LEGISLATION AND REGULATION

I. Legislation and Statutory InterpretationA. Sources of Statutory Interpretation

1. Text: The starting point of the analysis of any statutea) There is a presumption of “ordinary meaning,” which has come to

mean the dictionary definition, but can also be the colloquial use of a term or phrase

b) Terms of art: words that have one meaning on the street and a different meaning within a specialized community (for example, a scientific meaning, see Nix v. Hedden).

c) Context within the statute:i. Meaning derived from other sections of the same

legislationii. Meaning derived from other statutes

2. Legislative History (in descending order of weightiness)a) Committee Reports and Conference Committee Reports:

considered the most reliable source for Congress’ views on the purpose of the legislation.

b) Statements by sponsors or floor managers: Court presumes that the sponsor is most likely to know the details of the intent/purpose of a bill, but because they don’t reflect consensus, they are given less weight.

c) Floor Debate (statements by proponents and opponents): The statements of individual legislators are not typically taken very strongly into consideration because it is difficult to reconcile the various views expressed with those that are not. This includes statements made during hearings

d) Other tools that are sometimes considered:i. Rejected Proposals: Courts occasionally look to past

versions of bills to inform their understanding of what made it into the final version

e) Positions about the Admissibility of Legislative History:i. Should always be looked at if it exists since no law

prevents probative history from being introduced (American Trucking)

ii. Should never be consulted: classical rule in English common law, American rule until the late 19th century when Aldridge changed it. It is current admissible (Holy Trinity)

iii. Plain meaning: admissible if and only if there is statutory ambiguity, the Supreme Court’s use of legislative history has significantly declined, although there is no clear current view, the plain meaning rule typically prevails.

3. Subsequent legislation/(in)action (S = statute, I = interpretation, Ξ = identical)

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a) Ratification: Idea that if the legislature passes an identical statute following the Supreme Court’s interpretation of a prior statute, with the knowledge of that decision, it is Congressional authorization of the Court’s interpretation. This idea is problematic because while precedent can be overruled, ratification cannot. This is often criticized because Congress is the most agenda-constrained/time-sensitive branch. (Thus, ratification, though a logical inference, is not necessarily the appropriate one.)

i. S1 (x or y) I2 (x) S3 Ξ S1 I4 (x or y?) (Ratification would say x)

b) Acquiescence: Idea that silence equals consent such that if judicial review is made interpreting a statute a particular way and Congress does not act to strike it down, we should assume that it is Congress’ way of clarifying their intention.

i. Weaker than ratification because there is no affirmative act. Additionally, the structure of gate keeping in Congress may mean that even if there is a disagreement about the Court’s interpretation, it may not be clear through legislative history simply because of a lack of authority.

ii. Article 1, Section 7 of the Const. sets up bicameralism and the formation of bills. Critics of acquiescence say that the only constitutional way Congress can comment on judicial interpretation is by enacting statutes.

iii. S1 (x or y) I2 (x) ___ I4 (x or y?), acquiescence says x.

4. Absurdity Doctrine: “A slip of the brain;” the idea that there is a threshold of absurdity above which it is assumed the statute did not intend to reach. (Avoid drawing conclusions that would require absurd foresight or knowledge, as well as those with unanticipated consequences). The absurdity doctrine says that Congress could not have considered the specific instance and its absurd results when they included the language being interpreted.

a) Arguments in favor: perfect foresight is never possible and might actually be a waste of time, so it makes better sense for Congress to get the main applications down and leave it up to judges, the “faithful agents” who will fix the few absurd applications.

b) Critiques: It won’t always be judges making the decisions, but will instead be people/agencies interpreting the statutes or making exemptions. Whether one agrees with the doctrine depends on one’s assessment of how competent the agency/agent is-might want them to have less discretion based on their lack of intelligence.

5. Scrivener’s error: “a slip of the pen,” an obvious mistake in the transcription of the legislature’s policy into words. It differs from the absurdity doctrine in that it is a facial error rather than an interpretative

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one. Ambiguity is not a predicate for a scrivener’s error, and a judge’s conclusion based on the error will face a lot of scrutiny.

6. Foundational Theories: a) Intentionalism: (most traditional, but has fallen out of favor) when

a judge confronts a difficult issue of statutory interpretation-when the statute is unclear, or seems to dictate a troublesome result-the judge tries to determine what the legislature would have specifically intended if it had confronted the particular interpretative question before the court.

b) Purposivism: purposivists view the above question as too illusory or difficult to reconstruct. They maintain that Congress adopts legislation for a reason and that courts should read specific statutory provisions to advance the purpose of general aims of the legislation, as derived from a variety of source. They pay close attention to the semantic meaning of the text, so long as it does not contradict the statute’s overall purpose.

i. “Rational actor theory”-the master would want the faithful agent to follow his purpose, not his specific command.

c) Textualism: holds that interpreters should strive to discern how reasonable people would understand the statutory language, arguing that going beyond the text to further some elusive notion of congressional intent or purpose is both illegitimate in principle and unworkable in practice.

d) Note: Judges subscribe to any one of these theories and use any combination of the sources listed above and below to inform their interpretation. Each of these approaches is grounded in the principle of legislative supremacy, the idea that in the U.S. constitutional system, acts of Congress enjoy primacy as long as they remain within constitutional bounds, and that judges must act as Congress’s faithful agents.

i. Liber’s Hypothesis: Purpose + Belief = Intent7. Canons of Construction: Interpretive principles or presumptions judges

use to discern-or construct-statutory meaning. a) Semantic Canons- rules about language use (also called

“linguistic” or “syntactic” rules) (generally disfavored by academics)

i. Ejusdem generis (“of the same kind”): if you have a list of things, identify the class those things belong to, and read the ambiguous term to mean the same as the other things in the class (based on the idea that legislators tend to group together words that have a common characteristic.) Often invoked when the term at the end (called the residual term) has a broad meaning that would go beyond the sorts of things specifically enumerated without the canon-used to read the term more narrowly so that it encompasses only

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things that are similar to the items that are specifically mentioned.

o An opposite reading would hold that lists are used for each word to have a different meaning, otherwise the list would be repetitive.

ii. Expressio unius (“the express mention of one thing excludes all others”): if something is mentioned explicitly, it is meant to be exhaustive. The very fact that items were enumerated means that everything else is excluded.

o An opposite reading would say if a list is included, it is meant to be illustrative and not exclusive (more similar to ejusdem generis).

iii. Noscitur a sociis (“you know it by its friends”): a word’s meaning can be clarified by the words around it-necessitates looking at the surrounding language to understand the meaning of a particular word.

iv. Presumption of consistent usage: construe words within statutes on similar subjects to have the same meaning

b) Substantive Canons: a judicial presumption in favor of or against a particular substantive outcome. These are judge-made principles, grounded in commitment to certain systemic values rather than any empirical beliefs about actual congressional intent

i. Rule of lenity: construe ambiguous texts to mean the meaning most favorable to the defendant. This rule is based on the need for fair warning, closely related to our valuation of real notice, which must be offered even if the defendant does not take it, because we want Congress to be clear before they implement sanctions. Currently, the rule acts as a tiebreaker, as there is a trend toward using legislative history to create sufficient clarity such that the rule is not triggered.

ii. Rule of constitutional avoidance: If a statute is ambiguous, if one interpretation would raise an issue of constitutionality and other would not or is constitutional, pick the constitutional interpretation. (Shorthand: if possible, decide in a way that avoids finding that a constitutional question is present)

i. Severability doctrine: When a statute is unconstitutional in some of its applications but not in others, it can be held as to its constitutional application and invalid as to the others.

ii. Vermuele wants to get rid of the canon, though it is helpful for litigators who want a narrower interpretation (they can refer to a constitutional question in the hope of a narrower construction).

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iii. Presumption against retroactivity: “repeals by implication are not favored” (TVA v. Hill)- if Congress passes something in 1977 that is inconsistent with an earlier statute but does not acknowledge the inconsistency, if there is any way to allow both to continue, the court does.

iv. Presumption that appropriations cannot change substantive law: expressions of committees dealing with requests for appropriations cannot be equated with statutes enacted by Congress (TVA v. Hill).

B. Cases1. Foundational Theories (Purpovism): TVA v. Hill (1978):

a) Issue: Did the Endangered Species Act of 1973 require a court to enjoin the operation of a virtually completed federal dam? Text of statute: “each federal agency shall…insure that any action authorized, funded, or carried out by such agency…is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of habitat of such species…”

b) Majority Opinion (Burger): Takes an interpretation that is purposivist and textualist. This type of result was actually the plain intent of Congress and the language reflects that. Burger depends on the text, legislative history, purpose vs. intention, the canons of presumption against retroactivity and appropriations laws changing substantive interpretation. (They favored the Secretary’s argument that once a federal project was shown to jeopardize an endangered species, a court is compelled to issue a restraining order).

c) Dissent (Powell): Powell argues that the shutting down of the dam in favor of some birds (the snail darter) to be ridiculous. He favored the ruling of the District Court, which determined that since the dam was 80% completed, and there had already been an “irreversible and irretrievable” commitment of resources by Congress over a decade, through subsequent legislation, it would be unreasonable, even absurd, to require them to stop.

i. Powell relies heavily on Holy Trinity, which said that “frequently words of general meaning are used in a statute, words broad enough to include an act in question, and yet a consideration of the whole legislation, or of the circumstances surrounding its enactment, or of the absurd results which follow from giving such broad meaning to the words, makes it unreasonable to believe that the legislator intended to include the particular act” literal application of a statute which would lead to absurd consequences is to be avoided whenever a reasonable application can be given which is consistent with the legislative purpose.

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d) Takeaway: This case demonstrates that while judges agree that they must faithfully carry out Congress’s intentions, they vary on how to best do so.

2. Scrivener’s Error: United States v. Locke (1985) a) Issue: The federal recording system required that claimants file a

notice of their intention to hold the claim “prior to December 31st” of every year. The appellees, filed on December 31st and lost their claim, wanted “prior to December 31st” to be read as “on or before December 31st”

b) Majority (Marshall): Found that because deadlines are arbitrary by design, it is proper to adhere to the literal meaning (appellees lose-“tough luck”). Majority rejects the idea that this is a scrivener’s error because “the fact that Congress might have acted with greater clarity or foresight does not give courts a carte blanche to redraft statutes in an effort to achieve that which Congress is perceived to have failed to do.”

c) Dissent (Stevens): This language is at worst a mistake and at best unclear/ambiguous. An analysis of the context of the provision reveals that Congress clearly meant to say by the end of the year.

d) Better example of the scrivener’s error: Cernauskas v. Fletcher, state legislature passed a statute about public streets that said, “all laws and part of laws are hereby repealed”- must mean all laws that contradict this particular provision.

3. Ordinary vs. scientific (“term of art”) meaning: Nix v. Hedden (1893)a) Issue: Are tomatoes properly classified as fruits or vegetables

under the Tariff Act? (Vegetables were taxed and fruits were not)b) Majority: While there is a particular botanical meaning for “fruit”

and “vegetable,” there is no specialized meaning in trade and commerce, so the ordinary meaning rules.

c) Conclusion: There is a presumption in American law that ordinary meaning applies unless Congress/the legislature indicates otherwise. It is appropriate to use the particular context and common usage to come to a conclusion about a particular word.

4. Ordinary Meaning vs. Dictionary Meaning: Smith v. United States (1993)

a) Issue: Does the exchange of a gun for narcotics constitute “use” of a firearm “during and in relation to…[a] drug trafficking crime” within the meaning of a statutory provision requiring that a defendant who “uses or carries a firearm” during and in relation to any crime of violence or drug trafficking crime be sentence to five years incarceration.

b) Majority (O’Connor): Yes, exchanging a gun for drugs does constitute “use” under the statute, determining that it would be unreasonable to read the clause as excluding the use of a firearm in a gun-for-drugs trade. She considers the remaining provisions of the statute for more clues as to its meaning and rejects the rule of

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lenity argument, since the “mere possibility of articulating a narrower construction does not by itself” make the rule applicable. The majority depends in large part on the dictionary definition, an approach that is often criticized since dictionary definitions often miss or undervalue the policy impulses that inspired the legislation.

c) Dissent (Scalia): The ordinary use of the word “use” would lead to the opposite conclusion. Further, the rule of lenity requires an interpretation in favor of the defendant.

5. Textualist Critique of Legislative History: Blanchard v. Bergeron (1989)a) Issue: A statute provided that a court “in its discretion may allow a

reasonable attorney fee” to a prevailing party in federal civil rights action. Was a court’s reduction of a plaintiff’s award proper?

b) Majority (White): No, the contingent-fee contract does not impose an automatic ceiling on an award of attorney’s fees, and to hold otherwise would be inconsistent with the statute and its policy and purpose. The Court relies heavily on a Senate Report that cites various decisions to reach this conclusion.

c) Concurrence (Scalia)-favoring textualism: The purpose of the references in the Senate Report was to influence judicial construction, not to inform Members of Congress about the bill. The Court should continue to adhere to the approach of seeking to develop an interpretation of the statute that is reasonable, consistent, and faithful to its apparent purpose, rather than to achieve obedient adherences to case cited in the committee reports.

d) Primary textualist critique of legislative history is that only the text of the statute, not the subjective intentions of individual legislators discerned from the text, is the law.

6. Legislative Process and Statutory Interpretation: Continental Can (1990)a) Issue: Continental Can wanted special treatment under a statute

that applied when “substantially all of the contributions of the plan are made by employers primarily engaged in the long and short haul trucking industry…” for a pension plan. Does anything over 50% = substantially all?

b) Majority (Easterbrook, Circuit Judge): No, the history prior to the statute’s enactment suggest that it was intended to mean 85%. The legislative history of a bill is valuable only to the extent it shows genesis and evolution, making “subsequent legislative history” an oxymoron. The text of the statute, and not the private intent of the legislators, is the law. The text is law and legislative intent is a clue to the meaning of the text, rather than the text being a clue to legislative intent.

