ADMINISTRATIVE LAWCASE, SPRING 2011

1/13: What Is Administrative Law and Why Should We Study It?p. 5-21Video: The Regulators

Bureaucratic monster of unnecessary rules vs. necessary to make government run smoothly and without abuse

Finding a key legislator who would help point out the abuse (clean air in national parks) Regulators = enforce the will of the legislatures But must balance government vs. free enterprise Spectrum of interpretations of laws enacted by legislatures To modify legislation: form relationships with other members of Congress and agencies

o But each representative brings its own marching orders from its agency 500 pages of regulation to explain 5 pages of law Compromise: protecting parks, concessions for power plants (states get final say on

integral vista) Final regulation did not solve problems that originally brought about the discussion Lawsuits begin after regulation is passed by agency (arbitrary and capricious)

1/18: A Walk Through the APAp. 22-30

Institutional differential variation: oversight and overlap of multiple agencies Point of regulation is to reduce risk…have to balance with economic incentives

Overview:1. Rulemaking: an agency’s “quasi-legislative” role – creating law to govern future

conducto Quasi-legislative: we say this for constitutional reasons but this is fiction…they

create substantive rules2. Adjudication: an agency’s “quasi-judicial” role – applying existing rules to make

decisions regarding past conduct3. Judicial Review: how may review of rulemaking and adjudicatory action be obtained?

Rulemaking: 5 U.S.C. § 551(5) – “rule making” means agency process for formulating, amending, or

repealing a rule 5 U.S.C. § 551(4) – “rule” means the whole or part of an agency statement of general or

particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of the agency….

o Law will apply broadly and will apply in the futureo Definition recognizes the difference between process and substance

Adjudication: 5 U.S.C. § 551(7) – “adjudication” means agency process for the formulation of an

order

1

5 U.S.C. § 551(6) – “order” means the whole or part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rule making but including licensing

o Everything that is not rulemaking is an order

Three types of rulemaking: informal, formal, and hybrid

Informal Rulemaking:Most rules are made this way!Three-Step Process in 5 U.S.C. § 553:

1. Notice a. 5 U.S.C. § 553(b) – General notice of proposed rule making shall be published in

the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof in accordance with law

b. Two Exceptions to Notice Requirement:i. 5 U.S.C. § 553(b)(3) – Unless notice or hearing is required by statute, this

subsection does not apply…1. to interpretative rules, general statements of policy, or rules of

agency organization, procedure, or practice; or2. when the agency for good cause finds … that notice and public

procedure thereon are impracticable, unnecessary, or contrary to the public interest

2. Comment – a. 5 U.S.C. § 553(c) – After notice required by this section, the agency shall give

interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments with or without opportunity for oral presentation.

b. Written public commentsc. Not required to present live comments (like hearings from video)

3. Publication – a. 5 U.S.C. § 553(d) – The required publication or service of a substantive rule shall

be made not less than 30 days before its effective dateb. 5 U.S.C. § 553(c) – After consideration of the relevant matter presented, the

agency shall incorporate in the rules adopted a concise general statement of their basis and purpose

c. [Both the final rule and statement of basis and purpose appear in the Federal Register]

Formal Rulemaking: 5 U.S.C. § 553(c) – When rules are required by statute to be made on the record after

opportunity for an agency hearing, sections 556 and 557 of this title apply instead of this subsection.

Agency must require formal rulemaking. The italicized language must be in the statute (or close to it).

Hybrid Rulemaking:

2

Congress can, and often does, impose specific rulemaking procedures within specific statutory schemes

These rulemaking procedures may be more detailed than the informal rulemaking procedures of § 553 but less detailed than the formal rulemaking procedures of §§ 556 and 557

Often a mix between formal and informal rulemaking Congress will dictate this in the statutes…always must check the statute to see if they

proscribed a different process than what the APA defaults to

Formal Adjudication: 5 U.S.C. § 554(a) – This section applies … in every case of adjudication required by

statute to be determined on the record after opportunity for an agency hearing…. THIS IS A TRIAL

Informal Adjudication: If formal adjudication under § 554(a) – “adjudication required by statute to be determined

on the record after opportunity for agency hearing” – is not required, informal adjudication (not governed by the APA) may nonetheless be necessary if:a. Statute authorizing agency action requires use of some hearing procedures, orb. Constitutional principles of due process obligate the agency to follow some type of

hearing process (notice and opportunity to be heard--this is more often the case for informal adjudication)

Judicial Review: 5 U.S.C. § 701 – [Judicial review] chapter [of APA] applies … except to the extent that–

o (1) Statutes preclude judicial review; oro (2) Agency action is committed to agency discretion by law

Is not reviewable 5 U.S.C. § 702 – A person suffering legal wrong because of agency action, or adversely

affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.

o This provision can provide constitutional “standing” (i.e., a legal right to review) if another statute does not provide such a right to review of agency action.

Scope of Review: 5 U.S.C. § 706 – The reviewing court shall –o (1) Compel agency action unlawfully withheld or unreasonably delayed; ando (2) Hold unlawful and set aside agency action, findings, and conclusions found to

be— (A) Arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law; (B) Contrary to constitutional right, power, privilege, or immunity; (C) In excess of statutory jurisdiction, authority, or limitations, or short of

statutory right; (D) *Without observance of procedure required by law; (E) Unsupported by substantial evidence in a case subject to sections 556

and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or

3

(F) Unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court

1/20: The Delegation Problem Creation of Agencies

Under the American constitutional system, agencies are creatures of the legislature and function only in so far as a legislature has given them authority to function

o Not mentioned anywhere in the Constitution Thus, a legislature must enact a statute creating an agency (organic or enabling act)

o Exists as long as Congress wants it to existo Authority comes only from Congress

The principle that legislatures create agencies and set limits on their authority by statute is a cardinal rule of administrative law

Constitutional Separation of Powers Art. I, § 1 – vests “all legislative powers” in Congress

o If you read this literally (strict construction), then legislative power is given exclusively to Congress and so the administrative system would be completely unconstitutional under this view

o BUT…administrative agencies operate in a totally legislative manner Art. III, § 1 – vests “judicial power” in the Supreme Court and in such “inferior courts”

as established by Congress Art. II, § 1 – vests “executive power” in the President of the United States

Constitutional Tension Art. I, § 1 – “All legislative powers herein granted shall be vested in … Congress”

o Read literally, the Constitution gives legislative powers exclusively to Congress Art. I, § 8 – Congress has the power “[t]o make all laws which shall be necessary and

proper for carrying into execution” the other powers of Article Io Can be read to allow Congress to authorize other entities to act on its behalf, even

if delegated actions resemble the exercise of legislative power Under a literal reading of Art. I, § 1, any exercise of legislative power by an agency is

unconstitutional However, a very busy Congress has neither the time, resources, or expertise to effectively

or even meaningfully supervise on a day-to-day basis every detail of the functioning of the national government

Thus, under the language of Art. 1, § 8, some delegation of congressional authority is a compelling necessity

See Mistretta v. U.S., 488 U.S. 361, 372 (1989) (“in our increasingly complex society … Congress simply cannot do its job absent an ability to delegate power”)

Overview of Non-Delegation Doctrine Under the Constitution, Congress may delegate its powers to an agency only under

carefully controlled conditions, and those conditions must be expressly set out in the agency’s enabling act

4

Through Supreme Court precedents, this has evolved into the “intelligible principle” requirement -- when Congress delegates decision-making power to the agency, Congress must establish some “intelligible principle” within the language of the statute itself that constrains or limits the agency’s discretion in acting under its particular grant of authority

o Need some constraint on the power of the agency in the statute. If there is not, we have a delegation problem

Whitman v. American Trucking Association DC Circuit : EPA’s interpretation of the statute did not have an intelligible principle to

guide the agency’s exercise of authorityo There is not sufficient limitations and no principle to guide you in order to make

the decision you had to make Supreme Court : cannot cure an unlawful delegation of legislative power by adopting in

its discretion a limiting construction of the statute Key to Non-Delegation Doctrine

o Spotting and resolving the issue of a proper standard – an “intelligible principle” to guide and constrain agency discretion – is a matter of searching the enabling act in question for words that set out a standard [IN THE STATUTE, CANNOT BE IN A REGULATION]

o Said another way, the issue of non-delegation is one that must be decided by examining the language of the enabling statute itself

Clean Air Act statute in question: EPA must establish “ambient air quality standards the attainment and maintenance of which in the judgment of the Administrator, based on [the] criteria [documents of § 108] and allowing an adequate margin of safety, are requisite to protect the public health.”

o Requisite: sufficient but not more than necessary o Looked at precedent to see if it fits in an intelligible principle

Court doesn’t feel like it is in a better position than Congress to second guess them (only two times has the non-delegation problem been found unconstitutional)

Scalia’s response to DC Circuit’s concern about amount of discretion: cannot put exercise of judgment in a tightly controlled box. EPA should have some requisite discretion because there are some uncertainties about these tradeoffs.

Note 1: Scalia vs. Stevens’ Concurrenceo Scalia (strict constructionist): only Congress has legislative power; delegation to

EPA is not legislative authority; if we have an intelligible principle, they are just carrying out the law

o Stevens: lets call it what it is: legislative authority. But its not an unconstitutional delegation of legislative authority because it has an intelligible principle.

OSHA case Enabling language in OSH Act OSHA § 3(8): “The term ‘occupational safety and health standard’ means a standard

which requires conditions, or the adoption or use of one or more practices, means, methods, operations, or processes, reasonably necessary or appropriate to provide safe or healthful employment and places of employment.”

5

Benzene case: Industrial Union Dept. v. American Petroleum Institute (U.S. 1980) – a plurality of the Supreme Court interpreted § 3(8) of the Occupational Safety and Health Act to require OSHA to find, as a threshold requirement to regulating under § 3(8), that a toxic substance poses a “significant health risk in the workplace.”

o Rehnquist said that the statute was unconstitutional delegation of legislative authority because it gave no guidance to OSHA on where to draw the line

o Threshold finding that it poses a significant health risk in workplace…o Interpreting statute for OSHA

Significant risk, avoiding is feasible, then we can step in o OSHA means feasible, i.e. when its possible

Court: come up with a narrower interpretation--cost-benefit analysis (economic feasibility) but remands to agency for them to cure (OSHA declined opp to interpret statute to require cost-benefit analysis)

o OSHA instead interprets the statute to mean safety standards that impose a high degree of worker protection (Court upholds this)

Reconciling Whitman and OSHA? It looks like Whitman would say OSHA is not okay…also calls into question Benzene Cannot give an interpretation of the statute to limit the discretion of the agency Scalia says you cannot fix statute through an interpretation, as was done in OSHA Congress sets out guiding principles, not the agency Whitman would probably say language of OSHA statute is okay

1/25: Legislative Veto and Appointment Power

LEGISLATIVE VETOPresentment and BicameralismINS v. Chadha

Facts : Immigration judge found that Chadha met the “extreme hardship” requirements to avoid deportation

Attorney General then conveyed its decision to Congress for possible veto…the House, without debate or recorded vote, passed a resolution of disapproval

Constitutional Framework : o Legislative Powers Clause (Art. I, § 1) – vests the legislative power of the

federal government in both the House and the Senateo First Presentment Clause (Art. I, § 7, cl. 2) – requires that a bill passed by both

Houses be presented to the President for signature o Second Presentment Clause (Art. I, § 7, cl. 3) – requires the President either to

sign or veto legislation and permits Congress to override a veto only by a two-thirds vote of each body

Violated legislative powers clause and presentment clause (because 1 house vote and was not presented to President for signature

How do you tell if Essentially legislative in person and in effect o Test : The action taken by the House was “essentially legislative” because “the

House took action that had the purpose and effect of altering the legal rights, duties, and relations of persons…”

6

Justice White’s Dissent : presented with a problem here because either (a) refrain from delegating necessary authority or (b) abdicate its law-making function to the executive branch and agencies

o Article I is satisfied because President’s approval is found within Attorney General’s approval and the legislative powers clause is satisfied because House and Senate indicate their approval of the Executive’s action by not passing a resolution of disapproval within statutory period

o If we decide we are okay with the non-delegation (delegation of legislative authority) because of concerns of running a modern government…why can’t Congress keep some of their legislative powers with the legislative veto (another kind of check)

Post-Veto DevelopmentCongressional Review Act

Wasn’t used by Congress until 2000 for an OSHA provision; rarely used Suspends every substantive agency rule for 2 months 5 U.S.C. §§ 801-808 process:- Substantive rules and an accompanying agency report must be submitted to Congress and

GAO- For “major rules” the GAO must submit a separate report to Congress within 15 days

from receipt of agency report- Effective date of rule is suspended for 60 days- Congress may vote a joint resolution of disapproval- Joint resolution is presented to President- Congress may overturn any Presidential veto of joint resolution by normal veto override

procedure

Problem 6-5 (p.559)a. Any congressional committee may by majority vote further stay the effective date of a

major rule for 90 additional days beyond the statutorily required 60. One committee of one house of Congress Is this legislative in effect? Chadha test. Does it alter legal rights? An extra 90

days is more than double the normal time allotted. Alternative argument: its just a postponement

b. Director of the Office of Management and Budget may suspend indefinitely the effect of any rule adopted by any federal agency, if the Director finds that it does not maximize the net benefits to society.

Director of agency, not Congress, is wielding the power As long as there is an intelligible principle, it would be okay

c. No major rule adopted by any federal agency shall be effective unless approved by joint resolution of Congress.

As long as both bodies of Congress will act, there is no bicameralism problem But this would be overly burdensome on Congress so probably would never

happen Defeats the whole purpose of the non-delegation doctrine

7

APPOINTMENT POWER

Appointment of “Officers of the United States”Buckley v. Valeo

Appointments Clause : U.S. Const. art. II, § 2 provides that the President “shall nominate, and by and with the Advice and Consent of the Senate, shall appoint … all … Officers of the United States…; but the Congress may by Law vest the appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.”

