Rhea Lana, Inc. v. DOL , 824 F.3d 1023 ( 2016 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 2, 2015 Decided June 3, 2016
No. 15-5014
RHEA LANA, INC. AND RHEA LANA’S FRANCHISE SYSTEMS,
INC.,
APPELLANTS
v.
DEPARTMENT OF LABOR,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:14-cv-00017)
Stephen S. Schwartz argued the cause for appellants.
With him on the briefs were Matthew J. MacLean, John F.
Scalia, Keith Hudolin, and Daniel Z. Epstein.
Sydney A. Foster, Attorney, U.S. Department of Justice,
argued the cause for appellee. With her on the brief were
Benjamin C. Mizer, Principal Deputy Assistant Attorney
General, Vincent H. Cohen Jr., Acting U.S. Attorney, Mark B.
Stern, Attorney, U.S. Department of Justice, and Dean A.
Romhilt, Senior Attorney, U.S. Department of Labor.
2
Before: GARLAND,⃰ Chief Judge, PILLARD, Circuit Judge,
and EDWARDS, Senior Circuit Judge.
PILLARD, Circuit Judge: Plaintiff Rhea Lana’s periodic
tag sales of used children’s toys, clothing, and furnishings—
staffed principally by mothers and grandmothers as
salespeople—are reminiscent of many a charitable fundraising
event. The difference is that Rhea Lana runs and franchises
its sales for a profit. The Department of Labor has for several
decades read the Fair Labor Standards Act to prohibit for-
profit, private-sector entities from using volunteer workers.
Consistent with that view, the Department sent Rhea Lana a
letter informing it that its failure to pay its salespeople
violates the Act. The letter also bore a warning: the Act
contains a penalty provision for repeated or willful violations
and, now that Rhea Lana had official notice of its non-
compliance, it would be subject to willfulness penalties for
any further infractions. Rhea Lana sought pre-enforcement
declaratory and injunctive relief against the Department’s
determination that it was out of compliance with the Act. The
district court viewed the Department’s letter as analogous to
agency advice letters that this court has held to be
unreviewable, non-final agency action, and so dismissed the
suit.
We conclude that the Department’s letter to Rhea Lana is
final agency action because it is more than mere agency
advice. By notifying Rhea Lana that the company was in
violation of its wage-and-hour obligations, the letter rendered
knowing any infraction in the face of such notice, and made
Rhea Lana susceptible to willfulness penalties that would not
otherwise apply. The letter thus transmitted legally operative
⃰
Chief Judge Garland was a member of the panel at the time the
case was argued but did not participate in this opinion.
3
information with a “legal consequence” sufficient to render
the letter final. We therefore reverse the district court’s
dismissal.
I.
Plaintiffs Rhea Lana, Inc. and Rhea Lana’s Franchise
Systems, Inc. (collectively, Rhea Lana) operate, and franchise
the opportunity to operate, semi-annual consignment sales of
used children’s toys, clothing, and related items. Rhea Lana
leases space and handles logistical matters at the events, and
consignors provide the items for sale. Consignors generally
receive at least seventy percent of the proceeds from their
items when sold, and may also help staff the sales.
Consignors who work at Rhea Lana’s sales—dubbed
“consignor-volunteers”—receive no pay. However, they are
allowed to buy items in advance of the general public and to
help sell their own items and increase their profits by, for
example, favorably displaying and promoting their goods.
In January 2013, the Wage and Hour Division of the
Department of Labor (DOL or the Department) began
investigating Rhea Lana’s employment practices. At a
meeting in May 2013, the agency advised Rhea Lana that
DOL considered the company’s consignor-volunteers to be
employees under the Fair Labor Standards Act (FLSA),
entitled to wages, including back pay. In August of that year,
the agency reiterated its position in a pair of letters from
Robert A. Darling, a district director of the Wage and Hour
Division. The first letter, dated August 6, 2013, went directly
to Rhea Lana’s consignor-volunteers. It explained that those
workers “might not have been paid as required by the law”
and that, although the agency would “take no further action
on [their] behalf,” the consignor-volunteers could bring suit
under the FLSA to recover back pay. Letter from Robert A.