7. Semantic Canons (ejusdem generis): McBoyle v. United States (1931)a) Issue: Does the term “vehicle” include aircraft under the National

Motor Vehicle Theft Act? (Statute provides “motor vehicle” shall include “an automobile, automobile truck, automobile wagon,

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motor cycle, or any other self-propelled vehicle not designed for running on rails…”

b) Majority (Holmes): invokes the idea of paradigm meaning (what picture is conveyed by the use of the term) to suggest that plane is not covered. Follows ejusdem generis to say that the provision is limited to land vehicles, since those are the types of vehicle explicitly named (the residual term presumed to be limited)

8. Canon of Avoidance: Catholic Bishop (1979)a) Issue: Are lay teachers at a religious school within the jurisdiction

of the National Labor Relations Act? If the Act authorizes such jurisdiction, does its exercise violate the guarantees of the Religion Clause of the First Amendment?

b) Majority (Burger): No, there is no clear Congressional intent mandating such a result, and the second question need not be decided. Burger’s understanding is that the canon can be used only to resolve a statutory ambiguity that would exist independently of the canon. Thus, it functions more like a clear statement rule, according to which general terms should not be applied in ways that create serious constitutional problems. Thus, if Congress wants a general statute to reach constitutionally problematic cases, it must provide a “clear expression” of “affirmative intent” to do so.

c) Dissent (Brennan): Applying the requirement for clear Congressional intent is problematic and could lead to the Court “virtually remaking” congressional enactments. Use of ejusdem generis demonstrates that Act was intended to cover al employers, as well as the rejected proposal doctrine. Brennan emphasizes that the Court may only adopt an interpretation that avoids a constitutional problem if that interpretation is “reasonable” or “fairly possible.” If the text of the statute is not ambiguous, then the avoidance canon has no place.

II. RegulationA. The Uneasy Constitutional Position of the Administrative Agency

1. Non-delegation Doctrine:a) Source: Article 1, Section 1 of the Const.: “all legislative powers

herein granted shall be vested in a Congress of the United States.” The Constitution thus solely delegates legislative powers to Congress, and those powers cannot be re-delegated to others.

b) Positions Under the Doctrine: Does Congressional delegation always, sometimes, or never amount to an impermissible delegation of legislative power?

i. Always: The vesting of all legislative powers in Congress is not only an initial allocation, but a final one. Congress cannot transfer its legislative powers to any other institution, including administrative agencies.

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ii. Sometimes: When Congress enacts a statute granting authority to the executive (or perhaps to private parties), the statute amounts to or effects a delegation of legislative power (and is therefore impermissible) if the scope of the grant is too broad or if it vests too much discretion in the executive.

iii. Never (Minority (Vermuele’s) view): When Congress enacts a statute granting authority, there is no “delegation” of legislative power no matter how broad the grant or how much discretion it confers, because by delegating the power through the enactment of the relevant statute, Congress has exercised its power. So long as the grantee acts within the bounds of its statutory authority, however broad they may be, the grantee is necessarily and by definition exercising executive power, not legislative power.

2. Non-delegation Evolution:a) Hampton (1928): The Court upheld a statute that allowed the

President to revise tariff rates whenever he determined that such revision was necessary to “equalize the costs of production in the U.S. and the principal competing country.” The Court determined that this was not an invalid delegation of Congressional power based on the “intelligible principle” test: “if Congress lays down by a legislative act an intelligible principle to which the person or body authorized to take action is directed to conform, such action is not a forbidden delegation of legislative power.” At this time, the Court had never invalidated a statute based on unfair/improper delegation.

i. Problem with the intelligible principle: all intelligible principles will leave unbounded discretion in some domain because the legislature cannot offer a principle sufficient to close the gap between the delegation and the rule as is required/necessitated by the statute, and filling up that gap is necessary-part of what it means to execute the law.

b) Panama Refining Co. v. Ryan (1935): involved a challenge to the National Industrial Recovery Act’s (NIRA) Petroleum code. The code was challenged on the basis of a section that gave the President authorization to “prohibit the transportation in interstate commerce” of oil petroleum. The Court held this section unconstitutional because it said nothing about when the president was to exercise the authorized power. (No intelligible principle)

c) A.L.A. Schecter Poultry Corp. v. United States (1935) (“sick chickens” case): The NIRA was passed during the Depression to help stabilize wages and prices to restore business confidence. The act provided for representatives of management and labor in each industry to meet and develop codes of fair competition. Petitioners were convicted of violence of the “Live Poultry Code” and

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contested the code on the basis that the delegation was impermissible because it allowed the President to set out codes industry by industry with the force of law.

i. Holding: Because the NIRA grants virtually unlimited discretion to the President in approving or proscribing codes, and thus enacting laws for the government of trade and industry, the NIRA confers a code-making authority that is an unconstitutional delegation of legislative power. (No clear intelligible principle)

ii. The delegation here went too far because it allowed the committee to set its own standards and there was lack of accountability among those committee. Note: Since this case, there have been no Supreme Court cases invalidating a statute on the basis of overly broad delegation.

d) The Benzene Case (1980) (Attempt to revive the non-delegation doctrine):

i. Background: The Petroleum challenged a regulatory standard limiting occupational exposure to benzene. Under the Occupational Safety and Health Act, the Occupational Safety and Health Administration (OSHA) is responsible for developing such standards, which are then formally adopted by the Secretary of Labor. The Act delegated broad authority to the Secretary to promulgate different kinds of standards. The Secretary took the position that no safe exposure level can be determined and that he had to set an exposure limit at the lowest technologically feasible level that will not impair the viability of the industries regulated. The Secretary set an exposure limit on airborne concentrations of benzene.

ii. The plurality found that there must be a significant risk of health impairment for the Secretary to deem higher levels of benzene impermissible. Because there was an intelligible justification/rationale, the delegation stood, but it was remanded to the Secretary for review to determine that it is at least more likely than not that long-term exposure to benzene presents a significant risk of material health impairment.

iii. Rehnquist, in his concurrence, attempted to revive non-delegation as a reason for invalidating the statute by laying out three functions of the non-delegation doctrine:

o It ensures that the important choices of social policy are made by Congress, the branch most responsive to popular will

o It guarantees, to the extent Congress finds it necessary to delegate authority, that the recipient of the authority will have an “intelligible

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principle” to guide the exercise of the delegated discretion

o It ensures that the courts charged with reviewing the exercise of delegate legislative discretion will be able to test that exercise against ascertainable standards.

o His concurrence was rejected. Thus, while non-delegation lives as a principle for interpreting statutes, in a practical sense it follows the avoidance canon.

e) American Trucking v. EPA (D.C. Cir. 1999) i. Background:/issue The Clean Air Act requires the EPA to

promulgate and periodically revise national ambient air quality standards for each air pollutant identified by the agency as meeting certain statutory criteria. American Trucking contested those levels.

ii. Holding (per curiam): The construction of the Clean Air Act on which EPA relied in promulgating the standards at issue here effects an unconstitutional delegation of legislative power because the EPA did not use an intelligible principle to set those levels (not because of an impermissible delegation). The court remanded it back to EPA to develop an actual principle showing that the standard was set at the level required to “protect the public health” with an “adequate margin of safety” so that they could provide meaningful judicial review.

f) Whitman v. American Trucking (2001)i. Majority (Scalia): Congress, not the EPA, should have

articulated the intelligible principle. The SC determined that the constitutional question is not whether the EPA’s interpretation violated the non-delegation doctrine, but whether the statute has delegated legislative power to the agency. They noted that an agency cannot cure “an unconstitutionally standardless delegation of power by declining to exercise some of that power.” However, Congress’ delegation was sufficiently clear/intelligible since “not lower or higher than necessary to protect public health” sets out a ceiling/floor.

ii. Scalia describes the balance between appropriate scope and non-delegation as a sliding scale: the Supreme Court hardly ever invalidates something on non-delegation grounds except in cases where there are extreme factors on either the intelligible principle or scope side, meaning that the delegation must be extremely broad or must have little or no intelligible principle. In those cases, the Court preserves the right to invalidate, however this case is not one of

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those. (Basically, Vermuele says that this is just the Court avoiding having to invalidate the statute since they fail to provide any real guidance).

3. Tools of Congressional Control (ways Congress constrains agencies).a) Legislative Veto: A statutory provision that says a particular

agency action will take effect only if Congress does not nullify its resolution within a specified period of time. The goal of the legislative veto is to allow Congress an opportunity to oversee, or veto, agency decisions, especially if agencies are acting under statutes that give them broad discretion amounting, in practice, to a form of lawmaking. Three elements are essential to such a veto:

i. A statutory delegation of power to the Executive;ii. An exercise of that power by the Executive;

iii. A reserved power in the Congress to nullify that exercise of authority

iv. Case: Immigration & Nationalization Service v. Chadha (1983)

o Facts: Chadha was an immigrant who remained in the U.S. after his visa expired. He was ordered deported, but the AG suspended his deportation for reasons of hardship. However, a provision in the Immigration and Nationality Act required that such deportations not be suspended without Congressional assent. The House passed a resolution (legislative veto) overturning his decision.

o Issue: Did the House’s action violate the Constitution?

o Majority (Burger): Yes, the Court overturned the action as unconstitutional on the basis that it violated the bicameral structure of Congress as well as the Presentment Clause. (Court declares legislative veto as a whole unconstitutional)

o Dissent (Powell): By invalidating this statute and the legislative veto, the Court affects 200 other statutes when it should have used the avoidance doctrine.

b) Alternatives to Legislative Veto: i. In 1996, Congress passed the Congressional Review Act,

requiring agencies to submit almost all regulations to Congress before they become effective, while Congress has 60 legislative days to pass a joint resolution of disapproval, which would keep the regulation from going into effect. The impact of CRA has been minimal.

ii. Enactment of regulations as statutes: a bolder approach would require Congress to actually enact agency

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regulations as statutes (so an agency’s proposed rule could only go into effect after Congress enacted an authorizing statute). Such a proposal has been offered a number of time, but never been passed.

iii. Joint resolutions of approval: instead of permitting passage of a joint resolution of disapproval before a major regulation becomes effective, a statute such as the Regulations from the Executive in Need of Scrutiny (REINS) Act would require approval before the regulation becomes effective. This alternative has also not yet been enacted.

c) Appropriations: Agencies can do nothing unless Congress has provided funds to do it. Thus, an unhappy Congress may reduce, or threaten to reduce, an agency’s overall budget to influence an agency. Appropriations are often used as temporary amendments to the underlying legislation.

d) Oversight: Through its committees, Congress pays close attention to agency activities, with each committee or subcommittee with relevant subject matter jurisdiction maintaining fairly continuous, informal communication with the agency. There is always the possibility, or threat, that the committee, if unhappy will be moved to pursue legislation that will reverse or redirect the agency’s course, and the agency knows this. Thus all agency-Congress interactions occur against the backdrop of the possibility that if the agency does not conform its actions to the desires of legislators, it will find itself subject to legislation affecting the substance of its program, its structure, or its budget. (This includes oversight hearings, in which an agency official is summoned to the Hill to appear before the (sub)committee to explain and justify his or her activities).

e) Casework and Constituent Service: members of Congress or their staff are in frequent contact with agencies regarding specific actions that affect particular constituents. Casework refers to the response or services that Members of Congress provide to constituents who request assistance. Members of Congress determine the parameters of such activities.

f) Senate Advice and Consent: The Senate’s authority to withhold approval of the president’s nominee gives it some influence over who ends up running an agency. In general, the Senate has been highly deferential in considering appointments of the heads of departments, but less so with regard to lower-level officials or members of independent agencies.

4. The President and Agencies: Appointment, Removal, and Cost-Benefit Analysis

a) The “headless fourth branch”-agencies that have no boss so they cannot be removed by Congress under Bowsher and cannot be

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removed by the President under Humphrey’s. These include the SEC, FCC, NRLB, etc. This branch is necessary because in certain domains we have desires about immunizing the agency from accountability not to the nation but to the special interests within it, as well as preventing political corruption within specialized bodies of expertise. Also, it’s unclear how much directive authority the President has.

b) Appointments (see back of p.3 February 16): Under the Appointments Clause, Article 2, Section 2, Clause 2, the president “shall nominate, and by and with the Advice and Consent of the senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States…” Congress has more discretion over “inferior Officers…”

i. Principal Officers: placed by the President with the approval of 2/3 of the Senate.

ii. Inferior Officers: The President, without Senate consent, by the courts of law or by heads of departments can appoint inferior officers. (Congress can place the appointment of “inferior officers” in the president alone, the heads of departments, or the courts of law, leaving the Senate out of the process.)

iii. Buckley v. Valeo (1976):o Background: The Federal Election Campaign Act

of 1971 created the Federal Election Commission (FEC) to implement the act. The agency was authorized to write rules, investigate violations of the act or its rules, hold hearings to determine whether violations had occurred, give advisory opinions, and commence civil judicial enforcement actions. The commission had six voting members. The president appointed two members with confirmation by a majority of both the Senate and the House. The speaker of the House and the president pro tempore of the Senate each appointed two commissioners, also subject to confirmation by both Houses. The secretary of the Senate and the clerk of the House were ex officio members without a vote.

o Issue: The appellants urged that since Congress gave the Commission wide-ranging rulemaking and enforcement powers with respect to substantive provisions of the Act, Congress is precluded under the principle of separation of powers from vesting in itself the authority to appoint those who will exercise such authority.

