Administrative Law Outline

I. Introduction to the Administrative State a. The need for administrative agencies in government What do agencies do? 1) manage things 2) collect and disseminate info 3) educate – studies, findings, etc. ** Course deals with what happens when agencies take on the traditional powers of the three branches of government? 1) rulemaking (legislative) 2) enforce rules (executive) 3) adjudication (judicial) Study of admin law is like study of Con Law I and the role of the courts – examine doctrines of restraint. What constraints are needed so an agency does not run afoul. Comparing and Contrasting Admin Law with other Systems: (Rainmaking problem) Common Law – Private actions in court using property, contract & tort law. - may not have adequate development of law to deal with a situation what is reasonable under common law standards? jurisdiction issues – limited to state courts/state remedies – reactive process battle of experts when courts do not have expertise/experience in the area. Common law system is great over time, but when starting with a new area of law, it can take time to develop standards. If trying to use contract law, too many people to contract with to gain permission to divert rain clouds. Also, if weather conditions change, common law can create problems through causation, foreseeability, etc. Numerosity problems arise - must get together people who are affected. Legislative Prescription – Statute prescribes private entitlements and obligations, enforced by private actions in courts. has immediate effect (do not have to wait for a common law to develop). legislators can pull in experts to help draft legislation, but can be tension between experts and politicians legislation is prospective – you do not know if it will work until after it has passed. May need to be tweaked, but legislative process is slow, leading to uncertainty in application/enforcement of law. (slow correction process if statute is wrong) Involves politics – most affected people may not vote Creation of Administrative Agency – Statute creates an agency, specifying goals of regulations (perhaps some private rights & obligations) and powers/authority of agency. Can have technical experts on staff at the agency and develop expertise Can get pro-action instead of reaction – the agency can sense a problem approaching and head it off before it grows. Can also have flexibility – take things on a common law case by case approach. Agencies can achieve things in a better and more efficient way than other options. However, courts and legislature have their roles, which agencies may take on the role of – this can cause some problems. When agencies are created, they are in the headlines and a variety of interested parties, in addition to the industry, come out of the woodwork and give their input - things start off looking good. However, as time goes by the industry is still interested in what is going on at the agency, but other interested parties may not keep up with what is happening. Gradually, the industry becomes more in control of the path/goals of the agency. Jurisdiction is another problem with agencies – they tend to be thought of as expert and flexible, but they can get bogged down in problems. Also, agency personnel can have malaise over time about performing their public interest role – may get offers from industry to scratch their back and be rewarded upon retirement from the agency. Potential lack of respect for legal rights Interest group influence & capture (good or bad?)—S thinks agencies are less beholden to interest groups than legislature. Runaway agencies and imposition of idiosyncratic values Inefficiency and sloth—problem of entrenched bureaucracy. So, in evaluating the above systems, consider 1) competence to set standards 2) 3) a) Expertise b) Accountability for value judgment c) Processes for Deliberation Monitoring and Enforcement a) Incentives and resources (all kinds of problems for private parties) b) Proof of violation and causation Jurisdictional Limits—if system, at point 1, causes problems at point 2, want system that corrects problems at all points ** Any part of gov‘t that is not mentioned in constitution that exercises any of the powers of gov‘t is an agency. b. The business of administrative agencies and how they go about it Agencies are located within an environment that includes parts of government, and extra-governmental parts. President (president advises agencies & vice versa; additionally, the president appoints (& fires) some agency heads) Judiciary [Article 3 courts] (all different ways) Congress (one way—Congress to agencyenables agency; gives discretion; provides procedure); can control agency budgets and make agencies answer their inquiries. Press (one way—agency to press); Freedom of Info/Government in Sunshine Acts. Regulated entities (2 ways—agencies tell entities what to do; entities give agencies information) Regulatory beneficiaries (Mostly one way—beneficiaries give agencies information [exception—regulations which only create beneficiaries, e.g. welfare]) ** If an entity/beneficiary sues an agency, there are hurdles one must clear (standing, ripeness, finality, exhausted administrative remedies)…however, this is another form of agency interaction. Agency structure 1. Agency head (i.e. EPA Administrator) 2. Program Offices (i.e. Air, Water, Hazardous Waste) 3. Enforcement (police force within agency) 4. Adjudication (formal appeals go to ALJ, then appeals council [in some agencies, the appeals council is the agency head]) 5. Service Offices (provide services to other parts of the agency--consumer affairs/personnel/research [economists]/general counsel) Agency structure should: 1) 2) 3) Encourage, and respect, the participation of stakeholders Ensure democratic accountability Create incentives for agency to pursue public, rather than idiosyncratic, interests ** The substance of regulations that agencies pass falls under regulatory law, not admin law. c. Theoretical justifications for the administrative state Rabin‘s article on regulatory state: Examines approaches to regulation which is not the same as admin law. But, they go hand & hand. There is no coherent theory of regulation. Historically, there are movements for and against regulation. After New Deal, government was to step in and rationalize the market process. FCC is an early example – licensing of who could use the airwaves. Debate arose as to how interventionist the government should be. Way to deal with this was to look at procedure – regularize the way that agencies acted. 1970s – another switch occurred with the Great Society and regulation of social aspects – environmental regulations, etc. Courts are reactive and sometimes lag behind politics. Also, law is incremental – vestiges of old law remain which can lead to a lack of coherence in admin law. Transmission Belt/Formalist Model (1880s)—Agency implements the value laden decisions of the Legislature. Agency doesn‘t make the decisions itself b/c they‘re political.  Agency to implement statute to carry out Congress‘s will (almost like a special master)  Notion of Politics as irrelevant at agency level (fiction) *Problem - there are value judgments to be made, even in the narrow arenas prescribed by Congress – it can be hard to reach a consensus. New Deal/Expertise—Prevailing notion of market not working properly. Desirable for Gov‘ t to be pervasive.  •Agency expertise to determine what is best within regulatory program  •Issues are technical rather than political (fiction—still involves choices between competing values) Legislature‘s Role—Tell agency of problem; tell agency to fix it [like going to a doctor and telling him your symptoms]  The agency is given an area in which to operate with broad powers, and are expected to be insulated from politics/conflict. The professional spirit of the agency would deter them from setting unwise or intrusive policy. * Problem: there are choices which involve value judgments, and expertise does not clearly resolve these issues agencies do not always go with expertise decisions. Legal Process/Public Interest (or maybe Pluralist) (WWII till ‗60s) (at the time, a surprising amount of consensus that this is the proper theory)  •Agency is to act in accordance with its institutional competence to further the public interest  •Agency action is justified if it seeks to further the goals of its authorizing statute (Mission Statement) and agency follows appropriate procedure (procedure is the constraint).  –For adjudication – trial type procedures and insulation from politics  –For rulemaking – notice and comment procedures; politics a necessary factor  -PROBLEM—agencies became friendlier with the entities they regulate * For almost 2 decades, this model appeared to be working – realities were identified by government scholars, economists, etc. Public Choice/Interest Group Representation (still a common view)  Role of agencies is to deliver gov‘t benefits to competing interest groups  Positive view – simulates markets by facilitating delivery of goods to groups with greatest overall interest in regulatory outcome. If the value to a smaller interest is great enough, then the overall value to society outweighs the competing concern. o -Converts the bureaucratic democracy to a market (and fails, because gov‘t is a monopoly)  Negative view – gov‘t generates monopoly rents by granting regulatory protections to various constituents (―I‘ll finance you‘re campaign if you pass favorable rules‖). o Problems—difficulty in coordinating the masses results in under-representation of the masses, resulting in small focused groups winning more than they should; monopoly rents o This view led to Ralph Nader, et al, forming interest groups to try to gain representation for the traditionally under-represented interest groups.  Government basically gives out benefits to those with the most political power. Thus agencies were not doing the best job they could because opposing views of non-organized groups were not being considered. Deliberative Democracy/Transformative Politics—Want Stakeholder Involvement (accounts for noneconomically rational actions of people) (re-read ―civic republican justification)  To try to achieve consensus among stakeholders  Process to allow empathetic interactions that can change preferences (i.e. political values)  Agencies accountable to all three branches of government  Agency must explain its decision in terms of factors Congress (politics?) makes relevant * You don‘t want agencies too unresponsive to politics, nor should they be over-responsive. You want agencies to have authority and discretion – they should lead a public debate on issues and be open-minded as to what the solutions should be. - Although this is a Utopian view, it is a great goal and should lead to best solutions for the whole. Key is to make the agency explain its actions and have them be subject to outside/administrative/judicial review. Questions then arise about the type/scopes of review. The last two models inherently have things that judges like. Because each model was in existence at a different time, cases adopting certain position are likely reflecting these models. d. The complex relationship of agencies to the political branches Lead Hypothetical: If Congress did not like what the EPA set as lead levels, they could use: 1) Power to pass a law overriding agency rule Problems: -Inertia! Procedural Barriers  –Lack of Time  –Committee system—must get through both houses in identical language.  –Party system and party leadership (e.g. debate in Senate; rules committee in House)  -House Rules Committee—must also approve, because otherwise the rules associated with passing the bill can be so cumbersome as to ensure that the bill won‘t pass. - Need to Overcome Executive Support for Agencies   –Requires either veto-proof majorities, or leveraging of pressure from other issues o Aside—Congressional Review Act—―Fast-Track System‖— Need to overcome executive support is evidenced by the lack of impact of the Congressional Review Act – (fast track legislative review without committee veto possible). Only one of 407 rules has been overturned, and that was a Clinton midnight rule. 2) Appropriations—is this more effective? Yes—―Power of the Purse‖ (most commonly used). Congress must pass an appropriations bill, whereas there is no overarching need to pass legislation which modifies a rule. Reduces the impact of the Procedural Barriers, but can run into presidential veto of bill, so tension can arise which may lead to deals. President faced with choice of having to approve something he doesn‘t like to get the things he likes passed. 3) Committee Oversight— (hearings/investigations) why is this a threat?Makes disputes public!! - Effective because oversight threatens:  Direct legislative reversal  Reduction in agency budget or specific appropriations  Agency head‘s reputation—in extreme cases, the agency head can lose her reputation (e.g. Gorsuch—Reagan‘s head of EPA—and she hasn‘t been heard of [politically] since) 4) Power of Appointment (although at this point, it‘s too late) If president does not support the agency action – 1) Fire Agency Head (maybe) -President could incur political costs, both through Congress and the public. (e.g., imagine if GWB fired Colin Powell…)  President has this authority, but Congress may restrict that authority (Independent agencies—ICC, FCC, etc.—President cannot remove, as the heads serve fixed terms of office).  Executive agencies, however, are different—serve at pleasure of President. -BUT Morrison v. Olson—Congress can restrict President‘s power to remove even purely executive official (in this case, the prosecutor of the executive branch) if functional approach to separation of power so warrants.(But see Scalia—President can remove principal officers at will and inferior officers for subordination.) ** Before Morrison v. Olson, Congress could do it as long as the person is not solely a purely executive officer. After the case, Congress‘s powers were increased – they had a functional test to see if, even if the officer is purely an executive officer, if the balance of powers was upset, then Congress could limit the president‘s oversight of executive officers. So, this is up to Congress and some constitutional limits    2) Executive Order (tells agency head what to do (or not to do)). Traditional view is that President does not have power to dictate particular policies. (For purposes of this course, this is likely the correct answer) Originalists argue that executive power is vested in President alone, and therefore President does have this power. (dep‘t head is president‘s alter ego, acting in p‘s stead; ergo, he can be dismissed at P‘s will) Elena Kagan—Congress can restrict President‘s power, but it does not do so when it allows President to remove agency head at will. Therefore, Congress has awarded President authority of oversight. (S—is this not Congress recognizing the influence of the President, as opposed to the actual authorized dictation of agency rules?) Ex: Reagan makes a statement that agency is adopting a rule for the Family Planning Council to omit the use of the word ―abortion.‖ Agency adopts this rule—is this just influence, or is it Reagan making a rule? Rust v. Sullivan 3) Other Means for Presidential Influence on Special Policies. - General influence—pressure, cajoling, threats to go public… * Quare—is this not what the president is doing when he issues a directive? Similar, but according to S, not the same…difference between influence and actual authority to change… (Consider: Persuasion may be more than persuasion, and command may be less than command) - Emergency/Technicality rules - Cajole/publicize/deal – this can have political costs – depends on relationship and popularity of the official. But, if pres can get the public to go along with it, it can create a lot of power to wield at Congress. II. Procedures for Administrative Decision-making A. Due Process Requirements a. The quasi-judicial / quasi-legislative distinction and the applicability of due process Londoner v. Denver (SCOTUS, 1908) Plaintiffs were assessed taxes after city paved road alongside their property—tax was assessed to those specially benefitted by the improvement. s objected;  did not allow for notice and a hearing although city clerk had published notice saying they would be heard before the passage of the ordinance. Issue: Whether authorizing a tax, without notice and opportunity for hearing to the landowners, violated due process. Court held: No hearing = no due process; ordering tax payments requires a hearingwhen action is quasi-judicial. ―Where [a body made subordinate to the legislature] determines whether, in what amount, and upon whom it shall be levied…due process of law requires the taxpayer an opportunity to be heard [before the taxes are fixed].‖ Π‘s were allowed to file complaints but were given no true opportunity to be heard.. State law denied taxpayer‘s right to protest tax in state court – only board was given power to hear objections. IN DISSENT: Holmes Bi-Metallic Investment Co. v. State Bd. Of Equalization (SCOTUS, 1915) Tax increase for all property owners in Denver (up 40%) mandated by State Board of Equalization.  objected, stating they did not have an opportunity to protest the new assessment, and sought a hearing. Court held due process does not protect you because this is a generally applicable law—more property owners in Denver than on 8th avenue (Londoner where small number of people were ―exceptionally‖ affected). ―Where a rule of conduct applies to more than a few people, it is impracticable that every one should have a direct voice in its adoption.‖ ―There must be a limit to individual argument in such matters if government is to go on.‖ Seidenfeld: ―What‘s really going on‖—why did Holmes write opinion in Bi-Metallic and rely upon the ―Number of people‖ which is a weak argument? B/C Holmes dissented in Londoner—he thought there was not a difference. This was about store-owners not wanting the street paved and definitely not wanting to pay for it; ergo, Holmes thought it was quasi-l legislative. Additionally, raising property values resemble quasi-adjudication, but Holmes has to reconcile with Londoner—reverts to poor argument of ―Number of People.‖ ** Overlap between all the factors—even legislative v. adjudicatory *** also consider that another factor was that in Londoner, the tax was assessed in a manner that considered the specific benefits granted to each taxpayer – focused on the particular situations of individuals rather than across the board, blanket tax as in Bi-Metallic. If action is judicial in nature, due process applies. (Londoner—a few parties rights are determined). If action is legislative in nature, due process does not apply. **General rule- there are certain actions that are legislative in nature (quasi-legislative); in these situations,  due process is inappropriate since the legislature is capable of handling these situations.  So many policy decisions are made every day which affect so many people – policymaking  cannot be constrained by constitutional requirements that every voice be heard. How could courts enforce that?? Distinction between quasi-legislative and quasi-judicial is important when parts of the APA may or may not apply. They overlap sometimes, but can be differentiated under APA and due process analyses. Key features to help determine what type of action it is: 1) prospectivity of the action Prospectivity (legislative) v. Retroactivity (judicial)(only part of the difference- some adjudicatory actions may still be prospective)  RELIANCE! Reliance interests are greater for retroactive actions.  Protection of reliance interests more important when action is retrospective, and sense of fairness and justice counsels that individual be directly involved in proceeding when such interests are upset.  But note that prospective decisions can upset reliance interests too! 2) generality of deprivation due to action Generality—legislative actions affect broad classes equally while judicial actions are focused on particular individuals or entities.  •Propriety of fact-finding at a judicial type hearing o –Adjudicatory versus legislative facts  *Example—suppose in Bi-Metallic, the board said it was only dealing with Mile-High Stadium. The issue is ―What‘s the value of the stadium‖, versus ―Are the property values in Denver generally over-valued?‖ and the party one would ask is the property owner. The more general, the less likely the affected parties will have relevant information—general, legislative facts are more suited to reading, examination, policy, etc., whereas adjudicatory facts = ―what happened.‖ o –Pragmatics – the number of parties and feasibility of trial type hearings  •Propriety of political accountability –The size and influence of the directly affected class compared to the relevant electorate (see BiMetallic) 3) the rule of law; unbiased application of law in judicial rulings Creating Rule of Law (Institutional Competence)—legislative actions create policies and rules while judicial actions apply policies and rules to particular situations. [key—create v. apply]  •Propriety of Judicial Oversight o –When policies and rules already exist, courts can apply them without making value judgments; other wise courts are not engaged in legal decision-making, but policy-making. o -Courts are good at applying standards, but not so good at creating o standards.  •Propriety of Legislative Oversight o –When rules already exist, legislative decisions can reflect politics in the negative sense of raw transfers of wealth to appease interest groups o 4) not important, but relevant is the number of people deprived Coniston v. Hoffman Estates (7th Cir, 1988) p. 246 Developer applied for approval of a development. Not approved by County Board and no opportunity provided for a hearing. Held zoning decisions are inherently legislative, because they involve balancing of factors that are not known in advance. This is not applying existing law, and therefore not judicial in nature. ―No due process required.‖ [Does 7th Cir. ignore the fact that this affects only one person with a particular property? What of the fact that the zoning regulations are already set? Not general; not policy making; but nonetheless do not have to comply with due process] Concern of Arbitrary Action—when actions seem arbitrary, it‘s often an indication that something else is going on. The way around arbitrary action is explanations! (Generally, though, courts tend not to follow thisusually treat zoning as quasi-legislative) Due Process: 1) determine if the action is quasi-judicial or quasi-legislative. 2) determine whether claimant has a liberty or property interest property interest: is there some form of entitlement to the property interest. Property interests are not founded in the constitution, but are created by government entities. liberty interest: grounded in the constitution 3) what procedure is due? b. The types of interests protected by due process (1): The distinction between the entitlement approach to property and the natural law approach to liberty 1) determine if the action is quasi-judicial or quasi-legislative. Bd. Of Regents of State Colleges v. Roth (SCOTUS, 1972) p. 801 State entered into a contract for one year with a professor. State did not renew the contract (there was no indication in the contract that he would be retained for more than a year – just protected him during his 1-yr contract). No hearing. : This is arbitrary; I‘m out of a job, and they didn‘t tell me why. It‘s really because I spoke out against the system. Held: Due Process does not require a hearing. No property or liberty interest exists, therefore there is no tenure. Must look to not weight, but nature of the interest at stake – must have legitimate claim of entitlement to it!! *Liberty interest (Natural Law)—―those privileges long recognized as essential to orderly pursuit of happiness‖ (e.g. natural rights—right to contract, right to engage in legal occupations, raise children, religion—essentially, COURT CREATED). Here, did not take away right to occupation b/c it didn‘t infringe upon his right to be a professor at another school. *Property interest—―defined by government. Statutes, constitution, understandings, etc‖Positive Law. Must be more than a unilateral (subjective) claim of right—must be a mutually recognized expectation for benefit (objective manifestation of agreement). An entitlement; a reason to say ―I deserve that.” Perry v. Sindermann (SCOTUS, 1972) p. 808 Professor was fired without a hearing. Here, there was a de facto tenure system promulgated by Faculty Guide for many years – wanted employees to feel tenured as long as their work was satisfactory, etc..  had worked for several years at the college and claimed a reliance interest on this tenure system. Held: Due Process required—manual states that if standards are met, teachers won‘t be fired. This was also the practice of the university. This is sufficient to create a property interest‖rules or mutually explicit understandings that support a claim of entitlement. HYPO— A prisoner (Joe) is transferred from a medium security to max security prison as a result of a prison uprising. Not clear who started this uprising, but the finger was pointed at Joe. Did this switch deprive Joe of a property or liberty interest? Pro: No liberty interest once one is in prison [and actual holding—uses different standard of liberty for prisoners. Uses entitlement analysis—―you could have been sent to max security right off the bat, so you don‘t have any entitlement not to be there now‖] Con: He‘s obviously lost some freedom Same facts, but prison protocol indicates that changes in prison must be predicated upon problematic behavior. -Due process is probably needed—―mutually recognized expectation for benefits.