Administrative Law: Prof. Ogden, Spring 2015
I.
Administrative Law and Administrative Agencies
A. History of Administrative Law
1. 1887-1890= Controlling Monopolies and Rates  railroads boomed but were unregulated until government
formed the,
a) Interstate Commerce Commission
2. 1906-1915= Regulating Product Quality
a) Federal Trade Commission
b) Predecessor to FDA
- Administrative agencies form out of historical context, for example,
o Interstate Commerce Commission formed to control railroad; Multi member board appointed by President
o Federal Trade Commission  formed because of large corporate monopolies
o 1930-40’s, Great Depression  formed Food and Drug Admin, Social Security Admin, Federal
Communications Commission, Federal Power Commission, National Labor Relations Board, Securities
Exchange Commission.
o 1960-1970: Extending Regulation to Enhance Public Health and Safety and to Promote Fairness in the
Workplace and Community  Equal Employment Opportunity Commission, Environmental Protection
Agency, Occupational Safety and Health Administration, Consumer Product Safety Commission, Civil
Rights Division of Justice Department.
o 1978-2000 Deregulation Movement to Reduce Bureaucratic overexpansion
o 2001-2011 War on Terror, Globalization and Economic Stability  patriot Act, Department of Homeland
Security, World Trade Organization, Health Care legislation (HHS), Dodd Frank legislation (new consumer
finance agency), Sarbanes Oaxly (new powers for SEC).
B. What is Administrative Law?:
1. Definition: Administrative Law may be defined as the branch of law that controls the administrative operations
of government. This type of law is mostly procedural - it’s the law governing agencies - not the law formulated
and produced by agencies [we call that substantive law]. Administrative law
a) sets for the powers vested in administrative agencies;
b) lays down the requirements imposed by law upon the exercise of those powers; and
c) provides legal remedies to those aggrieved by unlawful administrative action.
2. Purpose: The primary purpose of administrative law is to keep administrative powers within their legal bounds
and to protect individuals against abuse of those powers.
C. Types or Sources of Administrative Law:
1. Constitutional Law:
Tyranny and abuse of power was feared more than inefficiency
a) Federal [due process or separation of powers]
o DUE PROCESS RIGHT TO A HEARING:
 Can the governmental action [against a private person or entity] be considered to be an adjudicative
proceeding?
 Londoner and BiMettalic decisions Anaconda Decision
 Not every government decision guarantees an adjudicative proceeding.
 They apply to government, not private actions
 Are there disputed issues of material adjudicative fact?
 No need for a hearing unless there are disputed facts
 Is the interest [of the private person affected by the governmental action] protected by due process of
law?
 Does the private person effected have an interest protected by due process of law?
 Roth and Loundermill Decisions
 If yes, has the private person been given notice of the governmental action, and has the person made
a time requires for a hearing?
 Goldberg v. Kelly= a welfare case dating from Social Security Act set up during the New
Deal and expanded by Lyndon Johnson. Welfare recipients (AFDC and General Relief, was
operated by welfare employees not lawyers) were terminated from further eligibility for
benefits in NY. Termination procedures used by the state did not allow oral hearings before
aid was ended, only after aid was cut off. A recipient who wanted to dispute lack of
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eligibility had to make a written submission. Many of the eligibility issues were fact
specific, such an income sources, number of people in the household, dependent eligibility
and others. The law was very complex and even the notices sent to recipients were very
difficult to understand. They challenged due process violation because didn’t provide
predetermination notice and opportunity to have an oral hearing (recipients could talk so
wanted oral hearing) prior to disqualification. We find due process of law concepts in
o US Constitution 5th Amendment: no person shall be deprived of life, liberty or
property without due process of law. This only applied to federal government
o 14th Amendment: due process of law applies to states
o Protected property interests: “property interest” doesn’t only include property but
also includes statutory entitlements, as decided for the first time in Goldberg. This
means due process applies to all protected property interests, including statutory
entitlements.
o Due process requirements: if you have determined it is protected property interests,
then look at due process requirements. Pre-termination notice and an opportunity for
a hearing are required in this setting to protect the eligible recipients from having
their welfare benefits cut off erroneously.
 Balancing of Interests [made explicit in the Matthews v. Eldridge case]:
1- Private Interest: recipients of welfare face brutal need if they lost their benefits erroneously; they may
starve. This pushed for strong pro due process pre termination hearing factor
2- Governmental interest: cost of hearings and fiscal impact on budge for benefits. This pushed for strong
due process post termination hearing factor
3- Risk of error with existing procedures and need for added fact finding procedures. The pre-termination
oral hearing would reduce the error rate because many of the fact issues relied upon the testimony of
witnesses, including the recipient, and most recipients did not have sufficient literacy or English
language skills to make written presentations.
^Goldberg Holding: Max Hearing Procedures The balance of these three interest led majority to hold
that due process of law required pre-termination notice and an opportunity for a pre-termination
administrative informal hearing. 7 day notice period was sufficient time. But hearing includes rules
found in adjudicative rules except for no hearing record nor judicial opinion.
^ Minimum Hearing Procedures: Goss v. Lopez (kids were suspended from school for 10 days) Due
process rights of high school students are based on a state law property right to an education.
 Notice
 Statement of reason
 Opportunity to respond (orally or in writing)
 Impartial decision maker
^Emergency Hearing Cases: the government can act first and hold post action hearing. Examples
include
 suspension
 Seizure
 Price controls
 Disqualification
 Board of Regents v. Roth: untenured college professor with a 1 year contract was not rehired for
year two. Professor claimed nonrenewal was based upon his 1st Amendment protection because he
protested the Vietnam War. Professor sued Board of regents and claimed that he had a due process
right to notice of reasons for nonrenewal and to a hearing. Court rejected this claim. In doing so, the
court stated the requirements for the liberty and property interests for the application of due process
of alw. Property interests iddn’t apply to his work contract because the contract expired after one
year, so there was no right to renew the contract. If the school had fired him during the 1 year
contract, he would be guaranteed a hearing. But since NO PROPERTY INTEREST, NO DUE
PROCESS RIGHTS ARE GUARANTEED.
 You have to look at independent sources of state and federal law, in addition to due process
clause, to see if due process applies.
 There was no liberty interests because the school did not state any reasons for nonrenewal,
there is no basis for a name clearing hearing in Roth’s case.
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
CA Due Process: Slaeeby v. State Bar- CA due process provides a little broader protection than
federal. CA adds a dignitary interest in informing persons of the nature, grounds and consequences
of the action and in enabling them to present their side of the story before a responsible government
official. The grievance was that a client lost money to his lawyer and was seeking reimbursement
from the client security fund. They sought to have State Bar exercise discretion. This is not a strong
statutory entitlement. Now Bar must explain why they are denying a claim and to hear their side.

What hearing procedures are required by due process of law?
 Goldberg and Matthews Decisions
 When must the hearing be held? Before they take away your rights?
 Goldberg and Matthews Decisions
 Common law tort remedies provides hearing rights
 Ingraham v. Wright Devision
 Emergency hearings are different because government must act quickly without violating due
process rights.
 Gilbert v. Homar
o DUE PROCESS + THE APA
Loudermill Case: City employee who had job security (termination for cause only) were fired. Under applicable
state law, only a post termination hearing was available and it took place 9 months after discharge. The US
supreme court held that these permanent job positions were property interest protected by due process of law, but
the statutory procedures were not controlling. The question of what process is due is decided by the courts, not
by the state or local statutes that create the property rights. This decision rejected the approach of a plurality
opinion in Arnett v. Kennedy that held statutory procedures were controlling.
PROTECTED PROPERTY INTERESTS:
1) Government Jobs= when the employee has permanent status and the protections of civil service laws apply
to that employee. In states that have public employee unions (like CA), collective bargaining agreements
may add additional layers of protection for employees. Local government and employee union CBA’s may
include the procedures to be used for employee discipline. Those procedures may be purely administrative,
like an APA hearing, or arbitration based, or a hybrid of the two systems. For state employee’s in CA, the
State Personnel Board is the responsible agency that determines whether a state employee facing suspension
or termination abtion by their employing agency will lose their job. In state with at will public employment,
employees may lack due process protection.
a. Example of At-Will Employment  Bishop v. Wood; the SC held that under view of state law that
permanent employee held his position at the will and pleasure of city, with removal being
conditioned only on compliance with certain specified procedures discharge of police officer without
hearing did not deprive him of a property interest protected by 14th amendment and that statements
of asserted reasons for discharge did not deprive officer of liberty, even if the reason given were
false, where initial statement of reasons were communicated orally to officer in private and not made
pubic.
2) Government Benefits= social security disability benefits; unemployment benefits
3) Professional and vocational licenses (Barry v. Barchi)= suspension of horse trainer’s license
4) Public Education= k-12 with mandatory attendance laws (Goss v. Lopez)
5) Public Utilities= page 39 note 3
Problem 10: There is no right to be employed so she has no property interest in the job that rejected her. But by being on the
list there is a liberty interests because it is stigmatizing. But to meet the stigmatizing plus test, she must prove that she was
rejected for a specific job to meet the plus test. Also as for procedures, if there is a high risk of error with the initial listing
criteria, those criteria would violate due process of law.
- Valmonte v. Bane: held that claim was ripe even though P had not actually been deprived of employment or suffered
any other injuries as result of her name being placed on the list. Also the fact that defamation occurred precisely in
conjunction with P’s attempt to obtain employment within child care field.