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Can the Appointments Clause be read to include Congress or its officers as among those in whom the appointment power may be vested?

o Holding (per curiam): No. The arrangements for appointing FEC commissioners violated the appointments clause. Defined “Officer of the U.S.” as any appointee exercising significant authority pursuant to the laws of the United States (thus includes both principle and inferior). There is no mechanism by which Congress or any of its members can appoint officers in the United States.

iv. Morrison v. Olson(1988) Appointment: o Background: The (now-expired) Ethics in

Government Act created the post of “independent counsel,” a prosecutor to investigate and, where appropriate, prosecute the possible criminal activity by senior executive branch officials. Matters were referred to a three federal judge panel appointed by the Chief Justice for the purpose of naming independent counsels. The independent counsel had “full power and independent authority” to exercise investigative and prosecutorial functions of powers in/of the DOJ.

o Holding: The Supreme Court held that the independent counsel was an inferior officer, and so appointment by the court was permissible. Even purely executive officers can be made independent, so long as such designation does not unduly interfere with the President’s constitutionally specified powers.

o Court lays out the following test for distinguishing inferior and principal officers:

1. Is the appellant subject to removal by a higher Executive Branch official? (If yes, they are “inferior” since Congress can only remove principal officers by impeachment)

2. Is the appellant empowered by the Act to perform only certain, limited duties? (Does it grant authority to formulate policy for the Government or the Executive Branch, or give administrative duties outside those necessary to operate the office?)

3. Is the office limited in jurisdiction? 4. Is the office limited in tenure?

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o Dissent (Scalia): Pointed out that many indisputably principal officers, such as heads of departments, are subject to removal by a higher official (namely the President), so the test fails in that respect. Second, he thought the majority mischaracterized the scope and authority of the independent counsel. He also thought that their inquiry was misplaced and should have focused on the text of the Const. and the division of power it imposes. He would have concluded that the Independent Counsel was not an inferior officer (and that therefore her appointment was invalid) because she is not subordinate to any officer in the Executive Branch.

v. Edmond v. United States (1997): o Background: Case considered the Coast Guard

Court of Criminal Appeals, which included two civilian members appointed by the Secretary of Transportation without Senate advice and consent (appointed as inferior officers). Edmond argued that this method was unconstitutional.

o Analysis: Whether one is an “inferior” officer depends on whether he has a superior, since “inferior” connotes a relationship with some higher-ranking officer or officers below the President. Inferior officers are therefore those officers who work is directed and supervised at some level by other who were appointed by Presidential nomination with the advice and consent of the Senate (“principal officers”).

o Holding: Using the Morrison test as well as the new test of subordinance, the Court determined that the judges of the Court were inferior officers, and that therefore their appointments were proper. (New test: if there is subordinance, then look to the Morrison factors-subordinance is necessary, but not sufficient.)

vi. Free Enterprise Fund v. Public Company Accounting Oversight Board (PCAOB) (2010)

o Background: The Sarbanes-Oaxley Act of 2002, created in response to the various corporate scandals of the prior year, created the Public Accounting Oversight Board, composed of five members appointed by the SEC and removable by the SEC for cause. Every accounting firm that audits public companies under the securities laws

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must register with the Board, pay an annual fee, and comply with its rules and oversight. Free Enterprise was an accounting firm and non-profit organization. The Board released a report critical of the firm and began an investigation into its practices. Petitioner sued, claiming it was unconstitutional and seeking an injunction against its exercising its power.

o Holding: In a 5-4 decision, the Court struck down the provisions requiring cause for removal of PCAOB members, but upheld the provisions regarding appointment of the Board members. (Board members determined to be “inferior officers”).

vii. Cross-branch appointment (Congress allowing one entity to appoint another in a separate branch of government) is permissible so long as such appointments are not incongruous with the purpose of the appointee or appointer (101). (For example, a court can appoint a prosecutor).

viii. Recess appointments: Under Article 2, Section 2, Clause 3, the recess appointments clause authorizes the president to make temporary appointments (lasting until the end of the following congressional session) without Senate approval. It has become a mechanism for the president to get in place, if only temporarily, a nominee who for whatever reason the Senate has failed to confirm.

c) Removali. The Constitution is silent as to the removal of federal

officers. In the “decision of 1789,” Congress adopted statutory language that did not expressly grant the president power to remove but did specify what was to happen after he removed a secretary, implying a presidential power to remove. The dominant understanding is that the first Congress concluded that the Constitution places the power to remove executive officers in the president. (The Constitution does mention the possibility of impeachment in which the House proposes a removal for cause and the Senate has to agree with a 2/3 vote.)

ii. Myers v. United States (1926): o Background: Myers was appointed postmaster for

a four-year term under a statute providing that postmasters “shall be appointed and may be removed by the President with the advice and consent of the Senate.” President Wilson removed him from office, prior to the expiration of his term, without the consent of the Senate and Myers

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sued for back pay. The government argued that his removal was lawful because it is unconstitutional to limit the president’s power to remove an executive branch official by requiring the Senate’s agreement.

o Analysis: The President must have the power to quickly remove subordinates who he does not have full faith in. Congress can pass specific legislation to limit that power, but absent that, it is unchecked. Even if the statute says it requires Senate approval, the President has broad powers of removal.

o Holding: The power to remove subordinates is inherently part of the executive power, which Article 2 Section 1 vests in the President. The removal was lawful.

iii. Bowsher v. Synar (1986)o Background: Congress passed the Balanced

Budget Act, giving the comptroller general power to make budgetary decisions as a member of the executive branch. The head of the Government Accountability Office could be removed only for cause by a joint resolution by Congress. The Supreme Court invalidated this statute on the basis that it was improper for Congress to grant executive power, determining that Congress was encroaching on the domain of the executive by placing officers in the executive.

o Holding: “Congress cannot reserve for itself the power of removal of an officer charged with the execution of the laws except by impeachment”

o Result: When combined with Buckley, the Court seems to be saying that Congress is very limited in the types of controls it can put on personnel. It cannot affirmatively appoint or remove.

iv. Humphrey’s Executor v. United States (1935)o Background: The FTC was created to enforce

certain provisions of the antitrust laws and to define and eliminate “unfair methods of competition.” Proponents wanted a nonpartisan organization, free from the interference of either Congress or the President. In its early years, the Commission brought few major cases. Roosevelt wanted to install commissioners who would be more vigorous and ambitious in enforcing the Act. Humphrey was nominated by Hoover and

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confirmed for a seven-year term to end in September 1938. In 1933, Roosevelt sent a letter asking for his resignation and after the Commissioner declined to resign, he removed him from the position.

o Issues: The FTC Act stated “any commissioner may be removed by the President for inefficiency, neglect of duty, malfeasance in office.” Does this provision restrict the power of the President to remove a Commissioner except for one of the causes named? If so, is such a restriction valid?

o Holding: The Court repudiates Myers outside of its narrow application to postmasters and the idea that an officer, as a unit of the executive department, is inherently subject to the exclusive and illimitable power of removal by the Chief Executive, including all purely executive officers. It does not include officers who occupy no place in the executive department and who exercise no part of the executive power vested by the Const. in the Pres.

o Resulting Rule: For purely executive officers, the President has to be able to remove at will. For officers exercising quasi-legislative or quasi-judicial powers, Congress can create for-cause removal protection (such as the provision at issue in this case).

o To take away the President’s power to unilaterally remove officers, Congress must create “independent agencies” (e.g. the FTC, NLRB, FCC, SEC), which must have a balance between parties. Humphrey’s thus licenses the Congressional creation of independent agencies. Thus, while Congress cannot appoint or remove, it can constrain the President’s ability to do so.

v. Morrison v. Olson (1988): Removalo Background: The Independent Counsel could be

removed from office “only by the personal action of the AG and only for good cause, physical disability, mental incapacity, or any other condition that substantially impairs the performance of such independence counsel duties.” The independent counsel had the power to investigate and prosecute.

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o Issue: Is the provision, mandating that the IC be removable only for cause by the AG (rather than removable at the President’s will) valid?

o Majority (Rehnquist): The Ethics in Government Act puts the removal power squarely in the hands of the Executive Branch, without the requirement of congressional approval, though it is subject to judicial review. The Court moves from a question of quasi-judicial/legislative to “whether the removal restrictions are of such a nature that they impede the President’s ability to perform his constitutional duties. The “good cause” removal provision here does not burden the President’s power to control or supervise the independent counsel. Further, the Act does not undermine or disrupt the balance of power between the coordinate powers. While this is nominally the test, Vermuele expects that it will be overruled.

o Dissent (Scalia): The Court errs because it finds that the conduct of the independent counsel was purely executive and that the statute necessarily deprives the President exclusive control over the exercise of purely executive power, yet fails to determine that the statute vesting that power in a person not the President is void. How much the statute reduces Presidential control is irrelevant, the fact that it does so renders it invalid.

vi. Back to PCAOBi. Issue: May the President be restricted in his ability

to remove a principal officer, who is in turn restricted in his ability to remove an inferior officer, even though that inferior officer determines the policy and enforces the law of the U.S. (is an “executive officer”)? (Double for-cause protection) (see diagram in Feb. 17th notes)

ii. Holding (Roberts): Such multilevel protection from removal is contrary to Article II’s vesting of the executive power in the President. The Court reached this conclusion because members of the Board were insulated from the Commission’s control-the Commission could not remove Board members at will, but only “for good cause shown in accordance with” certain procedures.

iii. Effect: PCAOB is narrow on its face but the language is targeted at limiting/clarifying the

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permissible constraints on the President’s power under Humphrey’s Executor.

Summary Of Removal

May Congress Remove?a. Myers (narrow): no, there is no requirement of ex post Senate consent to removal (only impeachment is available)b. Bowsher: Removal by statute is impermissibleOverall, no except by impeachment, in part because of the idea of avoiding “aggrandizement”-the temptation to centralize/draw in all the government’s power.

May Congress make executive officers removable by the President only for cause? (Constrain removal by the President?)a. Myers (broad reading): no, Congress cannot do so, as it will be a violation of the Constitutional clause vesting the executive power in the Presidentb. Humphrey’s Executor: yes, for quasi-legislative or quasi-judicial officers (overturns Myers in part by saying that to the extent that the officers are not exercising purely executive powers, Congress can determine that they are removable only for cause.)c. Morrison: yes, unless it interferes with the President’s constitutional duties to execute the laws (does not matter whether the independent agency is quasi-judicial or quasi-legislative)d. PCAOB (narrow): Congress cannot grant two layers of for cause protection: cannot create an independent board/office in which the principal officer is protected against at-will removal and the subordinate/inferior officer is also only removable for cause.e. PCAOB (broad reading): A broad reading would essentially re-instate Myers, though Morrison remains the nominal test. Morrison is quickly falling out of favor.

On the exam, if there is a removal question, mention both Myers and Humphrey’s, then say that Morrison is the prevailing rule, and then reference the change with PCAOB (So go through each test.)

Note: In practice, the presence or absence of the power to remove does not equate with substantive authority.

d) Presidential Administration and Cost-Benefit Analysis (see hypotheticals February 23rd notes)

i. Directive Power: the power (or lack thereof) of the President to tell agency officials how to exercise discretion delegated to them by a statute.

o Question of Constitutional Authority: The traditional and mainstream position is that if Congress assigns a task to the head of an agency, the president cannot dictate the substance of the decision, and thus a decision made in direct

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contravention of a presidential command would be legally valid. Some lower courts have taken the view that the vesting clause and the take care clause create broad presidential power to dictate policy to officials.

o Statutory authority: Even if the president lacks an inherent directive authority under the Constitution, it is universally agreed that Congress can grant him such power over particular officers or particular decisions, and it sometimes does so. Statutes that do not mention the president and grant particular authority or assign particular tasks to agency officials are primarily read as prohibiting presidential displacement of the designated agency official as decision-maker. However some, notably Justice Kagan, have read such statutes, in regard to executive agencies, to implicitly authorize presidential direction absent an explicit statement to the contrary. (She supports the opposite presumption when it comes to independent agencies.)

o A broad reading of Myers seems to point strongly to Presidential directive power. A narrower reading, however, understands it as validating the President’s role of supervision and guidance rather than command-thus the President can ask agencies to consider making rules on certain subjects, and agencies have a legal obligation to consider them but not to actually do it. There are exceptions even to a broad reading:

1. There is a question whether the President can overrule or revise the officer’s interpretation of his statutory duty when the duties are so “peculiarly and specifically committed to the discretion of a particular officer.” (108)

2. When there are duties of a quasi-judicial character imposed on executive officers and members of executive tribunals whose decisions after hearing affect the interest of individuals, the President cannot properly influence or control such decisions (108). (Where there is an adjudicative decision)

ii. Presidents coordinate control by creating a centralized system of review that emphasizes coordination and cost effectiveness. He can take such an active role in regulation

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through official memoranda, executive orders, and press conferences, and in doing so puts his official stamp on the regulation. Congress has stated, however, that administrators “shall not submit [their] decisions for the approval of, nor be bound by, the decisions or recommendations of any committee, board, or other organization created by Executive Order.” (See other outline for the ways prior Presidents have utilized Executive Orders).

o Guidance Documents are agency statements that provide general information about regulatory requirements but do not impose new requirements or bind regulated entities or the agency. They can be in the form of letters, or “Frequently Asked Questions,” or manuals, or memoranda or interpretive rules. Critical features: (a) Unlike so-called “legislative rules,” guidance documents are issued by agencies without public input, and (b) in theory, they are not binding.

o Any regulation that will cost more than $100 million is considered “significant” and subject to OIRA rules under Presidential Executive Orders.

iii. Cost-Benefit Analysis: The current administration’s executive order says that agencies are required to quantify benefits and costs to the extent possible, and where appropriate may consider qualitatively values that are impossible to quantify (e.g. equity, dignity, fairness, and distributive impacts.) A cost-benefit analysis (CBA) is performed using the following steps (pp. 155-161):

o Calculate and monetize multiple effects: The agency must consider, either formally or informally, the benefits of the substance they might ban and thus the costs of any ban. First, they must determine which benefits and costs to consider and then decide how to measure them.

o Look at the markets for non-health effectso Deal with commensurability issues: make various

sorts of risks and benefits commensurable so that some sort of global estimate of each can be reached, allowing them to be weighed against each other.

o Distributional questions: ask whether giving certain distributional weights to particular outcomes would be helpful.