Problem is that President only appointed 2 officers, other 4 were appointed by Congress Test for “Officers of the United States”

o “…any appointee exercising significant authority pursuant to the laws of the United States is an `Officer of the United States,” and must, therefore, be appointed in the manner prescribed by § 2, cl. 2 of … Article [II]….”

o FEC exercises (1) enforcement powers, (2) rulemaking, and (3) adjudication However, Congress can appoint officers whose duties are limited to an investigative or

informative natureo Aids lawmaking o Necessary part of legislative process

Inferior OfficersMorrison v. Olson

Independent Counsel Act--attorney general appoints independent counsel. This is being challenged because they argue that independent counsel is a principal officer and thus should be appointed by President (Court upholds ICA)

Provides no definition of inferior officer But factors influencing the Court included:

o Subject to removal by a higher Executive Branch officialo Performed only certain, limited duties which do not include the formulation of

policyo Office limited in jurisdiction and tenure (case-specific)

Independent counsel is NOT principal office

Problem 6-7 (p.570) Inferior officers:

o Subject to removal by chief judgeo Perform certain limited duties (only hear certain cases) and do not formulate

policy because chief judge has final sayo Office is limited in jurisdiction (only hear assigned cases) and tenure (do not

serve for life) Congress has not vested power in anyone--is the tax court a Court of Law? Because tax

court is not an Article 3 court BUT chief judge of tax court is head of department Principle officers? Do not meet Buckley test

8

1/27: Rulemaking InitiationSources of Proposed Regulations

Statutory command – specific or general statutory mandate by Congress requiring the agency to adopt rules

Bottom-up – rulemaking initiated through recommendations of agency staff Top-down -- rulemaking initiated through political pressure from the legislative or

executive branches Public – rulemaking initiated by directly lobbying agency officials or staff, or indirectly

by enlisting the help of elected officials, or by filing a rulemaking petition

Rulemaking Petition 5 U.S.C. § 553(e) – “Each agency shall give an interested person the right to petition for

issuance, amendment or repeal of a rule.” 5 U.S.C. § 555(d) – “Prompt notice shall be given of the denial … of a …petition….

Except in affirming a prior denial or when the denial is self-explanatory, the notice shall be accompanied by a brief statement of the grounds for denial.”

Problem 2-1 (p.51-52) Lobbying the agency from different sides to amend the rule. How does your firm

convince EPA to amend the rule?o Statutory command does not exist

(a) Biotech companyo Bottom-up: lobby EPA staff

Should we talk Atlanta regional office first? At least get insight from them, especially if you are an Atlanta law firm (with connections). BUT…purpose of regional office is enforcement and implementation but do not have rulemaking capabilities

Probably want to bring a scientist along Start with staff, not with the politically appointed assistant administrator Could start in Registration Division or Field Operations (see chart)--talk to

regional folks to decide which office/right person to start with Frame your argument in a way that is beneficial to the agency

(b) National Wildlife Federation

Petitions for Rulemaking Advantages: the agency has to respond…and that decision will be reviewable Disadvantages: time delay, lack of clear procedural rules

Agency Delay5 U.S.C. § 706 (Scope of Review):The reviewing court shall – (1) Compel agency action unlawfully withheld or unreasonably delayed;(2) Hold unlawful and set aside agency action … found to be –

(A) Arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

9

5 U.S.C. § 551(13) – “Agency action” includes the whole or part of an agency rule, order, license, sanction, relief, or the equivalent or denial thereof, or failure to act;

Problem 2-2 (p.64) Compel agency action (which can include a failure to act) At some point, failure to act can become arbitrary and unreasonable Factors applied below

TRAC v. FCC Rule of Reason Test for Agency Delay1. Where Congress has supplied a timetable (or other indications of its expectation

concerning the agency’s speed), the statutory scheme may supply the definition of “unreasonable delay.” NO. Not applicable.

a. Even if there is statutory deadline, the courts are reluctant to enforce those timetables if the agency has a reasonable explanation (over burdened, under staffed, limited resources)

2. Delays that might be reasonable in the sphere of economic regulation are less tolerable when human health and welfare are at stake.

a. Point of existing regulation is to protect human healthb. Because they don’t know the environmental effects (unregulated activity could

expose humans to danger), human welfare is at stake if this amendment were to be added

c. Delay seems to be more promotive of human health3. A court should consider the effect of expediting delayed action on agency activities of a

higher or competing priority. a. Weighs against client because right now testing of other pesticides are more

important. Have to deal with backlog first4. A court should take into account the nature and extent of the interests prejudiced by the

delay. a. Interests that underlie this particular rule, aligned with interests of statute b. Opp to create something that will have beneficial social and environmental effects

5. A court need not find any impropriety to conclude delay is unreasonable. a. Presumption of unreasonableness if there is impropriety (though this is hard to

prove, because not privy to inner-workings of agency)b. Absence of impropriety is not a reason for court to find unreasonable delay

Reviewing Denial of Rulemaking Petition Arkansas Power v. ICC – the court asks whether the agency has adequately explained the facts and policy on which it has relied and whether the facts have some basis in the record

Court will only compel an agency to institute rulemaking proceedings only in extremely rare instances

Northern Spotted Owl v. Hodel – an action is arbitrary and capricious when an agency fails to articulate a “satisfactory” explanation for denial of the petition, including a rational connection between the facts found and the choice made.

The reviewing court must determine if the agency’s decision is based on relevant factors and whether the agency engaged in a substantial inquiry into the facts that was searching and careful.

10

Massachusetts v. EPA – Refusals to promulgate rules are … susceptible to judicial review, though such review is “extremely limited” and “highly deferential”

“[O]nce EPA has responded to a petition for rulemaking, its reasons for action or inaction must conform to the authorizing statute. Under the clear terms of the Clean Air Act, EPA can avoid taking further action only if it determines that greenhouse gas emissions do not contribute to climate change or it if provides some reasonable explanation as to why it cannot or will not exercise its discretion to determine whether they do.”

Problem 2-3 (p.68) Dealing with abuse of discretion standard; highly deferential to agency Arbitrary and capricious review: probably not (not a big burden to produce an adequate

statement of denial)o List several reasonso Related to statute o Current rule works well; lack adequate resources

What is the remedy if the denial was found to be arbitrary and capricious? Usually do not order them to engage in rulemaking. Just remanded to agency to explain itself better

2/1: APA Rulemaking ProceduresInformal Rulemaking Three Step Process:5 U.S.C. § 553:–Notice

5 U.S.C. § 553(b) – General notice of proposed rule making shall be published in the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof in accordance with law.

–Comment 5 U.S.C. § 553(c) – After notice required by this section, the agency shall give interested

persons an opportunity to participate in the rule making through submission of written data, views, or arguments with or without opportunity for oral presentation.

–Publication 5 U.S.C. § 553(d)

Rulemaking: General Exceptions5 U.S.C. § 553(a) – This section applies … except to the extent that there is involved–

1. A military or foreign affairs function of the United States; or2. A matter relating to agency management or personnel or to public property, loans,

grants, benefits, or contracts.

Informal Rulemaking – Exceptions to Requirements 5 U.S.C. § 553(b)(3) – Unless notice or hearing is required by statute, this subsection does not apply –

A. To interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice; or

B. When the agency for good cause finds … that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.

11

Problem 2-4 (p.76) Facts : EPA has 7 days to decide whether they want to do something specific with this

permit, or otherwise, it is automatically granted Issue : Whether this regulation could be adopted immediately, without prior notice and

comment, under one or more of the APA exceptions to the requirement of notice-and comment-procedures

Does the rule of procedure exception apply? See rules from cases below. FIRST PART : Does this change the substantive way the agency will act?

o Still reviewing applications, but now in a different way (like in JEM, created a “hard look” window to look at applications that were substantially complete; but if you filed outside of window, it had to be complete and if it were only substantially complete, you were out of luck and application would be denied)

o Changes the way in which company presents its application to the agencyo Shifting review from front-end to back-endprocedural

Alternatively, what has changed substantively? All of theses applications will go through without agency review (now, there is no substantive review of agency applications)

SECOND PART : are there interests that would be promoted by public participation that are outweighed by effectiveness, efficiency, and reduction in expense?

o Interests promoted: public as watchdog (public will not want generic conditions unless they know what they are); opportunity to give opinions, data, etc. These concerns are related to health and safety

o Agency’s response: certainly reduces expenses, less of a burden on agency Though this is procedural, second part dictates that notice and comment should occur

because there are still substantive impacts

1. American Hospital Assn. v. Bowen D.C. Circuit initially applied the “substantive impact” test – if an agency rule had a

“substantive impact,” notice and comment procedures were required AHA v. Bowen court abandons this test because “even unambiguously procedural

measures affect parties to some degree”o Every procedural rule has some sort of substantive impact

Court asked, instead, “whether the agency action … encodes a substantive value judgment or puts a stamp of approval on a given type of behavior”

2. Air Transport Association of America v. Dept. of Transportation Comes up with a different test, other than the one given in Bowen Divided panel attempts to change test, holding that notice and comment procedures must

be used when the agency’s procedural decisions involved “substantive” choices about procedural issues

Here, the DOT made “highly contentious choices concerning what process civil penalty defendants are due”

o This is a substantive choice about a procedural issue (therefore, notice and comment should have been complied with)

Dissent: tries to apply Bowen case

3. JEM Broadcasting Company, Inc. v. Federal Communications Commission

12

Disowns Air Transport test and creates a two-part test: First, JEM emphasizes that a procedural rule is one that does not itself directly alter the

rights or interests of the parties, although it may alter the way in which the parties present themselves or their viewpoints to the agency. If the rule does directly alter the rights or interests of parties, it is substantivenotice and comment. If not, go to second part!

o [Said another way, does the rule “change the substantive standards (altering rights or interests)” by which the agency will act? This part of test comes from AHA v. Bowen]

Second, even if a rule does not directly alter the rights of parties, notice and comment is necessary if the substantive effects of procedural rules are “sufficiently grave so that notice and comment are needed to safeguard the policies underlying the APA.”

o In this regard, the court asks whether the “interests promoted by public participation in rulemaking” are outweighed by “the countervailing considerations of effectiveness, efficiency, and reduction in expense” (by not having public participation)?

o Balancing test: interest in losing public participation vs. what the agency would be gaining for not having to go through it for what is a procedural rule

The second part of the JEM test recognizes the difficulty of distinguishing procedural and substantive rules in light of the fact that procedural rules have substantive impacts.

Thus, the second part of the test asks the broader question: does it serve the purposes of notice and comment rulemaking to exempt the rule?

“Good Cause” Exception – Legislative History: Statute: When the agency for good cause finds … that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.

“Impracticable” means a situation in which the due and required execution of the agency functions would be unavoidably prevented by its undertaking public rule-making proceedings.

“Unnecessary” means unnecessary so far as the public is concerned, as would be the case if a minor or merely technical amendment in which the public is not particularly interested were involved.

“Public interest” supplements the terms “impracticable” or “unnecessary”; it requires that public rulemaking procedures shall not prevent an agency from operating and that, on the other hand, lack of public interest in rulemaking warrants an agency to dispense with public procedure.

A lot of times, some sort of emergency gets thrown into this exceptiono Safety mechanism o What about experimental use permits? There is no emergency here

Formal Rulemaking: 5 U.S.C. § 553(c) – When rules are required by statute to be made on the record after

opportunity for an agency hearing, sections 556 and 557 of this title apply instead of this subsection.

[For formal rulemaking, the detailed requirements of §§ 556 and 557 replace the comment and publication portions of the informal rulemaking process in § 553]

13

US v. Allegheny: must say “hearing on the record,” (although not explicitly), to invoke formal rulemaking

If Congress wants to invoke formal rulemaking, it is really easy to do so Vermont Yankee v. NRDC

o Absent extremely compelling circumstances, up to agency to create its own procedural rules (cannot impose more procedural rules than are required by informal rulemaking in 553)

“On the Record” 5 U.S.C. § 556(e) – “The transcript of testimony and exhibits, together with all papers

and requests filed in the proceeding, constitute the exclusive record for decision in accordance with section 557 of this title…. When an agency decision rests on official notice of a material fact not appearing in the evidence in the record, a party is entitled, on timely request, to an opportunity to show the contrary.”

2/3: Informal RulemakingProblem 2-5 (p.98-99)

Changing dietary standards for free lunches served at school Received comments from VEGI, which advocated that schools should be required to

serve a minimum of five vegetarian meals per month Lawyer for Beef Producers: have not complied with 553(b)

o Final rule does not give notice that a minimum of 5 vegetarian only meals must be given each month

o Could argue that there are all kinds of ways to increase dietary fiber, limit on calories, etc.

Could use leaner meat No specific mention of veggie only meals

Lawyer for USDA: have complied with 553(b)o In Chocolate Manufacturer, explicitly say that they can have flavored milk and

then the final rule does a complete reversal…however, here, there is not explicit provision for beef meals

Notice is not misleading here as it was in Choc; reaches conclusion exactly opposite to that proposed

Notice in this case is about ways to reduce fat content and sodium, etc.; not a complete reversal

Puts them on notice that you do have interest at stake, that there will be reduction in school lunches

o Logical outgrowth test

A. Notice (5 U.S.C. § 553(b))General notice of proposed rulemaking shall be published in the Federal Register, unless persons thereto are named and either personally served or otherwise have actual notice thereof in accordance with law. The notice shall include –

1. A statement of the time, place, and nature of public rule making proceedings;2. Reference to the legal authority under which the rule is proposed; and

14

3. Either the terms or substance of the proposed rule or a description of the subjects and issues involved.

“Logical Outgrowth” Test The courts test whether the description of a rule is adequate to satisfy the notice

requirement by asking whether a rule is the “logical outgrowth” of the proposal and comments.

“If the final rule materially alters the issues involved in the rulemaking or, if the final rule substantially departs from the terms or substance of the proposed rule, the notice is inadequate.” Chocolate Mfgs. Assoc. v. Block (4th Cir. 1985)

“The crucial issue … is whether parties affected by a final rule were put on notice that their interests were at stake.”

“In other words, the relevant inquiry is whether or not potential commentators would have known that an issue in which they were interested was “on the table” and was to be addressed by a final rule.” American Medical Ass’n v. U.S. (7th Cir. 1989)

See Note 1 (p.108)

Chocolate Manufacturer’s v. Block Rule specifically included flavored or unflavored milk Notice wasn’t adequate because there was no indication in the notice that elimination of

chocolate milk was being considered Logical outgrowth test : “if the final rule materially alters the issues involved in the

rulemaking or if the rule substantially departs from the terms or substance of the proposed rule, the notice is inadequate”

o Sufficient to know that your interests are on the tableo Changes to rule are inevitable; they are looking for input and will respond to it

B. Ex parte CommunicationsProblem 2-6 (p.112)

Proposed rule goes through…final rule has not been issued; comment period has ended, but deliberations still go on

Beef producers want to “lobby” USDA as to its opinions USDA could argue that Sierra doesn’t apply to them because it does not have a similar

requirement as the Clean Air Acto So they can have a secret record here so HBO should applyo Ex parte communications should be considered improper for the same reasons

that HBO said they were improper

Four sources of potential rules against ex parte contacts: 1. Due Process

Under Sangamon Valley Television Corp. v. United States (D.C. Cir. 1959), due process prohibits ex parte contacts when rulemaking involves “conflicting claims to a valuable privilege”

Have the right to be heard and to be given notice We need a more tangible property interest under Problem 2-6

o Constitution is not the right move under this situation

15

2. APA 5 U.S.C. § 551(14) INFORMAL – “ex parte communication” means an oral or written

communication not on the public record with respect to which reasonable prior notice to all parties is not given, but it shall not include requests for status reports on any matter or proceeding covered by this subchapter”

o Exception for status inquiries 5 U.S.C. § 557(d) FORMAL– contains detailed prohibitions on ex parte communication

in formal rulemaking (and adjudication) procedureso These prohibitions serve the purposes of 5 U.S.C. § 556(e) which requires

decisions made pursuant to § 557 in formal rulemaking (and formal adjudication) to be made on the “exclusive record for decision”

o Formal rulemaking is made exclusively by the record

HBO v. FCC APA prohibits (implicitly) ex parte contacts in informal rulemaking for two reasons:

1. Such contacts create a “secret record” preventing effective exercise of court’s judicial review function

2. There is a lack of advocacy surrounding such communications. The lack of an adversarial process among parties also hinders the court’s judicial review function.

