohibition by rule on third-party payments is
unnecessary for several reasons. First, with respect to conflict-of-
interest concerns, Department attorneys are subject to strict conflict
of interest rules imposed by the Department and their respective State
bars that apply in the context of litigation, including the settlement
of claims. Second, the Department has concluded that, although the
commenters' concerns are unfounded based on past settlements, it can
best proactively address such concerns through the use of policies like
the May 2022 Memorandum, or changes to the Justice Manual, rather than
a less flexible rulemaking process. Indeed, the May 2022 Memorandum
sets forth guidelines designed to ensure that third-party settlements
are not used for improper purposes, including a requirement that
projects ``have a strong connection to the underlying violation or
violations of federal law at issue'' and a provision barring the
Department and its client agencies from ``propos[ing] the selection of
any particular third party to receive payments to implement any project
carried out under any such settlement.'' May 2022 Memorandum at 3.
These guidelines adequately guard against cronyism and political
favoritism while preserving the benefits of third-party payments. Third
(and relatedly), the Department notes that allowing for third-party
payments can increase trust in the judicial process by, for example,
allowing settlements to be more responsive to affected communities.
For similar reasons, the Department disagrees that a rule
prohibiting third-party payments is necessary to ensure transparency.
As detailed earlier in this preamble, see supra Part I.C, transparency
concerns can be addressed through other means, including the revisions
to the Justice Manual described there. Those revisions appropriately
balance concerns of transparency and efficiency with the benefits that
can accrue from third-party settlements in a way that a rule banning
third-party settlements would not. Nor is a rule necessary to ensure
that unaccountable actors are not making important settlement
decisions. Rather, the Department can ensure accountability through
other means, such as subjecting settlements that include third-party
payments to approval requirements similar to those required for other
significant departmental actions. See May 2022 Memorandum at 3-4
(settlements involving a payment to a non-governmental third party must
obtain the approval of the Deputy Attorney General or the Associate
Attorney General, with certain exceptions).
To the extent that commenters suggest that Congress's decision not
to fund certain activities is evidence that it is improper for the
Department to agree to third-party payments that would fund such
activities, they have not provided any reason to draw an inference that
Congress's inaction evinces an intent to affirmatively disapprove such
settlements.
Some commenters identified particular past payments to third-party
organizations that they view as inappropriate, including settlements
involving allegations of lending discrimination that required the
defendant to make payments to third-party organizations to conduct
general public education and awareness projects and a 2006
environmental non-prosecution agreement requiring a third-party payment
in the form of ``$1 million to the Alumni Association for the United
States Coast Guard Academy, New London, Connecticut to fund an Endowed
Chair of Environmental Studies.'' The Department, while not conceding
to the commenters' characterizations of these settlements, is sensitive
to the need to give the public confidence that settlements providing
for payments to third parties are appropriately tailored. In that vein,
the May 2022 Memorandum provides that ``[n]o such settlement shall
require payments to non-governmental third parties solely for general
public educational or awareness projects; solely in the form of
contributions to generalized research, including at a college or
university; or in the form of unrestricted cash donations.''
5.2. Selection of Third-Party Recipients
Comments: One commenter would revise the May 2022 Memorandum to
allow DOJ and EPA to work with affected community members in two
respects: to devise appropriate SEPs and to suggest appropriate third-
party recipients. The commenter says that the May 2022 Memorandum can
be read to give defendants ``sole control'' in selecting projects
because it prohibits Department selection of a specific third party and
allows the defendant to propose projects. The commenter argues that
impacted communities may know how best to remedy harm done to them, and
they should not be required to work directly with the party causing the
harm. Such revisions, the comment
[[Page 97533]]
continues, would also help to prevent funding of organizations
improperly favored by defendants.
Several commenters argue that under the May 2022 Memorandum, DOJ
has too great a role in the selection of the recipients of third-party
payments, which will lead to the funding of ``political allies.'' Other
commenters similarly express concerns about ``steer[ing] settlement
funds to political allies,'' ``picking winners,'' or funneling funds to
``advocacy groups'' for ``favored programs.''
Response: The Department acknowledges the concerns with allowing
defendants sole authority to select third-party recipients, but in
order to avoid the appearance that the Department is directing the
inclusion of particular projects or third parties into a settlement,
declines to adopt a policy under which the Department would make such
selections. And the Department has addressed these concerns through
other means to help ensure appropriate project selection. For example,
under the May 2022 Memorandum, ``projects must have a strong connection
to the underlying violation,'' ``be consistent with the underlying
statute,'' and ``advance at least one of [the statute's] objectives.''
