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Another Administrative Law Outline Notes for Law School

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Another Administrative Law Outline Notes for Law School Powered By Docstoc
					ADMINISTRATIVE LAW OUTLINE
INTRODUCTION 1. Development of Modern Administration and Administrative Law a. Overarching question: i. what law governs agencies? b. Agencies carry out the will of the principal i. here, principal is Congress c. Legitimacy i. Agencies not provided in the Constitution 1. Art. II says President can create departments a. ex: Postmaster General, Treasury 2. Framers couldn’t have foreseen modern problems and growth 3. Need agencies for efficiency, risk unchecked power a. traditionally courts check agencies b. more and more President empowered to justify agency actions ii. Legal Basis for 4th Branch of Government 1. Congress a. Congress writes “organic statute” giving agency certain powers i. make rules ii. hold adjudications iii. enforce rules b. Administrative Procedure Act 1946 i. 4 types of agency action 1. informal rulemaking a. “notice and comment” b. Section 553, 556, 557 2. formal rulemaking a. on the record b. Section 554, 556, 557 3. on-the-record adjudication 4. informal adjudication ii. other pertinent sections: 1. 551: definitions 2. 553: rulemaking 3. 554: adjudications 4. 555: ancillary matters 5. 556/557: formal rulemaking 6. 706: scope of judicial review 2. Judge-made law a. interprets APA b. interprets organic statutes c. creates norms for agency behavior 1

3. Executive a. makes executive orders i. comes directly from White House ii. tells agencies how to comply with policy b. helps legitimacy b/c president is elected official 4. Room for Agency Discretion? a. exercise of discretion not always reviewable by courts i. agencies are sometimes in better position than courts to make such decisions b. agency rules should be written to be followed and enforced i. but problem with writing is you risk rigidity iii. Basic Requirements 1. Legislature does the authorizing through statutes with rules/ standards limiting agency power and granting it 2. Contains procedures that ensure agency compliance with legislative directives 3. Judicial review must be available 4. Agencies must do things in a way that help courts conduct judicial review d. Accountability 1. agencies aren’t subject to the democratic process directly, so prove their legitimacy by: a. showing they have an indispensable place in our constitutional structure i. sometimes the market fails and we need agencies to regulate the market b. show agencies are politically accountable i. they are somehow answerable to democratic branches of gov’t c. their performance is effective d. the procedures they use are fair e. Theories of Administrative Law i. Public Choice 1. when gov’t acts it doesn’t necessarily act for the common good but acts in response to economic motivation 2. so agencies are acting in their own economic interest a. want agency to stay in business, stay relevant b. want to gratify businesses/industries they serve ii. Neopluralism 1. agencies should identify the interests of the competing groups/communities that are affected by their decisions, then come up with a compromise iii. Public Interest

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1. agency should respond to public interest, not interest groups iv. Civic Republicanism 1. gov’t/administrative state should be shaped to enhance people’s opportunity to be good citizens and feel involved in self-gov’t, respond to their contributions f. Theme: i. agencies can and should develop expertise that Congress cannot so the agency can do the will of the principal 1. risk: expert agent will blind principal with science CONSITUTIONAL POSITION OF THE ADMINISTRATIVE AGENCY 1. Constitutional Doctrines a. Separation of Powers i. should each branch be treated as independent? b. Checks and Balances i. Check Congress: 1. vote legislators out 2. agents can’t be voted out c. Nondelegation i. Constitutional basis: 1. legislative power vested entirely in Congress in Art. I 2. and now Congress is delegating some power to agencies to make rules with force of law 3. nothing grants Congress power to do this a. general principle of gov’t is that delegated power (the power to legislate granted by people to Congress) can’t be delegated (by Congress to agencies) 4. but nothing says legislators can’t create mini-legislators either ii. Policy: 1. deliberative democracy: a. participants in a democracy should govern themselves through deliberation through democratically elected officials b. forces Congress to come up with limiting principles rather than allowing agencies to have broad discretion 2. accountability a. since laws and rules of law infringe on individual liberty, those in charge of doing so should be democratically accountable 3. promote rule of laws values a. promote planning by those subject to the laws

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b. limit discretionary authority of enforcement officials who might otherwise act arbitrarily/capriciously iii. Current situation: 1. Nondelegation is settled, Congress is allowed to delegate powers to agencies 2. But as a practical matter the doctrine serves as a limitation on Congress’s delegations, they know not to do too much 3. so rather than determining whether Congress delegated too much, look at agency behavior 4. Rule: a. A delegation is Constitutional so long as it contains an intelligible principle that binds agencies 5. Cannon of Avoidance: a. Courts purposely read statutes narrowly to avoid finding constitutional problems with Congress’s actions iv. Cases: 1. Benzene case a. Background: revitalizes nondelegation for the first time since 1935 b. Organic Statute: can make rules that are “reasonably necessary or appropriate” to provide “safe/healthful” employment/places of employment. Toxic agents must also be regulated to “most adequately assure to the extent feasible that no employee will suffer material impairment of health, even if exposed for life.” c. Facts: OSHA develops safety standards, decided benzene, as a carcinogen, causes leukemia. Secretary’s rule: if something is a carcinogen (like benzene) then there’s no such thing as safe exposure and limit should be as low as technologically feasible. d. Issue: is there a limiting principle? e. Holding: yes, look at legislative history: i. history shows that more likely than not this rule will meet its proposed ends f. Dissent: i. also finds a limiting principle, but more broader principle that “safety” and “reasonably necessary” are all limiting words g. Shows courts are deferential to agencies and Congress

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2. State ex rel. RR & Warehouse Commission v. Chicago (1888) a. commission tried to lower the rates the RRs were charging b. RRs challenged legitimacy of commission c. Court upheld delegation i. Rule: Congress can delegate as long as rules are reasonable/calculated 3. Panama Refining Co. v. Ryan (1935) a. Statute: Section 9(c) of NIRA allowing President to sign exec. order restricting sale of oil made in excess of rates set under this statute in ISC i. the prohibition only applied to one industry b. law struck down because it failed intelligible principle test: i. there wasn’t a standard listed for when the president should exercise his power 4. Schechter Poultry Corp. v. United States (1935) a. Statute: Section 3 of NIRA: not so much a prohibition but admonition directed at most American businesses b. this was upheld, gave more direction, private parties were more involved in designing the rules 5. Amalgamated Meat Cutters v. Connelly (1971) a. Rule (no longer good): delegation from Congress to an agency that would violate nondelegation can be cured by the agency’s own adoption of a limiting principle b. **NO LONGER GOOD RULE-overturned by American Trucking c. but shows interpretive techniques: i. read act in light of background, legislative history, purpose, and prior regulatory programs to find limiting principles ii. even if language appears to be a blank check, measure rule against programs that preceded it 6. Whitman v. American Trucking (2001) a. Organic statute: Clean Air Act, mandates agency action at specified temporal intervals, every 5 years agency must review air quality standards. b. Issue: here EPA must determine the threshold standard for when the presence of poisons in the air (particulate matter) begins to be harmful, basically manages the ozone. (Background—lots of public response in notice and comment, plus criteria paper

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listing science and staff paper giving guidance to EPA head, not a lot of public support but President supported the rule) c. Challenge: nondelegation problem in CAA d. Holding: court finds limiting principle: “requisite to protect American’s health” i. criticism: is “requisite” really limiting? e. new Rule: agency cannot adopt its own limiting principle to cure a nondelegation problem in an organic statute i. problem because Congress likes to give a broader delegation because they aren’t the experts v. Hypo: 1. Law 1: IRS shall tax all citizens income at 10% a. no admin. problems b/c it is a direct delegation 2. Law 2: IRS shall tax all citizens income 2%-10% a. probably ok because it provides clear intelligible principle 3. Law 3: IRS shall tax all citizens income at a fair rate a. is “fair rate” an intelligible principle? b. doesn’t define “fair” in context, probably too subjective c. but under American Trucking “requisite” passed and it seemed similarly ambiguous, so it might work 2. Executive and Agencies a. Appointment and Removal i. Appointment: 1. Constitution: Art. II Sec. 2 a. President nominates ambassadors, public ministers, and all other officers of the US b. Congress may vest appointment of inferior officers in the President, or in Courts, or in heads of Departments ii. Removal: 1. Constitution: a. impeachment power 2. But impeachment generally limited to President and Judges, so for all other public officers debate about removal a. one argument: President shouldn’t have unfettered discretion to fire people in his branch, so Congress should be able to limit his power i. standards for firing (good cause, etc.) changes depending on cases iii. Independent Agencies