Hasn’t been overruled but has not be cited since case came out

Sierra Club v. Costle Refused to follow HBO case Ex parte contacts are not prohibited in informal rulemaking for three reasons:

1. Language of § 533 does not prohibit them, like it does in formal rulemaking1. Look to Congressional intent…included in formal, but not in informal

2. Legitimacy of policymaking performed by unelected administrator depends on openness and accountability to needs and ideas from members of the public

3. Agency can learn valuable information and win valuable support for proposed rules through such contacts

Not worried about secret record…because Clean Air Act expressly prohibited rulemaking based on other materials not available in the record Decision must be based in record; if it is not, court will set it aside as arbitrary and

capricious

3. Legislative Mandate Congress can, and sometimes does, limit ex parte communications in express language in

the agency’s enabling statute Such statutory procedural requirements are an example of “hybrid rulemaking”

4. Agency Regulations The agency can, and sometimes does, itself limit ex parte communications through

internal agency rules

16

2/8: Hybrid & Negotiating RulemakingA. Hybrid Rulemaking:Three step analytical approach:

What is the statutory trigger? That is, when does the statute require the agency to undertake these procedural requirements?

If there is a trigger, what analysis does the statute require the agency to undertake? Is agency compliance with the requirements subject to judicial review and to what

extent?

Problem 2-7 (p.131-32) RFA Trigger:

o Department of Ag is clearly an “agency”o Whole school lunch is about the adequacy of notice of proposed rulemakingo Exemptions?

Would a school district meet any of these exemptions? School district is a small government jurisdiction…but this is a national

program so there is no question that this will have significant impact on a substantial number of school districts

EO Trigger:o $100M economic effect (significant regulatory effect) so EO probably applies

primarily because this is a national program

Regulatory Flexibility Act (RFA): requires agencies to create a Regulatory Flexibility Analysis (RFA) whenever they propose a rule that may have a significant economic impact on a substantial number of small businesses, organizations, or governments.

RFA --What is the trigger? Applies to an “agency” as defined in 5 U.S.C. § 601 (and by reference 5 U.S.C. § 551(1)) 5 U.S.C. § 603(a) – requires a regulatory flexibility analysis any time that § 553

(informal rulemaking) requires a general notice of proposed rulemaking (NPR) Possible exemptions:

o 5 U.S.C. § 605(b) – exempts rules that will not “have a significant economic impact on a substantial number of small entities”

5 U.S.C. § 601(6) – defines “small entity” to include “small business”, “small organization” and “small governmental jurisdiction”

5 U.S.C. § 601(5) – defines “small governmental jurisdiction” to include “school districts … with a population of less than fifty thousand”

RFA – What analysis does the statute require the agency to undertake? 5 U.S.C. § 603(b) – requires, among other things, an estimate of the classes of small

entities impacted by paperwork requirements (reporting, recordkeeping and other compliance requirements) and of professional skills necessary to meet the requirements of the proposed rule

o Reason for this is small entities do not have personnel, staff, etc. to handle paperwork burdens; burden/cost will be greater than what would be imposed on larger entities

17

5 U.S.C. § 603(c) – requires the agency to consider alternatives and methods for reducing the regulatory impact on small entities

5 U.S.C. § 603 – requires § 603’s “initial regulatory flexibility analysis” [previous slide] to be published in the Federal Register at the time the general notice of proposed rulemaking is published

o This analysis becomes part of the notice so that people can offer comment on this information

5 U.S.C. § 604 – requires a “final regulatory flexibility analysis” (or a summary) to be published in the Federal Register at the time the final rule is published

RPA -- Special procedural requirements? 5 U.S.C. § 609(a) – imposes special procedures to notify small entities potentially

impacted by the NPR 5 U.S.C. § 609(b) – imposes special procedures to review comments of small entity

representatives

Judicial Review 5 U.S.C. § 611(a)(1)-(2) – specifically authorizes judicial review of agency compliance

with procedural requirements 5 U.S.C. § 611(a)(4) – in the event of noncompliance, court can remand rule or stay

enforcement against small entities 5 U.S.C. § 611(b) – the regulatory flexibility analysis for the rule becomes part of the

rulemaking recordo Can’t come under RFA to get to substantive rule itselfo More of a “hard look” standard o Could set it aside as not a good enough job…remand to do it right or can’t enforce

it against small entities

Executive Order 12866: issued by President Clinton and subsequently adopted by President George W. Bush – requires agencies to assess the benefits and costs of proposed and final “significant regulatory actions”

The Office of Information and Regulatory Affairs (OIRA), part of the Office of Management and Budget (OMB), is responsible for overseeing agency compliance

On January 18, 2011, President Obama issued a new Executive Order, “Improving Regulation and Regulatory Review,” that authoritatively referenced Executive Order 12866 indicating that it continues to be in force under the Obama Administration.

What’s the trigger for EO 12866? Sec. 3(b) – EO 12866 applies only to executive agencies and expressly excludes

independent agencies Sec. 6(a)(3) – imposes procedures with respect to matters determined to be a “significant

regulatory action” Sec. 3(f)(1) – “significant regulatory actions” defined as regulations with an annual

affect on the economy of $100 million or more, or which “adversely affect in a material way … State [or] local … governments or communities”

18

What analysis does the order require the agency to undertake? Sec. 6(a)(3)(C) – requires an agency to undertake a cost-benefit analysis of the proposed

rule and of other feasible alternatives

Special Procedural Requirements: Sec. 6(a)(1) – (i) should involve in the regulatory process, where appropriate, interested

persons, such as governmental officials, and (ii) allow for not less than a 60 day comment period

Sec. 6(a)(3)(E) – agency must make the cost-benefit analysis available to the public

Special Substantive Requirement: Sec. 1(a) – “agencies should select those approaches that maximize net benefits … unless

a statute requires another regulatory approach” Sec. 1(b)(5) – agencies should design regulations in the most cost effective manner Sec. 1(b)(11) – agencies should tailor regulations to impose least burden on society

Judicial Review? There is no judicial review of EO 12866 However, sec. 6(b) provides for executive enforcement through OIRA oversight Sec. 7 – Conflicts between agency heads or between agencies and OIRA are to be

resolved by the President (with assistance by the President’s Chief of Staff)

B. Negotiated Rulemaking Negotiated rulemaking is an idea to reform the rulemaking process to address concerns

with undue delay in achieving final rules, increased costs, and the litigious nature of the rulemaking process

In this process, the agency and representatives of all major groups affected by a particular regulation assemble to negotiate agreement on regulatory requirements

Benefits: Reduce total agency resources devoted to rulemaking Reduce total agency resources devoted to defending against administrative and judicial

challenges to rules Increase public acceptance of rules Produce better rules informed by wider sharing of critical information

Problems: Cannot require interested groups to participate – some may choose to opt out of the

process Cannot guarantee that litigation will not follow the process if some participants are

nonetheless unhappy with the result Cannot guarantee that all participants will approach the process in good faith Agencies are not required to engage in negotiated rulemaking When agencies do engage in negotiated rulemaking, they have the authority to pull the

plug on the process at any time and that decision cannot be reviewed

19

2/15: Judicial Review: Statutory Interpretation Scope of Review:5 U.S.C. § 706 – To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning and applicability of the terms of an agency action.

Constitutional Violation 5 U.S.C. § 706(2)(B) – The reviewing court shall … hold unlawful and set aside agency

action, findings, and conclusions found to be … contrary to constitutional right, power, privilege, or immunity

Scope of judicial review – de novo

Statutory Compliance 5 U.S.C. § 706(2)(C) – The reviewing court shall … hold unlawful and set aside agency

action, findings, and conclusions found to be … in excess of statutory jurisdiction, authority, or limitations, or short of statutory right

Scope of judicial review – Chevron v. NRDC test

Procedural Violation 5 U.S.C. § 706(2)(D) – The reviewing court shall … hold unlawful and set aside agency

action, findings, and conclusions found to be … without observance of procedure required by law

Scope of judicial review – de novo

Findings and Conclusions (Informal Rulemaking) 5 U.S.C. § 706(2)(A) – The reviewing court shall … hold unlawful and set aside agency

action, findings, and conclusions found to be … arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law

Scope of judicial review – arbitrary and capricious standard

Findings and Conclusions (Formal Rulemaking) 5 U.S.C. § 706(2)(E) – The reviewing court shall … hold unlawful and set aside agency

action, findings, and conclusions found to be … unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute

Scope of judicial review – substantial evidence test

Chevron v. Natural Resources Defense Counsel Agency: existing plant that contained several pollution emitting devices could install or

modify one piece of equipment without obtaining a permits if the alteration did not increase the total emissions from the plant

o Stationary source: includes all pollution devices within the same industrial group as though the plant was encased within a single “bubble”

NDRC: source meant each individual pollution-emitting piece of equipment Court of Appeals sides with NDRC

20

USSC: overturns Court of Appeals, starting point for review is with what the agency has done…cannot ignore agency because they are the ones with experience

Chevron Two Step Test for Statutory Interpretation by AgencySTEP ONE: Is the statute silent or ambiguous on the precise interpretive question at issue?

If not, the court must apply (and the agency must follow) the unambiguously expressed intent of Congress and the inquiry ends.

If the answer is yes, then move to Step Two.STEP TWO: Is the agency’s interpretation based on a permissible (reasonable) construction of the statute?

If yes, the court defers to the agency’s interpretation. If not, the court will proceed to provide a reasonable interpretation. [NOTE: The agency typically prevails if the court gets to Step Two.]

Justifications for Agency Deference: Gap filling –

– Congress has made a legislative delegation of authority to the agency to make policy judgments to fill gaps in the statute

– Because Congress has delegated this policymaking authority to the agency, the court should not substitute its own judgment for a reasonable interpretation made by the agency

Agency expertise –– Agencies have the expertise, time, and resources to consider technical and

complex regulatory policy questions in a detailed and reasoned fashioned– Courts do not have the same luxury of time, resources, and expertise to focus on

these issues and thus the agency is in the better position to make these decisions Legal realism –

– The federal judiciary is not an accountable political branch as is the executive branch (of which the agency is a part)

– It is more appropriate for a political branch of government to make policy choices that reconcile competing political interests

Note 2: agencies want to show that a statute is ambiguous; persons challenging the agency interpretation want to show that it is not

Problem 2-9 (p.152-53) Poultry Products Inspection Act:

o Poultry imported from countries other than Canada and Mexico are “subject to the same inspection, sanitary, quality … standards applied to products produced in the” U.S.

o Poultry imported from Canada and Mexico are “subject to inspection, sanitary, quality … standards that are equivalent to” U.S. standards

Proposed USDA Regulation (regulation in question):o All foreign countries desiring to import poultry to U.S. must ensure compliance

with inspection and processing standards “at least equal to” U.S. standards Motivations of different parties:

21

o Agency : if we construe “same” strictly, then same means “identical” No one uses exactly the same processes as US…concern is that we cannot

then import chicken because no other countries standards will be like the US

Could end up with chicken shortage Dilute strict construction of the word “same” by saying “at least equal to”

o National Broiler Association : worried about foreign competition “Same” is more protective of public health

o Australian Trade Association : concerned that they cannot import chicken to US because they have higher standards than the US does (because of use of radiation)

STEP ONE: How do you decide if there is ambiguity? Notes 2 & 3 (p.148-49)Plain Meaning Approach:

Plain meaning: forgo legislative history or inferring legislative intent from statute’s animating principles

At Step 1, the court determines whether a statute is ambiguous under a “plain meaning” test that foregoes the use of tools of statutory construction such as legislative history or inferring legislative intent from the statute’s animating principles.

K Mart Corp. v. Cartier, Inc. (U.S. 1988) – “In ascertaining the plain meaning of the statute, the court must look to the particular statutory language at issue, as well as the language and design of the statute as a whole.”

Problem 2-9:o Look at “same” and other words in the statuteo NBC : will look to Random House definition…same=identical

Congress used words “same” with foreign countries But with Canada and Mexico, used “equivalent” Must give some effect to difference in language…created a

different standard for Canada and Mexicoo ATA/Agency : Black’s Law definition…”of the kind or species, not the specific

thing” Black’s uses the word “equal” to define same…also rejects identical as the

only possible meaning of same

Statutory Construction (Plain Meaning Plus): At Step 1, the court determines congressional intent by using traditional tools of statutory

construction. Dole v. United Steelworkers (U.S. 1990) – the starting point is “the language of the

statute,” but in “expounding a statute,” a court is “not guided by a single sentence, but looks to the provisions of the whole law, and to its object and policy.”

CMA v. NRDC (U.S. 1985) – examine “the legislative history or the purpose or structure” of the statute to determine whether an interpretation is contrary to the intent of Congress

Problem 2-9:o Purposes:

NBC : where will “at least equal to” lead us that “identical” will not? Identical is not as subjective as at least equal to is

22

o Legislative History: NBC : Congressional Record wants to delete “at least equal to” and replace

it with “same”…characterizes it as a clerical error ATA : Agricultural Committee uses the word “at least equal to” in

markup…intent of committee is stated that they meant “at least equal to” Congressional Record misstates what intent of committee was

If court goes to STEP TWO, i.e. if the decide ambiguity exists, the question is: is this interpretation of agency a reasonable construction of the statute? Agency usually wins here.

2/17: Judicial Review: Substantive DecisionsProblem 2-10 --FTC Mechanical Defects Disclosure Rule (p.164-65)

Original rule – Used car dealers must check off defects on a list of mechanical systems posted on a window of which the dealer had knowledge, although no pre-sale inspection by the dealer would be required.

Revised rule – FTC eliminated this requirement.

FTC Substantive Decisions in Issuing the Rule When issuing the Mechanical Defects Disclosure Rule (and later revoking it), the FTC

made two types of substantive decisions:o Factual findings on the issues of car dealer knowledge and consumer awarenesso An ultimate conclusion that, in light of the facts found, mandating dealer

disclosure would not eliminate unfair and deceptive acts and practices

FTC Factual Findings (Dealers) In the first rule, the FTC found that dealers often know of defects at the time of sale

because they routinely inspect cars before purchase at auction and appraise privately owned vehicles before purchase.

