Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-akd-3_15-cv-00021/USCOURTS-akd-3_15-cv-00021-1/pdf.json

Nature of Suit Code: 893
Nature of Suit: Environmental Matters
Cause of Action: 33:1365 Environmental Matters

---

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ALASKA

SCOTT W. WALTHER and PIONEER )

RESERVE, L.L.C., )

)

Plaintiffs, ) 

)

) 

vs. ) 

)

UNITED STATES OF AMERICA, et al., )

)

Defendants, )

) No. 3:15-cv-0021-HRH

and )

) 

THE SU-KNIK MITIGATION BANK and )

SU-KNIK ENVIRONMENTS, LLC, ) 

) 

Intervenor-Defendants. )

__________________________________________) 

O R D E R

Motions to Dismiss

Defendant United States of America, on behalf of the U.S. Army Corps of Engineers,

moves to dismiss plaintiffs’ second amended complaint.1 This motion is opposed.2

1Docket No. 95. 

2Docket No. 98. 

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Case 3:15-cv-00021-HRH Document 103 Filed 11/09/15 Page 1 of 13
Intervenor-defendants also move to dismiss plaintiffs’ second amended complaint.3 This

motion is opposed.4 Oral argument has not been requested and is not deemed necessary. 

Background

Plaintiffs are Scott W. Walther and Pioneer Reserve, L.L.C. Defendants are the

United States of America and Christopher D. Lestochi, Colonel, District Commander, U.S.

Army Corps of Engineers, Alaska District. Intervenor-defendants are The Su-Knik

Mitigation Bank and Su-Knik Environments, LLC. 

“Under the [Clean Water Act (CWA)], ‘any discharge of dredged or fill materials

into ... waters of the United States [] is forbidden unless authorized by a permit issued by

the Corps of Engineers pursuant to’ Section 404 of the CWA[.]” Fairbanks N. Star Borough

v. U.S. Army Corps of Engineers, 543 F.3d 586, 589 (9th Cir. 2008) (quoting Leslie Salt Co.

v. United States, 55 F.3d 1388, 1391 (9th Cir. 1995)). “In issuing § 404 permits, the Corps

must comply with the § 404(b)(1) Guidelines..., which are promulgated by the EPA

pursuant to 33 U.S.C. § 1344(b)(1), and incorporated by the Corps into its own regulations.” 

Kentuckians for Commonwealth v. U.S. Army Corps of Engineers, 963 F. Supp. 2d 670, 676

(W.D. Ky. 2013). “Under the Corps’ CWA Guidelines, a § 404 permit cannot issue ‘unless

appropriate and practicable steps have been taken which will minimize potential adverse

3Docket No. 96. 

4Docket No. 99. 

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impacts of the discharge [of fill material] on the aquatic ecosystem.’” Ohio Valley

Environmental Coalition v. Aracoma Coal Co., 556 F.3d 177, 202 (4th Cir. 2009) (quoting

40 C.F.R. § 230.10(d)). The EPA and Corps have made “‘no overall net loss’ the goal of the

§ 404 regulatory program and agree that mitigation has three components: avoidance,

minimization, and compensatory mitigation.” Id. (citation and footnote omitted). 

“Avoidance is defined as the selection of the least environmentally damaging practical

alternative.” Id. “Minimization is achieved through practicable project modifications and

permit conditions that minimize adverse impacts.” Id. “Finally, compensatory mitigation

is used where appropriate to compensate for unavoidable adverse impacts after all

avoidance and minimization measures have been taken.” Id. 

“On March 31, 2008, the EPA and the Corps issued revised regulations governing

compensatory mitigation for authorized impacts to wetlands, streams, and other waters

of the United States under CWA Section 404....” Kentuckians for Commonwealth, 963 F.

