CONGRESS ENACTS A STATUTE TO SOLVE A PROBLEM
- Does the statute include rulemaking authority?
- Is disclosure of comments for notice and comment rulemaking required?
- Does the statute contain “on the record” language?
- Does the statute grant the power to act retroactively?
- Does the statute create a cause of action?
- Does the statute preclude review?
- Is the plaintiff within the zone of interest?
- Does the statute specify when a rule is final and/or reviewable?
- Does the statute expressly require exhaustion?
- Does the statute delegate interpretive authority to the agency? Mead
- Is the statutory provision clear and unambiguous? Chevron
AGENCY INTERPRETS ACT AND ISSUES RULES
- N otice and C omment Rulemaking [DEFAULT]
o Goal: reasoned decision-making
o Initiation
§ Congress mandates rulemaking by legislation
· “Top down”: proposed by Congress or the President
· “Bottom up”: proposed from within the agency
· Private initiative
o Informal lobbying
o Formal petition (APA §§ 553(e), 555(e))
o Exceptions
§ Exceptions to APA § 553(b) notice and comment process
· No force of law
· No requirement of legislative authorization
· Must be published (usually in the Federal Register) pursuant to APA § 552(a)(1)(D) (FOIA)
· Advantages to non-legislative rulemaking
o More efficient
o Creates uniform application of the regulations across the field offices
o Gives regulated entities notice of possible future action (avoiding due process claims later on)
· Problems with non-legislative rulemaking
o Not legally binding
o Regulated entities don’t contribute to the process
o Agencies may have incentive to try to slip things through quickly or change interpretation regularly
o Difficult to get judicial review
· Challenging non-legislative rules: “The rule should have been formally promulgated in accordance with notice and comment requirements.”
§ APA § 553(b)(3)(A) exceptions
· Procedural rules
o Set forth the mechanisms for enforcing or affording substantive rights, but are not substantive rights in themselves
o JEM Broadcasting Co., Inc. v. FCC (1994): “hard look” rules prohibiting a revised application and promulgated without notice and comment were procedural and did not invoke § 553 because the applicant’s rights were not so significant as to require notice and comment safeguards
§ Overruling Air Transport Ass’n of America v. Dep’t of Transportation (1990): even though the rule in question was procedural, § 553 notice and comment were required because the agency applied a “substantive value judgment” (citing American Hospital Ass’n v. Bowen (1987))
o Test
§ Does the rule alter substantive rights?
§ Are those rights of sufficient gravity to outweigh the agency’s efficiency concerns and invoke notice and comment requirements?
· Good cause
o Impracticable
o Unnecessary
o Contrary to public interest
§ Balancing test: agency expertise versus public participation
§ Must be substantiated on the record (APA § 553(b)(3)(B))
§ “Interim final rule”: time sensitivity requires a rule to be published before notice and comment, with amendments later on
§ “Direct final rulemaking”: rule is published with a deadline; if there are objections before the deadline, then the rule will go through the normal notice and comment procedure; if no objections, rule will be final as is without notice and comment
· Military and foreign affairs
· Agency management, personnel, public property, loans, grants, benefits, contracts
§ Interpretive rules (statements of interpretation of the regulations)
· When is something an interpretive rule that does not require notice and comment?
o (1) New D uty Test: Metropolitan School District v. Davila (1992)
§ Does the agency action create a new legal duty?
· How does the agency characterize the statement?
· Is the agency action intended to create new law, rights, or duties?
o (2) Other “New Duty Test”: American Mining Congress v. Mine Safety & Health Administration (1993)
§ Does the agency action create a new legal duty?
· Does the agency have rulemaking authority?
· Does the rule contradict or revise a prior legislative rule?
· Is the rule published in the Federal Register or CFR?
o (3) When the agency lacks authority to undertake § 553 rulemaking
§ Policy statements (statements of intention to enforce the regulations in a particular way)
· When is an agency action a policy statement that does not require notice and comment?
o (1) For ce of L aw T est (New Duty/Binding Effects): American Hospital Ass’n v. Bowen (1987)
§ Does the agency action have the force of law?
· What is the present effect?
· Does the action prevent future discretion by agency decision-makers (are they bound by it)?