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o Calculate the difference between willingness to pay to obtain a certain benefit and willingness to accept to give up a certain benefit.

o Weighting: A regulator must consider how to weigh risks to human life against economic or non-health benefits.

o Calculate the “value of statistical life”o Consider the qualitative differences among risks.o The discount rateo The bottom lineo In the end, most regulation does not go through

CBA. (see other outline for policy concerns/considerations)

B. Procedure1. Rules and Order: Background

a) Agencies have two basic procedural modes through which they make general policy and apply that policy in particular contexts, namely rulemaking and adjudication. An agency has to stay within the bounds of its grants of power for these procedures. These procedures have five basic sources:

i. Organic Statutes: The organic statute creating an agency or vesting it with powers often specifies applicable procedures.

ii. Agency Procedural Regulations: The agency may have adopted procedural regulations, which it must follow in accordance with the principle that an agency is bound by its own rules

iii. APA: The APA establishes procedural requirements of general applicability.

iv. Federal common law: The courts have created “federal common law” imposing procedural requirements on agencies; most of these requirements, based neither on specific statutory provisions nor the Constitution, are designed to facilitate judicial review. (E.g. the requirement, developed in Chenery and subsequent cases, that agencies articulate a sustainable justification for discretionary decisions is an example.)

v. The Constitution: Constitutional due process requirements may apply.

b) Rulemaking and Adjudication: the Constitutional Distinctioni. Londoner v. Denver (1908):

o Background: Colorado statute provided that the Board of Public Works might, after notice and opportunity for hearing, order the paving of a street on petition of a majority of the owners of property facing that street. The Denver City

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Council had to approve and implement this order through the adoption of an ordinance authorizing the paving. Additionally, before taking any action, the council had to provide notice and opportunity to file written objections. Plaintiffs, owners of property, challenged the council’s approval/levying of a tax against them on the basis that the authorization of improvement was invalid because they didn’t get a majority of owners to sign, paving had not been properly completed, the apportionment of costs was improper, and the hearing procedures afforded by the council with respect to assessment were inadequate.

o Issue: Did the council’s action violate the due process clause of the fourteenth amendment? Did the council’s approval of the assessments without an opportunity for an oral hearing violate the Constitution?

o Majority (Moody) Analysis: The Court determined that the council’s action in authorizing the improvements without notice and opportunity for hearing did not violate due process. Since the state legislature delegated the assessment and levying of the tax to a subordinate body (here the City Council), however, the plaintiffs had a right to an oral hearing.

o Holding/Conclusion: Decisions, made by an administrative body rather than a legislature, that are adjudicative in nature (case-by-case determination) must be subject to some sort of review (here an evidentiary hearing.)

ii. Bi-Metallic Investment Co. v. State Board of Equalization (1915):

o Background: The State Board of Equalization and the Colorado Tax Commission made an order increasing the valuation of all taxable property in Denver by forty percent. The plaintiff brought a claim on the basis that it was given no opportunity to be heard and that therefore its property was being taken without due process of law.

o Issue: Did the Board and Commission violate due process because they gave no opportunity for an oral hearing?

o Majority (Holmes): no violation of due process. Distinct from Londoner because there was a large

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number of people effected versus a small number of people (and therefore they could influence the legislature); it was an order with general rather than specific effect (no one was “exceptionally affected”); and further Londoner dealt with adjudicative facts (facts about the parties and their activities, businesses, and properties, which require an opportunity to be heard) rather than legislative facts (general facts which help the tribunal decide questions of law and policy and discretion-broad principles of general application).

o Note: These distinctions are not always dispositive because they often have contradictory results. (E.g. a large party with specific claims on legislative facts)

iii. These cases both demonstrate the principle that the Constitution does not impose any procedural requirements when either legislatures or administrative agencies adopt general laws or rules (according to common law). When a legislature extinguishes a property right by way of legislation that affects a general class of people, the legislative process provides all the process that is due. The Londoner/Bi-metallic Distinction says that the following factors tend to make an act adjudicative in nature (requiring a hearing or some other means of judicial review): a small number of people, specially affected by the act, on the facts of an individual rather than general case.

iv. Southern Railway v. Virginia (1933):o Background: The Highway Commissioner

directed Southern Railway to eliminate an overhead railroad passage on the basis of his opinion that public safety and convenience required such a measure. The decision was made under the authority of a Virginia statute that said no prior notice was needed. The statute included no mechanism for judicial review of such decisions. Southern Railway sued, claiming that such an order violated due process because there was no notice or hearing.

o Analysis: The statute allowed an administrative officer (the Commissioner) to make a final determination without notice, hearing, or evidence, and the finding was not subject to judicial review.

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o Holding: The RR company was entitled to a fair hearing on the fundamental facts (of whether public safety and convenience required its elimination).

c) Non-constitutional requirements: The Chenery Litigationi. Background: The Public Utility Holding Company Act

gave the SEC sweeping authority to reorganize and simplify public utility empires. The SEC could then approve the issuance of new securities pursuant to voluntary reorganization unless the commission found that “the terms and conditions of the issue…are detrimental to the public interest or the interest of investors or consumers.” The Chenerys were the officers, directors, and controlling shareholders of the Federal Water Service Corp. The SEC refused to allow them to participate in the reorganization process (which would have allowed them to maintain their controlling share). The Commission did not find that the Chenerys acted covertly or with inside knowledge, etc., however it claimed its action under the principle of equity.

ii. Chenery I (1943): The Court (Frankfurter) determined that the Commission did not proffer new standards of equity on which it relied in its effectuation of legislative process (in its determination against the Chenerys). The Commission claimed that it relied on administrative competence, but the Court found that those considerations were not what the Commission based its decision on. An administrative order cannot be upheld unless the grounds upon which the agency acted in exercising its powers were those upon which its action can be sustained. An agency must make a clear statement of its rationale. No post-hoc rationalizations are allowed, agencies must articulate their rationales contemporaneously with their decisions. The court is unwilling to supply a rationale for an agency decision in order to uphold it on other grounds, and so must send it back to the agency for a new decision. Remanded.

iii. The SEC Decision on Remand (1945): While the Supreme Court indicated promulgating a general rule would be advisable, the absence of such a rule does not make the decision void. After consideration of the question, the statute grants power to withhold approval on cases like this, even when there is not affirmative evidence that actual misconduct existed. The proponents of the plan must show that the plan is fair and equitable. They failed to do so, so their participation is still not permissible. (Same result, just

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claiming to rely on statutory authority for their equitable principle rather than the equitable principle alone).

iv. Chenery II (1947): (The Court, which has changed significantly): The SEC can apply the statute in this way. The retroactive/ad hoc nature of their justification is not problematic because the Chenerys still get their money back plus interest. Administrative agencies have informed discretion to choose between proceeding by general rule or by individual, ad hoc litigation (adjudication or rulemaking). Thus, the Commission had the right to use this proceeding to announce and apply a new standard of conduct. Because the decision had a rational and statutory foundation, it stands. (Agencies have broad discretion to choose between adjudication and rule-making).

v. Summary: Courts will not limit an agency’s discretion to choose between case-by-case adjudication and rulemaking to develop policy unless a statute so specifies. (Where agencies have the power to do both, they have broad discretion to choose between them.) Thus, agencies can decide whether they want to put themselves into the Bi-Metallic or Londoner world.

2. The Administrative Procedure Act: (See pp. 28-29 of the other outline to get really clear on APA requirements/sections) Enacted in 1946 in response to concerns that the administrative state was out of control, it provides a loose framework for agencies, allowing flexibility for agencies and courts deciding what agencies are allowed to do. Under §551 (1), the APA covers all agencies”- “each authority of the Government of the U.S., whether or not it is within or subject to review by another agency, but does not include: Congress, the courts of the United States…agencies composed of representatives of parties or of representatives of organizations of the parties to the disputes determined by them…”

i. Rulemaking vs. adjudication: Under §551 (5) “rule making” means agency process for formulating, amending, or repealing a rule; (7) “adjudication” means agency process for the formulation of an order. Adjudication includes licenses. Note: these definitions are different from those in the Const. and the distinctions made in Londoner, Bi-Metallic, and Southern Railway.

ii. Informal vs. formal proceedings: Formal proceedings are triggered when the relevant organic statute requires that the agency act “on the record after opportunity for an agency hearing” §556 and §557. Informal is the default for both unless the magic words appear. Under §553 (b) (3), notice or hearing, unless required by statute, is not mandated

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when it comes to: interpretive rules, general statements of policy.

o Informal (notice and comment) rulemaking: Under §553, it essentially involves the agency giving public notice of its proposal, a period for submission of written comments by any interested person, and then publication of a final rule along with an explanation and response to comments.

o Formal rulemaking: A trial-type hearing replaces submission of written comments.

o Formal adjudication: With the magic words, then §554, 556, and 557 apply, and the agency must hold a full, trial-type hearing. (For pre-hearing and hearing information, see pp. 513-514).

o Informal adjudication: no triggering language, then the APA imposes essentially no requirements (though §555 and 558 apply to all four categories). 95% of all adjudication is done informally. Under these proceedings, persons appearing before an agency are allowed to be represented by counsel; an agency must provide a “brief statement of the grounds of denial” of any application, petition, or other request”; when it comes to revocation of licenses, agencies must give permittees a second chance to bring themselves into compliance

Formal Rulemaking§553 (a) (b) (d) (e) §556, 557

Informal (notice and comment) rulemaking §553

Formal adjudication: §554, 556, 557 Informal adjudication (almost no procedures)

iii. Rule vs. order: §551 (4): A rule means the whole or part of an agency statement of general or particular applicability and future effect…; (6) an order means the whole or a 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. The APA’s definition of order is much broader than the constitutional concept of adjudication. (See §551 (6)-(7)).

Organic Statute Requires Decision on “Record” after “Opportunity for Hearing?”Yes No

Rulemaking

Adjudication

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3. Casesa) Dominion Energy Bayton Point, LLC v. Johnson (1st Cir. 2006)

(come back to this p. 511 after Chevron, West Chicago, etc.)i. Background: The EPA issued a permit/license to

Dominion, a power plant, under the Clean Water Act (CWA). In renewing the permit, EPA denied Dominion’s request for a variance on the basis of written submissions, without a formal hearing under the EPA. The CWA requires that the EPA provide “an opportunity for public hearing” before issuing or renewing such a permit.

ii. Holding: [Although ordinarily, this would require formal adjudication, the Court determined that the agency’s interpretation merited Chevron deference.] The administrative interpretation took account of the “relevant universe of factors.” The Court rejected the Seacoast decision, another 1st Circuit case that required formal proceedings even in the absence of the magic words and instead found that an agency can determine (under Chevron) whether or not a hearing is warranted, so long as their determination is reasonable given the factors in the particular case. (Note: Courts are more likely to interpret the statute as providing for a hearing on the record in cases where the agency is imposing a sanction or liability on a party under Londoner).

b) National Petroleum Refiners Association v. FTC (D.C. Cir. 1973)i. Background: FTC Act gives the FTC power to prevent

unfair or deceptive practices in commerce and to make rules to carry out the Act. The FTC promulgated a regulation declaring that it was illegal to post octane ratings on gas pumps at service stations, then brought enforcement action against Nat’l Petroleum for not complying. The District Court ruled that the Commission lacked the authority to issue such rules.

ii. Issue: Whether the FTC is empowered to promulgate substantive rules of business conduct that will later be used by the agency in adjudicative proceedings aimed at producing cease and desist orders against violations of the statutory standard.

iii. Holding: Yes, the FTC can do so since utilizing rulemaking in advance of adjudication minimizes the unfairness (and unpredictability) of using a purely case-by-case approach requiring “compliance by one manufacturer while his competitors remain free to violate the Act.” Unless the organic statute is very clear, agencies will be assumed to have the power of both rulemaking and adjudication, as

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well as the power to choose between them (consistent with Chenery 2).

c) Summary: There has been a general trend toward rulemaking, but adjudications have not been eliminated. Although the official trigger for formal adjudication under the APA is “on the record after opportunity for hearing,” there are three different views on whether it actually means that:

i. Seacoast/Londoner: As long as the organic statute says something like “hearing,” there is an assumption that the formal adjudication statute is triggered, even if it doesn’t include the rest of the magic words for the sake of respecting values similar to due process. (Bi-Metallic exception: If the order affects a large number of people, deals with legislative issues, and is general rather than specific, no hearing is required.)

ii. West Chicago: Reads 554 in a textualist way to say that unless the organic statute contains the magic words, no formal adjudication is triggered

iii. Dominion Energy/Chemical Waste: It is up to the agency to determine whether a hearing is warranted, and the reviewing court should accept the agency’s view as long as their interpretation of the statute is reasonable.

d) FPC v. Texaco (1964): i. Background: The Federal Power Commission, through

notice and comment rulemaking, adopted regulations governing the terms of contracts between independent natural gas producers and pipelines, prohibiting “escalator” clauses adjusting the contract price for gas to future (higher) prices for newly delivered gas. This rule allowed them to dismiss Texaco’s application for a license without hearing because it contained such a clause. Texaco was allowed to submit written comments but did not get an oral hearing.