Supp. 2d at 676. Plaintiffs refer to these regulations as the “Final Rule.” “Permit

applicants are responsible for proposing an appropriate compensatory mitigation option

to offset unavoidable impacts.” 33 C.F.R. § 332.3(a)(1). The district engineerthen evaluates

the proposal. Id. 

When evaluatingcompensatory mitigation options, the district

engineer will consider what would be environmentally

preferable. In making this determination, the district engineer

must assess the likelihood for ecological success and

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Case 3:15-cv-00021-HRH Document 103 Filed 11/09/15 Page 3 of 13
sustainability, the location of the compensation site relative to

the impact site and their significance withinthe watershed, and

the costs of the compensatory mitigation project.

Id. Permissible mitigation methods include restoration, enhancement, establishment, and

preservation. Id. § 332.3(a)(2). When preservation is used as the method of mitigation,

certain criteria must be met, including that the resources to be preserved must be “under

threat of destruction or adverse modifications[.]” Id. § 332.3(h)(iv). 

Compensatory mitigation can be accomplished in one of three ways: 1) mitigation

banks, 2) in-lieu fee programs, or 3) permittee-responsible mitigation, with the use of

mitigation banks being the preferred method. Id. § 332.3(b). However, this preference

“does not override a district engineer’s judgment as to what constitutes the most

appropriate and practicable compensatory mitigation based on consideration of

case-specific circumstances.” 73 Fed. Reg. 19,594, 19,628 (April 10, 2008). 

“A mitigation bank is an offset of preserved and restored wetlands used to

compensate for the environmental impact of more destructive land use.” Hearts Bluff

Game Ranch, Inc. v. United States, 669 F.3d 1326, 1327 (Fed. Cir. 2012). “Landowners can

apply for mitigation banking instruments to participate in the program, and then can sell

credits under the instrument to developers to offset environmentally destructive projects

covered by section 404 permits under the Clean Water Act.” Id. “The Corps is in charge

of the mitigation banking program and it has issued regulations to establish procedures for

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Case 3:15-cv-00021-HRH Document 103 Filed 11/09/15 Page 4 of 13
granting instruments for mitigation banks.” Id.

Any private or public entity (referred to as a sponsor) may propose to establish a

mitigation bank. 33 C.F.R. § 332.2. The “[m]itigation banking instrument” [MBI] is the

“legal document for the establishment, operation, and use of a mitigation bank.” Id. The

sponsor must propose properties forthe mitigation bank site, which are then incorporated

into the MBI. Id. § 332.8(d)(1). 

Plaintiffs allege that Walther purchased land in the Mat-Su Borough which was

suitable for development and that the Corps encouraged him to encumber his land with

perpetual easements rather than develop it.5 More specifically, plaintiffs allege that “[t]he

Corps assured Walther that it would require the [Alaska Railroad] to buy compensatory

mitigation in the form of mitigation bank credits from a mitigation bank site to be

established by Walther on a part of the Land, if and when the PMRE [Port McKenzie Rail

Extension] project was issued a CWA § 404 permit.”6 Plaintiffs allege that “[f]ollowing

these assurances, Walther formed and became an owner of Pioneer [Reserve L.L.C.], and

Pioneer entered into a mitigation bank agreement (‘the Contract’) with the Corps.”7

“The

Contract created a wetland mitigation bank known as the Pioneer Reserve Mitigation

5

Second Amended Complaint at 6, ¶¶ 32-34, Docket No. 94. 

6

Id. at 7, ¶ 39. 

7

Id. at ¶ 40. 

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Bank.”8

“Following full execution of the Contract, the Land was conveyed to Pioneer” and

“Pioneer proceeded to record perpetual conservation easements on [the] Land and paid ...

$140,000[] to a third-party non-profit organization, as a ‘financial assurance’ to ensure

Pioneer’s ongoing performanceundertheContract.”

