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INTRODUCTION

AGENCIES: THEIR ORIGINS, FORMS, AND FUNCTIONS

WHAT IS AN AGENCY?  “agency” is dependent on the meaning of “authority” o the meaning of “authority” is unclear  a unit of the US government is an “agency” for purposes of the federal APA if the unit is sufficiently important to be called an agency

WHERE DO AGENCIES COME FROM?  Agencies are created by their an organic act promulgated by Congress

THE STRUCTURE OF FEDERAL AGENCIES  Two agency distinctions o All agencies are either single-headed or multi-member . All Cabinet-level agencies are single-headed, while most, though by no means all, of the alphabet-soup agencies that broadly regulate economic activity are multi-member boards or commissions o The second structural distinction among agencies concerns the manner in which the head or heads of an agency can be removed from office. . Agencies whose heads are subject to unlimited presidential removal authority are generally referred to as executive agencies. . Agencies headed by persons who the P cannot remove at will are generally called independent agencies.  Designed to insulate the agencies from presidential control  All of the major multi-member boards are independent, and almost all of the single-headed agencies are executive.  The distinction between rulemaking and adjudication may be the most critical distinction in all of administrative law. o R . Produces a rule…abstract effect  more like legislation . General and prospective generally . Procedural DP does not apply o A . Produces an order…concrete effect  More like a court decision . Specific and retroactive generally . Procedural DP applies  Londoner and Bi-Metallic o Agencies engaged in rulemaking are not subject to any procedural due process constraints; whereas, agencies engaged in adjudication are subject to constitutional procedural due process constraints

1 . Rulemaking…due process doesn’t apply . Adjudication…due process applies . Generality/specificity is a better indicator that prospectivity/retroactivity when determining rulemaking/adjudication

551(4)-(9) (1946)  (4) "rule" means the whole or a 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, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefore or of valuations, costs, or accounting, or practices bearing on any of the foregoing; o “includes…foregoing” . exception to…agency approval is a license (approval, charter, certificate, charter, etc.) and thus always adjudication  the approval of ratemaking, financial structures…rulemaking o in these situations, the big number of parties involved would cause a nightmare with regards to all the procedures that come with adjudication o “rule…agency” . rulemaking can be “general” or “particular”  if you are technically following the APA, you cannot look to the generality when determining R/A  (5) "rule making" means agency process for formulating, amending, or repealing a rule; o rule making is making a rule  (6) "order" means the whole or a part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rule making but including licensing; o People in practice are much more casual about how they talk about orders… “order” used loosely does not always mean we are talking about adjudication o The definition . Negative, rather than positive . Exception…licensing  Licensing means we are dealing with an order, and thus in turn dealing with adjudication  (7) "adjudication" means agency process for the formulation of an order; o adjudication is what issues an order  (8) "license" includes the whole or a part of an agency permit, certificate, approval, registration, charter, membership, statutory exemption or other form of permission; o any time an agency grants permission, an agency is issuing a license, and because licensing involves an order, the agency must be adjudicating . any time an agency gives permission it is engaged in adjudication  this takes one broad category out of the rulemaking/adjudication debate

2  (9) "licensing" includes agency process respecting the grant, renewal, denial, revocation, suspension, annulment, withdrawal, limitation, amendment, modification, or conditioning of a license;

Executive Order 12866 § 3(D)  “Regulation” or “rule” means an agency statement of general applicability and future effect, which the agency intends to have the force and effect law, that is designed to implement, interpret, or prescribe law or policy or to describe the procedure or practice requirements of an agency. o Rule… “general applicability and future effect” . Congress has disregarded the “or particular” part of the APA definition for a rule  Why hasn’t this forced admin law into incoherence? o R/A distinction is generally made by common sense o Many situations are decided by statutory fiat o Courts often ignore APA definition . SC has never decided a case turning on the APA definition of a rule

Recap  APA is not really too useful in the R/A debate, except when regarding licensing = adjudication and ratemaking/financial structures = rulemaking exception  something can look like a rulemaking or adjudication depending on your perspective o one’s perspective of the facts can determine how the ruling comes down

THEORIES OF AGENCY BEHAVIOR

 Madison, 1787 o Human nature is bad and government officials are just a subject to it as anyone else o Consequences of this view . Limit the role of each branch . Protections for the public from the government authority . We need to be able to remove agency officials if they are not doing their job o Madison would have been suspicious of wide government power and would have been for wide legal controls of government’s ability to act  Eastman, 1928 o Progressive view o Agencies are nonpartisan o Not as much of a role to control agency behavior. The agencies have the scientific expertise to do what they need.  Landis, 1938 o Takes progressive view one step further…Landis thinks that agencies should have power to set policies, rather than simply implement them. . Thus, Congress should really instill just very general statutes . Landis thinks agencies can be as unbiased as judges

3 o This view is more extreme than other views, but has driven the production of admin law in the 30s, 40s, 50s . This sentiment shifted in the 1950s  The public became more skeptical of agencies in thinking that they did not always act in the interest of the public.  Bernstein, 1955 o “. . . [T]he agency ordinarily begins its administrative career in an aggressive, crusading spirit. . . . In the period of maturity, . . . [t]he approach and point of view of the regulatory process begins to partake of those of business management. . . . The Commission becomes more concerned with the general health of the industry and tries to prevent changes which adversely affect it.” o Life cycle view . Aggressive…complacent…pro-industry view  Noll, 1971 o “In theory, regulatory commissions are composed of neutral, objective experts on the affairs of the regulated industry and on the public interest in the behavior of the regulated. In practice, appointees to commissions must have the tacit approval of the regulated industries.” o Takes a more cynical view . Industry capture model o Thinks agency will always act in their own interest if left to do as they please  Wilson, 1980 o There is not one single thing driving agencies at a particular time o Agencies are somewhat self-interested because they are risk averse . They overregulate to cover their flanks o Not that many barriers in the 1980s to challenge agency action o There is a little bit more accountability, and thus agency is limited in promoting a pro-industry bias

THE CONSTITUTION AND THE ADMINSTRATIVE STATE

CONCEPTS OF SEPARATED POWERS  Madison… o We need this separation of powers in order to preserve individual liberty . Ambition checking ambition o The members of one branch of government should have as little role as possible in appointing members of another branch o One branch should not be dependent on another with regards to setting their salaries o Government should not do a whole lot  Admin agencies assert all three forms of power: legislative, executive, and judicial

Looking Constitutional provisions

Recap  Profound distrust of power

4 o Even paranoia . Fed governments power is limited in two ways:  Enumerated powers  Separation of powers o Nondelegation powers… . CON is not totally rigid  VP breaks Senate tie . The notion that human nature is bad…  Need for political accountability o Checks and balances o Divide and conquer solution . Federalism  Preserving power of state governments  Vertical limitation . Separation of powers  Horizontal limitation  Ambition should counteract ambition  Checks and balances  Formalist view v. functionalist view of government/CON o Formalist . Instruction manual  Explicit delegation of power . Follow it verbatim  Focus on black letter law o Functionalist . We need to look at what works well  CON is not meant to be completely rigid . Pragmatic, but does not disregard the CON . We need agencies but still must pay attention to how they work within the CON . More concerned with one branch of government taking away power away from another . Not as concerned about a separate entity having power  They are okay with a fourth entity (i.e. the admin branch)  Unfortunately, the SC has vacillated between the two views without saying it is doing so  Landis view of government o Agencies must have vast power for federal government to work o CON is outdated and does not work that will in the modern admin state

AGENCIES AND ARTICLE I  “nondelegation doctrine” … the standards for determining when Congress has crossed the constitutional line between delegating legislative authority and simply allowing executive and judicial actors to carry out their constitutionally prescribed functions.  Congress cannot simply delegate its legislative authority to other branches o This notion comes from the idea of the separation of powers 5  Where congressional authority ends and executive authority begins is important for the administrative state

Before the New Deal  4 cases…main take away o No instance of the SC finding a case unconstitutional on non-delegation grounds . SC has only found statutes unconstitutional on non-delegation grounds twice…  Dealing with the same statute…NIRA

The New Deal  Panama Refining Co. o The Industrial Recovery Act violates non-delegation doctrine o Policy set is way too broad . No “intelligible principle” or policy delegation o Standard/Doctrine . There must be some specific policy statement tailored to the P action at issue  It cannot be general  The policy must be specifically relevant to the policy at issue  A.L.A. Schechter Poultry Corp. o Violation of non-delegation doctrine . No real restriction on the P’s discretion  No specific limitation  Delegation is saying what he can’t do, but not any real clear indication of what he can do or is limited to doing . Even though there may have been general understandings of fair competition, the P is not really restricted by this code . Congress is basically telling the P to go out and do anything he deems wise for a given industry

After the New Deal  Mistretta o The “intelligible principle test” applies to congressional delegations. As long as the act by Congress includes an intelligible principle to which the delegee is directed to conform, the legislative action is not a forbidden delegation of legislative power. The Supreme Court of the United States has ruled it “constitutionally sufficient if Congress clearly delineates the general policy, the public agency which it to apply it, and the boundaries of this delegated authority.” o Summary of Mistretta majority . Major ND case of the day . The ND doctrine is only going to apply to cases as egregious as Schechter  S may still be good law after M, but P will probably not still be good law  Panama and Schechter…no policy, constitutional problem o Broader language than Mistretta

6  Mistretta…only if there is no policy, constitutional problem o Only in the extreme Schechter situations, will there be a problem . Mistretta goes a further than Panama and Schechter  More consistent with functionalism than formalism o It works best this way  Constitutional avoidance doctrine o Interpret a statute narrowly so as to avoid any constitutionality issues . SC may interpret a statute more narrowly rather than explore a ND challenge

Life after Mistrtta  Whitman o D.C. Cir. case o Court is not really trying to change much from Mistretta o the more important/general (rather than specific/small) the issue, the more substantial the guidance must by given by Congress . small matters…almost never will be a ND problem…Court does not even really have to give much policy guidance . bigger matters…really specific criteria not really necessary

Recap  Mistretta…only if there is no policy will there be a ND problem o Key modern case  Schechter probably still good law o Unclear for Panama

Controlling Delegations  US CON, A1S7 o Clause 2: “Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States; If he approve he shall sign it, but if not he shall return it, with his Objections to that House in which it shall have originated, who shall . . . proceed to reconsider it. If after such Reconsideration two thirds of that House shall agree to pass the Bill, it shall be sent . . . to the other House, by which it shall likewise by reconsidered, and if approved by two thirds of that House, it shall become a Law. . . .” o Clause 3: “Every Order, Resolution, or Vote to which the Concurrence of the Senate and House of Representatives may be necessary (except on a question of Adjournment) shall be presented to the President of the United States . . . .”  The process provided under A1S7 is difficult to get through, so Congress created other mechanisms for controlling the authority delegated to agencies… o Statutory overrides . The most straightforward way for Congress to control agency discretion is simply to override, by statute, agency decisions with which Congress disagrees. In extreme cases, Congress can amend the organic statute to eliminate altogether the agency’s discretion – or even the agency itself. Less dramatically, Congress can leave in place the agency’s basic authority but

7 overrule, on a case-by-case basis, specific exercises of that authority. o Legislative veto . Ordinarily, legislative overrides take the form of statutes and thus must clear the constitutional requirements for legislation: passage in both houses of Congress and presentment to the President. This process is deliberately cumbersome and fraught with political obstacles. A more attractive device for Congress is to give the agency discretion that is conditional on subsequent approval, or lack of disapproval, by Congress, the House or Senate alone, or even legislative committees. Such a mechanism, popularly known as a legislative veto, allows Congress to reserve to itself, or to some component of itself, the power to override agency decisions without going through the full article I legislative process. This device became enormously popular in the half-century before 1983, finding its way in some form into nearly 200 federal statutes. In 1983, the SC dealt the legislative veto a powerful blow…  Chadha…Presentment o Congress tried to put a check on this power by forcing the AG to write a report o Court held it was unconstitutional . Violations of bicameralism principle and the Presentment Clause  Presentment Requirement o Uniformly accepted that the P has a role in the legislative process o specific procedures are given to limit the power of legislation afforded to Congress . Bicameralism  a House cannot take action by itself  Peoples’ rights are protected by the bicameralism requirement o When are these requirements not going to apply to action by Congress? . There may be sometimes when Congress acts non-legislatively . Here, Congress is acting legislatively o 4 provisions in the CON that explicitly specify when both Houses do not need to act . this does not fall under one of those instances…thus, bicameralism applies o Decision is more formalist than functionalist

 Constitutional Means by which Congress can Influence Agency Action o (i) Enact statutes that cabin agency discretion. o (ii) Limit overall appropriations of money to agencies. o (iii) When appropriating money to agencies, prescribe how that money is to be spent. o (iv) Express detailed views with respect to how a particular statute is to be interpreted within that statute’s legislative history.

Recap  Article 1 limitations o ND doctrine…Mistretta o Chada

8 AGENCIES AND ARTICLE II

 Appointments Clause o A2S2C2: “[The President] shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, [(i)] in the President alone, [(ii)] in the Courts of Law, or [(iii)] in the Heads of Departments.” o House of Representative really has no role in appointing  Questions raised by appointments clause o (1) Who are officers? o (2) Who is a principal officer as opposed to an “inferior officer”? o (3) Who may exercise the appointment power with respect to each officer? o (4) Can Congress alter the duties of existing officers without following constitutionally prescribed appointment procedures?  Tiers of analysis for appointment problems o Are employees officers at all? . Officers v. employees o Are they principal officers? . Principal officers v. inferior officers

APPOINTMENT OF AGENCY OFFICIALS

 Buckley o An officer of the United States is “any appointee exercising significant authority pursuant to the laws of the United States.”  Landry (DCC) o ALJs are mere employees because they did not have final decision power o Found “significant authority” test from Buckley to be not that helpful o Freytag (US SC) . Special trial judges…different from ALJs  Special trial judges had some deference to their facts  Special trial judges had final decision making power o Crucial distinctions o Buckley carries more weight, but this case remains relevant as long as it is non- conflicting because it is D.C. Cir.  “The line between ‘mere’ employees and inferior officers is anything but bright.”  Relevant factors suggesting one is an officer: o Whether office was “established by Law” o Whether the “‘duties, salary, and means of appointment’ for the office were specified by statute” o Whether the individual carries out important functions in which they “exercise 9 significant discretion” (examples: taking testimony, conducting trials, ruling on the admissibility of evidence)  Critical factor: whether individual has the “power of final decision”: In this case, the ALJs had all of the powers listed as “relevant above.” The one they lacked was the power to issue a final decision, which was dispositive.  Merely exercising some less important duties, along with important ones, is not determinative of whether one is an officer. o Just because all job responsibilities are not significant would not prevent someone from being an officer  Morrison o Special Prosecutor was an inferior officer . Factors:  Limited tenure…limited to this investigation  Removable by AG  Do not formulate policy o SC held that SP was properly appointed as an inferior officer . Special Division did appointment  “Court of Law” appointing an executive official o SC held that there was enough relevance for the Special Division to have a role  Interbranch appointments are okay o The person doing the appointing should have the expertise to select someone relevant though . E.g., here there was significant expertise to overcome separation of powers challenges . However, if a Tax Court judge is appointing a health care official, we may have a separation of powers issue o “The line between ‘inferior’ and ‘principal’ officers is one that is far from clear . . . .” o Suggests that a multi-factor test is relevant in determining whether one is a principal or inferior officer. If an officer is subject to the following characteristics, the officer is inferior. An officer that is somewhat more powerful may also be “inferior”—the Court does not draw a bright-line rule. Nonetheless, any officers who have the following characteristics (or, less powerful ones) are inferior: . (i) subject to removal by higher Executive Branch official . (ii) empowered to perform only limited duties . (iii) limited jurisdiction . (iv) limited tenure  Edmond o An inferior officer is one who has a superior (other than the President). Inferior officers are those “whose work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.” o “Inferior officer” = presence of a supervisor? o Scalia tries to set forth a test that’s a little more certain than the one set forth in

10 Morrison o Having a superior is a necessary, but not sufficient, condition to be an inferior officer . No superior other than the President, than you have to be a principal officer . There might be some principal officers with a superior, but they generally have other important duties making them principal officers

Recap  “officer of the US”… o Buckley . “significant authority” o Landry . “power of final decision”  critical factor  other relevant factors to look at  principal v. inferior officer o Morrison . Multi-factor test . Additional factors beyond the test . Hard to evaluate under this test whether an officer fits the criteria o Edmond . An inferior officer is simply one who has a superior o Outstanding question…What test is the Court going to use?... . You can argue both sides  Edmond o Scalia – who wrote Edmond – stated in his Morrison dissent that having a supervisor is a necessary, but not sufficient, factor in determining an inferior officer . But then why would Suter have to concur in Edmond?  Morrison o Not overruled  Free Enterprise Fund (2010) o SC quotes the Edmond test o FEF is essentially the same as Edmond o Current state of the doctrine? Unclear still… . To be inferior, you have to at least have a supervisor  Having a supervisor is necessary, but not sufficient o Look to Morrison factors  You could still be a principal officer, even if you have a supervisor, if you job duties are sufficiently important  Freytag o SC unanimously held that the CJ of the Tax Court could constitutionally appoint “special trial judges.”