In the second rule, the FTC found that –o Careful inspections do not always reveal or predict mechanical problems that may

occur shortly after the sale;o Dealer knowledge about general conditions of a car does not necessarily mean

that the dealer has knowledge of specific defects; ando Although the record has anecdotal evidence that dealers know about specific

defects, the record has other evidence, which supports the conclusion that most dealers do not.

FTC Factual Findings (Consumers) In the first rule, FTC found consumer awareness of defects would improve, relying on a

study finding that more buyers received pre-purchase information from dealers after a Wisconsin known defects disclosure rule went into effect.

In the second rule, the FTC discredited this study –o More consumers in Minnesota (with no disclosure law) reported more awareness

of defects prior to sale than consumers in WI (with disclosure law)o Number of buyers indicating they lacked needed information declined from 32%

(pre-law) to 28% (post-law); thus the law’s impact was small

23

o Number of buyers who indicated that the dealer gave them good information stayed the same (62%)

FTC Ultimate Conclusions The FTC ultimately concluded that a known defects disclosure rule would –

o Not provide used car buyers with a reliable source of informationo Have the unintended and perverse effect of discouraging, rather than encouraging,

inspection and disclosure of defectso Confuse consumers and cause them to make inaccurate assumptions about the

condition of the car after reading the defect disclosure

Scope of Review – Findings and Conclusions (Formal Rulemaking) 5 U.S.C. § 706(2)(E) – The reviewing court shall … hold unlawful and set aside agency

action, findings, and conclusions found to be … unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute

Scope of Review (APA) – Findings and Conclusions (Informal Rulemaking) 5 U.S.C. § 706(2)(A) – The reviewing court shall … hold unlawful and set aside agency

action, findings, and conclusions found to be … arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law

BUT…Congress enacted a hybrid standard of review in promulgating the Act.

Scope of Review – FTC Act (hybrid rulemaking) 15 U.S.C. § 57a(e)(3)(A) – “The court shall hold unlawful and set aside the rule … if …

the court finds that the Commission’s action is not supported by substantial evidence in the rulemaking record … taken as a whole.”

How has the Court defined “substantial evidence”? Consolidated Edison v. NLRB (U.S. 1938) – A court should uphold a rule under the

substantial evidence standard if it finds the agency’s decision to be “reasonable,” or if the record contains “such evidence as a reasonable mind might accept as adequate to support a conclusion.”

This standard does not require that the court agree with the agency’s conclusions; it only requires that the agency’s choice is a reasonable one, even if the court would have made another choice.

What is the “rulemaking record” under the FTC Act? 15 U.S.C. § 57a(e)(1)(B) – “For purposes of this section, the term `rulemaking record’ means the rule, its statement of basis and purpose, the transcript required by subsection (c)(5) of this section, any written submissions, and any other information which the Commission considers relevant to such rule….”

VERSUS “ARBITRARY AND CAPRICIOUS”

24

How would review of the rule compare under the APA? Citizens to Preserve Overton Park v. Volpe (U.S. 1971) – the Court said that the

“arbitrary and capricious” standard requires the agency to base a decision on a “consideration of relevant factors” and to avoid a “clear error of judgment”

Under 5 U.S.C. § 706 (last sentence), the APA requires judicial review based on the “whole record”

How are they different? Courts tend to impose same obligation on agency to explain itself (give a rational

explanation) Not a lot of difference between substantial evidence and arbitrary

Agency must give an “Adequate Explanation” Motor Vehicle Mfgs. v. State Farm (U.S. 1983) – “the agency must examine the relevant

data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.”

•Motor Vehicle Mfgs. v. State Farm (U.S. 1983 ) – In reviewing the agency’s explanation for its conclusions, the court will consider whether –

o “The agency has relied on factors which Congress has not intended it to consider”;

o “Entirely failed to consider an important aspect of the problem”;o “Offered an explanation that runs counter to the evidence before the agency”; oro “Is so implausible that it could not be ascribed to a difference in view or the

product of agency expertise”

As applied to the problem: Consumer Union : Dealers

o Dealers know defects because they take them through many different inspections Agency : inspections do not always reveal mechanical problems; dealer

may not know specific defects, just general ones Consumer Union : Consumers

o Consumer awareness of defects may improveo Not much explanation as to what is going on in Minnesota

Agency : Don’t think it will change the consumers knowledge of defects pre-law

Consumer Union : Ultimate Conclusions/Adequate Explanationo Agency : this rule won’t work it reality…dealers aren’t forced to do a pre-sell

inspection so they won’t have to check off defects (willful blindness) Also, difficulty of inspection

o Consumer Union : ultimate conclusions are not based on facts

2/22: Challenging the Agency Rule Questions to Address in Deciding to Appeal an Agency Decision

1. Are there alternatives to litigation?2. Is the rule vulnerable to challenge?3. What results would be obtained by a successful challenge?

25

4. What will a challenge cost?

Alternatives to Litigation: Ask the agency (or the White House) to reconsider the rule Seek to persuade Congress to legislatively override the rule Ask the agency to interpret the rule in a manner that lessens its unacceptable impact

Is the rule vulnerable to challenge? Does it exceed the agency’s statutory authority? (cf. 5 U.S.C. § 706(2)(C)) Is it unconstitutional? (cf. 5 U.S.C. § 706(2)(B)) Is it unreasonable? (cf. 5 U.S.C. § 706(2)(A)) Is it supported in the agency’s record? (cf. 5 U.S.C. § 706(2)(A)) Is it otherwise procedurally inadequate or improper? (cf. 5 U.S.C. § 706(2)(D))

Is the rule vulnerable to challenge? (Statutory Interpretation, i.e. Chevron analysis) Chances of prevailing on an appeal raising a statutory interpretation issue are worst when

the inconsistency claimed is only “implicit.” Chances of prevailing on an appeal raising a statutory interpretation issue are best when

there is a substantial conflict between a rule and statutory language, or when the rule sweeps beyond the statutory purpose and scope.

Is the rule vulnerable to challenge? (Unreasonable Rule) Reasoned decision-making requires that –

The decision be supported by facts in the record The agency provide reasons for the decision The agency has considered clearly viable alternatives

What results would be obtained by a successful challenge?Likelihood of a successful challenge should be evaluated on whether the decision is –

Within the scope of the agency’s competence Based on solid data (i.e., did the agency ignore substantially conflicting data) The result of the agency’s use of an adequate process (i.e., courts might be more

suspicious if an agency did not give the public an adequate opportunity to participate)

What will a challenge cost? Will it be financially feasible to attack the rule? Ultimate cost of a judicial challenge is principally a function of two factors –

o The size of the regulatory record on a given issueo Whether a further appeal will be necessary to resolve the issue (i.e., is the issue

addressed so significant that the losing party is likely to appeal the initial reviewing court’s decision)

Problem 2-11 (p.183) Alternatives to litigation:

o Ask agency to reconsider, but in Problem 2-4, they have asked the agency to reconsider through lobbying efforts and were unsuccessful

26

Agency is of the view that they have already spent too much time on this than its worth

o Seek to persuade Congress: uncertain as to whether you could garner enough political capital and support of members of Congress

Difficult to get Congress to override something when they have broadly delegated these powers to the agency…Congress does not want to deal with day to day issues

Further, this is procedural agency rule…not substantive. Would be hard to get the whole Congress to care about it enough to override it

Congressional Review Act has only been invoked once…usually applies to substantive rules, not to procedural rules

Vulnerable to challenge:o Statutory interpretation: no, because this is not a statutory interpretation of a ruleo As arbitrary and capricious: no

Cost considerations

Problem 2-12 (p.188): Can the benefits of delay be weighed at all? Beef Producers want to appeal to push day that rule is effective off into the future Can they do this?

Lawyer as adviser – Should give “professional opinion as to what the ultimate decisions of the courts [are]

likely to be” (EC 7-3) “Primarily assists [the] client in determining the course of future conduct and

relationships” (EC 7-3) “Should give his professional opinion as to what the ultimate decisions of the courts

would likely be as to the applicable law” (EC 7-3) Furthers the client’s interest by “giving a professional opinion as to what he believes

would likely be the ultimate decision of the courts on the matter … and the practical effect of that decision” (EC 7-5)

Lawyer as advocate – Authority to make decisions affecting the merits of the cause – i.e., to appeal – is that of

the client (EC 7-7) “May continue to pursue a course of conduct contrary to the lawyer’s advice … so long

as the lawyer does not thereby knowingly assist the client to engage in illegal conduct or to take a frivolous position” (EC 7-5)

o Lawyer must say no to these, even if client wants to do so Has the duty “to represent the client zealously within the bounds of the law”

Is it Improper to Bring a Lawsuit Solely to Obtain Delay? YES. Cannot be your sole purpose. Rule 3.2 of the Model Rules of Professional Conduct requires that a lawyer must make

reasonable efforts to expedite litigation consistent with the interests of the client. According to the comment: “Delay should not be indulged merely for the convenience of

the advocates, or for the purpose of frustrating an opposing party’s attempt to obtain

27

rightful redress or repose … Realizing financial or other benefit from otherwise improper delay in litigation is not a legitimate interest of the client.”

Is it Improper to Bring a Lawsuit Primarily to Obtain Delay? Rule 3.1 (MRPC) – a lawyer must have a basis for a position that is not “frivolous, which

includes a good faith argument for an extension, modification, or reversal of existing law….”

Comment to Rule 3.2 indicates that the “question is whether a competent lawyer acting in good faith would regard the course of action as having some substantial purpose other than delay.”

o Beef Producer’s lawyers say that the chance of winning is “very, very small.”

3/1: Formal or Informal AdjudicationDefinitions: 5 U.S.C. § 551(7) – “adjudication” means agency process for the formulation of an order5 U.S.C. § 551(6) – “order” means the whole or part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rule making but including licensing

Formal (APA) Adjudication:5 U.S.C. § 554(a) – This section applies … in every case of adjudication required by statute to be determined on the record after opportunity for an agency hearing….[5 U.S.C. §§ 554(b)-(e), 556 and 557 contain the specific procedures that govern formal adjudication]

Informal (non-APA) Adjudication: If formal adjudication under § 554(a) – “adjudication required by statute to be determined

on the record after opportunity for agency hearing” – is not required, informal (non-APA) adjudication may nonetheless be necessary if: Statute authorizing agency action requires use of some hearing procedures, or Constitutional principles of due process obligate the agency to follow some type of

hearing process The APA contains no requirements applicable specifically to informal adjudication However, the minimal requirements of 5 U.S.C. § 555 (Ancillary Matters) are applicable

to all agency proceedings (which would include proceedings constituting “informal adjudication”)

Ancillary Matters: § 555(b) – right in any proceeding to be represented by counsel or, if allowed by the

agency, by an other-qualified representative § 555(b) – the right of interested persons (as opposed to parties) to appear before an

agency in any proceeding “so far as the orderly conduct of public business permits” § 555(b) – the right to have an agency conclude a matter presented to it within a

“reasonable time” § 555(c) – the right to retain (or obtain) copies of materials required to be submitted to an

agency

28

§ 555(d) – the right to utilize agency subpoena power upon a showing of general relevance and reasonable scope of the evidence sought

§ 555(e) – the right to receive prompt notice of a denial of a request, application, or petition, as well as a “brief statement of the grounds for denial”

Seacoast v. Costle (1st Cir. 1978) Permit proceedings under CWA allowed point source to demonstrate entitlement to

exemption from EPA permit requirement “after opportunity for public hearing” 5 U.S.C. § 554(a) applies “in every case of adjudication required by statute to be

determined on the record after opportunity for an agency hearing….” Supreme Court precedent does not require precise words “on the record” to trigger the

formal requirements of §§ 554, 556, and 557 1st Circuit distinguishes between adjudication and rulemaking Rulemaking is the agency equivalent of legislation and legislation rarely involves a trial-

type hearing When rulemaking is the type of procedure at issue, there is a presumption against a

trial-type proceeding that can only be overcome by clear statutory language indicating that Congress intended a different result

On the other hand, where the procedure at issue is adjudication, because adjudication is the agency equivalent of judicial action, the presumption is in favor of a trial-type proceeding

Thus, any requirement for a hearing, where the proceeding at issue is an adjudication, triggers the APA requirements for formal adjudication, absent clear language in the statute indicating that Congress intended a different result

PRESUME FORMAL ADJUDICATION UNLESS YOU CAN REBUT IT WITH SPECIFIC LANGUAGE IN THE STATUTE

City of West Chicago v. NRC (7th Cir. 1983) Atomic Energy Act requires NRC to grant a “hearing” if requested in any proceeding to

grant, revoke or amend a license or permit The language of APA section 554(a) notwithstanding, the precise words “on the record”

are not required to trigger the formal, on the record hearing provisions of §§ 554, 556, and 557

7th Circuit disagrees with the 1st Circuit and Seacoast v. Costle and creates an opposite presumption against formal adjudication absent clear language in the statute indicating a contrary intent from Congress

7th Circuit applies the same test for finding that formal adjudication is required as the Supreme Court established for finding that formal rulemaking is required – clear legislative language indicating Congressional intent to require the formal hearing provisions of the APA

PRESUMPTION AGAINST USING FORMAL ADJUDICATION ABSENT CLEAR LANGUAGE IN THE STATUTE

Chemical Waste Management v. EPA (D.C. Cir. 1989) RCRA requires EPA to “promptly conduct a public hearing” on challenges to orders

assessing civil penalties or suspending or revoking permits for RCRA violations

29

D.C. Circuit holds that a presumption that a statutory requirement for a hearing in an adjudication requires formal, “on the record” APA hearing procedures is inappropriate in the light of the Supreme Court’s decision in Chevron v. NRDC (U.S. 1984)

The question of whether formal adjudication procedures are required must be answered applying the two-step Chevron test

o STEP 1 : Is the statute silent or ambiguous on the question of whether Congress intended the APA’s formal adjudicatory procedures to apply?

o STEP 2 : If yes, then the agency must resolve the ambiguity and the court should defer to a reasonable interpretation by the agency as to whether such procedures are required by the statute

Dominion Energy v. Johnson (1st Cir. 2006) First Circuit overruled Seacoast and instead applied Chevron to determine whether

formal adjudication is required. First Circuit felt compelled to overrule Seacoast in Dominion Energy because Chevron

was an intervening decision of the U.S. Supreme Court.

3/3: Adjudicatory ProceduresNotice of Hearing5 U.S.C. § 554(b) – “Persons entitled to notice of an agency hearing shall be timely informed of:

(1) The time, place, and nature of the hearing;(2) The legal authority and jurisdiction under which the hearing is to be held; and(3) The matters of fact and law asserted.”