9

“AfterPioneer encumbered the Land

with perpetual conservation easements, ... Pioneer was awarded wetlandmitigationcredits

that it could sell to CWA § 404 permittees in orderto satisfy their compensatory mitigation

needs.”10 Plaintiffs allege, however, that 

after Pioneer performed all of its obligations under the Contract, including encumbering the Land with conservation

easements, and despite the fact that Pioneer’s mitigation

banking credits were the highest ranked ecologically preferred

compensatory mitigation available, rather than require the

[Alaska Railroad] to satisfy its compensatory mitigation needs

by purchasing Pioneer’s mitigation banking credits, the Corps

required the [Railroad] to buy ‘invalid’ banking credits from

the Su-Knik Mitigation Bank....[11]

The Mat-Su Borough is the sponsor of the Su-Knik Mitigation Bank.12“The Corps

awarded Su-Knik’s mitigation banking credits based on the Borough recording a

8

Id. at ¶ 41. 

9

Id. at ¶¶ 42-43. 

10

Id. at ¶ 45. 

11

Id. at 8, ¶ 48. 

12

Id. at 11, ¶ 78. 

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Case 3:15-cv-00021-HRH Document 103 Filed 11/09/15 Page 6 of 13
conservation easement on a Borough-owned property known as the Fish Creek Parcel.”13

Plaintiffs allege that “[t]he Fish Creek Parcel was not under any threat of destruction or

adverse modifications whatsoever when it was encumbered by a conservation easement

and contributed into Su-Knik.”14 Thus, plaintiffs contend that Su-Knik’s banking credits

were not valid. Plaintiffs allege that the Corps has issued seventeen § 404 permits for

which compensatory mitigation was “provided by the purchase of Su-Knik’s invalid

credits.”15

Plaintiffs allege that “Pioneer’s economic interest in its mitigation bank credits was,

and continues to be, damaged and Pioneer is adversely affected and aggrieved, when the

Corps fails to require offsetting compensatory mitigation for permitted impacts to [waters

of the United States] in compliance with the non-discretionary requirements of the Final

Rule.”16 Plaintiffs also allege that “Walther has suffered economic injury, and faces the

imminent threat of continuing,irreparable economic injury, as a direct and proximate result

of the Corps’ failure to perform its non-discretionary duties” under the Final Rule.17

Plaintiffs further allege that “[t]he Corps’ award of mitigation bank credits to the Su-Knik

13

Id. at 12, ¶ 83. 

14

Id. at ¶ 84. 

15

Id. at 13, ¶ 97. 

16

Id. at 14, ¶ 103. 

17

Id. at 3-4, ¶ 15. 

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Case 3:15-cv-00021-HRH Document 103 Filed 11/09/15 Page 7 of 13
Mitigation bank, without complying with the non-discretionary requirements of the Final

Rule, adversely affected Pioneer’s economic interest in its mitigation bank credits and

Walther’s economic interest in his ownership interest in Pioneer.”18

In their second amended complaint, plaintiffs assert a single APA claim.19In their

prayer for relief, they ask that the court

(1) find that the Corps’ alleged actions violated the APA, the

CWA, and the CWA’s implementing regulations, including the

Final Rule, (2) find that Su-Knik’s mitigation bank credits are

invalid and were not awarded in compliance with the Final

Rule, (3) order the Corps to cause the sponsor of the Su-Knik

Mitigation Bank, the Matanuska-Susitna Borough, to provide

compensatory mitigation,incompliance with the Final Rule for

all mitigation credits previously soldbythe Su-Knik Mitigation

Bank that has been awarded in violation of the Final Rule, (4)

orderthe Corps to comply with the non-discretionary requirements of the Final Rule as it issues CWA § 404 permits, and (5)

grant such further relief as this cause merits. 

Defendants and intervenor-defendants (referred to colletively as “defendants”

hereinafter) now move to dismiss plaintiffs’ second amended complaint on the grounds

that plaintiffs lack standing to bring their APA claim.

18

Id. at 6, ¶ 31. 