‖ Say the prisoner gets transferred to Mental Health Ward. Due process required? -Likely to have a liberty interest—stigma of going to a mental ward; lost liberty interest of having to take pills, etc. **Must have Stigma + -Does this interfere with mutually recognized expectations? Probably—it‘s not mutually recognized when convicted that you‘ll be transferred to the psych ward and treated with drugs that cause side effects. c. The types of interests protected by due process (2): The entitlement approach applied Entitlement 1) evidence of entitlement (In order of most to least recognized) a. determination of eligibility & receipt of benefits Perry v. Sindermann: Determination of eligibility is that he was hired, and receipt of benefits is that he worked at the job and was paid. b. receipt w/o determination of eligibility c. claim of entitlement w/o receipt (application for benefit). i.e. I think I qualify for disability payments but never receive a check under that program. This creates problems because the courts then have to deal with stuff every time someone applies for a job, a license, etc. The courts have suggested that due process has never held to apply in these situations, but some lower courts have applied it. d. Government contract AMMI v. Sullivan (SCOTUS 1999) p. 814 Employees, whose benefits were withheld under a provision of the PA Workers Comp statute, sued, arguing that they have an entitlement to benefits and therefore are due a hearing before payments are delayed. Majority distinguishes interest in claim for payments from interest in payments. Ginsburg adds gloss that majority merely holds that plaintiffs don‘t have property interest in immediate receipt (pragmatics—can‘t expect an immediate, day-to-day determination), but have one in receipt (in general). – Breyer and Souter concur, suggesting that in some circumstances, past receipt of benefits would give plaintiffs right to continuation until a hearing (again, emphasis on receipt) – Stevens concurs, suggesting that contract -hearing satisfies due process. Remedy is under contract law. Lujan v. G&G Fire Sprinkler (SCOTUS 2001) p. 815 Government was in contract with a contractor, who was in contract with a sub-contractor. Sub failed to pay employees adequate amount, in violation of CA Labor Code. By code, CA withheld money to con., who withheld to sub. Sub argued that this money couldn‘t be withheld w/o a hearing. A claim for payment under a K creates no present entitlement, and ordinary process in K disputes should apply - that will be your process. You are out a certain amount of $ - you can always sue afterwards to get that money, and you will be reimbursed if you deserve the money. No property interest under due process, since K law already protects that interest. – Not clear if adopting Stevens rationale from AMMI or majority rationale with different wording Nature of the entitlement ―Standard‖ a. ambiguity Bishop v. Wood (SCOTUS 1976) p. 819 Employment contract case; statute read as saying that you can get notice as to whether you are meeting a standard, but does not say that you cannot get fired. SCOTUS held that state court‘s interpretation of statute should stand since there were multiple interpretations – some could give rise to entitlement, others not. If there is ambiguity in a state statute, then the court will defer to state. b. discretion Bd. Of Pardons v. Allen (SCOTUS 1987) p. 820 Inmates claimed their parole applications had been denied w/o due process. Statute said prisoners shall be released when in the board‘s opinion, there was reasonable probability to do it. State held there was not an entitlement since there was discretion. SCOTUS held there was an entitlement. There were criteria given, and evidence to be looked at; the fact that there is discretion in addition to guidelines does not negate an entitlement. As long as standards are given to guide agency discretion, they create property interest IN DISSENT: in order to give rise to protected insterest, discretion must be meaningfully limited. KY DOC v. Thompson (SCOTUS 1989) p. 821 Dealt with visitation rights at prison. State court found an entitlement since there were specific criteria laid out governing that visitors could be turned away if they presented danger/threat. SCOTUS held no entitlement existed – it was in the judgment of the prison administrators as to whether someone would not meet these criteria. It was discretionary – there was no mandate in the guidelines. Statute stopped short of requiring a particular result in certain situations. IN DISSENT: If in practice, the criteria are regularly employed, then that creates the interest. ** perhaps parole is a more important interest than getting a visitor. Also, there are more visitation determinations compared to parole hearings. Court does not want to get involved in day to day operations of an agency. HYPO – entitlement approach Hospital has a policy that a DR will not lose his privileges unless he is unfit to practice. DR has his privileges removed without a hearing—sues for reinstatement. A year and a half layter, he filed suit. The hospital then holds a hearing and then finds him unfit. Due Process Violation? ** There was a due process right since Dr. had an entitlement to a hearing before his privileges were removed. Dr. was entitled to damages & salary for the 1.5 year where his privileges had been terminated prior to the hearing (even if the hearing was correct about revoking his privileges). Problem with entitlement theory is that courts then get involved in state laws to determine if there is an entitlement through contracts and everyday practices. Liberty Interests--What constitutes a privilege that is recognized as essential to the pursuit of happiness? Court provides a normative component, e.g., the right to engage in a common occupation, but not prostitution or a bookie Reputation +, but not reputation alone… Constantineau p. 823 (1976) Drunk was posted on a poster by police chief; C sued, claiming that he was owed process since the poster besmirched his reputation. Court held his liberty interest was violated since his reputation was harmed and he could not get served alcohol. (defamation and removal of liberty) Paul v. Davis p. 823 (1976) Posters posted saying Π was a shoplifter.  was labeled a shoplifter by the town, and wants a hearing; distinguishing Constantineau, ct. holds reputation alone is not sufficient for entitlement [is this positive law creeping in? THINK!] Also, tort law is in the background. Meachum v. Fano p. 823 (1976)  line of prison cases that stated prisoners were not entitled to the same standard of due processBUT hearing is req‘d before a prisoner is transferred to a psychiatric facility. Can Process Terms Create an Entitlement??? Logan v. Zimmerman Brush Co. (SCOTUS 1982) p. 883 Illinois law said agency had to hold hearing on discrimination against handicapped w/in 120 days. Agency did not schedule the hearing in that time frame – state court dismissed Logan‘s complaint since it did not meet the 120 day deadline. Court held due process required the agency to hear the claim – ―Having chosen to provide this entitlement . . . Illinois had to provide an opportunity to vindicate it.‖ State cannot destroy property entitlement throught termintaion without giving the employee a right to present a claim of entitlement – state has insubstantial interest in refusing Logan‘s procedural request. d. What process is due? Mathews v. Eldridge’s balancing to determine procedural protections. Goldberg v. Kelley (SCOTUS 1970) p. 839 & 783 Controversy was about timing of process – what process was due before welfare benefits were terminated?? Held: Welfare benefits are protected under due process clause since they mean so much to poor individuals. Erodes the distinction between rights and privileges—instead, new goal is prevention of arbitrary government action. *Result of ―New Property‖—Prof. Reich argues that gov‘t largess has resulted in a change in emphasis, a change in what is important to individuals. * Ct. advocates test of balancing individuals‘ interest in a hearing with entity‘s interest in failing to hold a hearing. Mathews v. Eldridge (SCOTUS 1976) p. 839  receives disability benefits from SSA; four years later, after a questionnaire and contacting his physician, the SSA determines that he is no longer eligible for the benefits. Process he has available: State agency determination; review of state agency determination; appeal to an ALJ in front of SSA (all the while,  is not receiving benefits). : I need an evidenciary hearing before they cut off my benefits (see Goldberg v. Kelley). Issue: Does due process require this? Held: Due Process means different things in different situations—allows flexible procedures and provides a test to determine when more procedure is appropriate. 3 factor balancing (squishy) test: 1) Value of the private (liberty or property) interest deprived(benefit) 2) Decrease in risk of erroneous deprivation if additional procedure afforded (risk) 3) The burden on the state/government of affording additional procedures (cost) *So, the test is (Interest of the claimant in avoiding interim harm) x (Increased accuracy of additional procedure) > or < than (Gov‘t Interest in avoiding more process) - First two factors give benefit of additional procedures How did the Matthews Court apply its own test? Private interest: ―Being deprived of disability benefit is not as dire as that of being deprived of welfare—he can still receive other forms of gov‘t benefit/ income / etc.‖ S: ―Shouldn‘t this be evaluated according to the actual value of the benefits to the ? Why only say it has no value b/c he has other things to fall back on?‖ Roofner: The court achieved this result with regard to the larger picture—the value to the average ; it is not as concerned with the private interest to this particular , even though it might affect his private interest more than the average disability payment. [What is the lesson? Don‘t focus on the value of procedure to your client, but rather, the value to the whole class of s] *Other problem—this test is extremely subjective, and differs according to the preferences of individual judges. The Value of Additional Procedure (Risk of erroneous decision): The court limited its analysis to instrumental value Focused on whether additional procedure would increase accuracy, rather than make an outcome more acceptable (fairness; value of involvement) for those seeking benefits. *Also focused on value of adversarial procedures, rather than on alternative models to provide neutral professional assessment (neutral doctor assessment; attempt to find  a job) **Isn‘t this implicitly contradictory? This focuses on the value of additional adversarial procedure, but the point of the case is that due process means different things in different situations] What is the gov‘t‘s interest in refraining from additional procedure/Cost to state: -Administrative burden of additional procedures (how much would extra procedures cost in direct dollar expenditures) See Matthews. -May interfere with other interests, aside from direct costs. E.g., potential for procedures to interfere with the state program. See Ingraham v. Wright. At some point, the agency is entitled to deference, and separation of powers requires that the court trust the agency as experts. This begs the question, why subject the agency to review at all? Politics—scarce resources might lead the agency to cut corners, save costs, and lead to judicial doubt of the agencies‘ motives, even though they are trusted as experts. ―We don‘t want this statute to be undermined by the day-to-day politics of agency operation.‖ ** Mathews might shortchange and undercut the value of procedure, since it does not include soft aspects of the value of procedure. Maybe procedure should not be about entitlement and bureaucratic viewpoints – maybe it should focus on individuals and whether they should receive the benefit. Now, Due Process test is: Quasi-judicatory or quasi-legislative? Is the interest protected? (i.e. Property or liberty? (Goldberg and Roth)) ? What is the value of the interest? (Matthews balancing test) EX: Case – medical student given warning; 7 doctors sent around to evaluate her; she was dismissed and challenged under due process. SCOTUS held that the fact that she was given a warning and did not improve was enough process – 7 doctors was adequate review of her performance – she could have improved. e. The effect of post-deprivation procedures North American Cold Storage Co. v. Chicago (SCOTUS 1908) p. 884 City officials ordered storage company to turn over bad meat for destruction. Company refused. Issue focused on whether they were entitled to process before destruction of the meat. Held: No need for pre-deprivation procedures when: -Procedure would impose delay that gov‘t could not afford (emergency situations such as contagious disease)exigency. -Post-deprivation avenues for redress against the state for erroneous deprivation exist. If party cannot get process before hand, then they can seek it after and get reimbursement for the destroyed product. Legislature has great power to enact laws, like the one at issue, to protect public health. There is non lack of due process here, since it was an emergeny, and company can seek process in court after destruction. *Seidenfeld—this might reflect an antiquated notion of what constitutes a hearing—adversaries, etc. **What is the nature of the exigency? US v. James Daniel (5-4)seizing real property to exert control against an indicted drug dealer is not sufficiently exigent, as real property isn‘t going anywhere. ** Cold Storage Co. could fall under third factor of Mathews test- cost or burden to government. If there are tainted goods, the government needs to be able to destroying it since the cost of not doing it may be tremendous. e.g. citrus canker in South Florida – effect on goals of agency in addition to direct cost. There is also a post-deprivation remedy for loss of property. They can be made economically whole. If company claimed that they could not be made economically whole since they might go bankrupt, etc., under Mathews application, it is written in terms of average company, not specifically the company at issue – stuff happens. Post-deprivation relief can go towards the existence of the interest under Mathews test. The presumption of ―some kind of hearing‖: -Judge Friendly—advocated more flexible hearing procedures along with a principle that the state is required to give ―some kind of hearing‖ prior to deprivation. -Goss v. Lopez—seemed to adopt Friendly principle and held that state could not suspend student from school without at least confronting student and giving him an opportunity to tell his side—using the term ―some kind of hearing.‖ *This didn‘t last long Ingraham v. Wright (SCOTUS 1977) p. 888 Corporal punishment case; outcome was similar to Cold Storage. There were criminal and tort post-deprivation actions available. ―Liberty interest that should not be deprived without a hearing.‖ Ct: Yes, this was a liberty interest, but no additional process is required. Majority says you can be made whole, but dissent comments that the physical liberty interest cannot be made whole. Risk of erroneous deprivation is significantly lowered because there are such severe post-deprivation consequences on those who erroneously deprive someone of a liberty interest in corporal punishment cases - has a deterrent value. Distinguished Goss v. Lopez by saying it did not involve state-created property interest in public education. Ingraham and the impact of availability of post-depravation procedure on: –Value of interest at stake (Ct: not strong*—traditionally and historically, kids have been paddled in school) *What of the fact that in a pure property (monetary) interest case, there is a good chance that post-deprivation remedy will make  totally whole [breach of contract action], whereas with a liberty interest, there is not a comparable post-deprivation remedy? Can‘t get pain/embarrassment/etc. back. Not fungible with money –Risk of erroneous deprivation (Ct: important factor—a) deterrent effect of criminal/civil sanctions are sufficient [don‘t need pre-deprivation remedy because of the sufficient post-deprivation remedy] b) additionally, Ct states that additional process would not increase accuracy because the teacher is in the room and sees the behavior (!)*) *Seidenfeld—Decision-maker‘s should not be allowed to see evidence themselves. This reduces the impartiality of the decision-maker. Also, in some sense, the teacher has a personal stake… -Also, what of the ―color of state law‖ which might make it more difficult to recover from the teacher (11th amd., etc.) –Government interest in preventing added procedure— a. Additional direct cost is a factor b. In Ingraham, the effectiveness of corporal punishment could be undermined by requiring a pre-paddling hearing—disruption in classroom, etc. Prison cases and post-deprivation process: Parratt v. Taylor p. 897- lost model hobby kit in mail room at prison. Court decided there was no intentional deprivation Davidson v. Cannon – prisoner asks to be put in safe area since he feels threatened; superior ignores written request; prisoner is beaten up; there was no intentional deprivation. Court dealt with it by saying the state did not deprive the prisoner, the aggressor prisoner did the deprivation. Hudson v. Palmer p. 898 – a guard goes into a prisoner‘s cell and intentionally destroys property. Rogue employee – adding procedure in this case is hard since the employee is not acting according to procedure – would be burdensome/impossible to add pre-deprivation procedure. Court could have maybe dealt with post-deprivation procedures?? Pre-deprivation relief Zinermon v. Burch – Burch was admitted to state mental hospital. While medicated, he signed a voluntary commitment form. Several factors come into play for pre-deprivaton relief: 1) was the deprivation predictable? 2) was a predeprivation process possible? 3) was the deprivation action authorized? SUMMARY - Impact of Post-Deprivation procedures 1) Need to fit the analysis into the Matthews v. Eldridge framework (see Zinerman v. Burch—prisoner was being treated by anti-psychotic drugs; while he was under influence, the wardens made him sign a release stating he was committed to the state hospital voluntarily. CT: If a person acts negligently or intentionally to break the rules, a hearing won‘t help.) 2) Question becomes, again, what interest is being protected? It is not clear what constitutes the delineation of liberty interests … 3) Must remain aware of alternate approaches such as North Am. Cold Storage principle—post-deprivation 4) Prison cases—distinction between accidents and negligence (which may not create a deprivation). 5) What about notice as an alternative to process? Think ―bike locks‖… B. The Structure of the Federal Administrative Procedures Act – a. The basic categories of agency action under the APA. Sources of agency authority (listed in decreasing order of what trumps what): 1. Constitution 2. Authorizing Statute (Organic Act) – gives the agency the authority to deal with the issues it was created to deal with. 3. APA 4. Agency Rules & Regulation Formal §556 & §557 Trial type procedures § 554 Adjudications; §556 & §557 Trial type procedures Informal §553 Notice & Comment ―less than informal‖ Publication Rules (§552) – must publish the rule before you use it. Nothing Rulemaking Adjudication Maybe §555 (even that is not very much). §551 – Definitions (4) ―rule‖ means the whole or part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, ages, corporate or financial structures, or reorganization thereof, prices, facilities, appliances, services or allowanes therefor or of valuation, costs, or accounting, or practices bearing on any of the foregoing; (5) rulemaking means agency process for formulatin, amending, or repealing a rule; (6) order means the whole or part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rulemaking but including licensing; (7) adjudication means agency process for the formulation of an order. Wetlands Preservation Act Hypo: EPA wants to implement a rule requiring contractors to acquire a permit a) First, must determine if this is rulemaking or adjudication -Def of a rule is found at 551(4)—general or particular applicability and future effect (prospective) designed to implement, interpret, or prescribe law or policy (additionally, rate setting is a rule, despite having characteristics of adjudication) b) Next, must determine whether this rule requires formal or informal requirements Def.: ―Formal rulemaking‖ requires ―trial type‖ procedures—sworn statements, creation of a record, etc. Def.: ―Informal rulemaking‖ requires notice and an opportunity for public to comment So, which one does this require? § 553(c)—sets ―Notice and Comment‖ procedure for informal record, but only requires trial type proceedings when the agencies‘ statutes and rules require such proceedings. In this hypo, there is no indication that formality is required. What kind of notice does an agency have to give? §553(b) just requires statement of time, place, nature of proceedings, reference to the legal authority under which the rule is proposed, and the terms or substance of the proposed rule or a description of the subjects and issues involved. Suppose a statute/agency rule did not require a hearing (formal) but required a submission of comments and opportunity for rebuttal comments? This extra procedure would have to be followed—the APA sets a minimum, and the agency/legislature is free to impose additional procedure. [Comment procedure is located at §553(c)]. May have to have several comment periods to comply with the statute. Suppose the statute required a hearing and any rule adopted be supported by evidence in the hearing record? Agency must follow §§556 & 557. *Some differences in Formal Hearings and Trials—taker of evidence does not have to write the opinion; FRE do not necessarily apply ** Give a chance for parties to have a neutral third party decide the case. *** Even in a rulemaking case, can take on the appearance of a trial. i. §556—―Hearings, ALJs, powers & duties, burden of proof, record as basis of decision ii. §557—―Initial decisions, conclusiveness, review by agency, submissions by parties, contents of the decision, record. Now, EPA wants to fine a builder for violating the rule— a) Adjudication or rulemaking? Adjudication—―agency process for the formulation of an order.‖ Is the fine an order? Order: ―any disposition of an agency in a matter other than rule making.‖ (order is defined in the negative.) Is this rulemaking? No—it is retroactive, rather than prospective. b) What Procedure does this require? §554—Formal—―In every case of adjudication required by statute to be determined on the record after opportunity for an agency hearing.‖ If no decision can be reached by agency adjudication, the section refers to §556 & §557 for the next step – a formalized, trial type hearing. c) If statute had authorized EPA to fine violators, but had not said it must first hold a hearing and make determinations based on the hearing record, what procedures would the EPA have to follow? -This is an order, and therefore is not a rule. The statute does not require a formal hearing; the APA makes no mention of Informal adjudication (only formal adjudication for orders). Seidenfeld: agencies make informal adjudications all the time—day-to-day matters ARE adjudications, but we won‘t require a hearing for every single one. -But see §555—―Ancillary matters.‖ Some (very few) courts have held that this applies to all agency matters. [S—this was originally intended for attendant circumstances in existing adjudications—think ―ancillary jurisdiction from civ pro‖—and this causes some problems, uncertainty with broadly applying §555]. §555e Supreme Court dicta indicates that this may apply in every agency action. *What process does §555e entitle a person to? Probably not much… - §555b – if it applies, may allow a party to appear and be represented. To the extent orderly business applies, and interested person may also have the right to appear. Landowner wants a permit from EPA—fills out a standard questionnaire, responds to questions on the questionnaire, and the agency then makes the decision based upon the responses. Is this a permit rulemaking or adjudication? Definition of ―order‖ includes a license; def. of license includes permits. We know we‘re in adjudication; under the APA, there is no such thing as an informal adjudication; §555(e) would seem to indicate licensing always requires formal adjudication; however, courts have read ―licensing‖ the same as other orders, and only require a formal hearing when required by rule/statute. §558 deals with licenses explicitly – (c) : the agency shall set and complete proceedings required to be conducted in accordance with §556 & §557 or other proceedings as required by law. If a hearing is not required by law, you do not automatically go to 556/557, since the agency must first be required to comply with 556/557 (all lower courts universally accept this). a) Most likely, the EPA‘s procedures are enough to satisfy 555, which is what Josephine is bumped to. b) What about homeowners who exist prior to passing of the statute, and the owner uses a shovel to dig a hole. The agency claims the shovel is earth-moving equipment under the statute, and he is prohibited from using it. §553 exempts the agency from giving notice on interpretive rules. The homeowner has no proceedings. Ernest wants the EPA to pass a stricter rule a) How can he attempt to get EPA to adopt the rule? §553(e)—any person can petition the agency for a rule and a rulemaking proceeding; there is no obligation for the EPA to consider your application on the merits and it may merely flatly reject the rule. You can petition all you want, the agency has to give you an answer under §555, but that is it. What is the recourse if the party does not like the EPAs decision? 701 – 706 deal with Judicial Review. Seidenfeld: § 553—provides exceptions to whom the rulemaking rules apply, ex. Military; internal agency management. Importantly, full N&C procedure is not required for: Interpretative rules, general policy statements, or rules of agency organization, procedure, or practice; when agency finds for good cause that notice and public procedure are impractable, unnecessary, or contrary to the public interest (emergency rules). -This is Seidenfeld‘s Publication/Less than informal rulemaking. Only req. is that the rule must be published before it is used against someone. C. Adjudicatory Procedures and Structures under the APA How do you know when you have to have a formal proceeding vs. an informal proceeding??? For rulemaking – when rules are required by statute to be made on the record after opportunity for hearing. For adjudication –§554: this section (formal adjudication) applies in every case of adjudication to be determined upon the record after opportunity for agency hearing **Language is identical in both situations. a. Triggering Formal proceedings in Adjudication What if the statute said, regarding rulemaking, only that the rule must be implemented after a ―hearing‖ but does not mention a record? a) If the statute stated that a ―hearing‖ is required, and the statute predated the APA, the presumption was that the hearing is to be formal (with the establishment of a record). That is, until FL. E. Coast RR, where the Ct. ignored the date of the statute, and only required a formal hearing when the statute calls for a ―hearing on the record.‖ Case involved a company that felt prejudiced by a rule that dealt with how rates and how long rail cars had to sit on tracks. The statute called for a hearing but did not say on the record. Court rules that only informal rulemaking and hearings are required. i. If the statute stated that a hearing is required, and the statute was enacted after the APA, the presumption is that the required hearing is informal. ii. Generally, courts were more willing to allow informal process for rulemakings (exception: ratemaking)—―this is legislative—we want to free up parties to use informal process…there must be some kind of indication that Congress intended a decision on the record.