4
Darling to Rhea Lana Consignor-Volunteers (Aug. 6, 2013),
J.A. 21.
The second letter, sent to Rhea Lana on August 26, 2013,
explained that “[t]he investigation [had] disclosed violations”
of the FLSA’s minimum-wage and overtime provisions.
Letter from Robert A. Darling to Rhea Lana Rhiner (Aug. 26,
2013), J.A. 23. The letter noted that Rhea Lana had agreed to
pay back wages to thirty-nine managers it had been treating as
volunteers, but that the company “refuse[d] to comply” with
respect to the consignor-volunteers. Id. In a paragraph of
particular significance for this appeal, the letter continued:
We would like to direct your attention to section 16(e)
of the FLSA and Regulations, Part 578. As you will
note, section 16(e) provides for the assessment of a
civil money penalty for any repeated or willful
violations of [the FLSA’s minimum-wage and
overtime requirements], in an amount not to exceed
$1,100 for each such violation. No penalty is being
assessed as a result of this investigation. If at any
time in the future your firm is found to have violated
the monetary provisions of the FLSA, it will be
subject to such penalties.
Id.
As DOL explained in its letter to consignor-volunteers, it
had decided to conclude the matter by putting the company on
notice and taking no “further action.” Letter from Robert A.
Darling to Rhea Lana Consignor-Volunteers (Aug. 6, 2013),
J.A. 21. Rhea Lana filed suit against DOL under the
Administrative Procedure Act (APA), 5 U.S.C. § 706(2)(A),
challenging the agency’s determination that Rhea Lana’s
consignor-volunteers are employees under the FLSA. Rhea
Lana sought a declaration that those workers are not
5
employees and an injunction barring DOL from further
investigations or enforcement proceedings flowing from the
agency’s determination.
The agency moved to dismiss, contending that Rhea Lana
lacks standing and that the challenged letters are not final
agency action subject to APA challenge. The district court
held that the company has standing, but that the challenged
agency action is non-final. The court reasoned that the letters
here are indistinguishable from other statements of agency
legal opinion that this court has found non-final, such that
“D.C. Circuit precedent forecloses APA review of the DOL
letters at issue.” Rhea Lana, Inc. v. U.S. Dep’t of Labor, 74 F.
Supp. 3d 240, 245-46 (D.D.C. 2014); see id. at 244-45 (citing
AT&T Co. v. EEOC, 270 F.3d 973, 976 (D.C. Cir. 2001);
Indep. Equip. Dealers Ass’n v. EPA, 372 F.3d 420, 427 (D.C.
Cir. 2004); Reliable Automatic Sprinkler Co. v. Consumer
Prod. Safety Comm’n, 324 F.3d 726, 731 (D.C. Cir. 2003)).
Rhea Lana timely appealed.
II.
We review the district court’s dismissal de novo.
Reliable Automatic Sprinkler Co., 324 F.3d at 731. Agency
action is final, as it must be before we may review it here, 5
U.S.C. § 704, if it satisfies two conditions: “First, the action
must mark the consummation of the agency’s decisionmaking
process . . . . And second, the action must be one by which
rights or obligations have been determined, or from which
legal consequences will flow.” Bennett v. Spear, 520 U.S.
154, 177-78 (1997) (internal quotation marks and citations
omitted).
The parties have narrowed the question at issue in two
ways. First, DOL has conceded the first finality requisite: the
letters completed the agency’s decisionmaking on the
6
consignor-volunteers’ status as employees. See Mem. in
Supp. of Mot. to Dismiss 9 n.2, J.A. 65; Oral Arg. Rec. 31:50-
32:04. Second, Rhea Lana has clarified that its finality
contention is limited to the agency’s August 26 letter to the
company. See, e.g., Rhea Lana Br. 3, 8-10; Oral Arg. Rec.
12:38-13:04. Accordingly, the sole question before us is
whether DOL’s August 26 letter (hereinafter, the Letter)
satisfies the second finality requisite—that is, whether the
Letter (a) determines rights or obligations or (b) creates legal
consequences.
