The following is a more accessble plain text extract of the PDF sample above, taken from our Legislation and Regulation (Admin Law) Outlines. Due to the challenges of extracting text from PDFs, it will have odd formatting:
BUREAUCRATIC INTERPRETATION OF THE LAWS
ADMINISTRATIVE PROCEDURE ACT
It is a super statute, enacted in 1946, after the New Deal controversies and the creation of tons of agencies.
The public was upset because they thought agencies’ regulations were not transparent enough and did not include enough public participation.
It provides a set of default rules of procedure.
The procedures in the APA can be supplemented or waived by the federal statute delegating tasks to the agency. But there is a presumption written into section 559 of the APA, which requires that later statutes overrule the APA “expressly.”
§553 (Informal rulemaking)
(b) “General notice of proposed rule making shall be published in the Federal Register…The notice shall include—
(1) a statement of the time, place, and nature of public rule making proceedings;
(2) reference to the legal authority under which the rule is proposed; and
(3) either the terms or substance of the proposed rule or a description of the subjects and issues involved.”
(c) “After notice required by this section, the agency shall give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments with or without opportunity for oral presentation. After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose.”
§556 & 557—Formal procedures.
§706 (Judicial review standard)—“The reviewing court shall—
(2) hold unlawful and set aside any agency action, findings, and conclusions found to be—
(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law;
(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;
(D) without observance of procedure required by law;
(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title…”
Rules (rulemaking)—Prospective (quasi-legislative)
Orders (adjudication)—Retroactive (quasi-judicial)
More process is required for orders (notice concerns—enforcing existing law against someone might require more process than developing a new rule that will have only “future effect”).
Formal—§556 & 557
Only addresses rulemaking.
Notice and comment procedure.
Informal adjudication is only governed by DP concerns and common law considerations.
Whether one gets formal or informal procedures depends on the statute under which the agency is operating.
Regarding rulemaking, the “magic words” that trigger formal procedures are: “MADE ON THE RECORD AFTER OPPORTUNITY FOR HEARING” (not enough to have only “hearing” or only “record”).
Otherwise informal—almost all rulemaking is informal.
Formal requirements for rulemaking would really slow things down.
Regarding adjudication, mere mention of a “HEARING” triggers formal procedures.
Formal procedures are easily triggered for adjudication because notice and due process concerns require that in adjudication, one gets a lot of procedure.
INFORMAL “NOTICE AND COMMENT” RULEMAKING (§553)
§553 requires that agencies provide information to the general public at both the beginning and the end of the informal rulemaking procedure.
At the beginning:
(1) General notice of either the terms or substance of the proposed rule or a description of the subjects and issues involved in the Federal Register.
(2) Some undefined opportunity for comment.
At the end, if the agency chooses to adopt a new rule:
(3) Some “concise general statement of the basis and purpose of the rule.”
United States v. Nova Scotia
Facts: In seeking to minimize the outgrowth of botulism and protect the public health, the FDA, employing informal rulemaking procedures, issued a proposal with time, temperature and salinity (TTS) requirements generally applicable to all fish. Nova Scotia suggested that specific processing parameters be established on a species by species basis because the proposed rule’s TTS requirements were economically infeasible for whitefish. The FDA took cognizance of the suggestion but imposed its TTS requirements generally. The FDA did not respond to the recommendations that nitrate and salt concentrations could render the TTS requirements less stringent. Nova Scotia argued that the regulation was invalid because (1) the FDA improperly relied upon undisclosed evidence in promulgating the regulation, and (2) there was no adequate statement setting forth the basis of the regulation.
Issue: Whether the regulation is invalid.
Holding: There are serious inadequacies in the procedure followed in the promulgation of the regulation and hold it to be invalid as applied to Nova Scotia.
Interested parties were not informed of the scientific data used by the FDA—unless this data is included in the public records, criticism of the agency’s methodology is rendered impossible.
Textual Argument--§553 only says “issues and subjects” so doesn’t expressio unius mean “data” is excluded.
Purpose Argument--It is not consonant with the purpose of a rulemaking proceeding (notice and comment) to promulgate rules on the basis of inadequate data or data that is known only to the agency.
It is “arbitrary and capricious” for an agency not to take into account all relevant factors in making a determination and if the failure to notify interested persons of the scientific research upon which the agency was relying prevented the presentation of relevant comment, the agency may be held not to have considered all the relevant data.