‖ Therefore, most* rulemaking is only required to be informal (notice and comment). *Occasionally, there are ―hybrid‖ procedures which require more than notice and comment and less than a decision on the record… **This is also a minimum—an agency can choose to have more procedure than the APA requires. So, what about adjudication? Since the language is the same, does this also apply to adjudication? Or is there something inherently different about adjudication? This is not a settled area of law!!!! Several approaches. a) What is adjudication? Broadly: day-to-day determinations; determinations of rights—everything that is not a rule i. For routine/everyday matters, Congress intended the APA to impose no burden on agencies ii. For significant adjudicatory matters, Congress expected that the agency would be required by statute or practice to hold a formal trial-type hearing. What if the statute uses the term ―hearing‖ (or even ―public hearing‖) for adjudication but does not state ―on the record?‖ b) Seacoast Anti-Pollution League v. Costle (1st Cir. 1978) p. 325 (Presumptively Formal) Power company sought CWA permit for water pollution discharge—hotwater from a nuke. Issue: what effect will the hotwater from backflushing have on the life that is further down the estuary? CWA: can still get a permit if you can show that EPA‘s standards are more strict than is required to maintain life; statute provides for a ―hearing‖—issue is whether this requires a formal hearing on the record. Ct: There needs to be a hearing. There are experts who have told the administrator what to do; this advice needs an opportunity to be cross-examined. A trial type proceeding is appropriate in this situation. -Presumption that the word ―hearing‖ in the context of adjudication triggers trial-type proceedings. **When statute calls for a hearing in adjudication, the hearing is presumptively ―formal‖ under the APA. Problems with SeaCoast— -Is the solution to this problem requiring a hearing? Won‘t this lead to a battle of the experts? - How helpful will cross-examination be? Who will know best about the effect of the warm-water discharge?? – the AGENCY/PERSONNEL/EXPERTS – don‘t need cross-examination of landowner to decide what is best for the biology of the area. -Statute requires ―public hearing‖—what the court is requiring is not what the AEC statute intended when it was drafted. - Must there be hearings for everything? They can be expensive/time consuming. - Even though there is a presumption, it is based on what Congress said, not what the situation requires. City of West Chicago v. US NRC (Materials at 12) (not presumptively formal) Kerr McGee sought a materials handling license to decommission a nuclear material milling facility and dispose of radioactive wastes on site. City of W. Chi., where facility was located, asked for formal hearings. NRC determined that it need not hold such hearings when requested under AEC because it used the term ―hearing.‖ Ct.: The language itself is dispositive—there is identical language in the rulemaking proceeding; adjudicatory language dealing with Rulemaking which the Supreme Court has already interpreted. We will follow the Supreme Court‘s interpretation. ** ―When statute calls for ―hearing‖ the hearing required is not presumptively formal.‖ Seidenfeld: The Atomic Energy Act was overseen by joint committees of the Senate and House; problem of people asking for hearings and slowing things down. AEC: ―We need the flexibility to dispense with trial type hearings—we want to operate with informal hearings/written requests.‖ Congress: ―You cannot escape the formal hearing requirement, but now, you only must have a hearing when someone requests it.‖ (S: ―Is this not a good indication that Congress intended a formal hearing?‖) Problems: - With this application of Florida Eastcoast Railroad—opinion acknowledged that, with respect to rulemaking, hearing can mean a number of things. With respect to adjudication, however, there is no something else—―the alternative to formal adjudication is nothing.‖ The word hearing doesn‘t mean nothing, so they must get something. So the courts rationale does not make sense when applied to adjudication (but it does with rule-making). -In adjudications, more likely to have facts for which evidentiary hearings are appropriate. - Also, if agency is left this much discretion, they likely will always decide that no substantive hearing is needed. Chemical Waste Management, Inc. v. EPA (DC Cir. 1989) p. 332 EPA is required by RCRA provision to have a hearing before corrective orders. EPA: this does not require a formal hearing. Ct: No need for formal hearing… ―public hearing‖ requires formal APA adjudication only if the hearings in question could lead to a civil penalty or the right to continue operations. -Use of term ―public hearing‖ is ambiguous—we must defer to the agency interpretation of its own rules under Chevron Problems— - what statute was court interpreting? Not clear whether it‘s interpreting RCRA or APA. -Additionally, Congress writes procedures into the statute to check the agency—Does this make the invocation of Chevron appropriate? Chevron applies when interpreting statutes. If agency is interpreting APA, which applies across the board to all agencies, then there should be a standard interpretation, rather than just whatever the agency thought it meant. - agency can be captured by industry interests, thus reasonable interpretations can be one-sided. - Also, if agency is left this much discretion, they likely will always decide that no substantive hearing is needed. How do you reconcile these cases? You don‘t… -Most Ct‘s—read the individual statutes and try to discern the intent… So, the different and competing approaches are: -presumptively formal—may result in burdensome proceedings -presumptively informal—eliminates procedure which may protect against arbitrary action. Presumption can be rebutted. -Chevron (problem—agency will do what is in its best interest [presumptively not formal] which may eliminate the very procedure that is there to protect the regulated party) **It will always be in agencies best interest to push back on required procedure** -Devine legislative intent—does legislative intent really mean anything? (used by most ct‘s) Where is the law? Originally, Seacoast was followed in several circuits – now it is down to just one circuit (9 th). Other circuits are split among the other approaches. Chemical Waste is probably the most prevalent approach in the circuits, but often courts will avoid the issue by going in and trying to see what Congress intended, rather than using presumptions, or deferring to agencies. b. Citizen Participation in Formal Adjudication Traditional notion: not considered political –law and policies had already been determined by statute and rule, so adjudication was just an application. Court‘s role was to protect rights of people from being trampled by agency in these adjudication proceedings. People‘s role was the public interest role vs. agencies. If a person was dissatisfied with the agency, the theory was that they should go to Congress and complain. Late 60‘s: began to change with Mississippi radio licensing case where the interest of the listener was asserted against the FCC‘s licensing activities. Usually, the agency and the regulated entity are parties. Who else can be parties? a. Do parties have to meet Art. 3 requirements? Not as a matter of Art. 3, because administrative adjudication is not a court. However, enabling statutes may allow standing that is broader than Art. 3. b. Traditional view—adjudication was not political, but an application of law and policy to facts; courts role was to protect rights (liberty & property) of those directly subject to regulation; agency role was to represent the public interest; remedy for dissatisfaction with agency was appeal/lobbying to political overseers. c. Formalist model—must have a legal interest (no standing; no need for it; the interests being determined don‘t effect you.) d. Expertise model—gov‘t is the expert, so you don‘t need representation. Ignores politics. e. Interest group model—agencies respond to interest group pressures, and courts role is to ensure level playing field in agency proceedings (equalize opportunities for interest groups to convince agencies). Any person who has an interest as a regulated entity or regulatory beneficiary entitled to be represented in adjudications. Agency given discretion only to ensure against redundant representation and presentation of evidence. *These interest groups will likely have standing for judicial review; therefore, there is a solid argument for inclusion in the agency proceeding to allow admission of evidence into the record so the review will be meaningful. Office of Communications of the United Church of Christ v. FCC (DC Cir. 1966) p.334 Group sought to intervene on the re-licensing of a radio station (which allegedly played racist diatribes and did not provide opportunity for the counterpoint, e.g., NAACP)—group showed effect and would have Art. 3 standing; FCC denied the intervention. Ct held.: Right to intervene is liberal. We don‘t buy that FCC has gov‘t expertise and will work in the public‘s interest. Seidenfeld: this is a liberal ―highpoint‖ of administrative intervention—establishes argument that administrative and judicial intervention ought to be tied. ―If one can go before a court to represent his interest, one ought to be able to go in front of an agency.‖ *For the most part, though, agency intervention is still liberal, and has not constricted as judicial standing has narrowed. But See Envirocare of Utah v. NRC (DC Cir. 1999) p. 339—―no connection between judicial standing and agency intervention.‖  was the only entity authorized to take transported waste from nuclear sites (other plants had authority to store waste on-site—non-transported). NRC authorized movement to other sites-- sued, stating that this had impacted its interests (economic [breaking up monopoly]; also, protects the public safety).  had Article 3 standing (and NRC stated it could seek review in court, but couldn‘t intervene in the proceeding)—Injury in fact, zone of interests, etc. Ct. held: Article 3 doesn‘t apply—just as admin. standing can be more liberal (see UCC), it can also be more restrictive. -Rejects presumption of right to intervene set out in UCC—rolls back somewhat the notion of liberal right to intervention. -Looks to direct legislative intent about who should intervene -Reliance on Chevron doctrine [was reliance appropriate???] Seidenfeld—how did the court arrive here? ct: Look at legislative intent about who should intervene, considering the era (and thus, theoretical approach) in which the statute was passed. If the statute was enacted before 1970, Congress probably did not intend liberal intervention—rather, the traditional/legal process model would exclude the intervention, as the agency would represent the public interest. Seidenfeld: is Envirocare the law? He doesn‘t know… *Probably still ‗liberal intervention‘ (UCC) generally allowed—however, there are cracks—if you can show Congress didn‘t intend to allow intervention, or show ambiguity (and use Envirocare‘s dubious* reliance upon Chevron for statutory interpretation) ―An agency is not an umpire calling balls and strikes‖—a party to formal agency adjudication does not necessarily (or even usually) have the same rights as he would if he were a party to a judicial proceeding—parties may have witnesses/evidence limited. * §555(b)—parties have a right to appear in person and be represented by counsel; have a right to ask to present evidence/witnesses (may not be granted). Seidenfeld: ―Courts make legal judgments and factual determinations‖—the theory is courts are a-political. However, agencies (especially under the interest group model) respond to interest group pressures—this is pure politics. This creates an argument for relaxing Art. 3 requirements, which exist partially to reduce the court‘s political motives/clout. c. Admissibility and Uses of Evidence in Formal Proceedings Evidence on which an agency can rely in formal adjudication 1. Explicitly, the Federal Rules of Evidence (FRE) do not apply in agency decisions. 2. §557(b)—ALJ may hear the evidence on which the agency decides * Still must show ―materiality‖ and ―relevance‖ 3. In other situations, the FRE do apply (i.e. privileges—attorney-client, etc.)—privileges are considered more important than the finding the truth. 4. Hearsay evidence is generally admissible; can call witnesses to summarize other witnesses; can create a hypothetical and lead witness through answering the questions. Why? Because the ALJ is a lawyer and knows what is going on, whereas the jury may be misled. Notice Castillo-Villagra v. INS (9th Cir. 1992) p. 353 Deportation proceeding—Nicaraguans sought asylum, attempting to show that if they were deported, they would be threatened by the Sandanistas. The Board of Immigration Appeals took administrative notice of an election in Nicaragua and determined that because the Sandanistas had lost, the threat to the s had disappeared.  was not given an opportunity to rebut the notice and present evidence supporting their argument that, despite the election,  would still be endangered if they were deported to Nicaragua. Ct held.: It was not improper to take notice of the election (legislative facts); however it was improper to take notice of the inferences (fear of persecution is unfounded due to regime change) the board drew from the noticed facts without opportunity for rebuttal [S: This means they can take notice of adjudicative facts! Agency‘s capacity for notice is therefore broad! However, there must be an opportunity for rebuttal for controversial facts – an offer of proof]. Judicial notice is proper for non-controversial facts…Administrative notice is broader—though better suited for ―legislative facts‖, administrative notice can be used for judicial facts Agency must consider the offer of proof and then based on the agency‘s knowledge and the offer of proof, must then say if they find the offer of proof persuasive enough to open up the hearing again. The agency will get some discretion in this decision. Agency ability to notice facts are way broader than courts, and have more discretion to hold with a noticed fact rather than actual testimony. Courts will review this to see if the discretion was abused. Agency will be reversed if they don‘t give the party notice that they will be considering evidence. Squishy Test—Agency has discretion of whether to take notice, and of whether to allow rebuttal evidence, and even whether to warn whether notice will be taken (reviewable for abuse of discretion). As the facts grow in controversial nature, the decision not to warn or allow rebuttal evidence is more likely an abuse of discretion. Procedure for Official Notice: Agency decides to take official notice ↓ Agency must let parties know of intent to take notice and allow them to respond ↓ parties proffer proof that notice is improper ↓ ↓ agency decides to hold Agency declines to hold hearing on hearing on the factual issues factual issue ↓ ↓ agency decides factual issue agency decides factual issue ↓ ↓ judicial review of fact fact finding judicial review of decision not to (substantial evidence standard) hold hearing (abuse of discretn std.) Why do we let agencies take notice that is broader than judicial notice? 1) Expertise 2) Efficiency 3) ―Do what‘s right/best‖ nature of agency, rather than a judge, who decides who had the best argument. May want to seek a more appropriate/policy-oriented outcome than is encapsulated by the arguments 4) Judicial Review also serves as a check Comparison (with judicial notice) -Judicial notice is much narrower—courts may take notice only of facts that are uncontroversial in nature. -Official Notice is broader, but attended by protective procedures Suppose INS held a hearing, and all that existed was the s fear (unlike the actual case where the state dep‘t report indicated s fears were well founded) and a letter from his brother? Can the agency take official notice of contradicting evidence? -Yes—agency can reject testimony; once the agency takes notice, it is as good as any evidence in the record. (They must explain why they think they‘re right and your wrong, but there is no requirement to enter countervailing evidence into the record. Limit may be judicial review.) -S—does this give you pause? Do you question the agency‘s purpose/motives? *Intimation in the opinion—notice can be taken WITHOUT PROCESS for uncontroversial legislative fact…occasionally, however, other courts will remand procedurally, even non-controversial legislative facts. Ohio Bell Telephone Co. v. Public Utilities Comm‘n of Ohio (SCOTUS 1937) p. 360 Issue concerned rates that were to be fixed and the size of rebates owed if there were overcharges. Tentaive values were announced in January of 1931. Comm‘n took judicial notice of property value for certain years to determine value of property in years between date the proceedings began. Telephone company protested claiming due process problems. Court held telephone company was denied fundamentals of trial when they were ordered to pay back overcharges based on rate evidence not on record. Comm‘n had not released the evidence they were relying on and refused when company asked. This made the hearings ―empty forms.‖ On excluding evidence, APA says: §556(d): Any oral or documentary evidence may be received, but the agency as a matter of policy shall provide for the exclusion of irrelevant, immaterial, or unduly repetititous evidence. - standard understood to not exclude hearsay evidence, but the weight of that evidence is open for debate. - Under Federal law, an agency finding will be upheld if supported by substantial evidence—such evidence may be entirely hearsay (and therefore inadmissible in court) [Aside—What about Florida law? ―Substantial and competent‖ evidence. (―competent‖ evidence is evidence that is admissible in a court of law—THIS MEANS THAT IF THE DECISION IS BASED ENTIRELY UPON HEARSAY, THE AGENCY DECISION CANNOT STAND)] d. The Position and Role of the ALJ in the Agency In the Federal system, the ALJ is an employee of the agency. 1) He is the trier of fact for the agency. This is comparable to having a trial judge as an employee for an appellate judge. Problematic? 2) However, ALJs are not subject to supervision (at least, on a day-to-day basis) by anyone involved in investigation or prosecution—they are in a ―separate box‖ in the agency structure. 3) Administrative Adjudicators (AJs)—preside over disputes that are not subject to the requirements of APA. AJs can be a judge in one case, a prosecuting attorney in another. Do not have the mandatory independence required by APA. Ex Parte Rules--§554(d)(1) (―ALJ may not consult [another] on a fact in issue unless on notice and opportunity for all parties to participate‖) and §557(d)(1). What about talking to people outside the agency about a fact at issue? Can an agency head do this? 557 is more restrictive that 554 – completely blocks ex parte communications. When you talk about going outside the agency – don‘t talk about it with anyone who is an interested party. This is because it should appear on the record and the opposing party should be given a chance to respond to it. Central Platte Nat. Resources v. Wyoming (SC of Neb. 1994) p. 378 (Neutrality) Water use controversy upon the Platte river. At the hearing, the agency (realizing this would be technical) used an expert to preside over the hearing (essentially used her as an additional ALJ). However, she had written a study regarding the need for water/demands upon the Platte river—the very issue in the case. Next, she advised the Director as to what the outcome of the case should be—it happened to coincide with what she had previously indicated in her publication. Issue: Does the expert‘s previous publication indicate her bias/unfitness for assisting in the decision? Additionally, she has knowledge of the facts from outside the proceeding, and the decision is supposed to be based upon the record. Ct held.: Prejudgment—Everyone prejudges; ALJs having opinions about the law and policy; this does not disqualify them from presiding; otherwise, many ALJs would be disqualified in many circumstances. -However, with respect to facts, an adjudicator who has actually ‗prejudged‘ the FACTS, should be disqualified. A person can have prior knowledge, but this prior knowledge cannot become prejudgment. Hypo—in the federal system, can an ALJ call up his friend during the proceeding and ask for information? -No—Ex Parte rules—once an ALJ is assigned to the case, he cannot talk to ―outside‖ sources. The information must be on the record, and the parties need to have an opportunity to rebut. Hypo—can an agency assign a specific ALJ to a case (in the Central Platte case, the expert was hired specifically for the case)? - Here, per S, the difference is legislative v. adjudicative (again)—the expert above was hired for her expertise on legislative facts. Agency Management of ALJs 1) Agencies may direct ALJs about how to conduct hearings, including telling them the weight they should give to expert witnesses, and the proper length of hearings and opinions. 2) Agency may set a reasonable production quota for ALJs (at least, in a context like the SSI disability program where claims are handled in large volume). Nash v. Bowen—SS case. Program imposes review of ALJs whose approval rate for benefits is higher than the agency would like (that is, every single case would be reviewed sua sponte, for deviance from SS‘s goals—―you‘re a problem and we‘re watching‖). ALJ bring pro se action stating this review impairs ―decisional independence‖, as specified under APA. Ct.: ―The [agency‘s] efforts through peer review to ensure that ALJ decisions conformed with his interpretation of relevant law were permissible so long as such efforts did not directly interfere with ‗live‘ decisions.‖ -Reasoning behind setting benchmark for reversal rates—ALJs hear large numbers of cases; if they‘re applying the same law, their reversal rates should be roughly the same; if they‘re not, then there is an inherent unfairness/arbitrariness as the persons chances of recovery are primarily determined by the ALJ presiding over his hearing; also, inconsistency may reflect deviation from agency policy; AND ANYWAY—they still get judicial review after the ALJ hearing. S: ―IF it is not the facts that are different [and, statistically, they‘re probably not that different given the large number of cases] then inconsistency reflects a deviation/error in application of agency policy, WHICH IS THE AGENCY‘S JOB TO MAKE.‖ ** The case suggests that an agency would step outside of its allowed managerial role if it aimed to limit the number of cases by an ALJ resulting in a certain outcome; however, an agency may be able to use outcomes as a reason for focusing attention on ALJ decision if the outcomes indicate a potential problem with 1) quality of decisions, or 2) application of agency policy. S: You can see how politics plays a role in administrative law would never have a politically accountable entity reviewing the decisions of federal judges and deciding the law was improperly applied. e. The Agency Decision-making Process Morgan v. US (SCOTUS 1936) (Morgan I) p. 394 [precedes APA, which responded to these cases—however, while this is ratemaking and therefore rulemaking (if under the APA) there is little difference in any formal proceeding] Ratemaking proceeding regarding stockyards in Kansas City. Sec. of Agriculture to make a decision about maximum rates. There was a hearing, lots of testimony, enormous record. The stockyards filed a brief based on the record stating what the rates should be (according to them); the new Secretary, who did not hear the arguments, relied upon the briefs, review of the record, and a memo by a staff member that was not disclosed to the Stockyards. Ct.: Statute requires a full hearing; in order for the hearing to be a ―full‖ hearing, ―he who decides must hear” (and the hearings in question were not in front of the presiding Secretary who ultimately made the decision). -Is reading part of the transcript enough? -Can (and should) you impose on the agency the requirement that it should look and act more like a court because the statute requires formal hearings? -This ―He who decides must hear‖ is a judicial notion, despite the fact that this is rulemaking. Morgan v. US (SCOTUS 1938) (Morgan II) ―Whatever the Secretary did, it was insufficient to satisfy the requirements of a full hearing.‖ Ct. ignored the problem that Secretary didn‘t hear—buys into some notion of institutional decisionmaking (implicit rejection of Morgan I ―he who decides must hear‖ rule). HOWEVER, Ct. has a problem with lack of notice—parties need to know each other‘s arguments, and need notice of how the agency/staff believe case should be resolved. Reaction/Discussion of the propriety/result/logic of the Morgan cases. After Morgan—the parties that may preside in a formal proceeding are: a. ALJ (formal adjudication) b. Member of the agency (the head) c. Entire Agency (whole board) d. For rulemaking, can have a party that is not an ALJ (i.e. AJ) Parties‘ Procedural Rights: a. To present sworn testimony and other relevant evidence b. To cross examine witnesses (although oral testimony may be dispensed with in rulemaking or initial licensing if no party is detrimentally affected) c. Offer findings of fact and conclusions of law prior to the initial/recommended agency action Post Hearing decision a. Presiding officer issues initial or recommended decision  becomes final if agency doesn‘t act or it is not appealed b. In rulemaking or initial licensing, a qualified employee other than one who presided may issue initial or recommended decision. Parties rights with respect to initial or recommended decision—Must be given opportunity to file exceptions to initial or recommended decision (focuses the issues for the agency head) S: Another way to get around Morgan is to delegate the final decisionmaking authority to the ALJ. Hypo: What if, after a recommended order and briefs on exceptions, the agency head reviews the order. In addition, he has a member on his staff write a memo and consult others (i.e., ALJ, other known authorities, etc.)? Does this not defeat the whole purpose of requiring notice? Ex Parte Rules (designed to guard against this)--§557—In rulemaking and adjudication, no party outside of the agency may communicate with anyone in the decisionmaking body about ―any relevant matter.‖ Violation requires an entry into the record of all ex parte communication; may also result in the violator losing the case or contested issues. §554—ADJUDICATION ONLY—Presiding officer may not consult ex-parte with any person about an issue of fact in the proceeding. Cannot:  Be responsible to or supervised by any person engaged in investigating or prosecuting the case.  No person involved in prosecuting or investigating on the case may be involved in making the decision on the case except as a witness or counsel in the public proceeding  But—the Agency (i.e. the Head) is exempt from the ex-parte provisions of §554.  -Therefore, the agency may supervise prosecutorial staff; initiate a proceeding and participate in decisionmaking; may talk to anyone about facts of the case (EXCEPT the prosecutorial staff, as that would result in the STAFF‘s violation of the section) Final Agency Decisions—what is required? i. Findings of Fact ii. Conclusions of law iii. Explanation of the Decision Armstrong v. Commodity Futures Trading Comm. A was charged with failing to register/various crimes. ALJ found that A had control, and should be liable for the actions of his employees. The agency affirmed, but stated that the findings of fact were ―substantially correct.‖ Ct.: We don‘t know what the findings are—agency said ALJ was ―substantially correct‖ but did not identify what was (partially?) incorrect. How detailed must the findings be? Ct.: Must be sufficiently detailed to reveal the path the agency took. ―A decision by an ALJ that is only ‗substantially correct‘ should be fully correct by the time an agency imprints its seal of approval.‖ 2 theories Armstrong could have been liable under - Single enterprise theory & controlling person liability. Different theories had different legal requirements – needed details to know which law the ALJ & agency was applying so they could have adequate review. f. Informal Adjudication Informal Adjudication—procedural requirements are not specified in APA, except possibly §555 §555 is a mess - To what does §555 apply? a. The section heading is titled ―Ancillary Matters‖—in order to be ―ancillary‖, something must have already occurred (at least linguistically) b. HOWEVER, §555(a) states that the section applies as specified by the section. c. How does one align/reconcile §(b) and §(e)? i. §(b) has 3 sentences regarding appearing before an agency ii. §(e)states that it applies in ―in any agency proceeding‖ §555(b)—governs, among other things, who may appear before the agency in which matters. 3 sentences: 1) A person ―compelled to appear before the agency‖ would seem to govern parties and witnesses subpoenaed in ongoing proceeding 2) ―A party‖ would seem to govern those already involved in a proceeding, or those who will be parties when a proceeding is convened. 3) ―An interested person in any issue in a proceeding and in connection with any agency function‖ seems to apply to any party legitimately addressing the agency in an agency matter. The letter of §555(b): 1. ―Person Compelled to Appear‖ is entitled to be represented 2. ―Party‖—is entitled to appear in person or by counsel 3. ―Interested Person‖—is entitled to appear ―for the presentation, adjustment, or determination of an issue, request or controversy in a proceeding…or in connection with an agency function.” -Aside—who would be an interested person and not a party? S: Few people. An interested person, following UCC, is probably entitled to be a party. However, an interested person is entitled to appear in connection with any agency function, whereas a party is only entitled to appear in any agency proceeding. *Question becomes, is ―agency proceeding‖ different than ―any agency function‖? -APA defines ―Agency proceeding‖ as rulemaking, adjudication, and licensing. What is left (for ―in connection with any agency function‖)? AG manual seems to indicate that ―in connection with any agency function‖ was meant to include the masses of the day-to-day agency functions—this would seem to indicate that ―Agency Proceeding‖ is meant to include only FORMAL ADJUDICATIONS, rulemaking, and licensing. -S: This is a conflict between the language of the APA, which indicates ―agency proceeding‖ includes informal adjudication, and the AG manual, which indicates that ―agency proceeding‖ does not include informal adjudication. SO§555(e): ―Prompt notice shall be given of the denial in whole or in part of a written application, petition, or other request of an interested person in connection with any agency proceeding.‖ a. Requires notice and an explanation of a denial of request in an agency proceeding—however, the language does not clarify what this agency proceeding is. b. ―Agency Proceeding‖ either : i. Does not include the mass of administrative routine of an agency (AG manual) ii. Includes all adjudications including the mass of informal adjudications (APA language) (LTV Corp; lower court cases; but cf. Overton Park). Pension Benefit Guaranty Corp. v. LTV Corp. (SCOTUS 1990) p. 472 LTV‘s pension fund was insured by the PBGC (a federal corp protecting pension funds). LTV: ―we‘re 2.1 billion short of our future guaranty for our pension fund—we‘re going bankrupt.‖ PBGC: ―We will recognize that you are entitled to the ERISA insurance—you are no longer responsible for your pensions.‖ However, ERISA does not fully insure the pensions, and steelworkers were unhappy. LTV: Now, following ERISA, we‘re doing well enough to make up the difference—―whatever ERISA won‘t cover, we will now cover.‖ PBGC: ―Timeout—the whole point of ERISA is that the workers take a hit—shouldn‘t use ERISA to make its workers whole. You are no longer entitled to ERISA protection AT ALL.‖ This is Notice of denial (§555(e)). LTV refused to comply, and PBGC sues. PBGC is denied enforcement at DC and 2d cir. Ct held.: Due process does not apply; therefore, the procedure LTV is entitled to is supplied by the APA. *Vermont Yankee—―a court cannot require more process than is supplied by the APA.‖ *But, 2d Cir. had said ―fundamental fairness‖ requires a hearing. *SC overrules, in LTV: ―Fundamental fairness‖ is not required by APA—all APA requires is §555(e)—―entitled to notice of denial‖, and LTV has already received this. Clear statement that 555 applies outside of formal adjudication process. S: Does this create a conflict/problem under §555(b)? Clearly, LTV is a party. The question is, is this an agency proceeding? It must be, because §555(e) only applies in agency proceedings…but in that case, sentence #2 of §555(b) would indicate that LTV is entitled to appear—this was NOT ADDRESSED by the Court. Did they mean e to apply but not b?? ** The state of the law is therefore unclear/unresolved/muddy; however, LTV would seem to indicate that §555(b) does not include informal adjudication. Implicit in LTV case was that LTV got all the procedure required by 555. Courts shouls not add procedures not require by statute, but it leaves open the possibility that given the issues in a case, certain procedures are needed for them to be able to review – hinted strongly at this. D. Rulemaking Procedures a. The Rudiments of Rulemaking: What is a Rule and What do Notice and Comment Procedures Require? APA § 553 states 2 possible procedures for creating regulations: 1) on the record process (similar to trial procedures) rarely used – when ―rules are required by statute to be made on the record after opportunity for an agency hearing.‖ 2) less formal approach called ―notice and comment rulemaking‖ §553 does not apply to matters relating to agency management/personnel issues. US v. Florida East Cast RR Co. (SCOTUS 1973) p. 487 ICC established incentive rates to encourage rr‘s to send empty freight cars back to owners. Statute said to act after hearings, but ICC only allowed people to submit written comments. Court held that simple statute reference to hearing was not enough to activate §553‘s formal proceedings. Types of Rules Legislative Rules (for this class, ‗Regulations‘)  -Have binding substantive effect on parties and agency  -Require: formal rulemaking, informal rulemaking, or less-than-informal procedure (for good cause. §553) Procedural Rules  -Attach legal force to conduct that involves interaction with the agency. Does not require notice and comment. §553(b)(3)(B). Guidance Documents  -Do not have binding legal impact—state how the agency plans to act in future proceedings.  -2 kinds: o I) Statements of General Policy (―we‘re telling you in advance how we‘ll use our discretion to exercise/enforce something that already has legal force‖), and o II) Interpretative Rule—(―The statute requires us to do something, but this something is not clear, so we (???)‖) What is a meaningful notice? Just has to have reasonable notice. Publication of the rule – must have a concise and general statement of its general purpose. For a rule with significant economic impact, may have a not so brief and concise statement. Remember that rules are prospective, so if you are in the middle of some kind of action, they cannot change the procedure that you are already involved in. Sugar Cane Growers v. Veneman (DC Cir. 2002) p. 493 Dept. of Ag. paid sugar-growers not to produce sugar—if growers participated in the program, they received sugar from the surplus to sell as if they had grown it themselves. 2 kinds of producers—sugarbeets, to whom subsidy was significant; sugarcane, to whom subsidy was not valuable. Agency changed the rule for the program (in order to encourage more competitive bidding) by a ―Notice of Program Implementation‖ in the Fed. Reg.  sues for a failure to provide notice and comment. Gov‘t: This is ―like‖ a gov‘t contract—it does not impose requirements; it merely states what the gov‘t will do if parties apply for/participate in the subsidy program. Def. of Rule: Any statement, prospective in nature, that announces or implements agency policy. However, a rule that prescribes agency procedure does not require notice and comment procedures. See §553(b)(3)(B). S: Agency screwed up by not characterizing the rule as this. Ct. held: This is a rule—needed opportunity for notice and comment. **Agency argued that the agency is not doing rulemaking every time the contract for something (think of minor issues like ordering pencils for schools, or buying bathroom fixtures on army base). This argument is countered by the fact that the ―contract‖ in this case dealt with regulation of a market, not just buying a product. It is a matter of policy on how much sugar will be in the market each year, and how much they will be paid. Under APA, if court finds agency did not follow procedures, then it shall set aside the agency action – in the Sugar grower case, the court reversed and remanded to the agency to figure out what to do and did not reverse the decision completely and eliminate the plan because some sugar growers had already not planted their field, and if the plan was erased, then they would not get paid their subsidy. b. Required Procedures and Determination of Facts in a Rulemaking Vermont Yankee Nuclear Power Corp. v. Natural Res. Defense Council (SCOTUS 1978) p. 498 Involved NRC and hearings to determine environmental impact of Vermont Yankee‘s licensing. After hearing, supplemental docs were filed to clarify and revise environmental survey. The NRC adopted second version of proposed alternative environmental surveys. Case became ―A screed against judicial intervention with legislatively set guidelines.‖ Except as required by due process or in exceptional circumstances, a court may not order an agency to engage in procedures in addition to those required by the APA. Court indicated that exceptional circumstances may exists where an agency changes long-standing procedures. Since this case has been decided, in the rulemaking context, there have been zero recognition of theses exceptions. Case stands for the proposition that courts know procedures, but not rulemaking – agencies should be the ones developing rules. ** Rationale Judicial Expertise—Courts can require/examine procedure; courts are not so good at creating policy, making broad substantive determinations entrusted to agencies S: Procedures can be used to determine outcomes—when used in this manner, procedure can be essentially political. However, if procedure is used to make agency decision LESS transparent, it creates a problem for political oversight. Before Vermont Yankee, Congress would come along and provide hybrid procedures. It became more prevalent after Vermont Yankee. Procedures are thus on the table as political deals are struck. Some of the hybrid procedures were that an agency is supposed to, in a rulemaking proceeding, instead of using formal testimony, they could use written affidavits that are submitted. Also could cross-examine the witnesses who prepared the written evidence. STATUTORY HYBRID PROCEDURES i. Statutory hybrid procedures require some sort of hearing but relax some of the requirements of formal proceedings ii. A common example is requiring cross-examination but allowing agency to conduct it and limit it. iii. Opens up process to judicial control -Compare Harry Bryant (funeral home practices) with Corrosion Proof Fittings (EPA asbestos rule) In Harry Bryant case (funeral home case) the agency had limited cross-examination; agency said they would go through and conduct the cross-examination on behalf of parties. After the proceeding, the funeral home business sued and challenged that they had been denied the right to cross-examine. Court upheld agency in that case. In Corrosion Proof Fittings case , the EPA under Toxic Substance Control Act, had similar cross-examination procedures. The EPA tried to ban the use of asbestos in indoor products. Corrosion was denied the right to crossexamine certain witnesses – court said that they had the right to cross examine unless EPA could show under 556 that it was redundant or immaterial. REVIEW OF TECHNICAL SCIENTIFIC FACTS Courts are often unable to understand, let alone resolve, such facts. DC Cir. debate: Bazelon approach – ensure full hearing procedures to allow parties to create record including questioning of commenters. He knew procedures, and if he was not certain, he could have them give more procedure to develop the record. The burden is on the agency to give procedure but on the parties to show the agency was wrong on something. If the topic is too complicated, he would defer to agency as long as they give procedure. Leventhal approach – court must immerse itself in the issue to ensure that agency seriously considered all objections and alternatives to its determination [closer to substantive review, rather than securing the ct‘s role as merely requiring procedure] Judges should figure it out as well as they can. The agency should help us figure it out as lay people. If they cannot convince the judge, they will send it back to the agency to have them make it right/clear. ―Hard look‖ approach. * Supreme Court rejected Bazelon approach – cannot order the agency to have particular procedures just because you think you know the best approach. LTV REVISITED Application of Vermont Yankee principle to adjudication Detailed Facts and Background on LTV Lower court (2d Cir) held that fundamental fairness required that LTV be given the opportunity to state its position LTV HOLDING--The Vermont Yankee principle applies in adjudication as well as rulemaking. (Fundamental fairness is not a compelling argument) Open Question – if court feels it needs more procedure to evaluate whether the agency decision was arbitrary and capricious, is that an exception? c. Meaningful Notice of a Proposed Rule What goes in the Notice of a Proposed Rule? There are 3 kinds of records: a. Public Record—revealed to the public as part of the notice and comment proceedings—But STILL, it‘s a closed record) b. Agency Record—information before agency at the time the agency promulgates the rule c. Judicial Record—information that a court may consult to perform its task of reviewing the rule ** Are there differences between the 3 records? S: No. The notion of a Judicial Record is that it‘s closed—but so is the public record, and also the agency record. S: ―It‘s clear that when the statute was passed Congress did not intend the agency to promulgate informal rules with only a closed record. However, the courts have chipped away, in their desire to create something like a record for review. APA §553 reqs for NOPR: ―General description of subject matter rule will address, or language of the proposed rule.‖ What if the final rule differs from the proposed rule? 1) Model State Act (and several states)—new comments are required whenever the final rule differs substantially from proposed rule. problems are that you have to keep opening up the comments everytime it changes a lot. There is a cost in delay and expense to the agency, and to parties since they had to do comments when ultimately, it was unnecessary. 2) Federal Law—―Logical outgrowth test‖—[are these different? In theory? In practice?] Nuts and bolts of Logical Outgrowth Test  ―The extent to which parties are on notice that the agency might issue the rule as it finally did.‖ a. Traditionally, did not focus on significance of changes from proposed to final rule b. Focuses instead on whether the nature of the proposal put persons on notice that the issue was on the table c. Courts seem to have deviated from traditional logical outgrowth towards ―Substantially different.‖ Natural Resources Defense Council v. US EPA (9th Cir. 2002) p.519 AK had to certify that log transfer facilities (sending timber down rivers) were meeting CWA req‘s. Proposed rule had a standard for woody debris—each LTF could have a 1 acre facility of up to 4 inches on bottom, but an understanding that 1 acre was not to be strictly enforced. Final rule—no limit on size, with a strict enforcement of the 1 acre standard for required remediation. Issue: Whether the parties could have known the EPA was going to change the rule in such a manner. Ct. held: ―When the final rule departs so much from the PR that the parties would be surprised by it, it violates the ‗logical outgrowth‘ req. The agency is required to re-notice the rule.‖ Seidenfeld: This is close to the Model State Act analysis—question becomes, ―Has the rule changed a lot?‖ *Would the industry have anticipated this change? Is the final rule more of a surprise than noticed from the proposed rule? S: Court should not focus on surprise, if it is the natural evolution of the rulemaking process… Logical outgrowth standard in NRDC v. EPA is a broader standard than a significant change standard. In reality, people will not complain about an insignificant/small change. So logical provides more guidelines than significant. Court found no logical outgrowth in this case. BUT, the fact that they are having a rulemaking should have let people know they were changing things. The reason that the parties did not comment might have been that the parties did not think they would change the AK standards. if the agency is doing rulemaking, and there is any possibility that they may be doing something you care about, the burden is on you to file comments. Seidenfeld‘s favorite case Am. Medical Assoc. v. IRS How do you count journal sales income and dues, etc. Rule had a list of 7 factors to determine taxability. AMA did not file comments; after comment period, IRS changed the rule to a 3 factor test (which would cause AMA to pay taxes). Ct.: ―You should have known that there was a chance that the system would be changed. As a commenter, you bear the risk that the rule will change outside the scope of the rule as it is proposed, and you fail to comment at your peril.‖ Look at other commenters – if 34 people comment on an issue, it is hard for you to then come in and say ―I did not know this was an issue.‖ Their comment puts people on notice, even if the agency doesn‘t. S: Does the logical outgrowth test include the comments on the table? *Under either standard, the test does not consider the offered comments. Can you use the comments AT ALL in finalizing a rule? *Under ―logical outgrowth‖, the comments can provide evidence of what a reasonable person thought the evidence meant? Should the commenter or the agency bear the risk of missing the comment? Competing arguments—desire to involve all the commenters (―let everyone have their say‖), v. burden on agency of requiring re-notice for every proffered comment. If the comment is to be meaningful, there must be an opportunity to comment upon the basis (factual, scientific, etc.) of the proposed rule. However, this is somewhat antithetical to the notion of an agency record that is broader than the public record. US v. Nova Scotia Food Products Corp. (2d Cir. 1977) p. 524 Regulation imposed a procedure for smoked fish to minimize the risk of botulism.  (who violated rule until this enforcement action was brought) complained that the rule would make ‗whitefish‘ unmarketable.  had submitted comments that the rule was not necessary for whitefish. Alleged defects: a) No support for application to whitefish in the record; b) the record was incomplete because the basis for the rule was not subject to comment; c) in the final rule agency did not answer s comment about the applicability of alternative procedures. Ct.: a) & b) When the agency issued the proposed rule, it stated that it relied on scientific studies, but did not make studies available for comment. This is unacceptable [for purpose of this case]—interferes with notion of comment being meaningful. c) The agency did not make a ‗concise general statement‘ (per §553) wrt ‘s suggestion to provide different standards for individual fish  to sanction silence wrt vital questions would render a ‗concise general statement‘ less than adequate as a safeguard against arbitrary decision-making. Competing objectives—agency expertise v. propriety/arbitrariness/balance of power of allowing a rule based upon undisclosed scientific evidence. Additionally, there must be a basis for judicial review—if the study is not in the record, the court cannot review whether rule was ok or not. b. S—how is this situation (where agency has information prior to notice) different from where the agency acquires information subsequent to comment? c. ―The agency claims expertise. To the extent they know they‘re relying on a study, they should cite that. However, if they don‘t know, they don‘t have to cite it. This could lead to grossly extended rulemaking periods.‖ d. Re: this issue—there is a split in the circuits. Generally, if the agency is relying on a study in order to promulgate the proposed rule, it should be included in the record. The split is whether, when the agency receives new information as a result of the comment, whether the agency has to re-notice the rule. (worry of even more protracted rulemaking and private parties abusing the system v. transparency of process) e. Suppose the agency imposes the final rule, and Nova Scotia says ―we‘ve done this for 75 years, and haven‘t had a botulism problem. This whole study is flawed.‖ If the issue is whether the study was right—not whether it was properly admitted to the record—what recourse does NS have? Re-notice? *Not requiring re-notice indicates that there is a distinction between public record and agency record. So, question is, what record is relied upon in the judicial review record? If agency is not required to admit information to agency record that shows its study is suspect, it is almost a corollary that judicial review must be based upon a record broader than the agency record. However, if the Nova Scotia rule is adopted and the three records are the same, new information at judicial review will not be utilized, but the rulemaking process may be delayed indefinitely as the rule is re-noticed. POINT: At some point, parties must be allowed to take issue with the information in the record—the difference in the circuits is whether this occurs via re-notice or at judicial review. Post Vermont Yankee: If the agency has the info available, and relies on it to develop its NOPRM, and does not provide it to parties, the courts will generally reverse it. If the info is developed by the agency in response to comments, the court will sometimes still remand it, but in some circuits, they will let it stand. Clear that APA did not explicitly require agencies to provide more than notice & comment. Courts have said that in order for notice to be meaningful, agencies should not have to hide information that they will rely upon. Info should be exposed to public, and agency should give meaningful opportunity for people to respond. What if agency in response to comments generates or looks up new information? If they do, then commenters will sometimes be deprived of the ability to respond to this new info. Commenters should not wait until agency relies on info to protest – if you know about the study during the original comment period, do the research and comment on them. Where you could have found info, the burden is on you, the commenter. EX: Agency issues final rule, rule is based on info never released to public. Public never got a chance to comment/respond to info. Court could review the info. While it might have been procedurally ok for the agency to do it, substantively, it raises enough questions that it should go back to agency for them to answer the questions raised. a. (Leventhal view). This creates a funny situation – if at the end the data is flawed or leaves questions open, then the agency risks that they will be reversed after issuing the final rule. Leaves it up to the agency. Rybachek v. EPA (9th Cir. 1990) p. 534 EPA added 6000 pages to record after the public review and comment period. Court said that was ok since the material was the EPA‘s response to the comment period. Rybachek‘s did not have never-ending right to comment on the EPA‘s responses to their comments. Ober v. EPA (9th Cir. 1996) p. 534 At EPA‘s request, state submitted 300 pages of information responding to comments that had been made. Court found that not offering others an opportunity to comment on the additionally material violated APA. Distinguished Rybachek – here, material was not added by EPA , but by one of the interested parties. Also, here, the info submitted involved critical statutory provision. Center for Auto Safety v. Fed. Hwy. Admin. (DC Cir. 1992) p. 538 Agency was asked to reconsider its ruling – agency explained it had used two recent studies, neither of which had been put on the record. Later, when the rule was challenged in court, the agency added a third study to its list of things it had relied on. Court said: having chosen to exclude the three studies at the administrative stage, the agency could not now rely on those same studies to provide evidentiary support during judicial review. Agency said these were less formal evidentiary things, and were excluded from the record under their rules. Court said too bad. Building Industry Assoc. of Sup. Calif. v. Norton (DC Cir. 2001) p. 16 of materials Agency rule was challenged on basis of agency‘s heavy reliance on a study not made available during the comment period. The study was released after the comment period. Court found that agency was not required to publish the study for notice and comment. To avoid perpetual cycles of new notice and comment periods, a final rule that is a logical outgrowth of the proposal does not require an additional round of notice and comment even if the final rule relies on data submitted during the comment period. In relying on this study, agency did not more than provide support for the same decision it had proposed to take. d. Agency Initiation of Rulemaking a. Agency proposes rule; comments come in; agency reviews comments; makes decision. IN THEORY, this is straightforward—however, the idea to even propose a rule must come from somewhere. The decision to undertake rulemaking is itself complicated. Need:  Idea for Rule  Decision to Undertake Rulemaking  Formulation of Proposal  Notice of Proposed Rulemaking (in Fed. Reg.)  