In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-2045
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
RUETH DEVELOPMENT CO.
and HAROLD G. RUETH,
Defendants-Appellants.
____________
Appeal from the United States District Court for
the Northern District of Indiana, Hammond Division.
No. 2:96-cv-540—James T. Moody, Judge.
____________
ARGUED APRIL 9, 2003—DECIDED JULY 10, 2003
____________
Before FLAUM, Chief Judge, and POSNER and KANNE,
Circuit Judges.
FLAUM, Chief Judge. In 1996 the United States sued
the Rueth Development Company and Harold Rueth (col-
lectively “Rueth”) under the Clean Water Act, 33 U.S.C.
§ 1251 et seq. (“CWA” or “the Act”), for failure to obtain a
permit before discharging dredged or fill material into
four acres of wetlands located in Dyer, Indiana. Rueth
chose to settle the suit and entered into a consent decree
that required him to restore the wetlands by specified
dates. When he failed to meet those deadlines, the gov-
ernment moved to enforce the agreement, seeking over
$6,750,000 in penalties. Rueth responded by petitioning for
2 No. 02-2045
modification or vacatur of the consent decree based on the
Supreme Court’s decision in Solid Waste Agency of N.
Cook County v. United States Army Corps of Eng’rs, 531
U.S. 159 (2001) (“SWANCC”), which he claimed was a
material change in law affecting the decree’s validity. The
district court disagreed, granted the government’s mo-
tion to enforce, and assessed penalties in the amount of
$4,018,500, and Rueth appeals. We affirm.
I. BACKGROUND
In April 1991 the Environmental Protection Agency
(“EPA”) issued an administrative compliance order under
33 U.S.C. § 1319(a), finding that Rueth had illegally
discharged dredged or fill material into wetlands located
in the Castlewood subdivision of southeastern Dyer. The
fill was specifically found to have been placed in wetlands
“adjacent to an unnamed tributary to Dyer Ditch, which
flows north to Hart Ditch, which flows north to the
Little Calumet River, which is a navigable water of the
United States.” The compliance order directed Rueth to
cease all discharges and restore the wetlands to their
original condition, warning that noncompliance could re-
sult in the assessment of substantial penalties under the
CWA.
Rueth then proceeded to apply for an after-the-fact per-
mit from the United States Army Corps of Engineers
(“Corps”). The Corps declined to give approval, however,
noting its concern that Rueth was presenting his develop-
ment plans in a piecemeal fashion in an attempt to avoid
a comprehensive review of their cumulative environ-
mental impact. The Corps stated that it would reconsider
its position if Rueth modified his plans so that less than
ten acres of wetlands were affected.
Rueth did not submit new development plans, reapply
for a permit, or undertake the restoration activities out-
No. 02-2045 3
lined in the administrative compliance order. Instead, he
filed a complaint for equitable relief in the district court,
claiming that the government lacked regulatory jurisdic-
tion over the wetlands in the Castlewood subdivision. But
because the administrative compliance order was a pre-
enforcement action not subject to judicial review, the
district court dismissed the suit, and we affirmed, stating
that Rueth could contest jurisdiction if and when the EPA
sought judicial or administrative enforcement of penalties
against him. Rueth v. EPA, 13 F.3d 227, 230 (7th Cir. 1993)
(“Rueth I”). We also remarked in passing,
We acknowledge that our holding places Rueth some-
what in limbo until such time as the EPA seeks to
enforce the compliance order or assess administrative
penalties. . . . Responsibility for this predicament does
not fall entirely on the EPA and the Corps of Engi-
neers, as any reasonable and experienced developer
such as Rueth should have known that the wetlands
were potentially subject to regulation. Perhaps Rueth
is in its present predicament because it attempted to
short cut and take an end-run around the permit
requirement. . . . Of course, Rueth now argues that it
had no idea the wetlands at the Castlewood develop-
ment were “waters of the United States” [within the
meaning of the CWA]. As our decision in Hoffman
Homes, Inc. v. EPA, 999 F.2d 256, 261 (7th Cir. 1993),
makes clear, however, nearly all wetlands fall within
the jurisdiction of the CWA since one test for whether
the wetland affects interstate commerce is whether
migratory birds use the wetland. Decisions such as
Hoffman Homes, give full effect to Congress’s intent
to make the Clean Water Act as far-reaching as the
Commerce Clause permits. On the other hand, it is
not inconceivable that the EPA or the Corps of Engi-
neers might completely overextend their authority. In
such a case, we suggest to those agencies that we
4 No. 02-2045
will not hesitate to intervene in pre-enforcement ac-
tivity, but this is not the case as we are of the opinion
that the wetland at issue falls under the broad defini-
tion of “waters of the United States” in Hoffman Homes.