Rhea Lana says the Letter both determines obligations
and creates legal consequences; either would suffice. The law
in this area is hardly crisp. Our finality precedent lacks many
“self-implementing, bright-line rule[s],” given the
“pragmatic” and “flexible” nature of the inquiry as a whole.
Nat’l Ass’n of Home Builders v. U.S. Army Corps of Eng’rs,
417 F.3d 1272, 1279 (D.C. Cir. 2005) (internal quotation
marks omitted); see U.S. Army Corps of Eng’rs v. Hawkes
Co., No. 15-290, 136 S. Ct. ___, ___, slip op. at 7 (U.S. May
31, 2016) (noting “the pragmatic approach we have long
taken to finality” (internal quotation marks omitted)). And
“rights or obligations” and “legal consequences” may have
some analytic overlap. See, e.g., Appalachian Power Co. v.
EPA, 208 F.3d 1015, 1022-23 (D.C. Cir. 2000). We are
assisted in this case by comparison of Rhea Lana’s
predicament to that of the plaintiffs in Sackett v. EPA, 132 S.
Ct. 1367 (2012)—a case that, as we explain, provides helpful
guideposts in discerning finality.
The company casts this case as the spitting image of
Sackett, in which the Supreme Court found the challenged
agency action to be final. The Court in Sackett considered the
finality of an Environmental Protection Agency (EPA)
administrative compliance order issued against the Sacketts,
7
Idaho landowners who had, without seeking a dredge-and-fill
permit under the Clean Water Act, filled part of their land
with dirt and rock in preparation for building a house there.
Id. at 1370. EPA responded with an order explaining that the
Sacketts’ property contained wetlands under federal law, and
that the Sacketts’ unpermitted filling activities violated the
Act. Id. at 1370-71.
The Court concluded that the EPA order under review
“ha[d] all of the hallmarks of APA finality.” Id. at 1371. The
order directed the Sacketts “immediately to undertake
activities to restore” the property, and to provide EPA with
access to the site and related records. Id. (internal quotation
marks, alteration, and citations omitted). It “determined
rights or obligations” by giving the Sacketts “the legal
obligation to restore their property . . . and [to] give the EPA
access to their property and to records and documentation
related to the conditions at the Site.” Id. (internal quotation
marks and citation omitted). And, the Court concluded, “legal
consequences . . . flow[ed]” from the order because, among
other things, “the order expose[d] the Sacketts to double
penalties in a future enforcement proceeding”—one set of
penalties for violation of the Clean Water Act, and one for
violation of the compliance order itself. Id. at 1370, 1372.
Tracking Sackett, Rhea Lana contends the Department’s
Letter is functionally equivalent to the EPA’s order in both
regards. It casts the Letter as an order to comply that thus
determined rights and obligations, and it asserts that legal
consequences flow from the Letter because it renders the
company vulnerable to future action for civil penalties. We
agree only with the second contention.
8
A.
The Letter here, unlike the EPA compliance order in
Sackett, created no new legal obligations beyond those the
FLSA already imposed. The EPA compliance order
commanded action to mitigate the violation the Sacketts
already had committed, specifying actions the Sacketts
“shall . . . undertake” in accordance with an attached
Restoration Work Plan, and dictating deadlines by which they
must do so. See Sackett Compliance Order ¶¶ 2.1-2.13,
J.A. 127-29. That order contained formal and detailed
findings of fact, concluded as a legal matter that the Sacketts
had violated and were continuing to violate the Clean Water
Act, and spoke in mandatory terms. Id. ¶¶ 1.1-.13, 2.1-.14,
J.A. 125-29. EPA’s cover letter likewise emphasized the
mandatory and immediate requirements of the agency’s order.
See Letter from Michelle Pirzadeh to Chantell & Michael
Sackett (Nov. 26, 2007), J.A. 123 (noting that the order
“requires you to perform specified restoration activities and
provide certain specified information”).