- Matthews v. Eldridge: Social security disability recipient (who had to periodically report back to SSA agency and
keep up with your dr. to prove that you are still disabled) received letter indicating that state agency had tentatively
concluded that his disability had ceased as of a specific date. After no new medical information was provided by
recipient, benefits were terminated. Recipient had the option of seeking a post termination reconsideration of
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termination and later an administrative hearing to challenge termination. Instead, recipient sued SSA in federal court
asserting the right to pre-termination notice and an opportunity to be heard.
o The social security disability standard I strict and the burden of proof is on the applicant for initial benefits,
and on the recipient for continued benefits to est. the requisite level of disability (strict standard). The
disability has to be severe enough to preven the applicant from not only performing their current job but also
from performing any job (any ‘substantial gainfula ctivity’). Disability determinations rely heavily on
medical examinations and reports prepared by doctors. The typical issues with disability claims focus on the
level and scope of disability as well as how long will the individual be subject to that disability. Age 50+
individuls with limited educations have the best chances of meeting the standards.
o Holding: They lost, an evidentiary hearing is not required prior to the termination of Social Security
disability payments and the administrative procedures prescribed under the Act fully comport with due
process.
o Unlike welfare procedures in Goldberg, the SSDI procedures at issue here were elaborate, focused on
medical and vocational issues, ad there are several levels of review
o Balancing of Interest test (any court that considers due process issue will cite Matthew’s Balancing of
interest test)  (a) due process is flexible and calls for such procedural protections as the particular situation
demands, “Resolution of the issue here involving the constitutional sufficiency of administrative procedures
prior to the initial termination of benefits and pending review, requires consideration of 3 factors
 (1) the private interest that will be affected by the official action (the court stupidly said that
termination of SS benefits is likely to be less in the case of disabled workers than in case of welfare
recipients. In Matthews they weighted that private interest was not as weighty)
 (2) the risk of an erroneous deprivation of such interest through the procedures used, and probable
value, if any, of additional procedural safeguards (In Matthews, the benefits will turn upon routine,
standard and unbiased medical reports by their contracted dr. who have history of deeming recipients
no disabled. However in SSI written submissions provide the disability recipient with an effective
means of communicating his case to the decision-maker. The detailed questionnaire identifies with
particularly the information relevant to the entitlement decision. Info critical to the decision is
derived directly from medical sources. Finally prior to termination of benefits, the disability
recipient or his rep is afforded full access to the info relied on by the state agency, is provided the
reasons underlying its tentative assessment, and is given an opportunity to submit additional
arguments and evidence).
 (3) the government’s interest ($), including the fiscal and administrative burden that the additional or
substitute procedures would entail (In Matthews, requiring an evidentiary hearing upon demand in
all cases prior to the termination of disability benefits would entail fiscal and admin burdens out of
proportion to any countervailing benefits. The judicial model of an evidentiary hearing is neither a
required, nor even the most effective, method of decision making in all circumstances, and here
where the prescribed procedures not only provide the claimant with an effective process for asserting
his claim prior to any administrative action but also assure a right to an evidentiary hearing as well
as subsequent judicial review before the denial of his claim becomes final, there is no deprivation of
procedural due process.
^ Since Factor 1 and 3 are directly opposing, then factor 2 will be critical. In predicting an outcome 2nd
factor will play key role. In Matthews, because the SSDI statutory procedures were elaborate, the risk of
error factor cut the other way, and the SC held that a pre-termination notice and hearing opportunity was
not required by due process of law.
Problem 6- Public Housing, they had notice and prompt post notice hearing.
Eviction of a low income tenant from public housing:
o —1. Protected Interest: If public housing provisions are an entitlement, as many courts have held, then
nonrenewal only for good cause is required. In this problem though lease renewal requires the agreement
of both the landlord and the tenant. Thus, there may not be an entitlement here unless the custom has
been to grant renewals automatically unless there was cause (Sinderman v. Perry analysis)
Balance of due process interests:
1.Private Interest: the tenant may have no place else to go. She may end up living on the street.
2. Risk of error with existing procedures: There are lots of factual disputes related to the noise
complaints. The tenant denies making noise.
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3. Governmental interest: the governmental interest in orderly public housing may be strong ( stronger in
more serous circumstance such as drug dealing) but not so strong here in avoiding a pre eviction hearing.
However, a prompt post evicting hearing may satisfy due process of law.
 HUD v. Rucker: Public housing tenants brought action against Dert of Housing and Urban
Development and Oakland Housing Authority alleging that the Anti-Drug Abuse Act did not allow
evictions on basis of drug related criminal activity engaged in by tenant’s household members,
guests. At SC they lost, they held that Anti-Drug Abuse Act required lease terms that gave local
public housing authorities the discretion to terminate the lease of a tenant when a member of
household or guest engages in drug activity
 Richmond Tenants Org. v. Kemp: public housing tenants group challenged National Public Housing
Asset Forfeiture Project on behalf of nationwide class of tenants. Appeals held that eviction of public
housing tenant pursuant to Forfeiture Project without prior notice and opportunity for hearing
violated due process, absent exigent circumstances.
 Goss v. Lopez: Provides minimum due process protection. Protected Interests
1) property interest: statutory right to a public education (compulsory school attendance laws); education is
an entitlement.
2) liberty interest: harm to reputation from being suspended from high school.
- —Students were suspended for 10 days or less for fighting at school.
- You get notice (oral or writing), explanation for the suspension (with evidence), opportunity to refute it and must
have an impartial decision maker (besides someone who observed the conduct)
- “Due process requires, in connection with a suspension of 10 days or less, that the student be given oral or written
notice of the charges against him and, if he denies them, an explanation of the evidence the authorities have and an
opportunity to present his version. Generally, notice and hearing should precede the student's removal from school,
since the hearing may almost immediately follow the misconduct, but if prior notice and hearing are not feasible, as
where the student's presence endangers persons or property or threatens disruption of the academic process, thus
justifying immediate removal from school, the necessary notice and hearing should follow as soon as practicable.”
 Ingraham v. Wright: Corporal punishment in public schools
- The supreme court recognized that public school students have a liberty interest in avoiding excessive corporal
punishment. The court also recognized that teachers had a common law privilege to use reasonable force to discipline
children, and that common law tort remedies were sufficient to police abuses. Thus, there was not right to a pre
discipline notice and hearing. Due process of law was satisfied if the student filed a lawsuit in court to recover
damages for excessive force. The court trial would satisfy the right to a hearing.
1. Private interest: the student’s interest in avoiding excessive or unnecessary punishment is substantial.
2. Risk of error: Abuses are rare, the school are open and the common law safeguards in place means that there is a
minimal risk of error
3. Governmental interest: Requiring pre discipline hearings in all cases would be burdensome for school districts.
School may as a result, eliminate corporal punishment.
Internet hearings for welfare reductions: Does this violate due process of law?
- Demeanor evidence (Telephone hearings and credibility determinations )
1) Whiteside v. State, Department of Public Safety, Division of Motor Vehicles (2001) 20 P. 3d 1130 (Supreme Court of
Alaska)
—- TELEPHONE HEARINGS VIOLATE DUE PROCESS OF LAW
- Holding: The Supreme Court of Alaska held that a motorist was deprived of due process of law in a driver’s
license revocation proceeding (for refusal to take blood alcohol breath test) because the state of Alaska held the
hearing by telephone, and did not offer the driver an in person hearing, when the credibility of the driver was
material to the hearing. Matthews, CJ, stated in support of the holding:
- In-person testimony is a valuable tool for evaluating the credibility of witnesses.”
- Here we deal with the second of the Mathews factors. In terms applicable to this case, do telephone hearings create
an unacceptable risk of an erroneous deprivation of a person's right to drive? This turns in large part on the value of
the live testimony of a party.
- The significance of live testimony and demeanor evidence has been long recognized. Blackstone explained that,
"[by] examination of witnesses viva voce, in the presence of all mankind, ... and this [method] only, the persons who
are to decide upon the evidence have an opportunity of observing the quality, age, education, understanding,
behaviour, and inclinations of the witness.“ 3 William Blackstone, Commentaries. This method "was also indeed
familiar among the antient Romans ... [a]nd this, or somewhat like it, was continued as low as the time of Hadrian."
2) Babcock v. Employment Division (1985) 72 Or. App. 486, 696 P. 2d 19
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—TELEPHONE HEARINGS DO NOT VIOLATE DUE PROCESS OF LAW
- Holding: The Oregon Court of Appeals held that a former employee who challenged denial of unemployment
benefits was not denied a fair hearing under statutory and due process of law requirements because the state
unemployment agency held a telephone hearing in her case. The former employee was denied unemployment
benefits because of a determination that she was discharged for misconduct. Gillette, PJ stated in support of the
holding [citations omitted]:
- This brings us to the most difficult issue, credibility. Judging the credibility of witnesses is certainly an element of
the referee's function. Physical appearance can be a clue to credibility, but of equal or greater importance is
what a witness says and how she says it. Beyond testing credibility by the inherent plausibility of a witness'
testimony we are satisfied that the audible indicia of a witness' demeanor are sufficient for a referee to make an
adequate judgment as to believability. We find no statutory violation.
The due process issue must be decided on federal constitution grounds….
- Do video hearings, or Skype hearings (visual clues as well as auditory clues) solve these problems better than
telephone hearings?
- Video hearings are widely used in SSA disability cases, and in state law administrative hearings in large states (such
as Florida) or states with remote populations ( eg, Alaska)
Property Due process Issue/Adjudication:
US v. Florida East Coast case develops a distinction as
1) Rulemaking includes  doesn’t require due process (i.e. Adoption of Zoning Ordinance)
a. General policy with legislative judgment
b. Affects a lot of people on similar grounds
c. Prospective app
d. Legislative facts
^ If it is a legislative action, a person would not be able to cross-examine city planner
2) Adjudication includes  requires due process
a. App of specific policy rules to individuals
b. Small numbers of people affected with individual circumstances
c. Not prospective application
d. Adjudicative facts
- Londoner Case: Adjudicative action impacts specific persons based upon individual facts and circumstances. In
Londoner, an owner of real property wanted to contest the assessment of his property for part of the costs of street
paving in his neighborhood. He claimed that the assessment for his individual parcel was arbitrary because property
owners with equal assessments had not benefitted equally from the paving. The assessment process before the city
council allowed property owners to file written complaints but there was no opportunity for an oral hearing before
the city council.
- The U.S. Supreme court held in Londoner that Due process of law under the 14th amendment was denied to the
property owners by the city because there was no notice and no opportunity for an oral hearing before the assessment
ordinance was enacted. The property owner had the right to present arguments and proof of his claim before the city
council. Today, it is less likely that Londoner would heave been given a trial type hearing as part of an assessment
ordinance hearing. However, property owners are given due process hearing rights to challenge assessment of their
real property (particularly for changes in assessment). In California, the State Board of Equalization (SBE) manages
the hearing process for property assessment challenges.
- Anaconda Case: —In this case, under the federal APA rulemaking procedures, the 10th circuit court of appeal held
that Anaconda was the only smelter affected by the proposed EPA rules, but that Anaconda was not entitled to a trial
type hearing. Anaconda could participate in the notice and comment process under the APA. The Clean air Act
required a public legislative hearing, not a trial type hearing. This was because this was rulemaking or legislative
action. Due process of law (Londoner vs. Bimettallic) did not require a trial type hearing even though only one
smelter was the subject of air pollution regulation.