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1. Evidence that an agency is independent (and not executive): a. Congress created multiple heads of the agency b. President’s removal power is limited for certain causes c. Heads serve in staggered and limited terms so they don’t coincide with change of administrations d. President still appoints e. goal: insulate agency from certain presidential control iv. President’s control over agencies 1. Executive Orders a. President can issue executive orders telling agencies what direction they should design rules, prior to the APA notice-and-comment requirements kick in i. shows Agency President’s preferences ii. Agency more likely to adhere to President’s goals, despite public comment b. Example: Executive Order 12866 i. administered through Office of Management an Budget (OMB) specifically through OIRA (Office of Info and Regulatory Analysis). 1. agencies send significant regulations to OIRA, who evaluate plans and seek justifications 2. each proposed regulation must contain cost-benefit analysis, show how its consistent with organic statute and how it promotes President’s priorities ii. Tone: deregulatory: 1. achieve public health, safety, environmental protection w/o unreasonable costs on society iii. Conflict: Director of agency generally has discretion re: rulemaking, fear that President is influencing agencies too much iv. 12866 not enforceable in court c. Hypo: Congress passes statute that XYZ Agency must regulate and reduce pollutant A as “far as practicable.” Doesn’t say whether XYZ should consider costs i. assumption: passes nondelegation

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ii. President issues exec. order to XYZ saying the program will be costly so he tells XYZ to consider costs when designing policy iii. No Court holding says this is prohibited, White House headed this direction iv. But consider whether XYZ is independent or exec. agency 1. if Exec. Agency, Congress might have left the issue open purposely knowing President would make a decision about it 2. If Independent Agency, less likely Congress conceived President could influence v. Either way, President has no way to enforce the order v. Cases: 1. Myers v. US (1926) a. Statute: Postmasters shall be appointed by President and can be removed by President only with advice and consent of Senate b. Facts: Myers is Postmaster in Portland, President tells Postmaster General to remove him c. Issue: is it constitutional to limit President’s removal power by requiring advice and consent? d. Holding: only President can remove executive branch officials so posing limits is unconstitutional e. Important: Postmaster seems to be more of a purely executive office (not independent) i. only carries out exec. branch duties ii. doesn’t adjudicate/make rulees 2. Humphreys Executor v. US (1935) a. Statute: FTC commissioners may only be removed by President for inefficiency, neglect of duty, or malfeasance b. Rule: look at character of the office, if it’s strictly executive then President’s removal powers cannot be limited, but if the official acts in a judicial or legislative capacity Congress may limit President’s removal power 3. Weiner v. US (1958) a. Facts: Congress didn’t make a plan for removal of officers from the War Claims Commission. The WCC does quasi-judicial work

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b. Issue: is there a limitation on President’s power to fire a WCC official when the statute did not delineate standards for removal? c. Holding: President’s removal power is limited (despite the absence of a standard in the statute) because the WCC is an adjudicative body so it is more independent 4. Morrison v. Olson (1998) a. Statute: Court can appoint independent counsel to investigate certain offenses within the executive branch, and President can only remove IC for good cause. b. Issue: is it constitutional for Court to appoint IC that can be removed by President only for good cause? c. Holding: Law is valid because IC wouldn’t prevent President from exercising his Constitutionally specified functions i. strays from Myers b/c IC is only doing executive functions (investigating and enforcing laws) so President should be able to remove him whenever 5. US v. Mistretta a. Statute: creates US Sentencing commission, comprised of 7 members of the judicial branch who write guidelines that are biding on federal judges b. Holding: Commission is valid i. President won’t have undue influence on the Judiciary, it makes sense for the Commission to be within the Judicial branch ii. allowed despite some aggrandizement of the Judicial Branch b. Legislative Veto i. Formalist vs. Pragmatists 1. formalists: a. form/procedure established in the Constitution, and anything deviated from that procedure isn’t Constitutional 2. pragmatists (functionalists): a. things have gotten complicated, and broad delegations are fairly permissible, so we need to be able to stray some from the strict procedures to keep the broad delegations in check ii. Cases: 1. INS v. Chadha

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a. Statute: if either house of Congress doesn’t like an AG’s decision to suspend a deportation, one house can pass a resolution and reverse AG’s decision b. Issue: is this “legislative veto” constitutional? c. Holding: No i. Unconstitutional because laws are made through bicameral system and approved by President, this action doesn’t follow proper Constitutional procedure and this action has the force of law 2. Bowsher v. Synar a. Statute: Comptroller General can be removed at any time by joint resolution of Congress for specified reasons b. Issue: Can Congress control firing of CG? c. Holding: CG is a purely executive official so Congress cannot be involved in removing him, only President. If Congress can control this removal then they have overreached into executive branch and violated the Constitution 3. Judiciary and Agencies a. Agency Adjudication i. Broad Issue: 1. Art. III: “judicial power of US in one Supreme Court and in such inferior courts that Congress shall from time to time establish” 2. So what would happen if Congress hadn’t made so many inferior courts? a. cases wouldn’t necessarily all go to Supreme Court because it’s a court of limited jurisdiction b. things would otherwise happen in state courts c. so it’s not inherently unconstitutional for agencies to have adjudicative mechanisms ii. Requirements: 1. Judicial Review of agency adjudication is a necessary but not sufficient requirement for constitutionality of agency adjudications a. where does review happen? i. doesn’t have to be federal courts, because federal courts don’t have to exist ii. hypothetically could happen in state courts, but Congress has never given J to state courts iii. Private Rights vs. Public Rights 1. private rights a. rights of one individual to another

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b. source: common law or very old statutes that precede current Constitution c. assumption: can have deprivation of private rights adjudicated in the old-fashioned traditional manner (through courts) 2. public rights a. rights between individual and the government b. source: Congressional statutes c. even if right is between individuals could be public if created by Congress or part of integrated Congressional statutory scheme (Thomas, Schor) d. assumption: Congress created the right so Congress can determine how it will be adjudicated iv. Analysis: If Congress has created a non-Art. III adjudicative court: 1. is private or public right at stake? 2. if it seems private, can argue it’s public because Congress made it part of a broader Congressional scheme 3. If public, must either be territorial, courts marital, or court dealing with public rights 4. Defining Public: Thomas, Schor and Grand Financiero tests a. help further define whether something is public right even if it’s not between gov’t and individual b. is there meaningful judicial review available? c. did adjudication occur in an agency with the consent of the parties? d. due process might require art. III judicial review, but not decided b/c lower art. III courts aren’t even mandatory v. Rationales: 1. Brennan: Art. III should be exclusive with some exceptions a. Northern Pipeline 2. Look for historical exceptions to Art. III courts, read more broadly than Northern Pipeline 3. Necessary and Proper clause: Congress can do anything so long as due process is satisfied a. Brandeis dissent in Crowell 4. Balance interests to see if Congress can justify departing from Art. III a. Thomas, Schor 5. Appellate review is available, see how aggressive the standard of review is vi. Cases: 1. Crowell v. Benson a. Statute: Lonshoreman’s Act, Congress provides tort substitute of regulatory action to compensate for