Informal requirement, like the complaint (if comparing it to a civil case)

Reply to Notice5 U.S.C. § 554(b) – “When private parties are the moving parties, other parties to the proceeding shall give prompt notice of issues controverted in fact or law; and in other instances agencies may by rule require responsive pleading.”

Ex. EPA requires a responsive pleading

Intervenors5 U.S.C. § 555(b) – “As far as the orderly conduct of business permits, an interested person may appear before an agency or its responsible employees for the presentation, adjustment, or determination of an issue, request, or controversy in a proceeding, whether interlocutory, summary, or otherwise, or in connection with an agency function.”

[NOTE – “interested person” means someone other than a party initiating agency action or a party compelled to respond in such an action]

Settlement 5 U.S.C. § 554(c)(1) – “The agency shall give all interested parties opportunity for … the

submission and consideration of … offers of settlement….” 5 U.S.C. § 556(c)(6) – “…employees (i.e. ALJs) presiding at hearings may … hold

conferences for the settlement … of the issues by consent of the parties….”

30

Administrative Law Judges5 U.S.C. § 556(b) – “There shall preside at the taking of evidence –

(1) The agency;(2) One or more members of the body which comprises the agency, or(3) One or more administrative law judges appointed under section 3105 of this title.”

*Up to agency to decide who they want to preside at adjudication. Usually, it is (3) ALJs.

5 U.S.C. § 556(c) – “Subject to published rules of the agency and within its powers, employees presiding at hearings may–

(1) Administer oaths and affirmations;(2) Issue subpoenas authorized by law;(3) Rule on offers of proof and receive relevant evidence;(4) Take depositions or have depositions taken when the ends of justice would be served;(5) Regulate the course of the hearing;(6) Hold conferences for the settlement or simplification of the issues….(7) Inform the parties as to the availability of … alternative means of dispute resolution…;(8) Require the attendance at any [settlement] conference [of a representative of a party with authority to negotiate];(9) Dispose of procedural requests or similar matters;(10) Make or recommend decisions in accordance with section 557…;(11) Take other action authorized by agency rule consistent with this subchapter.

5 U.S.C. § 556(e) – “When an agency decision rests on official notice of a material fact not appearing in the evidence in the record, a party is entitled, on timely request, an opportunity to show the contrary.” [“judicial notice” provision]

5 U.S.C. § 554(d) – “The employee who presides at the reception of evidence … shall make the recommended decision or initial decision required by section 557….”

5 U.S.C. § 554(d) – “An employee … engaged in the performance of investigative or prosecuting functions for an agency in a case may not, in that or a factually related case, participate or advice in the decision, recommended decision, or agency review pursuant to section 557… This … does not apply– …(C) to the agency or a member or members of the body comprising the agency.”

[NOTE: this is the “separation of functions” provision – separating the prosecution from the adjudicative functions within the agency, but with an exception for the “head” of the agency which is permitted by the APA to engage in both functions]

Burden of Proof5 U.S.C. § 556(d) – “Except as otherwise provided by statute, the proponent of … [an] order has the burden of proof.”

[NOTE: The Supreme Court has clarified that this means “burden of persuasion” rather than “burden of production.”]

Less formal than trial procedures

31

Evidentiary Standard 5 U.S.C. § 556(d) – an agency decision must “be supported by and in accordance with

the reliable, probative, and substantial evidence” 5 U.S.C. § 556(d) – “Any oral or documentary evidence may be received, but the agency

as a matter of policy shall provide for the exclusion of irrelevant, immaterial, or unduly repetitious evidence.”

Testimony & Documents 5 U.S.C. § 556(d) – “A party is entitled to present [a] case or defense by oral or documentary evidence, to submit rebuttal evidence, and to conduct such cross-examination as may be required for a full and true disclosure of the facts.”

Record5 U.S.C. § 556(e) – “The transcript of testimony and exhibits, together with all papers and requests filed in the proceeding, constitutes the exclusive record for decision in accordance with section 557….”

Ex Parte Communications 5 U.S.C. § 557(d)(1)(A) – “no interested person outside the agency shall make or

knowingly cause to be made to any member of the body comprising the agency, administrative law judge, or other employee who is or may reasonably be expected to be involved in the decisional process of the proceeding, an ex parte communication relative to the merits of the proceeding;”

5 U.S.C. § 557(d)(1)(B) – “no member of the body comprising the agency, administrative law judge, or other employee who is or may reasonably be expected to be involved in the decisional process of the proceeding, shall make or knowingly cause to be made to any interested person outside the agency an ex parte communication relative to the merits of the proceeding;”

Proposed Findings & Conclusions with Supporting Reasons5 U.S.C. § 557(c) – “Before a recommended, initial, or tentative decision, or a decision on agency review of the decision of subordinate employees, the parties are entitled to a reasonable opportunity to subject for the consideration of the employees participating in the decisions–

(1) Proposed findings and conclusions; …(3) Supporting reasons for the … proposed findings or conclusions.”

Problem 3-1 (p.209) Facts: Lane’s Autobody workers were not wearing respirators while painting (or even

while not painting) Adequate notice issue : whether there was adequate notice

o Problem: agency cited the wrong section when given out a citationo NLRB case is distinguishable because after hearing there o Lane’s knew very well what they were being cited for…can’t really say that they

were surprised about what they would have to deal with Made arguments “even assuming respirators weren’t being used…”

o Southwest Sunsites, Inc. v. Federal Trade Commission (9th Cir. 1986):

32

o “The purpose of the notice requirement in the [APA] is satisfied … if the party proceeded against `understood the issue’ and `was afforded the full opportunity’ to justify his conduct.”

Interpretation issue : when OSHA interprets statute to say that painters must be wearing respirators even when they are not painting

o Martin v. OSHRC (U.S. 1991): An agency’s construction of its own regulations is normally entitled to deference when that construction is subject to review. The deference reflects the assumption that Congress delegated to an agency the primary responsibility to clarify its regulations. This arrangement recognizes the agency’s expertise and permits it to develop consistent policies.

o Deferring to agency expertise and judgment…have a rational, reasonable reason for doing it this way

Get even more deference when it comes to interpreting their own regulations (even more so than statutes)

Not a whole lot of room for Lane’s because OSHA has provided a rational reason

Evidentiary issue : did OSHA fail to meet its burden of persuasion because it was based on hearsay?

o Admission of Hearsay Evidence: Residuum Rule (prohibiting decisions from being rendered based solely

on hearsay evidence) undercut by Richardson v. Perales (U.S. 1971) Thus, hearsay evidence alone can form the sole basis of decision in some

situations, where the nature of the hearsay is relatively “reliable, probative, and substantial.” This means, of course, that not all hearsay can support decisions by itself if it does not meet this standard.

o Wallace case: must be able to cross examine affadavit (decision relied heavily upon testimony by doctors post-hearing)…he didn’t have a chance to cross-examine because he didn’t know that it was being relied upon

o However, in the problem, Lane’s didn’t really raise this issue. Further, they could have subpoenaed the inspector but elected not to

Not disputing what the inspector is saying substantively

3/8: Ex Parte CommunicationsSeparation of Powers:

5 U.S.C. § 554(d) – “An employee … engaged in the performance of investigative or prosecuting functions for an agency in a case may not, in that or a factually related case, participate or advise in the decision, recommended decision, or agency review pursuant to section 557, unless he becomes unavailable to the agency.”

Ex Parte Communications: 5 U.S.C. § 557(d)(1)(A) – “no interested person outside the agency shall make or

knowingly cause to be made to any member of the body comprising the agency, administrative law judge, or other employee who is or may reasonably be expected to be involved in the decisional process of the proceeding, an ex parte communication relative to the merits of the proceeding;”

33

5 U.S.C. § 557(d)(1)(B) – “no member of the body comprising the agency, administrative law judge, or other employee who is or may reasonably be expected to be involved in the decisional process of the proceeding, shall make or knowingly cause to be made to any interested person outside the agency an ex parte communication relative to the merits of the proceeding;”

5 U.S.C. § 557(d)(1)(C) – “[those persons] who [are] or may reasonably be expected to be involved in the decisional process … who receive[], or who make[] or knowingly cause[] to be made, a communication prohibited by this subsection shall place on the public record of the proceeding:

o All such written communications;o Memoranda stating the substance of all such oral communications; ando All written responses, and memoranda stating the substance of all oral responses,

to the [section (i) and (ii)] materials described [above]” 5 U.S.C. § 557(d)(1)(D) – “upon receipt of a [prohibited] communication…, the …

employee presiding at the hearing may, to the extent consistent with the interests of justice and the policy of the underlying statutes, require the party to show cause why his claim or interest in the proceeding should not be dismissed, denied, disregarded, or otherwise adversely affected on account of such violation;”

Problem 3-2: Spotted Owls and Logging Endangered Species Committee (“God Squad”) can completely override the act and must

decide whether the agency can take action that would jeopardize a listed species (these agencies must get an exemption from this committee)

Requires formal adjudication, i.e. no ex parte communications are allowed Committee grants an exemption if at least 5 of 7 members of committee grant exemption Issue: several committee members were summoned to White House and were allegedly

facing political pressure to grant the exemption We assume that all alleged meetings are true for this problem… What are the communications we are focusing on as the problem?

o Discussions/conversations, but we don’t know actual content and who said what 1. Determine if its someone on the outside of the agency 2. Then determine if this person on the outside is an “interested person”

o Who is an “interested person” under 5 U.S.C. § 557(d)(1)? Legislative history states that the term covers “any individual or other

person with an interest in the agency proceeding that is greater than the general interest the public as a whole may have. The interest need not be monetary, nor need a person be a party to, or intervenor in, the agency proceeding….”

“…The term [“interested person”] includes, but is not limited to, parties, competitors, public officials, and nonprofit or public interest organizations and associations with a special interest in the matter regulated. The term does not include a member of the public at large who makes a casual or general expression of opinion about a pending proceeding.” PATCO v. FLRA (D.C. Cir. 1982)

o Is Mr. Yeutter an interested person? Press reports suggest that WH has taken an interest

34

Probably not hard to demonstrate that WH has a greater interest than the public as a whole has

o Problem does not have a lot of specific detail on WH’s interest (must be specific) So then, the question becomes: what are we going to do about it?

o PATCO : The mere fact of ex parte communications does not necessarily void an agency’s decision.

Rather, the decision is voidable if, “as a result of improper ex parte communications, the agency’s decision-making process was irrevocably tainted so as to make the ultimate judgment of the agency unfair, either to an innocent party or to the public interest that the agency was obliged to protect.”

Gravity of Communications:o Factors relevant to decision to void agency decision (PATCO):

The gravity of the ex parte communications; Whether the contacts may have influenced the agency’s ultimate decision; Whether the party making the improper contacts benefited from the

agency’s ultimate decision; Whether the contents of the communications were unknown to opposing

parties (who therefore had no opportunity to respond) Whether vacation of the agency’s decision and remand for new

proceedings would serve a useful purpose. Knauss voted to support granting the exemption whereas Reilly ultimately voted against

the exemption…both were “pressured” but with different results What if the decision had been 6-1 instead of 5-2? What remedy would you expect?

o If you can void the process, the case just gets remanded to the committee for another decision

o But the problem is that you can undue what they may have heard in ex parte communications

Problem 3-3 Issue: clerk going and asking the other lawyers a question and speaking with Jones before

he formulated his own thoughts o We don’t have the memo so we don’t know what it says

Stone v. FDIC (Fed. Cir. 1999) “The introduction of new and material information by means of ex parte communications to the deciding official undermines the public employee’s constitutional due process guarantee of notice (both of the charges and of the employer’s evidence) and the opportunity to respond. When deciding officials receive such ex parte communications, employees are no longer on notice of the reasons for their dismissal and/or the evidence relied upon by the agency.”

Factors relevant in determining whether ex parte communication involved “new and material information”:

Is the information new or merely cumulative? Did employee know of the error and have the chance to respond to it?

35

Was the ex parte communication of the type likely to result in undue pressure upon the deciding official to rule in a particular manner?

“Ultimately, the inquiry … is whether the ex parte communication is so substantial and so likely to cause prejudice that no employee can fairly be required to be subjected to a deprivation of property under such circumstances.”

3/10: Due Process Hearings IMissed Class: Notes from Dreda

When APA procedures don't apply, often the agency has adopted procedural regulations for the type of procedure applicable to the adjudication

question of whether this complies with Due Process Clause 5th Amendment (federal government) 14th Amendment (state and local government)

Due Process: no person shall be deprived of life, liberty, or property without due process of law

Substantive Due Process Procedural Due Process (this is what we deal with in Admin)

Two main questions to determine procedural requirements:o Whether the DPC applies at all?

Individualized decision making deprivation of a property or liberty interest

o Assuming the DPC applies, what procedures are required?Individualized Decisionmaking

o individualized deprivations of property or liberty require due processo policy-based deprivations affecting a class of individuals do noto Londoner v. Denver

Plaintiffs brought action to relieve lands owned by them from an assessment of a tax for the cost of paving a street upon which the lands abutted

Supreme Court held that the tax assessed was constitutional tax was assessed under Denver's charter which allows the city to

make local improvements and assess the cost of those improvements upon the benefitted properties

Steps to execute this power: Board of public works transmits to the city council the work

to be done, an ordinance authorizing it, and the assessment district

o First there has to be a petition from the owners of the properties to be assessed

Ordinance will be passed by the city council once they determine that the action was duly taken

the cost will be assessed to the landowner

36

this landowner is questioning whether the assessment was made without notice and opportunity for hearing to those affected by it

When the legislature doesn't levy the tax, but rather commits to a subordinate body the duty of determining whether, in what amount and on whom the tax shall be levied, due process requires that the person against whom the tax will be levied shall be given notice and an opportunity to be heard

Bi-metallic Investment Company v. State Board of Equalizationo suit to enjoin the State Board of Equalization from putting in force an

order increasing the valuation of all taxable property in Denver 40%o Question of whether all individuals have a constitutional right to be

heard before a matter can be decided in which all are equally concerned

o It is impracticable that everyone should have a direct vote in its adoption

distinguished form Londoner where there were relatively few property owners

Protected Interests Problem 3-4: Definition of Property and Liberty

o Student was reported for violating honor code (didn't include quotes in certain cites and paraphrased whole portions of briefs)

o Honor Committee investigated and reviewed the charge. The student was notified of the charge and requested council (but that was denied). He responded to the charge, pleading ignorance of the rule and presented various other assertions to support his position.

o Ultimately the committee unanimously found that Jeremy had committed plagiarism, a violation of the Honor Code, and by a two-to-one vote recommended that Jeremy be suspended for one year. These findings weren't presented to Jeremy before the Dean made the decision to expel him.

o Is there a protected interest? Liberty interest: You can have an interest in your job, but not

everyone has an interest in their job. Also, where a person's good name, honor or integrity is at stake

because of what the government is doing to him, notice and an opportunity to be heard are essential.