§ The reviewing court will also consider how the agency characterizes its own conduct
o (2) When the agency lacks authority to undertake § 553 rulemaking
o N otice of P roposed Rulemaking (NPRM)
§ Affected parties must have sufficient notice to alert them that their interests are at stake if there is to be a meaningful opportunity to participate in rulemaking
§ Method of notice (APA § 553(b))
· Publishing the proposed rule; OR
· Description of the subjects and issues involved
o Fair notice must be given to those whose interests may be affected
§ Test for adequate notice:
· (1) The rules ultimately adopted must be a logical outgrowth of the proposal; OR
o Chocolate Manufacturers Ass’n v. Block (1985) (chocolate milk was originally exempted from the rule, but then included on a list of prohibited foods in the final rule)
· (2) The final rule may not materially alter the issues involved in the rulemaking and may not substantially depart from the proposal
§ Subject to judicial review
o Includes Preamble and Proposed Rule
o Comment
§ APA § 553(c)
· Flexible comment requirements with a focus on fairness
§ Policy: public participation and diversity of viewpoints
§ Ex parte communications: no ban on ex parte communications in APA § 553
· But see
o Sangamon Valley Television Corp. v. United States (1959): due process prohibits ex parte contact when rulemaking involves “conflict claims to a valuable privilege”
o HBO v. FCC (1977): any communication prior to NPRM is permissible, but if it affects the outcome, it has to be on the record; after NPRM, all communication has to be through formal comment or on the record
§ A broad reading of Vermont Yankee Nuclear Power Corp. v. NRDC (1978) may require a very narrow reading of APA § 553 provisions, therefore casting doubt on decisions like HBO that affect agency action by interpreting § 553 to require more or something other than what the agency did in those cases
· Agency may voluntar ily ban ex parte communications
o Easier to apply a blanket ban than try to figure out when they are allowed and when they are prohibited (e.g. during hybrid rulemaking)
§ Sierra Club v. Costle (1981): court chose not to follow HBO v. FCC (informal rulemaking did not ban ex parte communications, but the Clean Air Act in this cases did require docketing and evaluation of ex parte communications)
o Agency may want to avoid appearance of impropriety
o Ex parte communications will generally be allowed during informal rulemaking unless the court finds undue pressure. DC Federation of Civics Ass’n v. Volpe (1971)
§ Two conditions must be met before undue pressure found:
· (1) The content of the pressure on the administrator must be designed to force him to decide upon factors not made relevant by Congress in the applicable statute
· (2) The administrator’s determination must be affected by those extraneous considerations
o Final Rule
§ APA §§ 553 (b), (c)
· Agency re-evaluation and amendments
· General statement of basis and purpose included in the final rule
§ The rules ultimately adopted must be a logical outgrowth of the proposal. Chocolate Manufacturers Ass’n v. Block (1985)
§ 30 days’ notice required before rule may be enforced
o Application
§ Adjudication
- Judicial Review
o Agency fails to act
§ APA § 551(13)
o Agency delays in acting
§ APA § 706(1)
§ Telecommunications Research & Action Center (TRAC) v. FCC (1984): available remedies for agency delay are mandamus (forcing the agency to act immediately) or issuance of an order setting another timetable (and case dismissed without prejudice)
· Common law factors when deciding whether agency delay requires remedy
o (1) Time taken to make decision must be reasonable
o (2) Congress has provided a timetable
o (3) Economic regulation where health and welfare are at stake
o (4) Issues of competing priorities
o (5) Nature and extent of interests produced by delay
o (6) The court does not need to find any impropriety to find that agency delay is unreasonable
o Agency denies request
§ APA § 706(2)(A)
§ Arbitrary and capricious standard of review
- Formal Rulemaking
o APA § § 556-557
o APA § 553(c)
§ Adjudicatory process (cf. informal rulemaking which is more legislative than judicial)
· Pleading stage: proposed rule; written response
· Trial stage: testimony; documentary evidence; cross-examination
· Decision: formulation of final rule
§ Only invoked if statute requires a hearing “on the record”
· United States v. Allegheny-Ludlum Steel Corp. (1972): statutory hearing requirement is not sufficient to require formal rulemaking without a requirement that rules be made “on the record”
o The transcript is the record in formal rulemaking
· United States v. Florida East Coast Rwy. Co. (1973): formal rulemaking requires an unambiguous and express statutory mandate such as “on the record after agency hearing;” there is a presumption against formality
- Hybrid Rulemaking
o Organic statute exists that governs agency rulemaking in addition to the APA
§ **Always look to enabling statute when determining what notice and comment procedures govern rulemaking
§ Often referred to as the “ossification of rulemaking” (hardening or calcification)
§ Vermont Yankee Nuclear Power Corp. v. NRDC (1978): courts may not require procedures in addition to those specified in the APA or other applicable statutes (e.g. the enabling act); hybrid rulemaking remains unaffected
· A broad reading of Vermont Yankee may require a very narrow reading of APA § 553 provisions, therefore casting doubt on decisions like Chocolate Manufacturers and HBO that affect agency action by interpreting § 553 to require more or something other than what the agency did in those cases
o Regulatory Flexibility Act : requires agencies to consider the economic impact of its rulemaking activities on small businesses
§ Agencies must create Regulatory Flexibility Analysis when triggered by a “significant economic impact” on small entities. § 603(a)
§ Final RFA must be included with the promulgation of the final rule. § 604
§ RFA compliance is subject to judicial review pursuant to § 611 and APA § 706
o Executive Order 12866: requires agencies to assess the benefits and costs of all “major rules” or “significant action.” § 3(f)
§ Ensures that agencies promulgate rules only when necessary (centralized review of agency action).