May 2022 Memorandum at 3. ``The project should also be designed to
reduce the detrimental effects of the underlying violation . . . to the
extent feasible and reduce the likelihood of similar violations in the
future.'' Id. Moreover, the Department and its client agencies ``may
specify the type of entity'' to be the beneficiary of any projects
carried out, id., and may ``disapprove of any third-party implementer
or beneficiary that the defendant proposes'' provided that the
disapproval is based upon objective criteria for assessing
qualifications and fitness outlined in the settlement agreement. Id.
The May 2022 Memorandum also expressly precludes certain payments that
would ordinarily be too broad to satisfy the criteria above:
Settlements may not ``require payments to non-governmental third
parties solely for general public educational or awareness projects;
solely in the form of contributions to generalized research . . . or in
the form of unrestricted cash donations.'' Id. Thus, these provisions
rule out Federal selection of any particular recipient but permit the
United States to disapprove a particular recipient based on objective
grounds laid out in the settlement agreement.
In addition, the Department can address the concerns about
defendants selecting projects in other ways. The May 2022 Memorandum
``provides internal Justice Department guidance only.'' May 2022
Memorandum at 2. Nothing prevents a community from engaging with the
defendant at any time, including regarding potential SEPs. Moreover,
once a defendant expresses interest in or proposes a third-party
payment as part of a judicial settlement, Department attorneys and
their client agencies may encourage the defendant to seek input from
affected communities on their proposal. Defendants may choose to
consult with the community to identify the community's needs and
concerns in advance of agreeing to a settlement, which would help
satisfy the Department's requirement that third-party payments have a
strong connection to the allegations and advance the underlying
statutory purpose. The Department will also add a provision to Justice
Manual section 1-17.000 that provides for public comment on certain
settlements that include these types of payments, see supra Part I.C,
so the public will be able to provide input on the particular remedies
identified in the settlement.
Finally, with respect to concerns that the Department would steer
settlement funds to political allies, pick winners, or funnel funds to
favored groups and programs, the requirements detailed above operate to
ensure, as stated in the May 2022 Memorandum, that third-party payments
function properly as ``critical tools for addressing violations of
federal law and remedying the harms those violations cause.'' May 2022
Memorandum at 2. The Department would not support the use of partisan
or viewpoint-based criteria in determining how to implement a third-
party payment, as those would not be ``objective criteria,'' id. at 3;
such criteria could give rise to an inference that a potential
recipient of a third-party payment was rejected based on the
Department's disfavoring of that particular partisan characteristic or
viewpoint.
5.3. Guidelines and Limitations: Adequacy To Constrain Settlement
Discretion
Comment: One commenter views the May 2022 Memorandum as ``window-
dressing that will reopen avenues of past abuse'' of the Department's
settlement discretion. In this commenter's view, the guidelines still
permit the Department to indicate the category of recipient of third-
party payments and to disapprove specific recipients based on criteria
the Department itself selects, and even the express prohibition of
certain types of third-party payments can be circumvented by allowing
some minimal funding of another type of activity or minimal statement
of conditions for cash donations. The commenter made several further
similar criticisms addressed below.
Response: The Department disagrees with the characterization that
the May 2022 Memorandum does not sufficiently constrain its settlement
discretion. On the contrary, the memorandum's provisions impose
significant and appropriate constraints on the use of this tool. The
guidelines and limitations operate together to ensure that settlement
agreements providing for payments to non-governmental third parties are
structured properly, and are consistent with applicable law. See May
2022 Memorandum at 2-3. The requirement that the Deputy Attorney
General or Associate Attorney General approve a settlement containing a
third-party payment also promotes consistency in application of the May
2022 Memorandum's terms. See id. at 3-4.
The commenter states that the prohibition on third-party payments
``solely'' for general public educational or awareness projects or
generalized research is not constraining because a settlement could
``allocate any amount of the settlement money to some other activity
that is not public education, awareness, or generalized research'' in
order to ``skirt this limitation.'' That misunderstands the relevant
limitation. The term ``solely'' is intended to recognize that a project
that otherwise complies with the guidelines set forth in the May 2022
Memorandum could also have an incidental effect of public education or
awareness or could have incidental benefits to generalized research.