Comment Period  Agency Consideration of Comments  Publication of Final Rule (if adopted) Sources of Idea for Rule i. Agency Head or Staff—either part of agency agenda, or to address specific problem agency has experienced. Bottom-up, or top-down. ii. Administration—part of presidential agenda iii. Congress—Part of congressional agenda; constrains agency or forces action. iv. Private Entity—pursuant to petition §553(e) Developing a Proposed Rule i. Agency Staff—―Team‖ decides if further consideration is warranted, and may develop alternatives ii. During this time, investigations are performed—scientists, economists, regulated parties, etc. iii. Once the Agency gets to the point of deciding to propose a rule, it must: -Engage in a Cost-Benefit Analysis -Impact/Protection on Small Businesses -Analyze the effect on State, Local, & Tribal gov‘ts -Paperwork Reduction Act *Cannot proceed until this is approved by Office of Management and Budget‘s Office of Information and Regulatory Affairs. e. Public Initiation of Rulemaking Who can participate in Rulemaking?? §553(e) – Each agency shall give an interested person the right to petition for the issuance, amendment, or repeal of a rule. In response, an agency cannot do nothing, unless 555 does not apply to informal rulemaking. The agency must give a reason within a reasonable time. Usually it gets ignored for awhile, and no action is taken. If interested person wants to petition for a rule to be made, the chances of the agency seriously looking at it is very small. §553(c) – After notice is given, agency shall give interested persons an opportunity to participate in the rulemaking through submission of written data, views, or arguments with or without opportunity for oral presentation. One exception is Professional Pilots Federation v. Federal Aviation Administration: Normal standard is great deference to the agency on how they will spend their resources and which issues to take up. Here, they upheld the agency, but not under the deferential standard. Professional Pilots Federation v. Federal Aviation Association (DC Cir. 1997) p. 596 FAA had Age 60 rule in effect. FAA reconsidered rule in light of 1993 study that said there was no increase in accidents as pilots approached age 60. A couple of questions come up after a 553 petition is filed and rule is not changed. Court treated it as the same standard as if the agency had actually issued a rule. Why not the deferential standard here?? Because this is not a case involving internal issues where the court would be hesitant to dictate the use of money/staff. Usually standard is very deferential abuse of discretion standard – court will deviate from it when there is more of a record to show that agency may have not done something for reasons other than internal reasons. Court found that agency did not act arbitrary and capricious since there was no way to accurately predict the effect that older pilots would have on accident rates. And court did not find it unreasonable that agency‘s rule prohibits collection of data that might lead to overturning the rule – the agency was justified in passing the rule in the first place. Alison v. Block (8th Cir. 1983) p. 605 Insurance program covering non-crop insured losses authorized by statute had not been promulgated by Sec. of Ag. Court enjoined foreclosure on farm pending Sec.‘s compliance with the deferral statute. Sec. had failed to implement program entirely, not just fail to give aid. Iowa v. Block (8th Cir. 1985) p. 604 State asked Sec. of Ag. to implement program authorized by statute. Ordered Sec. to start rulemaking procedures – did not order the Sec. to give aid, but ordered them to come up with criteria. Court looked to legislative intent/history – Congress did not give secretary unfettered discretion. Statute gave clear guidance that they wanted certain situations to be covered by a program. Congress expected Sec. to do it sometimes, and it is up to agency to let courts know by what standards it will be given. Heckler v. Chaney (SCOTUS 1985) p. 602 Enforcement action that entity was violating regulation. Court said decision to enforce regulation is entirely within agency‘s discretion (prosecutorial discretion). Court‘s have not applied this case to all agency actions (e.g. initiating a rulemaking procedure). ** There are times that Congress specifies a date by which an agency must adopt regulations. If agency does not comply with these requirements, then you can file a 553 petition, but a better chance would be to seek an order of mandamus directly to tell agency to fulfill its legal obligation. The mandamus technically should prevail, but if court gives them a deadline, and the agency does not comply, you would have to go to court again, and set up another timeline, and years later you may get a final rule issued. The courts simply can‘t make an agency do everything that is required if they are not given the budgets required. E. Choice of Decision-making Mode for Creating Policy a. Agency Discretion to Make Policy y Adjudication Unlike Courts/Legislatures, agencies are authorized to promulgate policy via two avenues—the question is, do they have a choice? Policy-Making by Adjudication What are the advantages of rulemaking to implement policy v. adjudication, and vice versa? a. Rulemaking—can broadly implement a universal, consistent regulation. Greater certainty for regulated entities. Efficiency—don‘t have to continuously re-defend the policy. Prospectivity—Gives Notice! To public and the agency employees. With notice and comment, you can take care of everyone‘s concern at once. But if you need a quick rule to deal with an issue, rulemaking procedure is too slow. *Given these benefits, why would an agency ever NOT use rulemaking? See infra. b. Adjudication—less complex than rulemaking (although, as the number of adjudications increase, this advantage decreases). Keeps agency from getting pigeonholed. Closes/allows loopholes—allows case-by-case decision on ambiguities in code/regs (―we didn‘t know we needed a rule here...‖ Unforeseeable policy needs). Can consider new solutions/problems with different parameters/policy percolation. Quicker in implementing policy than rulemaking. Do you really want to spend time an energy doing rulemaking for something that may only come up once every 10 years?? SEC v. Chenery (SCOTUS 1947) p. 556 Pyramid structure (holding companies) of utilities was prohibited by ―Public Utility Holding Company Act.‖ Required utilities to re-organize according to a plan supervised by the SEC; chairs of the company bought stock on the free market in the reorganization (i.e., $50 in bonds was converted to stock, and the price will go up to $55). SEC approved the plan for all bonds except those bought by the chairs—―violation of fiduciary duties—cannot get a screaming deal at the expense of your shareholders.‖ ). If company is half-debt/half-equity, and one company holds all the equity, and that equity makes up 50% of the holding company, and the other 50% by debt, then you end up with having much more debt than just 50%. Chenery‘s (directors of company) proposed a reorganization plan and went out and bought a bunch of debt to be an owner of the company (debt would eventually be converted to stock). Could buy the debt at a cheaper price than the stock. Ct (Chenery I)—―does not violate CL fiduciary duty.‖ Remands. On remand, SEC rejects the Board‘s arrangement on policy grounds. Ct (Chenery II)—―if this is based upon the policy the agency wishes to promulgate, it‘s acceptable to prohibit.‖ *This is a different judicial result for the essentially the same agency result (albeit via different reasoning/justification). **Seidenfeld‘s response to the argument ―I wasn‘t on notice that this was to be the agency result‖—they almost lost the case in the first place—this was a risky gray area. Ct.: Rulemaking is good, but we have to be careful about hamstringing the agency. Blackletter: Agency with rulemaking as well as adjudicatory authority may create new policy by adjudication—it is within the agencies‘ discretion. ―Informed discretion‖ NLRB v. Wyman-Gordon Co. (SCOTUS 1969) p. 567 Generated 6 opinions on various grounds. NLRB case that involved situation where employees for company wanted union. Years later, company said that original union members had dwindled to 10% of current union, so company tried to get rid of the union by holding a new vote on it. NLRB had previously said that it would not force company board to do something in regards to unions, and it was reversed in Excelsior case – NLRB said under new policy, Excelsior would have to bargain with union, but the said the company was liable to it prospectively, since they did not know the policy was going to change. Wyman Gordon then went through the same claim as was in Excelsior, and the change in NLRB policy applied to them – they had to negotiate with the union, they had not, so they were liable. WG claimed that agency announced new policy that applied prospectively, and thus it was rulemaking – argued you can‘t do rulemaking by adjudication. SCOTUS essentially held that WG was right that it was a rule and they should not have applied it prospectively. However, WG still loses since even if it was an invalid rule, the NLRB could have changed their policy and applied it to WG in the adjudication sense. Agency‘s can change policy and apply it in future cases. So, agency technically cannot come up with a new policy and say it only applies prospectively – that should be rulemaking. But, later claimants cannot say it should not be applied to them, since it is a valid policy change. WG was right on procedure, but did not win. Bell Aerospace Co. v. NLRB (I) (2d Cir. 1973) p. 567 Who is entitled to take advantage of NLRA ―permission to unionize?‖ (without this permission, unionizing is illegal— an antitrust act). Under NLRA, ―employees‖ (not managers) could unionize. However, a distinction between classes of managers arose. Employer: You (buyers) are not entitled to collective bargaining. At issue: whether buyers (classified as managers; have some discretion; however, do not have ability to make fundamental policy) are actually ―employees‖ and can unionize? On judicial review: : ―For 35 years, you have said managers are not employees. In order to reverse this policy, you need to make a rule.‖ Ct.: Chenery says agency can choose adjudication to make policy, when it is writing on a blank slate. Here, there is a longstanding practice of a contrary interpretation. 2d Cir agreed with Bell that you could not change a long standing policy, but SCOTUS said agency has discretion to do this, and it is reviewed under abuse of discretion standard. This case defined a balancing test for when an agency can change a long standing policy in an adjudication setting rather than a rulemaking setting. What Bell adds: Although the agency has informed discretion wrt mode of policy-making, the choice of mode of policy-making itself is subject to judicial review for abuse of discretion. -Factors in abuse of discretion: i. An explanation of the decision (not an explanation of WHY the agency chose to adjudicate, rather than rulemake, to promulgate policy); ii. Reasonable reliance and a significant reliance interest (S: if you find both of these, the agency will be in trouble if it changed policy via adjudication) [Applied to Bell: no reliance interest—requiring collective bargaining doesn‘t hurt the employer, as this result would have occurred had the policy been promulgated by a rule]. Adjudicatory rulemaking begs the questions: 1) what are the limits of this? 2) Wyman Gordon – if you do so, the rule must be applied retrospectively as well, cannot be prospective. But, if they don‘t apply it retrospectively, later parties cannot complain. 3) Bell Aerospace – balancing test – need for agency to proceed by adjudication vs hardship on party to have it applied to it. b. Limits on Retroactive Application of Policy Epilepsy Foundation v. NLRB (DC Cir. 2001) p. 574 Involved union member‘s right to bring a representative with them when meeting with supervisors/management. Court faced what happens when person is in a shop that is not unionized – statute does not say it has to be a union member requesting the protection of it. Court found that employee acted at his peril in not meeting with his supervisors – Board should not have applied the new interpretation allowing statute to apply to non union members. Court said that retroactive effect is appropriate for new applications of existing law, clarifications, and additions. Here, that standard was not met. NLRB substituted new law for old law, so not a new application. ** Difference between ―we have never addressed how this would apply in situation X‖ and ―we used to apply it in X, but now we won‘t‖ This statement of the law is somewhat inconsistent with Bell Aerospace. S would decide it that the law was clear at the time, and there was reasonable reliance on a significant interest, thus bumping it to agency to explain why it decided it a certain way. Court should have applied Bell Aerospace. Did not say person had to have significant reliance interest – makes it sound like there must be reasonable reliance, not significant reliance interest. Bowen v. Georgetown Univ. Hospital (SCOTUS 1988) p. 578 What is the flip side- when an agency wants to apply a rule retroactively. Here, agency wanted to change the method for compensation and apply it in past years. Party claimed it was procedurally defective. Agency said that parties knew the rule was going to be changed, they had notice, etc. And since Congress had changed statute, the rule only applied retroactively to two years. Scalia concurred, focusing on language of APA. ** Courts have used equity powers over remedies to say that if there is some defect with a rule and they are pretty certain that the rule is going to be held invalid after the agency corrects its procedural mistakes, then the court will remand but not reverse the rule but the rule stays on the books and remains in effect thus avoiding retroactivity problems. Due Process Concerns Hypo: agency interprets an ambiguous statute or reg and then changes interpretation i. Line of due process cases says that a party must have fair notice of what is required of it before it can be subject to criminal prosecution or civil penalty *What does this ―fair notice‖ necessitate? S: if there is a sufficient degree of uncertainty whether the conduct might be illegal, due process does not require ―fair notice.‖ Hypo2: Agency changes interpretation or policy, and imposes a penalty retrospectively based on new interpretation or policy. i. Epilepsy Foundation—―when there is ‗substitution of new law for old law that was reasonably clear‘ the new rule may justifiably be given prospective only effect.‖ [BUT, retroactive effect is appropriate for ‗new applications of existing law, clarifications, & additions‘] ii. Compare US v. Chrysler: agency may not find a person in violation of a reg based on a new interpretation unless the person was on ‗fair notice‘ of the interpretation. * ―Fair notice of the interpretation‖ is narrower—limits what agency can do [Chris: WHY? What is the distinction here???) What if order only involved a retrospective penalty? a. APA seems to say that announcement of such a policy is a rule (which courts cannot make) b. Epilepsy—―we cannot order the employer to pay backpay—this would be retroactive application of policy.‖ HOWEVER, if it cannot be applied retroactively, it must be applied prospectively ONLY. This is the realm of rulemaking, which courts do not have the authority to do. c. Wyman Gordon case suggests that agency cannot make a new policy in an adjudication and apply it only prospectively—this ceases to be an order, and becomes a rulemaking, and therefore should have been done according to APA guidelines. *Maybe the real issue is, ―Who can enforce a violation of this doctrine?‖ d. What does this do to Epilepsy? E: must apply prospectively only; contra W-G: cannot apply prospectively only. e. Aside--DC Circuit doctrine allowing prospective application of changed policy seems at odds with Wyman Gordon. What happens when Rulemaking causes a retroactive application of policy? a. APA def. of rule: ―decision that is prospective which announces or implements policy.‖ b. Scalia: a rule cannot be applied retrospectively c. Bowen: (same result as Scalia, but different analysis)—Agency: ―this is a correction of an old rule that was applied incorrectly. An adjustment—everyone was on notice.‖ Ct.: There is a presumption against retroactive rulemaking (contra Scalia—rulemaking cannot be retroactive, ipso facto); statutory analysis of whether Congress intended to allow retroactive rulemaking. Ct. finds no such intent—orders case by case adjudication. NONETHELESS, a rule with only prospective application may still have some retroactive effect by upsetting reliance interests S‘s Evaluation of Bowen: •Usual distinction between rules and adjudication based on reliance interest – entity must know the law when acting •Bowen – hospitals had no reliance interest because knew what the agency considered to be the correct rule •More generally, distinction between retroactive and prospective does not correlate perfectly with greater and lesser impact on reliance interests c. Use of Rulemaking to Eliminate the Need for Fact-Finding Hearings Context: An agency is authorized to make a decision (e.g., issue a license) only after a formal hearing -The agency issues a rule that eliminates the inquiry into certain factual issues, and may eliminate the hearing altogether (e.g., FCC limits the number of broadcast licenses an entity may own. An entity with that many licenses seeks an additional one. FCC dismisses the application without a hearing!) *In order to do (x), you need a hearing…but agency can restrict fact-finding by making a rule!! Yetman v. FAA (7th Cir. 2001) p. 587 FAA rule req‘s all commercial pilots to be under age of 60 (for safety purposes). FAA issues licenses under a particularized adjudicatory proceeding. Issue is not whether FAA can issue this rule, but rather, when can the agency grant an exception? Ct.: Agency practice stated that the pilots must proffer a compelling test to overcome the ‗no exceptions‘ rule, even though exceptions were permitted by statuteagency was justified in rejecting pilots‘ proposal. ** FAA has the discretion to establish a rigid policy with no exceptions. Am. Airlines v. Civil Aero. Bd. (DC Cir. 1966) p. 17 of materials Statute req‘d all airlines get approval for the rates they charged for carrying cargo/passengers. Rates were dependent upon nature of the transport, but were applicable to all passengers and cargo based upon its destination. Rates were subject to agency approval. Conditions on licensees: e.g., if you had a license, you agreed to charge only what the license approved. Conditions were det‘d by individualized hearings. Any change in the license was to be det‘d by formal adjudicatory hearings. CAB passed a rule stating that only cargo planes are allowed to use ―block space rates‖— rents space on plane at a discount, but guarantees payment, even if nothing is shipped. CARRIERS CAN NO LONGER CHARGE BASED UPON THE NATURE OF THE SHIPPED ITEM. (rule only applied to solely freight carriers—not ones that carry passengers)—passenger carriers wanted ability to do this, too. This is a change to licenseholders‘ licenses, and it was not done by adjudication (as statute would seem to require), but by rulemaking. Ct.: agency may issue rules that eliminate the need for a hearing before making a decision that, by statutory mandate, must be made after a formal hearing. An agency can issue these rules EVEN when they alter the rights attached to existing licenses that, by statute, cannot be altered except after formal rulemaking. Rationale: agency is implementing general policy that cuts across large classes of carriers. Rulemaking, not adjudication, is best suited for these decisions. -License holders are protected by a) fact that they will not be alone in bearing brunt of regulation (rule effects broad class of carriers), and b) judicial review to ensure classifications and restrictions on certificates are ok. ** So, the standard for changing a license by rulemakings is: Public interest, convenience, and necessity. IN DISSENT: if a license is changed, a hearing is required by the statute. This is changing existing legal rights by rulemaking, not changing future legal rights. This is singling out carriers within the class. The new rule of law the majority implements states that so long as the rule effects a broad group (compare the whole class) and doesn‘t single out a single person, it‘s ok. Per Seidenfeld: ―Well reasoned opinion.‖ If agency changed the license of a single carrier, adjudication would be req‘d. When it cuts across a broad class of individuals, the protection is political—many others would be similarly disadvantaged, and you can take this to Congress. SSA disability determinations – Heckler v. Campbell (SCOTUS 1983) p. 592 SSA resolves 1.5 million claims for disability annually; 600,000 go before an ALJ. ALJ is criticized for inconsistency of decisions, high reversal rates, slow speed, etc. Grid rule is implemented to overcome these deficiencies. Created categories, predetermined to decide whether individual could perform in the national economy. For those who clearly fell within the categories of the grid, no hearing was needed. Ct: Agency may eliminate factual inquiries from hearings by rule. Grid rule improves a) consistency, b) responsiveness to politically accountable head, and c) efficiency and timeliness of hearings. Rulemaking as factfinding! This differs from Am. Airlines case since there, they were looking at public interest standards. Here, the standard was more clear – can X hold any job that exists. Can make more clear efforts at meeting that standard than the Airline case. ** Evaluation of Heckler and Cab—did the rules in these 2 cases play the same role in eliminating hearings? Is there a distinction between rules that reflect general factual conclusions, and those that reflect policy choices by the agency? Both of these cases determined facts by rules which defined broad classes…again, inquiry is: Public interest, necessity, convenience. *In the SSA, it is easier to apply this inquiry to the facts—SSA was mandated to make a factual inquiry; it was not asked to determine the standard, whereas CAB defined a new licensing standard. In Heckler, agency is not defining a standard, as in CAB—it is defining facts by a rule. Should the agency be able to circumvent the fact-finding hearing??? Could come out either way on that issue – 1) passing a rule to simplify fact-finding or 2) defining by policy statement what should happen in each case. FCC v. WNCN Listeners Guild (SCOTUS 1981) p. 595 Prior to issuing radio & tv license, asked applicants to describe what they would be broadcasting. Would ask questions about the amount of news & local issues the station would focus on. As for entertainment, would examine how many other stations in the community did the same stuff as the applicant. Would look at diversity of broadcast area to determine need. Reagan administration came along and wanted to get rid of this inquiry – said market would work to provide stations that were needed. Agency (after implementing Reagan‘s policies) said they would not make any exception to the administration‘s no-inquiry position – would not look into what type of stuff would be broadcast. WNCN said its listeners did not have much money, so the ―market forces‖ approach would not work to provide stations for everyone. SCOTUS said that as long as agency takes a look at their claim, then they could do what they wanted. Court was not going to worry about the no-exception provision if it was reasonable agency policy - ―an agency may adopt a rule (even one that does not perfectly correlate with statutory criteria) without providing an escape clause or waiver provision.‖ SO, you can use rulemaking to get rid of need for hearings and policy formulation, and help eliminate need for fact-finding, and in policy context, you can say no-exception to the rule. S—unlike legislation, agency rules often reserve an ―out‖ or an escape clause? Why? Notion of prosecutorial discretion—if there wasn‘t a discretionary provision, there might be unjust/inequitable application…similar to, i.e., a prosecutor not bringing a case due to notions of fairness. -BUT—sometimes agencies may not reserve this escape clause (see WNCN). WNCN v. Heckler—should rule of WNCN (i.e., no escape valve needed) apply to rules like the grid rule? In SSA context, there is a provision: ―if party has a unique situation, they are free to ask for consideration as to whether to apply grid.‖ Under WNCN, could the agency not include this provision? How far does this go? Agencies can use rules to define the criteria they will use in adjudications, to avoid having to hear those issues in the adjudications. - there are so many decisions to be made, this will speed up the process and will ensure consistency through all of the rulings. Does the agency have to provide a waiver exception to its rules?? They can but they do not have to. if person wants to have a hearing to see if they meet/fail to meet criteria, then person should be able to challenge that the rules do not apply to them for X reasons, and they are entitled to a hearing. Heckler v. Campbell – can you have rules that obviate the need for hearings altogether?? Yes. ** But if Congress provides a standard that is fact based, then agency should perhaps have to allow for hearings. d. “Guidance Documents” (1) – Interpretive Rules, Their Impact and Limitations on Their Use Guidance Documents: If you look at procedural requirements for rulemaking, you will see that there are exceptions to the notice and comment provisions when the agency has good cause to not use them (emergency provisions, minor and technical changes, etc.) An agency can issue an interpretive rule or agency statement of policy – under the provision that govern these, they need no be issued under notice and comment rulemaking, and all that needs to happen is that they need to be published in the Federal Register before becoming effective. A person may not be adversely affected by the use of these unless they have actual knowledge or have been published in the Register (constructive notice). Interpretive rule is a situation where an agency has a statute or regulation and the language is not dispositive about how things should come out in a certain context. e.g. slightly disabled is defined as someone who is restricted to carrying only 10 pounds or less. Someone with a back injury can lift 10 pounds, but cannot turn and move. So, does carrying weight mean only lifting, or moving while lifting?? Agency can then issue an interpretive rule clarifying the meaning of the statute or regulation. Under the APA, Publication Rules are 1) Interpretative rules, and 2) General Statements of Agency Policy. Do not require n&c procedure. §552—―Anytime an agency issues a rule, it shall publish the rule in the Fed. Reg. If it isn‘t published, it may not be used against an individual unless that individual has actual notice.