February 11, 2016 Articles

Pennsylvania Companies Are Allowed to Seek Pre-Enforcement Declaratory Relief

The state supreme court's decision potentially changes the legislative and rulemaking processes in the state and materially changes the settlement negotiation posture for businesses.

By Kenneth S. Komoroski, Matthew H. Sepp, and Daniel Carmeli – February 11, 2016

For decades, businesses (aka the regulated community) in Pennsylvania have operated on the premise that there is no “pre-enforcement review” of Pennsylvania’s statutes and regulations. Companies would have to await formal enforcement actions in order to “have their day in court.” On December 29, 2015, the Pennsylvania Supreme Court changed that premise. Convinced by the arguments that the circumstances were analogous to those before the Supreme Court of the United States in Sackett v. EPA, 132 S. Ct. 137 (2012), the court ruled that, where a government agency regards a company as committing ongoing statutory violations, the company need not await enforcement or exhaust its administrative remedies with regard to potential enforcement and threats of penalties. Instead, the company may immediately file a declaratory judgment action to address the threat.

Thus, the Pennsylvania Supreme Court’s holding permits companies to seek declaratory relief before an agency takes a final action and to do so as early as when the government agency expresses a position that “would have adverse, direct, and immediate effects upon salient rights or interest.” The decision, as discussed below, alters the business landscape—potentially affecting the legislative and rulemaking processes and materially changing the negotiating posture for Pennsylvania businesses faced with a threat of enforcement.

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