Nat’l Ski Areas Ass’n, Inc. v. U. S. Forest Service

Nat’l Ski Areas Ass’n, Inc.  v. U. S. Forest Serv., 2012 WL 6618263 (D. Colo. Dec. 19, 2012) (holding the United States Forest Service’s 2012 Directive is vacated because it violated the Administrative Procedure Act, the Regulatory Flexibility Act, and the National Forest Management Act; and plaintiffs are entitled to remedial and injunctive relief because of these violations).

National Ski Areas Association, Inc. (“Association”) sought the issuance of a nationwide injunction from the United States District Court for the District of  Colorado (“court”) to set aside the March 6, 2012, Directive (the “2012 Directive”) issued by the United States Forest Service (“USFS”). The 2012 Directive changed the nature and treatment of ski area water rights by requiring permit holders to transfer their water rights to the United States if permit reauthorization did not occur.  Association claimed the 2012 Directive was in excess of the Service’s statutory authority, compelled uncompensated taking of private property, violated of the Regulatory Flexibility Act (“RFA”), and that USFS did not provide public notice or opportunity to comment as required by the Administrative Procedure Act (“APA”) and the National Forest Management Act (“NFMA”)

USFS first argued the harmless error doctrine prevented Association from having standing.  The Service contended Association did not suffer injury because the failure to follow the APA requirements amounted only to a harmless error, and the input opportunities presented went beyond the APA requirements.  Additionally, the Service claimed Association could not demonstrate that its procedural injury was not redressable. The court, however, did not find these arguments compelling.  The court found the intent of the harmless error doctrine was limited to insignificant errors.  Therefore, complex issues or instances of disregard for important rulemaking procedures were outside the doctrine’s scope.  Also, the court concluded that the normal redressability requirement does not apply in cases involving enforcement of procedural rights under the APA and NFMA.  In short, the court found that Association satisfied the standing requirements in the case.

The court next examined Association’s claim under the APA.  USFS argued that the rule was merely an interpretive rule because of its nature and because it was published in its Manual.  The court concluded the 2012 Directive was a legislative rule as it carried the force of the law and imposed new duties and obligations on Association.  It further explained that publishing a rule in a manual does not make it an interpretive rule.  Because the 2012 Directive was determined to be a legislative rule, the court explained that the APA required public notice and opportunity for comments from interested parties.  The record demonstrated that the Service failed to follow this procedure when promulgating the rule.  Therefore, the court found Association succeeded on its APA claim.  Then the court examined the RFA claim. Under the RFA, agencies must examine the economic impact of a rule upon small businesses and provide an opportunity for such entities to participate in the rule-making process.  The court found that several members of Association fit the definition of a small business—entities that have less than $7 million in annual receipts averaged over three years.  The Service admitted that it did not assess the economic impacts on these entities.  Accordingly, the court found the USFS did not comply with the RFA.

Next, the court considered Association’s final claim under NFMA.  NFMA requires the Service to establish procedures, which provide the public adequate notice and opportunity to comment upon the formulation of rules and standards applicable to Service programs.  USFS argued the 2012 Directive was exempt from the mandated procedures because USFS regulations exempt materials issued in the Forest Service Handbook from NFMA’s notice-and-comment requirements. The court rejected this argument stating that an agency cannot use its own regulations to avoid a statutorily mandated process such as notice and comment procedures.  Therefore, the court found that the 2012 Directive violated NFMA.

The court then examined the question of what form of relief Association was entitled to.  The court implemented a two-part test to determine whether it should vacate the 2012 Directive, which examined i) the seriousness of the Service’s deficiencies and ii) the potential for disruptive consequences.  The court had little difficulty concluding the USFS’s APA violation rose to the level of serious deficiencies.  Similarly, the court found that the disruptive consequences of vacating the 2012 Directive would be minimal as the Service admitted it had operated for years without a national directive regarding ski area water rights.  Consequently, the court granted vacatur of the 2012 Directive.

Finally, Association sought to enjoin enforcement of the 2011 and 2012 Directives that were included in existing Ski Area Permits.  In determining whether to grant injunctive relief, the court applied a four factor test considering (i) the injury suffered, (ii) the remedies available at law, (iii) the balance of hardships, and (iv) the public interest involved.  The court found that all four factors favored Association.  The court found there was an irreparable injury with an inadequate remedy at law; the balance of hardships to both parties favored an injunction; and public policy favored holding agencies responsible for not following procedures and the injuries that resulted from such actions.  Accordingly, the court held that all of the factors support granting injunctive relief.  In sum, the court vacated the 2012 Directive because it violated the APA, RFA, and NFMA and found that Association was entitled to the narrow injunctive relief requested.