- Bi-Metallic Case: Rulemaking action: The agency adopted a general policy that affected a lot of people but did so on
a more uniform basis. In Bi-Metallic, The Colorado SBE and Tax Commission made a decision to increase the
valuation of all taxable property in Denver by 40%. This policy was adopted to remedy chronic underassessment of
property in Denver, which impacted the amount of prperty tax collected. A landowner sued to enjoin enforcement of
that policy based upon due process of law. The U.S. Supreme Court held that there was no due process right to
notice and a hearing in this case in which all landowners were equally affected by the 40% increase. The court
distinguished Londoner ( small number of people affected, individual circumstances).
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2. Statutory Law: Federal & state administration
a) APA: The Administrative Procedure Act of 1946 is a law laying down the basic procedures that must be
followed by federal agencies. It provides the required procedures for agencies to follow when enforcing the
substantive law the agency is responsible for (agency enabling act)
(a) Federal APA
(b) 2010 Revised Model State APA
(c) State APA
(2) More recently, there came the realization that the exercise of administrative power was just as
important to the study of Admin Law as the powers vested in agencies, and remedies for those
aggrieved by those agencies. With this realization, came an emphasis on procedural safeguards to
ensure the proper exercise of administrative authority. The APA is a manifestation of this.
(3) The APA is the foundation of federal Admin Law.
b) Agency Enabling Acts: These put forth the substantive requirements or standards an agency has to follow.
The agency’s enabling act creates the agency and gives it its power.
(1) sometimes it even sets out procedural limits
(2) think of an enabling act like a corporation’s charter
c) Freedom of Information Act
d) Privacy Act
e) Sunshine Act
ADJUDICATION VS. RULEMAKING: Londoner and Bi-Mettalic factors
Rulemaking includes
1) general policy with legislative judgment;
2) affects a lot of people on similar grounds;
3) prospective application; and
4) legislative facts.
- Under Federal APA, “rule making” means agency process for formulating, amending, or repealing a rule (“rule” means
the whole or a part of an agency statement of general or particular applicability and future effect designed to implement,
interpret, or prescribe law or policy and has the force of law)
Adjudication includes
1) application of specific policy rule;
2) small number of people affected with individual circumstances;
3) not prospective; and
4) adjudicative facts
- Under APA, adjudication is an agency process for the formulation of an order (an agency decision that determines or
declares the rights, duties, privileges, immunities, or other interests of a specific person).
- Both the constitution (due process) and the applicable APA require trial type hearings in agency adjudications,
so that there may be an overlap between the two sources of law that may apply to hearing rights in particular cases. Due
process of law provides for certain minimum procedural hearing rights but many statutory hearings may be more formal
and more elaborate than would be require to meet due process requirements. Professional licensing hearings are an
example of this category, such as the revocation of a doctor’s license or a lawyer’s license. Another example of more
formal hearings is the statutory scheme in theMatthews v. Eldridge
- The statute (APA) requires a trial type hearing hearing but the constitution does not. Formal rulemaking under
the APA is an example of this phenomenon. Regulatory licensing schemes (such as NRC licensing, as applied to
applications for nuclear power plant licensing) would be another example.
- The constitution requires a trial type hearing but the statute does not. Examples of this include two of the cases we
studied in the last chapter, Goss v. Lopez, and Goldberg v. Kelley.
STATUTORY HEARING RIGHTS:
- There are two approaches to deciding when a hearing is required by the statute.
1- External hearing rights approach: Under this approach, an external source of law must mandate
hearing rights, but not the APA. The APA’s role in this setting is to prescribe hearing procedures
in circumstances in which this other law mandates a hearing.
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
o
o
o
o
o
The external source of law can be a statute (other than the APA), such as an agency enabling
act, or organic statute (eg., the Clean Air Act) or the provisions of a federal or state
constitution. [Note the federal APA uses the term statue only unlike the MSAPA.
 The federal APA uses the external hearing rights approach. 5 U.S.C. Section 554(a)
provides: “(a) 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…”.
 To enforce this provision courts look for and seek to find in statutes(other than the APA)
language that uses the underlined terms or their equivalent. We will see how this issue is
resolved in the Dominion case.
 The modern approach is under 2010 Revised Model State APA uses the external hearing
rights approach when there is a contested case. “Contested case” means an adjudication in
which an opportunity for an evidentiary hearing is required by the federal constitution, a
federal statute, or the constitution or a statute of this state.”
 With this approach, hearing rights are governed by law other than the APA, but hearing
procedures are governed by the APA. This is the same as the Federal APA, except for the
constitutional language in Section 102(7).
 —When a hearing is required by another statue ( such as the Clean air act), then the
adjudication provisions of the federal APA in sections 554, 556, and 557 apply. This means
that a formal adjudication hearing with APA procedures is implemented. This includes a
number of requirements: 1) use of a federal ALJ; 2)separation of functions and ban on ex
parte contacts; 3) right to cross-examine; 4) recovery of attorneys fees by prevailing private
party when agency position not substantially justified; and other provisions.
 When the agency enabling act does not require a hearing on the record, then the federal APA
does not apply, and the party contesting agency action may be limited to informal
adjudication procedures governed by 1) due process of law (e.g., Goss v. Lopez); 2) any
enabling act requirements triggered by the use of the term “hearing” (which may require a
public hearing, but not a trial type adjudicative hearing); and 3) agency procedural rules
(which may require submission of materials in writing and a paper hearing.
Dominion Energy Case: Dominion Energy(D) owns an electric generation facility that draws water from a
river to use in the plant’s cooling process. Heated water is discharged back into the river. D is required to
have an NPDES permit from the EPA under the Clean Water Act (CWA)because heated water is considered
water pollution. D’s permit contains a thermal variance. D’s permit is up for renewal but the terms of the
renewed permit are in dispute between D and the EPA. The EPA denied D’s request for a formal
adjudicative hearing under the APA. This was based upon procedural regulations adopted by the EPA in
2000.
The CWA (agency enabling act) requires “an opportunity for a public hearing” before an NPDES permit or a
thermal variance is issued by the EPA. The term “public hearing” is not defined by the CWA. The issue
before the court is whether that language triggers an APA formal adjudicative hearing? Is the “opportunity
for a public hearing” language the equivalent of the Section 554(a) requirement that: adjudication required
by statute to be determined on the record after opportunity for an agency hearing?
Looking at precedent such as the Seacoast Case (1978), they looked at the statutory language and the
legislative intent. They held that public hearing in the CWA equals an evidentiary hearing.
However the SC decicion in Chevron changed things. Under Chevron, the court has to decide two things: 1)
whether Congress has directly addressed an interpretive issue in the applicable statue? If yes, than the
statue is controlling (here that may mean that Congress addressed in the CWA whether a public hearing is an
evidentiary hearing (such as with a statutory definition) or was only an opportunity to make comments on the
permit renewal process, but not to put on evidence. If no, then 2) if the statute is not clear, the court must
defer to an agency’s reasonable interpretation of the ambiguous statutory term.
The court in Dominion held that the Seacoast rule was no longer controlling. After the Chevron decision, the
EPA revised its procedural regulations to provide that an NPDES permit renewal proceeding did not require
an evidentiary hearing. The court in Dominion applied the Chevron two step test and concluded that the
statute was ambiguous as to the meaning of the term “public hearing” but the EPA’s interpretation of the
public hearing language (as not requiring an evidentiary hearing)was a reasonable interpretation of the Clean
Water Act provisions, and therefore controlling.
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o
The EPA used rulemaking type procedures in its procedural regulations. Notice and comment procedures
were used. The types of procedures are much quicker and less expensive than an APA formal adjudicative
hearing procedure. Further, the EPA could avoid having to use an independent ALJ, which most agencies
want to avoid using. While independence is desirable from the perspective of the regulated party or
beneficiary (neutral and impartial decision maker), the agency loses control of the outcome of these cases.
There is tension between the agency mission (institutional perspective) and fairness to the affected private
party (judicial perspective).
- Problem 8, pg. 83-83: Doesn’t have a statutory right to a hearing under federal approach because the relevant
statutory language did not provide for an “on the record hearing”. Using the term “public hearing” is not enough to
trigger the right to an APA style formal adjudicative hearing.
o Q2. What type of process is Mel entitled to? [informal notice and comment procedures or a type of informal
adjudication procedures with a paper hearing and an informal conference
o —Q3. Does Mel have a constitutional right to a hearing? [The Army corps of Engineers has broad discretion
to grant or deny dredging permits, so Mel probably does not have a protected property interest (not a matter
of statutory entitlement to the permit.).
o —The agency in this case, the Army Corps of Engineers, used an informal adjudication approach. Mel
wanted an evidentiary hearing.
o —Q4. If statutory requirements aren’t met, then go to Matthews Due process 3 part test. What are Mel’s
interests [permit applicant], the governments interests [hearing costs] , and the types of fact issues involved
[paper hearing minimized the risk of error]. On balance, the paper hearing would satisfy the calculus of due
process (See Buttrey v. US, CB page 78)
HEARING RIGHTS APPROACH:
1- External Hearing rights (2010): California [Ca. Gov. Code Section 11410.10. This statute provides: “this chapter applies
to a decision by an agency if, under the federal or state Constitution or a federal or state statute, an evidentiary hearing for
determination of facts is required for formulation and issuance of the decision.”
2. APA Hearing rights approach: This is a minority approach under which the APA provides for an all inclusive definition
of adjudication and requires APA hearings for all adjudications whether or not an external source of law requires hearing
rights.
- In administrative law, the presiding officer at an administrative hearing and the final decision maker who reaches
and writes a decision based upon that hearing are not always the same person. This characteristic is at the heart of
the issues related to the judicial model of administrative decision making (like a judge in an article 3 court deciding
a civil lawsuit) versus the institutional model of administrative decision making (like the regulatory powers
exercised by a major federal agency such as the Securities Exchange Commission). APA hearing procedures are a
blend of both models.
- —1. Both the federal APA [FAPA] and most state APA’s provide hearing procedures in which an administrative law
judge (ALJ) may act as the presiding officer at the APA evidentiary hearing.
- —2. Under FAPA, the ALJ’s have a protected status, but many federal agencies use Administrative judges (AJ’s) to
act as presiding officers.