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injuries incurred at sea. Review available in District Court if: i. questions of law (de novo review) ii. questions of fact (limited jurisdiction) b. Facts: Crowell, as deputy commissioner, ordered Benson to compensate Knudsen for injuries, but Benson said the Knudsen wasn’t employed by him at the time of the injury c. Right? Private d. Challenge: Benson says Congress cannot vest factfinding authority in the commission e. Holding: Statute upheld i. questions of jurisdiction are decided de novo by reviewing courts ii. commissions can find facts as long as there’s judicial review available (level not specified) iii. even though private right is at issue, it doesn’t have to be adjudicated in court IF: 1. essential attributed of judicial power are maintained a. is agency acting enough like a court? (collecting evidence, testimony, etc.) 2. judicial review is available 3. narrowed a bit in Northern Pipeline f. Views: i. decision gave a lot of power away because findings of fact by agencies can be seen as virtually conclusive in reviewing courts ii. strict decision because jurisdictional facts must be reviewed de novo and thus limits agencies because why can’t they make decisions re: jurisdiction? 2. Northern Pipeline v. Marathon Pipe Line a. Bright-line Rule: i. Congress can create the following non-Art. III courts: 1. territorial courts 2. courts martial 3. courts dealing w/ public rights ii. avoids diminishing Art. III courts, avoids giving agencies more and more power b. Holding: Bankruptcy courts were declared unconstitutional c. Impact: narrows Crowell

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i. Congress scrambles to create bankruptcy courts that meet the above listed rule 3. Thomas v. Union Carbide a. Statute: FIFRA—manufacturers of pesticides must get permission from EPA to market pesticides, must provide EPA with certain data, but if B comes later than A, B can use some of A’s data, which cuts down on B’s costs, but B has to pay A—creates right between B and A that’s part of a Congressional scheme b. Issue: what time of right exists between B and A c. Holding: i. traditionally that right would be private because it’s between individuals, but it’s public because it’s created as part of Congressional scheme ii. because it’s a public right it can be adjudicated in a non-Article III court 4. Schor a. Statute: Conti allowed to bring private right counter-claim in federal district court, but Schor convinced him to drop the claim in federal court and bring it to the Agency instead. Schor loses and objects to the Agency having jurisdiction b. Holding: act constitutional i. Schor consented ii. there was meaningful judicial review available 1. are findings of fact supported by weight of the evidence 2. findings of law reviewed de novo 5. Grand Financiero a. Issue: does 7th Amendment right to jury trial prevent Congress from permitting jury to be present in agency adjudication? i. answered reserved for another day b. this particular act is unconstitutional for other reasons SCOPE OF JUDICIAL REVIEW-QUESTIONS OF FACT, LAW AND POLICY 1. Introduction: a. Generally review of agency adjudications is vested in federal appellate courts b. Obtaining federal court review: 1. requires justiciability 2. statutory questions

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c. Standard of review? 1. if organic statute doesn’t contain standard of review: 1. APA Sec. 706 a. read 706 in light of all opinions interpreting it b. “The Reviewing Court shall hold unlawful and set aside agency action, findings, and conclusions found to be unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute” i. Universal Camera: questions of fact, interprets “substantial evidence” in Sec. 706 1. consider the whole record, look at all evidence supporting and detracting from the agency determination 2. questions of law from lower court to appeals: 1. reviewed de novo, no deference 3. questions of fact from lower court to appeals: 1. some deference, clearly erroneous standard 4. questions of policy 1. no standard 2. courts shouldn’t be making policy d. **issue: agencies do make policy, how should appellate courts review agencies’ policy decisions? 1. Motor Vehicle Manufacturers, Overton Park: Hard Look 2. Review Questions of Fact a. Cases 1. Universal Camera 1. Facts: hearing officer held hearing on whether to discharge employee. Position of hearing officer was created by organic statute, he was required to make report after hearing testimony, report to be looked at by Board. Board decisions reviewed by Circuit Court, then Supreme Court. 2. Issue: what does Supreme Court look at when reviewing? 3. Holding: Responsibility of reviewing findings of fact falls on the Court of Appeals, it is not Supreme Court’s position to review facts 4. Rules: a. rules of law should be considered de novo by court of appeals b. consider the whole record, consider the report and consider all evidence that detracts from Agency’s decision i. this is “substantial evidence” in APA Sec. 706

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c. reviewing court can consider findings in the initial report prepared by the hearing officer when reviewing agency’s decision i. make sure agency correctly used hearing officer’s facts since that’s the person who actually saw evidence/witnesses, etc. ii. agency’s fact-finding not treated as conclusive 2. Allentown Mack Sales and Service v. NLRB 1. Facts: one factory closing and another opening, and the new company tried to hire most of Mack’s employees. NLRB’s rules re: unions: new company must have an objective reasonable doubt before it could ask whether the employees still wanted to be in a union 2. Issue: Does the new company need to bargain with old union? 3. Rule: agencies must adhere to their announced rules until and unless they change the rule (like Arizona Grocery) a. here, NLRB was trying to enforce a rule about a finding of doubt that it had yet to adopt, cannot do that—NLRB old rule re: doubt was “disbelief” but here NLRB trying to say doubt means “uncertainty or disbelief” b. this is a much bigger review than normal, because Scalia is saying the agency didn’t mean what it says it meant 4. exception to Universal Camera, because here Supreme Court did review findings of fact 3. Zhen Li Iao v. Gonzalez 1. Standard: agency requires a petitioner have a “wellfounded fear of being persecuted” before asylum can be granted here. Can show fear by showing you were persecuted before. 2. Facts: INS reviewed petition, didn’t find that she had fear b/c she wasn’t home when investigators came, so they made inference that she wasn’t fearful or she would’ve complied with agency 3. Court of appeals has a lot of room to make fact-findings, because Supreme Court isn’t a fact-finder, so very deferential, and the legal standard of showing fear is high so it’s possible that the facts didn’t amount to a showing of fear 4. INS decision upheld. 3. Review Questions of Law a. Background

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1. Hypo: TSA has power to regulate importation of alcoholic products, so they make a rule that says no carrying alcoholic products in airplane cabins. You try to bring in chocolates with liqueur centers. TSA won’t let you. 1. TSA: chocolates are “alcoholic products” and therefore as a matter of law cannot be on the plane 2. Court of Appeals review: a. look at definitions of “alcoholic” and :”product” b. look at purpose of statute c. look at ease of enforcement: 53 Electus Parrots 3. Real consideration: was Congress speaking to this question when it made the statute or did it mean for agencies to use their expertise? b. Counter-Marbury (Cases pre-Chevron) 1. Crowell and Benson said questions of law should be reviewed de novo 2. But Chevron and Hearst create exceptions, so Courts must defer to agencies on certain types of questions of law 3. Analysis for construction of words in a statute: 1. Does word use common law definition/does Congress’ use of the word import common law terms? a. question of law, no deference 2. What factors should be used to interpret the word? a. question of law, no deference because Court tells agency to consider Congressional intent 3. In light of those factors, does the definition apply to the issue here? a. a lot of deference b. Universal Camera c. mixed law and fact d. agency has expertise 4. Findings of fact a. review agency decision for substantial evidence b. APA section 706 c. Universal Camera definition of substantial evidence 4. in general, on questions of application of construction of a statute to facts there will be deference, but on the construction of a word a statute the court will decide 5. NLRB v. Hearst 1. Facts: employers must bargain with “employees.” 2. Issue: are newsboys “employees” within the meaning of the statute (and thus Hearst would have to bargain) 3. Analysis: a. Court looks at what newsboys do, their autonomy, whether there’s indicia of master-servant