ii. Issue: Was this rule permissible/adequate under the APA?iii. Majority (Douglas): Yes. The statutory provision under

which the Commission was authorized included a requirement that the Commission set such applications “for hearings.” However, that provision does not preclude the Commission from setting standards through rulemaking and barring those who do not measure up to such a rule, otherwise the Commission would have to proceed on a case-by-case basis (summary judgment appropriate). The company had a chance to contest the rule during the notice and comment period.

iv. Texaco two step: 1) The agency can make a rule, subject to notice and comment, during which any interested party can

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challenge its passage.; 2) Once the rule is passed, it can be enforced against all parties who had the opportunity to participate in notice and comment, effectively acting as a mechanism of summary judgment, precluding parties from challenging the validity of the rule once it is applied to them. Essentially makes hearing much more cursory, where all an agency has to do is determine whether the contract fails to conform with the rule-this process is considered the hearing, without the possibility of prejudice from the denial of oral procedures since there are no issues in dispute.

e) Heckler v. Campbell (1983): i. Background: The Social Security Act provides that an

applicant denied disability benefits is entitled to a trial-type adjudicatory hearing before an Administrative Law Judge (ALJ). The Secretary of Health and Human Services (HHS) promulgated regulations providing that there are certain impairments that prevent a person from gaining employment, and that a claimant who establishes that he suffers from one of these will be considered disabled without further inquiry. If a claimant suffers from a less severe impairment, the Secretary determines: what the applicant’s medical condition is, his skill/experience, and whether or not there are jobs within the national economy for someone in his position. If there are jobs available, he is not entitled to disability benefits. Prior to 1978, the Secretary relied on vocational experts, however HHS adopted regulations establishing the types and numbers of jobs that exist in the national economy (eliminating the need for vocational experts). A judge, using these qualifications, denied the claimant’s application. The Court of Appeals held that the Social Security Administration was required to include in the administrative record more specific evidence, beyond the guidelines, of available jobs in the national economy she was capable of performing, and that the hearing did not qualify as a meaningful adjudicatory hearing.

ii. Majority (Powell): Citing Texaco, the court found that a case-by-case determination of the available jobs was not required and that the Secretary’s use of the vocational guidelines did not conflict with the statute.

f) U.S. v. Florida East Coast Railway (1973) i. Background: To ease the problem caused by a freight-car

shortage, the Interstate Commerce Commission (ICC) under the Interstate Commerce Act, passed a rule authorizing charges for the use of a freight car by a company that did not own it. The ICC passed this rule

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according to informal rulemaking procedures (without an oral hearing, though they allowed written comments). The Act granted authority to issue such charges “after hearing.” Florida East Coast sued claiming that this triggered formal rulemaking under 553/556.

ii. Majority (Rehnquist): The language “after hearing,” without more, is insufficient to trigger §556 and 557. It is simply a mandate to the Commission to consider the factors set forth in reaching their conclusions. (Though the magic words are not required, you need something more than what you have in this case.). The Court also relies on the Londoner/Bi-Metallic factors (not a particularized effect, general, and not unfairly disadvantaging a particular party) to determine that it could stand. In rulemaking, a written hearing is sufficient. We can generalize §559 and apply it to statutes even before the APA to unify the administrative state under a single set of procedures.

g) (Courts began requiring agencies to develop an evidentiary basis for their regulations through procedures that go beyond bare bones informal rulemaking requirements set out in the APA). United States v. Nova Scotia Food Products Corp. (2nd Cir. 1977):

i. Background: The FDA conducted §553 notice-and-comment rulemaking proceedings to promulgate safety regulations for the smoking of fish to safeguard against botulism poisoning. It sued to enjoin Nova Scotia from processing hot-smoked whitefish in violation of the regulations. Nova Scotia claimed that they followed the wrong procedure (though it is informal rulemaking) because there was an inadequate administrative record upon which to predicate judicial review and that the failure to disclose the factual material upon which the agency relied defeats the purpose of n+c.

ii. Issues: What record does a reviewing court look to? How much of what the agency relied on has to be disclosed to interested parties? To what extent must the agency respond to criticism that is material?

iii. Holding: A reviewing court must consider whether the agency took into account all of the relevant factors and whether there was a clear error of judgment (Overton Park). Failure to notify the interested persons of the research upon which the agency was relying necessitates a finding that the agency did not consider the relevant factors. The administrative process must disclose whether the proposed regulation is considered to be commercially feasible, or whether other considerations prevail. Further, the requirement in §553 (c) of a “concise general

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statement” requires an explanation of the adoption of the rule that gives more than cursory/conclusive information. There was no balancing to show that the procedure was not arbitrary. Thus, Courts can require agencies to consider relevant policy alternatives and make a reasonable choice between them under 553. Further, agencies must follow certain norms of procedural regularity like disclosing studies to interested parties for comment.

h) Result of these cases: Agencies are strongly encouraged to substitute rulemaking for adjudication since rules are made primarily informally through notice and comment, with a procedural benefit of being able to drastically limit/narrow the issues in subsequent adjudication. Idea of “paper hearings,” in which the “concise general statement of basis and purpose” of a regulation becomes the administrative record from which a court reviews a decision. This leads to “hybrid rulemaking,” a blend of formal and informal rulemaking requirements that go beyond “paper hearings” (rejected in Vermont Yankee)

4. Informal Rulemaking and “Common Law” a) Long Island Care (2007):

i. Background: In 1974, Congress amended the Fair Labor Standards Act to cover “domestic service” employees. It exempted from coverage companionship workers, which the Department of Labor interpreted to mean “those who are employed by an employer or agency other than the family or household using their services” (so those who were employed by third parties were not protected). A domestic worker challenged the validity of the regulation. She claimed that the promulgation of the regulation under notice-and-comment was defective because notice was defective.

ii. Holding (Breyer): The APA requires an agency conducting n+c rulemaking to publish in its notice of proposed rulemaking “either the terms or substance of the proposed rule or a description of the subjects and issues involved” §553 (b) (3). This requirement has been interpreted to mean that the final rule that the agency adopts must be a “logical outgrowth” of the rule proposed to ensure that all the parties who have a stake at the proceedings have fair notice (and by extension a chance to record their objects-must be reasonably foreseeable that their interests are at stake).

iii. Rationale: There is a need to structure the notice and comment proceedings to give parties maximum incentives to disclose information to the agency/court. The reasonably foreseeable/logical outgrowth test may do the opposite.

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b) “Hard Look Review”: Based on §706, if an agency has made irrational or unjustified policy choices, it is presumed to be acting arbitrarily and capriciously. Agencies have to show that they made a reasoned choice from among alternatives. To deal with the movement toward informal rulemaking, the D.C. Circuit adopted this type of review.

i. Vermont Yankee (1978): The Nuclear Regulatory Commission granted Vermont Yankee a license to operate a nuclear power plant. The standard involved a rulemaking proceeding through notice-and-comment. The commission, after holding a hearing the included expert testimony (but offered no chance for cross-examination) depended on that testimony to grant a license to Vermont Yankee based on the environmental conclusions without giving any hearing rights to environmental groups on the issue of waste disposal.

o D.C. Circuit majority (Bazelon): Reversed the grant of the license and the “zero grant “ rule on the basis that the commission failed to expose and permit adequate adversary probing of the waste disposal issues. He essentially said that the record on which the agency based its conclusion (the expert’s testimony) was insufficient given the alternatives they had to create more dialogue. (In other words, the agency did not adequately justify its policy choices-additional proceedings were needed to supplement the notice and comment proceedings).

o Concurrence (Tamm): Agreed that the record did not provide adequate data or analysis to support the Commission’s conclusion and was therefore “arbitrary and capricious.” However, he took issue with the emphasis on the additional proceedings (which the majority laid out in its suggestions for the way in which the agency could have created a more genuine dialogue around the issue).

o Supreme Court Ruling (Rehnquist): The APA established the maximum procedural requirements, which can be imposed on agencies in conducting rulemaking procedures. Agencies are free to grant additional procedural rights in the exercise of their discretion, but courts are generally not free to impose them if the agencies have not chosen to grant them (Court cannot impose more procedures than the agency has

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undertaken in compliance with the APA). Administrative agencies must be free to fashion their own rules of procedure within the APA. This is necessitated by the need for judicial consistency, to prevent the agency from having to adopt full adjudicatory proceedings each time in an attempt to employ the “best” procedures, and finally because any other requirement would fundamentally misconceive the nature of the standard for judicial review of the agency rule. So long as the Commission employs the statutory minimum of procedural requirements, the Court cannot overturn it on the basis that there were additional procedural steps that could have been taken. Short: The APA precludes, absent unspecified exceptional circumstances, judicial requirements that agencies use additional procedures beyond those specified in the APA or other relevant statutes.

ii. After Vermont Yankee, hybrid rulemaking requirements are impermissible, but paper hearings still stand. However, there is not a meaningful difference between the two.

5. Exceptions to Notice-and-Comment Requirements: As a result of the more formalized notice and comment requirements, agencies began looking for ways to avoid it altogether by falling under the exceptions outlined in §553 (b) (3) (interpretive statements and good cause)

a) American Hospital Association v. Bowen (D.C. Circuit 1987): A “general statement of policy,” which falls under the §553 exemption does not impose any rights and obligations and genuinely leaves an agency and its decision-makers free to exercise discretion. If something grants rights, imposes obligations, or produces other significant effects on private interest, or changes a current policy, it is a rule subject to notice and comment. If it merely clarifies or explains existing law or announces when an agency seeks to establish a policy, it is an interpretive rule not requiring notice and comment.

b) Appalachian Power Co. v. EPA (D.C. Circuit 2000): If an agency acts as if a document issued at headquarters is controlling in the field, if it treats the document in the same manner as it treats as legislative rule, if it bases enforcement actions on the policies or interpretations formulated in the document, if it leads private parties or state permitting authorities to believe that it will declare permits invalid unless they comply with the terms of the document, then the guidance document is for all purposes “binding,” regardless of the way the agency characterizes it.

c) Community Nutrition (D.C. Circuit 1987):

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i. Background: The FDA set “action levels” allowing them to bring a court action to condemn any interstate shipment of food that contained more than the maximum amount of unavoidable contaminants permitted by regulation. The FDA said these action levels were nonbinding statements of the agency’s enforcement policy (not requiring n+c under §553). Community Nutrition claimed that the levels were treated as binding and so constituted substantive, not interpretative rules.

ii. Holding: These guidelines were sufficiently binding to require notice and comment. Thus, even if an agency claims that a guidance document or other policy isn’t binding, if it treats it as if it is, the rule requires notice and comment.

iii. Dissent (Starr): To determine whether the agency’s policy is a guidance or a binding rule, look at whether it has the force of law in future proceedings. If it does, it is a legislative rule subject to notice and comment. To determine if it has force, ask whether the agency must show that the pronouncement has been violated or that the pronouncement is justified. If it is the former, it is a binding rule.

d) American Mining (D.C. Cir. 1993): i. Background: The Labor Dept.’s Mine Safety and Health

Act requires mine operators to submit reports and information as may reasonably be required. MSHA issued program policy letters (PPLs) to mine operators stating that the chest X-rays of miners that “scored” above a certain opacity would be considered a diagnosis that the employee had one of the illnesses specified in the regulations and could subject the employer to liability for disability.

ii. Holding: The PPLs were interpretive and not subject to notice-and comment requirements. He laid out the following test to distinguish legislative and interpretive: to determine whether a purported interpretive rule actually has “legal effect,” ask: 1) whether in the absence of the rule there would be not an adequate legislative basis for enforcement action or other agency action to confer benefits or ensure the performance of duties; 2) whether the agency has published the rule in the code of the Federal Regulations; 3) whether the agency has explicitly invoked its general legislative authority; 4) whether the rule effectively amends a prior legislative rule. If any of these have an affirmative answer, it is a legislative not interpretive rule.

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e) Hoctor v. U.S. Department of Agriculture (7th Cir. 1996) (Posner) (“Big Cats” case): Case dealt with whether an internal memorandum specifying the required height of fences around dangerous animals including tigers, lions, etc. constituted a legislative or interpretive rule. The court determined that it was a legislative rule requiring notice and comment because the inclusion of a number added substantive content.

f) Air Transport Association of America v. Department of Transportation (1991) (“American Pilots”):

i. Background: Amendments to the Federal Aviation Act raised the maximum penalty for a single violation, establishing a program authorizing prosecution and adjudication of smaller administrative polices. After Congress enacted these changes, the FAA promulgated rules regarding them without notice and comment, labeling them as “rules of organization, procedure, or practice” (falling under the §553 (b) (3)) exception.

ii. Holding: Where rules “encode a substantive value judgment” or “substantively alter the rights or interests of regulated” parties, they must be preceded by notice and comment. Because the new rules include a penalty provision that substantially affects a defendant’s right to an administrative adjudication, it cannot be properly labeled “procedural.”

g) Takeaway: Interpretation and procedure, which fall under the exception, are things without binding legal effect. Interpretation is to clarify rather than create the law. Procedure is ancillary to enforcing the law. Policy statements are not binding. Another exception is the “good cause” exception: when an agency creates a new requirement that might be evaded if advance notice was provided, there is no requirement of notice and comment. Agencies also occasionally produce “interim final rules,” meaning that they employ the good cause exception to promulgate a rule while simultaneously holding a notice-and-comment proceeding on the same subject, where the promulgated rule functions as the proposed rule. Some critics argue that rulemaking has become increasingly rigid (“ossification”) resulting in delay and increased transactional costs, causing agencies to forgo rulemaking for adjudicatory techniques that are less effective, rely on interpretive rules, etc. However, this criticism is largely unfounded (see p. 606 and March 9th notes).

