‘Sue-and-Settle’ Tactics That Circumvent Law Set a Bad Precedent

The Biden administration’s resistance to holding the lease sales for oil in the Gulf of Mexico required of it by the Inflation Reduction Act is the latest example of its disregard for regular constitutional order. And its method could set a dangerous precedent for the future of the rule of law.

A tactic dubbed “sue and settle” is increasingly allowing powerful interest groups to use the courts system as a pawn in developing environmental law without Congress. It works as follows: An interest group sues a friendly administrative agency, claiming the agency has violated the law. Rather than seek dismissal of a likely meritless claim, the agency settles, because the settlement agreement is a way to avoid a court setting limits on doing what the plaintiffs request, to exceed its authority, and to impose new rules—without going through the normal order of deliberative processes.

Often in these settlements, the agency agrees to do something it likely doesn’t have authority to do or may be prohibited from doing under existing legislation. And it makes these policy commitments outside the transparent process of notice and comment rulemaking demanded by the Administrative Procedure Act.

If this sounds like lawless collusion, that’s because it is. But unless the courts and Congress intervene, agencies will continue to use this sly maneuver to expand their authority and work around the constitutional limits imposed by our system of separation of powers.

This is what happened in August when the Biden administration and its Bureau of Ocean Energy Management entered into a settlement agreement in Sierra Club v. National Marine Fisheries Service. There, environmental groups sued claiming that the administration was required to take action restricting leases to protect whales alleged to be within the areas of proposed lease sales.

Rather than defend its statutory mandate to promote energy development and challenge the dubious claims of species harm in court, the administration entered into a stipulation to settle that case. This stipulation aligned with the policy preferences of the administration.

Never mind that the conditions to limit and delay lease sales, while also imposing burdensome conditions on vessel speeds and time-of-day operational restrictions, weren’t the kind that could be obtained by agency rulemaking.

By suing, the environmentalists simply opened an alternative, albeit illegal, channel for the administration to impose new rules. Both plaintiff and defendant could get what they want but otherwise couldn’t under normal procedures and legislative constraints imposed by law.

The settlement flies in the face of the National Marine Fisheries Service’s and BOEM’s underlying statutes, from which they exclusively gain their authority, and the 45-year history of being required to prepare regular five-year leasing programs.

Most notably, it defies the tax and climate law mandates that BOEM make new leasing options available in the Gulf as a condition of legislative compromise between competing concerns over energy development and environmental protection.

The APA provides tools to challenge such lawless tactics. Under the APA, courts are instructed to “hold unlawful and set aside agency action, findings, and conclusions” when that agency acts in a manner that is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” or when the agency action is “in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.”

Each of these unlawful behaviors present themselves when an agency uses side agreements to exceed its authority. In this case, BOEM is also directly violating mandates it received from Congress.

Even if the administration’s agencies had authority to impose these substantive limits on lease sales and leasing operations, they would need to proceed by rulemaking with an opportunity for public notice and comment to validly achieve these ends. The APA calls for setting aside agency action when it is “without observance of procedure required by law.”

While the courts haven’t yet adequately developed precedent explaining the unlawfulness of sue-and-settle tactics, this situation may be an ideal vehicle for proclaiming these maneuvers unconstitutional.

Chevron, Shell Offshore, the American Petroleum Institute, and the State of Louisiana filed a lawsuit on Aug. 24 challenging the new restrictions, moved to preliminarily enjoin the new restrictions, and won a preliminary injunction order from a federal district court setting aside the administration’s novel settlement-induced restrictions and ordering lease sales to go forward because the plaintiffs showed a likelihood of success on the merits of their claims.

BOEM agreed to comply with the preliminary injunction, yet it appealed to the US Court of Appeals for the Fifth Circuit only seeking a stay of that injunction to give it time to comply. But four environmental group intervenors appealed, challenging the actual merits of the preliminary injunction.

After it issued a stay to hear the appeals, the Fifth Circuit on Nov. 14 held the intervenor-appellants lacked standing, reinstated the preliminary injunction, and once again ordered that the lease sale be set to proceed within 37 days (granting the time BOEM had requested).

With this prolonged litigation to get the administration to do what the tax and climate law demands, an important avenue for domestic energy production has been delayed as the geopolitical world grows increasingly unstable, threatening energy security.

When it reaches the merits, the district court—and eventually the Fifth Circuit, and perhaps even the US Supreme Court on inevitable appeals—will have a chance to stop collusive settlements between presidential administrations—of any party—and their allies who sue solely to facilitate regulation by settlement.

Invalidating the sweetheart agreement between the Biden administration and the Sierra Club reopens the channels for leasing that Congress has proclaimed necessary and good, and it checks rogue agencies that seek to circumvent the Constitution by increasing their power through unlawful means.

The case is Louisiana v. Haaland, 5th Cir., No. 23-30666, 11/14/23.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Donald J. Kochan is professor of law and executive director of the Law and Economics Center at George Mason University Antonin Scalia Law School.

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