11 o “Courts of Law”: This phrase encompasses more than just Article III courts—it also includes legislative tribunals created by Congress, such as the Tax Court.  Free Enterprise Fund (2010) o The Court runs over the Freytag definition . An entity that is “a freestanding component of the Executive Branch, not subordinate to or contained within any other such component,” is a “‘Departmen[t]’ for the purposes of the Appointments Clause.”  “not subordinate to or contained within any other such component” o SC also held that “as a constitutional matter, we see no reason why a multimember body may not be the ‘Head’ of a ‘Department’ that it governs.” . A multimember body can be the “‘Hea[d]’ of a ‘Departmen[t]’ that it governs.” o Freytag definition of Courts of Law has not been undone, unlike its definition of “Department”  Weiss o Court held that a “germaneness” analysis may not have even been relevant here. . Shoemaker…new duties given to existing, named officers  Congress may be giving Appointment power to itself . Weiss…new duties given to existing, unknown (hundreds of candidates) officers  Congress did not know who the JAG would pick  More functionalist o Court is more formalist when one branch is looking to take power from another o “Germaneness” analysis . At times when Congress bestows additional duties on officers, the Court will need to analyze whether such duties are “germane to the offices already held.” If not, such officers must receive another proper appointment under the Appointments Clause. . That said, such a germaneness analysis may not always be required. It is more important to conduct such an analysis when Congress could be seeking the appointment power for itself by, in effect, “unilaterally appointing an incumbent to a new and distinct office.” . Weiss does not giving a clear answer as to when the “germaneness analysis” is required.  the Court has concerns with an already appointed officer is given new duties o it depends on who it is getting the new job and how they are getting the new job

REMOVAL OF AGENCY OFFICIALS

 Morrison o According to the Court: When evaluating the constitutionality of restrictions on the

12 President’s removal power, “the real question is whether the removal restrictions are of such a nature that they impede the President’s ability to perform his constitutional duty, and the functions of the officials in question must be analyzed in that light.” . The SC felt that the P could still perform his executive functions because the P is generally overseeing the AG and has influence over him.  AG had some, but not complete, restrictions. AG just had to find “good cause.” . Independent Counsel is a inferior officer and his duties aren’t that significant. Thus, it will not really impede the P to remove him at will. o Essentially, this opinion suggests that the Humphrey’s Executor distinction between purely executive officers and officers with quasi-legislative or quasi-judicial duties (i.e., officers in independent agencies) is no longer relevant. o Not a separation of powers issue to limit the P’s removal power some. . Congress not involved in direct limitation of the P’s removal power. . AG is limiting the P, and he is the P’s “alter ego” in a sense. o This test gives the Court more freedom in future cases to decide on a case-by- case basis whether a for-cause removal statute for a principal officer is constitutional . Multifactor Morrison test leaves the outcome up to interpretation to some degree  Free Enterprise Fund o Appointment…P – SEC Commissioner (Principal) – PCAOB (Inferior) o Removal…P – SEC Commissioner (Principal) (For-Cause) – PCAOB (Inferior) (For- Cause) . Morrison  Appointment…P – AG (Principal) o Special Division – Independent Counsel (Inferior)  Removal…P -- AG (Principal) (at-will) – IC (Inferior) (For-Cause) o Key difference between F and M…1 layer officer can be removed at will o Take away…Court does not think these double for-cause statutes are constitutional . Having the extra for-cause layer, severely limits the P’s authority. . P’s doesn’t really have the indirect influence that he had in M. o Differing views . Progressive view (dissent)…in favor of all these for-cause statutes  Insulation from political process will enable the agencies to do a good job . Majority’s view…against all these for-cause statutes  Only people can determine accountability and voters elect the P  Thus, less control of the P, less control had by the people

Removal Doctrine  General Morrison test: “[T]he real question is whether the removal restrictions are of such a nature that they impede the President’s ability to perform his constitutional duty, and the functions of the officials in question must be analyzed in that light.”

13  Free Enterprise Fund: Morrison is still good law. With respect to the specific facts of this case, however, the Court found that the President may not be “restricted in his ability to remove a principal officer, who is in turn restricted in his ability to remove an inferior officer.”  Free Enterprise Fund also tells us: Traditionally, it is permissible for Department Heads (themselves removable by the President) to face for-cause limitations on their own power to remove the inferior officers that they, as Dept Heads, appoint.  Many restrictions on the firing of lower-level government officials in the Executive Branch are permissible. E.g., civil-service laws

Individuals Whose Removal Can Be Restricted  Generally, lower-level employees (our cases have not addressed “employees,” just “officers” subject to Appointments Clause)  Principal officers of independent agencies, at least under certain circumstances, Humphrey’s Executor; Free Enterprise Fund o Beyond being executive, Principal officers can be both quasi-legislative and quasi- judicial  Even purely executive principal officers, as long as the removal restriction does not impede the President’s executive power, Morrison v. Olson  Inferior officers appointed by Department Heads who themselves are removable by the President (note: w/r/t these officers, the Dept Head—not the President—is the one doing the removing), Perkins

SEPARATION OF POWERS AND SEPARATION OF FUNCTIONS

 Agencies can adjudicate (judicial), make policy and rules (legislative), and enforce (executive)  Agencies need to limit the mixing of these powers…separation of functions o Congress has achieved this through statute…via APA…  ALJs o Distinct from A3 judges . No salary and tenure o Judicial in an agency engaged in policy (legislation) o Agency does not control salary and removal/tenure . No complete A3 salary and tenure protection, but not left completely vulnerable  Separation between the prosecuting (executive) function and ALJ o ALJ cannot be involved with people prosecuting . One exception: agency head can conduct trials and bring charges

STATUTORY CONSTRAINTS ON AGENCY PROCEDURE

 Will be talking about APA and organic acts mostly

INTRODUCTION: THE ADMINISTRATIVE PROCEDURE ACT

14  In FR and FA, agencies must provide elaborate, trial-type hearings before adopting legally binding rules or order and must justify those rules or orders solely on the basis of the material presented in the formal proceedings. In IR, agencies need only provide minimal notice and a right to file written comments on the agency’s proposals. In IA, the APA requires virtually no procedures at all.  The distinction between formal and informal agency proceedings remains one of the most important distinctions in admin law.  The APA uses essentially the same language in both R and A to “trigger” the use of formal procedures: whether proceedings are “required by statute to be [made/determined] on the record for an agency hearing.” o (1) Where does one look to see if there is a “statute” that requires a particular agency proceeding to be made “on the record after opportunity for an agency hearing?” . One looks to the organic statutes that empower and limit the agency in question. o (2) What does an organic statute have to say in order to trigger formal APA procedures? . Not an easy question. . May be different legal standards for R and A.  APA definitions for R and A o 551(5) . “‘rule making’ means agency process for formulating, amending, or repealing a rule” o 551(7) . “‘adjudication’ means agency process for the formulation of an order” o “ ‘[O]rder’ means the whole or a part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rule making but including licensing[.]” 551(6). . Something that comes out of any process other than rulemaking o §551(9): “ ‘licensing’ includes agency process respecting the grant, renewal, denial, revocation, suspension, annulment, withdrawal, limitation, amendment, modification, or conditioning of a license” o §551(8): “ ‘license’ includes the whole or a part of an agency permit, certificate, approval, registration, charter, membership, statutory exemption or other form of permission” o “ ‘[R]ule’ means the whole or a 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, wages, corporate or financial structures or reorganization thereof, prices, facilities, appliances, services or allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing[.]” o Administrative Proceedings & the APA . Formal Rulemaking: §§ 556, 557 . Formal Adjudication: §§ 556, 557, 554

15 . Informal Rulemaking: §553 . Informal Adjudication: none really . Formal proceedings are highly technical for R and A  Look similar to a trial  Formal R and A used to be known as on-the-record proceedings  Not bound by evidence rules o 553(c) . For rulemaking, agencies must employ formal procedures “[w]hen rules are required by statute to be made on the record after opportunity for an agency hearing . . .” . decision must come from record o 554(e) . For adjudication, agencies must utilize formal procedures “in every case of adjudication required by statute to be determined on the record after opportunity for an agency hearing.” . decision does not have to come from record

FORMAL RULEMAKING

 distinction between formal and informal is a key distinction in admin law

§ 556. Hearings; presiding employees; power and duties; burden of proof; evidence; record as basis of decision  (b) o who presides over formal APA proceedings? o Organic statute supersede the APA  (c) o powers of those presiding over formal APA proceedings o an agency could have more specific rules . these rules would control  (d) o proponent of the rule has the burden of proof o evidence is determined by the agency or person providing evidence . no irrelevant or immaterial evidence…but there is a lot of discretion here o the proceeding must be based on the record o oral examination is typical . in certain cases an agency may decide to look just at written evidence if a party will not be prejudiced o cross-ref to 557 (d) . if a party has knowingly committed ac violation of 557 (d) that is a sufficiently bad act that the agency could decide against that party on these grounds  (e) o what is included in the record?  Cross-references

16 o Tells us a little bit about how these formal rulemaking requirements interact with the APA o References to 553 and 554…rulemaking and adjudication in general o 556 and 557…formal  Summary of 556 + 557 o 556…Nuts and bolts about hearing o 557…more generalized look

§ 557. Initial decisions; conclusiveness; review by agency; submissions by parties; contents of decisions; record  (A and B) o 557 is trying to prohibit ex parte communication o if decision maker is privy to ex parte communication he must put it on the record  (D) o party may have to explain ex parte communication violation to avoid being ruled against  (E) o once there is notice that there will be a hearing, ex parte communications must stop  Why is Congress so concerned with ex parte communications? o To not let any one of the parties involved have a leg up gained through communication with agency officials o Focus on “on the record”  (d)(2) o Caveat with these requirements don’t apply . Cannot use these requirements as an excuse to withhold info from Congress  (b) o decision makers… . presiding employee  reference to ALJs or individual member of the commission o if initial decision is not appealed, it will become the final decision of the agency o appeal . agency has all its powers from 556, except to agency can limit the issues  (C) o parties in the formal proceedings are given a reasonable opportunity to submit their side of the story o the record includes… . the record is very complete and what the agency makes it decisions on  Summary o Very complicated formal procedures o Agencies have a lot of incentive not to be in formal proceedings

 553…rule making o (c) . when we are in formal rulemaking proceedings, we are going to be in 556 and

17 557, but that does not mean that all of 553 doesn’t apply  553 (a) and (b) still apply o 553 (b)…general notice of proposed rulemaking

THE ORIGINAL UNDERSTANDING

THE FLORIDA EAST COAST RAILWAY SAGA  Multiple layers of claims against agencies…nice for exam o (1) Has agency followed the APA? o (2) Has agency followed its own organic act? o (3) Has agency followed its own regulations? o (4) Has agency followed the CON?  Upshot of FECR o “Sections 556 and 557 need be applied ‘only where the agency statute, in addition to providing a hearing, prescribes explicitly that it be ‘on the record.’ We do not suggest that only the precise words ‘on the record’ in the applicable statute will suffice to make §§ 556 and 557 applicable to rulemaking proceedings, but we do hold that the language of the Esch Car Service Act is insufficient to invoke these sections.” . Technically, we do not need to see “on the record” to trigger formal rulemaking, but Congress has to prescribe explicitly that the decision be on the record  unclear how explicit Congress must be o in reality, we are almost at the “magic words” point with regards to formal rulemaking  Since FECR was decided, no statute that does not contain the magic words “on the record” has been found to require formal rulemaking.  Apart from the few rulemaking statutes that contain an express “on the record” requirement, formal rulemaking has virtually disappeared as a procedural category.  Rulemaking activity was dramatically increased just as FECR substantially reduced the procedural requirements in many rulemakings. At the same time, confidence in agency decisionmaking was on the decline; by the 1970s, agencies were widely viewed as tools of the regulated industries ripe for capture rather than apolitical technocrats disinterestedly seeking a well-defined public good. The combination of increased rulemaking activity under sharply decreased procedural constraints and a gloomy view of agency behavior proved highly volatile. Indeed, much of this course charts the consequences of this combination. o This flight to rulemaking had a number of sources. . First, and most importantly, Congress empowered a new breed of agencies to deal with health, safety, and environmental problems. . Second, as federal intervention in the economy continued to grow, the new and old agencies alike increasingly realized that they simply could not carry out their missions effectively through case-by-case adjudication

FORMAL ADJUDICATION  NRC (7th Cir.)

18 o This court has taken the FECR approach and applied it to formal adjudication . “magic words” … there must be clear reference to “on the record” to require formal adjudication o Rebuttable Presumption . Statute does not have the magic words “on the record” … presumption that formal proceedings are not required… . However, if evidence (legislative history) is presented to the contrary it may overcome the lack of “magic words” and create the requirement of formal proceedings  Aside: o Agency given super-deference in interpreting its regulations o Agency given deference in interpreting its organic act o Agency given no deference in interpreting the APA  Seacoast (1st Cir.) o Standard . If we are in a fact-based type of proceeding subject to judicial review, we will presume the need for a hearing, and in turn presume FA o Comparison to NRC . Reference to hearing, no “magic words,” assume IA…NRC . Reference to hearing, assume FA, unless statute says otherwise…Seacoast  …Both courts leave room for statutes to be rebutted  Seacoast and WC offering dueling presumptions: the S court was willing to presume (subject to rebuttal by evidence of contrary congressional intent) that any language in an organic statute calling for a “hearing” triggers formal adjudication, while the WC court appeared to presume (subject to rebuttal by evidence of contrary congressional intent) that the restrictive rule of FECR applies to adjudications as well as rulemakings.  Chemical Waste Management o One possible approach to looking whether a statute requires formal adjudication is the apply Chevron deference o Unless a statute specifically requires a hearing to be on the record, the Court will defer to an agency’s interpretation so long as it is permissible  key distinction between formal and informal o informal…all evidence can be written, and does not have to be oral

Recap  In the arena of formal adjudication, we have three different approaches in the court of appeals (SC has not stepped in yet): o One take away…if statute does not include “hearing” at all, informal adjudication will be most likely fine . The problem is when we have statutes telling us that there must be a “hearing,” but not saying anything about whether or not it must be “on the record” o (1) City . If a statute just says “hearing,” presume IA  The SC has ruled on the this in the rulemaking arena (FECR), why

19 change rationales? o (2) Seacoast . If a statute just says “hearing,” presume FA  Adjudications are much different the rulemakings  Adjudication is more fact-specific and a record will more easily allow a court to review . Note that 1st Cir. now goes with the Chevron approach o (3) Chevron approach . Chevron is overarching

INFORMAL RULEMAKING

THE ORIGINAL UNDERSTANDING

 Section 553 requirements o (1) Provide Notice, 553(b)—Publish general notice of proposed rule making in the Federal Register that includes: . Statement of time, place, & nature of public proceedings . Reference to legal authority under which rule proposed . Either terms OR substance of rule OR description of subjects & issues involved o (2) Provide Opportunity to Respond, 553(c)—“[A]gency shall give interested persons an opportunity to participate . . . through submission of written data, views, or arguments with or without opportunity for oral presentation.” o (3) Publish Rule, 553(c)-(d)—Rule must incorporate “a concise general statement of [its] basis and purpose.” Must be published at least 30 days before the rule’s effective date. o Notice . (b)…  general notice of proposed rulemaking in the Federal Register  agency does not have to say what it thinks the rule will be verbatim… it could just provide subject matter and terms o Actual rulemaking itself and participation . Interested persons’ ability to participate in writing is mandatory and oral participation is discretionary o Publication . (c)…  provide the general purpose of a the rule

THE VERMONT YANKEE SAGA

 DCC becomes the last word on a lot of admin law o At this time period, the DCC seems to be policing agencies both substantively and procedurally…concerns with agency capture have developed during this period  “hybrid APA rulemaking”

20 o transformation of the requirement of 553 . DCC added requirements of all three stages of IR  Rulemaking stages: o (1) the issuance of a notice or proposed rulemaking o (2) the conduct of the rulemaking itself, during which the agency receives comments and formulates its views, and o (3) the issuance (or not) of a final rule, along with a statement of basis and purpose for any rule adopted.