- 3. In state administrative law, the status of the judges who preside at hearings varies from state to state but central
panel judges are almost always administrative law judges (ALJ’s).
- In federal administrative law, almost all evidentiary hearings are presided over by either by an ALJ, or an AJ, not the
agency head whether single or a multi member head. In state administrative law, there is a mix of alternatives. In
some small states, many multi member boards ( often with licensing regulatory authority) schedule their own
hearings before the full board, but an ALJ or state hearing officer will often sit at the hearing, swear parties and
witnesses under oath, make evidentiary rulings, and act as the traffic cop for the hearing. In larger states, like
California, ALJ’s are used almost exclusively as the presiding officers except for a few areas of law (such as teacher
dismissal cases)
- —There are three decision options under the federal APA.
o Under the federal APA, 5 U.S.C. Section 557(b), the agency has the authority to make a final decision (and
will do so if the agency presided at the evidentiary hearing) [Under 2010 Revised model State APA, it is
called final order] but
o the agency also has the option of delegating decisional authority to an ALJ that presided at the evidentiary
hearing ,who will write an initial decision. (not in CA) [under 2010 Revised model stat APA presiding
officer shall issue an initial order]
o A third option is a recommended decision which the ALJ writes after presiding at the hearing in cases in
which the agency makes the final decision.
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Oregon environmental Council: They said it was an ORDER not a rule & it was not a CONTESTED CASE, which
meant Board didn’t have to follow the procedures AND P went to the wrong court, shouldn’t have gone to the Court
of Appeals-- Facts: Advocacy groups (OEC & NAS) challenged a decision of the State Board of Education to
approve a textbook , “Get Oregonized” for use in Oregon’s public elementary schools. The groups challenged
whether the Board used the proper procedures in approving the text book. They also argued for a broader scope of
review of the Board decision. The intermediate Court of Appeals held that the decision was a rule and affirmed that
decision. The Oregon Supreme Court reversed the decision of the Court of Appeals and held that the decisions was
an order in other than a contested case. That meant that the decision was not reviewable in the Court of Appeal. The
supreme court ordered that the petition for judicial review be dismissed.  Cases like this in CA only goes to
Superior Court, which means there isn’t much precedent
Board Decision: The Commission recommended approval of the textbook as a fourth grade social studies textbook.
At a board public hearing, presided over by a Board hearing officer, the two sides, proponents and opponents,
presented competing views on the textbook. These views were communicated to the Board by a written report from
the hearing officer. The Board approved the textbook on a six to one vote. The appeal to the court of appeal
followed.
o If it is a rule Board must explain how the book satisfied the board’s guidelines and criteria
o It is a rule if it applies with general applicability
—The Board decision to adopt a textbook was not a rule. The Oregon Supreme Court held that the Board decision
was not a rule. Thus, the Board was not required to explain how the book satisfied the board’s guidelines and criteria.
The board decision was not a rule, because it adopted one book. Thus, it was not a directive of general applicability.
The Board decision was like a professional licensing agency individual decision, which would be an order not a rule.
[There is a fundamental difference between a rule and an order under all current APA’s].
The Board decision was an order but NOT a contested case. Contested case proceedings in state administrative law
are formal adjudicative proceedings. This is the terminology used in the 1961 and 2010 MSAPA legislation, as well
as the Oregon APA. If the court had held that this was a contested case proceeding, then the Board decision
would have been reversed for not following the required procedures. Contested case orders are reviewed in the
court of appeals, based upon the agency record. Orders in other than contested case are reviewed in the circuit court
[trial court] as an equity case without the requirement of an exclusive agency record.
The Supreme Court held that none of the Oregon APA categories for contested cases applied to this decision. The
opponents argued, and failed
o They have constitutional right to a hearing  but failed because there is no constitutional protection to
prevent publication of the book, NOT to provide access to expressive materials
o Opponents also failed because there was no statutory right to contested case procedures
o Additionally, Publishers could challenge rejection of their textbook by the Board under subsection (a)(C), as
they would fall into the applicants or licensees category, but approval of a textbook does not require a
contested case proceeding prior to approval
o Finally the “public hearing” requirement adopted by the Board rule is an opportunity to be heard but does not
require a contested case proceeding (a)(D)
Greenwood Manor Case: Greenwood Manor (GW) applied for a “certificate of need” to open an Alzheimer’s unit
in Coralville, Iowa. The certificate would be issued by the State Facilities Health Council (Council). The enabling
act required the council to provide a “public hearing” when it receive an application at which all affected parties
have an opportunity to present testimony. When the public hearing was held, the other hospitals in the same area
opposed the granting of the certificate because of declining occupancy rates and shortages of health care
professionals. The council granted the certificate and the competitors appealed. In their appeals, the competitors
claimed that the were entitled to an APA type contested case hearing. The Iowa appellate court rejected that
argument.
Court ruling: The court concluded that the requirement of a “public hearing” did not require a contested case
hearing. This was reinforced by the Council’s procedural regulations which stated that public hearings of this type do
not constitute contested cases, so no evidentiary hearing is required. The statutory public hearing requirement with
the right to present testimony is not a contested case. The statutory analysis of this court is similar to the analysis in
the Dominion energy case.
Court ruling: The Iowa court also found that there was no constitutional right to a contested case hearing. This was
because: 1) certificate of need hearings addressed matters of legislative fact [like the Bi-Mettalic case] not
adjudicative fact; 2) there were no disputed issues of fact in this certificate of need presentation (thus no need for a
hearing, even if facts were adjudicative); 3) Competitors were not deprived of liberty or property interests by having
a new competitor; 4) competitors received all the process that was due (opportunity to submit written comments and
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public hearing were all the process that was due); and 5) denial of cross examination of witnesses did not prejudice
the competitors.
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Metsch v. Univ. Florida: Facts: An applicant for law school whose application for admission to the UF law school
was denied requested an administrative hearing to challenge the denial of the application. The applicant appealed the
denial of his hearing request to the Florida courts. Under the Florida APA [S 120.57(1)] the adjudicative hearing
provisions of the APA “apply in all proceedings in which the substantial interests of a party are determined by an
agency, unless…” the court held that the applicant did not have a substantial interest in law school admission. The
applicant did not have an injury in fact and no substantial injury protected by APA procedure. Further he did
not have a liberty or property interest in being admitted [no statutory nor due process rights implicated]. (
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Local constitutional analysis
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Liberty or
Property Interests
Federal  External hearing rights approacho statutory right to a hearing
State  depends, but most modern will permit to argue both statutory and constitutional
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CA legislature decided to adopt the external hearings rights approach and to reject the APA hearing rights approach,
it made that decision based upon a concern that the APA approach would lead to hearings requirements in a lot of
small cases, such as denial of a camping permit, in which the interest at stake was too small to justify an APA
adjudicatory [trial type] hearing.
Problem 7, pp 92-93
o County not subject to an APA: In most states, there would be no statutory right to a hearing absent some
civil service laws (or public employee union contract obligations). Constitutional right to a hearing?
Property interest (Yes: dismissal for cause only). Liberty Interest (Yes: derogatory information in the file
plus a short suspension may satisfy the stigma plus test). However what process is due? With a short
suspension, probably only a Goss type of hearing rights (minimal due process procedures: notice, statement
of reasons, opportunity to respond, impartial decision maker). Sanctions discretion may be an issue. If Ralph
admits that he did smoke at his desk, there will be no disputed issues of fact to be decided at a trial type
hearing.
o —2.State with the 1961 MSAPA [and the 2010 Revised MSAPA]: External hearing rights approach would
be used. 1961 act is not clear as to whether it includes constitutional hearing rights, but the 2010 MSAPA is
clear, so Ralph would be able to satisfy the external hearing rights approach at least to the extent that he
would have the sane hearing rights as with the county. He probably would not get a full APA type of
adjudicative hearing.
o —3. State with Florida statute [1981 MSAPA]: APA hearing rights approach “substantial interests of a party
are determined by an agency”. Is a minor sanction (5 day suspension) substantial? Probably not. Based on
the analysis in the Metsch case, this would not be substantial. If Ralph admitted that he smoked at his desk,
then he may get an informal hearing (under Florida law).
o —4. Federal agency (Federal APA): External hearing rights approach; Under the FAPA, there has to be a
statutory right to a hearing. FAPA does not include a constitutional right to a hearing. In this case, there is no
statutory right to a hearing so no APA adjudicatory hearing. Possibly a court could require a Goss type
informal consultative proceeding, but that would not be mandated by FAPA.
Heckler v. Campbell: Campbell applied for SSDI benefits based upon a back disability and hypertension which
prevented her from continuing to do her work as a hotel maid. She was denied benefits by the SSA. After a hearing
before an ALJ, the denial was upheld and the ALJ concluded that she could do light work and that there were a
number of jobs available in the national economy that she could perform. This determination was based upon agency
regulations (the medical vocational guidelines) not evidence admitted at the hearing. While Campbell could offer to
prove that the guidelines did not apply to her case, she did not have the right to offer proof on the issue of the
availability of jobs in the national economy. The SSA could make a decision based upon the application of the
regulations to an individual’s case.
The US Supreme court upheld the use of administrative regulations for the SSA to resolve issues of generalized fact
(legislative facts). The court held that the SSA was not required to establish this issue ( (no substantial gainful
activity is the statutory language) through individualized proof at an administrative hearing. It could be resolved
through using rulemaking, which requires notice and comment procedure, not a trial type hearing. Rulemaking is
much more efficient than using expert testimony in countless administrative hearings and it ensures greater
consistency in decision making.
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—1.The claimant still has the right to offer evidence on the particularized facts of her circumstances [see page 86,
casebook, lines 1 to 8], but not on the availability o other jobs in the economy. The claimant [See footnote 11, page
87 casebook] can show that the applicable regulations do not apply to him or her.
—2.This ruling can be characterized as foreclosure of hearing rights through rulemaking.[See note 1, page 88].