The Department now clarifies that no portion of a settlement may be
directed at these prohibited purposes. For example, a settlement
addressing the lead-based-paint violations of a commercial renovator
may include a third-party payment in the form of a project to remediate
lead-based paint in a nearby school. The settlement may have the
incidental effect of educating school attendees, their families, and
the local community about the dangers of lead paint, but no portion of
the third-party project could be directly used for a public awareness
campaign.
The commenter further argues that the requirement of a ``strong
connection to the underlying violation or violations of federal law at
issue in the enforcement action,'' May 2022 Memorandum at 3, is not a
significant constraint. The commenter suggests that this provision
requires only a connection to the broad purposes of the underlying
statute,
[[Page 97534]]
which the commenter states is ``highly subjective.'' The Department
disagrees. The same provision of the May 2022 Memorandum states that
``[t]he project should also be designed to reduce the detrimental
effects of the violation or violations at issue to the extent feasible
and reduce the likelihood of similar violations in the future.'' May
2022 Memorandum at 3. Linking the project to the detrimental effects of
the violation (and preventing recurrence) requires a strong connection
to the harms associated with the underlying violation; for violations
that affect a particular geographic area, this requirement will also
mandate that the project be linked to that area.
The commenter describes the limitation that a project ``should also
be designed to reduce the detrimental effects of the underlying
violation or violations at issue to the extent feasible and reduce the
likelihood of similar violations in the future,'' id., as expressing an
``aspirational preference, not a requirement of agency settlements.''
This is incorrect. The May 2022 Memorandum requires that a properly
structured settlement must address this factor ``to the extent
feasible.'' May 2022 Memorandum at 3. This qualification recognizes
that, in some instances, it may be difficult to reduce the detrimental
effects of a past violation of law where those effects are widely
shared.
The commenter states that the provision limiting third-party
payments for activities for which an agency receives a specific
appropriation will not be effective, stating that ``[t]o sidestep these
guidelines, an outside group need only describe the project for which
it may receive settlement funds in a manner that differentiates the
project from an agency's appropriations or statutory obligations.''
This is also incorrect. The Department will review any proposals for
overlap between a project and appropriations that an agency receives
and will not rely solely on the description of the project by the
defendant or any other party.
The commenter also questions the benefits of the provisions of the
May 2022 Memorandum providing for review and approval by the Deputy
Attorney General or Associate Attorney General of settlements that
include payments to non-governmental third parties. The Department has
long required that certain significant settlements be approved by the
Deputy Attorney General or Associate Attorney General. 28 CFR 0.160,
0.161. These requirements ensure that certain types of case resolution
receive appropriate review and attention within the Department. The
provisions of the May 2022 Memorandum requiring such approval for
settlements including payments to non-governmental third parties are
consistent with these longstanding provisions and will similarly ensure
that the memorandum's provisions are applied consistently and
uniformly.
The commenter also appears to presume that DOJ controls the
development of third-party payment provisions. The Department will
adopt a provision in Justice Manual section 1-17.000 clarifying that in
negotiating a civil case resolution, the Department and its client
agencies may condition a settlement on the inclusion of a third-party
payment if the third-party payment constitutes relief that a court
would have authority to order under applicable law or in equity, but
that otherwise such provisions may only be included if the defendant
expresses interest in doing so. Outside the context of relief that a
court could order, then, these provisions will be included only where
the defendant expresses interest in doing so. Second, the defendant has
the lead on developing the proposed project, which must have a ``strong
connection'' to the violation of Federal law underlying the case.
In addition, in many civil cases, following the conclusion of
settlement negotiations, there is a public process for entry of a
proposed Federal consent decree. 15 U.S.C. 16(b)-(h); 28 CFR 50.7. Once
the United States files the proposed consent decree in Federal court,
there is typically a period in which the general public may comment,
including on any provisions addressing third-party payments. The
Federal court then considers any resulting comments and exercises its
own independent judgment in deciding whether to approve such a decree.
The Department will add a provision to Justice Manual section 1-17.000
requiring a public comment process for certain civil third-party
payments subject to the May 2022 Memorandum, so that the public will
have additional opportunities for input on such provisions. This
requirement will afford additional transparency for settlements
including such remedies.
5.4. Guidelines and Limitations: Prohibition on Post-Settlement Control
Comment: According to one commenter, the recipients of third-party
payments under the May 2022 Memorandum are not subject to reporting
obligations to ensure oversight and accountability because DOJ and its
client agencies cannot `` `retai[n] post-settlement control over the
disposition or management of the funds or any projects carried out
under any such settlement.' ''
Response: The prohibition against post-settlement control is
designed to address the requirements of the MRA. See supra Part II.B.1.