Vermont Yankee  Holding o 553 provides maximum procedural requirements . agency has the right to add requirements, but courts cannot…Congress specially legislated to have this outcome  courts were intruding on agency discretion to promulgate rules o Rationale based on FECR . Just like a court cannot read into the notion that a FR is required, a court cannot read into 553 requirements that something else is mandated  Absolute principle o Absent constitutional constraints of extremely compelling circumstances, agencies should be free to fashion their rules so long as they stick with the 553 minimum requirements  Why refer to agencies rather than lower courts? o Courts would be less predictable o Court would be able demand adjudicatory-level requirements when participating in rulemaking o It is basically for pragmatic reasons…agencies are the experts and the SC does not want courts mucking up what they are doing  Connecticut Light (CADC) o Opportunity to Participate . A notice of rule-making must “provide an accurate picture of the reasoning that has led the agency to the proposed rule.” . “[I]t is especially important for the agency to identify and make available technical studies and data that it has employed in” proposing particular rules. Such info must be available “in time to allow for meaningful commentary.” . “An agency adopting final rules that differ from its proposed rules is required to renotice when the changes are so major that the original notice did not adequately frame the subjects for discussion.” Changes are OK if they “follow logically from” or “reasonably develop” the agency’s original proposed rules. . Explain what they’re relying on so parties can participate in a meaningful way  In order for parties to be able to communicate they need to have accurate conception of the studies and data relied upon. . Should attempt to list for the parties every single study you are relying on,

21 even if the studies are publicly available. . …In sum, there must enough about the technical studies to allow for meaningful comment . “Logical outgrowth”  the stated rule must be a “logical outgrowth” of the proposed rule in order for the opportunity to participate to be deemed sufficient o General Statement of Basis & Purpose . “This statement need not be comprehensive, but it must indicate sufficiently the agency’s reasons for the rules selected, so that the reviewing court is not faced with the task of ‘rummaging’ through the record to elicit a rationale on its own.” . Statement of general basis and purpose cannot be too cursory . Must provide a record clean enough for effective and efficient judicial review.  Informal Rulemaking – General Procedures o (1) Provide Notice, 553(b)—Publish “[g]eneral notice of proposed rule making” in the Federal Register that includes: . Statement of time, place, & nature of public proceedings . Reference to legal authority under which rule proposed . Either terms OR substance of rule OR description of subjects & issues involved o (2) Provide Opportunity to Respond, 553(c)—“[A]gency shall give interested persons an opportunity to participate . . . through submission of written data, views, or arguments with or without opportunity for oral presentation.” o (3) Publish Rule, 553(c)-(d)—Rule must incorporate “a concise general statement of [its] basis and purpose.” Must be published at least 30 days before the rule’s effective date. o CL could be read as simply interpreting the sparse text of the APA or expanding upon it. Either side could be argued. o “Opportunity to participate” . It seems as though the DCC expands this concept to include that the “opportunity to participate” should be “meaningful.” o “Basis and purpose” . DCC harps on this concept to include the notion that the statement should provide a clean record for a reviewing court to use.

 More DCC IR Requirements o (1) Purposes of informal procedural requirements: (i) “agency accountability and “reasoned decision-making”; (ii) “ensure fairness to affected parties”; and (iii) “give affected parties an opportunity to develop evidence in the record,” which will “thereby enhance the quality of judicial review.” o (2) Agencies engaged in informal rule-making have a “significant duty.” o (3) When adopting a final rule, an agency must (i) “articulate with reasonable clarity” the reasons for its decision and (ii) “identify the significance of the crucial facts.”  Bottom line concerning the scope of VY:

22 o As far as the notice of proposed rulemaking and the statement if basis and purpose are concerned, the DCC’s pre-VY innovations are all still good law, but once a valid notice of proposed rulemaking has been issued, courts may not require an agency to use specific procedures during the rulemaking unless there is some source of statutory, regulatory, or constitutional law that impose those specific requirements.  Informal rulemaking is thus a much more procedurally elaborate enterprise than was contemplated in 1946. It is not nearly as elaborate as formal rulemaking – there is no requirement of an ALJ, formal presentation of evidence, oral presentations and cross- examinations, etc. – but it is far more elaborate than the simple notice-and-comment process described in the text of section 553. Hybrid rulemaking may not be as vibrant as it was in 1977, but it is still very much alive.

THE NOTICE OF PROPOSED RULEMAKING  The modern understanding of the rulemaking process, however, is quite different. o In the post-1968 era, the rulemaking process is viewed more as a check on agencies than as facilitative device (allowing the agency to educate itself). The participation of interested parties in rulemakings is seen both as an end in itself and as a mean by which flaws in the agencies’ thinking can be brought to the attention of the agencies – and, eventually, to the reviewing court. Under this model of rulemaking, it is essential that agencies give detailed notice of their plans to the public so that comments can be directed at the agencies’ actual proposals. Challenges to the adequacy of an agency’s notice are now commonplace.  American Radio (CADC) o Even when we are talking about internal staff reports in an agency, access to the full staff reports must be available in order to for participation to be able to full and meaningful o Even if the agency messes up, the challenging party has to prove that the agency errors effected their rights (to participate meaningfully). . Prejudicial error  Norton (DCC) o 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. o Based in the logical outgrowth doctrine  Chamber of Commerce (DCC) o If the study is totally new and is looking at it is primary, rather than secondary/confirmatory data, then that info is going to be a problem  Why be a little more lenient with notice requirements? o Potential for perpetual cycle of notice challenges o Agencies may cease taking the notice requirement seriously

Brief overview the notice requirement  Notice o CL

23 . Technical studies must all be made available . Final rule can differ from proposed rule so long it is a logical outgrowth o AR . Cannot redact part of the report . Prejudicial error rule o New info is fine as long as final rule is a logical outgrowth of the proposed rule . New info will not be okay if it is primary key data o These rules have created great opportunity for litigation . This potential has instilled in agencies the notion that the (1) might want to know what their final rule will look like early on and/or (2) propose numerous alternatives.

THE STATEMENT OF BASIS AND PURPOSE  Courts look here for substantive issues  Agencies make these statements detailed so as to make sure all issues are adequately addressed  Every comment does not need to be responded to, but if a comment raises a significant issue it must be responded to in a reasoned matter…DCC (Reytblatt)  Level of detail required in a response depends on the subject of the regulation and the nature of the comments received…DCC (CAB)  …Really open-ended requirements  Farm Credit (DCC) o Standard . Agencies have to respond to comments that if true would require a change in the agency’s proposed rule  Rybachek (DCC) o Standard . Responses can reference new materials in comments without having to engage in a cyclic notice-and-comment scenario

RECAP…Informal Rulemaking  Stage 1; Notice o An agency must “identify and make available technical studies and data” on which its proposed rule relies. CT Light o An agency may not redact portions of such studies “that are inextricably bound to the studies as a whole and thus to the data upon which [the agency] has . . . relied.” American Radio Relay League, CADC 2008 o Failure to disclose subject to prejudicial error rule. Amer. Radio o Reliance on new info arising during the comment period: . No need for new notice-and-comment if final rule was a “logical outgrowth” of the proposed rule. CT Light; Building Indus. Ass’n . But additional notice-and-comment is required if the agency relied on the extra-record data as primary evidence. (I.e., not “supplementary” data, which is data there merely clarifies, expands, or amends previously disclosed data). Chamber of Commerce v. SEC

24 o The notice must reference all of the subjects addressed in the final rule. MCI Telecomm. Corp., CADC 2005 o Focus on the redaction being of consequence o Could be a different case if confidentiality is a really great concern  Stage 2: Opportunity to Participate o Section 553 describes the maximum requirements that Congress imposed on agencies with respect to an interested person’s opportunity to participate in a rulemaking. Vermont Yankee, Sup. Ct, 1978 o “Absent constitutional constraints or extremely compelling circumstances the administrative agencies should be free to fashion their own rules of procedure . . . .” Vermont Yankee o I.e., Courts cannot mandate that agencies permit the oral presentation of data during informal rulemakings. o Agencies do not have to do anything more at Stage 2 except for what is provided by 553 and if its organic statute provides anything of note  Stage 3: Statement of Basis & Purpose o “This statement need not be comprehensive, but it must indicate sufficiently the agency’s reasons for the rules selected, so that the reviewing court is not faced with the task of ‘rummaging’ through the record to elicit a rationale.” CT Light, CADC 1982 o An agency must “identify the significance of the crucial facts” leading to its final rule. Amer. Med. Ass’n, CADC 2005 o An agency does not need to address every comment, “but it must respond in a reasoned manner to those that raise significant problems.” Reytblatt, CADC 1997 o The level of requisite detail in an agency’s response to comments “depends on the subject of the regulation and the nature of the comments received.” Action of Smoking and Health, CADC 1983 . E.g., An agency “must respond to those comments which, if true, . . . would require a change in [the] proposed rule.” Louisiana Fed. Land Bank Ass’n, CADC 2003  Purposes of Sect. 553 Requirements o Agency Accountability: “[E]nsure that agency regulations are tested via exposure to diverse public comment o Fairness: [E]nsure fairness to affected parties o Judicial Review: [G]ive affected parties an opportunity to develop evidence in the record to support their objections . . . and thereby enhance the qualify of judicial review” . …Source: Int. Union, United Mine Workers, CADC 2005 (Notes case on p. 279)

STATUTORY HYBRID RULEMAKING  Hybrid rulemaking… o You have to follow the text of 553 plus all of the DCC judicial opinions that flesh out what it means to be fair  What are some vehicles that Congress may use to impose additional requirements?

25 o Organic art can require FR or “middle of the road” approach  Example…CAA Amendments o Congress explicitly replaced the APA with their own set of procedural requirements o Congress can be very specific if it wants to be  …Different agencies may be subject to totally different procedures

EXEMPTIONS FROM RULEMAKING PROCEDURES  the scope of these exemptions is much more important today than was the case prior to the 1970s, for two simple reasons o first, informal rulemaking was not a significant agency activity until fairly recently o second, when agencies did employ IR, it matter very little to either to agencies or to private parties whether the agency used 553’s notice-and-comment procedures or invoked an exemption. Parties gained very little, and agencies lost very little, when agencies used the rulemaking procedures prescribed by the actual text of 553 as originally conceived and interpreted. The stakes are much higher, however, when compliance with 553 entails modern hybrid procedures. Accordingly, when agencies seeking to avoid the procedural burdens hybrid rulemaking have good reasons to invoke 553’s exemptions, and parties have many reasons to challenge agency use of exemptions (for example, to invalidate rules, to discourage further rulemaking, or just to get more input into the rulemaking process).  You should always keep in mind, however, that an exemption from the APA’s rulemaking procedures is not an exemption from all procedural requirements. Sources of law other than the APA may require procedures even for rules that fall squarely within one of the APA’s exemptions.  Subject-Matter Exemptions from Section 553 Exemptions o Section 553(a): “This section applies, . . . Except to the extent that there is involved – . (1) a military or foreign affairs function of the United States; or . (2) a matter relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.  Section 553 Exemptions Based on the Character of the Rule o Section 553(b): “Except when notice or hearing is required by statute, this subsection does not apply— . (A) to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice; or . (B) when the agency for good cause finds . . . That notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.”

Procedural Rules  Air Transport (DCC, vacated…majority and dissent have same weight as persuasive authority) o Factors Making a Rule Substantive, AT Majority Opinion . Rules encoding a substantive value judgment (See, e.g., Air Transport where rules balanced a defendant’s right to procedure w/ an agency’s interest in efficient prosecution)

26 . Rules substantially altering the rights or interests of a regulated party (See, e.g., Reeder where certain types of counterproposals were barred by rules) . Rule affecting the right to avail oneself of administrative adjudication (See, e.g., Air Transport where rules affected the whole range of administrative adjudicatory procedures—not just discrete timing requirements) o Factors Making a Rule Procedural, AT Majority Opinion . Rule’s subject matter or circumstances divest the public of a legitimate stake in influencing the rule’s outcome (See, e.g., (i) American Hospital Ass’n where the public had little interest in the agency’s discretionary deployment of enforcement resources; (ii) rules involving merely the timing of applications) . Rule regards an agency’s internal operations  Dissent o Substantive v. Procedural Rules . Substantive rules are those that “purport[] to direct, control, or condition the behavior of those . . . subject to regulation by the authorizing statute.” . In addition, rules dealing with the award of benefits are substantive “because defining eligibility for a benefit program is the very essence of the program.” . Procedural rules are “those rules . . . which deal with enforcement or adjudication of claims of violations of the substantive norm but which do not purport to affect the substantive norm.”  JEM Broadcasting (DCC) o If AT set our standard for value judgment than everything may have be categorized as substantive as all courts in engage in efficiency analyses in its operation o AT extended value judgment reasoning to far . Set back from “rules encoding a substantive value judgment”  JEM…A rule valuing efficiency does not make it substantive

Interpretative Rules and Policy Statements

4 tests…

Interpretative Rule: “Legal Effects” Test  Legislative Rule: Operates like a statute; violation of such a rule is itself grounds for prosecution  Interpretative Rule: o Offers an agency’s opinion on a legal matter o Violation of such a rule is not itself sufficient grounds for prosecution. An agency would further have to prove that the conduct in question violated a legislative rule or a statute. . I.e., Such a rule is “not finally determinative of the issues or rights to which it is addressed.” PG&E Co., CADC 1974 o A policy statement is “merely an announcement to the public of the policy which the agency hopes to implement in future rulemakings or adjudications.” PG&E Co., 27 CADC 1974

Interpretative Rule: “Substantial Impact” Test  Asks whether an agency action has impacted the rights and interests of parties  The D.C. Circuit has since declared that this rule was discredited by the Supreme Ct’s decision in Vermont Yankee, which indicated that courts cannot engraft additional procedural requirements on top of the APA. See Cabais v. Eger, CADC 1982

“Impact on Agencies” Test: U.S. Telephone Ass’n, CADC 1994…  “The distinction [between a substantive rule and an interpretative rule] turns on an agency’s intention to bind itself to a particular legal policy position.”  Factors considered by the court in this case: o Sanctions framework set forth in rule was exhaustive and detailed o Out of 300 cases, the agency almost always followed its schedule of fines. . In some of the cases where the sanctions were not applied, the agency had simply decided not to prosecute at all. The court did not equate a decision not to prosecute with a decision to deviate from the standards. . Three of the agency’s eight supposed deviations were from just minor portions of the standards. Thus, the court did not find those cases to represent evidence that the agency was willing to completely disregard its standards.

“Impact on Agencies” Test: P2C2, CA5 1995  In analyzing whether the rule was substantive, the court gave “some deference, albeit not overwhelming,” to the “agency’s characterization of its own rule.”  The court’s analysis involved examining 3 things: o (i) the agency’s characterization of its rule o (ii) whether the rule had a “binding effect,” . (a) looking first to the rule’s “plain language” and . (b) second to the agency’s enforcement of the rule o (iii) the degree of enforcement discretion maintained by the agency  The court found particularly relevant the agency’s repeated references to the term “policy”; the non-exhaustive nature of the agency’s list of relevant factors; and the fact that the agency’s policy did not mandate one particular response if a violation of the policy were to be established.

 The “impact on agencies” test represented by United States Telephone Ass’n and P2C2, however, requires considerable experience with an agency’s application of a rule (300 adjudications in the case of USTA) before one can determinatively say whether a seemingly “interpretative” rule is in fact legislative (key disadvantage of the “impact on agencies” test). At the time that the rule is promulgated, neither the agency nor outside parties can tell for certain whether the rule requires notice-and-comment procedures. But that, of course, is precisely the point in time when one most wants to know what procedures, if any, are needed. o Agencies need to know in advance whether the need to engage in notice-and- comment rulemaking

28 Expanded “Legal Effects” Test: American Mining Congress, CADC 1993  Key issue is whether the rule has “the force of law”: i.e., if o (i) Congress delegated legislative power to the agency o AND (ii) the agency intended to exercise that power  The presence of any one of the following four factors reveals an “intent to exercise” legislative power: o (i) “where, in the absence of a legislative rule . . , the legislative basis for agency enforcement would be inadequate”; o (ii) rule is published in the Code of Federal Regulations o (iii) rule has amended another legislative rule (e.g., the second rule repudiates, or is irreconcilable, with the first) o (iv) the agency has explicitly invoked its legislative authority  The determinations of whether agency action is an interpretive rule or a policy statement should be subject to different tests. o Interpretative Rules v. Policy Statements . Judge Williams suggests that the “impact on agencies” test should not be considered in the case of interpretive rules  Interesting twist… o Analyzing Interpretative Rules v. Policy Statements presupposes you have decided IR v. LR . Distinction between IR and PS is unclear and not really followed, even in the DCC  The court doubted the legitimacy of the “binding effects” test even for policy statements, but said that test certainly should not govern in cases regarding interpretive rules.  The interpretive rule exemption should not be interpreted too narrowly; a narrow interpretation could lead to ad hoc agency actions.