6. Agency Decisionmaking Structure: Within agencies, according to §554 (d) (2), there should be separation in adjudication between those who perform investigative and prosecutorial functions and those who advise the decision. The test of whether the functions are connected is whether or not they are “factually related,” similar to the idea of a “common

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nucleus of operative fact.” Such separation of functions is only applicable when adjudication is required by statute (or by the Constitution). ALJs are supposed to be independent parties to decide cases.

a) Overall: For formal adjudication, at the initial level there is strict separation of function. Separation of functions applies only to formal adjudication, not to rulemaking of any kind. Ex parte contacts are prohibited in all formal proceedings. In informal proceedings, there is no requirement of separation of functions, though ex parte contacts are still prohibited. There is no separation of functions required for the head (§554 (d) (2) (c)). Agencies can constrain/put in place quality evaluations but cannot encroach on the decisional independence of the adjudicator.

b) Wong Yang Sung v. McGrath (1950): i. Background: A habeas corpus proceeding to determine

whether administrative hearings in deportation cases have to conform to requirements of the APA. Immigration officers arrested a Chinese person for overstaying his leave. An inspector held the hearing, recommended deportation, and the Board of Immigration Appeals affirmed. The inspector was similar to an investigator, despite prohibitions against the inspector being the one who investigates the case.

ii. Holding: The only time hearings are exempt from §554 is when those hearings are held by agencies on the basis of regulation, rule, custom, or special dispensation, not those held by compulsion. Deportation proceedings not exempted. While employees can have different roles/functions, they cannot perform two different functions in the same case or in cases with common facts.

iii. Aftermath: Although in Florida East Coast, the Court determined that formal rulemaking/an oral hearing was not required unless the words “hearing” or “on the record” appeared in the statute, courts have been quicker to require an on-the-record proceeding absent the magic words when the agency is engaged in adjudication. Courts have been reluctant, however, to extend the holding to all administrative adjudication. Congress overruled the decision through subsequent legislation. The Supreme Court upheld those procedures, suggesting that this whole issue was really a matter of APA interpretation. Lower court decisions have determined that the due process clause does not bar the combination of investigatory, prosecutorial, and adjudicative functions absent a more particular showing of bias. (See practice problem pp. 751-752).

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c) Hercules Inc. v. EPA (D.C. Cir. 1978): i. Background: The petitioners challenged the EPA’s

regulations limiting the discharge of two toxic substances into rivers and other waterways. The regulations, issued under the CWA resulted from formal rulemaking. The petitioners argued that the EPA administrator and the judicial officer who presided at the hearing and compiled the rulemaking record had impermissible contacts with EPA’s staff. (Under EPA rules, the administrator was allowed staff assistance as well as review of the entire record).

ii. In Home Box Office (later overruled), the court held that wide-ranging private contacts with FCC decisionmakers were impermissible. The petitioners contended that that staff contacts offended principles of fairness in the same way by depriving the reviewing court of the full and accurate administrative record and by preventing a genuine opportunity to genuine adversarial discussion. However, EPA claimed that Congress had expressly sanctioned staff contacts because of the quasi-legislative function of the rulemaking process and the necessities implicit in administrative policy (since §§553, 556, and 557 don’t have the same prohibition as §554 (d) (2) against mixed functions).

iii. Holding: Relying on Vermont Yankee’s holding precluding the imposition of procedural requirements beyond the APA, the Court determined that the EPA standards could be upheld and that the administrator could have such staff contacts. They noted the necessity for staff contacts to help view the extraordinary bulk and complexity of the administrative record, however, the court condemned the communication between the administrator and legal advocates since it gave an “appearance of unfairness,” suggesting that the EPA and other agencies should proscribe post-hearing contacts between staff advocates and decisionmakers in formal rulemaking proceedings for the sake of public confidence.

iv. Aftermath: Some critics find the APA’s “separation of functions” provision both too broad and too narrow. See p. 755 and consider the question at the bottom.

d) Administrative Law Judges (ALJ): The officer who does the adjudication, hired by the Office of Personnel Management. ALJs can only be fired for cause by the Merit Systems Protection Board, an agency. A hearing to determine whether there was cause is a formal adjudication in which another ALJ presides. (APA §3105)

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i. Problems: For cause protection: the structure of ALJ, with its double for-cause protection seems to conflict with the holding in PCAOB.

ii. Are ALJs exercising judicial or executive power? If they are exercising judicial power, they are in violation of Article 3. If they are exercising executive power, and are thus “officers of the United States,” they seem to conflict with PCAOB.

e) Nash v. Bowen (2nd Cir. 1989):i. Background: The plaintiff, an ALJ, claimed that the

reforms, regarding “quality assurance” and “peer review,” imposed by the director of the Bureau of Hearings and Appeals interfered with his ability to decide cases independently. After his protest, Nash was demoted.

ii. Holding: The Court upheld the efficiency standards on the basis of the need to ensure fairness, saying that the Secretary setting monthly production goals did not threaten the ALJ’s independence. It struck down the requirement for lower reversals because there was no evidence that such reversals did indicate errors in the decisionmaking of the ALJs (only that they might indicate such errors). It was within the discretion of the Secretary to adopt reasonable administrative measures to improve the decisionmaking process.

7. Agency Decisionmaking (At the Head) and Bias: Agency heads typically combine several functions, generally both issuing the complaint that initiates the hearing process and ultimately deciding the issue in the resulting proceeding. Although this potentially biases their judgment, there is no easy way to divide functions structurally among commissioners, which is why §554 (d) exempts “the agency or a member or members of the body comprising the agency” from its prohibitions.

a) Withrow v. Larkin (1975): At the agency head level, the combination of adjudicative and investigative functions does not itself violate due process.

i. Background: Larkin practiced medicine in Wisconsin. The board investigated his abortion practices in an “investigative hearing.” It later sent him notice that it would hold a “contested hearing” to determine whether he had practice under another name and done other illegal things. Larkin sought and obtained an injunction against this second hearing on the basis that it was unfair and unconstitutional to have the investigator from the first hearing make the final decision.

ii. Analysis: While there is a presumption of an increased probability of actual bias on the part of the

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judge/decisionmaker when the adjudicator has a pecuniary interest in the outcome or in which he has been the target of personal abuse or criticism from the party before him, it is less clear that a combination of investigative and adjudicative functions necessarily creates the same unconstitutional risk/bias. There is a “presumption of honesty and integrity” in those serving as adjudicators.

iii. Holding: The combination of investigative and adjudicative functions does not, without more, constitute a due process violation, though a court can determine from the special facts and circumstances present in the case before it that the risk of unfairness is intolerably high. The Court also analogizes to a judge who rules on a probable cause issue and then later rules on the facts in the case.

iv. Compare with Gibson: Citing Tumey v. Ohio, where the court determined that those with a substantial pecuniary interest in legal proceedings should not adjudicate those disputes because of the presumption that they will fall prey to their other interests (no presumption of honesty and integrity). In Gibson, the action was ruled impermissible on the grounds of “possible personal interest.”

b) FTC v. Cement Institute (1948): The Court upheld a Commissioner’s refusal to disqualify themselves from a proceeding on the basis of bias claimed from reports the Commission promulgated on the issue in a similar industry (steel). The Court pointed out that if the plaintiff’s position were allowed, there would be no one to make a determination in the case. This is the rule of necessity: “where the policy of disqualification conflicts with a litigant’s rights to obtain a judicial remedy, it has been generally conceded that the former must yield to the latter, trusting the conscience of the court to achieve a just result”: if all the judges in a particular context are unconstitutionally biased, then we must pretend that none of them are for the sake of allowing the case should go forward, lest we deprive the litigant of their day in court.

c) American Cyanide Co. v. FTC (6th Cir. 1966): The chief counsel of a Senate subcommittee helped conduct a broad-ranging investigation, examined witnesses, and helped with the final report on the investigation. He was then included in a hearing on the issue and refused to disqualify himself. The Circuit Court found that his participation amounted to a “denial of due process which invalidated the order,” noting “whenever there may be a reasonable suspicion of unfairness, it is best to disqualify.” In doing so, the Court distinguished between investigation and adjudication, relying on the purposes behind the Trade Commission Act to make the case distinct from Cement Institute.

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d) Cinderella Career & Finishing Schools v. FTC (D.C. Circuit 1970): The same chairman from the American Cyanide case made statements to the press indicating his stance on finishing schools. He then participated in a hearing regarding charges against such a finishing school. They said that the test for disqualification in such adjudication was whether “a disinterested observer could conclude that the agency had in some measure adjudged the facts and the law of a particular case before hearing it.” If a conclusion in the affirmative could be reached disqualification is appropriate. Commissioners can be disqualified for financial interests or for prejudging the facts in adjudication.

e) Association of National Advertisers v. FTC (D.C. Circuit 1979): The new chairman of the FTC gave a speech in which he strongly suggested that advertising aimed at children was harmful and legally “deceptive.” Shortly thereafter the Commission issued a notice of proposed rulemaking that considered banning television advertisements of sugared products during children’s programming. Various advertising agencies moved for the chairman to disqualify himself. The Court of Appeals emphasized that this decision was rulemaking, not adjudication.

i. Majority (Tamm): When a proceeding is classified as rulemaking, due process does not require procedures more rigorous than those provided by Congress. (Vermont Yankee). Congress is under no requirement to hold an evidentiary hearing prior to its adoption of legislation and so doesn’t delegate any such requirement (Bi-metallic). Distinct from Cinderella because it deals with legislative facts that require agency members to be involved with risk assessment, prediction, etc. A Commissioner should only be disqualified if “there is a clear and convincing showing that the agency member has an unalterably closed mind on matters critical to the disposition of the proceeding.” (In rulemaking, an agent is only disqualified if there is a showing of personal bias (due to past abusive interaction with the party) and pecuniary interests)).

ii. Dissent (MacKinnon): Even under the Majority’s test, the chairman should have been disqualified.

iii. Vermuele thinks it is problematic to make such a distinction between legislative and adjudicative facts-“when legislative facts are at issue, we call it expertise, when adjudicative facts are at issue, we call it bias.”

f) Morgan v. United States (Morgan I) (1936): In adjudication, the person in the agency who makes the decision has to be the one who considered the evidence: “he who decides must hear.” In this case, the secretary had the option to delegate the entire decision to

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the under-secretary for consideration of the evidence and the decision or he could make the decision himself-he had no option to hear the evidence or make the decision. This holding was diluted in Morgan 2-4 where after realizing that it’s difficult to implement the standard because of time constraints, the court said that “one who decides must in some way give personal consideration to the evidence,” however litigants cannot probe the legal processes of decisionmakers to determine whether they did in fact consider the evidence.” (The agency head can always informally delegate the decision to others who will informally “brief” the head on the issues, leaving him to make the decision.) This was affirmed in National Nutritional Food Ass’n v. FDA (2nd Cir. 1974) where the Court determined that where findings accompany a decision, there must be a strong showing of bad faith or improper behavior before testimony with regard to reason can be taken.

III. Questions of Law: ChevronA. Pre-Chevron

1. The problem: Although the APA instructs courts to decide “all relevant questions of law,” §706, courts said that there were some questions of law that the agency should decide. On those questions, courts should “defer” to the agency’s judgment, overturning the agency only if its legal determination is “unreasonable, impermissible, or arbitrary.” Basic question: When should a court “defer” or “give weight to” an agency’s determination of a legal question? There were conflicting ideas, including a impressive body of law sanctioning free substitution of judicial for administrative judgment when the question involved the meaning of a statutory term. Two primary views: (a) Courts should defer to “reasonable” agency interpretive positions; (b) Courts must remain the final arbitrators of statutory meaning.

2. NLRB v. Hearst Publications (1944): a) Background: Hearst refused to bargain collectively with a union

representing newsboys who distribute their papers on the streets of LA, claiming that they didn’t have to because newsboys are not “employees” within the meaning of the term in the National Labor Relations Act. The NLRB after hearings concluded that they were newsboys and ordered Hearst to bargain with them. The Circuit Court set aside the Board’s orders, determining that newsboys didn’t fall within the statutory definition. NLRB appealed.

b) Issue: Does a reviewing court have to accept an agency’s application of a broad statutory term?

c) Analysis: The Court determined that while Congress did not explicitly define the term, but looking at the terms and purposes of the statute, as well as the legislative history is helpful.

d) Holding: When the question is one of specific application of a broad statutory term in a proceeding in which the agency

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administering the statute must determine [its meaning] initially, the reviewing court’s function is limited. The Board’s determination of the definition of “employees” under the Act must be accepted if it has “warrant in the record” and reasonable basis in law. The Court emphasized that Congress set boundaries of the category without defining what went in them, and that it was the province of the agency to make decisions within those boundaries. (Idea that questions of pure law are for courts versus questions of pure facts, which are for agencies.)