19Walther’s first amendedcomplaint wasdismissed but he was given leave to amend

to address a statute of limitations problem with his APA claim. Docket No. 93. Plaintiffs’

second amended complaint, on its face, cures the statute of limitations problem with the

APA claim. 

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Discussion

“Under Rule 12(b)(1)” of the Federal Rules of Civil Procedure, “a court may dismiss

a complaint for lack of subject matter jurisdiction if the plaintiff cannot satisfy the standing

requirements set by Article III of the U.S. Constitution.” Brod v. Sioux Honey Ass’n Co-op.,

895 F. Supp. 2d 972, 974 (N.D. Cal. 2012) (citing Chandler v. State Farm Mut. Auto. Ins. Co.,

598 F.3d 1115, 1121–22 (9th Cir. 2010)). “‘A jurisdictional challenge underRule 12(b)(1) may

be made either on the face of the pleadings or by presenting extrinsic evidence.’” Id.

(quoting Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003)). 

Because defendants are making a facial challenge here, “the [c]ourt must accept all

allegations of fact in the complaint as true.” Id. at 974-75. 

“Standing to bring suit in federal court under Article III is an ‘irreducible constitutional minimum’ consisting of three elements: injury in fact, causation, and redressability.” 

El Dorado Estates v. City of Fillmore, 765 F.3d 1118, 1121 (9th Cir. 2014) (quoting Lujan v.

Defenders of Wildlife, 504 U.S. 555, 560–61 (1992)). “As the parties invoking federal

jurisdiction, plaintiffs bear the burden of establishing their standing to sue.” San Diego

County Gun Rights Committee v. Reno, 98 F.3d 1121, 1126 (9th Cir. 1996).

Defendants first argue that Walther cannot show that he has suffered an injury in

fact. “An injury in fact is an invasion of a legally protected interest that is both (1) concrete

and particularized and (2) actual or imminent, as opposed to conjectural or hypothetical.” 

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El Dorado Estates, 765 F.3d at 1121. A member of an LLC, such as Walther, does not have

standing to sue on his own for an alleged economic injury caused by a third party to the

LCC. See, e.g., Shell Petroleum, N.V. v. Graves, 709 F.2d 593, 595 (9th Cir. 1983) (“To have

standing to maintain an action, a shareholder must assert more than personal economic

injury resulting from a wrong to the corporation”). “However, a shareholder does have

standing where he or she has been injured directly and independently of the corporation.” 

Soranno’s Gasco, Inc. v. Morgan, 874 F.2d 1310, 1318 (9th Cir. 1989). 

Walther contends that he “has been damaged because the value of the mitigation

bank credits, owned by the mitigation bank in which he invested, has been destroyed by the

[d]efendant’s actions.”20 Walther insists that his personal standing is derived from his

contribution of his land to the LLC and thus he has been injured directly and independently

of Pioneer. 

Assuming without deciding that Walther has adequately alleged an injury infactthat

is independent of any alleged economic injury to Pioneer,

21 neither Walther nor Pioneer

have standing to pursue an APA claim because plaintiffs’ alleged economic injuries are not

20Plaintiffs’ Opposition to Defendant United States of America’s Motion to Dismiss

Second Amended Complaint at 8, Docket No. 98. 

21The court would have jurisdiction even if Walther does not have standing to sue

if Pioneer has standing to sue. See Cetacean Community v. Bush, 386 F.3d 1169, 1174 (9th

Cir. 2004) (“We have jurisdiction if at least one named plaintiff has standing to sue, even

if another named plaintiff in the suit does not”). 