Unlike the detailed terms imposed by EPA’s order in
Sackett, the Labor Department’s Letter to Rhea Lana
expressed the agency’s “understanding that [Rhea Lana]
refuse[s] to comply” with the Department’s back-pay
determination. Letter from Robert A. Darling to Rhea Lana
Rhiner (Aug. 26, 2013), J.A. 23. The Letter restated directly
to Rhea Lana the Department’s longstanding view that
employees of for-profit entities are subject to the FLSA’s
wage-and-hour provisions, and do not qualify for volunteer
status. Id.; see J.A. 19-47 (advisory opinions, letters, and
other agency publications confirming Department’s
longstanding interpretation of volunteer provisions). The
Letter thus gave Rhea Lana the opportunity to take
responsibility for bringing its operations into compliance; it
9
created no new obligation on Rhea Lana that the company did
not already bear under the FLSA. Without more, the
Department’s “Letter tread no new ground. It left the world
just as it found it.” See Indep. Equip. Dealers Ass’n, 372 F.3d
at 428.
In that way, the Department’s Letter resembled, not the
Sackett compliance order, but “the type of workaday advice
letter that agencies prepare countless times per year in dealing
with the regulated community.” Id. at 427 (internal quotation
marks and citation omitted); see Holistic Candlers &
Consumers Ass’n v. FDA, 664 F.3d 940, 945 n.6 (D.C. Cir.
2012). Agencies routinely use such letters to warn regulated
entities of potential violations before saddling them with
expensive and demanding enforcement actions. Treating such
reminders of regulated parties’ legal obligations as final and
judicially reviewable agency action would discourage their
use, “quickly muzzl[ing] . . . informal communications
between agencies and their regulated communities . . . that are
vital to the smooth operation of both government and
business.” Indep. Equip. Dealers Ass’n, 372 F.3d at 428. For
purposes of the rights-and-obligations inquiry, the Letter is
just like other forms of informal agency advice that we have
time and again treated as unreviewable.
B.
The heart of this case is Rhea Lana’s second argument—
that legal consequences flow from the Letter because it makes
Rhea Lana eligible for civil penalties in any future
enforcement action. Among the enforcement mechanisms the
FLSA authorizes is DOL’s assessment of civil penalties for
certain “willful” violations of the Act’s minimum-wage or
10
overtime provisions. 29 U.S.C. § 216(e)(2).1 Rhea Lana
argues that, as a direct result of the notice provided to it by the
Letter, the Department may treat its continued nonpayment of
consignor-volunteers as a willful violation of DOL’s
regulations, thereby subjecting the company to civil penalties.
That new exposure to civil penalties, Rhea Lana maintains,
constitutes a legal consequence that renders the Letter final
agency action.2 DOL counters that Rhea Lana misreads the
agency’s regulation and misunderstands finality. For the
reasons set forth below, we agree with Rhea Lana.
The FLSA provides that employers that willfully violate
the Act’s minimum-wage or overtime provisions “shall be
subject to a civil penalty not to exceed $1,100 for each such
violation.” 29 U.S.C. § 216(e)(2). The Department of Labor
promulgated 29 C.F.R. § 578.3 to flesh out, among other
1
The statute provides for civil penalties for repeated as well as for
willful violations, and Rhea Lana contends that the Letter also
exposes it to penalties as a repeated violator in future enforcement
proceedings. As we base our conclusion here on the potential for
willful-violations penalties, we need not consider the Letter’s
possible consequences with respect to repeated-violation penalties.
2
The focus of this litigation has been the Letter’s implications for
civil penalty assessment, but a finding of willfulness may
precipitate additional legal consequences. The statute of limitations
for a civil action against an employer is generally two years, but a
civil action challenging a willful violation may be brought within
three years. See 29 U.S.C. § 255(a). And, because courts have
discretion to deny liquidated damages only where an employer can
show its conduct “was in good faith and that [it] had reasonable
grounds for believing that [its] act or omission was not a [statutory]
violation,” id. § 260, a court faced with a willful violation may be
required to award liquidated damages.
11
things, what constitutes a willful violation.3 See Minimum
Wage and Overtime Violations; Civil Money Penalties, 57
Fed. Reg. 49,128 (Oct. 29, 1992). Subsection (c)(1) of that
regulation dictates that a violation “shall be deemed to be
‘willful’ . . . where the employer knew that its conduct was
prohibited by the Act or showed reckless disregard for the
requirements of the Act.” 29 C.F.R. § 578.3(c)(1).