‖ S: He‘s not sure what happens when the rule isn‘t published. [so what??] Chenery example – Before court reversed them, agency had several options. Agency has a statute and it is not clear if certain conduct violates the statute. 1) Agency can issue a notice of proposed rulemaking, and go through notice and comment proceedings. May take 1-2 years to complete this. When it comes out, it will have the force of law and will be clear. This is an ideal route, except for the length of time and the resources that will be tied up in the process. 2) Agency can wait for conduct to occur and then adjudicate the outcome. Advantages are that agency does not have to devote resources until the issue comes up – the agency then makes its decision immediately. 3) Agency issues an interpretive rule – tells public immediately what the agency is going to do. Not retroactive, but has an immediate time advantage. Problem is no public input since no notice and comment – do not know how hard and thoroughly the agency looked at the issue. If Chenerys did not think interpretation was right, they could challenge it and ask for declaratory judgment that the agency‘s application or adoption of the interpretation violates the statute. These do not have legally binding status – just interpretive decisions, and at best is precedential. Agency precedence is not as powerful as judicial precedence. - Under arbitrary and capricious standard of review, agency is required to address every meaningful argument about why their interpretation may be incorrect. If agency deals with those, and the challenging party comes up with a 4th reason later, the court could say the fourth reason conflicted with precedent, and was wrong. Agency could not do that – would th have to address 4 argument and deal with it. Pros – 1) good third option where parties will not be surprised. 2) Can inform the public about what will happen. 3) can inform agency staff about the policy. Cons – 1) agency might use this to change behavior of individuals, where they are not justified to do it. 2) Gives up on benefits of notice and comment rulemaking. 3) issuing interpretive rule may dissuade people from doing something or challenging something, even if the interpretation is not right. 4) there is not public input in the decision. 5) The standard for which agency review interpretations is very deferential. Whereas, if rule or regulation is challenged after notice and comment procedures, there is a higher burden for agency to deal with in defending it‘s actions. Air Transport of Am. Inc. v. FAA (DC Cir. 2002) p. 706 FAA set regulations for flight time/sleep limits to promote statute re: ensure safety in flying. FAA counsel issued letter discussing how time should be calculated under the regulation. Court said it would uphold the interpretation unless it was plainly erroneous or inconsistent with the regulation. APA rulemaking is required if an interpretation adopts a new position inconsistent with existing regulations. Difference between substantive rule and interpretive rule are whether it carries the force and effect of law o r rather if it spells out a duty fairly encompassed within the regulation that the interpretation construes. Is the interpretation fairly encompassed in the breadth of the statute? If you were to read this regulation and try to figure out, as an airline, what to do with time schedules, are you on notice that an agency may construe it in a certain way. As long as it is a reasonably possible interpretation, then it is fairly encompassed in the statute. Here, the letter clarified a duty which was an unresolved aspect of the regulation, so it was interpretive doc, not a rule. * S thinks this is a good approach, but could maybe do better? AK Professional Hunters Ass‘n (DC Cir. 1999) Hunting guide provides gear and instruction to hunt in Alaska. They fly you in to a remote location, and leave you there for a week. Question arose over whether this was commercial flying (thus requiring a commercial license). FAA originally tells them they are charging for hunting, so no commercial license needed. Years later, FAA decides they are commercial flights and tell the company they are considering changing the rule. The business opposes that. 4.5 years later, agency issues interpretive rule saying they are commercial flights. Pilots in the group sue and say it is an illegitimate use of an interpretive rule since it changed a longstanding policy. Court held that when an agency has given its regulation a definitive interpretation, and later significantly revises that interpretation, the agency in effect has amended its rule, which requires notice and comment. S thinks it only has the force of precedence, so you can challenge it if you want to, it is not law. DC circuit says you cannot change a longstanding policy by an interpretive rule. When you do this, you are essentially changing a legislative rule, thus they may only do it through notice and comment. Interpretive rules (remember, they‘re not ―technically‖ binding until adjudication —merely a heads-up; however see AK air pilots) 4 issues: a. b. c. d. How is a legislative rule distinguished from a guidance document? What impact does an interpretive rule have? Timing of judicial review (if the guidance document can be reviewed right away, it reduces the risk of prosecution, or alternately, the cost of compliance) What deference do they get upon review? 1) Fairly encompassed (possible reasonable interpretation) – whether the interpretation is fairly encompassed within the language of the statute . . . would you think that a reasonable person could read the statute to mean what the agency thinks it means. Closer on spectrum to a completely ambiguous rule. 2) Fair Notice (most likely/best interpretation – requires more, person subject to it must know that their conduct is probably prohibited . . . the interpretation should be pretty clear (even if there are other possible interpretations). Closer on the spectrum to the absolutely clear rule. 3) Language clearly requires agency interpretation Agency has already specified an interpretation – the party now has reasonable grounds for reliance (even if another interpretation is fairly encompassed). Agency now wants to change their interpretation (Bell Agency – weighs agency need for new rule vs. party‘s reliance interest)(Epilepsy – reasonable reliance is enough). To avoid retroactivity problem, the agency will only apply the change prospectively. a. Distinguishing an Interpretive rule from legislative rule Old Way—would agency have authority to make this in an adjudication? If so, N&C is not needed. Current way (in vogue in DC Cir. and 7th Cir)—analysis: does language of statute ―fairly encompass‖ the interpretation? S: ―what does ‗fairly encompass‘ mean?‖ Usually, leads to whether there is ―fair notice‖ (1. If you read statute, would you know that you might not be able to engage in that conduct, or 2. requirement that agency can only tell you what you should have known (narrower; S: if this is the test, why even have an interpretive rule?)) S: Both of these focus on substance, to determine a procedural point—this jumps the gun. [Chris: but when can substance and procedure ever be totally divorced?] Guernsey v. Shalala—Hospitals protested agency calculation of Medicare reimbursements, due to contravention of GAAP. ―This violates a background norm.‖ Ct.: This is an interpretive rule to advise the public of the agency‘s construction of its statute and regs. Besides, the rule does not say GAAP applies. *Isn‘t this a rejection of ―Fair Notice‖? If ―fair notice‖ were the test, wouldn‘t a person reading the statute be surprised that a background norm didn‘t apply? 1. 2. 3. 4. What deference do agencies get? Ct‘s are very deferential to agency interpretations of its own rules. See Guernsey. As one commentator described, this is a commission for the Congress to enact ―mush‖ and for the agency in turn to ―promulgate mush,‖ knowing its interpretation will be upheld so long as the interpretation the agency eventually gives the rule is not ―plainly erroneous?‖ BUT, desire to avoid regulatory vagueness is responsible for DC Cir‘s ―Fair Notice‖ *Again, reflects different priorities wrt an essential tension—fairness to regulated party v. desire for effective, efficient regulators Suppose that rule is determined (procedurally) to be an interpretive rule. You refuse to comply. What outcome? Explicit in §552(a)(2)—―interpretive rules may be used as precedent.‖ Interpretation is not what is violated; what is violated is the regulation, which has the force and effect of law. So, what good is an interpretive rule? 1) if party‘s argument is one that interpretive rule has already addressed (No new issues), ALJ HAS to follow—his job is not to re-interpret what agency has already re-interpreted; 2) ALJ can say, ―you violated the regulation, and the agency already responded to your argument‖ citing the interpretive rule as precedent. *What if the factual scenario differs? (e.g., Our tigers are incapable of jumping 8 feet—different conditions from the agency study) If only an interpretive rule, the party is free to offer this information and the ALJ can decide against the agency. **Agency must explain why this does not hold sway (rationale approach) ***Note: if agency goes after [game park for having inadequate fences] without an interpretive rule, it cannot be fined…however, if interpretive rule provides a guideline, it may have provided ‗reasonable notice‘—agency may now subject party to fines. May an agency, in adjudication, readopt an interpretation that a court previously reversed when part of an interpretive rule because the interpretive rule was procedurally deficient? Probably—would argue that old interpretation provided reasonable notice. ―Much ado about nothing‖ problem—agency issues a guidance document to its employees—―here‘s what to look for when looking for illegal tiger enclosures.‖ Published in CFR, but Ct holds that it is not ‗fairly encompassed‘ in statutory language, and therefore should have been issued by notice and comment (merely a procedural defect). Agency does not correct defect, but nonetheless issues a citation to a gamepark with an ‗insufficient‘ fence. Gamepark: Your rule has already been struck down. Answer: Bell indicates that the agency can do this by adjudication—this is an adjudication. It does not matter that the agency already had this rejected on procedural grounds. *What‘s the point of striking down interpretations on procedural grounds if adjudication can implement the same (rejected) policy? At best, might gain a minimal ability to defend upon 2d Bell Aerospace ground. e. “Guidance Documents” (2) – Agency General Statements of Policy and Limitations on Their Use Statements of Policy 1. As with interpretive rules, S.o.P. indicate how an agency intends to exercise its legally granted discretion. (Unlike interpretive rules, S.o.P. do not interpret existing positive law) 2. Procedure: ―Less than informal‖ againmust be published in fed. reg. before it is used against a party; no notice and comment needed. 3. Issues (again): a. When does an agency statement of future effect announcing policy require notice and comment proceedings? b. What is the impact of a policy statement? c. When is such a statement ripe for judicial review? d. What are the standards of review for such statements? Legislative rule v. Statement of Policy GE v. EPA (DC Cir. 2002) p. 719 EPA had a rule regarding cleanup of PCBs (here‘s what to do; if you don‘t like this, you can use an alternative method), of which GE manufactured. Allowed groups to come in with alternative analysis to figure out total toxicity values. Agency would then decide whether to accept the alternative means. But – did not give guidance on the types of alternative means. Agency said it could be done by evaluating the cancer risks and other noncancer risks (takes lots of time) or just assume 4mg/kg/day (which is the max they will accept). GE dumped tons of PCBs in Hudson River. GE did not want to use the assumption method, but couldn‘t really come up with a good assessment either- wanted another alternative. GE argued that the options were a rule, so EPA should have used notice and comment. Court held that the statement was a legislative rule – it had a pragmatically binding effect on parties. Thus, invalid since no notice and comment. Q.: What kinds of alternative methods are acceptable. Guidance Document: Look at cancer and non-cancer risks. GE: This isn‘t an alternative—this is binding, and is therefore a legislative rule. Issue: Should EPA have utilized notice and comment before issuing this guidance document? I#1: is the Guidance Document binding? [Aside: Binding v. Exceptions: a rule can be binding, and still allow exceptions; the agency has the discretion whether or not to grant the exception, and the seeker has the burden of proving the rule shouldn‘t apply to him] S: If the court will let the agency say ―You violated the rule, therefore you‘re in violation,‖ it is binding. I#2: Is the guidance document pragmatically binding? Ct.: Look at the language—if written in language that indicates agency will act in accordance with statement, it is a legislative rule. Does it look like you‘ve made up your mind? [S: this is the DC Cir; he doesn‘t think it fits w/ Shalala] Court held that the statement was a legislative rule – it had a pragmatically binding effect on parties. Thus, invalid since no notice and comment. S: Suppose Agency publishes this in the Fed. Reg. and labels it a guidance document—is this not sufficient to indicate that the doc. is not binding? For it to be binding, notice and comment is req‘d. PG&E – court said whether it is a policy statement is whether the agency could have done the same thing through adjudication later on. What is the problem with just telling people up front what they will do later on? Community Nutrition (DC Cir. 1987) p. 727 What level of toxins can be allowed in processed food? Agency said as long as it was below a certain amount, they would not go after food companies. CNI said the amount was too low. CNI persuaded court that setting the ―action level‖ itself required notice and comment rulemaking procedures. But isn‘t the agency decision to prosecute companies completely discretionary?? Shouldn‘t they have challenged the agency‘s abuse of discretion rather than attacking it on procedural grounds?? Thus, two standards have developed: 1) does it have pragmatically binding effect?? 2) could the agency have done this in the context of adjudication without issuing this? If they can, what is the harm?? (S prefers this method) Keep in mind that the agency is responsible for enforcing statute. Interpretive rule is just how they will rule when the issue comes up. So, the agency can still win, even if the interpretation is struck on procedural grounds. Alternative Standard (not usually used)—If the agency has the authority to exercise the discretion in particular cases as described in the statement, then the rule is a policy statement. Same standard as interpretive rule. (Focuses on substance, rather than procedure) Problem—what if regulated parties follow the guidance document, even though they know it‘s not technically binding? This is the pragmatically binding problem—worry that agency will abuse this, and circumvent notice and comment procedure. S: They could do this anyway! Would you rather them not issue a rule, and not know what they‘re thinking? Shouldn‘t care about whether it‘s binding, but whether the agency could do this anyway by adjudication. Impact of Statement of Policy a. No independent legal force b. Does the statement have any legal impact as: precedent? Deference on review? c. Notice of change in agency policy? S‘s critique of Current Doctrine Problems a. Discourages agencies from issuing guidance documents b. Deprives regulated entities of notice of agency intentions c. Deprives parties of safe harbors—regulated entities can‘t say ―can‘t fine us, we‘re doing what you told us.‖ d. Forfeits a mechanism to ensure consistent exercises of discretion in day-to-day ops. e. Doesn‘t change agency‘s ability to adopt the expressed policy via adjudication. (S: after the policy statement is rejected as an improperly promulgated rule, EPA can still use this precise argument in the order) S‘s Proposed Alternative Why are we bothering with these?? Even the fairly encompassing standard (which he likes) is not the best possible. If the agency issues a policy statement without using notice and comment rulemaking and doesn‘t say if it is a procedural rule or has a good cause exception, then by definition, it is a guidance document and only has the force and effect of precedent. It can always be challenged when the agency goes after someone – stop bothering with procedure!!! As long as parties can tell up front that it does not have the force of law, what is the harm in agencies doing this?? These interpretive rules are ripe for challenge. In interim, can get court to issue a stay if party would suffer hardship while challenging substance of it. a. A guidance document is not a legislative rule when it is promulgated without the agency going through notice and comment rulemaking, AND the agency does not identify another exception (i.e., good cause, or that rule is procedural). b. Sometimes, within a N&C rulemaking, there is accompanying interpretation (agency: ―this is what we mean right now…but it‘s subject to change‖); S would interpret this as legislative history and not a binding legislative rule. c. Impact of document is same as if the statement was issued as part of a prior adjudication— provides notice; provides precedent (which parties can argue does not apply to them) d. Key point: Guidance document will be reviewable substantively upon publication—the standard will be, ―does agency have authority to issue this per adjudication?‖ If the answer is yes, then the rule will be upheld e. Standard of review—―hard look‖ variant on arbitrary and capricious. Advantages of S‘s approach: a. Do not tie up agency with procedural rules regarding guidance documents; encourage agency to issue GD b. Would this lead to abuse? S: Under the current approach, even if a court strikes down the GD on procedural grounds, the agency can STILL implement the substance in an adjudication… c. Additionally, allows for judicial review of the substance before the agency applies the case… Use of policy statement to change policy – 1) is it pragmatically binding? 2) PG&E – (9th Circuit) asks substantive question is this a guidance document or is it a legislative rule- look at substance of rule to see if it is something they could have done by adjudication without making a rule on it? (does not apply to retroactivity problems). Agency cannot do it but still issue a policy statement – if only reason they cannot do it is because they reverse longstanding policy, prompting retroactivity problems, then court reasons that policy statement is just saying what they will do in the future. 3) issue of whether it is a legislative rule or guidance doc is a matter of did the agency use the proper procedure for a guidance doc – every agency has authority to tell public how they will exercise their discretion. If agency does not use Notice and Comment and it is not emergency/good cause exception, then agency can only use it as guidance doc, not authoritative force of law. III. Judicial Review of the Substance of Agency Action a. Standards of Review Intro: 1. Discussion supra encompassed review of compliance with procedural rules. 2. Judicial review is governed by 5 USC §§701-06. 3. §706 provides the bases for judicial review—6 bases: a) beyond statutory right/authority [legal claim]; b) failure to follow procedure; c) exercised discretion in an arbitrary or capricious manner; d) constitutionality; e) supported by the record [was there a factual basis?]; f) did the agency fail to provide a basis of review in instances where court will review de novo? 4. In sum, this amounts to four parts: a) violate substantive legal req‘s? b) violate procedural req‘s? c) adequate support by facts? d) arbitrary or capriciousness? Why have judicial review? Why isn‘t politics a sufficient check? 1. Some cases are small enough to fail to register on the political radar screen…inertia of actual political bodies…ALSO, political influence from key individuals in Congress or administration may be improper. 2. Keep agency within legal authority [This justifies review of facts at SOME level, or else agency could simply find whatever facts necessary to reach predetermined outcome]. 3. Ensure that agencies act carefully [S: Politicians don‘t usually consider ―care‖, but rather, bottom lines…we may like our agencies to act carefully, and the best way to ensure this may be review] 4. Provide Legitimacy—review gives force to agency decisions and provides legitimacy in the eye of the (government dis-trusting) public; police against manipulation of process against any stakeholder… Standards of Review (contra bases of review, supra). *S: This discussion is about the traditional understanding of these standards of review. De Novo Review—questions of law; appellate court does not pay any heed to lower court decisions. Anew.  Rarely comes up in review of administrative decisions today.  Reviewing court decides the issue as if the agency had never done so. Clearly Erroneous—reviewing court is reviewing findings of fact made by a judge.  Deferential, but only slightly deferential.  Traditionally (not currently in ad law), reviewing court examines the facts; makes it‘s own determination, then appraises its certitude in its determinations; in doing so, it judges if the lower court‘s decision was a substantial leap from its own judgment.  Not explicitly invoked by §706; but is the standard under some statutorily provided review. Substantial Evidence Test—reviewing court is reviewing findings of fact made by the jury  More deferential than clearly erroneous standard; rather than top-down review (per agency), it is bottom up; however, it also judges ―reasonableness.‖  Governs review of fact finding for all decisions in which the agency is statutorily or constitutionally required to make by formal adjudication.  Traditionally (but not currently in ad law), court will cull record and compare the record to the agency decision. If it cannot find sufficient support in the record to convince a reasonable person of the agency‘s findings, it will reverse… -S: Although it‘s traditionally more deferential than clearly erroneous, it‘s hard to find a situation where one will result in a reversal and the other will not. Arbitrary and Capricious review—(Catch-all; applies to any agency action other than those subject to a specified standard). Traditionally, review was comparable to that of a court reviewing a (non-suspect class) statute for constitutionality—―is there a legitimate relationship between the goals of the agency and the action, in light of the record?‖ b. Review of Fact-Finding in Formal Proceedings – The Relationship Between Facts Found by the ALJ and the Agency Decision Universal Camera v. NLRB (SCOTUS 1951) p. 940 Employee was fired—if it‘s b/c he called the personnel manager a drunk, his firing is justified; if he was fired b/c he was a union organizer, it‘s an unfair labor practice. Factual issue: Why was he fired? ALJ believed manager, and found that firing was not an unfair labor practice. Board reverses ALJ—―he was fired due to initiating union activities. substantial evidence standard of review since statute said ―supported by evidence‖ and looks like Board held 556/557 proceedings. Taft Hartley Act said that review evidence on the record as a whole Question 1: What kind of review is being sought? Depends upon whether question is one of fact or one of law—how does one define/separate the two? ―Anti-Union Animus‖ has elements of law, but in this case, no one is questioning this definition—mostly a question of fact. So, a question of factbeing reviewed for substantial evidence. When does the substantial evidence test apply, and what does it mean? Review for substantial evidence after §556-§557 proceedings—formal proceedings! *If this had been an informal proceeding, what standard would apply? Arbitrary & Capricious. What is the basic (old) ―Substantial Evidence‖ standard? Learned Hand: ―The kind of evidence on which responsible persons are accustomed to rely in serious affairs.‖ ―Such relevant evidence as a reasonable mind might accept as adequate support for a conclusion.‖ Court: the APA changed the Substantial Evidence standard. ―The determinations are to be based upon the whole record‖ Ct.: This means that you can‘t ignore evidence that undercuts the agency…must also consider the effect/weight of countervailing evidence. PROBLEM: Lower court did not consider the ALJ‘s finding. ―Whole record‖ is broader than just the evidentiary record—it includes the ALJ finding. S: How do you take into account what the hearing officer said when the agency has the entire authority to decide the case? Lower Ct.: We have no principled manner of giving the ALJ finding weight while still allowing the agency to have full decision-making authority. Un. Camera: ―You must take this in to account.‖ So, the question becomes, how do you take the ALJ finding in to account? How should the substantial evidence be applied in this scenario? *J. Frankfurter: ―One cannot express these differences in words/formulae. Congress expressed a mood to be more exacting & tougher on the agency; therefore, the reviewing court should reflect this ‗tougher mood‘ (!).