Syncor International Corp., CADC 1997:Distinguishing Between Types of Rules  The key distinction between (i) substantive rules v. (ii) interpretive rules and policy statements is that “a substantive rule modifies or adds to a legal norm based on the agency’s own authority.”  Nonetheless, interpretive rules are themselves distinct from policy statements. o Policy statement: “merely represents an agency position with respect to how it will treat—typically enforce—the governing legal norm” o Interpretive Rule: “typically reflects an agency’s construction of a statute that has been entrusted to the agency to administer”  Even if a rule fails to qualify as “substantive” under the AMC four-factor test, the rule still cannot be interpretive if it “does not purport to interpret any language in a statute or regulation.”

 Rules Interpreting Regulations & Statutes o An interpretation of a legislative regulation is itself legislative if it effects “ a fundamental change in [an agency’s] interpretation of a substantive regulation.” Paralyzed Veterans of America, CADC 1997

29 o Interpretive rules can construe regulations as well as statutes. Syncor . The promulgation of rules modifying an agency’s interpretation of its own regulation is likely to require notice and comment procedures. . The promulgation of rules modifying an agency’s interpretation of a statute is unlikely to require N and C. . …Rationale:  More room for an agency to play around when it is interpreting its own regulations as opposed to when it is interpreting a statute o Could provide a useful loophole to get away from notice-and- comment (NC)

Good cause  By far the most common section 553 exemption invoked by agencies concerned circumstances “when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedures thereon are impracticable, unnecessary, or contrary to the public interest.” 5 U.S.C. § 553(b) (2000).  Evaluating the “good cause” exemption will be heavily fact-based o Supposedly narrow . Emergencies causing serious harm; delays causing serious harm. Dean.  Some good explanation for why the agency’s thinks there is going to be harm. Dean. o Critical...Would notice-and-comment cause more problems than it foregoing it would solve?

INFORMAL ADJUDICATION

 Judicial Review Required in Overton Park o The reviewing court must conduct a “substantial inquiry.” o Although the agency decision is “entitled to a presumption of regularity,” the agency is not shielded from a “thorough, probing, in-depth review.” o This review involves several steps: . (i) First, the court must decide whether the agency acted within the scope of its authority and whether the agency properly construed its authority. . (ii) To determine whether the agency action was arbitrary or capricious, the court must consider whether the decision was based on relevant factors and whether there was a “clear error of judgment.” This factual inquiry is to be “searching and careful,” although “the ultimate standard of review is a narrow one.” Courts cannot substitute their judgment for that of the agency. . (iii) The court must evaluate whether the agency followed the proper procedural requirements. o Such a review must be based on the “‘whole record’ compiled by the agency,’” not merely the agency’s “‘post hoc’ rationalizations.” o Practical consequences for agencies . Court is not telling an agency that it needed a particular procedure for IA, but

30 the emphasis placed on judicial review suggests the need for an adequate, reviewable record . The Court is requiring in some way additional procedural requirements not in the ABA when engaging in IA…aren’t we not supposed to be adding additional procedural requirements?  Or, is the Court simply fulfilling its mandate to review agency’s textual decisions  PBGC o SC concludes that there is no tension between VY and OP . APA’s ceiling still stands, but there must be some kind of a record (formulated by no specific standards) for later “arbitrary and capricious” o SC felt as though the court of appeals was imposing procedures that were too specific . OP was just concerned about some record, not how the record was procedure  Fulfilling 706 mandate that courts could review agency rulings

THE CHOICE BETWEEN RULEMAKING AND ADJUDICATION

THE STRANGE SAGA OF C.T. CHENERY

Chenery I  Blanket principle o A court will consider only the reasoning the agency used in grounding its original order . Do not want to provide the agency’s reasoning for the agency . The Court says that if an administrative order is valid only as a determination of policy that the agency alone is authorized to make, an appellate court cannot supply the proper reasoning for the order -- in the same way that an appellate court cannot make a required factual finding that only a jury was empowered to make. The Supreme Court here seems to be indicating that an appellate court would be intruding on the proper role of an administrative agency if the court were to comment on what reasoning must have underlaid the agency's decision. At its most fundamental, I think the Supreme Court is raising a separation of powers concern here. Courts have no legal authority to formulate policy decisions for agencies.  As the SC stated in oft-quoted language: courts “may not accept appellate counsel’s post-hoc rationalizations for agency action.” This principle is sometimes known as the “C1 principle.” It remains a bedrock principle of fed admin law, applicable both to adjudications (the setting of C1) and to rulemakings.  Despite the clarity of C1’s warning against defending agency decisions on grounds not relied on by the agency, parties seeking affirmance of agency decisions violate the C1 principle with considerable abandon. o For the most part, however, the C principle effectively limits the defense of agency decisions to the grounds actually relied upon by the agencies.  There are two important corollaries of the C principle.

31 o (1) the first contains the appropriate remedy when an agency decision cannot be supported on the grounds advanced by the agency. . the usual remedy is to remand the case back to the agency for further consideration rather than to reverse the agency outright. . If there are grounds that could support the agency’s decision but were not in fact relied on by the agency, courts ordinarily give the agency the option of relying on those grounds. o (2) the second corollary is that the rationale for the agency’s decision must be clear: courts must understand the agency’s reasons for action before they can decide whether those reasons are adequate. . Courts, however generally do not enforce this requirement with much rigor.  As the SC has said in oft-quoted language, “while we may not supply a reasoned basis for the agency’s action that the agency itself has not yet given, we will uphold a decision of less than ideal clarity if the agency’s path may be reasonably discerned.”  Even a rationale that the agency never articulated can be a basis for affirmance if it is clear that the rationale actually underlaid the agency’s decision.  …Courts are practical about following the principle that they will only look to the agency’s stated reasoning Chenery II  Requiring agencies to engage in rulemaking to perpetuate no policy standards… o Might be easier and more efficient in some cases to make one general rule, but agencies have the power to make policy by case-by-case adjudication . Agency may not see all future problems, may not be experienced with the particular problem, or the problem may be too particularized for a general rule  Standard…agency has discretion to decide whether to engage in rulemaking or adjudication o Okay even when a new standard will be applied to the party that the agency is dealing with  Balancing test o Balancing the harm of the retroactive effect with the harm of the agency not sticking with the legal standard it has perpetuated  Dissent o Concerns with giving agencies carte blanche to make law without giving industry a heads up  Too Much Adjudication? o C2…SC held that “the choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion of the admin agency.” This, too, remains a bedrock principle of fed admin law, though as with the C1 principle, it displays a few fault lines. o C2’s statement that the choice between R and A “lies primarily in the informed discretion of the admin agency” left two openings for courts that might wish to impose such a requirement. . (1) the choice between R and A is “primarily,” not “exclusively,” left to

32 agency discretion; C2 clearly contemplates some judicial role in policing the agencies’ choices. . (2) if a court characterizes an agency’s exercise of discretion, such as a choice between A and R, as an abuse of that discretion, courts generally empowered to overturn such choices. . …Thus, C2 left ample legal materials from which courts could have fashioned a fairly wide-ranging requirement that agencies employ rulemaking  Courts, however, have not generally utilized the openings left by C2. o Any claim that an agency has abused its discretion by choosing to make policy through A rather than R is unlikely to succeed.  Too much rulemaking? o SC… “even if a statutory scheme requires individualized determinations, the decisionmaker has the authority to rely on rulemaking to resolve certain issues of general applicability unless Congress clearly expresses an intent to withhold that authority.”

o For now, it suffices to say that rules must generally be reasonable, and their degree of over-and under-inclusiveness is an important aspect of reasonableness.

A NOTE ON RETROACTIVITY

RECAP

 Chenery I

o Courts will review agency decisions only on the ground(s) for the decision cited by the agency at the time of making its decision.

o This principle is a fundamental principle of administrative law today. It applies in all types of agency proceedings – both to rulemakings and to adjudications.

. Courts may be a little generous at times

 Chenery II

o “[T]he choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion of the administrative agency.”

o At times, the retroactive effect of agency action is permissible. “[S]uch retroactivity must be balanced against the mischief of producing a result which is contrary to a statutory design or to legal and equitable principles. If that mischief is greater than the ill effect of [retroactivity], it is not . . . condemned by law.”

 Judicial Development with Respect to Retroactivity 33 o Chenery II suggested that agencies have a lot of leeway to determine that retroactivity is appropriate.

o But modern courts have imposed some limitations.

. When new law is substituted for “old law that was reasonably clear,” no retroactivity. Pub. Serv. Co. of Colo., CADC 1996

. “By contrast, retroactive effect is appropriate for new applications of [existing] law, clarifications, and additions.” Id. In such cases, there is a presumption in favor of retroactivity unless it would be unjust. Clark-Cowlitz Joint Operating Agency, CADC 1987

o Courts will not construe administrative rules to have retroactive effect, however, “unless their language requires this result.” Bowen v. Georgetown Univ. Hospital, S. Ct. (1988)

o Criminal laws may not have retroactive effect.

THE SCOPE OF REVIEW OF AGENCYACTION

INTRODUCTION

DEGREES OF DEFERENCE

IS THIS FOR REAL?

IS THERE A BETTER WAY?

 Two approaches

o Doctrinal approach

. Standard approach

o Legal process approach

. More case-by-case

 The standards (appellate court’s review of a lower court)

o De novo

. Closest look

. Legal determinations

o Clearly erroneous

34 . Less closely looked at

. Factual determinations made by a judge

o Abuse of discretion

. Even less closely looked at

 Closer to the jury standard than CE

o A bit of a gap between CE and AD

. Comes in specific times involving mixed questions of law and fact

o Jury standard

. Most deference given

. Factual determinations by a jury

 No reasonable person could have reached that factual determination

 Deference given to a jury of your peers

o No review

. Complete deference; no review

 UC

o Standards of review as “moods”

. There is phraseology attached to each standard

. But there is still a lot of room for judgment for the courts

. Rather just sticking to the words of legal standards, we can understand the standard as the mood the court is in

 DN…grumpy mood

 CE…a little bit more generous

 AD…even a bit more generous

 JS…extremely deferential; generous

REVIEW OF FINDINGS OF FACT IN FORMAL PROCEEDINGS 35  APA Section 706(2)(E) o “ . . . The reviewing court shall . . . (2) hold unlawful and set aside agency action, findings, and conclusions found to be . . . (E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute . . . . In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error.”  Universal Camera (US SC, 1951) o Substantial evidence test (APA 706 (2)(E)) . Somewhere in between AD and JS…closer to JS  You have to have enough evidence cutting against the ruling to overturn a jury verdict o A reviewing court must consider the whole record, rather than simply scour for information supporting the agency’s decision . In practice, courts generally consult only “those parts of the record cited by a party.” o Court has to look through the Board and consider what the initial fact finder decided . Board will get a little less deference from the initial fact finder if it is disagreeing with the original fact finder  In practice, such initial findings often carry great weight with reviewing courts, especially when the findings turn on determinations of witness credibility. o These kinds of reviewing situations don’t always comes up so much because… . APA Section 557(b)  “ . . . When the presiding employee makes an initial decision, that decision then becomes the decision of the agency without further proceedings unless there is an appeal to, or review on motion of, the agency within time provided by rule.”

 Kimm (CAFC, 1995) o Substantial evidence standard . Equated with almost reasonableness o Take away . Responsibilities the agency needs to fulfill…  The Board should have given further information as to why it disregarded the ALJ’s findings o The Court noted that an ALJ’s judgment on something like witness credibility, especially when it is a key issue, will be given great deference. Indeed, an agency will really have to address such an issue and convincingly prove to the contrary. . When considering witness credibility…the Board needs to either (1) explain why the Board’s right, or (2) that the issue is not critical to the case

36 . Substantial evidence is a pretty deferential standard  Needs to be enough evidence to show that a reasonable mind could not have come to the conclusion stated o Even though we are in the CAFC, this ruling is pretty universal across the circuits

 Laro (CADC, 1995) o Substantial evidence standard . Board would have had to show substantial evidence that the Board itself made the initial prima facie case and that the opponent did not rebut that case . Highly deferential . Reasonable language appeared again o Credibility . If the ALJ makes credibility determinations and the Board upholds them, there is even greater deference given by the reviewing court o Synthesizing K and L + take aways . L…both lower decision makers agreement  Court will have a much harder time going against this . K...lower court decision makers disagree  Courts will give less deference here . Also, at the end of the day, the reviewing court goes with the initial fact finder

Framework to Understand Standards of Review  (1) What is the prescribed standard of review for a given agency decision?  (2) How do legal authorities verbally describe, or categorize, that standard?  (3) When applying that standard, what type of analysis do legal authorities actually instruct the decisionmaker to engage in?  (4) In practice, do decisionmakers adhere to these principles?

Review of Findings of Fact in Formal Proceedings  (1) “The reviewing court shall . . . hold unlawful and set aside agency action, findings, and conclusions found to be . . . unsupported by substantial evidence . . . . [T]he court shall review the whole record.”  (2) Expanded description of “sub. evidence” review: o Before 1946 (APA enactment), the “substantial evidence” standard clearly was equivalent to the jury standard where substantial evidence merely had to be “enough to justify, if the trial were to a jury, a refusal to direct a verdict.” But the APA “demonstrate[d] a purpose to impose on courts a responsibility which has not always been recognized.” Universal Camera at 379, 383. . Now, SE is tougher than JS o “[C]ourts must now assume more responsibility for the reasonableness and fairness of [agency] decisions than some courts [showed] in the past. Reviewing courts must be influenced by a feeling that they are not to abdicate the conventional judicial function.” Id. at 383. o Reviewing courts are responsible for assuring that agencies keep within “reasonable

37 grounds.” Id. at 383. o Agency findings are entitled to respect but must be set aside when the record “clearly precludes” the agency’s decision “from being justified by a fair estimate of the worth of the testimony of witnesses or its informed judgment on matters within its special competence or both.” Id. at 383. o Reviewing cts should reverse an agency’s decision “if it is not supported by such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Kimm at 390. o Substantial evidence review is “highly deferential.” Laro at 396.  (3) Analytical methodology in which cts must engage: o Courts must take into account evidence contradicting an agency decision or “evidence from which conflicting inferences could be drawn . . . . The substantiality of evidence must take into account whatever in the record fairly detracts from its weight.” Universal Camera at 382. o Findings by Initial Decisionmaker: . A court’s analysis of the “whole record” must include the initial decisionmaker’s findings, even if the agency itself rev’d those findings. Univ. Camera at 384-385. . Along with the examiner’s findings, a ct should consider “the consistency and inherent probability of testimony.” Id. at 385. . In sum, reviewing cts “should accord the findings of the trial examiner the relevance that they reasonably command.” Id. at 386. . “[E]vidence supporting a conclusion may be less substantial when an impartial, experienced examiner who has observed the witnesses and lived with the case has drawn conclusions different from the Bd’s.” Universal Camera at 385. . If an agency reverses an (i) initial determination “concerning a witness’s state of mind” or (ii) a finding “explicitly or implicitly based on the demeanor of a witness,” the agency’s decision will not be sustained on appeal unless it “has articulated sound reasons, based on the record, for its contrary evaluation of the testimonial evidence.” Kimm at 391. . An ALJ’s “credibility determinations, as adopted by the [agency], will be upheld unless they are patently insupportable.” Laro at 396-397. o When analyzing agency inferences, a court’s review is “even more deferential” than the typical “substantial evidence” standard because drawing inferences from circumstantial or direct evidence invokes agency expertise. Laro at 396-397.

REVIEW OF FINDINGS OF FACT IN INFORMAL PROCEEDINGS

APA Section 706(2)(A)  “ . . . The reviewing court shall . . . (2) hold unlawful and set aside agency action, findings, and conclusions found to be– (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law . . . . In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error.”

38  ADAPSO (CADC, 1984) o Substantial evidence = arbitrary and capricious (reasoning is not quite a slam dunk here) . Statutory construction…(A) and (E) are not duplicative  APA Section 706(2)(A), (E) o “ . . . The reviewing court shall . . . (2) hold unlawful and set aside agency action, findings, and conclusions found to be– . (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law . . . [or] . (E) “unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute . . . .” o (A)…Arbitrary and capricious is more of a catch-all o (E)…specific application of the AC standard to formal proceedings, where the record is closed . alternative that comes up in a different situation . record is closed in formal proceedings o it would be absurd for the standards to mean something different in this case due to the way in which the statue seems to conflate the two standards o Upshot . The substantial evidence standard in this Act is equivalent to the standard in the APA . The substantial evidence and the AC standard are the same in fact finding cases in informal proceedings  Dictum in this case, but later cemented as law in the DCC at least  Thus, analysis in cases involving find finding in formal proceedings is the same as the analysis in cases involving fact finding in informal proceedings  Scalia looks to notions of “reasonableness” in applying the standard . Also…An organic act’s standards are not necessarily the same as the APA standards  Although, here, “substantial evidence” in the organic act is the same as “substantial evidence” in the APA

REVIEW OF AGENCY LEGAL CONCLUSIONS

THEORY AND HISTORY

 Gray, Hearst, and O’Leary (US SC) o Together, the three cases establish a coherent, understandable approach to judicial review of agency legal conclusions: When the issue is one of pure interpretation, the courts are at least as well suited as are the agencies to determine the correct meaning of statutory terms, so agencies get no deference.

