USA v. Lipar et al

Filing 205

OPINION on Summary Judgment. The government has not shown that the wetlands it says Lipar and the other defendants filled were jurisdictional waters of the United States. It will take nothing. Because its conduct has been oppressive and dishonest, it must pay the reasonable attorney's fees incurred defending this suit. (Signed by Judge Lynn N. Hughes) Parties notified. (ghassan, 4)

UNffiD STATES DISTRICT COURT

United States of America,
Plaintiff,

versus
Thomas E. Lipar, et al.,
Defendants.

SOUTHERN DISTRICT OF TEXAS

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Civil Action H-IO-I904

Opinion on Summary Judgment
1.

Introduction.
The government sued a developer and his contractors for filling wetlands. Because the

government cannot show that the wetlands were jurisdictional waters of the United States, it
will take nothing.

2.

Background.
Thomas E. Lipar, among other things, is a real-estate developer. He and his companies -

Lipar Group, Inc., LGI Land, LLC, LGI GP, LLC, and LGI Development - build residential housing
developments. Though based primarily in Texas, Lipar and his affiliates build in Georgia,
Arizona, and Florida.
Since 2004, Lipar has been developing tracts of land in north Houston. One tract is
southeast of the Woodlands, between Spring Creek and the west fork of the SanJacinto River.

It is called Benders Landing Estates. The other tract is northwest of the Woodlands, on the
northwest tip of Windcrest Lake, near Magnolia, Texas. It is called Lake Windcrest.
Before it began clearing for Benders Landing, Lipar assessed the site and hired James
Coody, a professional engineer, to opine about the land's coverage under the Clean Water Act.
Coody advised Lipar that the Act did not cover the tract. He said it was well upstream of
jurisdictional waters.

In 2oo7,jim Herrington, an employee of the Environmental Protection Agency, visited
the tract. He later spoke with Coody about the tract's coverage under the Act. In March, the
Agency told Lipar in a letter to stop developing the tract. Herrington visited the site again in
July, and the Agency administratively ordered Lipar to stop development in December.
Earlier in 2007, a consultant for the Agency - Science Applications International
Corporation - reported about the tract's coverage under the Act. Coody asked for a copy of the
report. The Agency refused. Coody requested a copy under the Freedom ofInformation Act,
but it was denied.
Herrington visited the site a third time in January of 2008. InJune, the Agency again
administratively ordered Lipar to stop development. The second order mentioned violations in
different locations than the first order.
On May 27, 20IO, the United States sued Lipar, his companies, Jesse Valeriano,m
Contractors, Inc., andm Construction, Inc., for violating the Act. It says that Lipar discharged
fill into waters of the United States without a permit in eight locations in Bender's Landing
Estates and at Lake Windcrest.

3.

Jurisdictional Waters.
The defendants say that the Act does not govern the areas that they developed. They

say that the areas are not waters of the United States under the Act.
Traditionally, the government's power to regulate commerce extended only to those
waterways which were accessible - navigable in fact - from a state other than those in which
they lie. '
In 1972, the government enacted the Federal Water Pollution Control Act
Amendments of 1972 which greatly expanded the Federal Water Pollution Control Act of
1948. These laws, together with further amendments in 1977 and 1987, have become known
as the Clean Water Act.
Among other things, the Act prevents the discharge of dredge or fill into navigable
waters - defined as the waters of the United States - without a permit. Waters of the United

I

Gilman v. Philadelphia, 70 U.S. 713 (1865); The Daniel Ball, 77 U.S. 557 (1870).

States has been interpreted to include more than waters that are navigable in fact. 2 It, however,
does not include every water or patch of mud tangentially connected to a navigable water. Nor
does its reach extend to the impossibly broad and distant outer limit of the vogue interpretation
of Congress's power to regulate commerce. 3
When dealing with non-adjacent wetlands - wetlands that are adjacent to a water or
wetland which is adjacent to a water that is navigable in fact - courts employ one of two tests
from a plurality decision of the Supreme Court. The first - and the more restrictive test in this
court's view - holds that wetlands are waters of the United States only if (a) an adjacent
channel contains a water of the United States and (b) the wetland has a continuous surface
connection with the water such that it is difficult to determine where the water ends and
wetland begins. 4 The second test holds that wetlands are jurisdictional waters only if they
possess a significant nexus to waters of the United States - waters that are navigable in fact and
waters or wetlands adjacent to navigable waters. 5
Because the wetlands at issue here meet neither test, this court need not decide which
is more restrictive. 6

A.