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b. Court defers to the agency determination because Congress assigned the task of defining “employee” to the agency i. agency has more expertise, every-day contact with this situation so they are better suited to make this definition c. Rule: reviewing court’s function is limited if the court is examining a situation where the court applied a specific term to a specific situation i. if definition has “warrant in the record” and “reasonable basis in law” then defer to agency’s interpretation 6. Packard Motor Car 1. Statute: same as in Hearst, same need to define “employee” and whether foremen are employees. 2. Holding: This is a naked question of law so Supreme Court overrules the agency interpretation without any deference. a. de novo review for questions of law b. Here the issue is so important that it shouldn’t be left to the agency, because defining foremen as “employees” has dramatically different and more weighty socio-economic effects than defining newsboys as employees 7. Brown and Williams 1. For a long time FDA said it didn’t have authority to regulate cigarettes because they didn’t fall into the class of carcinogens. 2. Then FDA decides it can regulate cigarettes, can they change their mind? 3. Court: this is a question that is too important to be left to agency discretion (follows Packard Motor Car) so Court can review de novo 8. Justifications for determining deference on only some questions of law: 1. comparative expertise a. decide whether Court or Agency is in better position b. Packard, Brown and Williamson, and Hearst 2. Congressional intent, where’d Congress want power to make determination? a. Hearst 3. comparative legitimacy a. expertise doesn’t go hand in hand with democracy 4. comparative functionality a. function of court vs. function of agency b. courts are better at forming general rules of law c. agencies are better at the particulars

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5. judges’ sense of their own power a. Packard vs. Hearst b. Packard—judges think they really know what’s important 6. comparative procedural advantage a. who’s in the best position to learn what needs to be learned to decide the case better? 9. Skidmore v. Swift & Co. 1. Issue: matter of interpretation, within the organic statute can “waiting time” count as “working time” 2. Court: a. This is a naked question of law i. no principle of law precludes court making this decision de novo ii. no deference to agency 3. Holding: waiting time can be working time 4. Skidmore deference: a. Applies to the deference courts must give to agency bulletins/publications, things that don’t have the force of law b. RULE: Courts only have to defer to non-binding agency “interpretive rules” to the extent that they’re persuasive 4. Chevron and its Progeny a. Background of Chevron: 1. Clean Air Act 1970, amended 1977 2. EPA interprets CAA, experiments with rules re: reducing pollution, different regulations 3. Issue in cases leading up and in Chevron: 1. EPA creates “bubble” rule where polluters can be treated as a bubble instead of individual sources of pollution from isolated places (count cumulative output of all sources vs. counting individual output from each source) 2. Asarco: DC circuit decides case as an anti-bubble matter 3. Alabama Power: DC circuit responds to amendments in CAA, pro-bubble 4. 1980 EPA again changed its position in notice and comment rulemaking to say it was anti-bubble, but once Reagan was elected became pro-bubble 1. Chevron challenges this pro-bubble rule b. Chevron 1. Issue: does CAA apply to whole factories (bubbles) or to individual apparatuses (anti-bubbles)? 2. Holding: Court decides it is reasonable for agency to say that “source” means “bubble” (cumulative effect) so the rule stands 3. ANALYSIS:

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1. Has Congress spoken directly to the question at issue? a. if yes, court and agency must defer to Congress b. look at Congressional intent c. tougher scrutiny, presumption of invalidity of agency rule 2. If Congress hasn’t spoken directly to the question at issue, has the agency given a reasonable/permissible interpretation to the statute? a. more deferential to agency interpretations here, because if Congress didn’t speak they meant for agencies to have discretion to resolve ambiguities b. delegations can be implicit or explicit 4. Justification: agencies are more politically accountable than courts c. Chevron Analysis 1. Step Zero 1. Bare Question of Law (see discussion above): a. Packard, Cardozo-Francesca b. If pure question of law court decides without deference c. Can you “know” on its face how to answer the question? d. or is it an issue of such national consequence that it’s too important to rely on agency’s decision? 2. Interpretation at issue an authoritative statement of the agency an interpretive rule (Skidmore) a. if the agency hasn’t decided something with the force of law you don’t even get to Step One b. Christensen v. Harris County (precursor to Mead) i. Issue: are opinion letters rules of law that are subject to Chevron 2-step analysis? ii. Holding: interpretations contained in opinion letters (that aren’t made after adjudications or rulemaking) are not entitled to Chevron deference 1. only entitled to Skidmore deference a. Court only must defer to the extent court is persuaded by the letters c. United States v. Mead i. Issue: are ruling letters decisions with the force of law or are they interpretive rules? ii. Facts: Mead imports day planners, and there’s a US tariff on importation of, among other things, diaries, but if not a diary then free of duty. US Customs sent out “ruling

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letters” that were binding only on Customs and the individual recipient of the letter. In some ruling letters Customs defined “diary” using Oxford English Dictionary to include day planner. iii. Rule: 1. Agency must demonstrate that Congress delegated it power to issue rules through adjudication or rulemaking and that in this case it acted under that power 2. Here the ruling letters are only binding on individual parties so they are not rules with the force of law 3. So the ruling letters are only entitled to Skidmore deference iv. Holding: the letters would only make it to Chevron Step One if they were rulings with the force of law 3. Brown & Williamson is another hurdle before getting to Step 1: a. presume that Congress wouldn’t implicitly delegate so much power to an agency to regulate a really huge industry (like the tobacco industry) b. would need to be an explicit grant of power 4. Kent v. Dulles is another hurdle before getting to Step 1: a. Facts: INS made new reg. denying passports to Communists, but for years that was not a basis for denying passports b. Issue: does Secretary have delegated power to deny passports for this reason? c. Holding: RULE: this power wasn’t delegated because it is a huge issue because it is a Constitutional issue and only Congress can limit citizens’ liberty interests so if they meant to delegate the power they would’ve done so explicitly d. Doesn’t make it past Step 0 because once your recognize it’s a Constitutional issue you presume Congress didn’t delegate it i. doctrine of avoidance to avoid deciding Constitutional issues without a clear statement 2. Step One 1. Determine whether Congress has spoken directly to the question at issue

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a. Use traditional tools of statutory construction (Chevron footnote 1) i. statutory language ii. legislative history iii. policy b. functionalist: i. legislative intent, evolving statutes, legislative history ii. like Stevens’ dissent in MCI: telecommunications is a dynamic industry 2. INS v. Cardoza Francesca a. Statute: AG may not deport alien if there’s a clear probability the alien’s life/freedom would be threatened, but AG has discretion to grant asylum if alien has a well-founded fear of persecution i. Agency decided the determination was whether the well-founded fear was “more likely than not” b. Issue: was the agency correct in applying the “more likely than not” standard to the well-founded fear rule? c. Holding: No d. Chevron analysis: i. Step One: has Congress spoken to the question at issue? 1. yes, look at statutory construction a. the second statute is different than the first, so it can’t possibly have the same burden of proof ii. Since Congress spoke directly to the question, no further analysis, defer to Congress 1. like Packard, there are some issues that are so important court must decide them, and here it’s obvious to the Court what Congress meant 3. Young v. Community Nutrition Institute a. Statute: Secretary shall promulgate regulations limiting quantity (of food dye?) therein or thereon to the extent that he finds necessary b. Facts: Sec. didn’t promulgate any regulations c. Issue: Is it reasonable that Sec. didn’t issue any regulations? d. Holding: yes e. Chevron analysis:

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i. Step One: has Congress spoken to the question at issue? 1. yes, “as he finds necessary” is permissive, it doesn’t say “shall” promulgate” 2. so Congress clearly delegated this discretion to Sec. 4. Babbit v. Sweet Home Chapter of Communities for a Greater Oregon a. Statute: ESA, impacts logging industry because there’s a woodpecker that lives there so ESA protects the habitat (and here prohibits logging) b. Issue: does the statute, conferring the Sec. power to regulate “takings” include the power to regulate the modification of species’ habitats? c. Holding: Yes d. Chevron Analysis: i. Step One: Did Congress speak directly to the issue? 1. No, there’s ambiguity because “harm” in terms of “take” isn’t defined 2. Can’t quite determine how Congress meant for “harm” to apply 3. so you have to defer to Congress 5. MCI Telecommunications Corp. v. AT&T a. Statute: requires all long-distance carriers to file tariffs. FCC made a rule that all but AT&T didn’t have to file a tariff. (MCI is on the FCC’s side) b. Issue: does FCC have the authority to change the act so broadly? Turns on the definition of “modify” because if it’s ambiguous then it gets to Step 2. c. Analysis: i. Did Congress speak to the question at issue? 1. FCC wants the Court to find that “modify” is ambiguous so that they get to Step 2 because at Step 2 they are more deferential to the Agency 2. FCC cites Webster’s 3rd to show that there are different definitions so it’s ambiguous 3. Court says no (Scalia), doesn’t accept the definition they cite 4. Underlying tone: Scalia decides what Congress must have meant because

