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CHAPTER 3. THE RIGHT TO A HEARING UNDER THE APA
Black letter
A. Formal Hearings Under the APA
Subject to the set of exceptions set forth in §554(a), a formal hearing is required by the APA in "every case of adjudication required by statute to be determined on the record after opportunity for an agency hearing." Where a federal statute requires such an on-the-record hearing, the hearing must comply with the provisions of §§554, 556 and 557 of the APA.
Determining whether a statute that calls for a hearing triggers the formal adjudication requirements of the APA is a matter statutory interpretation. Courts differ over whether to defer to an agency' interpretation that a particular statute does not require formal adjudication.
B. Agency Action Excepted from Adjudication Requirements
The APA does not require a formal hearing to the extent that there is involved a matter subject to a subsequent trial de novo in a court; the selection or tenure of an employee; proceedings in which decisions rest solely on inspections, tests, or elections; the conduct of military or foreign affairs functions; cases in which an agency is acting as an agent for a court; or the certification of worker representatives.
3.01 The "on the record requirement"
The APA specifies various procedural requirements that must be provided in a formal adjudication. These provisions are set forth in sections 554, 556, and 557 of the APA and in the provisions relating to administrative law judges (ALJs).[1] However, the APA formal adjudication provisions are not applicable unless the APA is triggered.[2] In this respect, the adjudication sections differ from the informal rulemaking sections of the Act which are automatically applicable to all cases of federal agency rulemaking unless specifically excepted.[3]
The triggering mechanism for the APA's formal adjudication sections is contained in section 554(a) which provides: "This section applies, according to the provisions thereof, in every case of adjudication required by statute to be determined on the record after opportunity for an agency hearing."[4]
If a statute concerns adjudication and specifically calls for a "hearing on the record," the APA adjudication provisions are triggered.[5] However, many statutes involving adjudications call for a "hearing" or a "public hearing" but fail to use the magic words "on the record." Unfortunately, the methodology to be used in such cases is not clear and present case law supports several different approaches to the problem.[6]
i. Some courts have held that, at least in adjudicative licensing cases involving sharply disputed factual questions, there is a presumption that a statutory reference to a "hearing" or "public hearing" means a hearing conforming to the APA.[7]
ii. Other courts have declined to apply such a presumption. In the absence of a clear requirement in the legislative history that the APA should apply, the court will not require the agency to comply with the APA.[8]
iii. Still other courts apply Chevron[9] methodology in interpreting section 554(a). Since a statute that calls for a "hearing" but fails to use the words "on the record" is ambiguous with respect to whether the APA applies, the court must defer to a reasonable agency interpretation of the statute. If the agency has interpreted the statute so that the APA is not triggered, and there are no indications that this approach is unreasonable, the court must defer to the agency's interpretation.[10]
In cases of rulemaking, if a statute calls for a hearing "on the record" the agency must engage in "formal rulemaking" which embodies most of the provisions applicable to formal adjudication. However, the Supreme Court has made clear that there is a strong presumption against interpreting an ambiguous statute to call for formal rulemaking.[11]
Illustrations:
1. A statute provides that Agency can recover civil penalties from airlines that fail to follow regulations relating to servicing airlines. The statute provides that Agency must provide a "hearing" before assessing such penalties. Agency adopts regulations providing that agency attorneys rather than administrative law judges will serve as fact finders in its civil penalty hearings. Whether these regulations are valid depends on the court's choice between the three approaches to interpreting §554(a). Under the first approach, the regulations are invalid (assuming that civil penalty cases present sharply disputed factual questions). Under the second and third approaches, the regulations are valid.
2. A statute provides that, "after opportunity for public hearing," Agency can establish rates for the reimbursement of private parties who operate federal prisons. Agency adopts the rates applicable to all private prison operators by using informal rulemaking procedures under section 553 of the APA. Agency refuses to permit cross-examination of witnesses as provided in APA section 556(d). The rates are validly adopted.
3.02. Hearings required by due process
The problem discussed here arises when no statute calls for an adjudicatory hearing "on the record." Consequently, the APA's formal adjudication provisions are not triggered.[12] However, because the federal government's action would deprive a person of liberty or property, procedural due process applies.[13] Normally, this determination would require a Mathews v. Eldridge analysis of what procedural protections are required and when the required hearing should occur.[14]
In an early case, Wong Yang Sung v. McGrath,[15] the Supreme Court held that the APA formal adjudication provisions are triggered when a hearing is compelled by procedural due process as well as by a federal statute. However, Congress acted immediately to overturn Wong Yang Sung by amending the applicable statute to provide that the APA should not apply to deportation cases.[16] Nevertheless, it remains possible that Wong Yang Sung could apply to matters other than deportation, with the result that the APA's formal adjudication provisions would apply to hearings required by due process.