Stigma-Plus test in Paul v. Davis In Codd v. Velger the future employment was the plus

factor. This honor code violation will stigmatize him

(admission into other law schools, character and fitness issues, other non-law school employment opportunities)

37

The letter that the Dean wrote also makes the action seem much more nefarious than it actually was.

Property Interest: look to see if there is something from which Jeremy could infer what was expected of him as a student (student handbook)

Property Interest Board of Regents v. Roth

o Professor hired for a fixed term of one year. Was informed that he wouldn't be invited back afterward. Brought an action charging that the decision not to rehire him for he next year infringed on his 14th Amendment rights

o To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must, instead, have a legitimate claim of entitlement to it.

o This is not within the interests protected by the 14th Amendmento The 14th Amendment's procedural protection of property is a

safeguard of the security of interests that a person has already acquired in specific benefits

o Note 3, page 249 (Perry v. Sinderman can be contrasted with Roth case)

Liberty Interest Historically, liberty meant freedom from bodily restraint or injury (gov't.

Ordinarily cannot restrain someone except as incident to the criminal process)

Liberty also includes all of those privileges long recognized...as essential to the orderly pursuit of happiness by free men

Paul v. Daviso Whether respondent's charge that petitioner's defamation of him, on

its own, stated a claim for relief...under the 14th Amendment (It does not)

o Respondent's claim is grounded in his assertion that the flyer distributed to local businesses included the phrase “Active Shoplifters” and included his name and photograph

designation as an active shoplifter would inhibit his ability to enter business establishments and would impair his ability to find employment

o Imputing criminal behavior is generally considered defamatory per se and actionable without proof of special damages (stigma associated with it)

o BUT reputation alone (without some more tangible interest) is not “liberty” or “property”

o This is the stigma plus test

38

Problem Materials Codd v. Velger

o Velger alleges that he had been wrongly dismissed and sought reinstatement and damages from the resulting injury to his reputation and future employment prospects

o He held only a probationary position so he had no property interest in the position but says that he was entitled to a hearing based on the material placed by the Police Department in his personnel file

o He said this material was what caused his dismissal o Question addressed was whether the the police department, in

discharging Velger, imposed a stigma on him that foreclosed his freedom to take advantage of other employment opportunities

the material in his personnel file said that while he was still a trainee, he put a gun to his head and tried to commit suicide

Court of Appeals held that the finding of no stigma by the lower court was clearly erroneous (this type of information would necessarily impair future employment)

o Supreme Court found that it didn't need to reach the stigma finding because there was no factual dispute between the employer and the discharged employee having any bearing on the case

o Stevens dissent: If the charge, whether true or false, involves a deprivation of liberty, due process must accompany the deprivation (favors two-step process)

establish truth or falsity of the charge, and provide a basis for deciding what action is warranted by the facts

Shands v. City of Kennetto Volunteer fireman dismissed because they attempted to undermine the

authority of the Fire Chief when they asked the city council to block the appointment of the candidate requested by the Chief, and appoint a friend of the plaintiffs' in his stead

o After a closed hearing, the council decided to dismiss the men. They released a statement to dispel rumors and misinformation concerning the discharges.

o Plaintiffs alleged (in spite of this) that the council had made false and stigmatizing statements about them and implicated their 14th Amendment liberty interests.

o They also alleged that the defendants had deprived them of procedural due process (failing to provide a fair and meaningful hearing).

To establish protected liberty interests, plaintiffs were required to establish that a city official, in connection with discharging the plaintiffs, publicly made allegedly untrue charges against them that would stigmatize them so as to seriously damage their

39

standings and associations in their community, or foreclose their freedom to take advantage of other employment opportunities

The statements regarding their release (that their dismissal was the result of a personnel matter) did not create the level of stigma required to implicate a constitutionally protected liberty interest

3/22: Due Process Hearings IIProblem 3-5: Did the law school deny Jeremy due process by refusing his requests to be accompanied by his lawyer when he addressed the HC and to call other students and practicing lawyers to testify?

Matthews v. Eldridge “Due process is flexible and calls for such procedural protections as the particular

situation demands. According, resolution of the issue whether the administrative procedures provided … are constitutionally sufficient requires analysis of the governmental and private interests that are affected.”

Analyzing the governmental and private interests affected requires consideration (balancing) of three distinct factors:

o The private interest that will be affected by the official action;o The risk of an erroneous deprivation of such [private] interest through the

procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and

o The Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.

Board of Curators v. Horowitz How can the law school use this case? Academic, higher-learning institution…both were

dismissalso Court doesn’t want to put in judicial proceedings into academic settings

How is it distinguishable?o Medical student didn’t say he wanted a lawyer or to call witnesses (issues in law

school case are not at issue in Horowitz)o Academic vs. conduct

Academic is subjective…conduct hearing is more like a judicial setting

Osteen v. Henley Dismissal case based on conduct “Mathews v. Eldridge … applied to school or college disciplinary proceedings…,

requires consideration of the cost of the additional procedure sought, the risk of error if it is withheld, and the consequences of error to the person seeking the procedure.”

How does this case hurt Jeremy? o

How does this case help Jeremy?

40

o Osteen could attend another school…Jeremy could argue that he is in a professional school and has been accused of professional misconduct

o Not having an attorney did not cause him anymore detrimento Osteen had a student representative…Jeremy had no one

Burdens of having lawyers present:o Lawyers are zealous advocates…process becomes more adversarial o Disciplinary hearing becomes a full blown trialo University would have to get an attorney as well

What other role could the lawyer play? Counselor Osteen pled guilty so he had much less of a need to have an attorney present whereas

Jeremy is asking them to apply many subtleties to guide him in this process Osteen pled guilty to a criminal charge so may have had more of a reason to need an

attorney present to advise him but he didn’t even have an attorney present so why should Jeremy?

Burdens of being able to call witnesses:o Cost of attorney, time

Risk of error if procedure sought is withheld:o Jeremy doesn’t get his story fully told o Law school could say that having a witness is irrelevant because even if we had

that testimony, it doesn’t change what he did

5 U.S.C. § 557(c) “Before a … decision on agency review of the decision of subordinate employees, the

parties are entitled to a reasonable opportunity to submit for the consideration of the employees participating in the decisions … exceptions to the … recommended decisions of subordinate employees … and … supporting reasons for the exceptions….”

Neutral Decision-Maker:Withrow v. Larkin

A biased decision-maker is constitutionally unacceptable process as well as an unacceptably large “probability of actual bias” on the part of the decision-maker

A pecuniary interest in the outcome or having been the target of personal abuse or criticism from the party being adjudicated are examples of an unconstitutional risk of bias

The mere fact of a combination of investigative and adjudicative functions does not create an unconstitutional risk of bias in the decision-maker

Problem 3-6: was Jeremy deprived of his right to a neutral decision-maker? What is the concern with respect to the dean’s statement? That he has already made a

decision before the panel convenedo Pre-judged the case

What argument will the law school make? That he is just responding to what the instructor said…triggering the initiation of the process but not pre-judging the case

o Not a determination that he did it but an opinion that if someone did that it’s a violation of the HC

41

“No decision of this Court would require us to hold that it would be a violation of procedural due process for a judge to sit in a case after he had expressed an opinion as to whether certain types of conduct were prohibited by law.” Withrow.

3/24: Judicial Review: Substantial EvidenceScope of Review:5 U.S.C. § 706(2)(E) – The reviewing court shall … hold unlawful and set aside agency action, findings, and conclusions found to be … unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute

Application of the Standard: this would be in federal court (ALJagencyfed. court) Substantial evidence standard applies only to formal (§§ 556, 557) agency action “Substantial evidence” has been defined as “more than a mere scintilla,” or “such

relevant evidence as a reasonable mind might accept as adequate to support a conclusion” A court performing substantial evidence review must review the record as a whole,

examining both the evidence supporting and opposing the agency’s decision, to determine whether the decision is supported on the entire record by substantial evidence

The reviewing court’s role is not to weigh or reweigh the evidence – if a reasonable person could have arrived at the same conclusion as the agency, based on the record before the agency, the agency’s decision should stand (IT IS NOT DE NOVO REVIEW)

Moreover, the mere fact that a reasonable person might reach some other conclusion is insufficient for a reviewing court to overturn a reasonable conclusion by the agency if supported by substantial evidence

Agency Review of an ALJ Decision: Generally, there are two stages important to the process of substantial evidence review –

o The fact gathering stage (essentially the proceeding before the administrative law judge)

o The final agency determination stage An agency reviewing an appeal of an ALJ’s findings has de novo powers of decision and

may set aside the ALJ’s factual findings (AGENCY DOES NOT HAVE A SUBSTANTIAL REVIEW)

(See 5 U.S.C. § 557(b) – “On appeal from or review of the initial decision, the agency has all the powers which it would have in making the initial decision….”)

However, this does not mean the agency may necessarily ignore ALJ findings and conclusions – they are part of the overall record that must be reviewed and the ALJ’s work cannot be totally disregarded

With respect to the ALJ’s findings as to the credibility of witnesses, agencies must be especially sensitive (and give weight) to those findings because it is the ALJ who hears the live testimony

Penasquitos Village, Inc. v. NLRB Identifies two different types of credibility determinations:

o “Testimonial inferences” or credibility determinations based on demeanor – the way the witness appears and acts while testifying

42

o “Derivative inferences” or credibility determinations based on upon inferences from what the witness says

Because only the ALJ can assess a witness’s demeanor, testimonial inferences by the ALJ should be given particularly strong weight by the reviewing agency (and the reviewing court)

However, based on agency expertise and experience, special deference is accorded the agency regarding derivative inferences to be made from factual testimony, notwithstanding contrary derivative inferences by the ALJ

“The Board … is viewed as particularly capable of drawing inferences from the facts of a labor dispute. Accordingly, … a Court of Appeals must abide by the Board’s derivative inferences, if drawn from not discredited testimony, unless those inferences are `irrational,’ `tenuous’ or `unwarranted.”

“…However, the Board, as a reviewing body, has little or no basis for disputing an administrative law judge’s testimonial inferences….”

“We emphasize that we do not hold that the [ALJ]’s determinations of credibility based on demeanor are conclusive on the Board. We simply observe that the special deference deservedly afforded the [ALJ]’s factual determinations based on testimonial inferences will weigh heavily in our review of a contrary finding by the Board….”

Case says that when an ALJ gives testimonial inferences he doesn’t have to explain himself. In fact, it is better if he doesn’t because then the reviewing agency will have little opportunity to reverse him since he is afforded special deference since he observed the witness first hand

o Agency DOES have to explain itself…ALJ does NOT.

Problem 3-7 (p.276)Testimonial or Derivative?

“…Mr. Darby struck me as sincere, forthright, and candid.” Testimonial. “He admitted dating secretaries, although he is married, but denied ever making the

alleged statements to Miss Jones.” Derivative. Inference: he admitted to dating his secretaries (even though he’s married) so we believe him when he denies making those statements to Miss Jones…makes his denial more believable.

“…In his testimony he did not use the type of language which Miss Jones attributed to him.” Derivative.

“…Miss Jones struck me as wholly incredible. Her manner was brusque and opinionated.” Testimonial.

“…She was unable to verify the times and places where the alleged conversations took place, suggesting that she made them up.” Derivative.

3/29: Judicial Review: Mixed Questions of Law and Fact & Arbitrary and Capricious Judicial Review of Agency Determinations Three categories of issues that might emerge:–Questions of basic fact,–Mixed questions of fact and law (i.e., application of law to fact) (“ultimate facts”),–Questions of “pure” law.

Question of Basic Fact

43

Formal adjudication (§§ 556, 557) – substantial evidence test – a court may not reverse unless after a thorough search of the entire record it concludes that the finding was not supported by substantial evidence and that a reasonable person looking at the same record would not have found the same thing. (5 U.S.C. § 706(2)(E))

o Reasonablenesso If answer is yes, then substantial evidence supports the finding

Informal adjudication – arbitrary/ capricious test – Citizens to Preserve Overton Park v. Volpe (U.S. 1971) – the Court said that the “arbitrary and capricious” standard requires the agency to base a decision on a “consideration of relevant factors” and to avoid a “clear error of judgment”

Note: Supreme Court has not defined the difference between the standards, and some (including Justice Scalia) have suggested there is no difference. Others suggest the latter is simply rational basis review. The touchstone for both tests is reasonableness.

Questions of “Pure” Law 5 U.S.C. § 706(2)(A-C) – a reviewing court is authorized to hold unlawful and set aside

agency action that is “contrary to constitutional right,” “in excess of statutory jurisdiction, authority, or limitations, or short of statutory right,” or “otherwise not in accordance with law.”

This separation suggests that the substantial evidence or arbitrary and capricious standards do not apply to questions of law (thus, a court may properly be less deferential to the agency).

Mixed Questions of Fact and Law Identifying mixed questions of fact and law (sometimes referred as application of fact to

law or questions of “ultimate fact”) requires a preliminary determination of some of the legal issues in the case and the impact the specific facts of the case are going to have on those issues.

Query: Should reviewing courts defer less to the agency’s decision on mixed questions of fact and law than on questions of basic fact?

Courts and the APA are of little help here NLRB v. Hearst (U.S. 1944) suggests that something like “substantial evidence” review

applies First, the court reviews the facts found by the agency and determines whether its

conclusions have a “warrant in the record” Second, the court reviews the agency’s explanation for its decision to decide whether it

has a “reasonable basis in law” Helpful hint : If there is little dispute on the legal question (i.e., definition of statutory

terms) and the dispute is primarily over whether the facts in dispute fit within the statute, the substantial evidence test will apply

On the other hand, if the dispute is primarily over the legal question, a court may properly be less deferential to the agency

Problem 3-8 (p.291) Legal issue: at the time of his death, was he acting within the scope of his employment?

44

Fact issue: was he in the scope of his employment when he had his clothes off when a non-employee…i.e. what was he doing at the time of his death?

o Three possibilities: Was he on work break? Was he on patrol/surveillance?

