Rulemaking
Part III
Procedural Rules


Procedural rules are exempt from notice and comment
 The form of an application for benefits is procedural
 The facts that the claimant has to establish to get the
benefits are substantive
A procedural rule can become substantive if the change
in procedure has a substantial impact on the regulated
parties.
2
Substantial Impact Test for Procedural
Rules


The Department of Health and Human Services
changed the method by which home health providers
could obtain reimbursement for expenses under the
Medicare Program. In particular it required that they
submit their requests in a new format and to regional
intermediaries, rather than to HHS directly.
How did plaintiffs argue that this was a legislative
rule, rather than a procedural rule?
 What is the impact on them of the change?
3
Inspection or Prosecution Guidelines



OSHA adopts a plan for deciding which employers
to inspect.
A selected employer contests the rule, saying that
OSHA inspections are expensive and time
consuming, thus this has a substantial impact.
Is this a successful argument?
 Why, or why not?
 How is this different from the coercion case?
4
‘‘Encoding a Substantive Value
Judgment’’ Test.


The D.C. Circuit uses what it described as asking
whether an agency’s rule ‘‘encodes a substantive
value judgment or puts a stamp of approval or
disapproval on a given type of behavior.’’
 Is this really a different standard than substantial
effect?
 Does this look like the standard for guidelines,
such as in the Hoctor case?
Limited to the DC Cir. and does not seem to make
much difference.
5
Substantial Impact Test for Procedural
Rules – Wrap-up



Same analysis as substantial impact or legally binding test
for substantive rules.
What is the actual impact on your client?
 Will compliance costs significantly increase – Medicare
case?
 Does it change their legal options – shortened period to
reply to complaint?
 Does it actually change substantive requirements –
requiring new information for a benefit determination?
We will revisit this when we look at standing.
6
Notice and Public Procedures Are
Impracticable, Unnecessary, or Contrary
to the Public Interest
GAO Report
7
Actions where Secrecy is Important



Wage and price controls
Bidding on contracts
Negotiations on land purchases and sales
8
Emergencies and Impracticality


Emergency Rules
 http://doa.louisiana.gov/osr/emr/emr.htm
 Misused in LA
 The GAO indicates that the feds may also
misuse this exception.
Interim Final Rules
 Published and in effect, but will be modified
after comments are in.
9
Time Constraints



The GAO found that agencies frequently skip notice
and comment when they have to make a rule with a
short timeframe.
 Usually statutory deadlines, or a version of
emergencies.
 Classic would be hunting seasons.
How would this have helped in the Regulators?
 How did notice and comment improve the rule?
Should the agency be able to use this exception if
has delayed rulemaking?
10
Technical Corrections



Calculations and other non-discretionary rules
Technical corrections
 Can require notice and comment if the
correction causes a different result.
Theory is that these are mechanical and thus
notice and comment would not add any new
information.
11
What is Formal Rulemaking?


A rulemaking conducted as a trial type hearing
 The agency support for the rule must be presented at
the hearing
 Interested parties may present and cross-examine
evidence
History - grew out of rate making in the early 20th century.
 Rate making affects a small number of parties
 The courts thought they should get due process
12
Why avoid formal rulemaking?



The peanut hearings (FDA must do formal
rulemaking in some situations)
 Should peanut butter have 87 or 90% peanuts?
 10 years and 7,736 pages of transcript
What was the concern in Shell Oil v. FPC?
 Formal rulemaking was impossibly time
consuming to use for regulating something
changeable such as natural gas rates.
Why does just getting the right to be heard at a
formal hearing benefit parties that oppose a rule?
13
When is Formal Rulemaking Required?



Disfavored by the modern courts
Must have magic statutory language or be required by the
agency's on rules
 Only when rules are required by statute to be "made
on the record after opportunity for an agency hearing"
Lawyering tip
 When would you want to argue that formal rulemaking
is required?
 What do you have to do to support you request?
14
The Procedures of Notice-and-Comment
Rulemaking
Continued from the first and second
classes
15
The Logical Outgrowth Test




What is WIC?
What evil substance in what food did the
proposed rules propose to regulate?
How was the final rule different from the proposed
rule?
Chocolate Manufacturers Ass’n v. Block, 755 F.2d
1098 (4th Cir. 1985).
16
The Notice Problem





What was the CMA's claim?
What was the agency defense?
Does the rule have to be the same?
 Why have notice and comment then?
 What is the logical outgrowth test?
 How would you use it in this case?
What did the court order in this case?
What will the CMA do if a new proposed rule
includes them?
17
Limits on Logical Outgrowth - Arizona
Public Service Co. v. E.P.A.