Subsection (c)(2), in turn, provides that “conduct shall be
deemed knowing, among other situations, if the employer
3
The regulation’s willfulness provision states in full:
(c) Willful violations.
(1) An employer’s violation of section 6 or section 7 of
the Act shall be deemed to be “willful” for purposes of
this section where the employer knew that its conduct
was prohibited by the Act or showed reckless disregard
for the requirements of the Act. All of the facts and
circumstances surrounding the violation shall be taken
into account in determining whether a violation was
willful.
(2) For purposes of this section, an employer’s conduct
shall be deemed knowing, among other situations, if the
employer received advice from a responsible official of
the Wage and Hour Division to the effect that the
conduct in question is not lawful.
(3) For purposes of this section, an employer’s conduct
shall be deemed to be in reckless disregard of the
requirements of the Act, among other situations, if the
employer should have inquired further into whether its
conduct was in compliance with the Act, and failed to
make adequate further inquiry.
29 C.F.R. § 578.3(c).
12
received advice from a responsible official of the Wage and
Hour Division to the effect that the conduct in question is not
lawful.” Id. § 578.3(c)(2).
In its Letter to Rhea Lana, the Department recounted the
regulation’s provision for repeated or willful violations of
minimum wage or overtime obligations, advising that,
although “[n]o penalty is being assessed as a result of this
investigation,” Rhea Lana “will be subject to [the FLSA’s]
penalties” if it “at any time in the future . . . is found to have
violated the monetary provisions of the FLSA.” Letter from
Robert A. Darling to Rhea Lana Rhiner (Aug. 26, 2013),
J.A. 23. Thus, if Rhea Lana continued not to pay consignor-
volunteers after it received the agency’s Letter, its conduct
would constitute a willful violation under that regulation, at
least as the agency interpreted it in the Letter.
The parties agree that Darling was “a responsible
official” within the meaning of the regulation. Oral Arg. Rec.
8:15-24 (Rhea Lana); id. at 17:55-59 (DOL). And there is no
dispute that the Letter contains “advice” that Rhea Lana’s
non-payment of consignor-volunteers was “not lawful.” 29
C.F.R. § 578.3(c)(2). The parties now part ways over the
meaning of the regulation’s reference to violations that “shall
be deemed” to be willful. Id. The regulation uses “the
mandatory ‘shall’ [which] . . . normally creates an obligation
impervious to judicial discretion.” Shapiro v. McManus, 136
S. Ct. 450, 454 (2015) (internal quotation marks and citation
omitted); see Cook v. FDA, 733 F.3d 1, 7 (D.C. Cir. 2013)
(citing “case law [that] provides ample support” for the
principle that “the ordinary meaning of ‘shall’ is ‘must’”
(internal quotation marks omitted)). The regulation’s
statement that conduct “shall be deemed knowing,” 29 C.F.R.
§ 578.3(c)(2), and thus willful, id. § 578.3(c)(1), upon a
showing of unheeded prior advice from a responsible official
13
appears to require a finding of willfulness in a case like this
one.
The exposure to willful-violation penalties apparently
resulting from receipt of such advice would be a legal
consequence within the meaning of Bennett v. Spear, just as
exposure to double penalties made EPA’s compliance order
legally consequential in Sackett. The Supreme Court’s
decision this week in Hawkes further supports that result.
There, the Court concluded that jurisdictional determinations
issued by the Army Corps of Engineers have legal
consequences under Bennett, because negative jurisdictional
determinations “limit[] the potential liability a landowner
faces for discharging pollutants without a permit,” while
positive determinations “den[y] . . . [a] safe harbor” from
administrative enforcement proceedings. Hawkes Co., 136 S.
Ct. at ___, slip. op. at 7. The DOL letter at issue here, like the
jurisdictional determination in Hawkes, has the kind of “direct
and appreciable legal consequences” on potential liability that
count for purposes of finality. Id. at 6 (internal quotation
marks omitted).