Rueth I, 13 F.3d at 230-31 (citation omitted).
By November 1996 Rueth had still not performed the
tasks outlined in the administrative compliance order,
prompting the government to file this enforcement action.
The complaint asserted two bases for the government’s
regulatory jurisdiction: (1) adjacency—specifically, that
the Castlewood wetlands were “adjacent to waters which
flow into the Little Calumet River, an interstate stream,
which itself is a ‘water of the United States’ within the
meaning of the CWA,” see 40 C.F.R. § 230.3(s)(7); and
(2) effect on interstate commerce, see id. § 230.3(s)(3). In
addition to injunctive relief, the complaint requested
that the district court assess a civil penalty under 33
U.S.C. § 1319(d) for each day that Rueth was in violation
of the CWA and the administrative compliance order.
After over a year of negotiations, the parties entered
into a proposed consent decree, which the court then
entered as a final judgment in January 1999. In the con-
sent decree, Rueth agreed to perform a number of “mile-
stone” tasks—such as excavating fill, sealing and raising
storm sewers, and replacing wetland vegetation—by set
deadlines. The agreement also required Rueth to pay a
$23,000 civil penalty and set forth additional stipulated
penalties that would result from failure to meet “any
milestone” according to the specified timetable.
Rueth ultimately completed the wetland restoration at
a cost of around $100,000 but failed to perform a number
of the interim milestones in a timely fashion. Because of
this failure, the government moved to enforce the stip-
ulated-penalties provision of the consent decree, alleging
that Rueth had “in very large part” disregarded his ob-
No. 02-2045 5
ligations under the agreement. For instance the govern-
ment asserted that Rueth was 67 days late in paying the
$23,500 penalty, 579 days late in excavating the fill and
performing the storm-sewer tasks, and 158 days late in
replacing the wetland vegetation. The government sought
a separate stipulated penalty for each alleged violation of
the agreement, resulting in a grand total of $6,757,500.
But before the district court could rule on the govern-
ment’s motion to enforce, Rueth moved under Fed. R. Civ.
P. 60(b)(5) for modification or vacatur of the consent de-
cree based on the Supreme Court’s decision in SWANCC.
Rueth claimed that SWANCC, which held that “navigable
waters” as defined in the CWA does not extend to iso-
lated intrastate waters solely because they are used as
habitat by migratory birds, made “legal what the decree
was designed to prevent,” thus rendering it unenforceable.
The district court disagreed, however. It concluded that
SWANCC did not affect the validity of the decree be-
cause the government had not invoked the Migratory
Bird Rule as a basis for its jurisdiction but sought rather
“to regulate the [Castlewood] Site on the theory that it is
an ‘adjacent wetland.’ ” Then, the court made a factual
finding that the Castlewood wetlands were “adjacent” to
navigable waters because they have “an [effect] on flows to
Dyer Ditch, and ultimately the Little Calumet River,” which
“is itself a navigable waterway.” The court thus denied
Rueth’s Rule 60(b)(5) motion, granted the government’s
motion to enforce the consent decree, and imposed pen-
alties in the amount of $4,018,500.