Lake Windcrest.

The government says that Lipar filled wetlands when it built Lake Windcrest. It says
that the filled wetlands were jurisdictional waters of the United States because they had a
continuous, surface connection to one or more of three tributaries that flow into Windcrest
Lake. The lake, in turn through its spillway, flows into Dry Creek, which it says, at least
seasonally flows into Spring Creek - in fact, it flows to Mill Creek, a tributary of Spring Creek.

It says that Spring Creek is a traditionally navigable water. Alternatively, the government says
that the wetlands have a significant nexus to Spring Creek.

2

3

U.S. v. Riverside Bayview Homes, Inc., 474 U.S. 121, 139 (1985).
Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers,
53 1 U.S. 159, 174 (2001).

4

Rapanos v. U.S., 547 U.S. 715, 742.

6

Marks v. U.S., 430 U.S. 188 (1977).

T a be navigable, a water must be susceptible of being used, in its ordinary condition,
as a highway for commerce, over which trade and travel are or may be conducted in the
customary modes on water.7 The court is not convinced that Spring Creek is navigable. During
all but a flood, a craft of more than six-inches draft would likely not be able to navigate it.
Though, perhaps, a canoe or kayak may be able to ply its waters, these recreational uses are not
customary modes of trade and travel. A river boat, cargo ship, tanker, or other burdened vessel
could not traverse it.
Assuming that Spring Creek is navigable, the wetlands about which the government
complains are not sufficiently connected to it to be jurisdictional waters. Following the
government's reasoning, Mill Creek is adjacent to Spring Creek, a navigable water. Dry Creek
is adjacent to Mill Creek. Windcrest Lake is adjacent to Dry Creek. Three tributaries are
adjacent to the lake. The wetlands about which it complains are adjacent to the three
tributaries.
This regression is too tenuous. Mill Creek and Dry Creek, as the latter's name suggests,
are little more than drainage ditches that conduct water only after a rain - a country boy could
easily jump them. The same is true for the three tributaries. They are not permanent waters.
The government's characterization as seasonal is generous and accurate only insofar as they are
wet in the Spring and Fall after it has rained. They are wetlands only in the same way that the
entire area is coastal prairie.
As even the government's environmental scientist - Peter Stokely - admits, there is no
known, continuous surface connection from the wetlands to Spring Creek. The lake is dammed.
Dry Creek is dry. The three tributaries flow intermittently. There is no difficulty determining
where water ends and wetland begins.
The wetlands that were developed also bear no substantial nexus to waters of the United
States. At best, they are part of the same watershed. This, however, is too broad. By the same
logic, a storm sewer in Karen, Texas, is a jurisdictional water of the United States because the
water it conducts eventually flows into Spring Creek. The government has nothing to show that
the wetlands it complains about affect the chemical, physical, and biological integrity of Spring
Creek or other waters farther downstream. It has nothing to show that fill discharged in the
wetlands eroded and silted jurisdictional waters farther downstream, or something similar.

7

The Daniel Ball, 77 U.S. at 56}.

The wetlands that were developed in Lake Windcrest were not waters of the United
States under the Act. The defendants needed no permit to fill them.

B.

Benders Landing.

The government says that Lipar and the other defendants filled wetlands in seven areas
around the Benders Landing development. It has labeled each by letter A through G. Generally,
it says that each area contained wetlands because each had hydrophytic vegetation, hydric soils,
and ponded water. Each area, it says, is connected by tributaries to either Spring Creek or the
west fork of the SanJacinto River - navigable waters according to it. The government relies on
stream data from the United States Geological Survey, aerial photographs, topographical maps,
national wetland inventory data from the United States Fish and Wildlife Service, and site
inspections. The government admits that the national wetland inventory data is only about 50%
accurate and that the soil maps were created for agricultural purposes, not wetland
identification.
F or the same reason as Spring Creek, the court is skeptical that the west fork of the San
Jacinto River is navigable. Assuming that the development filled wetlands, and assuming that
the west fork along with Spring Creek are navigable, the government has not shown that the
wetlands Lipar and the others filled are jurisdictionally connected.
The government says that areas A and B flow through a tributary and into T antrough
Gully. The gully, in turn, flows to the west fork. Areas C and G flow through two other
tributaries and eventually into the west fork. Areas D, E, and F all flow through other
tributaries into Spring Creek.
The government's naturalists say that T antrough Gully flows year round into the west
fork. Each of the other tributaries, whether they flow to Spring Creek or the west fork, are
intermittent. The government characterizes these intermittent flows as seasonal- that is, they
drain the area after it rains.
Each area of wetland, the government says, has a continuous surface connection to the
tributaries. These are conclusory legal generalizations. They are supported only by broad
reference to the aerial photographs and topographical maps. What is more, they are belied by
the naturalists themselves who attest that a continuous surface connection is, at best, a guess
for some locations.
Assuming the government had proof, it does not matter. The seasonal connection of
some wetlands to seasonal tributaries that feed navigable waters is too tenuous a connection to
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give the government jurisdiction under the Act. Wetlands with only an intermittent, physically
remote hydrologic connection lack the necessary connection to jurisdictional waters. 8
The government fares no better under the significant-nexus test. It has no particular
data about the impact that these wetlands have on the west fork or Spring Creek. Like before,
general allegations that the area is part of the watershed are unavailing.