This does not mean, however, that DOJ will not oversee the settlement
and ensure the defendant's compliance with it. In fact, the fourth
guideline in the May 2022 Memorandum specifically allows for this:
Any such settlement must be executed before an admission or
finding of liability in favor of the United States, and the Justice
Department and its client agencies must not retain post-settlement
control over the disposition or management of the funds or any
projects carried out under any such settlement, except for ensuring
that the parties comply with the settlement.
May 2022 Memorandum at 3 (emphasis added) (citing Softwood Lumber, 30
Op. O.L.C. at 119).
In addition, Federal consent decrees and settlements in civil cases
contain standard provisions to ensure compliance, typically including
stipulated penalties for failure to complete required actions spelled
out in the agreement. Settlement agreements including a third-party
payment may also contain specific terms addressing implementation and
compliance. The Government can seek enforcement of these provisions to
ensure compliance with the terms of the settlement or consent decree.
Furthermore, following the conclusion of settlement negotiations, the
Department will require opportunity for public comment on certain
settlements that incorporate third-party payments in Justice Manual
section 1-17.000, which will provide a mechanism for additional
accountability on such terms. See supra Part I.C. (Such a public
process is often already required by law, 15 U.S.C. 16(b)-(h), 28 CFR
50.7.)
6. Comments Regarding SEPs
6.1. Characterization of SEPs in the May 2022 Memorandum
Comment: One commenter states that the May 2022 Memorandum and IFR
appear to ``fundamentally misunderstan[d] what SEPs are and how they
are designed to function'' by treating them as ``a remedy for the
underlying violation.'' The commenter goes on to provide his
understanding of what a SEP is by reference to EPA's 2015 SEP Policy
and in contrast to the remedy the commenter identifies as mitigation.
The commenter made several further similar criticisms addressed below.
Response: This comment discusses one potential type of third-party
[[Page 97535]]
payment used in the environmental context, ``Supplemental Environmental
Projects.'' EPA's 2015 SEP Policy specifically addresses such projects.
The Department's May 2022 Memorandum is distinct from EPA's 2015 SEP
Policy, and comments on EPA's policy are outside the scope of the
Department's request for comments, although the Department notes in
this respect that the EPA policy never characterizes, as the comment
suggests, SEPs as projects undertaken ``in exchange for a lower civil
penalty.'' Similarly, the May 2022 Memorandum does not authorize third-
party payments in any context to be made ``in exchange for a lower
civil penalty.''
The Department's memorandum does reference SEPs as one potential
category of third-party payment that can be an appropriate remedy in a
Department settlement. (Note that not all SEPs necessarily involve
third-party payments, however.) The Department will respond to this
comment to the extent that it addresses aspects of the May 2022
Memorandum, as distinct from EPA's 2015 SEP Policy.
This commenter asks why ``[t]he May [2022] Memo and the Interim
Final Rule do not explain why courts' equitable authority is
insufficient to remedy the harms from violations of federal
environmental law.'' At the outset, remedying harm is not the only
purpose of these types of third-party payments; they also operate to
``punish and deter future violations.'' May 2022 Memorandum at 1. As to
their function in remedying harm, the May 2022 Memorandum states that
some categories of harms, including in environmental cases, ``can be
difficult to redress directly in particular cases.'' Id. at 1-2. Where
a violation has attenuated or indirect effects (such as the example
where excess air pollution accelerated weathering and increased lead
exposure from deteriorating lead-based paint), it may not be feasible
to identify the scope of those affected with precision. In settling a
case, litigants are not subject to the same limitations that apply to
judicial remedies and can agree to remedies that may go beyond those
that a court would typically order. See, e.g., Frew v. Hawkins, 540
U.S. 431 (2004); Local No. 93, Int'l Ass'n of Firefighters, AFL-CIO v.
City of Cleveland, 478 U.S. 501 (1986); United States v. Charles George
Trucking, 34 F.3d 1081 (1st Cir. 1994); United States v. BP Prods. N.
Am., Inc., No. 2:23-CV-166, 2023 WL 5125148 (N.D. Ill. Aug. 9, 2023).
In Firefighters, the Supreme Court stated that when considering a
consent decree that would resolve a matter within its jurisdiction and
within the general scope of the case pleadings and would ``further the
objectives of the law upon which the complaint was based,'' ``a federal
court is not necessarily barred from entering [that] consent decree
merely because the decree provides broader relief than the court could
have awarded after a trial.'' 478 U.S. at 525.