However, agencies need not disclose additional studies, undertaken to rebut comments, that confirm their original position.
The required “concise general statement of basis and purpose” was less than adequate.
Agencies have a good deal of discretion in expressing the basis of a rule—however, if judicial review is to be meaningful, the concise general statement of basis and purpose must enable the court to see what major issues of policy were ventilated by the informal proceedings and why the agency reacted to them as it did.
Agency must respond to “vital questions” and “major issues of policy” (this requirement is inferred from the need for judicial review—otherwise arbitrary and capricious under §706).
The FDA did not address the nitrate and salt recommendations nor the comment that the regulation would destroy the commercial feasibility of whitefish.
Court wants to know whether agency is making a legal or factual claim.
Legal—Reg might destroy market but policy concerns trump.
Factual—Reg won’t destroy market.
To sanction such silence in the face of such vital questions would be to make the statutory requirement of a concise general statement less than an adequate safeguard against “arbitrary and capricious” decision-making.
Judicial review of agency formal adjudication will only be based on “the record” (Chenery I).
This means that no post hoc rationalization is permitted.
S.E.C. v. Chenery Corp. (pre-APA)
Facts: The Public Utilities Housing Act was meant to break up monopolies of public utilities. Chenery was purchasing the stock that had been converted to have voting power in order to break up the monopolies. In Chenery I, the Court held that because the SEC offered only one reason for requiring Chenery to give up its stock (judicial doctrine of conflict of interest) and because that doctrine was not recognized by the courts, the SEC’s order had to fall because judicial review had to be based on that rationale. The agency came back and this time proffered a formally adopted alternative reason—Chenery was violating the “fair and equitable” purpose of PUHA (the SEC had used its formal adjudication power to construe “fair and equitable”).
Issue: Whether it was proper for the SEC to use an order, rather than a rule in this case?
Holding: Not every principle essential to the effective administration of a statute can or should be cast immediately into the mold of a general rule and in such situations, the agency must retain power to deal with the problems on a case-to-case basis if the administrative procedures is to remain effective.
Since the SEC, unlike a court, does have the ability to make new law prospectively through the exercise of its rule-making powers, it has less reason to rely upon ad hoc adjudication to formulate new standards of conduct within the framework of PUHA and the function of filling the gaps of the Act should be performed, as much as possible, through this quasi-legislative promulgation of rules to be applied in the future—but any rigid requirement to that effect would make the administrative process inflexible and incapable of dealing with many of the specialized problems that may arise.
Problems may arise that were not reasonably foreseeable to the agency.
An agency may not have sufficient experience with a particular problem to warrant rigidifying its tentative judgment into a hard and fast rule.
No traditional stare decisis in agency adjudication.
The problem may be so specialized and varying in nature as to be impossible of capture within the boundaries of a general rule.
Sometimes an order is necessary to have retroactive effect (like in this case).
The choice to proceed by rule or adjudication lies primarily in the informed discretion of the agency.
The fact that an order has retroactive effect must be balanced against the mischief of producing a result which is contrary to a statutory design or to a legal and equitable principle.
In reviewing an administrative order, the wisdom of the principle adopted is none of our concern—a court’s duty is at an end when it becomes evident that the SEC’s action is based upon substantial evidence and is consistent with the authority granted by Congress.
The dissent said that the SEC should have announced its policy in advance through rulemaking (notice issue—should have “legislated” before “adjudicating”).
Take Away: Chenery II clearly establishes that there are few legal constraints on agencies’ ability to announce and apply general principles—principles that look a lot like rules—in order issued pursuant to administrative adjudications.
Perhaps the most significant consequence of this case is that certain agencies, not notably the NLRB, do virtually all of their policymaking in adjudicative orders rather than rulemakings.
Formal adjudication requires much more elaborate procedure than N&C rulemaking—BUT: it only has to be for the interested parties. So it’s a much smaller group of people with much more intensive participation.
ARBITRARY AND CAPRICIOUS REVIEW §706
§706(2)(E) is only relevant to formal proceedings and only assesses facts.
§706(2)(A) is relevant to all informal proceedings and assesses facts, law, and policy.
It is a very deferential standard.
The doctrinal interpretation of §706(2)(A) requires:
Consider all/only relevant factorsinterpret law correctly.
