#11536 - Bureaucratic Interpretation Of The Laws - Legislation and Regulation (Admin Law)

BUREAUCRATIC INTERPRETATION OF THE LAWS

1. ADMINISTRATIVE PROCEDURE ACT

   1. It is a super statute, enacted in 1946, after the New Deal controversies and the creation of tons of agencies.

      1. The public was upset because they thought agencies’ regulations were not transparent enough and did not include enough public participation.

   2. It provides a set of default rules of procedure.

      1. 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.”

   3. Basic Safeguards

      1. Procedural:

         1. §553 (Informal rulemaking)

            1. (b) “General notice of proposed rule making shall be published in the Federal Register…The notice shall include—

               1. (1) a statement of the time, place, and nature of public rule making proceedings;

               2. (2) reference to the legal authority under which the rule is proposed; and

               3. (3) either the terms or substance of the proposed rule or a description of the subjects and issues involved.”

            2. (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.”

         2. §554—Formal adjudication.

         3. §556 & 557—Formal procedures.

      2. Substantive

         1. §706 (Judicial review standard)—“The reviewing court shall—

            1. (2) hold unlawful and set aside any agency action, findings, and conclusions found to be—

               1. (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law;

               2. (C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;

               3. (D) without observance of procedure required by law;

               4. (E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title…”

   4. Agency Actions

      1. Rules (rulemaking)—Prospective (quasi-legislative)

      2. Orders (adjudication)—Retroactive (quasi-judicial)

         1. 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”).

   5. Procedures

      1. Formal—§556 & 557

      2. Informal—§553

         1. Only addresses rulemaking.

            1. Notice and comment procedure.

         2. Informal adjudication is only governed by DP concerns and common law considerations.

      3. Whether one gets formal or informal procedures depends on the statute under which the agency is operating.

         1. 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”).

            1. Otherwise informal—almost all rulemaking is informal.

            2. Formal requirements for rulemaking would really slow things down.

         2. Regarding adjudication, mere mention of a “HEARING” triggers formal procedures.

            1. Formal procedures are easily triggered for adjudication because notice and due process concerns require that in adjudication, one gets a lot of procedure.

2. INFORMAL “NOTICE AND COMMENT” RULEMAKING (§553)

   1. §553 requires that agencies provide information to the general public at both the beginning and the end of the informal rulemaking procedure.

   2. At the beginning:

      1. (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. (2) Some undefined opportunity for comment.

   3. At the end, if the agency chooses to adopt a new rule:

      1. (3) Some “concise general statement of the basis and purpose of the rule.”

   4. United States v. Nova Scotia

      1. 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.

      2. Issue: Whether the regulation is invalid.

      3. 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.

      4. Rationale:

         1. Notice

         2. 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.

            1. Textual Argument--§553 only says “issues and subjects” so doesn’t expressio unius mean “data” is excluded.

            2. 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.

            3. 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.

               1. However, agencies need not disclose additional studies, undertaken to rebut comments, that confirm their original position.

         3. Comment

         4. The required “concise general statement of basis and purpose” was less than adequate.

            1. 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.

            2. 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).

               1. The FDA did not address the nitrate and salt recommendations nor the comment that the regulation would destroy the commercial feasibility of whitefish.

               2. Court wants to know whether agency is making a legal or factual claim.

                  1. Legal—Reg might destroy market but policy concerns trump.

                  2. Factual—Reg won’t destroy market.

            3. 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.

3. FORMAL ADJUDICATION

   1. Judicial review of agency formal adjudication will only be based on “the record” (Chenery I).

      1. This means that no post hoc rationalization is permitted.

   2. S.E.C. v. Chenery Corp. (pre-APA)

      1. 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”).

      2. Issue: Whether it was proper for the SEC to use an order, rather than a rule in this case?

      3. 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.

         1. 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.

            1. Problems may arise that were not reasonably foreseeable to the agency.

            2. An agency may not have sufficient experience with a particular problem to warrant rigidifying its tentative judgment into a hard and fast rule.

               1. No traditional stare decisis in agency adjudication.

            3. The problem may be so specialized and varying in nature as to be impossible of capture within the boundaries of a general rule.

            4. Sometimes an order is necessary to have retroactive effect (like in this case).

         2. The choice to proceed by rule or adjudication lies primarily in the informed discretion of the agency.

         3. The fact that an order has...