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he didn’t want to accept FCC’s sweeping change of the statute 5. So he says that they spoke to the issue, so they don’t go on to Step 2 6. Public Citizen v. Young a. Statute: The Delaney Clause, which does not on its face, include a de minimis exception, says that FDA must regulate color additives inducing cancer. b. Issue: Should the Court conclude that there’s a de minimis exception to the FDA’s power under the Delaney Clause to reg. color additives that induce cancer in people and animals? c. Analysis: i. Step One: has Congress spoken to the question at issue? 1. the language itself does not include an exception, does that mean 2. Congress meant not to include one? 3. pretty obviously not ambiguous here, would have included it if they meant to 4. So cannot read a de minimis exception in here, don’t get to Step 2 7. Hypothetical: a. Statute: FDA shall regulate cigarettes, filtered and unfiltered, cigars, pipes, pipe tobacco and chewing tobacco in the public interest b. Facts: FDA makes reg. to reg. all those things and also cigarillos, and require them to carry a safety warning incl. the surgeon general’s warning c. Analysis of Cigarillo Manufacturer’s claim, attempting to BYPASS CHEVRON: i. At Step 0: say FDA’s reg. isn’t a rule with the force of law (Mead) 1. say the rule wasn’t made pursuant to notice and comment and therefore doesn’t go through Chevron 2. (but likely that this reg. was made through FDA’s power to make rules with force of law—move to Step 1) ii. Alternatively: argue you don’t get to Chevron because of Brown & Williamson 1. assume FDA doesn’t have power to reg. cigarettes because Congress wouldn’t have delegated so much

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power to the FDA to reg. such an important/big industry 2. (the issue is so important that Court shouldn’t to Chevron) 3. doesn’t work here because statute specifically gave FDA power to reg. 4. Whereas Brown only gave FDA power to reg. drug delivery devices: shows that one of these things on the list isn’t like the other (the pipe is different from regulating carcinogens and tobacco b/c the pipe itself isn’t dangerous) 5. look at Kent v. Dulles for clear statement rules iii. Chevron Step 1: manufacturer will argue Congress didn’t speak to the direct question at issue 1. Congress enumerated a list and therefore it’s exhaustive a. this might be true, depending on what cannon of interpretation you use (handout) 2. Congress spoke to the issue b/c reading the statute in its plain meaning, cigarillos are different from the things enumerated in the statute 3. FDA will say that a cigarillo is just a mini-cigar, so why shouldn’t it be considered a cigar, but manufacturer will say the statute said filtered and unfiltered, so why didn’t it say cigars and cigarillos, if Congress knows how to use detail why didn’t they this time? 3. Step Two 1. Generally: a. Court will defer to the Agency’s interpretation if it is reasonable or permissible b. There is debate about whether “reasonable or permissible” requires Hard Look review or not 2. Hard Look review a. APA 706 “arbitrary and capricious” consistent with hard look

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b. Background: i. often agencies don’t produce a record so courts can’t review that non-existent record for substantial evidence when trying to decide the correctness of an agency decision ii. APA only requires record for formal rulemaking, so unless organic statute required record, no legal requirement iii. Ethyl Corp. v. EPA 1. Bazelon view: courts should ensure procedures are adequate if the procedures aren’t adequate courts should add procedures a. supports Overton Park 2. Leventhal view: courts shouldn’t add procedures, courts should delve into the merits of the matter on review a. support Vermont Yankee c. Overton Park i. Statute: pro-Park element, preserve parks in Atlanta. Secretary makes decision that I-30 can be built through Overton Park in Atlanta, decision made through nonadjudicatory, quasi-legislative process. Neither the statute nor APA requires a record ii. Chevron Analysis: 1. Step 0: it passes because it’s a quasilegislative act w/ force of law 2. Step 1: ambiguous, move to Step 2 3. Step 2: Must give deference to agency, but how much? a. substantial evidence review n/a because that only applies when rulemaking or adjudication is on the record or that review is required by organic statute b. BOOTSTRAPS: even though there’s no statutory requirement to create a record so substantial evidence n/a, meaningful review can’t occur w/o a record, so agency MUST create a record to

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justify what it did, or refuse to do so at its own peril i. review: arbitrary and capricious, or abuse of discretion? ii. was decision based on relevant factors? iii. was there a clear error of judgment? iii. Holding: the agency must provide a record in order for the court to engage in meaningful judicial review 1. standard of review: arbitrary and capricious, can’t be done w/o a record iv. Impact: 1. Vermont Yankee a. Courts are not allowed to add/require procedures for agencies that aren’t required by statute b. limits Overton Park, stops it from expanding c. does not overrule Overton Park d. Pension Benefit Guaranty Corp. v. LTV Corp i. Background: Supreme Court reviews 2nd Cir. decision that Agency was arbitrary and capricious because the Agency didn’t consider things outside the scope of the organic statute ii. Issue: what “relevant factors” must an agency consider? iii. Holding: Reversed 1. it was enough for agency to consider its duties under this title 2. agencies don’t have to consider everything, but have to consider more than what’s made relevant just in the organic statute e. National Coalition Against Misuse of Pesticides v. Thomas i. Facts: Agency said it would have zero tolerance for pesticides in mangos, then reversed and said it will accept some pesticides because the zero tolerance policy

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might have an adverse effect on 3rd world econs ii. Issue: is 3rd world econ. a “relevant factor”? iii. Procedure: Case remanded because effect on 3rd world econ. isn’t a relevant factor 1. safety of food in US is a factor to consider, not 3rd world econs iv. Result: Agency changed rule and said basis was public safety laws—this is upheld f. Community Nutrition Institute v. Bergland i. Facts: FDA adopts regs. IDing nutritious food to give to school children in fed. funded programs, so FDA allows some junk food that has been injected with “nutritious” stuff ii. Issue: is that policy the result of a clear error of judgment/arbitrary and capricious? iii. Holding: permitting otherwise nonnutritious food to be fortified is irrational and arbitrary g. Motor Vehicle Manufacturers i. Background: NHTSA makes rule requiring airbags or passive seatbelts in all cars, then rescinds the reg. requiring passive seatbelts ii. Issue: was rescinding that reg. arbitrary and capricious? iii. Analysis: 1. Overton Park: NHTSA made this reg. using informal rulemaking under 553, so arbitrary and capricious standard applies 2. But statute and legislative history indicate Congress want substantial evidence review (defined by Universal Camera) 3. ultimately court used arbitrary and capricious review and found the agency didn’t consider all the alternatives of the alreadyacknowledged technology that is cost beneficial and didn’t give good reason for not opting for that requirement iv. Holding: Agency acted arbitrarily and capriciously h. Allentown Mack:

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i. Used substantial evidence instead of hard look ii. Scalia: when arbitrary and capricious requires searching and careful review of a record, then it becomes a substantial evidence review i. Syracuse Peace Council v. FCC i. Background: FCC makes policy to reg. broadcasting in public interest. Its judgment shouldn’t be influenced by lobbying. Requires 1) licenses to cover controversial matters and 2) reasonable opportunity for broadcast of contrasting views. FCC then decides not to enforce prong 2. ii. Facts: in this case FCC abandons prong 1 because another policy requires broadcasters to cover issues “of importance” to the community. Prong 2 had a chilling effect so they abandoned it. Now Prong 1 irrelevant? iii. Issue: Was FCC’s abandonment of Prong 1 arbitrary and capricious? iv. Holding: no, apply State Farm j. BOTTOM LINE: hard look varies i. substantial evidence can but into arbitrary and capricious ii. Chevron: responsibility of courts to review agencies for their fidelity to the law, whether they are acting within the delegation of lawmaking authority they receive iii. Overton Park/State Farm: review questions of policy, did agency think the matter through? 1. State Farm: no, agency misunderstood the organic statute, didn’t consider alternatives (so it’s not a Chevron problem because they came up w/something without justification) iv. if something is made under 556 or 557, standard of review is substantial evidence v. Paradox: courts engage in a more thorough review (searching and careful) of agency policies than on questions of law (Chevron deference) 3. Rather than Hard Look, is agency’s interpretation reasonable given Congress’s discernable preference?