3. Skidmore v. Swift & Co. (1944): a) Background: Employees of the Swift packing plant brought action

under the Fair Labor Standards Act to recover overtime. (The Administrator published documents in the form of interpretative bulletins and informal rulings as a practical guide to employers and employees on how the office would seek to apply the Act. His test to determine whether overtime was warranted was to consider “the degree to which the employee is free to engage in personal activities during periods of idleness…”). They spent time on the premises at night to answer fire alarms and were paid for each alarm they answered. There was no statutory provision to say how much deference courts should pay to the Administrator’s conclusions. The trial court said that, as a matter of law, this did not constitute hours eligible for overtime pay under the Act and gave significant deference to the Administrator’s findings. The Circuit Court affirmed.

b) Issue: Can courts, in determining controversies take account of reports, recommendations, and opinions of administrators?

c) Analysis: While non-binding, the Administrator’s policies were made in pursuance of his official duty and are entitled to respect.

d) Holding: Yes. Courts and litigants can properly resort to the rulings, interpretations, and opinions of Administrators under the Act because, while not binding, their authority constitutes a body of experience and informed judgment. How much weight is given each judgment will depend on the thoroughness evident in its consideration, the validity of the reasoning, its consistency with earlier and later pronouncements, etc. (p. 280). Expertise-based deference-idea of seeking to find the best answer (“Skidmore factors”-see (e)). Other considerations:

i. Whether the agency’s interpretation was made near the time the statute was enacted, whether its interpretation is longstanding, and whether Congress reenacted the same statutory language against the background of the interpretation.

ii. Additionally, courts consider the nature of the agency’s specialized experience in relation to the legal question and the practical implications of deferring.

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e) In sum, the Court determines how much deference to give an agency depending on the following Skidmore factors:

i. Thoroughness evident in the agency’s considerationsii. The validity of the agency’s reasoning

iii. Consistency with earlier and later pronouncementsiv. Whether the interpretation is long-standingv. Whether Congress reenacted the same language in the

presence of a particular interpretationvi. The nature of the agency’s specialized experience in

relation to the legal question (expertise)vii. Practical implications

B. Chevron USA, Inc. v. Natural Resources Defense Council (1984)1. Background: The case concerned the interpretation of the words

“stationary source” in the 1977 Amendments to the Clean Air Act. The statute requires states to develop air pollution plans that “require permits for the construction and operation of new or modified major statutory sources…” The EPA promulgated rules that allowed states to define an entire plant as one stationary source, allowing a “bubble effect.” The Court of Appeals held that the statute did not permit the EPA to allow such a definition because it would undermine Congress’s goal of speedy compliance with national air quality standards.

2. Issue: In the absence of clear Congressional intent regarding the interpretation of a statute given by an agency, should courts defer to the agency’s interpretation?

3. Holding (Stevens): Yes (EPA’s interpretation should stand). Courts should follow a two-step process:

a) Look to see if Congress has expressed a clear intent. If the intent of Congress is clear, that is the end of the matter. If Congress has not directly or unambiguously addressed the precise question at issue, rather than imposing the court’s construction of the statute,

b) The Court considers whether the agency’s interpretation is based on a permissible construction of the statute. The agency’s interpretation does not have to be the same as the Court’s, it just has to be permissible.

c) For the first step, looking at the text, legislative history, and canons can be helpful (ordinary statutory interpretation). (Scalia says this includes policy considerations to determine whether the law is ambiguous.). Together, the steps create authority-based deference

4. Rationale: Appropriateness of delegation when the question involves matter of law-idea of attributing to Congress a default rule despite §706’s language to the contrary. Expertise is not as important here as it is in Skidmore. These rules promote political accountability: for Congress to be clear in its intent when making legislation. Perhaps the true purpose of Chevron was to help judges who were realizing that often there was not a single best answer of interpretation. It gave judges

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a way to constrain the range of acceptable agency decisions without requiring one particular decision.

5. Policy: The Court emphasizes that it is permissible for an agency, within the limits of the policymaking responsibilities Congress delegated to it, to rely upon the incumbent administration’s view of wise policy to inform its judgments. Therefore, when a challenge is based on the wisdom of an agency’s policy, rather than whether it is a reasonable choice within the permissible bounds delegated by Congress, the challenge must fail.

C. Chevron Step Zero: Since Chevron neither explicitly overruled nor replaced Skidmore, to which agency decisions does it apply? Step Zero: “a predicate for Chevron is a delegation of interpretive power to agencies.”

1. It does not apply in the following situations:a) When interpreting statutes that apply to all agencies, i.e. the

Freedom of Information Act, the APA, etc. since no agency administers them. (p. 283 Chevron deference requires the agency to be construing an organic or enabling statute “when a court reviews an agency’s construction of the statute which it administers…”)

b) Litigating Positions: Chevron only applies when we’re dealing with an agency’s contemporaneous construction of a statute it administers. Chevron, like Chenery, excludes post hoc rationalizations.

c) Statutes administered by courts (where courts are the administering agencies), e.g. the Fair Labor Standards Act (no rulemaking or adjudication by the agency)

d) Criminal Statutes, since they are all administered by courtse) Although it is less clear, when statutes create authority that is

shared across agencies, meaning that they can be enforced by more than one agency, sometimes neither agency gets deference, sometimes they both get deference, etc.

2. United States v. Mead Corporation (2001): a) Facts: The Customs Service provides tariff rulings before the entry

of goods by regulations authorizing “rule letters,” setting tariffs for particular imports. No notice and comment procedure in establishing these rule letters, and most of the letters contained very little rationales. Mead’s planners were previously classified as “other” and exempt from tax, but Customs switched them to the “diary” category and levied a 4% tax, citing the dictionary definition of diary as their rationale.

b) Issue: Does a tariff classification ruling by the U.S. Customs Service deserve judicial deference?

c) Majority (Souter): No. There was not an official delegation to the Customs Service to have this power. When Congress provides for a relatively formal administrative procedure, there is a presumption that they intended administrative action to have the effect of law.

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Otherwise, there is a presumption that agency discretion doesn’t exist unless the statute expressly or implicitly says so. When it is clear that Congress has delegated such law-making power, then we consider Chevron. Otherwise, a consideration of the Skidmore factors is appropriate. Reversed and remanded.

d) Dissent (Scalia): Scalia says that the majority seems to be adopting a presumption that unless there is an affirmative showing of Congressional intent to delegate, the courts interpret ambiguity in legislative instructions. He thinks the presumption should be the opposite-when there is silence/ambiguity, the agency’s decision should be reviewed solely for reasonableness, and the court should defer so long as their conclusion is reasonable. “Step Zero” is entirely inappropriate/impracticable.

e) Conclusion: We presume that the appropriate degree of deference is determined by the Skidmore factors unless the agency shows that there is an affirmative congressional intention to delegate power to the agency to make rules with the force and effect of law through the use of formal processes (notice and comment or formal rulemaking/adjudication) or some other comparable showing of intent, in which case Chevron is triggered. Note: while the inclusion of formal procedure in delegation seems to be sufficient for Chevron to be triggered, it is not necessary (so its absence does not automatically require a turn to Skidmore). Interpretive rules and informal adjudication are considered “beyond the Chevron pale.” In addition to Skidmore factors, we consider the number of decisions the agency put out to best understand whether Congress wanted to delegate that much power to the agency. Force and effect of law, at what level the agency decision was made, and whether the agency applied proper procedure/thought.

f) Rationale: We don’t want an automatic use of Chevron for two reasons:

i. Functional Reason: There are all sorts of different agencies with different structures, and it seems intuitive that we don’t want to be overly deferential to all those different parts.

ii. Legal/congressional intent: Congress could not have intended for the agencies rather than the courts to have that much law interpreting power.

g) Effect: Skidmore generally applies when an agency has expressed views about the meaning of the statute it administers and Chevron is inapplicable.

h) Problems: The Skidmore factors tend to bleed into the Mead analysis, which is problematic since the court is supposed to be choosing between Skidmore and Chevron deference. Outside of formal adjudication/rulemaking/notice-and-comment, it is unclear what gets Chevron deference (typically interpretive rules do not.)

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3. Barnhart v. Walton (2002) (Breyer): Breyer says Chevron applies because of the interstitial nature of the legal question, the related expertise of the agency, the importance of the question to the administration of the statute, the complexity of that administration, and the careful consideration that the Agency has given the question over a long period of time (i.e. the Skidmore Factors).

4. Gonzales v. Oregon (2006): “Congress does not hide elephants in mouse holes”: Congress would not implicitly delegate to the Attorney General because it would encroach on the state’s traditional authority to regulate medical practice. Essentially, delegations have to be clear/express and courts are reluctant to find an implied delegation where federalism is in play.

5. Back to Long Island (p. 34), Breyer says to determine whether Congress has delegated law-interpreting power to the agency, look at the following factors (Skidmore factors again, like in Barnhart):

a) Complexity of the question/level of agency expertiseb) Consistency of the agency’s announcementc) Thoroughness of the pronouncementd) Whether the question is interstitial or important

6. Summary of the different views regarding deference:a) Scalia: Chevron is the proper standardb) Mead camp (Souter): the question is always whether there is an

implied/explicit delegation of power to the agency (i.e. did the agency use notice and comment, formal adjudication or rulemaking?) If so, Chevron, if not, then there may or may not be a delegation, depending on whether or not the decision was centralized, how many decisions were made, and how binding they are

c) Breyer: Merge Chevron and Skidmore by having Chevron depend on Skidmore like factors.

7. How to approach a question of deference on the exam:a) Ignore Scaliab) Think of Mead as a “toggle switch”: ask is there implied/express

delegation of authority? Know that there could still be a delegation even in the absence of formal adjudication, rulemaking, or notice and comment (for guidance documents or other forms from informal adjudication or rulemaking, go through the factors of centralization, the number of decisions, and their binding effect). If there is Chevron.

c) Even if there is (b), say according to Breyer, an analysis of the Skidmore factors (as he defines them in Barnhart and Long Island) would be relevant, go through those factors, and then say that it is not clear whether the Skidmore factors are appropriately part of the Mead analysis.

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D. Chevron Step One: Is there a gap or ambiguity in the language of the statute such that Congressional intent on the particular issue is unclear? (Did the agency act within the statute’s range of ambiguity?)

1. First, use the traditional tools of interpretation to try and discover Congressional intent: text, legislative history, etc.

2. Also look at the canons (textualism, intentionalism, purposivism). For “major questions,” you can assume that Congress did not intend to delegate decisionmaking power on major questions to the agency under the non-delegation doctrine.

3. Babbitt v. Sweet Home (1995):a) Facts: The Endangered Species Act defines “take” and “harm.” It

contains protection for endangered species, making it unlawful for any person to take any endangered or threatened species. The Secretary promulgated a rule that defines the statute’s prohibition on takings to include “significant habitat modification or degradation where it actually kills or injures wildlife.”

b) Issue: Did the Secretary exceed his authority under the Act in promulgating that regulation? (Can the regulation be used to keep loggers fro any activity that would “harm” certain birds?)

c) Analysis: The court uses the canons, rejecting the lower court’s use of noscitur a sociis, to understand the meaning of the word “harm,” as well as the dictionary definition. They also look at the purpose of the ESA and determine that it was designed to extend protection against activities that cause harm. Congress delegated broad administrative and interpretive power to the Secretary when it enacted the ESA.

d) Majority (Stevens): Congress did not unambiguously manifest its intent on the issue. The Secretary’s interpretation was reasonable and should stand. (Although the Court only did typical statutory interpretation, it then draws a Chevron conclusion).

e) Dissent (Scalia): The legislation was unambiguous in that it forbade the hunting and killing of animals and provided that the federal government could protect animals by buying land with endangered animals. Scalia relies on expressio unius and the absurd result doctrine (Congress couldn’t have intended to protect endangered species at any cost) to reach his conclusion.

4. MCI v. AT&T (1994): a) Background: The 1934 Communications Act requires long-

distance telephone carrier to file tariffs for services and rates with the FCC and charge customers only in accordance with filed tariffs. The act authorized the commission to “modify” these requirements. By rule, the FCC provided that only AT&T-historically the dominant long-distance carrier-was required to file tariffs. AT&T challenges, alleging that the FCC went beyond its authority in making such a rule.

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b) Analysis: MCI said that “modify” includes the authority to make even basic and fundamental changes in the scheme created by that section and that the court should defer the agency’s interpretation of the word. Using several dictionary definitions of the word, Scalia rejects that interpretation, saying that Congress’ intent was unambiguous.

c) Holding: Alterations to the Communications Act that would result in a fundamental revision of the statute are not considered “modifications” under the act. Scalia also seems to be saying that this was an invalid delegation (based on non-delegation and the idea that Congress would not delegate on major questions to prevent the agency from having too much power.

d) Significance: The agency does not have discretion unless Congress made it clear that it does-back to the idea of elephants in mouse holes-no authority unless it is explicit.

5. FDA v. Brown & Williamson (2000):a) Background: The FDA, after disavowing the authority to do so

since its inception, asserted jurisdiction to regulate tobacco products and promulgated regulations intending to reduce tobacco consumption among children and adolescents.

b) Analysis: If tobacco was included, the FDA would have to remove it from the market. Congress has passed other tobacco statutes over 35 years, acting on reliance that tobacco cannot be regulated by the FDA to enact other regulatory schemes. They also explicitly rejected a bill that would give the FDA jurisdiction. Deference under Chevron to an agency’s construction of a statute is premised on the theory that a statute’s ambiguity constitutes an implicit delegation from Congress to the agency to fill in the statutory gaps, but that is not always the appropriate conclusion (namely in situations of major economic or political significance.)

c) Majority (O’Connor): The FDA does not have this power. Congress clearly precluded them from asserting jurisdiction to regulate tobacco products. Plus, the major questions canon (Congress not taken to delegate power unless such delegation is clear) undermines an opposite ruling. (Also, the court considered ratification, absurdity, etc.)

d) Dissent (Breyer): The statute’s basic purpose supports the inclusion as well as a natural reading of the text. Breyer argues against the use of the major questions canon saying that it inverts Chevron. (Breyer may be right, major questions and Chevron cannot coexist, since the former says that the agency loses unless it clearly wins and Chevron says the opposite.)

e) Effect: At step 1, use all the traditional tools of statutory interpretation plus major questions with a presumption of non-delegation unless Congress says otherwise

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6. Mass v. EPA (2007):a) Background: Massachusetts wanted the EPA to promulgate

regulations prohibiting the emissions of greenhouse gases including carbon dioxide. The EPA said that they did not have such authority under the CAA to address global climate change and that even if they did they would not in their discretion because of scientific uncertainty about climate change and the likelihood that it would undermine bargaining power with foreign nations. The EPA relied heavily on Brown and Williamson to say that Congress would not have delegated such a large issue without explicitly saying so.

b) Majority: Reading the term “air pollutant” broadly, the statute unambiguously gives the EPA the authority to rule. They had jurisdiction, and had no business disavowing it. Instead, they have to show that there is actually scientific uncertainty, not just that they believe that to be the case. (Under an Overton Park reading, the problem was that the EPA failed to form a true scientific judgment or express finding of uncertainty.)

c) Dissent (Scalia): The statute does not prevent the deferral of such a decision and the EPA’s behavior/interpretation should be allowed to stand under Chevron.