‖ [Upon remand, the 2d Cir. expressed that it was still at a loss—it couldn‘t find a middle ground between de novo review, and the deference it previously gave to the agency.] Impact of ALJ Findings: APA states that the agency shall have ―all the powers which it would have‖ had the agency, rather than the ALJ, made the initial decision. *APA further states, however, that the ALJ decision is part of the record on review. *Un. Cam—an agency must take into account the ALJ det. when making its final findings of fact. -On Remand—2d Cir. draws a distinction between primary and secondary factual inferences. So, the agency must accept ALJs findings as to primary facts—primary facts are those where there is a direct statement (i.e., This is what happened—―it rained that day‖), but may make it‘s own secondary factual inferences (i.e., b/c it rained,  got wet). This case changes substantial evidence to ―on the record as a whole‖, including things that go against the decision, not just findings that support it. This makes the substantial evidence standard & the clearly erroneous standard essentially the same thing!!! Why do we try to maintain this distinction?? Because Congress uses the terms – courts must try and maintain the moods for each standard. SCOTUS says ALJ‘s findings should be given some weight since they are impartial, experienced observer and whether the ALJ observed the witnesses. Record does not reflect whether testimony was given with a sneer or timidity, etc. The ALJ got to see the witness and drew inferences/conclusions from that aspect. With respect to primary testimonial facts, you either believe them or don‘t believe them – the determinations of these facts by the ALJ are binding. SO, on remand, lower court says that it seems like their job is divide up the facts into primary/testimonial and secondary/derivative – those that are binding and those that are not. Penasquitos Village v. NLRB (9th Cir. 1977) p. 950 Issue arose over whether agency‘s decisions were always subordinate to ALJ‘s findings just because the ALJ was present. Court said yes, Dissent: Credibility/demeanor is unreliable. Witnesses can fabricate demeanor and be the consummate liar. We should not be overconfident—dissent would defer to the agency overturning ALJ so long as there is an explanation (agency must say WHY it came out in a different manner than the ALJ), and not require a clearly erroneous standard. Facts themselves are not inherently testimonial or derivative – must look at all things on the record. Primary/secondary is problematic since facts can be both. In that situation, dissent says, you should go with the agency‘s determination since they have the expertise, etc. Is there an alternative to this?? Agency may not ignore what hearing officer did, but if you don‘t follow it, then explain why you did not follow it. c. Review of Fact-Finding in FormalProceedings – The Relationship of Fact-Finding and Agency Expertise Allentown Mack Sales v. NLRB (SCOTUS 1998) p. 953 (a, is deference dead?, and b, if not using usual meaning of language, state it up front.) Have a company that was bought out by its management, and downsized it. At old company, there was a union—if (as the NLRB ruled) it‘s the ‗same‘ company, the same union would stay in place.  did not want to deal with union, and had 3 options: a) hold a formal NLRB-administered poll, b) hold an internal poll of employees, or c) stop bargaining with union.  can do (b) and (c) only if it has a good faith, reasonable doubt. What is being reviewed? Finding of fact—whether co. had a good faith, reasonable doubt. This is a formal proceeding, therefore, the agency is to be affirmed if its decision is supported by substantial evidence. S Ct. reviews NLRB‘s interpretation of ―good faith, reasonable doubt‖ as ―substantial uncertainty.‖ Substantial Evidence—every employee the managers talked to disavowed the union. S: These statements were all in the context of job interviews, which the NLRB has found unreliable. Additionally, they relied on statements made by employees about other employees; this is contra to a long line of agency precedent. S: Why have agencies then? Who is the court to come in and say that it knows how to better evaluate the evidence? S: How is this different from de novo review. i. S: the ―good faith, reasonable doubt,‖ standard was itself promulgated by adjudication. ii. S: The question now is how far this will go…why did the court apply the test itself rather than merely state what the test is? The court could have defined ―good faith reasonable doubt,‖ then remanded. Instead, it applied the standard itself. iii. This means that if you have a client that wants review, you would argue that Allentown changed the standard. If you‘re the agency, you‘d say the standard is the same, and it was a tough case. Open Question—whether Allentown signals a less deferential standard for substantial evidence. Second part of the opinion—: ―we‘ve always interpreted reasonable doubt as ‗reason for disbelief‘, not ‗substantial uncertainty.‘‖ Ct.: Improper—should be interpreted as ―uncertainty.‖ See dictionary. It‘s bad policy to have NLRB adopt a term, and then use it via an alternate definition. If you‘re going to use an alternate definition, it must be stated clearly (shouldn‘t make people wade through the mush/interpretation to figure out what standard applies). *S: This reason is likely why the court took the case. However, in order to get there, it may have wrecked ―substantial evidence.‖ Not many courts have used this new standard/approach, but be aware that it is out there!! – Judge Easterbrook in 7th Circuit Court in Universal Camera has told us that we should look at the findings on the record as a whole and evaluate if a reasonable person could conclude as the trier did – rather than clearly erroneous which is look at the record and see if it supports the conclusions. What if finder of fact makes a determination that differs from the agency? Universal camera said agency at the very least has to take into account the ALj‘s findings. In response to that, courts have adopted ALJ‘s findings as binding with regards to testimonial facts rather than derivative facts. Problem arises with with one should dominate when things can be considered both, and as dissent in Village case said, why should ALJ be given such weight when witnesses can fool an ALJ as much as they can fool anyone else. Response to that by some judges has been to classify ALJ decision as part of the record. If agency disregards ALJ decision, they must explicitly say why and how it is different – so not bound by ALJ just since ALJ saw the witness. Testimonial fact/evidence – evidence that says exactly the fact to be proved. E.g. witness says it was raining outside and fact at issue was whether it was raining – either you believe the witness or not – nothing to figure out. Derivative fact – e.g. was a driver driving too fast for the road conditions?? There is testimony that the road was wet, there was oil on the road, signs cautioned drivers about slick when wet, the car was driving fast, etc. – All of these things are put together to derive a fact such as was the driver going too fast for the conditions?? d. Review of Fact-Finding in Informal Rulemaking – The Problem of General and Predictive Facts and the Rulemaking Record What do you do with something OUTSIDE the formal §§ 556-57 framework? What standard applies in N&C rulemaking? Arbitrary & Capricious—the fallback provision. See §706(2)(A). What is the difference between this and the ―substantial evidence‖ test? Traditionally, Arbitrary & Capricious was less demanding (so long as you don‘t get laughed at, you are deferred to) ADPSO v. Board of Gov‘s of Fed. Reserve (DC Cir. 1984) p. 965 Bank holding companies were required to get prior reg. approval before engaging in nonbanking activities. Ct.: The standard under the ‗arbitrary and capricious‘ test for review of facts is the same as the standard under the ‗substantial evidence‘ test. (Difference is the open v. closed record.) Why? How are §706(2)(A) and (E), which clearly have different language, the same? Nature of the Record! *Scalia: How can there be? Nothing fits between the two—how can a decision that is not supported by substantial evidence not be arbitrary and capricious? (S (countering): WHY did Congress include 2 different standard if they didn‘t mean it?) (AS: (E) applies to a closed record, and this standard has traditionally applied as such. When you don‘t have a closed record (i.e., rulemaking), you can‘t apply the closed-record standard. In each case, what is required is an agency explanation) -S: ―I don‘t know if I buy this distinction, but it is true that A&C was traditionally applied to legislative matters, whereas Substantial Evidence was traditionally applied to matters that were judicial in nature.‖ -S: Scalia has other problems: Congress USED substantial evidence with respect to informal rulemaking in other statutes—indicates that Congress intended difference in the standard. AS: They didn‘t know what they were doing…(!) 5th, 11th, & 9th Circuits interpret the Substantial Evidence test as tougher than A&C (contra ADPSO)—however, they don‘t say exactly HOW it‘s tougher. (think Frankfurter: ―it‘s a mood‖ v. Scalia: ―if you can‘t articulate a difference, then there is no difference‖). S: if there is a difference, it is that it will accept larger leaps in logic under A&C—but it cannot precisely articulate what this difference is. Reviewing Facts which cannot be proven (i.e., rulemaking) 1) ―Trans-scientific facts‖—either pragmatically or technically cannot be proven; predictive of future event; agency can only explain WHY it acted, but can‘t prove that it was correct in so acting. 2) Current trend (per S: reflecting a distrust of agencies) to require scientifically acceptable data—Data Quality Act and agency action. 3) Nature of the rulemaking record (S: tension w/DQA): a. Congress intended that the record be open to include matters beyond those before the public b. This creates a tension with meaningful opportunity for comment, as there may be no chance to verify sources on which agency relies to draw factual conclusions. c. Policy choice of making record that is before the public, or allowing the record for judicial review to include info not before the agency. A&C standard of review – general understanding is that it has moved from the notion of ―anything that is not crazy passes‖ to having agencies explain from the record how they got to the ultimate findings/conclusions. 9th circuit - Test is less deferential than A&C test. What do you do when the agency decision is such that you have a question where the agency is applying the law and the facts, yet there is still discretion to be exercised in deciding how it comes out. e. Review of Agency Application of Law to Facts Historical basis Hearst v. NLRB (SCOTUS 1944) p. 979 Question of whether ‗newsboys‘ were employees for purpose of National Labor Relation act. If they were, they entitled to unionize. (S: these weren‘t schoolkids—grown men, using their sales to support the family). : These are independent contractors, not employees, and not entitled to unionize. ―Must look to CL definition of employee.‖ Ct.: 1) Employees cannot be a CL definition, b/c that would result in differing administration of the statute in different states—it must be a broader term than a mere CL def. of employee. I #2—Was the agency position (that the newsboys were employees) justified? A mixed question of fact and law—whether the newsboys were employees was a question of fact, but by doing so, it is saying something about what the statute means. An application of law to the facts. Ct.: ―The nature of this inquiry—who is an employee in this context—is best served by a case-by-case basis. This is best left to the agencies, to det. if they fall within the bounds of the statute.‖ (S: This makes it start to sound like a legal issue.) Ct.: As long as there is warrant in the record and a reasonable basis in law, the agency decision will be upheld. (REMEMBER, this is a historical building-block case.) S—indicating that deference is entitled to agency decisions regarding the boundary of law and facts—sometimes, the hair is split fine…S: why did they do that?? Court thinks it is their job to abstractly state a line surrounding employees, and it is up to the agency to figure out where a specific person falls in relation to the line. Over time, the fuzzy areas of the law will get narrowed down with each agency decision – it is the agency‘s job. **This case is the progenitor of Chevron Packard Motor Car (SCOTUS 1947) p. 984 Question of whether foremen on an automobile assembly line are employees under NLRA. Clearly, at CL, foremen would be employees. BUT, for the purposes of NLRA, are these employees (v. management) and entitled to unionize? Boardemployees. Ct.: ―A naked question of law,‖ and the board got it right—affirms b/c it‘s correct, not b/c it‘s entitled to deference. S: Why is this ―a naked question of law‖ when Hearst is not? What is the difference? When are you ―applying law to facts‖ and when is it a ―naked question of law?‖ *If you merely look at the cases you probably CAN‘T find a difference. However, difference may be whether statute indicates a Congressional intent—―so important‖ that Congress must have had a result in mind, and that therefore the court is broadly interpreting a generally applicable law. (S: HOW do you det. when there was Congressional Intent? Ct. implies a ―constructive‖ Congressional intent when it so chooses…) ** This is not the law today. Skidmore v. Swift (SCOTUS 1944) p. 985 People work at meatpacking plant as firefighters; want overtime for time they spent waiting around. Court treated the issue as one of fact, resolved by appropriate findings of the trial court. NONETHELESS, the opinions of the Administrator (stating that waiting time is employment time), as expressed in an interpretive bulletin (manual) and informal rulings were entitled to due respect. Court said because agency has responsibility expertise, they must be afforded some sort of deference – not as much deference as Hearst since there, the agency as given authority, but here, they are not explicitly given a lot of responsibility in these decisions. They have expertise and are given some responsibilities, so courts should resort to them for guidance – weight of the guidance will depend n its reasoning, consistency, etc. Ct. reverses the Trial Ct. for failing to show due respect. S: This is an application of law to fact, BUT this was a private action—how is it that the court cannot make the decision? It‘s not an AdLaw case. J. Jackson: NONETHELESS, the administrator is the expert—his opinion should be entitled to respect. ―The weight of such a judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier & later pronouncements, and all those factors which give it power to persuade.‖ So now, this implements a 3d kind of standard—Skidmore deference. a. Skidmore Principle and Interpretation Issue in Skidmore mostly one of law, or at least, applying law, than fact. No one debated the conditions of employment—only their significance re: overtime pay. b. Resultsome courts deferred to agency interpretations, when there is a long history of a legal interpretation. After Hearst and Skidmore, you have: Questions involving facts with legal implications – 1) court would call it a mixed question and apply Hearst deference standard OR 2) call it a pure/naked question of law and it would be de novo EXCEPT there is a line of cases which, for pure questions of law, you have Skidmore deference (only weight for which it is worthy of). So, for mixed questions: -―Application of Law to Facts‖—Hearst—agency is entitled to deference -―Naked questions of law‖—2 standards: i. De Novo—Packard ii. Skidmore deference f. Review of Agency Policymaking – Reasoned Decision-making and the Presumption of Regularity For policy questions, standard of review is Arbitrary & capricious – the catchall!! ―Arbitrary & Capricious‖--§706 (discretion does not fall into the other categories; the default is ‗arbitrary & capricious‘) S: Agency findings of fact, which are not required by an agency proceeding; OR for trial de novo; OR for any discretionary policy decision ―arbitrary & capricious‖ standard. Citizens to Preserv Overton Park, Inc. v.Volpe (leading case) (SCOTUS 1971) p. 989 Congress passed a statute with the aim to protect parkland from use by building roads. ―If road is fed. financed, then b/f the road is built, it must be reviewed by Sec. Of Trans., and the Sec. must det. that the proposed location is the best location for the road.‖ No hearing req‘d. In Memphis, Sec. planned to route I-40 through a park. Issues raised: a) Secretary merely signed proposal—Sec. did not make findings and did not explain his decision in light of the federal statutes. Ct.: No—there is no req. in the statute or the APA to make the Sec. render findings. (HOWEVER, keep reading… ) b) Secretary did not even make the decision, as req‘d by statute. Ct.: General rule that you can‘t challenge the decision-makers mental processes— presumption of regularity. HOWEVER, keep reading… c) EVEN if Sec. did make the decision, it was arbitrary and capricious Ct.: must look at whatever was in front of the Secretary—the whole record. If he gives no reasons at all, then there will be a trial to det. what Sec. considered at the time. (Effectively, an exception to the presumption of regularity—―if there is no record for the decision, then we will probe to find the real reason for the decision.‖) This has led to agency decision makers providing (some?) reasons—avoid trials! d)  arg.: ―Act committed to agency discretion, and therefore, not reviewable at all.‖ [S: as long as there is law to apply, then there is some constraint to discretion] Black letter result of OvertonReasoned decision-making. Presumption of regularity req‘s the ct. to evaluate the decision based upon the reasons given (presumed to be actual reasons). However, if no reasons are given, the decisionmaker‘s mental processes may be probed. How far does the presumption go? *Nuclear plant straddling a fault in CA; compensation (shock absorbers) was compromised by a engineering screw-up. Nonetheless, the plant was approved by NRC—allegation that the real reason for approval (economic pressure) was not the reason cited. DCCir: the fact that one commissioner has indicated there is a contrary reason for the decision is not sufficient; this would give any dissenting commissioner to much power. S: Under this standard, the only way to rebut the presumption of regularity is through direct evidence—i.e., a copy of a check for a bribe. The record on review— The record for judicial review is what was before the agency at the time it made its decision Exceptions: i. New factual developments [S: PSC makes a rate determination; subsequently, price of oil drops dramatically] ii. Agencies raising an issue or fact after interested parties have had a chance to comment on it. [S: if a petitioner could have foreseen an objection and did not act upon it, they‘re going to lose—cannot ―sandbag‖ agency, and add to record on judicial review. However, if agency does something new, and the commenters did not have a chance to respond, the ct. will allow addition to the record.] Post-Hoc Rationalization a. Overton Park—Ct. must consider official decision by agency, and hence, must ignore subsequent facts unless they were b/f the agency when it acted. b. Particularlycourts cannot credit post-hoc rationalization c. HOWEVER, courts are moving away from this standard of refusal to credit post-hoc rationalization. Some judges will evaluate such reasoning if there are reliable indications that the rationalization was actually studied and a deliberate basis for agency decision. Overton‘s Operational standard—what should the courts require for ―reasoned decisionmaking‖? ** Reasons should be based on relevant factors (as det‘d by statute)  LTV revisited—―a reviewing court shall not require the agency to take into account policies other than those that are included in the statute the agency is implementing.‖  S: In short—an agency need not include policies or statutes other than those the agency administers.  S: There is something to this ―relevant factor‖ test, as restrained by statutes agency administers—eliminates surprises, as perceived by agency, for what is a relevant factor. HOWEVER, should this be the outcome in, say, an ERISA case, where the agency is, definitionally, cross-applying statutes? Agency must not have made a clear error in judgment. This amounts to a reasonable-ness test. Camp v. Pitts (SCOTUS 1973) p. 996 Agency sent 2 page letter saying this is why they made a certain decision. Court said they had to have a trial to figure out what had happened. SCOTUS said no, lower court misconstrued what had happened in Overton – court should look at record, but if no record, then must create one based on historical record of what happened before the agency. So, agency can give brief reasons, and court can review record and consider agency reasons to see if they are adequate or agency cannot give reasons, and then court will hold trial to find out what will happen. Agencies have a choice – a brief explanatory letter or a trial. Most will always choose brief letter with reasons. How far does the presumption of regularity go? Don‘t confuse this with the adequacy of the reasons. Cannot question if it is the real reason under presumption of regularity. Mothers for Peace v. NRC (DC Cir. 1984) p. 998 Case which challenged decision to license nuclear power plant. Plant was approved then built in earthquake prone area. Had plant on special shock absorbers, but they were the wrong size for each side. NRC said it was safe enough even though not ideal, but some on commission disagreed and accused others of giving false reasons for approving the plant. Mothers group got ahold of transcript from meeting. Overton had said generally speaking, given reasons are presumed to be right, but here, you have smoking gun showing other factors influenced decision and reasons given. DC Cir. Decided presumption of regularity was such that they would not look beyond given reasons even in the face of contradictory explanations. S: what would be enough to overcome the presumption of regularity – better have a signed check by briber with a note saying this is to bribe the commission. Must show actual reasons and that the given reasons were something like personal gain (since that shows system has broken down). If given reasons are good enough, then why do we care if they are right or wrong. Remember A&C differs from presumption of regularity!! g. Review of Agency Policymaking – Hard Look Review Hard-look doctrine—what are the courts looking for when they engage in review for ―arbitrariness & capriciousness?‖ Leventhal v. Bazelon debate revisited. Bazelon: i. Courts are not capable of making technical judgments; however, they must ensure that there is opportunity for the creation of a complete record. Procedural Protection. ii. The record will either demonstrate that agency action is irrational, or the agency will prevail iii. Ultimately, public and political process constrain the agency iv. Vermont YankeeREJECTS the Bazelon approach. (S: What‘s left?…see Leventhal) Leventhal: i. Ct‘s have to be allowed to review substance, not to substitute its judgment, but to keep the agency honest. Ct. must steep itself in the facts, and require an explanation. ii. Courts role is to ensure the agencies take a ―hard look‖ at the issues raised. iii. Vermont Yankee left open the question of whether the arbitrary and capricious standard embodies the Leventhal approach… Motor Vehicle Manufacturers Assoc. of US v. State Farm Mutual Auto Insurance (SCOTUS 1983) p. 1002 Secretary of Transportation was charged with implementing passive restraints for cars. Considered airbags and automatic seat belts. NHTSA wanted to ensure use of safety belts—―admission interlock.‖ PO‘ed the populace; Congress prohibited admission interlocks. Next stepNHTSA looked into airbags. Tech. proved a constraint…abandoned airbag approach. 1981 (Carter Admin.)—―we need airbags‖. Reagan election—―this is too invasive…we‘re going to do rulemaking re: rescinding the old rule.‖ After examination, agency states ―passive belts alone won‘t work‖ and abandons the rule, without regard to airbags. Ct.: Agency must consider all relevant alternatives (9-0). i. Agency rejected passive restraints, based upon seat belts…did not consider an ―airbags only‖ rule. Agency needs to explain why it did not consider an airbags only rule. A relevant factor is ―consideration of reasonable alternatives,‖ which includes ‗airbags only.‘ ii. Why is ―airbags only‖ a relevant factor? What does the ct. consider, and how does the agency know what the ct. will consider a relevant factor? Ct.: You previously had an ―airbags only‖ rule (rejected by the ct., and since modified)—you should have known that this was an option. Adequacy of data re: automatic safety belts—agency rejected automatic belts as more expensive than the benefit it would provide. (6-3) i. Some data indicated that people used automatic belts. Agency: ―atypical car buyers—if you pay for it, you‘re going to use it. The average driver will disconnect the belts.‖ ii. Ct.: Agency does not address ―inertia‖—whether people will be too lazy to disconnect automatic belts. This is a relevant factor—agency must consider it. (S: why is this relevant? ‗Cause the judge said so… Agency: how could we have known this?) iii. Agency is allow to use uncertainty (b/c benefits are uncertain, agency will restrain from imposing costs on industry)—however, it must explain exactly how it concluded the benefits were uncertain, in light of the record, and why it did not seek additional information if the record indicates such info would have helped resolve uncertainty. Holding: Agency must consider reasonable alternatives (failure to consider airbags only was unreasonable…who decides what alternatives are reasonable (the Judge!)) and must consider relevant factors (failure to consider inertia of having to detach airbags was unreasonable…who decides what factors are relevant (the Judge!)). [Most people think this is an adoption of the Leventhal position] So what is the Hard look test for arbitrary and capriciousness? 4 aspects (mostly quasi-procedural) 1) Did the agency provide meaningful opportunity for public participation? (informal rulemaking)? Notice and comments (as limited by LTV—―cannot force procedure other than those req‘d by statute/constitution‖) 2) Did the agency consider all reasonable alternatives? 3) Consideration of all relevant factors? (the catchall provisions) Give reasons why you came out the way you did. (Includes any statutory requirements. Additionally, agency must explain why it proceeded as it did—assumptions, technical models, data sets for evaluation, why it drew conclusions from such) *S: These are procedurally oriented—while the ―hard look‖ test is somewhat invasive, it doesn‘t tell the agency it is incorrect—it merely states the agency has not sufficiently explained itself. [Chris—how is this ―only‖ procedural?] 4) Did the agency commit a ―Clear error of judgment‖—we see your reasoning, your logic, and we think it‘s totally incorrect. (see Overton Park). At the end, even if first 3 are ok, court will look to see if the conclusions are erroneous. *S: this is probably substantive (for a, b, and c, the court will require more procedure, and then the agency can return with exactly the same result—for clear error, additional procedure cannot correct the defect). **Ct‘s are reluctant to reverse due to ―clear error,‖ and it was not part of Leventhal‘s original ―hard look test.