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a. the less popular choice because you’re supposed to be more deferential in Step 2 b. Ohio v. Department of Interior i. 4. Deference to agency’s interpretations of their own rules a. Bowles i. Defer unless plainly erroneous or inconsistent with regulation b. Greenwich Collieries (limits Bowles) i. Statute: Black Lung Act, for years Sec. of Labor said applicants seeking compensation under Act must satisfy burden of production, and then burden of persuasion lies in Agency ii. Issue: is Agency’s interpretation of Black Lung Act in conjunction with Sec. 554 of APA on the burden of proof subject to deference? iii. Holding: Court said the burden of persuasion is on the applicant, “burden of proof” is a well-settled term since 1946 iv. Here court interprets APA to give it a uniform meaning, and also preventing the possibility presented in Bowles of the court having to defer to an agency’s interpretation of the APA COMMON LAW REQURIEMENTS: CLAIRTY, FAIRNESS, CONSISTENCY 1. Common Law and APA: a. judges finagling between the Constitution and injecting old traditions from common law into statutory admin. law b. PROBLEM: if agencies rely on common law (past rules) might be unfair to big business because industrial revolution changed so many things c. so APA gives agencies rulemaking and adjudicative authority i. rulemaking: analog of statutes 1. general standards of conduct ii. adjudication: analog of courts 1. when you don’t comply w/ general standards of conduct iii. APA legislative history: 1. indicates strong preference for rulemaking a. too much unfairness in adjudication (no notice) b. don’t allow big sweeping changes with retroactive applicability 2. but doesn’t include enforceable method for choosing between rulemaking and adjudication

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a. if particular perception of unfairness courts draw back and require a rule 2. Requirement of Rules? a. Rules: less fact-specific, more rigid i. Agencies typically don’t like rulemaking because they can’t do case-by-case, so they prefer policy through adjudication b. No statute requiring agencies to proceed by rulemaking instead of adjudication i. but certain issues will require agencies to use rulemaking instead 1. narrow, very few c. Theory (Professor Davies): i. Agencies should make rules instead of using adjudication when agencies would be able to make discretionary choices based on factual situations ii. Will bind agencies 1. pre-existing rules prevent agencies from changing policies when applying rules 2. prevent judges from acting arbitrarily iii. Will help courts review agency actions iv. Will cure nondelegation problems (although this is no longer permitted, an agency cannot cure a nondelegation problem by adopting its own limiting principles) d. Cases: Due Process Requiring Notice by Rule i. Boyce Motor Lines v. US 1. Statute: ICC regs. safe transportation wihin US using “best known practical means” of securing safety, and agency figures out those best known practices. So agency said drivers transporting explosive gases should avoid, “as far as practicable” and “where feasible” driving through crowded streets, etc. 2. Issue: is this reg. specific enough to put drivers on notice? 3. Holding: yes, because they include the mens of “knowingly” so drivers won’t automatically be punished unless they knowingly choose the less safe route 4. Dissent: a. standard not intelligible i. seems like a nondelegation problem, did Congress give the agency enough guidance so the agency could guide citizens ii. Congress should make clearer standards b. Dissent wants rule i. ex: if you choose tunnel instead of bridge you will be in trouble 1. but how could they come up with each either or category, too hard. ii. it’s too easy to unwittingly violate the law

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ii.

iii.

iv.

v.

vi.

iii. ignorance of the law isn’t a defense Forsyth County, GA v. The Movement 1. Rule: required fee to ensure safety of demonstration, need a permit before you can rally. Administration can adjust the amount to be paid to meet demands for security 2. Issue: is there too much discretion here? 3. Holding: a. no standards to help administration determine fees for permits/security before rallies b. First Amendment problems: the discretion is not permissible because it can chill free speech Soglin v. Kauffman 1. Statute: U. of Wisc. can charge misconduct to demonstrators at school. Group of students blocking entrance are charged, challenge on 14th Amendment grounds 2. Holding: expulsion and suspension cannot be valid because there was no pre-existing rule permitting U. to act this way a. 14th amendment: need due process i. includes notice: pre-existing rule gives notice b. 1st amendment: protects freedom of assembly 3. GENERAL IDEA: a pre-existing rule can be applied with some discretion (so if the University had a rule on the books they didn’t have to enforce it every time) but they can’t enforce a rule that doesn’t exist Hornsby v. Allen 1. Facts: Hornsby owns liquor store, meets all qualifications but still doesn’t get a license, and they license board didn’t give her reasons for denying it. No Constitutional requirement that if you meet qualifications you definitely get a license. 2. Holding: if no ascertainable standards are established by which the applicant can intelligibly seek to qualify for a license, the court must enjoin denial of licenses under prevailing system until a legal standard is established and PDP is satisfied Holmes v. NYC Housing Authority 1. Issue: whether housing officials having discretion to hand out low-income housing is unconstitutional 2. Holding: Due Process requires selections amongst applicants must be done according to ascertainable standards, and when applicants are all equal then more standards must be given Fook Hong Mak v. INS

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1. AG refused to change Mak’s status because DOJ adopted a reg saying a transit authorization was granted on the condition that the alien won’t apply for adjustment of status. 2. Holding: if administrator has power over rulemaking and makes rule saying he won’t exercise discretion, the ok. Mak wants AG to use discretion on Mak’s behalf but AG already said he won’t. That’s ok. vii. Asimakopoulos v. INS 1. Rule: INS says it won’t exercise discretion 2. Holding: a. Rule precludes exercise of discretion b. Board’s failure to exercise discretion is reversible error c. Board had discretion, said by rule it won’t use it d. Distinguish Mak: the board cannot rule out using discretion altogether 3. Consistent Explanation a. Background: Public Utility Holding Company Act i. public utility companies are complex business structures ii. Act: gives SEC unprecedented power to restructure holding companies 1. to help yourself out you submit to voluntary reorganization plan iii. Chenerys officers/directors and shareholders of Federal 1. want to become controlling shareholders, so while negotiations going on they buy controlling block of shares in the company from a bank, which is being sold as a collateral on a loan on which another guy defaulted (and that guy had a controlling block in Federal) a. bought shares as a defense so that guy couldn’t regain control iv. SEC considering Federal’s request for voluntary reorganization, tells Chenerys they can’t engage in this inside training while reorganization is occurring 1. doesn’t say it’s necessarily against the law, but says it might later conclude it is. Advises that other shareholders might also object 2. Gives Chenerys opportunity to disgorge profits up to the projected poit of reorganization to quell objections from inside Federal to insider trading 3. Chenerys don’t take the deal b. Chenery I: i. SEC’s Resolution: SEC said managers weren’t acting fairly and equitably based on past judicial decisions. (Managers had fiduciary duty to act fairly to investors so Court looked at past

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ii. iii.

iv.

v.

vi.