The remedies that theoretically a court could order can require
more precise accounting of effects and injuries than may be practicable
in some instances. Further, to fully remedy the underlying harm caused
by the violation(s) might require more remedial action than a court may
order in a particular statutory scheme. The May 2022 Memorandum
requires that any project funded by a defendant ``be consistent with
the underlying statute being enforced and advance at least one of the
objectives of that statute,'' ensuring that the project will be
consistent with congressional intent in enacting the applicable
statutory framework. May 2022 Memorandum at 3.
Indeed, some of the other commenters provided examples of types of
harms that cannot be adequately addressed without remedies of this
type. See infra Part II.B.6.2. These harms can arise over long time
scales, in circumstances in which there are multiple sources of
exposure; in addition, it may be apparent that a particular area or
community has experienced unusual environmental harms, but difficult to
apportion causation from any individual source. For example, in 2015,
the United States, the State of Michigan, and AK Steel Corporation
agreed to a settlement to resolve claims for particulate matter
violations of the Clean Air Act at AK Steel's Dearborn, Michigan steel
plant, which is located in a mixed industrial area with multiple
sources of pollution affecting neighboring communities. The settlement
required AK Steel to pay a $1.35 million civil penalty and implement
injunctive relief to address the violations. The settlement also
required AK Steel to perform a SEP, consisting of the purchase and
installation of dynamic air filters in the air conditioning systems at
the Salina elementary and middle schools. The projects, which cost
$337,000, reduced students' exposure to fine particulates--from the
steel plant but commingled with pollution from other sources in the
airshed--while in school. Examples like this illustrate why the
Department concluded that ``[w]hen used appropriately, these agreements
allow the government to more fully compensate victims, remedy harm, and
punish and deter future violations.'' May 2022 Memorandum at 1.
6.2. SEPs as Public Policy
Comments: A number of commenters express support for the IFR's
restoration of the use of third-party payments in the form of SEPs in
judicial environmental enforcement settlements. In the view of these
commenters, SEPs serve to provide fuller mitigation for harm caused by
violations and are a tailored approach to address challenges for
communities who routinely face noncompliance from industries. As one
commenter states, ``SEPs represent a unique opportunity in the
environmental enforcement context to secure some form of restitution
for communities harmed by violations given the difficulty of
identifying and quantifying full individual harm from a violating
pollution source to support adequate direct mitigation. It is often
difficult, if not impossible, to fully trace all human ailments or
natural problems to a particular pollution source, especially over long
periods of time.'' Absent the availability of this settlement tool,
another commenter notes, ``enforcement actions are less able to reduce
or offset the detrimental effects that the unlawful behavior has
already had on affected communities.'' Some commenters state that the
Department's changes will support State efforts to address equity,
public health, and welfare issues in communities adversely affected by
environmental violations and at no additional cost to the taxpayer, and
note that 37 States have SEP policies allowing such projects in
settlements.
The Department received multiple comments discussing the benefits
of the changes in policy reflected in the Department's May 2022
Memorandum for communities and others affected by violations of law.
Commenters describe how third-party payments in the form of SEPs have
been used to provide more complete relief for communities affected by
environmental pollution, particularly overburdened communities. Some of
these comments specifically note that environmental violations can
cause harms that cannot be adequately addressed without this type of
remedy.
Some commenters, however, view third-party payments, including
SEPs, as ``corrupt'' tools inadequate to remedy public rights or deter
violators, arguing that SEPs and third-party payments undercut
deterrence, do not prevent pollution in the case of environmental
enforcement, and incentivize ``corrupt'' actions by officials to reward
favored entities with payments. Similarly, another commenter questions
the
[[Page 97536]]
deterrent effect of settlement agreements containing third-party
payments in the form of SEPs and characterizes SEPs as ``ad hoc'' and
as presenting ``likely inefficient ways to combat pollution.''
Response: These comments discuss one particular type of settlement
instrument, SEPs. As noted in DOJ's response to topic 6.1 above, see
supra Part II.B.6.1, comments on the terms of the 2015 SEP Policy are
outside the scope of the Department's request for public comment.
That said, the Department agrees with commenters that SEPs can
provide benefits. Federal environmental statutes seek to protect public
health writ large but, as applied in the context of a violating
facility, it is often the people who live near and downwind of that
facility who bear more of the harm. These harms can arise over long
time scales, in circumstances in which there are multiple sources of
exposure; in addition, it may be apparent that a particular area or
community has experienced unusual environmental harms, but difficult to
show causation from any individual source, as discussed. Third-party
payments may be crafted to ensure that the case resolution accounts for
the reality on the ground.