39 When, however, the issue is one of law application, and one must determine whether an ambiguous statute should be extended to cover a specific fact pattern, then the twin consideration of agency expertise and probable congressional intent justify giving agency decisions a level of deference comparable to the level afforded to agency factfinding.  Packard (US SC) o Why did the Court take a different approach in this case? . The importance of setting a legal precedent for an important rationale across the country.  The Court found that the agency was not particularly well-suited to interpret the statute here. o This may come about in situations where the Court thinks that statute at hand is simply too complex. o We slip from a more standard application of standards of review to a more case- centric analysis rooted in different factors determining what standard of review will apply  Skidmore (US SC) o In the prior cases (also in the case in Chevron), the agencies had the authority to implement. . In this case, the agency was not given specific authority to interpret this statute.  Congress decided no particular agency had the authority to implement the Fair Labor Standards Act. An Administrator had these duties. o The SC comes up with a special kind of deference… . Skidmore Deference  Applies when an agency interprets a statute w/o having a formal responsibility to administer it  Standard: A legal interpretation by an agency in such a case is “not controlling” but a court may still “properly resort [to it] for guidance.” “The weight of such a judgment . . . will depend upon o [(i)] the thoroughness evident in its consideration, o [(ii)] the validity of its reasoning, o [(iii)] its consistency with earlier and later pronouncements, o [(iv)] and all those factors which give it power to persuade . . .” o S is still relevant in instances where Chevron deference does not apply

THEORY AND CURRENT PRACTICE

APA Section 706(2)(C)  “. . . The reviewing court shall . . . (2) hold unlawful and set aside agency action, findings, and conclusions found to be . . . (C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right . . . .”

APA Section 706(2)  “. . . The reviewing court shall . . . (2) hold unlawful and set aside agency action, findings,

40 and conclusions found to be – o (A) arbitrary, capricious, . . . o (B) contrary to constitutional right . . . o (C) in excess of statutory jurisdiction, authority, . . . o (D) w/0 observance of procedure required by law; o (E) unsupported by substantial evidence . . . or o (F) unwarranted by the facts . . . .  In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error.”

 Pre-Chevron approach o Pure question of law…de novo o Application of facts to law…reasonableness standard . Similar to SE approach  In reality, lower courts treat Chevron as if it was a major point in the law o Courts have treated pure questions of law and mixed questions law and fact with the same degree of deference . Pure questions of law now get a substantial measure of deference

 Chevron (US SC, 1984) o SC seems to be applying a reasonableness standard to a pure question of law o Chevron test: . (0) Does Chevron even apply?  Under Mead, an admin interpretation of a statute qualifies for Chevron deference only when: o Congress delegated authority to the agency generally to make rules carrying the force of law; and o The agency interpretation being reviewed was promulgated in the exercise of that authority . (1) If the statute is clear, the SC deems the agency’s interpretation irrelevant  Congress has spoken clearly and it doesn’t matter what the agency says  Kind of a de novo review situation here  Courts seem a bit inclined to get past this prong and move on to step 2  Two ways in which you could change your step 1 analysis: o (1) the tools of statutory construction used o (2) the way the issue is presented o …different approaches or a different framing of the question may alter whether or not Congress has spoken clearly . (2) If the statute is ambiguous, the SC is obliged to defer to a reasonable interpretation of the statute by the agency  it doesn’t matter if the Court would have reached a different conclusion if it was the initial entity that interpreted the statute o courts should be really reluctant to overturn agency in

41 situations where Congress’s intent is unclear . agencies are well-equipped and tasked by Congress to handle the matter at hand  Step 2 is really wide open…What does “reasonable” really mean?

Chevron Framework  Applies only when an agency has interpreted a statute that it has been formally tasked w/ implementing  Most conceptualize the framework as having 2 steps: o (i) Has Congress “directly spoken to the precise question at issue”? . To answer this first inquiry, a court employs “traditional tools of statutory construction.”  E.g., legislative history, plain meaning, etc. . “Yes”: If the court determines the answer is “yes”  the case ends. The court adheres to its interpretation of the statute, not to any contrasting agency legal interpretation. . “No”: If the answer is “no”  the court moves to step 2. o (ii) The question for the court at this step is “whether the agency’s answer [to the precise question at issue in the case] is based on a permissible [i.e., reasonable] construction of the statute.”  INS (US SC, 1987) o Seems like the Court is going back to the pre-C approach distinguishing the deference given to pure questions of law and mixed questions of law/fact . this points to the notion that Chevron may not have effectuating any kind of revolutionary change o United Food . Not a majority on the Court . Seems to go back to the C approach  The level of deference depends on the clearness of Congress’s intent . Scalia’s concurrence  Affirms that we are still with our C approach  Everyone took this concurrence as the authoritative opinion of the Court and continued on with the new C framework o Maybe people thought Kennedy would go this way . He was appointed, but not deciding cases at the time o However, there are still members of the Court still unsure about the C 2 step framework

WHEN DOES CHEVRON APPLY?

 despite its breath, the broad reading of C does not require judicial deference to all agency legal interpretations  agencies can interpret many legal documents other than statutes, and in those contexts the C doctrine may not apply o most notably, agencies frequently construe their own regulations

42 . “Seminole Rock deference” or “Aura deference”  an agency’s construction of its own regulation “becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation.” o Auer deference is warranted only when the language of the regulation is ambiguous o Agencies must often interpret the Constitution to determine whether their actions violate substantive or procedural rights guaranteed by that document. Agencies receive no deference from courts on constitutional matters. o Agencies must often interpret and apply court decisions that construe statutes and regulations. C deference does not extend to agency interpretation of court opinions, even when the agency is entitled to deference in the interpretation of the statutes or regulations that were the subject of court opinions. o Agencies must often interpret contracts, deeds, and other legal instruments. In principles, C deference does not extend to these instruments; in practice, the results are mixed. o State agencies do not get C deference  Nor does C even apply to all federal agency interpretations of statutes. o C calls for deference to “an agency’s construction of the statute which it administers.” . Agencies are said to “administer” statutes for which they have some special responsibility. . Agencies will often interpret and apply statutes that they do not administer in this limited, specialized sense. o Ordinarily, agencies “administer,” and thus receive C deference concerning, the substantive provisions of the organic statues that they enforce. . Most of the time, it is fairly obvious whether an agency “administers” a particular statute within the meaning of C. . But what happens when the statutory provision at issue does not directly implicate the agency’s regulatory mission? o Recall from the materials on formal adjudication that the DCC and the 1st Cir. give C deference to agencies’ interpretations of procedural provisions in organic statutes providing for hearings. . This is not the case everywhere o It would be a little different to give the agency deference in interpreting their standards of review . Would not really make sense to do this o Agencies will not be given deference in interpreting criminal statutes . Courts should interpret in a pro-defendant manner  Everyone agrees that the relevant agencies “administer” such statutes for C purposes. At the other pole are statutes, such as the APA, that are applied by all agencies but specially enforced by none; everyone agrees that C does not apply in such cases. But what happens when, as is often the case, more than one agency, but fewer than all agencies, has enforcement responsibility with respect to a statute. Do they all get deference? Do none get deference?...

43 o Similar situations to APA…Federal Tort Claims Act; tax code  Rapaport (CADC, 1995) o DCC . If more than one agency administers a statute, deference is not owed to an agency’s interpretation of a statute of that it shares with other agencies  Not an across the board rule for every circuit o Some circuits provide C deference when there is no disagreement among agencies providing interpretations

o Two things being reviewed in agency interpretation situations… . (1) what is the agency interpreting? . (2) what is the form of the interpretation? o Next, we are looking at the second prong…  Christensen (US SC, 2000) o Interpretations such as those in opinion letters – like interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law – do not warrant C-style deference. Instead, interpretations contained in formats such as opinion letters are “entitled to respect” under our decision in Skidmore, but only to the extent that those interpretations have the “power to persuade.”  Mead (US SC, 2001) o Administrative interpretation of a particular statutory provision qualifies for Chevron deference when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority . You have to both have the authority AND use the authority o Delegation of such authority may be shown in a variety of ways, as by an agency’s power to engage in adjudication or notice-and-comment rulemaking, or by some other indication of a comparable congressional intent. o An agency is not precluded from changing its mind it just has to give reason as to why it is doing so

U.S. v. Mead  “[A]dministrative implementation of a particular statutory provision qualifies for Chevron deference when it appears that o [(i)] Congress delegated authority to the agency generally to make rules carrying the force of law, o and that [(ii)] the agency interpretation claiming deference was promulgated in the exercise of that authority.”  How to identify when the first Mead requirement has been met: Delegation of authority to the agency to make “rules carrying the force of law” may be shown in a “variety of ways”: o Agency power to engage in adjudication o Agency power to engage in notice-and-comment rulemaking o Some other… . This makes Scalia crazy because what does this really even mean

44 Indications that Congress did not intend tariff classifications to have the “force of law”  (1) Face of the statute: terms do not suggest Congress intended such classifications to have “force of law” o The classification rulings did not “naturally bind more than the parties to the ruling” o Even though the rulings had precedential value, that alone does not entitle a ruling to Chevron deference o CIT can give close review to classification rulings (CIT can consider new grounds & new info as part of record)  (2) Agency practice does not indicate Customs intended lawmaking when it issued tariff rulings: o Generally did not use notice-and-comment proceedings o Agency treats rulings as if they do not bind third parties  (3) Sheer number of tariff classifications issued each year by the Customs Service

 not a ton of raw principles coming from M  have mostly just this fact-specific analysis

 Christensen and Mead o C…opinion letter had no force of law so no C deference o M…even though there is binding effect, there was no force of law and thus no C deference o Key principle . Binding some party is a necessary, but not sufficient, condition to give an agency the force of law or C deference  Binding everybody is an indication that there should be C deference  Deference given in M o Skidmore  If we are in the Auer regime, we do not have to go through the whole Mead debate about how formal the interpretation was o This is when an agency is interpreting its own regulations

Gonzales v. OR (2001 Interpretive Rule)  “I hereby determine that assisting suicide is not a ‘legitimate medical purpose’ within the meaning of 21 CFR § 1306.04 (2001), and that prescribing, dispensing, or administering federally controlled substances to assist suicide violates the Controlled Substances Act. Such conduct by a physician registered to dispense controlled substances may ‘render his registration . . . inconsistent with the public interest’ and therefore subject to possible suspension or revocation under 21 U.S.C. [§] 824(a)(4).” 66 Fed. Reg. 56608 (2001). o looks at both a regulation and a statute . government is arguing for Auer  greater deference  also, remember that in the Auer regime does not require particular forms

45 o Court holds that Auer deference does not apply here . For A to apply it has to be an interpretation of the agency’s own ambiguous regulation . Parroting is not allowed  Regulations cannot simply parrot statutory language to get out from under Chevron and get Auer deference . No, Auer, then does Chevron apply?  AG is not within the scope of the types of decisions that he was given the authority for o The lawmaking you do must be in the correct form (Mead) and within the correct subject matter (Gonzales). . Interpretation must be in the correct form and on the right topic  C deference does not apply. o Analysis of the interpretative rule under Skidmore . Rule wasn’t upheld under S because it was not persuasive.  AG has no relevant expertise  There was no consultation with experts

 Take aways o anti-parroting posture o The lawmaking you do must be in the correct form (Mead) and within the correct subject matter (Gonzales).

When Chevron does not Apply  When interpretations are in documents “lack[ing] the force of law,” such as an opinion letter, a policy statement, an agency manual, or an enforcement guideline. Christensen, p. 472  When interpretations have some legal effect but other factors suggest Congress did not intend that type of agency interpretation to be sufficiently authoritative, Mead, p. 478  Interpretive rules as a class do not warrant Chevron deference. I.e., they may or may not. Mead, p. 480 o Mead . Binding some party is a necessary, but not sufficient, characteristic for C deference . Interpretative rules as a class do not warrant C deference  They may or may not get C deference  When Congress has delegated lawmaking authority in certain policy areas and the agency interpretation does not fall w/in the scope of those policy matters, as established by the terms of the relevant authorizing statute. See Gonzales v. OR

Auer Deference  Applies when agency interprets its own ambiguous reg  Standard: An agency’s construction of its own ambiguous regulation “becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation.” Seminole Rock (SCt 1945); see also Auer

46  May not apply when the text of a reg too closely mimics statutory text. In such a case, the agency has really interpreted a statute and Chevron must instead by analyzed. See Gonzales v. OR (SCt 2006)  To date, courts do not seem to limit Auer deference to only agency interpretations of a certain FORM. I.e., the Mead restrictions do not seem to apply to the Auer regime.

Skidmore Deference  Seems to apply whenever Chevron and Auer do not  Standard: Interpretations are “‘entitled to respect’ . . . to the extent that those interpretations have the ‘power to persuade.’” Christensen, p. 472  Weight of interp. under Skidmore, p. 441, depends on: o (i) “the thoroughness evident in its consideration” o (ii) “the validity of its reasoning”; o (iii) “its consistency with earlier and later pronouncements” o And (iv) “all those factors” giving it “power to persuade”

HOW CLEAR IS “CLEAR”?

Chevron  Step 0 o Mead o Does Chevron apply?  Step 1 o Is the statute “clear”? . If yes, stop. Court evaluates if the agency’s interpretation is equivalent to what Congress is saying. . If no, go to step 2.  Step 2 o Is the agency’s interpretation “permissible” (i.e., reasonable)? . The Court will defer to an agency’s reasonable interpretation, even if it may not agree with it. . Great deference is afforded to agencies here

Statutory Interpretation  There is no governing methodology for interpreting statutes in our legal system  Major statutory interpretation tools (Mascott’s hierarchy): o (1) Text of the statute o (2) Immediate context o (3) Entire Act o (4) All legislation . e.g., the entire USC o (5) Canons . disagreement between judges over which one to use o (6) Legislative History o (7) Purpose

47 . textualists generally shy away from this  unless the purpose is embodied in the text o (8) Social Policy . used to be more relevant than it is today . most people would say that judge’s own policy views are not appropriate in statutory interpretation . one situation you may see the use of SP is when a judge asserts that he cannot imagine a Congress drawing legislation to put forth some kind of unacceptable SP  some judges disagree about the appropriateness of categories. But, if they agree on relevancy, they may disagree on hierarchy. o All generally agree first 5 are relevant o Great disagreement over the order of the hierarchy

 Zuni (US SC, 2007) o The use/prioritization of different tools can lead to dramatically different outcomes o Some judges are more willing to find statutes clear rather than ambiguous . Pure textualists are more likely to find the statute clear  Otherwise, when you defer to Step 2, deference to the agency is likely o The more tools that you use will make it more likely that you find ambiguity  Yet, sometimes textualists may move on to Step 2 because they are so focused on finding the precise, literal answer  “Clear” o (1) “the obvious answer” . clear, express statement . White dissent (in Dole) o (2) Is the statute definitive? . Using all of tools and looking as deep as possible, does it appear that the statute is saying one thing  If it does, you have to interpret what the agency is doing in light of that definition o This is where the decision is made to strike down a statute or not

Ways to Interpret the Step 1 Reference to a “Clear” Statute  (1) After using every permissible interpretive device, an answer to the question before the court emerges as correct.  (2) After using every permissible interpretive device, the court is extremely confident that it has identified the correct answer to the question before it.  Essentially, “clear” statement requirements: o (3) After a fairly cursory analysis of the statute, an obvious answer emerges. o (4) After a fairly cursory analysis of the statute, the court is confident it has found an obvious answer.

48 Summary of Various Step 1 Methodologies  Method 1: no real requirement that the statute provide a “clear” answer to the relevant question; analysis done like it is in any statutory interpretation case  Method 2: High level of confidence required  Method 3: Clear statement required  Method 4: Clear statement + High level of confidence required

 4 ways to define “clear” … casebook o (A) after using every interpretive device…definitive . (1) an answer appears correct (No real “clear” requirement) . (2) the court is very confident that the statute is correct (clear=confident) o (B) after a cursory analysis…express . (3) answer appears correct (clear=obvious)  answer jumps off the page . (4) the court is confident the answer is correct (clear=obvious & confident)  Most judges go with (1) or (2) o Express requirement suggested in White’s dissent in Dole does not appear to receive too much recognition  Really and (A) v. (B)…think for exams o A…all methods . Less textualist  But can remain textualist depending on what tools you use o B…obvious; express; cursory . Not strictly textualist  A court using every permissible interpretive tool will be more likely to find an answer under Step 1 than a court using the "obviousness" (i.e., "clear statement") approach. Courts using every permissible tool still, however, often find no answer under Step 1 and so frequently move on to Step 2.  For the obviousness approach, the statute must explicitly tell us that what the agency is doing is wrong or right in order to make a decision about a regulation under Step 1. This almost never occurs, so we will move more quickly to Step 2. o it seems that it's fairly rare for a court to truly utilize a "clear statement" approach to finding answers under Step 1.