However, this result is considered unlikely and it seems probable that the Court will decline to follow Wong Yang Sung if the issue is squarely presented to it. That case seems inconsistent with Mathews v. Eldridge, the decision holding that the requirements of due process are wholly contextual. Wong Yang Sung, on the other hand, would impose all of the rigid APA formal adjudication provisions, including the requirement that hearings be conducted by ALJs, regardless of whether Mathews balancing would require anything close to such formality. Thus lower court cases have ruled that Wong Yang Sung does not require application of the APA in situations where due process calls only for informal hearings.[17]
Illustrations:
3. The facts are the same as illustration 1 except that the statute empowering Agency to collect civil penalties does not make any reference to hearings. Although the assessment of a civil penalty entails a deprivatiojn of property, Agency is not required to use ALJs as finders of fact in civil penalty cases.
3.03 Agency Action Excepted from Adjudication Requirements
Section 554(a) explicitly exempts a number of classes of adjudicatory matters from the formal adjudication provisions of the APA even if statutes applicable to those matters call for a hearing on the record.
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i. Matter subject to a subsequent trial of the law and the facts de novo in a court.[18]
ii. The selection or tenure of an employee, except an administrative law judge appointed under 5 U.S.C. §3105.[19]
iii. Proceedings in which decisions rest solely on inspections, tests, or elections.[20]
iv. The conduct of military or foreign affairs functions.[21]
v. Cases in which an agency is acting as an agent for a court.[22]
vi. Certification of worker representatives.[23]
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[1] In addition, prevailing parties are entitled under the Equal Access to Justice Act to recover attorneys' fees in the event that the APA formal adjudication provisions apply. See §xx
[2] If the APA formal adjudication provisions are not triggered, the proceeding is considered to be informal adjudication. Many fewer procedural protections are applicable. See §xx.
[3] APA §553(a).
[4] Emphasis added. The definition of "adjudication" in this section is discussed in §1.0xx The term "record" apparently means that the trier of fact is confined to considering the record compiled at the hearing rather than considering mwtters outside of the record.
[5] If the statute calls for rulemaking, the presence of "hearing on the record" language triggers formal rulemaking, meaning that sections 556 and 557 of the APA would apply. See APA §553c), last sentence. See text at note xx .
[6] The ABA has advised Congress to amend the APA to provide prospectively that, absent a statutory requirement to the contrary, any future legislation that creates the opportunity for a hearing in an adjudication should adopt the APA's formal adjudication requirements. The resolution also advised Congress to consider the following factors in determining the appropriateness of requiring formal adjudication: i) whether the adjudication is likely to involve substantial impact on personal liberties or freedom, whether it would produce orders that carry a finding of criminal-like culpability, imposition of sanctions with substantial economic effect, or determination of discrimination under civil rights or analogous laws; ii) whether the adjudication wold be similar to, or the functional equivalent of, a current type of adjudication in which an ALJ presides; iii) whether the adjudication would be one in which adjudicators ought to be lawyers. American Bar Association, Reports with Recommendations to the House of Delegates, 2000 Annual Meeting (Report 113).
[7] Seacoast Anti-Pollution League v. Costle, 572 F.2d 872, 875-78 (1st Cir.), cert. denied, 439 U.S. 824 (1978) is the leading case. See also Lane v. USDA, 120 F.3d 106 (8th Cir. 1997) (hearings provided by USDA's National Appeals Division are covered by APA since statute intended formal hearings and exclusive record); Marathon Oil Co. v. EPA, 564 F.2d 1253. 1260-64 (9th Cir. 1977). Seacoast and Marathon Oil involved §402 of the Water Pollution Control Act which calls for a "public hearing" by EPA before issuance of a discharge permit. Thus, in Seacoast, the issue was whether EPA should grant a permit to an applicant who wished to discharge hot water into the ocean from a nuclear power plant. The court said that formal adjudication was required because the case involved the resolution of sharply disputed factual questions involving a specific applicant; adversarial hearings would be helpful to guarantee reasoned decisionmaking and meaningful judicial review. Both courts relied heavily on the analysis of the Attorney General in his influential manual on the APA. Attorney General's Manual on the Administrative Procedure Act 42-43 (1947) (in adjudication, as opposed to rulemaking, where statute calls for a hearing this implies that the hearing will be "on the record").