The Department disagrees that SEPs decrease the deterrent effect of
Federal law and that they are inefficient ways to combat pollution. The
commenter does not provide data to support these statements. In fact,
the ability to include third-party payments in case resolution--in
addition to a civil penalty and injunctive relief--increases the
deterrent value of the Department's enforcement actions by expediting
and facilitating settlement, enabling the Department to prosecute more
violators and ensuring that violators are held accountable for all
harms, including those harms that may be intangible or difficult to
quantify, or where victims are no longer available to pursue individual
claims. Certain third-party payments may also serve to deter and
prevent violations, such as providing air-monitoring equipment to a
surrounding community in a Clean Air Act enforcement case.
In addition, the Department does not depend solely upon third-party
payments to accomplish its litigation objectives. Resolving violations
of environmental laws by settlement is a complicated task, involving
the weighing of a variety of factors, which the Department undertakes
in accordance with applicable law and Departmental policy. Key
considerations for the Department include compensating victims,
redressing harms, and punishing and deterring unlawful conduct without
the costs and delay of trial. The Department assesses that third-party
payments can support these goals, and the Department disagrees with
some commenters' suggestion that limiting the Department's enforcement
tools to civil penalties after judgment will maximize deterrence, much
less optimally serve the many goals of the Department's enforcement
activities.
Whether a third-party payment is appropriate as part of case
resolution is only one consideration for the Department when
negotiating a settlement but including such a payment may contribute to
a resolution. Such settlement agreements can be significantly more
efficient than litigating every case to judgment because they save
agencies and taxpayers significant time and expense. Those savings
allow the Department to pursue more cases that will deter more
violators from more future unlawful conduct. With respect to the
commenters' claims of favoritism, see the discussion in topics 5.1 and
5.2 above of such claims and of constraints on selection of third
parties and projects. See supra Part II.B.5.1 and II.B.5.2.
Finally, the Department notes that courts have entered Federal
consent decrees containing SEPs for decades. As one court stated when
approving a settlement with U.S. Steel involving SEPs at a value of
$1.9 million and a $2.2 million civil penalty:
Could the agreement be different? Of course. Could it demand
more from U.S. Steel by way of a fine, for example? Again, of course
it could. But making such a demand may have caused U.S. Steel to
walk away from the bargaining table and set the parties on a course
of protracted litigation. This is to say that there is no single
fair and reasonable resolution, but rather a range of them. And, in
my judgment, the Consent Decree proposed in this case is plainly
within that range.
United States v. U.S. Steel Corp., No. 12-CV-304-PPS-APR, 2017 WL
1190953, at *3 (N.D. Ind. Mar. 30, 2017).
7. Implementation of the May 2022 Memorandum
7.1. Publication of Future Memoranda
Comment: One commenter requests that DOJ make publicly available
all future memoranda addressing third-party payments in settlements
because they have been ``highly controversial and problematic.''
Response: DOJ recognizes the importance of and greatly values
transparency and public participation in enforcement matters where it
is possible given the sensitivity of bringing specific litigation. The
Department published the May 2022 Memorandum (see response to topic 4
above, supra Part II.B.4) and voluntarily sought public comment on it.
The requirements of the May 2022 Memorandum are publicly available in
Justice Manual section 1-17.000, as will be the Department's revisions
to that section. The Department will provide in the new Justice Manual
provision for a public process on certain civil settlements that
incorporate third-party payments. See supra Part I.C. The Department is
aware of the public interest in this topic and will seek to make future
memoranda in this area public to the extent it is feasible to do so.
7.2. Including Affected Communities
Comments: Multiple commenters address ways in which impacted
communities and individuals should participate more fully in the
settlement process and be better supported in doing so. Several
commenters asked DOJ and EPA specifically to affirm the continued
validity of EPA's 2015 SEP Policy and to update EPA's 2003 community
engagement guidance with ``meaningful'' engagement practices or made
similar suggestions on ways to increase engagement. See U.S.
Environmental Protection Agency, Interim Guidance for Community
Involvement in Supplemental Environmental Projects (2003). Several
commenters also encourage continued implementation of the training and
outreach practices in a recently issued Department memorandum.
Response: Commenters suggest a variety of mechanisms to increase
the role of communities in selecting and implementing SEPs. DOJ
recognizes the importance of remedying the harms to the communities
most directly impacted by violations of the Federal environmental laws.