3. See note 2, page 88, on the limits of rulemaking in this setting. Rulemaking can only be used for classes of issues
that do not requires case by case determination, or indivdualized proof.
o Problem 6 page 100: 1. Can the Madison board properly adopt this rule prohibiting graduates of foreign
medical school (other than Britain or Canada)from being licensed in that state? [Yes]What does the Heckler
case suggest? [Heckler would support the use of rulemaking in this circumstance.]
o 2. Can Kate seek a waiver of this rule? [Kate would have a good argument for waiver, given that her
circumstances are not typical of the usual foreign medical school graduate. If the board refuses a waiver,
does Kate have any remedy? [she can seek judicial review and argue that denial of a waiver is arbitrary
and capricious. However, judicial review is costly and time consuming so may be not a god option.]
o 3. If initial license are protected property interests under due process of law, Kate may be entitled to an
informal hearing assuming that there are no fact disputes. If these licenses are not protected, then she would
not have due process rights to any hearing procedures. Under current law, it is not clear whether initial
licenses are protected by due process of law. However, in most states a professional or vocational license
applicant whose license application is denied has a statutory right to a hearing under the state APA.
Personal responsibility of decision makers: Morgan v. US
Facts: The Secretary of Agriculture (Sec Agr) had the responsibility to set the maximum rates charged as
commissions by livestock agents working in a Kansas city stockyard. The plaintiffs filed a lawsuit which was
dismissed based on the pleadings. The allegations claimed that the were that the Sec Agr made the decision without
hearing or reading any of the evidence, the argument, or the parties briefs. The Sec Agr rubberstamped a decision
made by some one else (this was claimed).
The US Supreme court held that the decision maker must hear the case. The Sec Agr had to consider the evidence
and argument in the case before making a decision. The Sec Agr could use staff assistants such as 1) hearing officers
to preside at the hearing and take evidence; 2) subordinate agency employees to sift the evidence and make reports;
and 3) agency attorneys to put together the record for the Sec Agr to review as part of the decisional process. The
agency head’s duty is NOT impersonal. It is like a judge’s duty. This case was a judicial model decision. [Morgan
I]
The US Supreme court held that the decision maker must hear the case. The Sec Agr had to consider the evidence
and argument in the case before making a decision. The Sec Agr could use staff assistants such as
o 1) hearing officers to preside at the hearing and take evidence;
o 2) subordinate agency employees to sift the evidence and make reports; and
o 3) agency attorneys to put together the record for the Sec Agr to review as part of the decisional process.
The agency head’s duty is NOT impersonal. It is like a judge’s duty. This case was a judicial model
decision.
o 4. create an intermediate review board that would hear appeals from ALJ decisions.
o 5. use a condensed summary of evidence and arguments prepared by others as the material on which the
agency head reviewed and based its decision.
In Morgan II [ end of note 2, bottom of page 105], the supreme court concluded that the Sec Agr had complied with
the requirements of Morgan I by reading the summary presented by the appellant’ briefs and by conferring with
subordinates that had sifted and analyzed the evidence in the matter. This case was an institutional model decision
.[Morgan II]
The Revised 2010 Model state APA Section 413(c) provides: (c) A recommended, initial, or final order must be
served in a record on each party and the agency head not later than [90] days after the hearing ends, the record closes,
or memoranda, briefs, or proposed findings are submitted, whichever is latest. The presiding officer may exten the
time by stipulation, waiver, or for good cause.
In Morgan 4 [note 5, page 107] the Supreme court held that it was improper to conduct discovery of the Sec Agr to
probe how he made the decision. The court noted that litigants cannot probe the mental processes of the decision
maker.
Problem 7, pg. 108  This problem addresses the Morgan I issue in its own context. Is the board familiar enough
with the record to make the decision based on the hearing? The board only had enough time to read the review
committee’s decision, and nothing else. It did not have time to listen to the tape of the hearing, nor was there a
transcript to read and consider. There was no briefing or oral argument allowed either. This does not violate the
Morgan I holding. It is acceptable to base a decision on a recommendation that summarized the evidence (in CA it
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would be a due process violation). This problem was based off of a case Bates v. Sponberg, although this case won’t
pass because of due process violations. But under the Morgan I approach, it would be ok.
Hearer must decide or be replaced: Absmeier v. Simi Valley Unified School district
- California court of appeal held that a school district personnel commission properly removed for good cause an
administrative law judge (ALJ) appointed under Educ. Code § 43512 to hear and decide the administrative appeal of
a school district’s personnel director to challenge the director’s dismissal. The ALJ conducted the hearing but never
decided the case, and after eight months told the Commission that he would not decide the case. However, it was
improper for the personnel commission to hire the law firm that represented the commission to review the transcripts
and render a decision. Aside from the conflict of interest, the law firm did not see and hear the evidence. Credibility
determinations require more than reading a transcript of a hearing. Litigants are entitled to a decision by the judge
that heard the evidence. The Commission was required to appoint a second ALJ to conduct a new hearing, and base a
decision on the record in that hearing.
Adjudicative Process:
1- Institutional Model2- Judicial Model
- The biggest issue in adjudicative process is EX PARTE CONTACTS/COMMUNICATIONS.  the rule is,
communications between agency decision makers and persons outside the agency
o FAPA Section 557(d) prohibits ex parte communications between outsiders and agency decision makers that
are relevant to the merits of the proceeding.  can’t receive information from outsider communications
to agency officials & no agency offical can make any communication to an outsider
 Remedies: disclose the communication on the public record, there can be merits based sanctions
(discretionary based on whether it is in interest of justice).
 Ex Part Communication Prohibitions begin when an ALJ is designated and no later time where
proceeding is noticed for hearing
 Ex Parte Communications mean an oral or written communication not on the public record with
respect to which reasonable prior notice to all parties is not given, but it shall not include requests for
status reports on any matter or proceeding covered by this subchapter.
o 2010 Revised MSAPA Section 408(a) and (b) prohibits any ex parte communication with any person and an
agency presiding officer and final decision maker with specified exceptions (section 408(c),(d),(e), or (h)).
o PATCO Case: Facts: there were ex parte contacts between members of the FRLA, a three member board
considering revocation of PATCO’s exclusive representation status as the union for air traffic controllers,
and the Secretary of Transportation (Lewis) as well as the AFT leader (Albert Shanker). The revocation
proceeding was the result of an illegal strike by air traffic controllers, and PATCO eventually lost its
representation status when the three agency board members unanimously affirmed that ALJ decision to
revoke PATCO’s status.
 1. Secretary Lewis (Secretary of Transportation) was an interested person. His telephone calls
provided a status report on the strike and a request for an expeditious agency (FLRA)handling of the
appeal form the ALJ decision. His comments avoided the merits and may have been improper but
did not taint the proceeding.
 —Secretary Lewis’ comments avoided the merits and thus did not violate the Section 557(d)
“relevant to the merits of the proceeding” standard.
 —3. AFT President Shanker’s dinner with one member of the board(Applewhite). Shanker was an
interested person as the head of a major public sector union. His interest was greater than the general
interest that the public may have.
 —4. Shanker’s comments were relevant to the merits of the proceeding. Part of the dinner comments
were related to the decision the FLRA board had to make.
 —5. Applewhite should have ended the conversation when Shanker made his comments about the
PATCO strike. He did not. However, the ex parte contacts between Shanker and Applewhite had no
effect on the ultimate decision of the FLRA, to revoke the exclusive recognition status of PATCO,
and no party benefited from the ex parte contacts.
 6. In today’s legal and political environment, a public official like Applewhite would be subject to
more scrutiny for having a dinner with a well known labor official at the time of a public employee
union strike.
o Ex Parte Rules: Section 408 (a) In this section, “final decision maker” means the person with the power to
issue a final order in a contested case. (b) Except as otherwise provided in subsection (c), (d), (e), or (h),
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while a contested case is pending, the presiding officer and the final decision maker may not make to or
receive from any person ANY communication concerning the case without notice and opportunity for all
parties to participate in the communication. For the purpose of this section, a contested case is pending from
the issuance of the agency’s pleading or from an application for an agency decision, whichever is earlier.
o If improper communication  Section 408(f)[placing the EPC on the record , (g)[notice and opportunity
to respond by parties], and (i) [disqualification of ALJ, or merits based remedies or sanctions]contain
provisions for various remedies and sanctions when there is a violation of the ex parte communications ban.
But there is an insider communication ban; exception for multi member bodies
o Problem 7, pp 118: Public Utilities Commission 1. If ratemaking focuses on a generalized inquiry and no APA applies, then the ratemaking process
may be legislative in nature and fall on the BiMettalic side of the line. Thus, no due process
protections. The vast majority of state cases treat ratemaking this way.
 2. If the ratemaking is individualized as to the utility (as seems to be the case here), then due process
protections may apply. The utility has a large financial stake in the rate proceeding. The PUC does
not have a large interest in protecting ex parte contacts, but the risk of error is low because it is less
likely that the consumer groups have brought new information into the record.
 3. Under the 2010 MSAPA, the PUC would be required to use article 4 contested case procedure,
because there was a statutory right to a hearing. Section 408 would apply, and the consumer groups
would meet the “any person” test. The communications with Cr. Smith would be pr0hibited, unless
made on the record.
 4. Under FAPA, individualized ratemaking is considered rulemaking but Section 557(d) does apply.
The consumers would be considered to be interested persons, and the communications would satisfy
the relevant to the merits test.
Statutory Hearing Procedure:
- Ex Parte Contact —Key differences between FAPA and 2010 MSAPA.
—1. Interested person (FAPA) vs. any person (MSAPA)
—MSAPA is broader but both FAPA and MSAPA include but do not limit the ban to parties or their lawyers.
—2. Relevant to the merits of the proceeding(FAPA) vs. any communication concerning the case (MSAPA)
—MSAPA is broader by design. The FAPA standard was thought to be too narrow or too hard to enforce.
—3. Exceptions: Both FAPA and MSAPA except ex parte matters authorized by law. MSAPA has an exception for
uncontested procedural issues. These latter types of communications would be permitted under the FAPA standard for
prohibited communications (relevant to the merits of the proceeding).
—4. Both MSAPA and FAPA have disclosure on the record and merits based sanctions as remedies for ex parte contacts
violations. MSAPA also provides for disqualification of a presiding officer and sealing of the record as a permissible
alternative remedy.
Example: Professional Air Traffic Controllers Organization (PATCO) v. Federal Labor Relations Authority (FLRA) 685 F.
2d 547 (D.C. Cir., 1982)  no reversal because no prejudice from ex parte communication
Example: Mathew Zaheri Corp. v. New Motor Vehicle Bd., 55 Cal. App. 4th 1305, 64 Cal. Rptr. 2d 705 (1997)  relevant
to the merits of the proceeding test
- —Ethics rules and ex parte contacts. ABA Model Rules
—Rule 3.5 Impartiality and Decorum of the Tribunal
—A lawyer shall not:
—(a) seek to influence a judge, juror, prospective juror or other official by means prohibited by law;
—(b) communicate ex parte with such a person during the proceeding unless authorized to do so by law or court order;
- —Ethics rules and ex parte contacts. California Rules
—Rule 5-300. Contact With Officials.