 Dole (US SC, 1990) o Chevron analysis . Step 1…statute addressed the issue before the Court  it used system (A) because it did not point to one particular provision, but rather used many tools in coming to their answer  Pauley (US SC, 1991) o Here, the Court seems to be adhering much more to the “obviousness” requirement . A la approach (3) or (4)  Dole and Pauley reflect quite different understandings of what it means for a statute to be “clear.” At a minimum, P (and J. White’s dissent in D) suggest that clarity has

49 something to do with the degree of effort required to find meaning, while D (and J. Scalia’s dissent in P) suggest that clarity is a function, not of the effort required to find a meaning, but of the confidence that one has in the meaning that on ultimately finds.  Put another way, D seems to understand clarity in terms of the degree of certainty that one can have in an answer to a question of statutory meaning, while P seems to define clarity in terms of the obviousness of the answer.  Williamson Tobacco Corp. (US SC, 2000) o Step 1…Whether Congress has directly spoken to the direct question at issue . Tools  Look at other provisions of the statute  Look at other outside acts  The need to be guided by common sense o Is Congress likely to delegate such this issue to an agency? . Here, would Congress delegated such an important issue to the FDA? … no o This sounds like the Court is saying it can consider policy issues o Upshot of the majority . Court is very willing to look at the entirety of the act at hand  Doing an awful lot of work o Adhering to system (A) . Court is willing to look at all other types of legislation enacted in the past  Essentially willing to look at the USC in its entirety . Most judges will consider rejection of past legislation, but this will not have a lot of force in interpreting a statute  Here, there was numerous failed bans on tobacco o You can consider this, but it is not to be a given a whole lot of strength . Court will consider public policy . Court does not prohibit an agency to change its mind about a given issue . Another principle of statutory interpretation worth noting  For two seemingly conflicting acts, you refer to the later legislation o Take away . Example of a Court really taking a system (A) approach  If one counts the pages in the Federal Reporter system, it is evident that courts implicitly use the “clarity as degree of certainty” approach of Dole substantially more often than they use the “clarity as obviousness” approach of Pauly, though the latter continues to make appearances.  Beyond that, it is difficult to make useful generalization about lower courts’ treatment of Step 1 of Chevron. Sometimes, courts are relatively quick to find statutes ambiguous, while on other occasions courts seems to work very hard to find clarity. And every so often judges agree that the meaning of the statute is clear but disagree about the content of that clear meaning.

HOW REASONABLE IS “REASONABLE”?

50  At least one thing, however, is evident: although courts have not articulated very well the standard(s) that they are applying at step two of C, agencies very seldom lose at that stage of the analysis. o In the infrequent cases in which agencies lose at step two, the agency interpretation typically either fails completely to advance the goals of the underlying statute, or are so bizarre that close analysis is unnecessary.  AT & T o this involved a pretty egregious interpretation on the part of the agency  If a Court decides a case on Step 1, it could find the agency to be in accord or disaccord with the statute o Although typical, it is not always decision on Step 1 means an agency loss and decision on Step 2 means an agency win . for exam, we are most likely going to have to go to Step 2, for analysis purposes

HOW FAR DOES THIS GO?

 After finding for the agency under Step 2, can the agency change its mind? o Suppose an agency interpretation of a concededly ambiguous statute is affirmed by the federal courts under step two of Chevron. We now know that the agency’s interpretation was a reasonable resolution of the underlying ambiguity. In all likelihood, it was not the only reasonable resolution of that ambiguity; ambiguity by its nature can often be reasonably resolved in several, possibly conflicting, fashions. What if the agency, after savoring its judicial victory for a while, decides that it really should have resolved the ambiguity in a different manner. Is it now free to adopt a totally different (and let us stipulate equally “reasonable”) interpretation from the one that it initially defended in court? Pure Chevron theory would suggest “yes,” because to say on appellate review that the agency was reasonable is not to say that a different agency action would be unreasonable. Traditions of judicial review would suggest “no,” because once the court has spoken, the judicial decision is thought to fix the statute’s meaning.  National Cable (US SC, 2005) o If we are under C, we work based on the idea that the judicial system believes that Congress has delegated authority to the agency . So, we cannot let a court’s prior judicial opinion affect our C analysis o If an agency is due C deference, you should not change your Step 1 analysis at all with regards to judicial preference . Except for when:  A court in the past has unambiguously defined the meaning of a statute  If an agency has interpreted something and an agency is not due Chevron deference (Mead)

REVIEW OF AGENCY DISCRETION AND POLICYMAKING

51  Agency determinations that cannot be categorized as just a finding of fact or a legal conclusion  Section 706 of the APA contains a provision that speaks directly to these nonfactual, nonlegal determinations: o The reviewing court shall *** (2) hold unlawful and set aside agency action, findings, and conclusions found to be – (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law ***. 5 USC § 706(2)(A) (2000).

REVIEW OF OUTCOMES V. REVIEW OF PROCEDURE

REVIEW OF DECISIONMAKING PROCESSES

 A court reviewing an agency decision can evaluate a least three aspects of the decision: the agency’s decisionmaking outcome, the agency’s decisionmaking procedure, and the agency’s decisionmaking process. A defect in the outcome, the procedure or the process can be an independently sufficient ground to prevent affirmance of the agency decision.  Outcome test o I.e., “substantial evidence” test o The conclusion either has the requisite “fit” with the record evidence or it does not  Procedural test o Outcome tests focus on what agency concluded, while procedural tests focus on how the agency reached and issued its conclusion. o A substantially flawless outcome can fail a procedural test, and a procedurally flawless decision can fail an outcome test.  Process tests o The law independently requires that the agency’s decisionmaking process – the chain of reasoning employed by the agency to reach its conclusion once all applicable procedures have followed – satisfy a minimum standard of rationality. Process tests, which perhaps should be called reasoning process or decisionmaking process tests to distinguish them clearly from procedural tests, concern why the agency reached he conclusion that it did. . Basis cannot be off the wall  E.g., an agency cannot look to astrology for support . This is the aspect of agency decision making that we will be looking at for the next few days . Agencies have to make rational decisions and they have to be able to explain why their decisions are rational  At a minimum, the “AC” test prohibits decisionmaking processes that are starkly irrational. At a maximum, it imposes a far more rigorous requirement of explanation. Whenever, an agency has legal discretion, the “AC” test requires the agency to exercise that discretion rationally. Where such discretion involves an issue of policy significance, well-settled principles of admin review typically impose a substantial duty of explanation on the agency.

 “Hard look doctrine”

52 o The agency does not need to perfectly explain its decision, but its explanation must be adequate and reasonable . Less than de novo review o Harmless error doctrine still applies . Non-material errors in reasoning will not undo an agency decision  The error in reasoning must be material to the decision as a whole o In order to make a policy change, an agency needs to give a court enough reason to let the court know that it is intentionally changing policy (that there is not some mistake) and also the agency must discuss past precedent

 Hodgson (USCA, 1974) o The agency needed to think ahead to some objections and explain why it didn’t take certain approaches, rather than simply explain proactively the approaches that it actually took  State Farm (US SC, 1983) o Standard of review applied by the Court . AC standard  standard of review when an agency is revoking past policy . Why is revoking a standard different from a failure to act in the first place?  An agency revoking a standard is more serious than promulgating nothing to begin with o By setting a policy, the agency has taken a stance on what the proper decision is, and now they are trying to go back on that stance . So, the AC standard may in fact be a bit tougher here . Explanation required for an agency to change course…  The agency needs to provide a reasoned analysis regarding to why they are making such a change  Court will not take post-hoc rationalizations o Chenery applies  The agency needs to explain why it went the way it went, and also why certain alternatives were not the right way o The Court says agencies cannot let industry drive their regulation production o SC says that the agency cannot argue for the conflation of procedure and process . Here, the Court was just asking the agency to consider the air bag option, rather than requesting that it go back and look through all possible alternatives o SC drives home consideration of common sense by the agency o The Court really requires an in-depth analysis from the agency o Take away . The Court stresses that its opinion is about the agency providing adequate explanation, rather than trying to influence substantive policy  The agency needs to provide a reason for why it is seeming to back away from furthering public safety policy

53 . Highlighting the process test under the AC standard  Some discretion given to the agency  Important to look at: o Whether the decision was well-explained o If the agency looked at possible alternatives  These cases generally come up when agencies are looking at policy matters on the scientific information being consider is uncertain . The Court is taking a fairly tough stance on the agency here  The agency must explain why it is not possible for it to adhere to prior policy standards set forth o Rehnquist (concurrence/dissent) . Dissent  He thinks it is okay that a new president/administration leads to a dramatic policy shift o Different view about what the role of agency should be . He doesn’t think agencies are impartial, science-driven experts, but rather political arms of the president  Majority does not think this is right…they seem to view agencies as impartial, science-driven experts o The majority does not find a change in political parties relevant o Science should always be the same  Puerto Rico Sun Oil (1st Cir., 1993) o The Court seemed particularly persuaded by the fact that the agency switched its approach mid-steam without any kind explanation for doing so o Take away . Explanation is inadequate . The decision seemed nonsensical . Certain kinds of explanations may be determined inadequate  Massachusetts (US SC, 2007 o Two issues here: . Whether EPA has authority to regulate?  EPA’s argument o Two points derived from Williamson . Congress would not have left a decision up to agency when such great economic ramifications are at stake . The Court will look at the whole landscape of the law in looking at this particular statute  An agency will not be granted the authority to regulate where another statute already provides for that type of regulation elsewhere  Court o Statute is clear and allows for the inclusion of the regulation of greenhouse gases o Williamson doesn’t apply . The Court majority here is somewhat predisposed to

54 disregarding the extraneous arguments in Williamson . If so, is it AC to not regulate here?  Even assuming they had the legal authority, the EPA said it still was not going to regulate because… o Cannot be certain that there is a causal link between greenhouse gases and climate change o Afraid to get in President’s way to manage  The Court will not give total deference for failing to initiate a rulemaking here o Rulemaking is still legal and within the expertise of the Court o On the other hand, the Court will give a little more deference in making enforcement decisions  Court o The EPA only has discretion to determine whether the air pollutant is harming public welfare. o Analysis below o Another case where we see a change in administration and a different view about agency regulation o Massachusetts . Legal question: Does the EPA have the authority under the Clean Air Act to regulate greenhouse gases? . Discretionary question: If the EPA has such authority, was it wise for the EPA to exercise it?  Even once we get to D/P there can still be legal standards hemming in the discretion of the agency o Here, the EPA can only regulate the impact on public health and must act when it thinks an air pollutant effects it. . So, the only way the agency can get full discretion is if there no relevant legal standard or certain science.  Here, there is a clear legal standard/question (C Step 1), so the only way the EPA can be granted discretion to is figure out what to do if there is scientific uncertainty. o Thus, if there were scientific uncertainty about the impact on public health (i.e., what pollutants harm public health), the EPA would have been granted discretion here.

Types of Judicial Review of Agency Determinations  Focus on this for the exam, rather than trying to categorize something as outcome, procedural, process  Factual Determinations o Type of “outcome” determination o Reviewed under either the

55 . (a) “substantial evidence” standard, Section 706(2)(E) of the APA (review of factual findings in FORMAL proceedings) . OR (b) “arbitrary & capricious” standard, ADAPSO (review of factual findings in INFORMAL proceedings) . SE = AC  Legal Determinations: Chevron/Skidmore/Auer o Type of “outcome” determination  Agency Procedures: Typically under de novo review, p. 632 of casebook (citing CA9 decision) o NOTE: Here I’m referring to whether an agency actually engaged in a certain procedure required by law not necessarily to an agency’s determination of whether a procedure is required by law. For the latter type of analysis, see the three distinct approaches described on pp. 230-247 in the casebook.  Discretion/Policymaking o Type of “process” determination o Agency must clearly explain itself under State Farm (i.e., the “hard look” doctrine) o AC in ADAPSO v. AC here . ADAPSO…we have clear facts to govern us and we want to make sure this facts match up with the outcome . D/P analysis…comes up only when there is either factual (e.g., scientific) or legal uncertainty  you will have to find the uncertainty on the exam

SUBSTANTIVE REVIEW AND PROCEDURAL ADEQUACY

 Often the court will rely on the agency itself and the parties involved to provide the information that it will use to make its decision  The comment period airs the debate between two sides trying to shape how a regulation will come out  Because such extensive dispersion of information is required of an agency, an agency failure could be both a substantive and procedural failure o This is important because if a court views a decision as substantive, more deference will be given to the agency o Procedural decisions are generally reviewed under the de novo standard

DEFINING THE “RECORD” IN INFORMAL PROCEEDINGS

 Record in formal proceedings…556(e)  Record in informal proceedings…unclear under the APA  Federal Rules of Appellate Procedure o “The record must contain the order sought to be review or enforced, the findings or report on which it is based, and the pleadings, evidence and proceedings before the agency shall constitute the record on review in proceedings to review or enforce the order of the agency.” . This is about as set as the rules get on determining the record

56 in informal proceedings  Determining the record is important as Chenery limits the judicial review to the materials within the record  Courts take at face value that the record in informal proceedings includes all the materials used by an agency in making their decision  Remember: a complete record is important for an agency because judicial review is limited to the information provide in the record

HARD LOOK REIVEW IN PRACTICE: VARIATIONS ON A THEME

 Lemoyne-Owen (USCA, 2004) o The Court wants the Board to distinguish contrary precedents here because issues regarding the matter at hand are generally decided on a very fact-specific basis . The Board must explain why those decisions don’t govern here or why the Board is changing its mind  FLRA (USCA, 1993) o In the past agencies have came down on a different side concerning these prevailing rate provisions o Here, the agency tried to explain this change by distinguishing past precedent, but the court did not buy their reasoning . The court thinks that the agency just is not describing the statutes properly o When the agency decision being challenged seems to challenge prior precedent, especially when the party concerned is citing it, the court will require a formidable explanation  Center for Auto Safety (USCA, 1992) o Different from State Farm . The agency is not stopping regulating safety, it is just going a different route by funneling money into builder safer bridges rather than the inspection of them o Three types of review here . Chevron analysis of the legal question  Did the agency violate a statutory mandate? . Arbitrary and capricious analysis – ADAPSO substantial evidence  Was the 2-year exemption standard arbitrary and capricious? . Arbitrary and capricious analysis – State Farm hard look  Was the 5-year standard arbitrary and capricious? o The court would rather have the agency act than not act o The scientific standard was by the preeminent group in the field…the court seems to value this o Note the difference between the ADAPSO and SF AC standards . Outcome analysis v. process analysis o How is this case different from SF that allowed the court to uphold this decision as not AC? . Here, the agency acknowledges that it didn’t pick the best standard, but promises to look at this issue further

57  The court really seems to take this into account

A HARD LOOK AT STEP TWO OF CHEVRON

 When there is question of statutory interpretation… o Step 1 . Look for a definitive statutory answer  Statutory interpretation tools o Step 2 . Outcome test approach  Define the permissible range of ambiguity and determine whether the agency’s interpretation fits within this spectrum  Does the agency’s legal interpretation reasonably fit with what the statute is saying? . Process test approach  In addition to the question above, also explain why the agency picked the one out of several viable interpretations?  Viewing Chevron Step 2 as a bit more of a State Farm analysis o Lawson supports this view below  The kinds of reasons that courts generally accept as legitimate for agency policy choices are not necessarily the kinds of reasons that courts should accept for agency interpretations of statutes. Instead, agencies should have to justify their choice of statutory interpretation, in the first instance, by reference to theories of statutory interpretation.  Policy choices, on the other hand, must be justified/explained by reference to efficiency, fairness, administrative convenience, and a host of other considerations that courts accept as legitimate tools of policymaking.  State Farm AC o Factual uncertainties . Uncertain data o More of a policy decision o Facts don’t really apply  Chevron Step 2 AC o Legal/statutory interpretation o Terminology… . “reasonableness” . tie it back to the statute  SE o Factual determination o Does A fact fit with B conclusion?