§ § 6 require steps by agency in addition to providing notice and enabling comment
§ Office of Information and Regulatory Affairs (OMB) is responsible for approving or disapproving agency compliance with regulatory requirements, including EO 12866
§ EO 12866 compliance is n ot subject to judicial review
o Information Quality Act: requires agencies to issue guidelines and establish mechanisms allowing affected persons to obtain correction of information or complain about the accuracy of the information disseminated by the agency
§ The agency must then report on any complaints and responses to the OMB Director
o Office of Management and Budget : serves as tribunal before which agency conflicts are resolved
- Other
o Negotiated Rulemaking (NR)
§ Agency decides whether NR is in the public interest
· Agency publishes notice in Federal Register of intent to use NR
· Public has 30 days to comment on issues and nominate the negotiating committee
§ If agency does not go forward wit NR, it must publish its decision and reasons in the Federal Register
§ If agency does go forward with NT, it establishes a negotiating committee (agency nominates a facilitator and committee consents)
§ Agency responsibilities
· Pay for facilitator
· Pay for expenses of necessary parties who lack funding
· Provide administrative support
§ Possible outcomes
· Full consensus: committee presents proposed rule to agency, which decides whether to accept or reject (§ 553 notice and comment rulemaking commences if accepted)
· Partial consensus: committee may or may not present proposed rule to agency
· No consensus: agency decides whether to go forward with § 553 notice and comment rulemaking
§ When does NR apply?
· Is the dispute mature and ripe?
· Must participants compromise fundamental tenants?
· Can affected interests be represented?
· Are there numerous diverse issues at play?
· Will one interest dominate negotiations?
· Why wouldn’t participants operate in good faith?
§ No judicial review of agency actions under NR
o Rulemaking by adjudication
§ Can the agency formulate and apply general policy standard for the first time in adjudication?
· Advantages
o Avoid influence by interest groups (insulated from political pressure)
o More efficient/cost-effective
o Narrow policy movements rather than grand pronouncements by rulemaking
§ Conditions at issue are not static
§ Issues may not be ripe for global judgments
§ Too hard to weigh competing interests
§ Problem is so technical and specialized that it can’t be summarized in one rule
o Agency can select the defendant
· Disadvantages
o Less predictable
o Less consistency
o Less agency accountability
o Problems with notice to affected non-parties
o Unable to make broad policy
o Public input may be desirable
§ Legal constraints on choice of rulemaking versus “rulemaking” by adjudication
· Agency can use APA § 553 only if Congress authorizes agency to promulgate substantive rules (“shall promulgate regulations”)
· The ultimate choice cannot violate individual due process rights: sufficient notice of legal obligations?
o Injunctions usually do not trigger due process rights because property is not being taken from the regulated entity
o General Electric Co. v. EPA (2002): guidance documents issued by the agency were invalid absent notice and comment because the applicant following the agency guidance was assured it had satisfied certain requirements for a permit; agency could not issue a fine
o Appalachian Power Co. v. EPA (2005): guidance document “significantly broadened” agency rule and thus was invalid absent notice and comment
§ Precedent:
· SEC v. Chenery Corp. (1947): agency not precluded from choosing adjudication over rulemaking merely because adjudication had a retroactive effect
o Balancing test: the retroactive effect must be balanced against the mischief of producing a result which is contrary to a statutory design or to legal and equitable principles
o Agencies have discretion to fill the gaps in regulation through adjudication
· NLRB v. Wyman-Gordon Co. (1969): adjudication serves as a vehicle for developing policies which are later announced as rules