In favor of surveillance: o Told his wife he was going on patrolo Nighttime hours…not an unusual time to be on patrolo Illegal spotlighting had been going on

Against:o He was not wearing his clothes o She is there at the time of deatho Uniform and weapon are out of his reach

Not working In favor:

o He was nakedo With someone else who was naked

Against:o He is in his work vehicleo No fixed hours of employment (had freedom to take lots of

breaks)o No rule that he can’t have visitors with him

Agency denied him because of his “immoral activity”o Agency doesn’t actually say whether they believe he was on a break or was not

working…they do not make a finding like we made above Reviewing court may remand to make a specific finding of fact Durrah case: didn’t give notice that he was leaving his post to go get a soda…at the time

he was on a break, he had broken a rule. But even if he had told someone he was on break, he still would have slipped

o How is this analogous? If Lund had been by himself (without this female), he would still be dead

o Even if he was breaking a rule (and there is no indication that he was…), he still would have had the same outcome

Problem 3-9 (p.304) Question: whether the denial of his waiver of regulation was arbitrary and capricious? Haven’t explained what you mean by “most unusual circumstances” Not an adequate explanation of decision because there is no discussion of what is meant

by unusual circumstanceso Need to explain this so we then have a chance to decide

Inconsistent decisions are arbitrary and capricious: on two previous occasion, had granted this type of waiver…haven’t explained why this situation is different

Reviewing court will probably remand back to agency to give adequate explanations

Choice of Procedures

45

MISSED CLASS 3/31: Notes from DredaOption 1: Adjudication

Choice of Procedures – Option One: Adjudication Non-legislative rule is an agency pronouncement that advises the public of the agency's

view on an issue and does not have binding legal effect on third partieso Need not be adopted by notice and comment rulemaking

Rules adopted by the notice and comment process are called legislative rules (rulemaking) because they are legally binding

Also have a choice of adjudication Advantages and Disadvantages

o Rulemaking has only a prospective effecto Rulemaking also avoids the problem that adjudication focuses only on one

defendanto There is wide public participation in rulemakingo The availability of substantive rulemaking gives the agency an invaluable

resource-saving-flexibility in carrying out its tasks of regulating parties subject to its statutory mandate

o If the agency uses rulemaking, it can establish a bright-line policy, which is clearer and more precise than a policy developed on a case-by-case basis

o Problems may be so specialized and varying in nature as to be impossible of capture within the boundaries of a general rule

o Rulemaking insulates agencies from political pressureo Rulemaking is more likely to engage national interests o Proceeding against one individual or firm is likely to be significantly less

expensive and time consuming than a rulemaking applicable to the entire nationo If the agency proceeds by adjudication, it gets to pick its defendanto The substantial and increasing procedural requirements for rulemaking, such as

cost-benefit analysis and OMB and congressional reviews, can create burdens not applicable to adjudication

Problem 4-1: FTC Adjudicationo According to the UCC, a dealer is obligated to refund to the borrower any

“surplus” produced by the resale of the car, but the method to calculate whether there is a surplus is not specified.

o Question of whether the calculation used by Country Bob's is unfair under the FTC Act

o Consumer lawsuit is unlikely because the legal fee's are likely to be greater than the amount that would be recovered.

o Should the FTC use (formal) adjudication or (informal) rulemaking? Legal Constraints

o Choice lies primarily in the informed discretion of the agencyo Retroactivity must be balanced against the mischief of producing a result which is

contrary to a statutory design Problem 4-2: FTC Adjudication

o Factors considered in RWDSU Balancing Test: Whether the case that the agency seeks to apply retroactivly is one of first

46

impression Whether a new rule is an abrupt departure from well-established practice,

or merely an attempt to fill a void in an unsettled area of law The extent to which the defendant has relied on a former rule The degree of burden which a retroactive rule imposes on the defendant;

and The statutory interest in applying a new rule despite the reliance of the

defendant on the old standard

4/5:Option 2: RulemakingLegal Limitations on Agency’s Choice of Rulemaking

1. Does the agency have authority to promulgate substantive rules?o Statutes have to authorize agency the authority to create legislative ruleso National Petroleum Refiners Association v. FTCo But Congress usually wants agency to create legislative rules so usually included

in the statute2. Can an agency give retroactive effect to a rule?3. How does due process limit the agency’s ability to enforce ambiguous rules through

adjudication?

Agency Authority to Issue Retroactive Rules Bowen v. Georgetown University Hospital (U.S. 1988) – “…congressional enactments and administrative rules will not be construed to have retroactive effect unless their language requires this result . By the same principle, a statutory grant of legislative rulemaking authority will not, as a general matter, be understood to encompass the power to promulgate retroactive rules unless that power is conveyed by Congress in express terms.”

Problem 4-3: Copyright Fees Statute where Congress established rulemaking authority; but makes no mention of

retroactivity expressly So this statutory language is not enough…cannot apply rules retroactively

Ambiguous Rules -- Due Process General Electric Co. v. EPA (D.C. Cir. 1995) – Due process “prevents … deference

from validating the application of a regulation that fails to give fair warning of the conduct it prohibits or requires. In the absence of notice – for example, where the regulation is not sufficiently clear to warn a party about what is expected of it – an agency may not deprive a party of property by imposing civil or criminal liability.”

“…[W]e must ask whether the regulated party received, or should have received, notice of the agency’s interpretation in the most obvious way of all: by reading the regulations. If, by reviewing the regulations and other public statements issued by the agency, a regulated party acting in good faith would be able to identify, with `ascertainable

47

certainty,’ the standards with which the agency expects parties to conform, then the agency has fairly notified a petitioner of the agency’s interpretation.”

“Although the agency must always provide `fair notice’ of its regulatory interpretations to the regulated public, in many cases the agency’s pre-enforcement efforts to bring about compliance will provide adequate notice.”

The required notice can thus come from the regulation itself or the agency’s pre-enforcement efforts, but it cannot come from the citation itself. Once the citation is issued, it is too late for a regulated entity to conform its behavior to the regulation.

Deference to Agency’s Interpretation of Its Own Regulation:General Electric Co. v. EPA (D.C. Cir. 1995) – “We accord an agency’s interpretation of its own regulations a `high level of deference,’ accepting it `unless it is plainly wrong.’”

Problem 4-4:Bureau of Mines approved self-rescuers shall be available near the advancing face to equip each face employee. Such equipment shall be on the haulage equipment and in other areas where employees might be trapped by smoke or gas, and shall be maintained in good condition.

OSHA’s Argument:o Would have received the regulation and are expected to read it o Clear on the statute

“[A]nd in other areas where employees might be trapped by smoke or gas…”

JCC’s Argument:o By reading the regulationso Lack of an “also” in the second sentence

Who does the case help? o Case helps Johnson in the sense that that interpretation did not provide fair notice

with ascertainable certainty…so due process violation by giving them that fineo But…also helps OSHA because there is not as much of a level of complexity as

there was in GE case Discussing “dissolution”

However, in subsequent cases, this due process case with Johnson would constitute “pre-enforcement efforts,” and then OSHA would have put other regulated entities on notice

Option 3: Non-Legislative RulesSection 553 of the APA recognizes two types of non-legislative rules –

Interpretive rules – a statement “issued by an agency to advise the public of the agency’s construction of the statutes and rules which it administers”

Statement of policy – a statement “issued by an agency to advise the public prospectively of the manner in which the agency proposes to exercise a discretionary power”

Why are non-legislative rules even considered to be rules? The APA defines a “rule” as an “agency statement of general or particular

applicability and future effect designed to … interpret, or prescribe … policy….” (5 U.S.C. § 551(4))

48

Non-legislative rules are exempt from § 533 notice and comment rulemaking procedures (see 5 U.S.C. § 553(b)(3)(A))

An agency can make a non-legislative rule effective immediately upon publication in the Federal Register (see 5 U.S.C. § 553(d)(2))

o As opposed to legislative rules: take effect after some time they are published to make sure everyone has had adequate notice

The FOIA requires publication of non-legislative rules in the Federal Register and states that a regulated entity cannot be “adversely affected” by a non-legislative rule if it has not been so published (see 5 U.S.C. § 552(a)(1)(D))

Advantages of Non-Legislative Rules Easier to adopt and change than legislative rules (exempt from notice and comment

procedures and effective immediately upon publication) Despite being legally nonbinding, regulated entities may comply with interpretations

announced in a non-legislative rule If a non-legislative rule will stimulate sufficient compliance, the agency may decide not

to spend the additional time and resources required by a rulemaking Even if some entities may choose not to comply, the agency may use non-legislative rules

to warn regulated entities of its interpretation of the law This eliminates any surprise that can be claimed if the agency later seeks an adjudication

to declare certain conduct to be a violation of law

Disadvantages of Non-Legislative Rules The agency will not receive any public input and will thus lose valuable insights to be

gained from public comments that would assist in developing policy [NOTE: Administrative Conference of the United States recommends that agencies

voluntarily comply with notice and comment procedures for non-legislative rules unless “impracticable, unnecessary, or contrary to the public interest”]

Problem 4-5: OSHA Policy Statement

Missed 4/7: Differentiating Legislative & Non-Legislative Rules Non-Legislative Rules are POLICY STATEMENTS. They clarify what an existing rule

meansmaking a statement about what the rule actually means.

Metropolitan School District v. Davila (7th Cir. 1992) “An interpretive rule simply states what the administrative agency thinks the [underlying]

statute means, and only reminds affected parties of the existing duties. On the other hand, if by its action the agency intends to create new law, rights, or duties, the rule is properly considered to be a legislative rule.”

Two factors considered in Davila: 1. The “starting point … is the agency’s characterization of the rule. The

agency’s characterization is not dispositive, but is a relevant factor.”2. Second, did the agency intend by its action “to create new law, rights or

duties”? (If so, the rule is legislative.)

49

Problem 4-7: USDA Internal Memorandum Memo says: “Dangerous animals must be inside a perimeter fence at least eight feet

high.”

4/12: Reliance on Non-Legislative Rules Problem 4-8: USDA Interpretive Rule

We assume that this is an interpretative rule (non-legislative)…so Jones lost her argument in Problem 4-7

Her arguments based on Alaska Professional Hunters:o Definitive v. authoritative interpretation

Previous interpretation by this veterinarian--6ft high gets the job doneo Changed in position where I am injured if I am required to ddo something

different (detrimental reliance): you made a statement; I followed it; and if you change it, I will have to build a new fence which will put me out of business

Alaska Professional Hunters v. FAA:“Once an agency gives its regulation an interpretation, it can only change that interpretation as it would formally modify the regulation itself: through the process of notice and comment rulemaking. …. When an agency has given its regulation a definitive interpretation, and later significantly revises that interpretation, the agency has in effect amended its rule, something it may not accomplish without notice and comment….”

Definitive Agency Interpretation? Alaska Professional Hunters v. FAA – FAA argued (unsuccessfully) that there had been

no previous “authoritative interpretation” of its regulations Metwest, Inc. v. Secretary of Labor – court held that Alaska Professional Hunters did not

apply because the agency had never established an “authoritative interpretation” of its regulation on which a regulated party had “justifiably relied to its detriment”

Problem 4-8 Cont’d: Agency: not authoritative interpretation

o One statement, orally made, by low-level employee (under Metwest)o Jones: reasonable reliance…this was their inspector who they sent out to decide

whether I was in compliance or not, and he said I was in compliance with a 6ft fence

In Alaska, the pilots were consistently told that they were not held to the rules of commercial pilots and so they were not involved in the notice & comment portion of creating those rules (doesn’t not apply to Ms. Jones; this beefs up Alaska’s arguments…surprise!)

o Also, told the pilots across the board that they didn’t have to have commercial pilot’s license

o Whereas Jones had one inspector tell her 6ft was okay Jones has the reliance…but doesn’t have a lot of facts that were present in Alaska to rise

to an authoritative, definitive statement

50

How do we argue that notice & comment should still be required?o Situation where we ought to have notice & comment to avoid justified reliance…

agency could elect to do this

Problem 4-9: Animal Welfare Act Advice Is low-90s “excessive” heat? When can you argue that the government is estopped to deny its oral representations? Was the reliance detrimental? Agency made a representation; we acted in reliance; and

now we are fined Reasonable reliance?

o Party had duty to familiarize itself with the relevant legal requirements (YES)o Party understood the regulations were ambiguous (YES, they called to clarify)o Party should have known the agent giving the advice was not in a position to offer

a definitive interpretation (YES, they were aware that there was a process to determine something definitively under AWA--were told 8 to 10 weeks so they didn’t want to wait)

o Party failed to seek a definitive interpretation (YES)o Advice obtained by the party was oral and not written (YES)

Applying Heckler suggests that even though you did change you position in reliance, it wasn’t reasonable or justifiable reliance

Heckler v. Community Health Services Court refuses to declare a flat rule that estoppel – precluding an agency from enforcing a

law because of the “misconduct” of its agents – may never run against the Government Suggests that there may be “cases in which the public interest in ensuring the

Government can enforce the law free from estoppel might be outweighed by the countervailing interests of citizens in some minimum standard of decency, honor, and reliability in their dealings with their Government.”

Traditional elements of estoppel – “… the party claiming the estoppel must have relied on its adversary’s conduct `in such a manner as to change his position for the worse,’ and that reliance must have been reasonable in that the party claiming the estoppel did not know nor should it have known that its adversary’s conduct was misleading.”

Detrimental change in position in reliance on regulatory advice?o Required to pay back money to the Government to which the party was not

entitled, but this meant the party had received an interest-free loan for a period of two or three years

Reasonable reliance on regulatory advice?o Party had duty to familiarize itself with the relevant legal requirementso Party understood the regulations were ambiguouso Party should have known the agent giving the advice was not in a position to offer

a definitive interpretationo Party failed to seek a definitive interpretationo Advice obtained by the party was oral and not written

Appeal of Eno

51

Can ultimately incorrect regulatory advice from an agency employee as to what conduct is required under an ambiguous statute rise to the level of a due process violation?

In Appeal of Eno, the New Hampshire supreme court held that due process was violated when agency employees affirmatively misled an applicant for workers compensation concerning what steps she had to take to be eligible for benefits

Doesn’t change analysis in 4-9 says Case

4/14: Judicial Deference*Barnhart applies now! Tells you whether to apply Chevron or Skidmore deference.

Chevron Deference – Legislative Rules STEP ONE: Is the statute silent or ambiguous on the precise interpretive question at

issue?o If not, the court must apply (and the agency must follow) the unambiguously

expressed intent of Congress and the inquiry ends.o If the answer is yes, then move to Step Two.

STEP TWO: Is the agency’s interpretation based on a permissible (reasonable) construction of the statute?

o If yes, the court defers to the agency’s interpretation.o If not, the court will proceed to provide a reasonable interpretation.

Skidmore Deference – Interpretive Rules “We consider that the rulings, interpretations and opinions of the [agency] …, while not

controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance. The weight of such a judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.”

Very weak form of deference What is the court’s position on Skidmore? We are willing to defer to agency

interpretation if we are persuaded by it (more freedom)o Under Chevron, even if court is not persuaded by the agency but it is still

reasonable, it is required that the court defers to the agency

Problem 4-10: 12 U.S.C. § 2607 (RESPA) – Referral fees or kickbacks in mortgage loans are illegal, but

fees for “services actually performed” are not prohibited Culpepper v. Irwin Mortgage (11th Cir. 2001) – statutory meaning of “services actually

performed” does not include YSPs and are thus prohibited by RESPA (YSPs are per se illegal)

52

HUD Statement of Policy 2001-1 – “services actually performed” may include YSPs in appropriate circumstances and as such would not be prohibited by RESPA

Yield Spread Premium (YSP) = difference between the mortgage company’s offered mortgage interest rate and the interest rate actually negotiated by the mortgage broker, if the broker negotiates a higher interest rate with the customer than the company offers

The fight in this problem is which deference should this HUD statement receive—Chevron or Skidmore? It WILL receive one or the other.