As noted above, comments that relate to the details of the 2015 SEP
Policy or other EPA policies are outside the scope of this request for
public comment.
The Department recently addressed the need for meaningful
engagement with at least a subset of impacted communities in a
memorandum entitled Comprehensive Environmental Justice Enforcement
Strategy. See Memorandum for Heads of Department Components, United
States Attorneys from the Associate Attorney General, Comprehensive
Environmental Justice Enforcement Strategy (May 5, 2022)
(``Comprehensive Environmental Justice Enforcement Strategy
Memorandum''), <a href="https://www.justice.gov/asg/file/1217741-0/dl?inline">https://www.justice.gov/asg/file/1217741-0/dl?inline</a>
(last visited Oct. 31, 2024). Pursuant to the strategy, all
[[Page 97537]]
litigating components at DOJ shall consider appropriate outreach
efforts to identify areas of environmental justice concern in relevant
communities. Id. at 6-7. As the commenter suggested, designated
environmental justice coordinators in each U.S. Attorney's Office have
been trained to serve as point people for community outreach. Id. at 3
and 6. And cases initiated under the strategy will include the
development of case-specific community outreach plans to obtain input
on community concerns or potential case remedies. Id. at 6-7.
Regarding comments addressing consideration of community input in
the development of SEPs in enforcement actions, comments on EPA's
policy are outside the scope of the Department's request for comments.
But DOJ notes that in December 2023 EPA began piloting the use of an
email inbox to receive ideas from the public concerning potential
projects for settlement negotiations. Further information is available
at U.S. Environmental Protection Agency, Supplemental Environmental
Projects (SEPs), <a href="https://www.epa.gov/enforcement/supplemental-environmental-projects-seps#sepidea">https://www.epa.gov/enforcement/supplemental-environmental-projects-seps#sepidea</a> (``USEPA SEPs website'') (last
visited Oct. 31, 2024).
The Department appreciates commenters' suggestions for potential
assistance to impacted communities from the DOJ Environmental Crime
Victim Assistance program, and for funding streams from DOJ and EPA to
compensate community-based organizations for their expertise. However,
these comments are outside the scope of the IFR.
7.3. Working With Tribal Governments
Comment: One commenter expresses general support for SEPs, urges
DOJ and EPA to address the aspects of SEPs that are relevant to
Federally recognized Indian Tribes (``Tribes'') in Indian country, and
offers recommendations to the Department based on previous experiences
with SEPs. The commenter suggests working with Tribes early to avoid
SEPs that are ``rigid'' or ``unworkable,'' and to achieve environmental
justice.
Response: The Department has a policy on Tribal Consultation (Nov.
30, 2022), which can be found at <a href="https://www.justice.gov/d9/2022-12/doj-memorandum-tribal-consultation.pdf">https://www.justice.gov/d9/2022-12/doj-memorandum-tribal-consultation.pdf</a> (last visited Oct. 31, 2024).
Consistent with this policy, DOJ is committed to engaging in ongoing
communication with Tribes. While settlement negotiations fall outside
of our formal consultation policy, DOJ engages in communication with
Tribes beyond consultation such as listening sessions, meetings with
individual Tribes, and informal discussions with Tribal leaders.
The Department is a co-plaintiff with Tribes in a number of
environmental enforcement matters. In such cases, the co-plaintiff
Tribe is an active participant in settlement negotiations and able to
discuss SEPs as an element of relief for the claims the Tribe advances.
As noted in DOJ's previous response, see supra Part II.B.7.2, the
Department recently addressed the need for meaningful engagement with
impacted communities in its Comprehensive Environmental Justice
Enforcement Strategy Memorandum. Consistent with the strategy, all
parts of the Department shall consider appropriate outreach efforts to
identify areas of environmental justice concern, including each U.S.
Attorney's Office in communities within its district. Designated
environmental justice coordinators in each U.S. Attorney's Office have
been trained to serve as point people for community outreach. And cases
initiated under the strategy will include the development of case-
specific community outreach plan. In addition, the strategy requires
certain Department components to consider how to: ``(1) facilitate
consideration of these unique [Tribal environmental justice] issues in
cases brought pursuant to this Strategy; (2) identify opportunities to
work with the governments of Federally recognized Tribes, including
consortia of such Tribes; (3) work with other Federal agencies to
coordinate investigative resources and enforcement authorities; and (4)
recommend ways to address and incorporate Tribal concerns into the
Department's enforcement work.'' Comprehensive Environmental Justice
Enforcement Strategy Memorandum at 3.