cases in equity to see whether they acted fairly and SEC determined they didn’t). The SEC bound itself to act like a court of equity because those are the grounds upon which the SEC based its decisions. Holding: the Court refuses to give effect to SEC’s resolution of the matter RULE: grounds upon which an administrative order must be judged depends upon which the order discloses that action is based 1. think Overton Park (although this was decided pre-APA, it’s an analog to formal rulemaking because there’s a record) Analysis: 1. SEC wasn’t wrong for looking to equitable principles, it was wrong for misunderstanding/misinterpreting the principles 2. Determination of what is fair and equitable depends on particular sets of facts, a general rule can’t make these determinations because FAIRNESS AND EQUITY ARE FLUID AND DYNAMIC so here case-by-case is better than rules. a. agency acted too conservatively by binding itself to past decisions b. agencies are supposed to make fluid policy decisions responsive to modern needs 3. If SEC had claimed its basis for its decision was policymaking and provided reasons for making that policy on the record, Court would’ve been more deferential to SEC b/c SEC is given authority to make such decisions 4. But, SEC instead relied on judge-made rules of equity which are questions of law, so Court must review the question of law a. measure what agency did vs. what agency advanced as its rationale b. if agency provide rationale, court cannot accept post-hoc rationalization and cannot impose its own policy choices Dissent: (Black): 1. worried agencies will have to give overly fine justification for decisions, court is being too demanding 2. worried this allows courts to get involved in policy a. Overton Park, State Farm—hard look later do allow review of policy, so this concern was warranted REMANDED: 1. SEC can come up with a different rationale, or investigate what the Chenerys did, or acquiesced to what the Chenerys did

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2. SEC provides different rationale c. Chenery II i. Analysis: 1. this time SEC says administrative expertise is its rationale for the order 2. SEC can make rules that are prospective and avoid retroactive unfair application through adjudication, but there’s no inflexible requirement that they do that a. (see Bell Aerospace) 3. Concern for unfairness in retroactive adjudication: a. in Chenery I SEC misunderstood past court holdings (so it was remanded because they shouldn’t have relied on those as rationale) b. this time SEC reaches its own judgment i. this is ok, but this is why there’s preference for rulemaking (so that rules only have future affect and don’t get retroactive application) ii. Holding: SEC order upheld after court measures ground on which SEC re-rationalized its decision against the decision SEC made iii. Dissent: 1. Commission in Chenery I said it didn’t have expertise which is why it relied on judicial decisions, but Chenery II they rely on the expertise as their rationale a. this is objectionable 2. prefers rules because distaste for retroactive application of adjudicative rules iv. Murphy: the choice between rule and adjudication is for Agency to decide 1. retroactivity doesn’t make the ruling fail 2. retroactivity balanced against the mischief of producing result that is contrary to statutory design or to legal and equitable principles v. IMPACT: Chenery I & II stands for: 1. strong preference for rules 2. deference to admin. expertise which can be applied through ad-hoc adjudication 3. CONSISTENCY AND NOTICE 4. Following Agency’s own Rules a. Background of Arizona Grocery i. Shippers complained about rate being charged and asked courts ICC to judge that the rates were unreasonable, asked for reparations, and asked ICC to set a reasonable rate 1. occurred in adjudicatory setting ii. ICC sets a reasonable rate to be prospectively applied

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iii. In a subsequent adjudication, ICC said first rate was unreasonable, so they lowered again and charged the carriers to reimburse the shippers for prices set from the first reasonable rate b. Arizona Grocery i. RULE: 1. Agencies must follow their own rules; they cannot make a rule during an adjudication and retroactively apply it 2. When an agency acts in a quasi-legislative way and people are relying on the rules enacted in that capacity, the it can’t change the rule to retroactively affect people that relied on the rule a. analog: legislature can’t change laws to give them retroactive effect c. US v. Caceres i. don’t apply an administrative rule and make it enforced by the Constitution as it relates to the exclusionary rule in crim law d. HYPO: i. Agency rule: FAA publishes enforcement manual for its employees, which says a pilot’s certificate can be use suspended as punishment when the nature of a pilot’s violation so warrants. It establishes 6 criteria FAA prosecutors should consider in deciding whether to seek a suspension, including considering hardship to the pilot and their ability to pay a civil monetary fine instead. ii. Facts: FAA prosecutor didn’t consider personal hardship when it requested a suspension of Capuano, prosecutor only considered serious nature of the offense and that suspension would deter others. iii. Issue: Do FAA prosecutors haven to follow these rules when determining whether to prosecute? Should Capuano argue that he should be exempt for the hardship exception? iv. Analysis: 1. Look at the type of Rule: a. in AZ Grocery ICC made rule in response to shippers asking for ICC to set a rate b. here FAA made rule to guide prosecutors’ discretion, and to put pilots on notice c. the list is obviously not exhaustive, nobody reasonably thinks it is 2. Does it matter that prosecutor openly admitted he didn’t consider hardship? a. does “should” mean “must”? i. FAA prosecutor hasn’t done what handbook says it should do b. in reality Capuano probably isn’t a good pilot 3. The point:

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a. shows sometimes agencies make rules that are intended to structure the conduct of agency employees where those employees have discretion i. orders discretion w/o taking discretion away b. it would be detrimental to treat the handbook as mandatory i. those being prosecuted would want it to be discretionary so there’s the chance in their case the prosecutor would use discretion c. if handbook is treated like a rule, it will deter FAA from making handbooks which would be worse because then there won’t be any notice and no guidance e. HYPO: i. EPA Rule: in certain geographical areas a company that builds new units must obtain permits if the new unit will emit more pollutants than old, measured by capacity of new unit to emit vs. actual emissions of old unit ii. Facts: Cement company wants to modify an old unit to be more efficient, but when modified it could emit more than the old if it runs at full capacity, which Company doesn’t plan on doing. But EPA refused to issue NAD which would allow Company to avoid the permitting process. iii. Issue: does Rule apply to modifications of old units or only construction of new units, especially when old unit has been modified to be more efficient? iv. Analysis: 1. Company shows evidence of EPA internal memos that support EPA’s position of the rule, but others supporting Cement’s a. EPA response: not all administrators will act the same throughout the US but this inconsistency will not set aside EPA’s refusal to issue NAD here 2. Result: EPA has policy, but how’d they come up with it? Did they intend for parties to rely on it? a. Pro-Cement: granting NAD is consistent with rule they adopted, and according to AZ Grocery they should follow their own rules b. Pro-EPA: EPA’s rule clear and clearly applies to cement (focus on “capacity”) i. otherwise would have to trust that Cement is adhering to its promise not to emit too much, can’t make these exceptions b/c they wouldn’t be able to monitor whether companies are standing by their word 5. Due Process Requirements

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a. Five Procedural Requirements i. organic statute 1. Londoner v. Denver a. Statute: created procedure—petition, order, ordinance b. Issue: was the process sufficient by which the town council only had to provide opportunity for written objections? c. Holding: something more is required here because the statute specifically prohibits people from making their objections in court, and since the council can hear objections they have to let the people have a chance to make their arguments d. RULE: in this type of case there must be opportunity to support allegations by arguments, however brief, and proof, however informal 2. Bimetallic a. Facts: commission valued taxable property at 40% higher than it was before in Denver b. Issue: do all individuals concerned have Constitutional right to be heard? c. Holding: No d. Analysis: i. It is impractical to give ALL citizens the right to be heard 1. they technically get the right to be heard when they vote 2. sometimes there is stuff that gov’t does that you don’t have the right to participate in ii. Distinguish Londoner: in Londoner there was only a small number of people concerned that were exceptionally affected upon individual grounds e. RULE: when an agency acts like a legislature and passes a rule that affects a large number of people the same there is NO RIGHT to due process 3. Southern Railway v. Virginia a. Statute: VA highway commission lets commissioner to force any RR to abolish any designated crossings and make a overhead crossing instead when necessary for public safety/ convenience. No notice/hearing. Decision to be upheld unless reviewing court finds commissioner acted arbitrarily.