What did the EPA propose that Indian Tribes be
allowed to do that states were doing?
 State plans are subject to judicial review
 Why did the tribes object to this in comments?
How was the rule changed?
What was the claim by plaintiffs?
How did the court analyze the problem?
 Why shouldn't the change have been a surprise?
18
Procedures for Rules that do not need
Notice and Comment


http://biotech.law.lsu.edu/Courses/study_aids/adl
aw/552_update.HTM
 See (D)
What if the agency does not publish the document
in the FR, but puts it on the Internet? (Which has
become very common.)
 “Except to the extent that a person has actual
and timely notice of the terms thereof...”
19
What about Technical Information
Underlying the Rule? (not in book)




Portland Cement v. Ruckelshaus, 486 F2d 375 (1973)
 The agency must disclose the factual basis for the
proposed rule, if it relied on scientific studies or other
collections of information
Connecticut Light and Power v. NRC, 673 F2d 525 (1982)?
 The agency cannot hide technical information.
Why is this a big deal in environmental regs?
What are the potential downsides of this policy?
20
Additions to the Published Record
(not in book)
21
Rybachek v EPA, 904 F.2d 1276 (1990)



Gold mining under the CWA.
 In a dubious reincarnation of the 1890's world of
Yukon poet Robert Service, we deal here a century
later with “strange things done in the midnight sun
by the men who moil for gold.”, quoting The
Cremation of Sam McGee
EPA added 6000 pages of supporting info when
responding to comments
The agency may supplement the rulemaking record in
response to comments asking for explanation
22
Idaho Farm Bureau Federation v. Babbitt,
58 F.3d 1392 (9th Cir. 1995)



Endangered Species Act listing.
Agency added a report to the record, then relied
on it in the final rule.
The agency may not add new material and then
rely on it without given an opportunity to
comment on it.
23
Negotiated Rulemaking





What is this?
Why is often used in environmental rulemaking?
What are the advantages?
What are the public participation issues?
Assume you are regulating wood stoves
 Which groups are most likely to be able to
participate?
24
Ex Parte Communications in Litigation



What is an ex parte communication in litigation?
Why do we ban them in litigation?
If a party in a lawsuit wants to talk to the judge,
how are ex parte contacts avoided?
Ex Parte Communications in Rulemaking



How does the notice provision in rulemaking
change the issues in ex parte communications?
Why aren’t ex parte communications before the
promulgation of the rule a problem?
When could ex parte communications be an
issue?
 How can you cure this?
 The key is whether the published record
supports the rule.
26
Sangamon Valley Television Corp. v. U. S.,
269 F.2d 221 (D.C. Cir. 1959)



This is an old case.
While it is a rulemaking on allocation of the
electronic magnetic spectrum, it really resembles
an old ratemaking because it involves a very small
number of identified parties. It might better be
seen as an adjudication.
There were ex parte contacts, which were not on
the record, and the court found this a problem.
27
Bias and Prejudice




Why do we worry about bias and prejudice in
litigation?
What do we do to avoid biased/prejudiced
judges?
 Why is this a special problem with elected
judges?
When is recusal necessary?
What about on the United States Supreme Court?
28
Association of National Advertisers , Inc.
v. FTC, 627 F.2d 1151 (D.C. Cir. 1979)



FTC is adopting rules on TV advertising directed at
children.
 Chairman has written and spoken at length on the
evils of TV ads aimed at children
 Plaintiffs seek to disqualify him because of bias
Court held that plaintiffs must show clear and convincing
evidence that he has an unalterably closed mind on
matters critical to the rulemaking
No rulemaking has ever been overturned on the basis
that a decisionmaker was unlawfully prejudiced.
29
DC Federation of Civic Associations v.
Volpe, 459 F.2d 1231 (D.C. Cir. 1971)




(not a rulemaking)
Congress pressures DOT to build a bridge in DC.
 Plaintiffs claim that the Secretary gave into the pressure.
The Volpe test
 1) was there specific pressure on the agency to consider
improper factors?
 2) did the agency in fact change its mind because of these
considerations?
How can the agency defend itself from a Volpe attack?
 After Overton Park, this can be better seen as a case where
the Secretary did not properly document his decisionmaking
in the record.
30
Sierra Club v. Costle, 657 F.2d 298 (D.C.
Cir. 1981)




Rulemaking on coal fired power plants
 Why is this controversial then and more so now?
Plaintiffs claimed that the president influenced the
agency decision after the comment period.
 Is that wrong?
Senator Bird also weighed in
What do plaintiffs need to show to establish undue
influence?
 Why is the outcome test, combined with the record, a
good solution?
31
What is the President's Role in
Rulemaking? (not independent agencies)


Controls and supervises executive branch
decisionmaking
 What just happened with the ozone regs?
 How is the role different in adjudications?
When should the president's contacts be
documented?
 When the statute requires that they be
docketed
 If the rule is based on factual information that
comes from such a meeting.
32
Should State Rules Differ from Federal
Rules on Notice and Comment?



Limited staff
 Greater reliance on the expertise of board members,
rather than staff
 Board may hear lots of testimony and review a lot of
info - they cannot afford the time and effort to put
together volumes of supporting info for regs
 What about LA's 300+ tiny boards?
Should state agencies have a reduced publication
requirement?
Should they be able to publish rules without explanation
and only have to explain if asked?
33