The Department appreciates the commenter's suggestions for Tribal
set-asides, whether in the context of mitigation or a third-party
payment, depending on the particular case, and greater transparency
regarding the impact of emissions on tribal communities. These comments
are outside the scope of the IFR, and the Department does not address
them further.
7.4. Effectiveness of the 2015 SEP Policy
Comment: One commenter asks DOJ and EPA to affirm that EPA's 2015
SEP Policy remains in effect or to readopt it if does not. The
commenter indicates that even if it was never withdrawn or replaced,
having administrative procedural clarity would be beneficial.
Response: Where DOJ is working with EPA as a client agency, the
Department certainly discusses case resolution with it by reference to
relevant EPA policy documents. Whether EPA continues to apply a
particular policy, including its 2015 SEP Policy, is within that
agency's purview and beyond the scope of this action. DOJ understands
the 2015 policy to be in effect as reflected in several responses to
comments and points commenters to EPA's website, which itself cites the
2015 SEP Policy. See USEPA SEPs website.
IV. Regulatory Certifications
A. Administrative Procedure Act
This rule relates to a matter of agency management or personnel and
is a rule of agency organization, procedure, or practice. As such, this
rule is exempt from the usual requirements of prior notice and comment
and a 30-day delay in effective date. See 5 U.S.C. 553(a)(2), (b), and
(d). The rule is effective upon signature. In its discretion, the
Department sought post-promulgation public comment on the IFR and is
responding to public comment.
B. Regulatory Flexibility Act
An analysis under the Regulatory Flexibility Act was not required
for this rule because the Department was not required to publish a
general notice of proposed rulemaking for this matter. See 5 U.S.C.
601(2), 604(a).
C. Executive Orders 12866, 13563, and 14094--Regulatory Review
This rule has been drafted and reviewed in accordance with section
1(b) of Executive Order 12866, ``Regulatory Planning and Review,''
section 1(b) of Executive Order 13563, ``Improving Regulation and
Regulatory Review,'' and Executive Order 14094, ``Modernizing
Regulatory Review.''
This rule is ``limited to agency organization, management, or
personnel matters'' and thus is not a ``rule'' for purposes of review
by the Office of Management and Budget under section 3(d)(3) of
Executive Order 12866. Accordingly, this rule has not been reviewed by
the Office of Management and Budget.
D. Executive Order 12988--Civil Justice Reform
This regulation meets the applicable standards set forth in
sections 3(a) and 3(b)(2) of Executive Order 12988, ``Civil Justice
Reform.''
[[Page 97538]]
E. Executive Order 13132--Federalism
This rule will not have substantial direct effects on the States,
on the relationship between the National Government and the States, or
on the distribution of power and responsibilities among the various
levels of government. It is a rule of internal agency practice and
procedure. Therefore, in accordance with Executive Order 13132,
``Federalism,'' the Department has determined that this rule does not
have sufficient federalism implications to warrant the preparation of a
federalism summary impact statement.
F. Unfunded Mandates Reform Act of 1995
This rule will not result in the expenditure by State, local, and
Tribal governments, in the aggregate, or by the private sector, of $100
million or more (adjusted annually for inflation) in any one year, and
it will not significantly or uniquely affect small governments.
Therefore, no actions are necessary under the provisions of the
Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1501 et seq.
G. Congressional Review Act
This rule is not a major rule as defined by the Congressional
Review Act, 5 U.S.C. 804. This action pertains to agency management,
personnel, and organization and does not substantially affect the
rights or obligations of non-agency parties. Accordingly, it is not a
``rule'' as that term is used in the Congressional Review Act, 5 U.S.C.
804(3)(B), (C), and the reporting requirements of 5 U.S.C. 801 do not
apply.
H. Paperwork Reduction Act of 1995
This final rule does not impose any new reporting or recordkeeping
requirements under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-
3521.
List of Subjects in 28 CFR Part 50
Administrative practice and procedure.
Accordingly, for the reasons set forth in the preamble, the interim
final rule amending 28 CFR part 50, which published at 87 FR 27936 on
May 10, 2022, is adopted as final without change.
Dated: December 3, 2024.
Merrick B. Garland,
Attorney General.
[FR Doc. 2024-28866 Filed 12-6-24; 8:45 am]
BILLING CODE 4410-BB-P
</pre></body>
</html>Indexed from Federal Register on December 9, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.