Todd Fracassi, Pepper Hamilton
Mitchell Guc, Pepper Hamilton
Randy Brogdon, Troutman Sanders
Patrick Fanning, Troutman Sanders
The U.S. Department of Justice (DOJ) is quietly taking steps to provide financial relief during the COVID-19 pandemic. In an April 14 model letter, DOJ offered to temporarily suspend its collection of stipulated penalty payments owed under some consent decrees through at least May 31, 2020. Notably, the letter also stated that DOJ will advise as to whether the suspension will be extended beyond May 31, 2020 and that if a party simply does nothing in response to the notice, DOJ will not seek collection of the debt until after May 2020. The letter is signed by Joseph Davis, Chief of the Case Management Unit of DOJ’s Environment & Natural Resources Division (ENRD) Environmental Enforcement Section.
The payment suspension appears to be a logical outgrowth of the U.S. Environmental Protection Agency’s (EPA’s) March 26 enforcement discretion policy, wherein EPA indicated its intention to coordinate with DOJ “to exercise enforcement discretion with regard to stipulated penalties” for certain compliance obligations within consent decrees that have both EPA and DOJ as parties to the agreement. (See the following article for more information on EPA’s enforcement discretion policy.)
For those parties currently under a DOJ penalty payment demand, this payment suspension may signal an option for temporary relief during a time of crisis and uncertainty. However, note that DOJ appears to be offering the payment deferral option on an individualized basis and the model letter should not be relied on to justify payment deferral. Any party seeking to defer a penalty payment that has not received a letter from DOJ offering payment deferral should coordinate with DOJ to determine whether this option is available under its consent decree. Additionally, companies should be aware that any deferred payments may be subject to interest when the payment suspension period terminates — if possible, consider clarifying this point with DOJ staff before deferring payments so that the final penalty amount due will remain predictable. A party may elect to simply continue to make payment of a stipulated penalty without seeking deferral. Lastly, parties should be aware that the temporary suspension only applies to those consent decree penalty payments that are payable to the U.S. Treasury, not to penalty payments due to other parties in the settlement, such as states or local boards.
The attorneys at Pepper Hamilton and Troutman Sanders are actively working to assist companies in evaluating these complex issues and working with environmental regulators during this challenging time. For more information on these issues, please contact Todd Fracassi (Pepper Hamilton), Mitchell Guc (Pepper Hamilton), Randy Brogdon (Troutman Sanders) or Patrick Fanning (Troutman Sanders).