Last week, the Federal Circuit issued its opinion in City of Wilmington v. United States, a Clean Water Act case that attracted an amicus brief. In this case, the Federal Circuit reviewed a determination by the Court of Federal Claims that the City of Wilmington was not entitled to recover “the payment of reasonable service charges” assessed for “the control and abatement of water pollution” and interest pursuant to 33 U.S.C. § 1323. This is our opinion summary.

Judge Prost first discussed the relevant law by noting that the particular “provision of the [Clean Water Act] at issue” was § 1323, known as the “Federal Facilities Section,” which “requires federal facilities to comply with . . . requirements related to the abatement of water pollution.” Judge Prost quoted the relevant text of § 1323:

Each department, agency, or instrumentality . . . of the Federal Government (1) having jurisdiction over any property or facility, or (2) engaged in any activity resulting, or which may result, in the discharge or runoff of pollutants, . . . shall be subject to, and comply with, all . . . requirements . . . respecting the control and abatement of water pollution in the same manner . . . as any nongovernmental entity including the payment of reasonable service charges.

Judge Prost then emphasized the text of § 1323(a) after it had been amended in 2011:

For the purposes of this chapter, reasonable service charges described in subsection (a) include any reasonable nondiscriminatory fee, charge, or assessment that is—

(A) based on some fair approximation of the proportionate contribution of the property or facility to stormwater pollution (in terms of quantities of pollutants, or volume or rate of stormwater discharge or runoff from the property or facility); and

(B) used to pay or reimburse the costs associated with any stormwater management program . . . .

Turning to the City of Wilmington’s method of assessing stormwater runoff fees, Judge Prost discussed how “Wilmington charges all owners of property within its corporate boundaries . . . a monthly stormwater management fee based on an estimation of each property’s contribution to stormwater runoff.” And she highlighted how “the city assesses each parcel’s monthly stormwater fee based on a formula comprised of four variables.” According to Judge Prost, the primary variable at issue in this case is the “runoff coefficient.”

With respect to this variable, she explained it “is a multiplier based on estimates of a property’s imperviousness” and “ranges from 0 to 1, with a higher coefficient indicating greater imperviousness.” She explained how, to “determine a property’s runoff coefficient, Wilmington starts with County tax records,” which “assign each parcel a land use code based on the occupancy permit issued to the parcel.” She indicated “Wilmington uses these land use codes to assign each property to one of 11 ‘stormwater classes.'” Furthermore, she described, once “the various properties were categorized into a particular stormwater class, each stormwater class needed a runoff coefficient such that every property in each class would be assigned the same coefficient.”

Judge Prost then provided more facts regarding the background of the case:

The [The U.S. Army Corps of Engineers (‘USACE’)] owns five properties in Wilmington (the ‘Properties’) . . . The Properties serve as a dredge material disposal site in support of the USACE’s work dredging waterways near Wilmington. While stormwater runs off the Properties into the nearby river, none of the Properties discharges water directly into the city’s stormwater system. . . . Only one parcel contains paved surface area.

The city assigned the Properties to the ‘Vacant’ stormwater class. . . The Vacant class has an assigned runoff coefficient of 0.30, meaning that approximately 30 percent of all stormwater will run off a given parcel. . . . Based on the 0.30 runoff coefficient, . . . the city assessed the USACE $2,577,686.82 in fees for the Properties between January 4, 2011, and April 16, 2021. The USACE has never paid Wilmington the assessed service charges, nor has the USACE pursued the city’s appeal process.

In December 2016, Wilmington sued the United States in the Court of Federal Claims under the [Clean Water Act] . . . seeking to recover the unpaid stormwater management fees. . . . The case proceeded to trial in April 2021. . . . Following the close of Wilmington’s case-in-chief, the court suspended trial, and the government moved for judgment on partial findings. . . . The trial court granted the government’s motion, holding that the Federal Facilities Section waives the United States’ sovereign immunity only for “reasonable service charges” and that Wilmington failed to meet that standard by failing to prove its charges are a fair approximation of the Properties’ proportionate contribution to stormwater pollution.

Wilmington appeals.

On behalf of the court, Judge Prost proceeded to analyze the relevant law and how it applies in this case. She noted how the definition of “reasonable service charges” in § 1323(a) “establishes a low standard: for a service charge to be ‘reasonable,’ it need only represent ‘some fair approximation’ of a property’s proportionate contribution to stormwater pollution.” She concluded, moreover, that the phrase “‘some fair approximation’ refers to any one of an unspecified number of possible fair approximations.” After indicating that this approximation is based on an “objective standard,” she applied this standard, finding that “Wilmington’s approach, as applied to the Properties, does not meet the statutory definition of ‘reasonable service charges.'”

The panel found that the “city failed to show that the County tax assessment records ‘properly categorize the Properties for stormwater purposes.'” And, the panel concluded, “the trial court did not clearly err in finding that the city failed to show the runoff coefficient of 0.30 . . . provides a fair approximation of the Properties’ rate of runoff.” She explains how the panel concluded that “Wilmington has not shown ‘the degree of similarity within an occupancy code’ or shown that the code matches the reality of the Properties’ physical characteristics.”

Judge Prost emphasized, however, that the panel’s “holding is limited to the facts and circumstances in this case.” She explained that there “is nothing necessarily problematic about a stormwater fee methodology that uses a multifactor formula, or a formula that includes impervious area or runoff coefficients as variables.”

Judge Prost rejected several of the City of Wilmington’s other arguments. She, for example, rejected Wilmington’s argument that “the United States was required to exhaust the city’s appeal process,” noting that “Wilmington’s appeal process is permissive rather than mandatory and solely forward looking.”

Judge Prost also rejected the city’s argument that “the trial court was required to consider a 2008 EPA publication that described approvingly Wilmington’s stormwater management system as “fair and equitable” as a “binding factual admission.” She noted how “the 2008 publication predates the 2011 amendments’ definition of ‘reasonable service charges’ and, in any event, does not satisfy the city’s burden.”

In sum, in this case the Federal Circuit found that, because “Wilmington’s stormwater management fees are not ‘reasonable service charges’ . . ., the [Clean Water Act] does not waive the USACE’s sovereign immunity.” As a result of this analysis, the court affirmed the decision of the Court of Federal Claims that the City of Wilmington was not entitled to recover “the payment of reasonable service charges” assessed for “the control and abatement of water pollution” and interest pursuant to § 1323.