The Department urges a different reading of § 578.3(c),
however, arguing that subsection (c)(2)’s mandate is tempered
by subsection (c)(1)’s directive to consider “all facts and
circumstances,” such that unheeded advice is just one
circumstance that may be considered in evaluating—but is not
dispositive of—willfulness. The Department contends—for
the first time at oral argument—that we owe deference to its
current reading of the regulation. Oral Arg. Rec. 36:05-12.
As a general matter, an agency’s interpretation of its own
regulation is “controlling unless ‘plainly erroneous or
inconsistent with the regulation.’” Auer v. Robbins, 519 U.S.
452, 461 (1997) (quoting Robertson v. Methow Valley
Citizens Council, 490 U.S. 332, 359 (1989)). But “this
14
general rule does not apply in all cases.” Christopher v.
SmithKline Beecham Corp., 132 S. Ct. 2156, 2166 (2012).
Such deference is unwarranted “when it appears that the
interpretation is nothing more than a convenient litigating
position, or a post hoc rationalization advanced by an agency
seeking to defend past agency action against attack.” Id.(internal quotation marks, alteration, and citations omitted).
The Department concedes that, before this case, it had not
taken the position that unheeded advice should be treated as
merely one piece of evidence in a totality-of-circumstances
inquiry regarding willfulness. Oral Arg. Rec. 34:34-39,
35:21-38; see, e.g., 57 Fed. Reg. at 49,129 (“It is the view of
the Department that where an employer acts contrary to
advice that the employer has received from the Wage and
Hour Division, such action cannot be deemed merely
negligent, but rather constitutes a willful act.”). In this very
case the Department informed Rhea Lana that its advice
sufficed to trigger willfulness penalties. See Letter from
Robert A. Darling to Rhea Lana Rhiner (Aug. 26, 2013),
J.A. 23. And, despite the First Circuit’s “urg[ing]” that the
Department alter its regulation to adopt the position it presses
here, see Baystate Alt. Staffing, Inc. v. Herman, 163 F.3d 668,
681 n.16 (1st Cir. 1998), the Department has not done so.
Accordingly, the interpretation the Department presents in
this litigation does not qualify for Auer deference.
Contrary to the Department’s position in this appeal, the
regulation’s “interrelated and closely positioned” provisions
are most readily harmonized by treating the specific directive
in subsection (c)(2) as “control[ling] over [the] general
provision” of subsection (c)(1). HCSC-Laundry v. United
States, 450 U.S. 1, 6 (1981). While all facts and
circumstances ordinarily should be considered, the regulation
specifies that a particular circumstance—an unheeded agency
15
warning—itself reflects willful misconduct. See Davila v.
Menendez, 717 F.3d 1179, 1185 (11th Cir. 2013) (“An
employer knowingly violates the Act if he disregards the
minimum wage laws deliberately or intentionally . . . such as
by ignoring ‘advice from a responsible official . . . that the
conduct in question is not lawful.’” (quoting 29 C.F.R.
§ 578.3(c)(2)) (additional citation omitted)); see also W. Ill.
Home Health Care, Inc. v. Herman, 150 F.3d 659, 663 (7th
Cir. 1998). But see Baystate, 163 F.3d at 680-81.
The Department also argues that treating notice as
dispositive of willfulness is inconsistent with the Supreme
Court’s decision in McLaughlin v. Richland Shoe Co., 486
U.S. 128, 133 (1988). In support, the Department cites an
“incongruity” the First Circuit identified between Richland
Shoe’s willfulness standard, and subsection (c), on the ground
that the latter—at least as Rhea Lana reads it here—
“precludes legitimate disagreement between a party and the
Wage and Hour Division about whether the party is an
employer covered by the Act.” Baystate, 163 F.3d at 680.
Whether the First Circuit’s position ultimately prevails on its
merits, it is not dictated by Richland Shoe. The Court in
Richland Shoe rejected a willfulness standard for statute-of-
limitations purposes “that merely require[d] that an employer
knew that the FLSA was in the picture” in favor of a reading
of “willful” that required “that the employer either knew or
showed reckless disregard for the matter of whether its
conduct was prohibited by the statute.” 486 U.S. at 132-33(internal quotation marks and citation omitted). But that latter
standard is precisely the one the Department of Labor appears
to have adopted in its general definition of willfulness in
subsection (c)(1), at issue here. An employer who has
received advice from DOL that its conduct in particular
violates the FLSA certainly knows more than just that the
FLSA is “in the picture.”