E. Chevron Step Two: Is the agency’s interpretation reasonable? The Supreme Court has only set aside an agency interpretation in step two twice, leading to the conclusion that unlike Skidmore deference, where the court only has to give the agency’s interpretation respect, in Chevron, the court must accept the agency’s interpretation unless it is unreasonable, arbitrary, or impermissible.

1. Entergy Water Corp. v. Riverkeeper, Inc. (2009): a) Background: The Clean Water Act required that “any standard

applicable to a point source shall require…that reflects the best technology available for minimizing adverse environmental impact.” Under the CWA, the EPA promulgated regulations to require facilities to reduce the death of fish and shellfish by 80 to 95%. Although there was a feasible alternative technology that would achieve even greater reductions, the EPA concluded that requiring such a system would impose far greater compliance costs and achieve only small gains in performance (and was therefore not cost-benefit justified). Various environmental groups and states challenged the regulations and the 2nd Cir. held that the statute prohibited the use of such cost-benefit analysis.

b) Analysis: The EPA’s view was that a determination of the “best technology” permitted consideration of the technology’s cost in relation to the environmental benefits produced.

c) Majority (Scalia): The EPA’s interpretation that CBA could be included was a reasonable interpretation of the goals of the statute, in accordance with the dictionary definition of “best,” as well as a review of the other provisions of the Act. Scalia rejects the

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argument that Congress’ silence on the issue means that they rejected it, and instead says that they have to defer to the agency.

d) Concurrence/dissent (Breyer): The relevant statutory language authorized the EPA to compare costs and benefits, but it restricted such analysis. Thus, there’s no need to ever get to step 2-Congress is clear that the EPA does not have this power.

e) Dissent (Stevens): Congress does not permit them to use CBA so Step 1 is against the agency.

f) Effect: CBA is permissible unless there is a provision in the statute expressly forbidding it.

2. National Cable and Telecommunications Ass’n v. Brand X Internet Services (2005)

a) Background : After notice and comment, the commission decided that Internet services provided by cable companies was an “information service” and not a “telecommunication” for the purpose of regulation and that the Communications Act could not regulate it as a common carrier. Court of Appeals said that you had to follow the precedential case and regulate it as a telecommunications service (no Chevron deference).

b) Majority (Thomas): Chevron deference is not diminished by agency changing their policy over time (versus pre-Chevron idea that longstanding and consistent agency interpretations were entitled to special deference). “Unexplained inconsistency is at most a reason for holding an interpretation to be arbitrary and capricious.” A court’ prior judicial construction of a statute trumps an agency construction otherwise entitled to Chevron deference only if the prior court decision holds that its construction follows from the unambiguous terms of the statute (no room for any other interpretation of the statute-not just that they are picking the best from a permissible range). Otherwise, the agency may choose a different construction. (Remember, consistency is relevant only to a Skidmore inquiry.)

c) Dissent (Scalia): It is unconstitutional for Congress to give an agency the executive power to override a judicial decision by choosing an alternative other than that prescribed by the judiciary. (Vermuele disagrees with this conception under the idea that the Court just details the permissible range.) Note: The 9th Circuit opinion doesn’t speak to the particular issue of whether its interpretation is the sole interpretation or one in a permissible range.

F. Is Chevron really just one step? 1. The only thing we ever really need to know is whether the agency is

within the bounds of permissible action as delegated by Congress. We don’t have to know if that range has more than one option or just a single point. It is irrelevant whether we have more than one permissible interpretation or only one when making a determination about the

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agency’s action. So long as we know that the agency had a range, anything they do will be permissible.

2. Each opinion can thus be written as one step: either it’s unreasonable and therefore outside the range (fails Step 2) or Congress has said that it is impermissible to be outside the range (fails Step 1). In other words: saying that the agency’s construction was not in the permissible range (was unreasonable) is equivalent to saying that it was contrary to clear congressional intent (and there can never not be clear intent, because in order to find an agency’s action unreasonable under Step 2, there has to be some presumption that Congress did have an intent-an intent to exclude the agency’s interpretation from the permissible range.)

3. In the end, none of this (Skidmore v. Chevron, etc.) matters. When regulations are ambiguous, agencies get to interpret them. So long as the agency is reasonable, they will win. The court seemed to affirm this view in Auer (1997), where it said that an agency’s interpretation of an agency’s rule is “controlling unless plainly erroneous or inconsistent” with the regulation.

4. Views expressed in briefs do not receive Chevron deference. The Supreme Court also follows the “anti-parroting canon,” refusing to defer to agency regulations that simply track the statutory language.

IV. Questions of Policy: Arbitrariness Review (See p. 425)A. Origin of “Hard look review”

1. Courts, under pressure to strengthen judicial review of agency rulemaking, moved from the requirement that all agencies consider in their proceedings and opinions all of the relevant policies and factors bearing on discretionary policy choice to a “hard look” at the logical and factual bases for the choices made.

2. The court looks to determine whether the agency reasonably exercised its discretion in a given case. Typically, courts do not condemn an agency’s policy choice as faulty, but instead concludes that the agency was not adequately justified in its choice and remands it for further consideration of the relevant analysis/explanation.

B. Overton Park (1971)1. Background: The Department of Transportation Act of 1966 prohibited

the Secretary of Transportation from authorizing the use of federal funds to finance the construction of highways thru public parks if a “feasible and prudent” alternative route exists. If such a route does not exist, the Secretary can approve only if there has been “all possible planning to minimize the harm” to the park. Petitioners claimed that the Secretary violated the statute by authorizing the expenditure of federal funds for the construction of a highway through a public park in Memphis. The District Court granted the Secretary’s motion for summary judgment and the Court of Appeals affirmed.

2. Majority (Marshall): Judicial review is proper here under §701 because it does not fall under that section’s exception. The Secretary failed to

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indicate why he believed there were no alternative routes and made no showing that he engaged in a wide-range balancing of competing interests. (Considered the purpose of the statute to preserve parkland). The Court has to determine whether the Secretary considered the relevant factors and whether there was a clear error of judgment. Remanded for review of the full administrative record before the Secretary when he made his decision.

3. Effect: For arbitrary and capricious review, the court examines whether the decision was made based on: 1) consideration of relevant factors and 2) whether there was a clear error in judgment. The factors that are relevant are outlined by statute (and statutory interpretation can be used to determine how to apply them in the case.) A&C review also requires that there be a record to review, so in cases without such a record (informal adjudication and rulemaking), a record may have to be developed after the fact. (Only applies when an agency has made no contemporaneous findings). 3) After the case, while there remain no direct procedural constraints on informal adjudication, Overton Park creates indirect procedural constraints by requiring that a record be available for a + c review. Applies only to informal adjudication, since formal adjudication and rulemaking (paper hearings or notice and comment) creates the record we want.

a) Note: the consideration of relevant factors prong is conventionally discussed as a+c review but is really just a review of law because it asks what factors the statute makes relevant.

4. Conflict with Chenery (no ad hoc post rationalizations) and Morgan (no probing into decisionmaking): The Court deals with this tension in Pension Benefit by disavowing their allowing the District to bring the Secretary before the court to ask questions and instead says that the proper remedy is to remand it all the way back to the agency to remake the decision.

5. Conflict with Vermont Yankee: Court determines that implicit in §706 is that there must be a record to review-as long as there is a textual hook in the APA, there is no Vermont Yankee problem.

C. The organic statute determines which factors are relevant (implicit or explicit):1. Congress can say that an agency must consider certain factors

(mandatory relevant factors)2. Congress can say that an agency may not consider a certain factor

(impermissible factors)3. Congress can say that the agency has discretion to consider a factor

(permissible)4. If the statute is silent, the agency has legal discretion to consider it (thus

unless a statute clearly make s a factor irrelevant/impermissible, the agency can consider it.). The agency cannot, however, indefinitely defer making a judgment

D. Motor Vehicle Manufacturer’s Ass’n v. State Farm (1983):

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1. Background: The National Traffic and Motor Vehicle Safety Act directed the Secretary of Transportation or his delegate to issue motor vehicle safety standards that are practicable. First, the Secretary said that seat belts were required. Following the Carter Administration, the Secretary imposes a passive restraint rule (technology that operates even if you don’t) and gives manufacturers the option of automatic seatbelts or airbags. The Reagan Administration later rescinds the rule on the basis that people hate the automatic seatbelts, that the Secretary was no longer confident that seat belts produce significant safety benefits, and that creating detachable restraints would impose an impermissible cost. (Dealing with informal rule-making under §553.)

2. Issue: Was the Secretary’s rescinding of the requirement of passive restraints arbitrary and capricious?

3. Majority (White): yes. The agency failed to present an adequate basis and explanation for rescinding the requirement and must consider the matter further or adhere to or amend the original standard, depending on what result further analysis supports. (The agency never considered just imposing an airbag requirement). The Court notes that a revocation has a higher threshold of explanation than inaction or action.

4. Are policy considerations relevant? Rehnquist says no in Mass v. EPA, finding that the philosophy of an administration is irrelevant, however the Court here says that policy/pubic opinion is relevant with arbitrary and capricious review but political influence is suspicious (should have technocratic basis). Effect: Agencies have to supply a rational analysis supporting its decision in order to modify or rescind a previously promulgated rule. The agency must also consider the relevant factors, explore reasonable policy alternatives and articulate a satisfactory explanation for the choice it makes.

5. Concerns with this decision: ossification-the idea that we are freezing the status quo too much, and that it is an impossible standard because agencies cannot be expected to foresee and reject every possible policy alternative.

E. FCC v. Fox (2009):1. Facts: The 1934 Communication Act forbade the use of obscene

language on TV on radio. Congress gave the FCC various methods of enforcing the indecency ban include civil fines and license revocation. The FCC initially had a “safe harbor” rule, allowing the use of fleeting expletives, but outlawing “deliberate and repetitive use.” However, in 2004 the FCC changed that rule through adjudication to say that it was no longer in effect on the basis that they wanted to prevent children from enduring the “first blow” of hearing such language, even in passing, and so removed any literal/non-literal distinction that they used before. They also recognized that technology had changed to allow easier bleeping. Cher and Nicole Ritchie used vulgar words in a fleeting manner, but the FCC found the broadcasts indecent (though no fine was levied.)

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2. Issue: Was the FCC’s order changing their standards arbitrary and capricious?

3. Majority (Scalia): Employs an a+c review rather than Chevron to avoid constitutional questions. While an agency has to show the rationale for its new policy, it does not have to show that the reasons for a new policy are better than an old one, only that it is permissible and that the agency believes it to be better. There are some decisions for which no reason can be given (necessarily arbitrary). The court rightfully replaces the President in reviewing independent agencies. Exception (an agency only has to provide more explanation for a change in policy than it would in making the policy initially when): 1) the new policy rests on factual findings that contradict prior factual findings or 2) when there are some serious reliance interests to be taken into account (no reliance on old issue)

4. Dissent (Breyer): A switch in policy requires an explanation. Agency should have to answer: “Why did you make the change?” In terms of politics, Congress should enforce legal constraints on the agencies and perhaps lay out criteria for consideration, but their policy should not interfere with agency action/inaction.

5. Seems inconsistent with State Farm in how much explanation they require for action and inaction, as well as the role of politics within that review.

F. State Farm v. Fox1. State Farm says that:

a) Arbitrary and capricious review obligates agencies to respond to reasonable policy alternatives and to annex their decisions to policy showing why they chose it over the others;

b) The sequence of action followed by deregulatory rescission requires more of an explanation than agency inaction

c) Political influence on agency decision-making is suspicious and not a sufficient rationale for agency decision. Want a factual, technocratic reason for the change.

2. Fox is:a) Much more hospital to political/policy rationale: agencies can

change their minds because they like the new policy better, whether based on political influence, value judgments, or the like

3. Effect: Recent lower court cases say that action/inaction makes no difference for a+c purposes. If it fits within the text of the APA, it fits within the purpose as well. Court has been moving toward a standard of one arbitrary and capricious review, combining Overton Park and State Farm (relevant factors, no error of judgment, consideration of policy alternatives w/a clear explanation for a particular choice.)

G. Agency choices: (In)action and A+C Review1. An agency can choose to take no action (A)2. An agency can take action, in which case it has to give a reason to

survive arbitrary and capricious review. (B)

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3. Action followed by rescission (such as in State Farm) (C) 4. Action followed by a change in action (D) 5. Mass v. EPA: A and B require the same amount of explanation/get the

same amount of scrutiny. A = B6. State Farm: C demands more explanation than B, C > B7. Fox: D requires the same amount of explanation as B, but not more and

C should require more than A. D = B8. In accordance with lower court decisions and the Fox exceptions, C = B

= A = D i.e. there is one unitary standard-everything requires explanation.

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