58 ABUSE OF DISCRETION

 When we are in these discretionary decisions outside of legislative/congressional sphere, the courts tend to give the agencies more deference

CONSTITUTIONAL CONSTRAINTS ON AGENCY PROCEDURE

DUE PROCESS: AN OVERVIEW

POSITIVE THEORIES OF DUE PROCESS

 Due Process Clauses o Fifth Amendment: “No person shall . . . be deprived of life, liberty, or property, without due process of law . . . .” o Fourteenth Amendment: “No State shall . . . deprive any person of life, liberty, or property, without due process of law . . . .”  As the admin state has become larger, the due process clause has served as yet another restraint on admin actions  Due Process principles derived from state cases are seen as the same as those derived from federal cases  Theories of due process o Nihilist theory . No due process law, it reflects the shifting views of the court o Compartmentalist theory . Each body of law has its own due process doctrine o Doctrinalist theory . Due process can cross across each body of law  Constraints o When does the clause kick in? . Only for government actors . Some kind of deprivation  Does there have to be intent to deprive? . A life, liberty, or property interest  First constraint to really be aware of o What does due process of law mean? . Procedural due process…what procedures have to be followed o Extra-admin law constraint . Legislative-type admin actions do not fall under the due process clause . Adjudication context…look to DP  You also have to look at statutes and agency rules and regulations when analyzing . Rulemaking context…not concerned with DP

A ROADMAP FOR DUE PROCESS PROBLEMS

59 THE ORIGINAL UNDERSTANDING

THE ORIGINS OF THE DUE PROCESS CLAUSE

LIFELIBERTYPROPERTY

 Goldberg (US SC, 1970) o The termination of welfare benefits is governed under the due process clause . the termination of welfare benefits is viewed as a “life, liberty, or property” interest  the Court points to the more expansive role of the modern government o What process is needed? . A pre-termination hearing  Factors considered: o These kinds of people rely on welfare to get their food and housing…essential needs that would be stripped between termination and the (in place) post-termination hearing . They are immediately in a desperate situation if they lose this money o A person wont have anytime to give attention to their case if they lose the benefits . Government interests  Fiscal and admin costs  Interest in its citizens o Cuts against the gov’t o SC finds that the balance is clearly in favor pre-termination hearings . The state can manage its negatives more than the welfare recipients could manage theirs o What does the pre-termination hearing have to encompass? . Does not have to be a full judicial trial  The specific question/determination and the stage of the process may determine what process will be used . We must simply seek to determine that the termination was not wrongful . Timely and adequate notice of the reasons for termination; the opportunity to be heard (ability to present evidence and confront witness); decision has to respond to arguments made by the welfare recipient  Two key components: notice + the opportunity to be heard . Heightened interest in oral presentation of evidence here because welfare recipients may have lower literacy rates . Recipients must have counsel if they want . There must be an important decision maker o Analysis . Are life, liberty, process at stake? . If yes, then what process is needed?  Balance the people’s interest versus the governments interest

60 o Consider notice and the opportunity to be heard  Constantineau (US SC, 1971) o Government action . Posted that woman could not purchase liquor in liquor stores  No notice or opportunity to be heard was given o The damaging of someone’s reputation can be considered a LLP interest . Because we have a LLP at stake, there must be some kind of notice and opportunity to be heard  Bell (US SC, 1971) o Hearing was provided for prior to the suspicion of the uninsured motorist’s license . but at the hearing, he cannot discuss whether he was actually at fault o SC analysis… . Losing licenses affects a LLP interest because it affects the minister’s livelihood . Need a pre-adjudication hearing  Don’t need a full hearing  Only need to have a thorough enough hearing for the minister to challenge this judgment up front o The extended procedure is limited to evaluating the precise issue with regards to the matter at hand

RECAP  In the three cases above, a LLP interest was virtually anything that was important  Courts did not really look as to whether the interest fell within either L, L, or P  LLP interests from three cases above o Deprivations of welfare benefits o Damage to reputation o Suspension of one’s driver’s license

THE THIRD WAY: THE RISE OF THE ENTITLEMENT THEORY

 Roth (US SC, 1972) o If we know we have a protected interest, the Court says that a pre-termination must occur unless there is a really significant government interests that outweighs doing so o “Liberty” and “property” have broad definitions, but there will be some definitions o Is there an interest? . Look below for examples . when could a state’s failure to reemploy be problematic?  When the state levels charges o A hearing here would be over the ability to refute the charge, the state can still come back and decide not to rehire o Important to focus on what the hearing is for  Failure to rehire imposes a stigma or creates some other extenuating circumstances 61 o E.g., a tangible bar on future employment . Not some claim that he may not look quite as hirable as he did in the past o A property interest may exist with a contract, tenure, or some clearly implied promise for employment o General principle . You have to have a legitimate claim, not just an abstract (constitutional) desire  The legitimate claim should be rooted in positive state law o Statute, common law, or some sort of state practice that creates a reasonable assumption of a right (here, there would have to be a reasonable assumption of rehiring – not present here)  Sinderman (US SC, 1972) o Difference here . Professor has been with the state for 10 years; contracts renewed multiple times . Fired when he made some claims o Free speech claim . Court holds that you cannot fire someone for what they say  Even though the state has discretion in rehiring, it can use its discretion to violate constitutional norms o Property interest claim . No official tenure status, but the state guidelines suggested that the professor effectively had implied tenure  if the professor can show that the state implied tenure, he has a protected property interest, and a right to procedural DP o the need for a state standard in creating a property interest . although there are some LLP interests in the core of the CON’s meaning  narrow set of categories o look below Analysis  Has the Court ever declared such an interest as an LLP as guaranteed by the CON?  Has the state suggested that such a right should be protected as a LLP interest?

R and S  Focus on the state in defining a LLP  Are there any constitutional limitations on the state’s failure to define LLPs?

THE MECHANICS OF ENTITLEMENT THEORY: CRITERIA, CONNECTIONS, AND CONSTITUTIONAL CORES

 This excerpt addresses the minimal constitutional requirements for establishing a LLP interests o The state can go further and create greater more expansive LLP interests

62  Much of modern due process law consists of elaboration on the framework of identifying protected interests set forth in Roth and Sindermann.  Obviously, there are some interests that fall within the compass of the due process clause regardless of what any state or federal laws might say. o “life” . if the government tries to execute you o “liberty” . if the government tries to jail you . not just freedom from bodily restraint but also the right of the individual to contract, to engage in any of the common occupations of life, to acquire useful knowledge, to marry, establish a home and bring up children, to worship God according to the dictates of his own conscience, and generally to enjoy those privileges long recognized as essential to the orderly pursuit of happiness by free  also implicated within the context of corporeal punishment at schools and the assignment of at least some prisoners to supermax facilities  While the precise contours of constitutional “liberty” under modern law have not been – and probably never will be – precisely drawn, the Court’s decisions identify a number of seemingly quite important interests that do no make the cut… o Employee at a public university. Roth. o Many things of great concern to incarcerated prisoners . Good-time credits for well-behaved prisoners . Being transferred to a more or less desirable prison  One of the more intriguing modern omissions from the list of constitutionally protected interests is reputation. o Paul held that loss of reputation is constitutionally cognizable only when it is conjoined with the loss of some other interest, such a as a job or the right to purchase liquor (Constantineau). . the reputation-plus doctrine  C is no longer good law in the simplified sense that we talked about it before  Notwithstanding Paul, modern doctrine continues to recognize the (remote) theoretical possibility that, in extreme cases, harm to reputation could foreclose so many employment and social opportunities that it would constitute a deprivation of constitutional liberty. The problems of proving a stigma broad enough to implicate a liberty interest, however, are close to insurmountable.  Consider the 5th Amendment takings clause…the strong (and not at all surprising) suggestion is that “property” as well as “liberty” has a constitutional core.  Webb’s Fabulous Pharmacies o FL court collected the interest on deposited funds o FL courts looked to a FL statute allowing this o US SC reversed and held that interest usually follows the principle and the state cannot just come in and declare private property public company by pointing to ac statute that says so

63 . The SC says the only exception would be if you were to conceptualize the interest of the clerk of the court for holding the money  Here, the clerk had already been compensated  If an interest is not within the constitutional core of life, liberty, or property, it can still receive constitutional protection under Roth if state or federal statutes or regulations make it an entitlement. In order to qualify as an entitlement (as Roth discovered to his displeasure), the relevant statutes or regulations must provide adequate criteria and connections. That is, they must specify identifiable criteria that can be used to determine whether someone is eligible for the benefit that he or she seeks, and they must draw a causal link between satisfaction of those criteria and receipt of the benefit. If that seems unhelpfully abstract, consider whether the following three cases – a tiny sample of the voluminous case law – shed any light on the methodology to be employed in making these determinations.

 Remember: with procedural due process we are not saying that there is a right for the state not to deprive you of a right, but rather that one must receive some kind of process prior to the deprivation of a given right

Thompson (US SC, 1989)  Dealing with step 1…is there a protective interest at stake here? (this is the step we focused on for the other two cases above)…  Is there a liberty interest challenged by disallowing prisoners’ ability to receive visitors? o Prison officials have discretion to admit the visitor or not, and have a list of factors to look at . Consent decree provided prisoners with assurance of a fairly unrestrictive policy regarding visitors o Visitors were denied access without a hearing  Two prongs for a state to establish a liberty interest: o (1) substantive criteria that hems in discretion o (2) there has to be a mandatory consequence stemming from meeting or failure to meet the criteria  Here, o Six reasons for denying visitor admission . Substantive criteria o Problem…prison officials still had total discretion . Thus, you cannot say that the state authorized any kind of entitlement for the prison to receive visitors  if you fail to meet one prong, no liberty interest (statutory entitlement [or core constitutional right]) is established, and thus procedural DP is not required  How could the Court use language to create a liberty interest here? o A state could create a prisoners’ right by mandating that one’s visitor may come in if they had not meet any of the six criteria used for barring individuals . Procedures would then have to exist to determine whether the visitor fell into one of the rules and thus their expulsion was correct  Accordingly, the only way to be able to use negative language to create a liberty interest

64 is if the state establishes that a failure to commit a violation results in the mandatory establishment of a right o The mandatory ban would provide the reverse assumption of a mandate  At the end of the day, what we are looking for is an expectation of entitlement

Sandin (US SC, 1995)  The prison regulation states that one must be put in more secure confinement if there is substantial evidence of serious misbehavior o so, the reverse must be true in that if there is no serious misbehavior, the prisoner has a statutory entitlement not to be put in more secure confinement  Wolff o DP clause does not give a liberty interest for good-time credits, but the state could create this liberty interest  Meachum o There is no state statute creating a liberty interest in moving a prisoner from one prison to the next, even if the next has more or less favorable conditions . The difference is not significance as to consider the prisoner’s condition to have been changed  When do prisoners have a liberty interests in their conditions not being changed? o Washington . Prisoner is being force-fed drugs o Jones . Prisoner is being moved to a mental facility  Stigmatization of being a mentality unstable person  After Thompson, the Court hold that the states have all the ability in the world to give prison officials discretion, so as to avoid the establishment of liberty interests o Problematic because prison officials need guidance o Also, federal courts have become too involved in the regular operations of the prison systems…we cannot totally step away from determining whether the interest is important, and just focus on the language of the statute  Rule for the prison context o Different from the past few days . CON asserts the minimum constitutional line, and states can go above and beyond this line to create more expansive property and liberty interests o Here, the SC is establishing a the cap for liberty interests created by states within the prison context . The issue has to impose an atypical or significant hardship for the prisoner . Extremes that cannot happen without process…covered by the CON already  You cannot be sent to a mental facility without process  There cannot be forced administration of psychotropic drugs without process . A state cannot create a liberty interest for anything less serious than “an atypical or significant hardship for the prisoner”  Spectrum

65 o Minimum…covered by the CON already . You cannot be sent to a mental facility without process . There cannot be forced administration of psychotropic drugs without process o Maximum . “an atypical or significant hardship for the prisoner” o States have discretion to create liberty interests somewhere in between  Here, Court finds that solitary confinement was not “an atypical or significant hardship for the prisoner” permitting the establishment of a liberty interest o Dissents disagree with the factual assertion that solitary confinement is not “an atypical or significant hardship for the prisoner”  Hypothetically, perhaps solitary confinement may be due procedural DP if such restriction brings along consequences on one’s ability to obtain parole

“DUE PROCESS OF LAW”

THE DUE PROCESS CALCULUS

 Leading up to Mathews, the Court really just ruled procedural DP cases on notions of “fairness”

Mathews (US SC, 1976)  E lost his benefits at the first decision point of the administration o E said this violated his DP rights because he did not receive a full evidentiary hearing  3 factors put forth by the Court o (1) nature of the private interest o (2) the risk of an erroneous finding with the current procedures o (3) the administrative burden on the government in installing new procedures  In the past, the only time the Court has required a full pre-termination evidentiary hearing before the termination of benefits was Goldberg o In other cases, precise contours of revamped procedures were not specified  The problem of E is not that he never gets the hearing, but rather that he gets stripped of his benefits before the hearing o Eventually, the recipient will get the benefits if the initial determination is wrong  SC holding…procedures adequate o Distinction from Goldberg (three factors) . Risk of much more harm in G, then in M  The problem of losing welfare is much more problematic  Also, SSS person can get benefits back if initial determination found wrong (at the later afforded hearing) o Benefits lost temporarily for 1 year, rather than in their entirety . Government in G was going more off of rumors; reliable evidence was present in M  Not a whole lot of value in adding additional safeguards

66 o You don’t need to look at the credibility of medical evidence quite so much  Welfare recipients are more likely to be illiterate and will need to present their evidence orally . Requiring hearings in the massive Social Security System would be much more detrimental to the government  Massive costs would be imposed because everyone getting their benefits terminated would want this hearing  Government’s financial costs should not be controlling, but they are at least relevant here

 Usually you will not get a full hearing, but you will not be disallowed any hearing prior to the termination of your benefits. You will usually fall somewhere in between.

Loudermill (US SC, 1985)  L was promptly dismissed after the school found out he failed to disclose a felony  SC findings (in analyzing a due process problem we look to (1) the interest, then (2) the procedure) o There is a clear property interest o Is the process sufficient? . the state cannot reduce the constitutionally required procedures o What pretermination procedures are required? . You have to have some opportunity to respond  Does not usually have to be a full hearing . Mathews analysis  Private interest o There is a significant interest in maintaining one’s employment and you should have the right to explain your side  Government interest o There is a governmental interest in firing employees who are not working o The Court suggests that you can keep a disgruntled employee on (do not have to train another person) or suspend them without pay  The risk of procedures leading to an erroneous outcome o With no opportunity at all to weigh in before getting fired, the risk of error is high . M analyses are very fact-specific  Here, the Court really gets into the nitty gritty  SC’s final holding o There is need for a pretermination hearing, but it does not need to be extensive . There has to be some kind of notice of a hearing . And there must be some opportunity to present to present oral or written evidence on his own behalf o There may at some point be a constitutional problem with the delay in a post-

67 termination hearing, but that point was not reached here  Rehnquist dissent o Mathews methodology is ad-hoc, unpredictable, and subjective  Take always from Loudermill o There is a constitutional minimal standard for the substance of what is a LLP interest AND there is also a constitutional minimal procedural standard for due process o There will always be some sort of pretermination hearing, though not necessarily full evidentiary hearing o If you are getting a full hearing later on, the Court will probably not be as concerned with your pretermination hearing procedures o A delay in getting a postermination hearing could potentially be a constitutional problem

Homar (US SC, 1997)  How is the legal issue different from L? o This case evaluates a tenured public employee suspended without pay rather than a tenured public employee being fired without cause  There is no real opportunity to respond before he was given notice of his suspension  The Court says that the interest here is different from L o The Court assumes a property interest because no one challenges the case on this ground  Why doesn’t L govern here entirely? Why do we have to have a different analysis here? o This case evaluates a tenured public employee suspended without pay rather than a tenured public employee being fired without cause . The whole due process is very, very fact specific…important for an exam  The Court says that even though there is a property interest at stake here, it does not need to be a pretermination hearing if there is a real need for swift action o The reason for swift action must be very good  Mathews analysis o Private interest . Interest in an uninterrupted paycheck was not too high as the pay was not very high o Government interest . Not employing felons in positions of high public trust . It would be a really big burden to suspend with pay  In L, the Court was more focused on keeping a good employee as opposed to keeping around a felon o Risk of erroneous deprivation . The indictment suggests that there are reasonable grounds for suspension  The Court remanded the decision regarding whether or not there needed to be a more prompt post-deprivation hearing  Take aways o Mathews framework is obvious o All of these cases are important to consider for the exam . Goldberg, Mathews, Loudermill, and Homar

68  Consider how fact specific this doctrine is  Given the Mathews framework, which balances the private interest, the efficacy of the requested procedures, and the cost to the government, it is obviously easier to convince a court to award you a Goss hearing than a trial-type evidentiary hearing.