Christensen v. Harris County (U.S. 2000) “…We confront an interpretation contained in an opinion letter, not one arrived at after

… a formal adjudication or notice-and-comment rulemaking. Interpretations … contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law – do not warrant Chevron-style deference. Instead, interpretations contained in formats such as opinion letters are `entitled to respect’ under our decision in Skidmore, but only to the extent that those interpretations have the “power to persuade.”

If we applied this to the problem, the HUD policy statement would get Skidmore deference because the statement lacks the force of law

But then came Mead…

United States v. Mead Corp. (U.S. 2001) “This Court in Chevron recognized that Congress not only engages in express delegation

of specific interpretive authority, but that `sometimes the legislative delegation to an agency on a particular question can be implicit.’ It can … be apparent from the agency’s generally conferred authority and other statutory circumstances that Congress would expect the agency to be able to speak with the force of law when it addresses ambiguity in the statute or fills a space in the enacted law, even one about which `Congress did not actually have an intent’ as to a particular result.”

o Expectation is that agency can speak with force of law when addressing ambiguities

“When circumstances implying such an expectation exist, a reviewing court has no business rejecting an agency’s exercise of its generally conferred authority to resolve a particular statutory ambiguity simply because the agency’s chosen resolution seems unwise, but is obliged to accept the agency’s position if Congress has not previously spoken to the point at issue and the agency’s interpretation is reasonable.”

o Reiterating what Chevron is abouto If this is Congress’ intent (to have the agency fill in the interpretative gaps), then

the court has no business getting in the middleo Agency’s role

“...The overwhelming number of our cases applying Chevron deference have reviewed the fruits of notice-and-comment rulemaking or formal adjudication. …[A]s significant as notice-and-comment is in pointing to Chevron authority, the want of that procedure here does not decide the case, for we have sometimes found reasons for Chevron deference even when no such administrative formality was required and none was

53

afforded. The fact that the [interpretive choice] here was not a product of formal process does not alone … bar the application of Chevron.”

o We don’t think it is this bright line as it is in Christensen…the want of procedural aspects should not (in itself) preclude an interpretative statement from receiving Chevron

o Some informal, non-legislative interpretations may have the force of law

Problem 4-10 Cont’d Is this an interpretative rule or a policy statement? Interpretative rule (interpreting a

current rule…not making a prospective policy statement)o Applies now

Does agency have authority from Congress? Yes, see 12 USC § 2617: Authority of Secretary (“to make such interpretations”)

Barnhart v. Walton (U.S. 2002) “…The fact that the Agency previously reached its interpretation through means less than

formal “notice and comment” rulemaking does not automatically deprive that interpretation of the judicial deference otherwise its due. Mead pointed to instances in which the Court has applied Chevron deference to agency interpretations that did not emerge out of notice-and-comment rulemaking. It indicated that whether a court should give such deference depends in significant part upon the interpretive method used and the nature of the question at issue.”

Factors to consider in determining whether to apply Chevron deference to an interpretive rule –

o The interstitial nature of the legal question; i.e. identify the interpretative question Meaning what is the ambiguity? Are we filling something within in the

statutory text that is ambiguous or are we “interpreting” something that is not ambiguous to begin with—if not ambiguous, there is no need for interpretation and therefore no deference will be shown

Place of ambiguity in overall statutory schemeo The related expertise of the agency;

Is the gap related to the agency’s expertise?o The importance of the question to administration of the statute;o The complexity of that administration; ando The careful consideration the agency has given over a long period of time.

Even if the process was not formal rulemaking, how formal was the procedure involved? What steps did the agency take?).

As applied to Problem 4-10:o Interstitial nature: what is a YSP under the statute? Is it a referral fee or can it be a

payment for service?o Related expertise: agency definitely wins this one…common man does not know

what a YSP is o Importance of the question to the administration of the statue: in favor of Chevron

Important issue There are probably thousands of Betty Simmons (from problem) out there

o Complexity of administration In favor of Chevron

54

Complex matterso Careful consideration the agency has given over a long period of time

This could be argued either way

Deference to Agency Interpretation of Its Own Regulations Bowles v. Seminole Rock & Sand Co. (U.S. 1945) – an agency’s interpretation of its own

regulations is given “controlling weight unless it is plainly erroneous or inconsistent with the regulation”

Why give greater deference to an agency’s interpretation of its own regulations than to an agency’s interpretation of its statutory mandate?

*Notes 7-9

4/19 & 21: Standing Access to Federal CourtsThere are three necessary prerequisites for a plaintiff to have access to the federal courts:

1. The court must have subject matter jurisdiction,2. The plaintiff must have a private right of action, and3. The plaintiff must have standing to sue

Subject Matter JurisdictionTwo primary sources related to challenging administrative agency action:

Specific grant of jurisdiction to the court under a relevant statutory regime, or General “federal question” jurisdiction under 28 U.S.C. § 1331 (“The district courts shall

have original jurisdiction under all civil actions arising under the Constitution, laws, or treaties of the United States.”)

Private Right of Action Two primary sources to demonstrate that Congress intended to provide plaintiffs a federal remedy to challenge administrative agency action:

A statute expressly grants the plaintiff a private right of action (i.e., the statute contains language along the lines of “any person may commence a civil action on his own behalf”), or

Administrative Procedure Act establishes a “cause of action” for any “person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute” (see 5 U.S.C. § 702)

Standing to Sue Even where Congress has conferred a private right of action, plaintiffs still must

independently satisfy standing requirements The standing doctrine is a constitutional limitation on the ability of Congress to grant

private rights of judicial review stemming from Article III which limits the power of the federal judiciary to resolution of “cases” and “controversies”

Four basic requirements for standing :o The challenged action must cause plaintiff some actual or threatened injury-in-

fact;

55

o The injury must be fairly traceable to the challenged action (causation);o The injury must be redressable by judicial action; ando The injury must be to an interest arguably within the zone of interests to be

protected by the statute alleged to have been violated

Injury-in-Fact Lujan v. Defenders of Wildlife -- “injury in fact” is defined as an invasion of a legally

protected interest which is –o (a) Concrete and particularized (i.e., must affect the plaintiff in a personal and

individual way) ando (b) Actual or imminent, not conjectural or hypothetical.

Need proof to show that its reasonably certain…cannot be purely speculative

Causation Lujan v. Defenders of Wildlife – “…there must be a causal connection between the

injury and the conduct complained of – the injury has to be fairly traceable to the challenged action of the defendant, and not … the result of the independent action of some third party not before the court.”

Redressability Lujan v. Defenders of Wildlife – “…it must be likely, as opposed to merely speculative,

that the injury will be redressed by a favorable decision.”

Problem 5-1: Plaintiff is ALDF (SMJ, private right, & standing themselves)

o Organization can get into court on behalf of its members in their own righto “Associational” or “Representational” Standing:

An association can sue in its own name on behalf of its members if: One of its members would have standing to bring the action, The lawsuit relates to the purposes of the organization, and Neither the claim asserted nor the relief requested requires the

participation of individual members (that is, declaratory or injunctive relief is the goal, not individualized damages)

Standing:o Standing relating zoo:

Would need to show that members attend zoo and that their aesthetic interests are harmed by seeing primates isolated

Injury-in-Fact: Aesthetic Interest Lujan v. Defenders of Wildlife – “…the desire to use or observe

an animal species, even for purely aesthetic purposes, is undeniably a cognizable interest for purposes of standing. But the `injury in fact’ test requires more than an injury to a cognizable interest. It requires that the party seeking review be himself among the injured.”

56

Cf. Sierra Club v. Morton – injury to “environmental, aesthetic, or recreational interests” actually suffered by persons can qualify as injury in fact

Cannot be solely backwards looking…must show that they go to the zoo and will go back to zoo again and will be disturbed againpast injury not enough

Lujan v. Defenders of Wildlife – “As we have said in a related context, past exposure to illegal conduct does not in itself show a present case or controversy regarding injunctive relief … if unaccompanied by any continuing, present adverse effects.”

o Standing relating to the research facility: Going to be harder for them to argue that their members have access to the

research facility enough to be harmed by it Not enough for them to say that they know what is going on in there and it

bothers them No standing

Causation: is the injury complained of fairly traceable to statute that requires that they keep the animals in environment appropriate to promote the psychological well-being of primates

o Failure of agency to prohibit zoos from putting animal in these individual cageso Traceability: inaction on part of the agency

Regulations should be revised to put this in as an affirmative prohibition Redressability:

o Court order setting aside regulation

Burden of Establishing Standing Summers isn’t breaking new ground in terms of organization standing…still look to

Sierra Club v. Morton & Lujan Lujan: “The party invoking federal jurisdiction bears the burden of establishing the[]

elements [of standing]. Since they are not mere pleading requirements but rather an indispensable part of the plaintiffs’ case, each element must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation….”

“To survive … summary judgment …, respondents had to submit affidavits or other evidence showing, through specific facts, not only that listed species were in fact being threatened by funded activities abroad, but also that one of more of respondents’ members would thereby be `directly’ affected apart from their `special interest’ in the subject.” Organization standing!

Standing to Challenge a Procedural Violation The mere violation of a procedural requirement by an agency (e.g., procedural

requirement for an environmental impact statement, or a procedural requirement for a hearing prior to denial of a license application) is not an injury-in-fact sufficient to support standing to challenge the procedural violation unless the procedures “are designed to protect some threatened concrete interest of [the plaintiff] that is the ultimate basis of his standing.”

57

The procedural injury must impair a separate concrete interest (Kennedy, J., concurring in Summers).

Summers: There was an injury that had been established but parties resolved that particular injury

during settlement…court said plaintiff cannot stick around and argue procedural violations after he lost his standing by settlement (i.e. no standing)

Majority vs. Dissent:o Dissent test: whether there is a statistical probability that some of those members

are threatened with concrete injuryo Majority: this isn’t an actual and imminent injury…burden is on the party

invoking federal jurisdiction to establish standingo Question about sufficiency of proof and evidence

Kennedy’s Concurrence: does not want to foreclose on the possibility that Congress “sought to provide redress for a concrete injury giving rise to a case or controversy where none existed before”

Is Kennedy inconsistent? Key for Kennedy is the Lujan concurrence quotes in Massachusetts

o Past violation not enougho Must be a continuing problem

4/26: Exclusions from Judicial Review Under the APARight of Review5 U.S.C. § 702 – “A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.”

Judicial Review: Exclusions5 U.S.C. § 701(a) – “This chapter [“Judicial Review”] applies, according to the provisions thereof, except to the extent that–

(1) Statutes preclude judicial review; or(2) Agency action is committed to agency discretion by law.

1. Does the relevant statute “preclude judicial review”? Abbott Laboratories v. Gardner (U.S. 1967) – The APA “embodies the basic

presumption of judicial review to one `suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute,” so long as no statute precludes relief or the action is not one committed by law to agency discretion.”

o The APA’s “`generous review provisions’ must be given a `hospitable’ interpretation … [and] only upon a showing of `clear and convincing evidence’ of a contrary legislative intent should the courts restrict access to judicial review.”

Block v. Community Nutrition Institute (U.S. 1984) – “Whether and to what extent the relevant statute precludes judicial review is determined … from its express language, [and] also from the structure of the statutory scheme, its objectives, its legislative history, and the nature of the administrative action involved. … [A] statutory scheme [must be

58

examined] to determine whether Congress precluded all judicial review, and, if not, whether Congress nevertheless foreclosed review to the class to which the [plaintiffs] belong.”

o “The presumption favoring judicial review of administrative action is just that – a presumption. This presumption … may be overcome by specific language or specific legislative history that is a reliable indicator of congressional intent.”

o Block v. Community Nutrition Institute (U.S. 1984) – “the Court has found the [clear and convincing evidence] standard met, and the presumption favoring judicial review overcome, whenever the congressional intent to preclude judicial review is `fairly discernible in the statutory scheme.’ … [T]he `clear and convincing evidence’ standard is not a rigid evidentiary test but a useful reminder to courts that, where substantial doubt about the congressional intent exists, the general presumption favoring judicial review of administrative action is controlling.”

Note 1 (p.443)

2. Does a statute commit an action “to agency discretion by law”? Citizens to Preserve Overton Park v. Volpe (U.S. 1971) – Section 701(a)(1) is concerned

with whether Congress expressed an intent to preclude judicial review; subsection (a)(2) applies “in those rare instances where statutes are drawn in such broad terms that in a given case there is no law to apply.”

Heckler v. Chaney (U.S. 1985) “Agency action is committed to agency discretion by law” when a “statute is drawn so that a court would have no meaningful standard against which to judge the agency’s exercise of discretion. In such a case, the statute (“law”) can be taken to have “committed” the decision-making to the agency’s judgment absolutely.”

Said another way, if a statute grants discretion to an agency, and the law does not establish a standard against which to assess the exercise of that discretion (so that a court can determine if there was an abuse of discretion), then Congress has committed that action to agency discretion by law.

Webster v. Doe •National Security Act – Director of CIA “may, in his discretion, terminate the

employment” of employee “whenever he shall deem [it] necessary or advisable in the interests of the United States.”

•Court held terminations of the Director were unreviewable because of lack of any meaningful standards against which to review whether termination was “necessary or advisable in the interests of the U.S.”, and thus such decisions were committed under the statute to the absolute discretion of the agency.

Review of Agency Decision to Refuse Enforcement Heckler v. Chaney (U.S. 1985) – “…an agency’s decision not to prosecute or enforce …

is a decision generally committed to an agency’s absolute discretion.” “The general exception to reviewability provided by § 701(a)(2) for action “committed to

agency discretion” remains a narrow one, but within that exception are included agency refusals to institute investigative or enforcement proceedings, unless Congress has indicated otherwise.”

59

Problem 5-5: Refusal to Waive Regulation Statute clearly says that secretary “in his discretion to waive…” Then you would look to see if there is a standard or any guidepost (no, or we would have

it in the problem) So cannot review the secretary’s decision BUT Webster says that that doesn’t mean that

the secretary has the authority to make a decision that is unconstitutional o Disability Act says that this DOT statute could be unconstitutional, and this is

reviewable. Unreviewable under National Security Act but is reviewable against the Rehabilitation

Act

Exam: 50% is one issue spotting essay problem 25% short essay questions (e.g. compare one case to another) 25% 10 multiple choice questions

60