Avoid “clear error”interpret facts correctly.
Motor Vehicle Manufacturer Assn. v. State Farm
Facts: Safety Standard 208, which required auto manufacturers to install either airbags or automatic seatbelts, was imposed, amended, rescinded, reimposed, and rescinded again. In the final rescission the National Highway Traffic Safety Administration (NHTSA) maintained that it was no longer able to find that the automatic restraint requirement would produce significant safety benefits, and thus the $1 billion it would cost to implement was no longer reasonable or practicable.
Originally the agency had assumed that airbags would be installed in 60% of new cars and automatic seatbelts in 40%. It was now clear that manufacturers intended to install automatic belts in 99% of cars and that in the overwhelming majority of cases, automatic belts would be detached.
Applicable Statutory Language: The National Traffic and Motor Vehicle Safety Act, created for the purpose of “reducing traffic accidents and deaths and injuries to persons resulting from traffic accidents,” directed the Secretary of Transportation, after considering “relevant available motor vehicle safety data,” to issue motor vehicle safety standards that “shall be practicable, shall meet the need for motor vehicle safety, and shall be stated in objective terms.” The Act authorized judicial review under the provisions of the APA (§706(2)(A)) of all “orders establishing, amending, or revoking a Federal motor vehicle safety standard.”
Issue: Whether NHTSA acted “arbitrarily and capriciously” in revoking Standard 208.
Holding: NHTSA failed to present an adequate basis and explanation for rescinding the passive restraint requirement—thus it acted “arbitrarily and capriciously.”
First of all, the agency’s revocation should not be treated as a failure to act (which receives so much deference it amounts to zero review)—an agency changing its course by rescinding a rule is obligated to supply a reasoned analysis for the change (notice and comment).
Because the original rule was subject to notice and comment, we assume it was based on an informed judgment. Therefore, changing the rule requires some explanation and reasoning.
The scope of review under the “arbitrary and capricious” standard is narrow and a court should not substitute its judgment for that of the agency—Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action including a “rational connection between the facts found and the choice made.”
In reviewing an agency’s interpretation, the court must “consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.”
An agency rule would be “arbitrary and capricious” if it:
(1) Relied on factors that Congress had not intended it to consider.
An agency’s explanation that may be reasonable as a general matter may be unreasonable if it neglects the factors Congress has identified as important and relies on considerations that Congress has indicated ought not be considered.
(2) Entirely failed to consider an important aspect of the problem.
There is a threshold requirement of materiality—sometimes defined by what is discussed in comments (Nova Scotia).
Consideration must be reasoned—boilerplate generalities brushing aside detailed criticism will not do.
(3) Offered an explanation that runs counter to the evidence before the agency.
Clear error standard.
(4) Is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.
Clear error standard.
NHTSA gave no consideration to modifying Standard 208 to require that airbag technology be used (violated 2).
We are not imposing additional procedural requirements, nor requiring an agency to consider all (maybe just close?) possible alternatives—we only hold that the agency’s own judgment that airbags are an effective and cost-beneficial life saving technology requires that Standard 208 may not be abandoned without any consideration of an airbags only requirement.
If NHTSA were writing on a blank slate they would not have had to consider an airbags only rule, but because an airbags only rule is “embedded” in an old rule that has been ratified by the agency and thus deemed necessary for safety, the new agency must consider it before dismissing.
NHTSA determined that detachable automatic belts would not attain anticipated safety benefits but that does not justify any more than an amendment to Standard 208 requiring airbags only.
Given the effectiveness ascribed to airbag technology by the agency and that mandate of the Act to achieve traffic safety, this alternative to achieving the objectives of the Act should have been addressed and adequate reasons should have been given for its abandonment.
NHTSA was too quick to dismiss the safety benefits of automatic seatbelts (implicates 3 & 4).
Merely reciting “substantial uncertainty” is not a sufficient justification—an agency may revoke a standard on the basis of serious uncertainty if supported by the record and reasonably explained.
There is no direct evidence in support of the agency’s finding that detachable automatic belts cannot be predicted to yield a substantial increase in usage.
It was okay for the agency to reject the extrapolation of the detachable seat belt study, but accepting this view only indicates that there is a lack of evidence that usage rates will substantially increase—it does not indicate that there will not be a substantial increase (inertia).
The agency can interpret the facts any way they want but they must address them in the first place—if agency said “psychology of buyer overcomes inertia” it would have met its burden.