—(B) A member shall not directly or indirectly communicate with or argue to a judge or judicial officer upon the merits of a
contested matter pending before such judge or judicial officer, except:
—(1) In open court; or
—(2) With the consent of all other counsel in such matter; or
—(3) In the presence of all other counsel in such matter; or
—(4) In writing with a copy thereof furnished to such other counsel; or
(5) In ex parte matters.
- —Judicial Ethics and ex parte contacts: ABA Model Code of Judicial Conduct
—RULE 2.9 Ex Parte Communications (applies to all judges)
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—(A) A judge shall not initiate, permit, or consider ex parte communications, or consider other communications made to the
judge outside the presence of the parties or their lawyers, concerning a pending* or impending matter,* except as follows:
—(1) When circumstances require it, ex parte communication for scheduling, administrative, or emergency purposes, which
does not address substantive matters, is permitted, provided:
—(a) the judge reasonably believes that no party will gain a procedural, substantive, or tactical advantage as a result of the ex
parte communication; and
(b) the judge makes provision promptly to notify all other parties of the substance of the ex parte communication, and gives
the parties an opportunity to respond.
- Anstey v. Iowa State Commerce Commission, 292 N.W. 2d 380 (1980). Commissioner from State Commerce
Commission was not disqualified from the Commission or their proceedings on the basis of ex parte communications
when on two occasions power company officials called chairman to discuss reasons for the dismissal of the case
since there was no showing of any input from those officials which could influence the matter then pending or which
would go to merits of their petitions once they are refiled. These conversations would not require reversal of
Commission's actions. [no pending proceeding at time of ex parte contacts]
- Fremont Indemnity Co. v. Workers' Comp. Appeals Bd., 153 Cal. App. 3rd 965, 200 Cal. Rptr. 762 (1984).
Workers' compensation judge had denied the employer's insurance carrier a fair trial and due process of law when
judge twice initiated telephone calls to the independent medical examiner to obtain further medical information and
opinion, and in the process discussed the 'correct legal principles' involved after the case had been submitted to the
judge. [ex parte contact initiated by ALJ with a witness, which isn’t allowed]
- Wells v. Del Norte School Dist. C-7, 753 P.2d 770 (Colo. 1987). Teacher was entitled to a new hearing from the
school board, based on appearance of lack of impartiality that occurred when hearing officer sat at restaurant table
and had ex parte conversations with counsel for school board and school board's witness during lunch break at
removal hearing. [ex parte contacts can show lack of impartiality by judge]
- Vandegriff v. First Savings & Loan Ass n 617 S.W. 2d 669 (Tex. 1981). Savings and Loan charter applicant met
with Texas Savings & Loan Commissioner after first application had been rejected by Commissioner. Applicants
presented new information to Commissioner. Shortly thereafter, applicants filed a second application, which was
ultimately accepted by Commissioner, and a new charter was issued. The Texas Supreme Curt held that this was not
an improper ex parte communication because there was no current contested case at the time of the communications,
and no prejudice occurred because the ex parte communications information was disclosed at the second hearing, and
there was an opportunity for opponents of the charter application to counter, or present contrary information at the
second hearing. [no violation if no application pending]
- Pillsbury Case: Facts: Pillsbury (P) sought judicial review of an FTC decision that ordered divestiture of two
baking companies P had bought on the grounds that the acquisitions violated Section 7 of the Clayton Act. Section 7
prohibited acquisitions that would cause a “substantial lessening of competition”. P claimed that it was deprived of
due process of law because of improper interference by Congressional committees with the FTC’s decisional process
in the P case. The FTC had required its hearing examiner to use the rule of reason approach (which required
economic evidence and a more lengthy hearing process) rather than the per se approach, which was more cut and
dry. When the FTC chair and other FTC officials appeared before the U.S. Senate and House antitrust subcommittee
in 1955 for Congressional hearings, (while the P case was pending before the FTC) FTC Chair Howrey was
questioned extensively and critically about the P case and the FTC approach to that case by several senators,
including Senator Kefauver. The questioning was focused enough upon the specific P case and the FTC approach to
that case that Howrey disqualified himself from further participation in the case because of the answers that he had to
give to the question from senators related to his mental decision processes in the P case.
o Holding: When the FTC chair and other FTC officials appeared before the U.S. Senate and House antitrust
subcommittee in 1955 for Congressional hearings, (while the P case was pending before the FTC) FTC Chair
Howrey was questioned extensively and critically about the P case and the FTC approach to that case by
several senators, including Senator Kefauver. The questioning was focused enough upon the specific P case
and the FTC approach to that case that Howrey disqualified himself from further participation in the case
because of the answers that he had to give to the question from senators related to his mental decision
processes in the P case
o Congress has an important oversight role to play with federal administrative agencies when those agencies
carry out executive or legislative functions, but not when the agency is carrying out judicial (adjudicative
functions). The court vacated the divestiture order and remanded to the FTC for further proceedings. The
FTC dismissed the case as stale because of market change in the industry.
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o
Section 557(d) of FAPA was added after the P case decision. Members of congress are subject to the statute.
How would that have changed things in the case?  It meant they couldn’t ask any questions relevant to the
merits of the case.
Problem 7, page 124
Due process of law; Does Midway have an entitlement based on the standards for certificates of need and its application?
[probably not] However, if yes, then the legislative interference into the pending application by Midway would violate due
process of law (right to an impartial decision maker, not one pressured by legislators) The legislators’ comments in this case
were more extreme than in the P case, and they were far more likely to have influenced the Director’s decision
—2. 2010 Revised MSAPA: since there is a statutory right to a hearing, this proceeding would be a contested case and the
Article 4 provisions would apply, including Section 408 governing ex parte contacts. The legislators would be included in
the any person category and their letter would be a communication related to the case before the MHA. The application was
pending at the time that the letter was sent.
—3. FAPA: S 557(d) would be violated assuming that the knowledge standard was met. Legislators are interested persons,
and their comments are relevant to the merits of the proceeding.
SEPARATION OF FUNCTIONS: Rationale for limiting conflicting lawyer roles in agency representation:
- Separation of functions doctrines are designed to ensure an impartial decision maker in agency adjudication. Those
rules normally prohibit agency advocates from also acting as agency decision makers or advisors to decisions makers
in the same case or matter, as that is seen to be unfair to the private party whose interests are being adjudicated in the
agency proceeding. The combination of conflicting functions in the same agency is viewed with skepticism by those
subject to agency regulation. Whether this is an actual fairness issue, or merely an appearance of fairness issue, it is a
real issue that is one of the driving forces behind the creation of state central panels offices that house ALJ s who
decide adjudicative proceedings for other state agencies. Separation of functions restrictions can be based on the
applicable APA, for federal or state agencies, and are based on due process of law for local administrative agencies,
that are, by and large, not subject to the APA in any particular state.
- Lawyers who represent agencies should be careful to avoid serving in conflicting roles in the same agency
proceeding as the agency decision may be invalidated by a court on due process fairness grounds when the lawyer
has acted as both an advocate and an advisor to the agency decision maker. These issues arise most frequently in
local agency adjudication. The conflicting role ban applies to both agency attorneys acting as staff counsel and to
outside attorneys hired by the agency to represent them. Unlike the more typical situation with conflicts of
interest, in which the lawyer can be disqualified from further representation because of a conflict of interest,
here the agency decision can be overturned due to the lawyer’s violation of separation of functions rules.
While this has not been viewed as a typical conflict of interest situation to be avoided by lawyers, it can be viewed as
a conflicting role dilemma, and as the administrative law version of a conflict of interest.
- Executive branch agencies: most federal and state agencies are structured to combine executive legislative and
judicial functions in one agency. Combining functions at the institutional level is more efficient and can increase
effectiveness but this structure can also raise concerns of fairness. Agency structure reflects the institutional model
not the judicial model. If the judicial model were followed, then the agency judges would be in a separate agency
from the prosecutors and investigators (like the criminal law system in which prosecutors work for the district
attorneys office and the judges work for the court system in separate branches of government.
- Due process of law: The combined function structure does not violate due process of law.
o Withrow v. Larkin, 421 U.S. 35 (1975) a state medical licensing agency did not violate due process of law
when the board could both investigate and then later adjudicate a licensing suspension proceeding against a
physician for violating abortion laws. Institutional combination of both investigative, prosecutorial and
adjudicative functions in one agency did not violate due process of law because there was no
unconstitutional risk of bias in the agency structure. The court noted that internally different employees
performed the investigation and prosecutorial responsibilities for the Board. [institutional combination
does not violate due process of law]
- Due process of law: Internal separation of functions may be required by due process of law, and will be required
when there are conflicting roles at play.
o Walker v. City of Berkeley, 951 F. 2d 182 (9th Cir., 1991). Discharged city employee who challenged
discharge on wrongful termination grounds both in court under Section 1983, and through city administrative
hearing process was denied due process of law when city staff attorney acted both as advocate for city in
Section 1983 court lawsuit, and as decision maker in local administrative process. [advocate role
incompatible with decision maker role]
o Nightlife Partners Limited v. City of Beverly Hills, 108 Cal. App. 4th 81, 133 Cal. Rptr. 2d 234 (2003). Due
process right to an impartial decision maker was violated in case in which hearing officer who presided over
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administrative appeal of permit denial was assisted in hearing and decision process by city attorney who had
represented city in initial permit denial process. Bias was shown by mixing of advocacy and decision making
roles. Both city attorney and hearing officer were disqualified from hearing administrative appeal. [advocate
role incompatible with decision maker role]
- Due Process Screens rejected in Government Law Setting (Sabey v. City of Pomona (2013, 2d Dist., Div. 2) 215 Cal.