Rueth then moved under Rule 59(e) to alter or amend
the judgment, claiming that there was no evidence what-
soever that the Castlewood wetlands were “adjacent” to a
navigable waterway. He also claimed for the first time
that the language of the consent decree did not allow for
stipulated penalties to be separately imposed for each
uncompleted or delayed “milestone” task. Though the dis-
6 No. 02-2045
trict court denied the motion, it agreed with Rueth that
the question of “adjacency” was still open to dispute and
therefore vacated that portion of its earlier order. None-
theless, the court held that, even assuming the wetlands
were isolated and not adjacent, Rueth was still not en-
titled to modification or vacatur of the consent decree
because he waived his right to contest the government’s
regulatory jurisdiction by entering into the agreement. The
court also upheld its award of stipulated penalties, and
Rueth now appeals.
II. DISCUSSION
Section 404(a) of the CWA grants the Corps authority
to issue permits “for the discharge of dredged or fill mate-
rial into the navigable waters at specified disposal sites.”
33 U.S.C. § 1344(a). “Navigable waters” is defined else-
where in the Act as “the waters of the United States,
including the territorial seas.” Id. § 1362(7). The Corps has
in turn defined “waters of the United States” to include
“waters such as intrastate lakes, rivers, streams (includ-
ing intermittent streams), mudflats, sandflats, wetlands,
sloughs, prairie potholes, wet meadows, playa lakes, or
natural ponds, the use, degradation or destruction of which
could affect interstate or foreign commerce.” 40 C.F.R.
§ 230.3(s)(3) (2003).
In SWANCC the Supreme Court held that § 230.3(s)(3),1
as clarified by the Migratory Bird Rule, 51 Fed. Reg. 41217
(1986), exceeded the authority granted to the Corps under
§ 404(a) of the Act. The Migratory Bird Rule, which the
Corps issued in 1986 to clarify the reach of its jurisdiction,
1
Section 230.3(s)(3) was formerly codified at 33 C.F.R. § 328(a)(3)
(1999). For simplicity we will cite to only § 230.3(s)(3) throughout
this opinion.
No. 02-2045 7
had provided that § 404(a) extends to intrastate waters
that provide habitat for migratory birds. But the Court
concluded that nothing in the text of the statute in-
dicated any Congressional intent to extend the jurisdic-
tion of the Corps to “ponds that are not adjacent to open
water.” SWANCC, 531 U.S. at 168. Instead, § 404(a)’s use
of the word “navigable” had “the import of showing . . . what
Congress had in mind as its authority for enacting the
CWA: its traditional jurisdiction over waters that were
or had been navigable in fact or which could reasonably
be so made.” Id. at 172.
The question before us now is what effect, if any,
SWANCC has on the validity of the consent decree in this
case. In moving to modify or vacate the decree, Rueth relied
on the third clause of Fed. R. Civ. P. 60(b)(5), which pro-
vides that a court may relieve a party from a final judg-
ment if “it is no longer equitable that the judgment
should have prospective application.” To obtain relief
under this provision, Rueth bears the burden of showing
“that a significant change in circumstances warrants
revision of the decree.” Rufo v. Inmates of Suffolk County
Jail, 502 U.S. 367, 383 (1992). One instance where mod-
ification might be warranted is if the “statutory or deci-
sional law has changed to make legal what the decree
was designed to prevent.” Id. at 388. Rueth contends
that that is what SWANCC did here. Specifically, he as-
serts that SWANCC stripped the government of power
to regulate the Castlewood wetlands because they are
isolated and intrastate; therefore, the consent decree “is
void ab initio and should be rescinded.”
The government, not surprisingly, believes otherwise.