Overview of the Due Process Doctrine  Due Process Clauses o Fifth Amendment: “No person shall . . . be deprived of life, liberty, or property, without due process of law . . . .” o Fourteenth Amendment: “No State shall . . . deprive any person of life, liberty, or property, without due process of law . . . .”  Required Elements for a Due Process Claim (we focused on elements 4-6) o Due Process Clauses: “[(i)] No [government] [(ii)] shall . . . deprive [(iii)] any person of [(iv)] life, liberty, or property, [(v)] without due process of law . . . .” o (1) Government action o (2) Deprivation o (3) “Person” is the one suffering loss . includes legal and business entities like partnerships and corporations o (4) Life, liberty, or property interest o (5) Adequate procedures o (6) Adjudication–not rulemaking, Londoner & Bi-Metallic . When considering adjudication in the Due Process context we are considering the constitutional definition of adjudication…important distinction  APA definition is a little bit different from the constitutional definition  Rulemaking v. Adjudication o The constitutional debate is not quite as cut and dry (e.g., labeling all forms of licensing as adjudication) as the APA . You want to talk more in terms of generality and specificity o Dickinson & Fuchs: Theories on Rulemaking v. Adjudication . (1) The features of agency action most relevant to defining it as rulemaking or adjudication are its (a) prospectivity and (b) generality. . (2) The more forward-looking and general, the more an action is like rulemaking and the more backward-looking and specific, the more an action is like adjudication. . (3) That said, the prospectivity and generality of agency action are often matters of degree. . (4) Moreover, there can be difficult cases where an action is very specific but forward-looking or very general but backward-looking. In such cases, the generality of an agency action is its most important feature. If the factors of generality and prospectivity pull in different directions, generality tends to prevail. . (5) Finally, based on one’s perspective, the same agency action could look both (a) specific and retrospective OR (b) general and prospective. o APA § § 551(5), (7) . §551(5): “‘rule making’ means agency process for formulating, amending, or

69 repealing a rule” . §551(7): “‘adjudication’ means agency process for the formulation of an order” o APA § 551(6) . “ ‘[O]rder’ means the whole or a part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rule making but including licensing[.]” o APA § § 551(9), (8) . §551(9): “ ‘licensing’ includes agency process respecting the grant, renewal, denial, revocation, suspension, annulment, withdrawal, limitation, amendment, modification, or conditioning of a license” . §551(8): “ ‘license’ includes the whole or a part of an agency permit, certificate, approval, registration, charter, membership, statutory exemption or other form of permission” o APA § 551(4) . “ ‘[R]ule’ means the whole or a 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, wages, corporate or financial structures or reorganization thereof, prices, facilities, appliances, services or allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing[.]”  Requisite (1) Interest & (2) Process o (1) Life, liberty, or property interest: . (a) Constitutionally minimal protected interests AND . (b) Govt can by statute, regulation, etc. . . create additional interests w/ the exception of the prison context, where to acquire due process protection, the deprivation must be both (i) atypical and (ii) a hardship, Sandin v. Conner. o (2) Process: . (a) Constitutionally required minimum process . (b) Govt cannot choose to provide less process. See Loudermill (rejection of “bitter w/ the sweet” approach  Life, Liberty, or Property Interest: Constitutional Minimums o Reputation PLUS another tangible loss such as (i) inability to purchase alcoholic beverages (Constantineau) or (ii) loss of job (Roth), see Paul v. Davis . not really categorized as L, L, or P o Liberty: . Freedom from bodily restraint + rights to (i) contract, engage in common life occupations, acquire useful knowledge, marry and raise children, worship God according to conscience, Roth . Prison context: but NOT good-time credits, Wolff, and NOT freedom from transfer to less desirable prison, Meachum o Life: execution o Property: govt cannot, by ipse dixit, transform private property into public property,

70 Webb’s Fabulous Pharmacies (typically interest on interpleaded and deposited funds follows those principal funds and thus is owned by the owner of the principal; possible exception: if interest constitutes payment to the State for the performance of a service)  Life, Liberty, or Property Interest: Statutory Creation o Examples of statutorily created interests: . Entitlement/termination of govt benefit, see Goldberg (welfare); Bell v. Burson (automobile license & registration) . Disqualification for unemployment compensation, Goldberg . Denial of tax exemption, Goldberg . Termination of tenured gov’t employment, Roth . Suspension without pay from tenured gov’t employed, EXPRESSLY NOT DECIDED, Homar o Methodology of govt creation of benefits, Thompson . (1) “explicitly mandatory language” (2) connected w/ “establishment of specified substantive predicates” that limit discretion . But see Sandin v. Conner (prison exception)  Constitutionally Required Procedures . Must have both (1) notice & (2) opportunity to respond prior to the deprivation. VERY fact-specific inquiry. . (1) Notice: must be timely and adequate, Goldberg. The adequacy of notice might be evaluated, at least in part, by whether it provides info w/r/t all of the grounds for the govt’s relevant decision. Cf. Homar  Police officer did not know about all of the government’s evidence/charges . (2) Opportunity to respond: must include some type of pretermination hearing.  Goldberg (welfare): full adversarial evidentiary hearing.  But such a hearing is almost never required prior to the deprivation. See , e.g., Loudermill; Homar  Constitutionally Required Procedures, Mathews Framework o ALWAYS evaluate in light of the particular interest that the procedure is designed to protect. See, e.g., Goldberg; Bell . The nature of the interest may determine the level of procedure required o Three parts: . (1) Private interest (Goldberg: weighed heavily because severe neediness of claimants; Mathews: welfare or family $ OK alternative to Social Security; but see Loudermill: as in Goldberg, loss of income seen as significant) . (2) Govt interest (look at both interests for, see, e.g., Goldberg & Loudermill; and against more procedures)  Government interest may cut in favor of more or less process . (3) Reliability of procedures (Goldberg: oral exam needed because of claimants’ possible writing difficulties v. Mathews: reliable medical evidence) o Facts are important within this context

TIMING OF JUDICIAL REVIEW

71 EXHAUSTION

 Exhaustion is, in principle, the simplest timing doctrine in admin law. An exhaustion requirement tell you to present – or perhaps re-present – your argument to the agency before you bring it before a court. Exhaustion requirements come from two sources: statutes and judicial common law.

Statutory Exhaustion  Congress will sometimes require parties to present arguments to an agency, occasionally more than once, before those arguments can form the basis of judicial action.  Statutory exhaustion is thus a matter of reading the relevant special statutes to see whether and how they make appeals to agencies a prerequisite to judicial review.  Courts generally will not find that Congress has made exhaustion a jurisdictional requirement for federal court action (which entails that courts and parties cannot waive the requirement even if they all agree that it is a good idea to do so unless Congress has expressly indicated the jurisdictional nature of the requirement).

 Statutes may determine many exhaustion requirements...timing, subject matter, raising the same arguments…various jurisdictional prerequisites.

Common Law Exhaustion  For many years, both before and after enactment of the APA, courts would routinely require litigants to exhaust available admin remedies even in the absence of statutory exhaustion requirements. That is, if an agency provided an internal review or rehearing procedure, courts would generally list that litigants employ those procedures before coming to court, whether or not Congress made use of those procedure a jurisdictional prerequisite to judicial review.  Courts also evolved an elaborate set of exceptions to this generally-applicable exhaustion requirement. The rationale for, and exceptions to, the judicially-created exhaustion doctrine were well described by the Court in a leading decision…

McCarthy (US SC, 1992)  Bivens claim puts us under the common law rather than the APA  Why would he follow all these procedures if he may not get any money at the end of the day anyway?  SC analysis o Dealing with CL exhaustion requirements . Even if there is no statute explicitly requiring exhaustion procedures, the Court might still take note if the general congressional statute suggests or indicates certain procedures should be followed  Not the case here o Purposes of the exhaustion doctrine . Promotes judicial efficiency  Agency can fix its own mistakes

72  Better record is put in place . Protect the authority of agencies  Congressional delegation  Agency expertise o Arguments on the other side counseling against really strict exhaustion requirements . there are certain instances where the individual’s right outweighs the interest of the government . examples  if the individual will suffer irreparable harm while waiting  where agency cannot provide the relief (i.e., money relief here)  where the admin body is shown to be biased or has otherwise predetermined the issue before it o SC holds that general delegation of the authority of the agency is not enough, they want to see a specific statute showing them that their position is incorrect o Interest analysis . There is a strong individual interest because of the admin court’s inability to provide monetary damages . Government interest  No creation of a fact finding record here  No real expertise  Short deadlines seen as unnecessary . Strong individual interest outweighs the weak government interest here

Darby (US SC, 1993)  Court looks at APA section 704 o Final agency action meant you were good to go to court unless a statute or agency rule asserted otherwise  Review of ALJ is not mandatory, it has to be requested by one of the parties or the Secretary  No one requests review here and Petitioners are good to go straight to district court  Finality v. exhaustion o Finality…concrete determination by the decision maker o Exhaustion…even if there is a final definitive decision, do you have to challenge that decision one step further within the agency  The Court holds that the APA itself does not maintain in any requirement that you have exhaust all admin options before getting into court. So long as a decision is final (as required by the APA), judicial review is available unless another statute or agency rule requires additional agency action.  The key distinction between Darby and McCarthy o Darby…case is brought under the ABA, the Court looks to the APA . Court will step away and not add additional exhaustion requirements (the APA provides none) unless there is some outside statute requiring specific exhaustion requirements o McCarthy…CL exhaustion doctrine applies if we are not in the APA or under another statute (speaking to exhaustion)…because there is no statute to guide the Court, they go with the CL exhaustion doctrine

73 . E.g., Bivens claims, general violation of contract claim, general tort claims  The APA does not have any exhaustion requirement  Statutes with exhaustion requirements are looked to over the APA o CL exhaustion requirement exceptions do not apply . Statutes limit the circumstances under which you can be free of the provided exhaustion requirement

FINALITY

 Section 704 declares that judicial review is available for “agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court.” Thus, in the absence of an applicable special review statute, section 704 creates a cause of action for review of final agency action. Nonfinal agency action is therefore not reviewable. In addition, special review statutes uniformly authorize review only of final agency action. Through one route or another, finality of agency action is therefore a prerequisite to all judicial review in the federal system.  In principle, the meaning of finality could vary from statute to statute. In practice, courts have evolved a uniform meaning for the term that Congress is presumed to adopt unless it says otherwise.

 Typically if another statute requires final agency action, we can assume that the definition of “final agency action” is the same as the APA’s

Standard Oil Co. (US SC, 1980)  Socal notes that the FTC did not look at much evidence of Socal’s involvement  SC held that this was not final agency action because there was no definitive statement AND no immediate effect o The complaint was only an initiation of proceedings prior to a hearing (that would presumably issue the definitive statement) o The determination is not definitive sounding o There is nothing happening to Socal right now as a result of agency action  Importance of finality requirement o Could interfere with proper agency function o Burden on the courts as they will have to do piecemeal review of these cases because the agencies will not be included  You cannot confuse the finality and exhaustion requirements  Irreparable harm issue o The Court does not mean just the expense of litigation . Or harm to reputation for that matter o v. McCarthy . So many restrictions that the individual would never get proper review  Take aways o Final agency action . (1) Definitive  Use of tentative language

74  Further process of review for the complaint . (2) Direct and immediate impact on the party  Immediate legal consequences of not complying with the agency decision  Extensive complaint does not cause a direct and immediate impact on the party . Distinction between exhaustion and finality  E…raise all challenges needed to be raised  F…definitiveness of the decision

Air Brake (6th Cir., 2004)  Negative letter posted on NHSTA’s website about AB’s product  AB’s legal claims o (1) contents are wrong o (2) authority of the Chief Counsel to produce such letters  Contents of letters – not final action o Factual determinations lack definitiveness o Letters were speaking in generalities . Tentative language o Regulatory context of the letters . Preliminary decisions  No initiation of recall proceedings o Chief Counsel is the subordinate of the agency, thus he does not have the authority to make such a final decision o No change in the rights and duties of anyone. Thus, there is no immediate legal effect. . Even though there is no immediate rights or obligations being altered, if the interpretation would get deference in court it may have sufficient consequence as to warrant it a final agency action o Economic harm will not be an exception to the finality requirement . Potential business devastation was not enough for the Court o If there is a subsequent request for rulemaking, and that request is denied, that is final agency action  Authority of CC – final action o Reviewable o Use of authority is okay here o The CC is a subordinate official, but he is given this kind of authority

RIPENESS

 The context of ripeness and finality are often run together. In many contexts, ripeness is merely an aspect of finality, but in other contexts it has its independent significance. The

75 best way to understand modern ripeness doctrine is, as is often the case, to examine the doctrine that it has in large measure superseded.  Prior to 1967, agency rules could, in many circumstances, be challenged only if and when those rules were enforced against a party in an adjudication. An attempt to seeks judicial review of a rule prior to any enforcement action would often (though not invariably) be dismissed by courts as “unripe.” Rather than rule on an abstract challenge to an agency’s authority, such courts thought it best to postpone review until an enforcement proceeding (generally involving a formal adjudication) gave a more concrete sense of the agency’s position and a more effective record for judicial review. There was, however, little in the case law that specified precisely when pre-enforcement review of rules was appropriate.  In 1967, the Court decided three cases that continue to define modern ripeness doctrine…

Abbott Laboratories (US SC, 1967)  Regulation passed was a bit different from the statute o Generic name needed to be produced every time the established name appeared  SC o General principle . The Court assumed judicial review of an action, unless Congress says otherwise  Exception o When relief is discretionary (declaratory judgment or injunctive relief), the Court will apply a ripeness analysis o Rationales for the ripeness doctrine . Prevent themselves from entering an agency’s authority . Judicial efficiency o Two prong ripeness test . (1) whether the issues are appropriate for judicial resolution at the time . (2) how hard will it be on the parties if they do not get judicial review right away o Here . The Court holds that the issue is ripe for judicial resolution  Appropriateness factors o Purely legal question . Further factual development will not be helpful o Definitive, final agency action  Hardship factors o Significant hardship become drug companies have to comply immediately or face prosecution o Just the fact that prosecution was started in the first place could seriously harm the drug companies’ reputations . Pre-enforcement challenge would speed up enforcement

Toilet Goods (US SC, 1967)  In both AL and TG, there is no relevant statutory provision preventing pre-enforcement judicial action

76 o This must be considered prior to a ripeness analysis  SC holds that this question is not ripe for judicial review o It was a formal and purely legal question o However, the harm is speculative and the relief is discretionary . There are complicating facts that could affect the legal analysis o Hardship . The resulting harm would not be big…only a suspension that could be immediately challenged . Not as much of a public stigma in this industry in having your certification taken away

Take away  Pre-enforcement review has become the rule rather than the exception o If the policy decision is somewhat fleshed out and there is a legal question, it is likely that a court will find the question ripe for judicial review

 Application of the ripeness doctrine often turns on fact-bound determinations concerning the effects on parties of postponing review and the likelihood that further agency proceedings will shed light on the issue before the court. It is therefore hard to make useful generalizations about ripeness. Normally, however, o A claim that raises purely legal questions often is presumptively fit for judicial review so long as “the challenged policy is … sufficiently fleshed out to allow the court to see the concrete effects and implications of its decision.” Thus, “a controversy is ripe if further administrative process will not aid in the development of facts needed by the court to decide the question it is asked to consider.”  Occasionally, as in TG, a court will conclude that further agency proceedings are necessary to clear up ambiguities concerning the agency’s rules or actions.

Ohio Forestry (US SC, 1998)  SC o Ripeness . (1) Hardship to the Ps  No hardship here . (2) Fitness for review  (i) Whether judicial intervention would interfere with further agency action in solving the problem on its own o Stepping in would disallow further policy resolution o If an agency has a mechanism for cleaning up its action courts will generally not find the issue to be right  (ii) Whether judicial review at the considered stage would require time-consuming judicial consideration . factual uncertainty is a very big thing cutting against ripeness

National Park

77  Mere legal uncertainty will not make an issue ripe  If the outcome of a legal question could change contingent on the facts, the issue will not likely be ripe

RECAP  Pre-ripeness analysis…Is there a statute provision governing ripeness? No…  Ripeness analysis o (1) Hardship o (2) Fitness for review . Whether the question is purely legal  Will the answer to the legal question differ based on the particular facts? o Is the regulation factually clear? . Other factors in the above mentioned cases  Usually ripeness becomes an issue when declaratory or injunction relief is being sought o …no concrete harm

 It is certainly not true that pre-enforcement review is today the norm in a way that was not true before the modern era of admin law. But that merely poses a chicken-and-egg question: did ripeness law change in a way that had ripple effects on substantive and procedural doctrine, or did substantive and procedural law change in a way that had ripple effects on ripeness doctrines? Perhaps pre-enforcement review is more common post-1967 simply because the enhanced agency records generated by the procedural revolution make it more likely that cases will be found fit for judicial review without the need for an adjudicatory agency. o …Or vice versa…

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