NHTSA failed to articulate a basis for not requiring non-detachable belts (violated 2).
The agency is entitled to reject the use of non-detachable belts but it must explain its reasons for dong so to pass muster under the arbitrary and capricious standard.
AGENCY INTERPRETATIONS OF THE LAW
Agencies get deference.
Skidmore Deference (Respect)
Deference given when an agency interpretation of a statute is not authorized by Congress and not enacted pursuant to APA procedures.
Justified by expertise and desire for uniformity/consistency of interpretation of a statute (has nothing to do with legal authority).
It was the traditional rule before Chevron and is sill relevant where Chevron doesn’t apply.
It is a lower degree of deference than Chevron.
Skidmore v. Swift
Facts: In addition to their normal daytime working hours, Skidmore stayed on company premises at night to answer fire alarms. For each alarm answered, Skidmore received 50 cents in addition to his fixed compensation. While there at night, Skidmore used time in sleep or amusement. Skidmore brought suit to recover overtime pay, pursuant to the Fair Labor Standards Act. The Administrator had set forth his views of the application of the Act under different circumstances in an interpretive bulletin, in informal rulings and had filed an amicus brief.
Issue: Whether the Administrator’s rulings, interpretations and opinions of the Fair Labor Standards Act should have determinative weight.
Holding: The rulings, interpretations and opinions of the Administrator, while not controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which the courts and litigants may properly resort for guidance.
The Administrator has accumulated considerable experience in problems of ascertaining working time in employments involving periods of inactivity and a knowledge of the customs prevailing in reference to their solution (he is an expert).
The Administrator’s rulings, interpretations and opinions do not constitute a binding interpretation of the Act because (1) Congress did not authorize him to issue legally binding rules or orders and (2) his interpretive statements were issued without much procedural formality—However, his policies are made in pursuance of official duty, based upon more specialized expertise and broader investigations and information than is likely to come to a judge in a particular case.
The fact that his policies and standards are reached by trial in adversary form does not mean they are not entitled to respect.
The weight of such a judgment in a particular case will depend upon (looks like a sliding scale):
(1) The thoroughness evident in its consideration.
(2) The validity of its reasoning (not conclusion, which would be equivalent to no deference).
(3) Its consistency with earlier and later pronouncements.
(4) All those factors which give it the power to persuade, if lacking power to control.
Justified by inference of delegated authority to agency by Congress.
We justify this inference because:
Article II—The Constitution says that the President and those agencies that speak on his behalf are to execute the laws—fill gaps.
Article III—Courts should not resolve policy questions.
Step 1—The reviewing court must ask whether Congress has directly spoken to the precise question at issue (not asking whether statute is ambiguous in some broad sense).
In making this assessment, the reviewing court must employ the traditional tools of statutory construction.
If the reviewing court concludes that Congress has a clear intent on the precise question, then the court must give effect to that intent, regardless of the agency’s position.
If the reviewing court concludes that the statute is silent or ambiguous with respect to the specific issue, it must proceed to step 2.
Step 2—The reviewing court should uphold the agency’s construction of the statutory ambiguity so long as the agency has adopted a permissible construction of the statue.
If Congress conferred gap filling power on the agency, the court should defer to the agency’s interpretation unless it is arbitrary, capricious or manifestly contrary to the statute.
Looks like State Farm, except Chevron doesn’t require the agency to demonstrate that they used a valid interpretive method.
Chevron v. NRDC
Facts: In the Clean Air Act Amendments, Congress required non-attainment states to establish a permit program regulating “new or modified major stationary sources” of air pollution whereby permits could not be issued unless several stringent conditions were met. During the Carter administration, the EPA interpreted “stationary source” as any (single) device in a plant that produced pollution. Then, under the Reagan administration, the EPA adopted a new definition that allowed an existing plant to get permits for new equipment that did not meet standards as long as the total emissions from the plant itself did not increase (bubble).
EPA’s interpretations were based on informal rulemakings.
Issue: Whether the EPA’s decision to allow states to treat all of the pollution emitting devices within the same industrial grouping as though they were encased within a single “bubble” is based on a reasonable construction of the statutory term “stationary source.”
Holding: If the statute is silent or ambiguous with respect to the specific issue (Step 1), the question for the court is whether the agency’s answer is based on a...
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