Though the complaint did cite § 230.3(s)(3) as one basis
for regulatory jurisdiction, the government claims that
SWANCC is nonetheless irrelevant because the com-
plaint did not specifically invoke the Migratory Bird
Rule; instead, the alleged interstate-commerce nexus
8 No. 02-2045
under § 230.3(s)(3) “rested on other important ecological
functions of the wetland, such as water filtration, flood
control, and wildlife habitat.” Essentially, the government
is urging us to give SWANCC its narrowest reading
possible—that use as habitat by migratory birds is insuf-
ficient to bring purely isolated, intrastate ponds within
the Corps’ jurisdiction under the CWA. Or, in other words,
SWANCC did nothing more than invalidate the Migratory
Bird Rule. Section 230.3(s)(3), however, extends the Corps’
jurisdiction to intrastate waters for reasons other than
those having to do with use by migratory birds. For in-
stance it includes waters that “are or could be used by
interstate or foreign travelers for recreational or other
purposes,” waters “[f]rom which fish or shellfish are or
could be taken and sold in interstate or foreign commerce,”
and waters that “are used or could be used for industrial
purposes by industries in interstate commerce.” The gov-
ernment claims that SWANCC left these provisions in-
tact, whereas Rueth claims that SWANCC deprived the
Corps of all power to regulate any intrastate water based
on a nexus to interstate commerce. We conclude that
they are both partly right—the government because
SWANCC does not expressly make § 230.3(s)(3) illegal, and
Rueth because his reading ultimately may be the only
logical extension of the case. The Court’s concern with the
Migratory Bird Rule was that it conferred regulatory
jurisdiction over waters that were not actually or poten-
tially “navigable”; § 230.3(s)(3) suffers from the same
infirmity. For instance, that fish or shellfish can be taken
from a water and sold in interstate commerce does not
make that water any more “navigable” than it would be
if it were frequented by migratory birds. The same holds
true for intrastate waters that are used by interstate
travelers or for industrial purposes by industries in inter-
state commerce.
But what effect SWANCC has on the Corps’ jurisdiction
under § 230.3(s)(3) is a question that we need not decide
No. 02-2045 9
in this case. For it is clear that SWANCC did not affect
the law regarding the government’s alternative asserted
basis for jurisdiction—adjacency under § 230.3(s)(7). The
Corps’ adjacency jurisdiction is well-established; it was
upheld by the Supreme Court in United States v. Riverside
Bayview Homes, Inc., 474 U.S. 121 (1985), and was reaf-
firmed in SWANCC. Recognizing this, Rueth offers a
number of reasons why we should find that the Corps
lacks adjacency jurisdiction here. First, he claims that
the government has offered no evidence that the Castle-
wood wetlands are actually adjacent to navigable waters.
But this is beside the point. The government never had
to present such evidence because of the very fact that
Rueth chose not to litigate the case. Rueth also points out
that the district court’s order denying his post-judgment
motion “assumed” that the wetlands are isolated and not
adjacent. He attaches too much significance to the court’s
assumption, however; the court proceeded on the theory
that the wetlands are not adjacent only because it thought
that Rueth would lose regardless. Finally, Rueth asserts
that the wetlands’ link to navigable waters is too attenu-
ated to establish adjacency, alleging that the wetlands
are “merely adjacent to a tertiary tributary of a navigable
water (adjacent to an unnamed tributary of Dyer Ditch
which is a tributary of Hart Ditch which is a tributary of
the Little Calumet River).” But this simply raises the
question of what “adjacency” means, which SWANCC did
not address at all. Rueth, moreover, waived his right to
litigate the issue when he signed the consent decree. And
further, it is not even apparent that the necessary con-
tiguity to a navigable water is missing here. In Riverside
Bayview Homes, the Court found mere surface runoff
into nearby navigable waters to be a meaningful enough
connection to give rise to the Corps’ adjacency jurisdiction.
