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COA rejects developer’s private pond argument

February 21, 2019

An Evansville developer’s argument that the Indiana Department of Environmental Management does not have jurisdiction over private ponds did not hold water with the Indiana Court of Appeals.

Eagle Enclave Development, LLC, entered into an agreed order with IDEM in January 2015 after the state agency found the developer violated Indiana law by failing to minimize sedimentation running to off-site areas. In particular, IDEM required Eagle to remove any sediment from the site that had flowed into a nearby private pond.

However, Eagle sought to modify the order on the basis that two studies indicated that only an inconsequential amount of sediment had gone into the pond. IDEM denied Eagle’s request, noting state law does not set a set a threshold amount of sediment runoff before a violation occurs, but instead holds that any sediment discharge from a site is a violation.

Eagle then filed a petition for review with the Office of Environmental Adjudication. The OEA determined that Eagle’s request to modify the agreed order should be considered the developer’s first proposal.

IDEM considered Eagle’s request for modification as its first proposed plan but issued a rejection because the plan did not described how Eagle would remove the sediment from the pond. After Eagle proposed a second plan, IDEM filed a petition for civil enforcement of the agreed order.

Eagle responded by filing three counterclaims against IDEM. In its third counterclaim, the developer argued the agency did not have jurisdiction over the pond because it is privately owned.

IDEM filed a motion to dismiss Eagle’s counterclaim under Indiana Trial Rule 12(B)(6), which the Vanderburgh Superior Court denied. Before the Court of Appeals, IDEM contended the trial court erred when it did not dismiss Eagle’s third counterclaim because the issue of jurisdiction had been waived when the developer failed to raise it at the OEA. In essence, IDEM asserted Eagle had failed to exhaust its administrative remedies.

But Eagle argued it did not need to exhaust its administrative remedies because its counterclaim raised the question of IDEM’s jurisdiction. Pointing to Indiana Code sections 13-11-2-265(a) and (b)(2), Eagle contended the particular water at issue was not subject to IDEM’s jurisdiction because the pond is privately owned.

The appellate court ultimately disagreed in its Thursday decision in Commissioner of the Indiana Department of Environmental Management v. Eagle Enclave Development, LLC, 18A-MI-1379. It reversed the denial of IDEM’s motion to dismiss and remanded with instructions for the trial court to dismiss Eagle’s three counterclaims.

In regard to the pond, the Court of Appeals highlighted Indiana Department of Environmental Management v. Twin Eagle LLC, 798 N.E.2d, 839, 842 (Ind. 2003), and Outboard Boating Club of Evansville, Inc., v. Indiana State Department of Health, 952 N.E. 2d 340 (Ind. Ct. App. 2011). In both cases, the courts held the parties are not required to exhaust the administrative remedies when the question of an agency’s jurisdiction is a “pure question of law.” However, when the question of jurisdiction is a question of fact, then the administrative process must be completed before seeking judicial review.

Finding Eagle’s question of IDEM’s jurisdiction is a fact-sensitive issue, the Court of Appeals ruled the question should have been resolved first by the administrative agency.

“Accordingly, Eagle was required to raise the question of IDEM’s jurisdiction to the administrative agency before it could raise it to the trial court,” Judge Edward Najam wrote for the court. “Because Eagle did not raise the factual issue of IDEM’s jurisdiction to the administrative agency first, Eagle has not preserved for the trial court’s review Eagle’s claim that IDEM lacks jurisdiction over the (private) pond.” 

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