Regulatory policy

DOJ Policy Reinstates Settlement Agreements Involving Payments to Non-Governmental Third Parties | Williams Mullen

Settlement agreements regarding payments to non-governmental third parties have been sharply curtailed by the Trump administration. See “Last Minute Trump Administration Regulations Limit Environmental Justice Settlements,” Williams Mullen Environmental Notes, July 2021. Recent DOJ policy and regulation restores DOJ’s authority to enter into settlements involving third parties, including including additional environmental projects (SEP).

As noted in the previous article, the Trump administration’s regulations on third-party settlement payments included specific prohibitions on SEPs. While the Biden administration restored the ability to enter into settlements that include SEPs, the regulatory ban on third-party payments remained. This was seen as a significant limitation of environmental justice settlements, as such settlements often involve third-party payments.

The Biden administration has now taken steps to address this issue. A May 5, 2022 memorandum from the Attorney General sets out guidelines and limitations for settlement agreements involving payments to non-governmental third parties. Although the policy is of general application, the policy addresses environmental violations such as those that may be particularly susceptible to redress through third-party payments and was announced in conjunction with the announcement of the global policy of the administration’s environmental justice application, also released May 5. See Memorandum from the Associate Attorney General on the Global Environmental Justice Enforcement Strategy. A new Office of Environmental Justice was announced in conjunction with these two policy statements.

The Third Party Payment Policy has the following guidelines and limitations:

  • Such a settlement agreement must precisely define the nature and scope of the specific project(s) that the defendant has agreed to fund.
  • All such projects must have a close connection to the underlying violation(s) of federal law at issue in the enforcement action. To meet this requirement, the project must comply with the underlying law applied and advance at least one of the objectives of that law. The project should also be designed to reduce the detrimental effects of the underlying violation(s) at issue to the extent possible and reduce the likelihood of similar violations in the future.
  • The Department of Justice and its client agencies shall not propose the selection of any particular third party to receive payments to implement any project carried out under such settlement. Similarly, the Department of Justice and its client agencies shall not propose a specific entity to be the beneficiary of any project carried out under such settlement, although the Department and its client agencies may specify the type of entity. The Department and its client agencies may also disapprove any Third Party Performer or Beneficiary that the Defendant proposes to review, provided that the disapproval is based on objective criteria for assessing qualifications and suitability described in the Settlement Agreement. .
  • Such settlement must be executed prior to an admission or declaration of liability in favor of the United States, and the Department of Justice and its client agencies shall not retain post-settlement control over the disposition or handling of funds or any project carried out under a settlement, except to ensure that the parties comply with the settlement.
  • No such regulations should be used to satisfy the legal obligation of the Department of Justice or any other federal agency to conduct a particular activity. Nor will such settlement provide the Department of Justice or any other federal agency with additional resources to carry out any particular activity for which the Department of Justice or any other federal agency, respectively, receives specific credit.
  • No such regulations will require payments to non-governmental third parties solely for public education or outreach projects; only in the form of contributions to generalized research, including at a college or university; or as unrestricted cash donations.

In addition to the policy announcement, the memorandum also ordered that the Trump DOJ regulation limiting third-party settlement payments and specifically prohibiting payments under SEP projects be revoked. This was accomplished on May 10, 2022. 87 Fed. Reg. 27936. Although not mandatory, the revocation invites public comment on the revocation of the regulations as well as the general policy. All comments are due by July 11, 2022.

Guidelines and Limitations for Settlement Agreements Involving Payments to Nongovernmental Third Parties, 87 Fed. Reg. 27936 (May 10, 2022).