474 U.S. at 134. And recently, in United States v. Deaton,
No. 02-1442, 2003 WL 21357305 (4th Cir. June 12, 2003),
the Fourth Circuit upheld the Corps’ exercise of adjacency
10 No. 02-2045
jurisdiction over a parcel of land whose only connection to
navigable waters was surface runoff that, after a “winding,
thirty-two-mile path,” emptied into the Chesapeake Bay.2
Despite the government’s assertion of adjacency juris-
diction, Rueth seems to suggest that it would nonetheless
be manifestly unfair to hold him to the terms of the con-
sent decree because, at the time he settled the case, the
law was well-established that the Corps could exercise
jurisdiction over isolated intrastate waters. As Rueth
points out, we told him in his first appeal that “nearly
all wetlands fall within the jurisdiction of the CWA since
one test for whether the wetland affects interstate com-
merce is whether migratory birds use the wetland.” Rueth
I, 13 F.3d at 231 (citing Hoffman Homes, Inc. v. EPA, 999
F.2d 256, 261 (7th Cir. 1993)). This statement is ob-
viously no longer accurate after SWANCC, but regard-
less, we fail to see how it has any effect on the validity
of the decree. Back when the EPA filed its complaint in
1996, Rueth was faced with a choice: he could either con-
test the government’s jurisdiction or forego the costs and
settle the case. Having reasonably concluded that his
chances of succeeding on the jurisdictional challenge were
not good, Rueth chose the latter course. The defendants
2
As the court described it, the surface runoff drained into a
roadside ditch, which in turn “drain[ed] into a culvert under
Morris Leonard Road. On the other side of the road, the culvert
drain[ed] into another ditch, known as the John Adkins Prong
of Perdue Creek. Perdue Creek flows into Beaverdam Creek, a
natural watercourse with several dams and ponds. Beaverdam
Creek is a direct tributary of the Wicomico river, which is
navigable. Beaverdam Creek empties into the Wicomico River
about eight miles from the [defendants’] property. About twenty-
five river miles further downstream, the Wicomico River flows
into the Chesapeake Bay, a vast body of navigable water.” Id.,
2003 WL 21357305, at *2.
No. 02-2045 11
in SWANCC chose the former. Now, Rueth seeks a free
ride on the defendants’ success in SWANCC, but the
mere fact that the Supreme Court has cast doubt on one
of the complaint’s legal bases is not a ground on which to
reopen the case. See United States v. Krilich, 303 F.3d 784,
792 (7th Cir. 2002) (“Krilich III”); Cincinnati Ins. Co. v.
Flanders Elec. Motor Serv., Inc., 131 F.3d 625, 628-29
(7th Cir. 1997). As we stated in Krilich III, which also
involved a Rule 60(b)(5) motion to vacate a consent de-
cree based on SWANCC,
If a party believes that the waters at issue on his
own property are not properly subject to the EPA’s
authority, whether under the rationale of Hoffman
Homes I, SWANCC or under some other theory, he
should not stipulate otherwise. But that is exactly
what Krilich did, to his continued dismay. He ex-
pressly agreed that certain waters on his property
constituted “waters of the United States,” subject to
regulation by the EPA. Like most parties that enter
into a settlement or plea agreement, he presumably
made a tactical decision that the terms of the Consent
Decree were more favorable than the costs or risks
of continued litigation. Accordingly, we conclude that
SWANCC effected no relevant change in decisional law
such that the district court should have modified the
Consent Decree. Nor does SWANCC establish that the
EPA’s entry into and continued enforcement of the
Consent Decree are ultra vires acts. “To hold that a
clarification in the law automatically opens the door
for relitigation of the merits of every affected consent
decree would undermine the finality of such agree-
ments and could serve as a disincentive to negotiation
of settlements in . . . litigation.”
Id. (quoting Rufo, 502 U.S. at 389).
Rueth spends much of his brief explaining how Krilich III
is distinguishable from this case, but ultimately the
12 No. 02-2045
distinction comes down to this: in Krilich III the de-
fendant had conceded that there was some basis for the
Corps’ jurisdiction other than effect on interstate commerce,
whereas here, Rueth conceded only that there was some
basis for jurisdiction. But this is a distinction without
a difference. Even assuming Rueth is right that SWANCC
made illegal the government’s assertion of jurisdiction
under § 230(s)(3), if the case is reopened, the parties
would still have to litigate whether the government has
adjacency jurisdiction under § 230(s)(7). Six years ago,
however, Rueth made the conscious decision, given the
uncertainties of litigation, not to contest that issue. It
would render the consent decree worthless to allow him
to do so now. See Rufo, 502 U.S. at 389.3
So the district court was right not to modify or vacate
the consent decree, but Rueth maintains that, even so, the
court erred for several reasons in calculating the stip-
ulated penalties. He first contends that the language of
the decree does not support the imposition of cumulative
stipulated penalties for each uncompleted “milestone” task;
rather, according to Rueth’s reading, the court should
have imposed penalties based on days of noncompliance
regardless of the number of violations, which would have
reduced the total penalty to less than $1.5 million. Unfortu-
nately for Rueth, he has waived this claim by raising it
for the first time in his Rule 59(e) motion.4 Anderson v.