16
In deciding that the Department’s action is final,
however, we need not opine definitively on § 578.3(c)’s
meaning. It suffices for present purposes that the regulation is
capable of a reading rendering the Letter a stand-alone trigger
for willfulness penalties and that, notwithstanding its contrary
position in this appeal, the Department took that view in its
Letter to Rhea Lana; it gave no indication that other facts and
circumstances could mitigate the stated effect of the
company’s receipt of the Letter. See Letter from Robert A.
Darling to Rhea Lana Rhiner (Aug. 26, 2013), J.A. 23. In
Sackett, the Court likewise found a legal consequence where
the Government took the position that the order at issue
“exposes the Sacketts to double penalties in a future
enforcement proceeding,” 132 S. Ct. at 1372, without
“decid[ing] . . . that the Government’s position is correct, but
assum[ing] the consequences of the order to be what the
Government asserts,” id. at 1372 n.2. We can take the
Department at its word to the regulated party that § 578.3(c)
renders the Letter legally consequential, leaving the parties to
litigate on remand the merits of the regulation’s import. Cf.
W. Ill. Home Health Care, Inc., 150 F.3d at 663 (holding
DOL advice letter final where letter “warned that [companies]
would be treated either as recidivists or as willful violators if
they failed in the future to comply with the legal ruling
contained in the letter, thus subjecting them to penalties”).
Finally, the Department suggests that penalties are too
contingent to constitute the type of legal consequence
necessary to confer finality. The Letter itself does not assess
penalties; in order for the agency to do so, it would have to
(a) bring a civil action against Rhea Lana, and (b) persuade
the adjudicator that Rhea Lana violated the FLSA. But that is
the situation the Supreme Court confronted in deeming the
order at issue in Sackett to have legal consequences: the
Sacketts “could be subjected to monetary sanctions for
17
violating the order only if (a) EPA commenced [an]
enforcement action against petitioners, and (b) the court in
that suit determined that [the] petitioners had violated the
[Clean Water Act] as well as the order.” Brief for the
Respondents at 11, Sackett, 132 S. Ct. 1367 (No. 10-1062),
2011 WL 5908950, at *11. The possibility that the agency
might not bring an action for penalties or, if it did, might not
succeed in establishing the underlying violation did not rob
the administrative order in Sackett of its legal consequences,
nor does it do so here. See Sackett, 132 S. Ct at 1372. By
rendering Rhea Lana a candidate for civil penalties, the
Department’s Letter establishes legal consequences and is,
accordingly, final agency action.
The Seventh Circuit reached the same conclusion in
reviewing a similar Department of Labor letter, see W. Illinois
Home Health Care, Inc., 150 F.3d at 663, and that holding is
consistent with our own finality precedent. To be sure, we
have repeatedly held that agency action is not final if the
adverse effects of the action depend “on the contingency of
future administrative action.” DRG Funding Corp. v. Sec’y of
Hous. & Urban Dev., 76 F.3d 1212, 1214 (D.C. Cir. 1996)
(internal quotation marks and citation omitted); see also Am.
Airlines, Inc. v. Transp. Sec. Admin., 665 F.3d 170, 174 (D.C.
Cir. 2011); Fund for Animals, Inc. v. U.S. Bureau of Land
Mgmt., 460 F.3d 13, 22 (D.C. Cir. 2006). None of those
cases, however, involved a regulation that the agency read to
invest challenged agency action with legal effect. Even
without future administrative enforcement, the Letter,
together with subsection (c)(2), may have already rendered
Rhea Lana susceptible to civil penalties for violations that, in
the absence of the Letter, could be treated as non-willful and
ineligible for any such penalties.
18
***
For the foregoing reasons, we reverse the order of the
district court and remand for further proceedings.
So ordered.