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likely to be redressed by any relief the court might grant. “To establish redressability,

[plaintiffs] must show that it is likely, as opposed to merely speculative, that the injury will

be redressed by a favorable decision.” Bernhardt v. County of Los Angeles, 279 F.3d 862,

869 (9th Cir. 2002). “A claim may be too speculative if it can be redressed only through ‘the

unfettered choices made by independent actors not before the court[].’” Id. (quoting Lujan,

504 U.S. at 560).

Plaintiffs argue that it is likely that their economic injuries will be redressed by a

favorable ruling from this court. Plaintiffs contend that “[t]he essence of the remedy” they

seek “is that the [c]ourt order[the Corps] to comply with the nondiscretionary mandates of

the Final Rule as it administers the CWA Section 404 permitting program.”

22

If the court

orders the Corps to comply with the nondiscretionary mandates of the Final Rule, then

plaintiffs contend that the value of Pioneer’s bank credits will be restored and Walther’s

investment in Pioneer will be protected.

However, it is speculative, at best, that if the court were to find that the Su-Knik

Mitigation Bank credits were invalid because the Corps had not complied with the

requirements of the Final Rule, that plaintiffs’ alleged economic injurieswouldbe redressed. 

Even if Su-Knik Mitigation Bank credits could not be used during the Section 404 permitting

process that does not mean that a permittee would purchase banking credits from Pioneer. 

22Plaintiffs’ Opposition to Defendant United States of America’s Motion to Dismiss

Second Amended Complaint at 11, Docket No. 98. 

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As set out above, a Section 404 permittee is not required to use a mitigation bank to meet

its compensatory mitigation requirements. A Section 404 permittee may elect to use bank

credits for compensatory mitigation, but the permitttee can also use an in-lieu fee program

or it can directly implement compensatory measures at the impact site itself. As even

Walther concedes, if the Su-Knik Mitigation Bank credits cannot be used because they are

invalid, “there is no guarantee Pioneer Reserve’s bank credits will be selected”23 instead.

As plaintiffs point out, they are not required to show that a favorable decision from the

court is sure to redress their injuries, but they must show that it is likely that a favorable

decision will redress theirinjuries. Here, it is not likely that a favorable decision will redress

plaintiffs’ alleged economic injuries because a Section 404 permittee may propose, and the

district engineer may approve, a compensatory mitigation plan that does notinclude theuse

of mitigation banking credits. Because plaintiffs’ alleged economic injuries will not be

redressed by a favorable decision by this court, plaintiffs lack constitutional standing to

bring their APA claim.24

23Plaintiff Scott W. Walther’s Reply to Intervenor-Defendants’ Opposition to his

Motion for Preliminary Injunction at 8, Docket No. 57. 

24Because the court has determined that plaintiffs lack constitutional standing, the

courtneednot address intervenor-defendants’ argument that plaintiffs also lackprudential

standing. The court also need not address defendants’ argument that paragraph 99 of

plaintiffs’ second amended complaint should be dismissed. Because plaintiffs do not have

constitutional standing to pursue their APA claim, the court does not have subject matter

jurisdiction over plaintiffs’ second amended complaint. 

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Conclusion

Based on the foregoing, defendants’ and intervenor-defendants’ motions to dismiss

are granted. Plaintiffs are not given leave to amend. Plaintiffs have already had one

opportunity to attempt to cure the jurisdictional defects in their complaint. See Griggs v.

Pace Amer. Group, Inc., 170 F.3d 877, 879 (9th Cir. 1999) (“the trial court’s discretion” to

deny leave to amend “is particularly broad where, as here, a plaintiff previously has been

granted leave to amend”). Moreover, the deficiencies in plaintiffs’ second amended

complaint cannot be cured by amendment because plaintiffs cannot allege any injury in fact

that could be redressed by a favorable decision by this court. See Lopez v. Smith, 203 F.3d

1122, 1130 (9th Cir. 2000) (explaining that leave to amend should be given unless the

deficiencies in the complaint cannot be cured by amendment). The clerk of court shall enter

judgment dismissing plaintiffs’ second amended complaint with prejudice. 

DATED at Anchorage, Alaska, this 9th day of November, 2015. 

/s/ H. Russel Holland 

United States District Judge

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