App. 4th 489, 155 Cal. Rptr. 3d 452) (due process screen rejected in a case in which a city police officer challenged
his termination in a writ of mandamus proceeding for due process violations. Private Law firm screening in which
one partner acted as an advisor and the other partner acted as an advocate for the city in a personnel arbitration
proceeding was rejected because the risk of actual bias due to a conflict of interest was too great. Termination
decision reversed and remanded
- Due Process Screens allowed in Government Law Setting (Richardson v. City and County of San Francisco (2013 1st
Dist., Div. 2) 214 Cal. App. 4th 671, 154 Cal. Rptr. 3d 145)(Due process screen was admissible in writ of mandamus
proceeding challenging fairness of an administrative adjudication before SF Police Commission in proceeding in
which police officer was terminated from employment. Separate attorneys from SF City attorney’s office advised
police commission and defended SFPD in lawsuit brought by terminated police officer. Ethical screen prohibited
attorney advisor and attorney advocate from sharing confidential information and discussing respective cases
STATUROTY HEARING PROCEDURES:
- Quintinar: Department of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Board
(Quitanar), (2006) 40 Cal. 4th 1, 50 Cal. Rptr. 3d 585, 145 P. 3d 462. In this case, the California Supreme Court
held that the Department of Alcoholic Beverage Control violated the ex parte contact provisions of the California
Administrative Procedures Act [Gov. Code S 11430.10 ] by following the practice of having the department
prosecutor prepare a hearing report after the hearing and issuance of a proposed decision by the Administrative Law
Judge and then submitting that report to the chief counsel of the Department before a final decision was reached by
the director of the Department in that case. The prosecutor’s hearing report contained summaries of the issues and
evidence presented at the hearing by the prosecutor as well as a recommended resolution of the case with supporting
reasons. The report was submitted by the department prosecutor (who had represented the department at an
evidentiary hearing before an ALJ ) on an ex parte basis to the Chief Counsel of the Department, the prosecutor’s
supervisor, and the decision making advisor to the Director of the department. The report was not made part of the
record in the case, and the report was not served on counsel for the affected licensee. In each of the adjudicatory
hearing matters in which this practice was challenged, the ALJ issued a proposed decision dismissing the accusation
against an alcoholic beverage licensee (e.g., for selling alcoholic beverages to underage customers), and the Director
of the Department rejected that proposed decision, and substituted a department decision suspending the licenses s
of the licensees for a period of time (15 to 25 days).
o The California Supreme court noted that the ban on ex parte contacts is designed to insure a limited internal
separation of functions between prosecutorial and decision making employees who work for a single agency
that combines both prosecution and adjudication in the same agency. The California Supreme Court held that
the ban on ex parte contacts applies to communications with both presiding officers and agency heads, and
the ban includes both the hearing stage and the decision stage of the adjudication [Gov. Code S 11430.10(a);
]. The California Supreme court ordered the reversal of the Department’s decisions ordering the suspension
of alcoholic beverage licenses in these cases.
- Consumer Advocate Division Case: The Tennessee Court of Appeal affirmed the denial of a motion made by the
CAD to discover communications made to agency heads by staff. The motion was denied by the Chairman of the
Tennessee Regulatory Authority, and upheld unanimously by the TRA Board. The communications were made in the
form of off the record advice to TRA agency heads. The advice was given by TRA staff members who were not
previously involved in the TRA case to approve a rate increase sought by the Nashville Gas. Co. Staff advice is very
useful to commissioners when it relates to complicated issues of utility regulation.
o 5 U.S.C. Section 554(d): FAPA; The employee who presides at the reception of evidence pursuant to section
556 of this title (adjudicative role like an ALJ) shall make the recommended decision or initial decision
required by section 557 of this title, unless he becomes unavailable to the agency. Except to the extent
required for the disposition of ex parte matters as authorized by law, such an employee may not - (1) consult
a person or party on a fact in issue, unless on notice and opportunity for all parties to participate; or (2) be
responsible to or subject to the supervision or direction of an employee or agent engaged in the performance
of investigative or prosecuting functions for an agency (Supervisors must be separate subunit of the
department so ALJ’s won’t be coerced). [separation of functions]
o 5 U.S.C. Section 554(d)[cont]: An employee or agent engaged in the performance of investigative or
prosecuting functions for an agency in a case may not, in that or a factually related case, participate or advise
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in the decision, recommended decision, or agency review pursuant to section 557 of this title, except as
witness or counsel in public proceedings. This subsection does not apply - (A) in determining applications
for initial licenses; (B) to proceedings involving the validity or application of rates, facilities, or practices of
public utilities or carriers (ratemaking); or (C) to the agency or a member or members of the body
comprising the agency (agency head) [separation of functions]  2010 Revised MSAPA is same except
there is also agency head exception; [separation of functions: conflicting role ban; supervision ban;
agency head partial exception]
o Problem 10, ppg 135-36: —
 1. Helen is the final decision maker (the agency head).
 2. Sam is an adversary (which can be either an investigator or a prosecutor for the agency);
 3. Nancy is in the other staff category.
 Helen is allowed to communicate on an ex parte basis with Nancy without separations of functions
provisions being violated. Sam is not.
o Due process of law: The Withrow case did not decide whether internal separation of functions (different
agency employees) was required in an agency that combined functions at the agency level. It held that the
institutional structure (combining all 3 functions in one agency) did not violate due process of law. If internal
separation is required Nancy could act as a presiding officer and she could give advice to the decision maker
because she has not taken on an adversary role in this case. Sam could do neither, because he is an advocate
and not a neutral advisor. His advice to Helen jeopardized the decision on the record requirement as well as
the right to an impartial decision maker.
o Due process of law [cont]: If due process of law applies to agency decisions to issue licenses of this type
[water pollution license], then Baxter may have a protected interest that can not be taken away without use of
due process procedures. If License issuance decisions are not protected by due process of law, then no due
process procedures are applicable. If we apply the Matthews balancing analysis: 1) Baxter has a substantial
economic interest in building the chip factory, which requires issuance of the water pollution license; 2) the
governmental interest in environmental protection is also substantial; and 3) the risk of error in deciding
scientific issues, whether or not based on the precautionary principle, using adjudicative procedures is
substantial.
o Federal APA: Section 554(d) would allow Nancy to communicate with Helen because Nancy was not a
prosecutor nor an investigator, and staff advice to agency decision makers, is quite common in federal
administrative law. Sam’s off the record advice to Helen is problematical because Sam is an advocate giving
advice that is not neutral to Helen the final decision maker. Section 554(d)(C) contains an “agency head”
exception. If that is interpreted broadly, then Helen could not only personally investigate or prosecute the
case herself, but could communicate with Sam. There is no clear case law resolving this issue. [Note the
MSAPA does NOT have an agency head exception].
DISQUALIFICATION OF PRESIDING OFFICER:
- Due Process of Law: Tumey v. State of Ohio, 273 U.S. 510 (1927). Can’t get compensation if officer finds parties
guilty. The due process right to an impartial decision maker was violated when defendant was convicted by a judge
who was also the mayor of the village, when the mayor's salary was paid in part by fines and costs levied by him
acting in a judicial capacity. This is a disqualifying financial interest. [outcome dependent compensation;
increased salary for conviction]
- Ward v. Village of Monroeville, Ohio, 409 U.S. 57 (1972). The due process right to an impartial decision maker
was violated when the judge before whom petitioner was compelled to stand trial for traffic offenses was also the
Mayor of the town and was responsible for village finances, and the mayor's court through fines, forfeitures, costs
and fees, provided a substantial portion of the village funds. This is a disqualifying financial interest. [outcome
dependent compensation; village budget increased for convictions]
- Gibson v. Berryhill, 411 U.S. 564 (1973). Since the Alabama Board of Optometry was composed solely of private
practitioners and the corporate employees it sought to bar from optometry practice on charges of unprofessional
conduct constituted half the optometrists in the State, the Board members' had a pecuniary interest that disqualified
them from deciding the unprofessional conduct charges. The due process right to an impartial decision maker was
violated by the board structure. [professional competition; drive out competitors and make more money]
- Aetna Life Ins. Co. v. Lavoie, 475 U.S. 813 (1986). Justice's participation in case violated insurer's due process
rights in an action seeking punitive damages for insurer's alleged bad-faith refusal to pay valid claim where Justice,
at time he cast the deciding vote and authored the court's opinion, had pending at least one very similar bad faith
refusal-to-pay lawsuit against an insurer in another state court. The Justice’s interest in this case was direct, personal,
substantial, and pecuniary. [Judge has his or her own claim which has greater value to the judge after his vote]
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FYI Caperton v. A. T. Massey Coal Co., Inc. (2009) (due process of law; fair trial in fair tribunal; probability of
bias; campaign contributions.) In this decision, the US Supreme Court ( 5 to 4 vote) held that a West Virginia
Supreme Court justice (Brent Benjamin) should have recused himself from deciding a case before the court when the
principal officers (Don Blankenship) of one of the parties to that case (Massey Coal Co.) made campaign
contributions of approximately 3 million dollars ($1,00 direct contribution to the judge’s campaign; 2.5 million to a
Section 527 organization that supported the justice, and opposed the justices reelection opponent; and $500,00 for
independent expenditures in support of the campaign for the election of this justice.) to the campaign of the justice
for election to the Supreme Court of West Virginia. [large campaign contributions by a party to a pending case
requires recusal]
Haas v. County of San Bernardino (2002). A temporary local hearing officer who was a local attorney was selected
on an ad hoc basis by county attorney to adjudicate massage parlor license revocation proceeding based on an
employee’s solicitation of acts of prostitution. The hearing officer was paid an hourly rate by the county for her
work. The hearing officer was disqualified on grounds of financial interest bias under due process of law because she
had an incentive to decide in favor of the county and revoke the license. This was because if she ruled in favor of the
county and revoked the license, the county would be likely to select her for future cases, and if she did not favor the
county, she would not be selected by the county in the future. [prosecutor selects the hearing officer; hearing
officer is paid only if selected for future cases ]
FAPA Section 556(b)(3) provides: …. “A presiding or participating employee may at any time disqualify himself.
On the filing in good faith of a timely and sufficient affidavit of personal bias or other disqualification of a presiding
or participating employee, the agency shall determine the matter as a part of the record and decision in the case.” 
Agency makes the decision here rather than ALJs —
When grounds for disqualification are found, the affected judge may take one of several steps
o 1. Step aside in favor of a substitute judge (recusal);
o 2. Grant a disqualification order based upon a party motion;
o 3. Disclose circumstances that the parties need to know with or without recusal or disqualification
(reasonable doubts about impartiality grounds).