Flexel, Inc., 47 F.3d 243, 247 (7th Cir. 1995). The govern-
3
Rueth might have an additional problem in that the relief
he seeks—mainly, to be excused from paying the stipulated
penalties that accrued as a result of his missing the deadlines set
forth in the decree—may not be “prospective” in nature. Fed. R.
Civ. P. 60(b)(5). There is no need for us to address this issue,
however.
4
Notably, the district court did not even mention the claim in
its order denying Rueth’s motion.
No. 02-2045 13
ment made clear in its motion to enforce that it was seek-
ing a separate penalty for each violation of the decree. Yet
in his opposition to the motion, Rueth did not argue that
the stipulated-penalty provision was unclear on its face
but asserted only that the penalties sought were “uncon-
scionable and unenforceable” because they “bear no ra-
tional relationship to the potential harm which the plain-
tiff could have reasonably foreseen at the time it pre-
pared the Consent Decree, and because the size of the
penalties is grossly disproportionate to the degree of harm
to the EPA or the environment resulting from the alleged
delays.” Not until his Rule 59(e) motion did Rueth raise
any question regarding the proper construction of the
stipulated-penalty provision. Further, even had Rueth not
waived his claim, we find the government’s interpretation
of the decree to be the more reasonable one in any event.
We agree with Rueth that the stipulated-penalty provi-
sion is facially ambiguous, so in order to resolve the ambi-
guity we must “look at the evil which the decree was
designed to rectify.” Goluba v. Sch. Dist. of Ripon, 45 F.3d
1035, 1038 (7th Cir. 1995) (quotations omitted). The clear
intent of this decree was to require Rueth to restore the
wetlands by performing six discrete milestone tasks in a
relatively short (eleven-month) timeframe. Rueth knew
that he had to comply with all six milestones in order to
be in compliance with the CWA. Yet if he is right that
the stipulated penalties accrue only by day of violation
rather than per violation, there would be no incentive
for him to complete any of the other five tasks if he is in
violation of one. For this reason we cannot sustain Rueth’s
interpretation of the decree. To do so would render the
number of violations irrelevant to the total penalty, which
would in turn contravene the intent of the parties at
the time the contract was made.
Rueth’s next argument is that the district court erred
by failing to hold a hearing to determine whether the EPA
14 No. 02-2045
had consented to the delays in completing the storm-sewer
tasks. The consent decree, however, has a force majeure
provision, which states that untimely performance would
only be excused if Rueth provided a written request to the
EPA. Rueth did not present any evidence that he did so.
Thus, pursuant to the express terms of the decree, Rueth
waived his right to obtain an extension of the deadlines,
and so the court did not err in refusing to hear evidence
on his claim that the decree had been orally modified. See
United States v. Alshabkhoun, 277 F.3d 930, 936 (7th Cir.
2002); United States v. Krilich, 126 F.3d 1035, 1036-37 (7th
Cir. 1997).
Rueth also contends that, before the court imposed
the penalty, it should have considered the statutory crite-
ria (such as seriousness of the violation and ability to
pay) provided in the CWA. 33 U.S.C. § 1319(d). His argu-
ment is without support. Rueth negotiated and freely
entered into the consent decree and is therefore bound
by its terms, including those setting forth penalties, see
Alshabkhoun, 277 F.3d at 935; the statutory factors no
longer have any relevance. Likewise meritless is Rueth’s
argument that the penalties violate due process. Their
apparent severity is due to the fact that Rueth was so
negligent in complying with the decree that he himself
negotiated; indeed, he was up to 579 days late in complet-
ing some of the milestone tasks. Given these circum-
stances we cannot say that the penalty amount is unrea-
sonable, especially considering that it is but a small frac-
tion of the maximum penalty that could have been im-
posed under the CWA. See id.
III. CONCLUSION
The district court did not err in denying Rule 60(b)(5)
or 59(e) relief, and so the judgment is AFFIRMED.
No. 02-2045 15
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—7-10-03