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b. Holding: law legit because it comes from legislature and provides for review BUT the review needs to be in court of law not equity. c. Analysis: i. apply Bimetallic and Londoner: 1. if commissioner had made rules applicable to all crossings then there would be no right to process a. but he’d have to follow his own rules (AZ Grocery) 2. RR can be entitled to hearing after the commissioner has applied the rules (Londoner) 3. but this particular statute’s opportunity for a hearing is deficient because if the commissioner made his decision after considering all the facts there’s no real grounds for appeal at the hearing (b/c of the “arbitrary” standard of review) 4. If commissioner refrained from making rules and applied the statute in a case-by-case basis, then RR entitled to a hearing ii. procedural regulations (AZ Grocery) iii. APA 1. Formal on-the-record Adjudication §554(c), 556 and 557 a. When organic statute requires that agency create a record after opportunity for hearing in an adjudication i. sometimes statute will explicitly say “formal on the record after hearing” b. if statute says “agency shall decide by adjudication after hearing” it is unclear whether it means a hearing under 556 and 557 or a different type of hearing i. court has to decide whether Congress meant for formal on the record hearing (which is the issue in Seacoast and Dominion Energy) c. Seacoast i. Statute: CWA, admin. makes decision whether to grant polluters’ license “after opportunity for public hearing” 1. no specification for “on the record” ii. Issue: did Congress intend for a formal hearing, one that triggers 556 and 557?

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iii. Holding: Yes 1. this is the type of “quasi-judicial” proceeding for which the adjudicatory provisions of the APA were intended d. Brand Ex i. explains relationship between stare decisis effect of an appellate court’s statutory interpretation and the agency’s subsequent disagreement under Chevron ii. RULE: post-Chevron interpretations trump prior agency interpretations as long as the statute was determined to be ambiguous in the court’s prior decision iii. the pre-Chevron decision will only be binding if they had determined the statute to be unambiguous (like Chevron Step 1) e. Dominion Energy i. Statute: CWA, before admin. makes decision on permit, must offer “opportunity for public hearing” ii. Issue: did Congress intend for formal hearing, one that triggers 556 and 557? iii. Analysis: 1. APA doesn’t speak directly to this issue 2. Seacoast said it means an evidentiary hearing which triggers 556 and 557 3. Seacoast established rebuttable presumption that “public hearing” means 556 and 557 a. based on legislative history 4. BUT Chevron Step 2 changes things: a. creates more deference to the Agency, so if the statute is unclear (here, unclear about requirement of formal hearing) then Agency’s interpretation should be deferred to 5. here EPA based its decision on Chevron and the mood of the White House to decide 556/557 not triggered 6. And since there’s no statutory requirement in CWA or APA,

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Agency decision is deferred to, and they decided formal hearing isn’t used here 7. Apply Brand Ex: a. because in Seacoast the court said the CWA was ambiguous about the requirements, the postChevron interpretation of the CWA in Dominion Energy should be deferred to iv. Metro. Sevedore: it is the Court’s job to interpret the APA b/c it’s not a statute committed to any one agency so Chevron deference doesn’t apply and COURTS INTERPRET APA PROVISIONS DE NOVO v. here Metro. Sevedore n/a b/c EPA interpreted CWA not APA f. Formal Adjudication Procedure § 554(a) i. initiating event 1. person/application for license or permit/ enforcement action by agency official ii. investigation 1. § 555(c) and (d) 2. agency staff/investigative staff iii. agency decision to go forward in the matter/give notice 1. § 554 and § 558 2. agency staff/parties implicated here iv. pre-hearing 1. § 554(c) and (d), § 556, § 557(d) 2. parties/agency staff and admin. law judge (ALJ) v. hearing 1. § 554(c) and (d), § 556, § 557(d) 2. parties, agency staff, ALJ vi. decision 1. § 554(d), § 557 and § 558 2. reached by ALJ or some other agency official vii. review within agency 1. § 557 2. parties, agency staff, agency head, or board

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viii. decision on review 1. § 557 2. product of agency head or board 2. Formal Rulemaking § 553(c), § 556, § 557 a. Florida East Coast Railway i. when statute requires on the record after opportunity for public hearing rulemaking then 553 n/a, and 556/557 applies 3. Notice-and-Comment § 553 a. informal rulemaking procedure: i. general notice in Fed. Register inc. content and subject matter of proposed rule ii. opportunity for interested persons to comment on proposed rules and at option of agency opportunity for oral argument 1. debate about “interested person” 2. hard for agency to say someone isn’t interested iii. after promulgating rule, contain concise general statement of their basis and purpose 1. generally not concise iv. substantive rules not effective prior to 30 days before promulgation b. the procedure has been made more complicated i. Overton Park: requires record ii. Nova Scotia: complicates § 553 c. allowed except for: i. interpretive rules ii. general policy iii. rules of agency organization 4. Section 559: a. governs unless another statute modifies iv. Court-created common law (Chenery) v. Constitution (5th and 14th Due Process) 1. Crowell, Benson: judicial review is required because of due process 2. due process orders the way adjudications are run 3. separate inquiry to see what type of judicial review is required RULEMAKING vs. ADJUDICATION 1. National Petroleum Refiners v. FTC a. shows how courts during certain period answered question of how agencies had power to issue rules b. Footnote:

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i. FTC didn’t have substantive rulemaking powers (editor saying National Petroleum is wrong) 2. NLRB v. Wyman-Gordon a. Background: i. fractured court leads to confusing opinion ii. NLRB wants to adjudicate instead of making rules because it deals with diverse people, but a lot of people thought a rule would be more fair b. Facts: i. NLRB forces W-G to issue names/addresses of people seeking to organize, and they base this order on its order in Excelsior Underwear. 1. Excelsior: NLRB opened up the adjudication to people for testimony, there was an adjudication but it was more like a discussion, and then issued an order and made a general statement that employment lists could be furnished to unions c. Issue: can court force NLRB to make rules instead of adjudicating?

Hypo (Rulemaking vs. adjudication): Situation: -Step 1: to avoid rampant inflation in housing costs in areas heavily affected by WWII defense activities, Congress passes statute attempting to stabilize rents as of April 1 1941. Authorizes administrator 1) to est. defense rental areas and to recommend rents for housing in those areas and 2) if such recommendations fail to stabilize prices, to set maximum rents that will be “generally fair and equitable” giving “due consideration” to rents prevailing on April 1 1941. -Step 2: administrator establishes defense rental area near a major army base and recommends that max rents should be those prevailing in the area on April 1 1941 -Step 3: finding that his recommendation didn’t suffice, the administrator est. rent control in the area fixing rents at those prevailing on April 1 1941. For units rented for the first time after that date, the max. rent is the rent initially charged, subject to being later reduced if that initial rent is higher than rents generally prevailing on April 1, 1941. Thousands of apartments are affected in this area. -Step 4: administrator orders a reduction in the max rents allowable in a particular apartment which was first rented after April 1 1941 on the ground that the rate initially charge exceeded the rate generally prevailing on April 1 1941. -Step 5: administrator denies landlord’s protest to validity of the ordered reduction Now: you are the LL, don’t like that WWII statute takes freedom to control rent of your property out of your hands.

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Question: when should you as LL who owns the particular apartment in Step 4 get a hearing to satisfy due process set out in Londoner and denied in Bimetalic Answer: Step 4, because at that point the administrator made very specific fact determinations, which are adjudicative facts, still requires knowledge of particular facts, but only affects a particularized party -is party is Step 4 being exceptionally affected? you are being affected by the administrator doing his job -problem is line-drawing: when does it stop being adjudicative and start being legislative (when is it the difference between a particular party like a city block being affected, versus a zip code being affected that might not get the same rights under Bimetallic) question: what kind of facts do you need to know what a defense rental area is and what areas are affected by WWII activity, and how you figure out what rates were prevailing on April 1, 1941? -suggesting that administrator, if he’s doing his job, is knowing a whole lot of particular stuff all the way back in Step 1 -these facts are being used in mass, and making a blanket decision -if IRS used rule-making power to say Jones has to pay 2x the tax that everyone else pays, that’s not ok, you can’t call adjudication “rulemaking” and get away with it, and then process may be required -when rule brought to bear on individual that’s when individual gets chance to participate -different due process standards for war time than for regular time, so it’s possible that in war time the LL wouldn’t get a chance to appear until Step 5. but in normal circumstances LL would get chance to appear at Step 4.

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