4.

Sanctions.
F or ten years the government has investigated whether the two sites contained

jurisdictional wetlands. It gathered data for five years before it sued. In ten years, the
government has discovered no fact to show that the developed areas were jurisdictional
wetlands.
Despite this, it has been intractable, uncooperative, and defiant.

A.

Privilege.

On July 6,

2OIO,

this court ordered that the parties exchange disclosures and principal

documents well ahead of the conference of July 29. Before the conference, the government
produced three privilege logs. After a more detailed order, the government adjusted its privilege
log. The adjusted log was 336 pages and claimed thousands of pages. After several reevaluations

by the government - during which it discovered that

IO%

of the papers it originally claimed

were not privileged, and that a quarter of 50 documents selected by Lipar were not privileged the government submitted another revised log.
The court appointed a special master to review the log. Applying the Department of
Justice's own privilege guidelines, the master found that 88% of all the pages claimed by the
government were not privileged. He discovered that the government included documents from
completely unrelated cases which bore no significance to this case.

B.

Good Faith.

Before it sued, the government thrice ordered Lipar and the other defendants to stop
development. It threatened to fine them $ 32,500 per day. At that time, and when it later sued,
it had not delineated where the wetlands that it contends were filled were located. It also had
not determined, assuming there were wetlands, whether they were connected to a navigable
water.

8

Rapanos, 547 U.S. at 74 2 .

It, then as now, relied on much the same information - aerial photographs,
topographical maps, national wetland inventory data from the United States Fish and Wildlife
Service, and site inspections. These data, at best, show that the developed areas were marshy,
coastal prairie. None showed a continuous surface connection, or that the developed areas were
somehow substantially linked to a navigable water.
The government's own papers suggest that it sued Lipar and the other defendants in
part to discourage other companies from developing similar tracts in Houston. It disagreed with
Lipar's interpretation of the United States Supreme Court's construction of the Act, and it was
worried that other developers were aligning with Lipar's interpretation.

C.

Disclosure.

On September

10, 2.010,

this court ordered the government to produce the technical

data it relied on to sue. After three months, three dodges, and a compelled deposition, it finally
complied.
D.

Rule

II,

37, and inherent power.

The court may sanction a party when it has acted in bad faith in instituting proceedings
or continuing them. 9 The court may sanction a party when it has failed to obey an order on
discovery. The court has inherent power to sanction parties who misbehave.
IO

The government has not followed court orders or has done so only after months of
recalcitrance. When ordered to produce data, it either did not comply or did so only halfheartedly. It has never followed the spirit of the court's orders, and, at best, it only sometimes
complied with the letter. It has withheld papers under claims of privilege either maliciously or
because it is grossly incompetent. It has abused its power in an attempt to brow-beat the
defendants and discourage their colleagues and competitors from developing similar areas. Its
behavior is reprehensible.
The court sanctions the government by requiring that it pay Lipar and the other
defendant's reasonable attorney's fees which they incurred defending this suit.

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FED. R. CIV. P.

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FED. R. CIV. P. 37.

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5.

Conclusion.
The government has not shown that the wetlands it says that Lipar and the other

defendants filled were jurisdictional waters of the United States. It will take nothing.
Because its conduct has been oppressive and dishonest, it must pay the reasonable
attorney's fees incurred defending this suit.
Signed on August 3u ,2015, at Houston, Texas.

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-0lllt.l-!-.L---

Lynn N. tfughes

United States DistrictJudge

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