‖ ***S: USPS—builds a post office in upstate NY. Reports that there would be no resulting aesthetic environmental impact. Ct.: ―putting a tutu on an elephant and calling it a ballerina‖—can‘t say this monstrosity would have no aesthetic impact Is there a better way to determine what is relevant?? What should judges do? LTV – did not give company any procedural opportunity to argue what the case should hinge on, agency just said as a matter of policy X, but 2d Circuit said there is a whole set of policies that come into play like labor policies, ERISA, bankruptcy policies, etc. Should those policies be taken into account?? SCOTUS said agencies cannot consider policies underlying statutes other then the ones that they administer – can‘t consider every statute that might possibly be relevant – agency does not have expertise in those outside areas – if they do, then might create conflicting policies. What makes a factor relevant?? S: Seems odd that agency has to consider all kinds of things, but not other statutes. May come up with conflicting policies, but all of the agencies have to run their decisions by OMB, so presumably President can straiten things out if conflicts arise. Overton park changed standard from overly deferential to tell us why you decided it the way you did. Is it hard look review or relevant factor?? Depends on what court you are in – SCOTUS has never used term hard look. SCOTUS has only applied A&C standard in state farm case. Greater Boston TV v. FCC (DC Cir.1970) p. 1013 Court said it had to involve itself in the record to make sure agency took a hard look at all of the factors. Problem with hard look is extra time and cost to agency and process. Maybe the delay is justified in the quality of the rule being produced. S thinks it is good because it makes agency consider all views. But, doesn‘t bringing in a lot of experts water down the effectiveness of the agency‘s decisionmaking scope by making it too broad. S says that you can‘t just have the agencies be experts in one area – that puts blinders on them with regards to certain things and may have biases. Could the hard look test lead to poorer quality agency decisions since judges substitute their inexpert opinions for the agency‘s decision?? S says that when you require people to explain their decisions, people do a much better job of making decisions. S: executive and legislative branches love the hard look test – OMB has oversight, and Congress has oversight – maybe stems from distrust of agencies. h. Review of Agency Policymaking – An Evaluation of Hard Look Review ―Invasive‖ judicial review— a. 25-30% of rules that are challenged under this basis are reversed b. Decreases flexibility—leads to agencies incurring additional costs due to increased study, analysis, time, and staff to consider additional factors before promulgating a rule—ossification of rulemaking. *Ossification  i. Agency Uncertainty (―will this pass judicial review‖?) ii. Delay & Increased cost of rulemaking (commenter strategic behavior (tons of comments) & adversarialism; Paralysis by analysis) iii. Poorer Quality Decisions (?) (allows judges to substitute their preferences for agency judgment, and this results in no perceivable improvement of agency rules) Result—provides incentive to avoid rulemaking Alleged impact on use of rules: a. Rulemaking becomes protracted & costly b. Agencies try to avoid notice & comment (instead, make by policy by less-than-informal rulemaking or adjudication) c. Agencies avoid changing policy if issues raised are controversial. S: Doesn‘t the emphasis on explanation result in pushing the real power down from the agency heads to lower level bureaucrats, who control the information? Air bag case—criticism: court wanted science when the issue was political. If the issue is political, then shouldn‘t the check be the political branches (i.e., the president)? 2. Suggested alternatives: a. Return to original understanding of arbitrary and capricious review (pass-fail review) b. Substitute fast-track political review c. Leave it totally to politics 3. S‘s response to criticisms of hard look review 1) Prevalence of judicial review is overstated: *S (off the cuff)—frequent statement in law reviews (up until 2 years ago): ―virtually every EPA rule is challenged in court, and 30-40% of these rules are overturned.‖ However, empirical analysis has shown that this isn‘t true—3% of all rules & 20% of notice and comment rules; 35% of ―important‖ (controversial) rules are challenged. *Even with rules that are challenged, not all are challenged on arbitrary and capricious grounds. *Further, rules that are challenged are not reversed as frequently as the LR critics argue 2) The polity demands analysis & deliberation *People don‘t want glib, purely political decisions. 3) Data on number of rules indicates that the pace of rulemaking has not slowed down. *While cost and delay may be real (though delay may not be bad), there might not be a real institutional incentive to fail to promulgate rules. 4) Court can only remand and agency usually essentially reinstates the rule. S: ―Psychology of Accountability suggests hard look review improves agency decisionmaking‖— *Predictions that ossification will lead to poorer policies in specific instances have proven false. S‘s bottom line: the real issue is the cost of ossification v. the benefit of better decisionmaking. 1. i. Review of Statutory Interpretation – The Chevron Test Perversity arises out of Chevron – more deferential towards agencies on issues of law (statutory interpretation) than on issues of policy. Chevron USA v. Natural Resources Defense Council, Inc (SCOTUS 1984) p. 1026 Facts—dealing with sources of air pollution under the EPA. ―New Source Performance Standards‖—new sources have to use better technology. Question is, what if you take an old plant and increase the output—is this a new source? Shouldn‘t you allow for revamping old sources? Wouldn‘t this create incentive to leave belching dinosaurs? Led to ―Bubble concept‖—can increase capacity, so long as the total pollution is equal or less to that emitted from the original facility, even if it would not comply with the ―NSPS‖. Issue: Whether ―bubble‖ is consistent with the CAA ―stationary source‖ definition—EPA constructs ―stationary source‖ to be an entire facility (―bubble‖), while each source w/in a facility is conceivably a ―stationary source.‖ Lower court looked to policy—what was purpose of the act; adopted a ―static judicial def. of the term ‗stationary source‘ when it had decided that Congress itself had not commanded that def.‖ Essentially, it‘s ambiguous, and I‘ll resolve that ambiguity in accord w/ the policy of the act. Ct.: We agree the act is ambiguous, but it isn‘t your job to decide ambiguities. ―The ct. does not simply impose its own construction of the statute—rather, . . . if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency‘s answer is based on a permissible construction of the statute.‖ 2 step inquiry for an agency interpretation of a statute it administers: I. Is the statute silent or ambiguous with respect to the question facing the agency? (if no, the ct interprets the statute in accordance with its meaning on this issue) II. If yes, then the ct. defers to any permissible/reasonable agency interpretation. Chevron Questions: i) sources of law at step 1 – text of statute (and structure/context) and legislative history (for some judges). You almost never see the purpose of the statute used at this step (since this got the DC circuit in trouble in the first place in Chevron). Cardozo-Fonsecca – next case that SCOTUS dealt with agency interpretation – Chevron would have seemed to apply, but Stephens says it only applies where agency applies law to facts. In addition, even when applying Chevron, the court gets to use all the ordinary tools of statutory construction at step 1. Is Chevron a canon of interpretation?? Generally, courts will let canons be used at step one. ii) level of activism at step 1 - what if the text might not be ambiguous? At what point does a judge decide whether to go on to step 2? This has minimized the impact if Chevron on judicial activism. Also, precision of the issue will bear weight on whether the statute is ambiguous or not. iii) level of deference at step 2 – what is meant by reasonable or permissible interpretation? 2 approaches – 1) some people see step 2 as an extension of step 1 (in step 2 will go further to look and see if agency got it right using legislative history, etc.) 2) step 1 means that the statute is ambiguous or silent to the issue, but there are still bounds on what the agency can do under the meaning of the statute. Once you say there is discretion (no dictation by meaning or intent of statute) then you can have a choice of picking policy. Deference here is closer to A&C standard – 99% of cases here pass review. 1 SCOTUS case where they held the statute was ambiguous with respect to meaning, and the agency lost at step 2. Involved competition between telephone companies. Companies wanted to rent wires to other companies. FCC had to figure out what was necessary equipment to become a telephone company and rent wires. FCC said just needed to open an office since offices are necessary. Court said necessary was ambiguous term, but whatever it is, by using the word, Congress meant it had to be something outside of what every business has – otherwise there is no point in using that word. iv) exceptions to Chevron – different judges use different sources. Should canons of interpretation be used?? There are linguistic canons (expressio unius – you meant to leave it off the list); S thinks Chevron doctrine should take precedence over linguistic canons. If you need a canon, then you should admit it is sufficiently ambiguous to leave it to the agency‘s discretion. S thinks occasionally on canon SHOULD trump Chevron deference - if two interpretations are raised, and one raises a tough constitutional issue, then the non-problematic interpretation should be chosen. If the idea behind Chevron is an idea that Congress assigned something to an agency‘s discretion because there is accountability, then aren‘t we talking about the exact same issues that come up under the A&C standard – why don‘t we just do the hard look analysis at step 2?? Agency should tell how their decisions and reasoning makes sense. Activisim at Step One—two fundamental choices: *If a judge is able to decide what she believes is the meaning of a statute, she should vote for that meaning rather than defer (more active—―If I can figure a meaning, I vote for it‖the current trend; Scalia: ―Chevron is not an abdication of responsibility—if I can decide a meaning, I‘ll vote for it‖) -OR: *If a judge concludes that reasonable jurists could disagree as to the interpretation wrt the issue facing the agency, she should find the statute silent or ambiguous and defer to the agency. (less active) i. S: leads to absurd results—5-4 decision, with the majority and minority each having a diff. interpretation, but yet, they don‘t find ambiguity. ―You can always find some clear meaning.‖ ii. Exam tip—―Using the traditional tools, here are two approaches, depending on how active you want to be‖, then discuss the ramifications of activism/less activism. *Arg in favor of less active approach: agency expertise, agency accountability; agency as a policy-making organ, v. judiciary; *Arg for more active approach: judicial role in ―saying what the law is;‖ separation of powers (formalism); prevents abuse / runaway agenciespower capture; political rent seeking j. Sources of Meaning Under Chevron’s Step One MCI v. ATT (SCOTUS 1994) p. 1052 FCC made tariff-filings optional for all non-dominant carriers (i.e., change of manner in which FCC regulated rates. [tariffs are rates and conditions of service, in this context]. Previously, the FCC would review tariff filings for reasonableness. The statute didn‘t change, but the style of regulation did [become more competitive, compared to ATT‘s near-monopoly when the statute was enacted]). Problem—statute required that all carriers had to file tariffsinflexible approach to rate regulation, and discouraged entry of non-dominant carriers into the market. ATT sues only carrier subject to this new interpretation  sued based on inconsistency of agency practice w/language of the statute: ―every company must file tariffs.‖ : Statute states ―FCC may modify its reg. regime as the public interest requires.‖ Here, this is what the public interest requires—not requiring tariffs for non-dominant categories is in the public interestencourage competition. Issue: whether ―modify‖ can encompass this kind of wholesale change in a regulatory scheme? Ct. (Scalia): ―Modify‖ does not mean to change wholesale; it means to tweak, make minor changes. Clear Meaning! (While this rule is economically sensible, it isn‘t consistent with the statute)based upon ―clear meaning‖ as det‘d by 5 dictionaries (and expressly ignores a different dictionary definition of ―modify.‖) Discussion: This is a case of why Chevron could be good—have an agency that‘s on top of the political environment and is reacting to dynamic changes, and have a court that overrules based upon construction of the 1934 meaning of the statute. In class??? FCC comes along and says for purposes of regulation, they issue notice & comment regulation that internet access is not telecommunications access. 9th Circuit says they have already addressed the issue that cable access to internet is covered – SCOTUS says although 9th circuit has already interpreted it, that the agency should not be blocked from Chevron deference – when a circuit court decides issue of law that an agency can determine, the circuit court‘s determination should not prevent agency from getting Chevron deference and being able to promulgate rules/interpretations, etc. Scalia dissent says they should have given agency deference to begin with the first time – basically now an agency can overturn a judicial decision/interpretation. *Example of Hypertextualism.—active ct. at step 1. Rust v. Sullivan (non-active ct. at Step 1—downplays canons)—Can HHS impose gag rule prohibiting all individuals in family planning clinics receiving fed. aid from discussing abortion? (Highly political rule; also has First Amd. ramifications—Dr.‘s: ―You can‘t dictate what we tell our patients, just b/c you‘re providing funding‖) Ct.: Court deferred to agency rule via Chevron; Court ruled that the HHS interpretation did not raise a significant con. question; *Canon that the ct. shouldn‘t decide cases that have constitutional ramifications if they can be avoided—downplayed ―not a sig. Con. issue.‖ FDA v. Brown & Williamson Tobacco (SCOTUS 2000) p. 1065 (Textualists ignoring plain meaning)—FDA wants to regulate cigarettes as a ―drug delivery mechanism‖, per statute that says they can regulate drugs. Previously, they didn‘t think of cig‘s as a drug; however, they learned that cig‘s were, ―as a matter of intent,‖ designed to be a drug delivery device. Ct.: The assumption has always been that FDA does not have authority to reg. tobacco, and therefore, Congress has always vested the authority to reg. cigarettes with the Dept. of Interior. -Why the deviation from plain meaning? (S: Scalia is two-faced…) Ct. relies on context—Congress had passed other statutes that would not make sense if FDA had authority to regulate… (S: Why not make the agency pay the cost? ) S: thinks this is not hypertextualism this is ANTI hypertextualism. It is clearly within the plain meaning of the statute! S. thinks this is activism and Court also might have looked at tobacco companies that contribute a lot of money to political campaigns, etc. In Chevron: Chevron (cont.)- Step 1: Tools of statutory interpretation. All Judges use text. They also may use statutory context, legislative history (Scalia will not all others will, besides maybe Roberts and Alito). Two views: Scalia- I don?t care if judges can find reasonable alternatives, as long as I see there is a best answer then I am going to vote for this. I don?t care if I?m uncertain about it. Others- If I can envision that reasonable judges can find ambiguity or silence then I will go with agency interpretation. Activism at Step Two—Fundamental approaches i. Extremely deferential: Ct. reverses only if it finds that the agency interpretation ―fails the laugh test at the Kennedy School of Gov‘t.‖ Rust v. Sullivan. This is the standard ct‘s generally use.S: The problem is this mixes up a standard of review with a standard of decision-making, with the result being that the most crass knee-jerk politics (everything bad about interest group politics) is okay. ii. Ad hoc det. of deference—court reverses if it finds that the interpretation falls outside the bounds allowed by the silence or ambiguity. ATT v. Iowa Utilities Bd. (only case where agency has been reversed at step 2) (S & Chris: how is this different than a step 1 analysis?) iii. Reasoned Decision-making (arg‘ed for by commentators)—Ct. requires the agency to explain why it chose the interpretation it didpromotes deliberative democracy; additionally, even if this passes Chevron‘s step 2, still should be challengeable as arbitrary & capricious, yielding to the hard look test (S: this is not the actual practice of the ct. actual practice is ―if you win at step 2, it is not challengeable as arbitrary and capricious.‖) k. To What Decisions Does Chevron Apply? When to apply Chevron—is there an alternative? S: Remember that, before Chevron, the ct‘s employed ―Skidmore‖ deferencethe judge states ―I am responsible for ultimately det‘ing the law, but if the agency is consistent, reasonable, etc., I will give their interpretation some weight.‖ S: In order to understand these models, must analyze the underpinnings and models of Chevron. i. FormalistS rejects—Congress would be the experts, with the agency merely implementing Congress‘ will. ii. Expertiseseems to call for broad Chevron deference, due to notion of agency as experts iii. Legal ProcessAgency would get deference if you can show Congress intended to defer to agency, and the agency followed the appropriate/intended procedures. iv. v. Pluralistic DemocracyCt. should always defer to agency, b/c agency is politically accountable (optimist). Limitation might be keeping interest groups from paying monopoly rents. DeliberativeDefer to agency due to increased accountability; ct.‘s role is to ensure that the agency actually deliberates and does not merely kowtow to interest groups. Christenson v. Harris Co. (SCOTUS 2000) p. 1081 Does the min. wage law allow state and local gov‘ts to req. employees to use comp. time rather than force the employer to pay cash compensation? Dep‘t of Labor issued an opinion letter interpreting the statute as prohibiting gov‘ts from ordering employees to use comp. time. [This is an Interpretive Rule]. Is this opinion due Chevron deference? DC Cir (Thomas was the judge (before he became a justice))—―This is not a Chevron case—we will apply Skidmore deference, b/c this was an interpretive rule w/o the force of law. Additionally, we‘re not persuaded by the agency‘s interpretation—agency loses…‖ *S: This IS Skidmore—the Dep‘t of Labor does not have the authority to issue rules in this context—all it can do is prosecute. What this says: ―If agency does not have ultimate authority (Congress reserved it), Chevron does not apply.‖ S: This knocks out the expertise argument as a justification for Chevron; if anything, it advocates legal process ―Congress didn‘t give them the job, then they can‘t do the job…‖ **This is a limited case—does not address what to do when agency DOES have rulemaking authority, and chooses not to use it—is this entitled to deference, since Congress HAS delegated the authority? US v. Mead Corp. (SCOTUS 2001) p. 1068 (Ct. adopts legal process model—―a matter of intent‖) Touchstone of Chevron deference—―statutorily conferred authority and other statutory circumstances‖ imply that ―Congress would* expect the agency to be able to speak with the force of law when it addresses ambiguity in the statute, or fills a space in the enacted law‖implied intent. *S: This is looking for ―Constructive‖ intent, rather than ―implied‖ (meaning actual, intended) intent to fill in the gaps. [This is S‘s minority viewmost folks would say this is a matter of implied intent.] Mead - As a matter of legal process, have to construct intent of Congressthis is evidenced by the USE of the process, i.e., Notice and Comment. If the agency has not used authority as conferred by Congress, the agency does not get Chevron deference—that is, if the agency promulgates interpretive rules, it is entitled only to Skidmore deference. **NOTICE AND COMMENT IS THE TOUCHSTONE OF IMPLIED INTENT -S: How do you know when Congress would expect the agency to speak with the force of law? Mead—a matter of Congressional intent; to determine that intent, look to see if Congress gave the agency authority to act with the force of law. Next,What does it mean to speak with the force of law? Of course, formal* proceedings and notice and comment would satisfy this test. *S: What does ―formality‖ have to do with the force of law? What about emergency rules? Problems with Mead as stated a) What does it mean to have ―Force of Law?‖ -―Binding effect‖—Rules and adjudications have binding effect on parties w/in bounds of the order; courts can enforce this. -Influence on subsequent cases—orders have force of law if they have both direct binding effect and precedential value. *Do interpretive rules have binding effect? No. But they do have precedential effect. b) At issue in Mead—a ruling letter (for importing notebooks); by statute, they have no precedential effect, but they do have binding effect for the parties. The court says this is insufficient for ―Force of Law‖S: does this mean you need both precedential value and binding effect in order to have the force of law? c) There is ambiguity about what Mead means in the abstract—what does ―Force of Law‖ mean, since the ruling letter clearly was binding upon the parties to the transaction. Problems with Mead as applied—what Mead does. a) ―Touchstone is N&C and Formal Procedure‖ S: What does formal procedure have to do with binding effect and precedential value? NOTHING. There are plenty of agency practices which are binding AND have precedential value and are NOT done through formal procedures—an order is an order is an order. b) ―Many different offices can issue ruling letters‖ S: What does this have to do with the force of law? A party is just as bound by a ruling letter from a local office as from headquarters—clearly binding. Also, has some precedential effect, as the agency must explain why it takes a different position. c) S‘s minority position: ―Mead said force of law, but didn‘t mean it. Ct. was concerned that agencies were getting deference when it may not have carefully considered the matter. Ct: ―We want the agency to 1) carefully understand that it will have precedential effect; 2) done at a level where there is political accountability (and not done surreptitiously), and 3) make the rule with care.‖ S: These have nothing to do with the force of law—more of a reasoned decisionmaking. d) Result of Mead—case-by-case determination of whether the type of ruling warrants Chevron def. *Type of ruling = class of rulings authorized by regulatory scheme (broader than the individual action, but narrower than the procedural categories under the APA (formal, informal, less than informal, rulemaking or adjudication). Open Questions after Mead—does Chevron deference apply to: *Informal adjudication? (Binding, precedential, but don‘t use formal procedures—what result?) *Formal adjudications like SS disability rulings? (Order, binding, precedential, but 1200 ALJs making thousands of ruling a year—what if a few of these slip by? Owed Chevron deference?) *Legislative rules made under the ‗good cause‘ exception to §553? *Guidance documents issued pursuant to explicit statutory authority? Feder: Aren‘t all of these only factors to weigh—binding effect, precedential value, formal procedures, and many different offices? S: I agree—we are the minority view. The vast majority of the commenters have focused on what the Court said in the abstract—focus on ―Force of law.‖ Scalia’s Dissent a) If ―Force of law‖ is the test, why does procedure matter? b) Pragmatically, rejection of Chevron implies acceptance that judiciary is ultimately responsible for filling statutory gaps. *Lose flexibility and accountability in gap-filling interpretationi.e., if someone challenges an interpretive rule before it is subjected to N&C rulemaking, and the rule is overturned, the court has said what the law is—the agency can no longer change its mind; it cannot promulgate N&C rules. *Perverse effects, depending on whether court decides issue before or after agency issue a legislative rule. Increases agency authority because Skidmore deference applies to step one as well as two. c) Mead: When does Chevron apply? If not Chevron, then Skidmore!! Factors to consider: 1) ―force of law‖ (never explained) binding in general ---------------- binding for this (no precedent; binds only parties) 2) formality of procedures required 3) who is authorized to make interpretation? Is it centralized?? Less centralized decisionmaking maybe means less deference since you don‘t want random decisions to be given deference. Breyer‘s approach, tries to undermine Chevron but ends up mucking up Mead. Why does procedure matter?? Formalism and Ritual? Everyone assumes Skidmore is less than Chevron, but that is not always the case (under Chevron, only defer if the statute is not clear, while under Skidmore, the deference exists even if there is a meaning in the statute). Barnhart v. Walton (SCOTUS 2002) p. 1085 got tricky – person got disabled and got disability payments under assumption he would not work for 12 months – after 6 months he was able to work. Agency wanted money back – After suit was filed, agency held notice & comment rulemaking that determined agency decision was right. Court found informal adjudication was backed up by notice & comment, so Chevron applied. Opinion does not distinguish between the two procedures. Mead/Christensen Formal rulemaking – Chevron Informal rulemaking – Chevron (Barnhart – maybe not always Chevron) Formal adjudication – Chevron (??SSA formal adjudication??) Informal adjudication – ?? Guidance docs - Skidmore (Judge Easterbrook case – not always Skidmore) Some LR articles (Merrill approach) say the touchstone for whether Chevron deference is given is the ―force of law.‖ Concept of force of law is Formal and Informal rulemaking and adjudication (not guidance docs). 1) What is the impact of affirmance under Chevron? Before Chevron, if agency interpreted statute, then courts would look at statute and agency interpretation, and maybe give Skidmore deference, but the court would reinterpret the statute and that would become law from that point on. Now, the court gives the agency a dispositive answer on what the statute means if the statute is not ambiguous under step 1. Under step 2, the court passes on whether the interpretation is acceptable. So, pre-Chevron, court‘s intepretation is the law, post-Chevron, court decides if interpretation is reasonable, and agency can still change it later. 2) Thomas Jefferson/ Auer deference to interpretations of regulations. When agency interprets its own regulations, it gets even more deference. Must be given controlling weight unless it is plainly wrong – they wrote it, they should know what it means (Jefferson & Auer). What if the statute says the agency may modify the prescriptions of the statute and the agency passes a regulation that says they have the power to modify the prescriptions of the statute. The agency can then interpret its regulation and be given more deference than under Chevron with statutory interpretation. Courts make exceptions excluding these higher deferences from these situations – applies only when there is a real regulation (Non-Much policy)