[8] See City of West Chicago v. NRC, 701 F. 2d 632, xx (7th Cir. 1983) (requirement of a "hearing" for nuclear licensing cases does not trigger an APA-type hearing absent "clear intent" in the legislative history supporting such a requirement). The West Chicago case involved a request to the Nuclear Regulatory Commission to modify a "source material" license relating to thorium milling. The court was obviously concerned that the APA would impose unnecessary and burdensome requirements on an agency that is responsible for much more important matters than the regulation of thorium milling.
[9] Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984).
[10] Chemical Waste Management, Inc. v. EPA, 873 F.2d 1477, 1480-83 (D.C. Cir. 1989) (no presumption that "public hearing" means "on the record" hearing). The court in Chemical Waste announced that it would refuse to follow a prior circuit opinion containing dictum that relied on Seacoast. Union of Concerned Scientists v. NRC, 735 F.2d 1437, 1444 n.12 (D.C.Cir. 1984). Chemical Waste at 1482-83. See also Sibley v. DOE, 913 F. Supp. 1181, 1186 n.3 (N.D.Ill. 1995), aff'd, 111 F.3d 133 (7th Cir. 1997) (deferring to agency's interpretation that statute granting employees a "hearing" to challenge salary offset does not require hearing on the record).
[11] See United States v. Florida East Coast Railway Co., 410 U.S. 224, zz (1973), holding that a statutory mandate that railroad rates applicable to entire industry be made "after hearing" did not mean an "on-the-record" hearing governed by the APA. See also Bell Telephone Co. of Penn. v. FCC, 503 F.2d 1250, 1263-68 (3d Cir. 1974) ("opportunity for hearing" does not trigger the evidentiary requirements of the APA in case involving determination of general policy, regardless of whether it is classified as rulemaking or adjudication).
[12] See §3.01.
[13] See §2.02.
[14] See §§2.04, 2.05.
[15] Wong Yang Sung v. McGrath, 339 U.S. 33 (1950). Wong Yang Sung involved a proposed deportation of an alien. The Court held that due process requires a hearing in this situation and the hearing must observe APA requirements. The Court refused to "attribute to Congress a purpose to be less scrupulous about the fairness of a hearing necessitated by the Constitution than one granted as a matter of ewxpediency." Id. at xx.
[16] The Court sustained the constitutionality of this amendment. Marcello v. Bonds, 349 U.S. 302 (1955).
[17] See Greene v. Babbitt, 64 F.3d 1266, 1274-75 (9th Cir. 1995) (formal hearing provisions of the APA should be followed, based on Mathews analysis, but failing to mention Wong Yang Sung); Chemical Waste Management, Inc. v. EPA, 873 F.2d 1477, 1483-85 (D.C.Cir. 1989) (only informal procedures required in cases of orders for corrective action in cases of release of hazardous waste); City of West Chicago v. NRC, 701 F.2d 632, 645 n.11 (7th Cir. 1983) (Wong Yang Sung limited to cases where due process requires formal hearing); Girard v. Klopfenstein, 930 F.2d 738, 742-43 (9th Cir. 1991) (purporting to distinguish Wong Yang Sung but suggesting also that it did not survive Mathews v. Eldridge); Clardy v. Levy, 545 F.2d 1241 (9th Cir. 1976) (declining to apply APA to prison disciplinary cases to which due process applied). See Robert E. Zahler, Note, The Requirement of Formal Adjudication under Section 5 of the Administrative Procedure Act, 12 Harv. J. on Legisl. 194, 218-41 (1975). Compare Collord v. Department of Interior, 154 F.2d 933 (9th Cir. 1998) (applying Wong Yang Sung for the limited purpose of saying that a hearing could be said to be "subject to" the APA for purposes of allowing a winning litigant to claim fees under EAJA).
[18] Traveler Trading Co. v. United States, 713 F. Supp. 409 (Ct. Intl Trade, 1989) (because agency decision is subject to de novo review before the Court of International Trade, the APA did not apply to its proceedings). See also Attorney General's Manual on the Administrative Procedure Act 43 (1947) (no need for full administrative hearing where party aggrieved has right to full judicial retrial)