—B. Reversal on the merits: If a judge does not disqualify himself or herself, a later court may reverse the decision
of that judge or agency and remand for a new trial or hearing before new judge or agency official
Grounds for disqualification
o A. Financial interest (Due Process of law)
o B. Prejudgment (due process of law)
o C. Bias for or against a party or lawyer (statutory)
o D. Disqualifying relationships (Statutory)
o E. Impartiality may reasonably be questioned (Statutory)
Pre-judgement: Cinderella v. FTC; Facts: This case was an unfair trade practice proceeding brought by the FTC
against a finishing school for false and deceptive practices. The FTC sought a cease and desist order against the
school (like an injunction). The FTC ALJ dismissed the complaint, but the commissioners (the FTC is an
independent multi member agency) reversed that decision and ordered the school to stop the deceptive practices. The
DC circuit reversed the agency decision and remanded back to the agency. Among the reasons for reversal were
statements made in a speech to a national newspaper association convention by the chairman of the FTC, Paul Dixon,
while the appeal from the ALJ decision was pending before the Commission, that showed that Mr Dixon had
prejudged the merits of the case against the school. Mr Dixon stated “or becoming an airline hostess by attending a
charm school “ as one example of deceptive practices in advertising. This was the exact issue before the FTC at the
time the statement was made.
o The court held that due process of law was violated by these statements. The private party (Cinderella) had a
right to an impartial decision maker, and Dixon’s statements showed that he had prejudged the merits of the
case, and therefore was not an impartial decision maker. The FTC order was vacated and remanded for a new
review of the ALJ initial decision without the participation of Mr. Dixon.
Bias Case: Hernandez v. Paicius, 109 Cal. App. 4th 452, 134 Cal. Rptr. 2d 756 (Calif. Court of Appeal, 2003). The
California Court of Appeal reversed the lower court judgment without a showing of prejudice because the trial judge
made numerous comments about the residency status of the plaintiff which reflected stereotypes about illegal aliens
and that raised questions about the fairness and impartiality of the judicial proceedings. The appellate court also
ordered that the case be reassigned to another judge upon remand. [ bias against a party based on immigration
status]
U.S. v. Microsoft Corp., 253 F. 3d 34 (D.C. Cir., 2001). The Court of Appeal disqualified district court judge from
hearing case on remand because judge made extensive comments to media representatives while the case was
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pending before the judge. The Court of appeal concluded that the district court judge had violated the following
ethics provisions: “Canon 3A(6) of the Code of Conduct for United States Judges requires federal judges to "avoid
public comment on the merits of pending or impending" cases… [judge made negative comments about founder
of company]
- Berger v. U.S., 255 U.S. 22 (1921). Judge had no lawful right or power to preside as judge on the trial of three
defendants upon their indictment under the Espionage Act, when judge publicly stated his animosity to German–
Americans as those persons whose “hearts reek with disloyalty”. This is a showing of personal bias and prejudice
against those defendants’ national origins that is sufficient to disqualify that judge [national origin bias toward
defendants]
- Dayoub v. Com., State Dental Council and Examining Bd., 70 Pa. Commw. 621, 453 A. 2d 751 (1982). Dentist
was denied fair hearing before a fair tribunal when the record of proceedings before the state Dental Counsel and
Examining Board revealed several occasions during which member or members of Board heatedly questioned dentist
and argued with him in such manner that their behavior was much more in line with that of prosecuting attorney than
of neutral, detached and impartial decision maker. [bias based upon taking a pro prosecution position at hearing]
- Problem 8, pg 144: Andrews v. ALRB : “The California supreme court held that: (1) administrative law officer's
practice of law with law firm which had represented individual farm workers in suit against the Secretary of Labor
and which engaged in employment discrimination suits on behalf of Mexican-Americans, even if it could be taken as
evidence of his political or social outlook, was not a ground for his disqualification; (2) mere appearance of bias was
not a ground for disqualification; (3) temporary status of administrative law officer could not be used as an element
in a showing of bias; (4) allegation that some of administrative law officer's findings were not supported by
substantial evidence did not provide grounds for disqualification; and (5) administrative law officer's reliance on
certain witnesses and rejection of others could not be evidence of bias no matter how consistently he rejected or
doubted the testimony produced by one of the adversaries.” [social and political background and legal experience
not grounds for disqualification].
Federal ALJ Status: —
1. Federal agencies employ ALJ’s to hear and decide APA adjudicative hearings within the subject areas of those
agencies. ALJ’s are well paid and independent of the agencies for whom they work. Most of the ALJ’s work for the
Social Security Administration.
2. Federal agencies also employ AJ’s to hear and decide non APA adjudicative hearings within the subject areas of those
agencies. AJ’s are employees of the agency but are not independent of the agency.
3. There is no federal ALJ central panel.
State ALJ Status:
1. State agencies also employ ALJ’s and hearing officers. The independence of state ALJ’s varies from state to state.
Hearing officers at the state level often have a similar status as federal AJ’s.
2. 25 states have central panels, in which some or all of the state’s ALJ’s are employed. Use of the central panel
means that those ALJ’s are not subject to command influence from the agency whose cases they decide.
3.Central panels are an example of the judicial model as is the status of the federal ALJ. Decisional independence for
the ALJ is heightened with these structures.
* Agencies and their leaders are proponents of the institutional model. Agency heads have indirect political accountability to
Congress or a state legislature. These agency heads are expected to get things done, accomplish the mission. Agency leaders
are likely to view ALJ’s within the agency as part of the agency team whose overall purpose is to advance the mission of the
agency. ALJ decisions are viewed by agency heads through the lens of mission accomplishment. ALJ’s working within
agencies are susceptible to agency head pressure, but moist ALJ’s view their role as a neutral decision maker not a part of the
team.
NOTICE: Due process of law: Notice and an opportunity to be heard are required by due process of law. Goldberg v. Kelley
[397 U.S. 254, 268]states: "The fundamental requisite of due process of law is the opportunity to be heard." … The hearing
must be "at a meaningful time and in a meaningful manner.“ ... In the present context these principles require that a recipient
have timely and adequate notice detailing the reasons for a proposed termination, and an effective opportunity to defend by
confronting any adverse witnesses and by presenting his own arguments and evidence orally.…We are not prepared to say
that the seven-day notice currently provided by New York City is constitutionally insufficient per se, although there may be
cases where fairness would require that a longer time be given. Nor do we see any constitutional deficiency in the content or
form of the notice. New York employs both a letter and a personal conference with a caseworker to inform a recipient of the
precise questions raised about his continued eligibility. Evidently the recipient is told the legal and factual bases for the
Department's doubts. [Timely and adequate notice]
- Dusenberry v. US [note 3, page 141]: The adequacy of the notice of an administrative forfeiture of the assets of a
person convicted of drug dealing is evaluated under the Mullane case standard which requires use of methods of
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notice reasonably likely to inform not the Matthews balancing test. Sending a certified letter to a prisoner at a prison
meets the Mullane standard even though the prison officials lost the letter and the prisoner did not receive the letter.
The Mullane standard fits the Dusenberry legal issue better than the Matthews standard because the issue was
methods of notice not the content of notice.
- FAPA: Section 554(b) provides: Persons entitled to notice of an agency hearing shall be timely informed of—
o (1) the time, place, and nature of the hearing;
o (2) the legal authority and jurisdiction under which the hearing is to be held; and
o (3) the matters of fact and law asserted.
- Notice in Civil Litigation. FRCP Rule 8(a) provides: (a) Claims for Relief. A pleading that states a claim for relief must
contain:
(1) a short and plain statement of the grounds for the court’s jurisdiction, unless the court already has jurisdiction and
the claim needs no new jurisdictional support;
(2) a short and plain statement of the claim showing that the pleader is entitled to relief; and
(3) a demand for the relief sought, which may include relief in the alternative or different types of relief.
- Notice in criminal cases: the 6th amendment to the U.S. constitution provides in part: “and to be informed of the nature and
cause of the accusation”. Notice of criminal charges are required to be very specific, including in most cases, the specific
date and time that the charged crime occurred, must be alleged.  The policy rationale for these requirements is to provide
fair notice to the defendant of the charges brought against him or her so that they can be given the opportunity to provide an
adequate defense.
- Block v. Ambach: Not follow criminal law standards in license revocation case. Facts: In this case, two parties [Block, a
registered nurse, and Ackerman, a psychiatrist] had their professional licenses revoked for fraud, gross negligence and
incompetence in the practice of their profession, medicine in Ackerman’s case, and nursing in Block’s. Both parties were
charged with multiple ep1sodes of sexual misconduct with patients. The health care licensing agency brought administrative
charges against both of them. The charges alleged that the sexual misconduct occurred over a period of months [four months
and then five months with Block; 26, 78, 46, and 53 months with Ackerman]. The licensees’ challenged the revocation of
their licenses on the grounds that due process of law notice requirements were violated because the charging agency did not
allege specific dates in which the sexual misconduct happened. The New York Court held that the specificity standards
required in criminal law did not apply to license revocation proceedings [which are non criminal] so that specific dates are
not required. The fair notice standard is satisfied if the charges are reasonably specific in light of all the relevant
circumstances to apprise [inform] the party whose rights are being determined of the charges against him [or her] to prepare
an adequate defense.
- Holding: The court rejected the due process challenge and held that the time periods alleged provided reasonable
notice of the charges against them. The psychiatrist [Ackerman] was able to present his defenses at a lengthy hearing
which lasted 6 years, and included the testimony of 35 witnesses.
THE DECISION: FACT FINDINGS & REASONS
FAPA Section 557(c) provides: “Before a recommended, initial, or tentative decision, or a decision on agency review of the
decision of subordinate employees, the parties are entitled to a reasonable opportunity to submit for the consideration of the
employees participating in the decisions —(1) proposed findings and conclusions; or
—(2) exceptions to the decisions or recommended decisions of subordinate employees or to tentative agency decisions; and
—(3) supporting reasons for the exceptions or proposed findings or conclusions. The record shall show the ruling on each
finding, conclusion, or exception presented. All decisions, including initial, recommended, and tentative decisions, are a part
of the record and shall include a statement of —(A) findings and conclusions, and the reasons or basis therefor, on all the material issues of fact, law, or discretion
presented on the record; and
—(B) the appropriate rule, order, sanction, relief, or denial thereof. “
Ship Creek Hydraulic Case: Facts; In this case, a property owner challenged the condemnation of its property for use as
part of a highway project. In states like California, condemnation issues are litigated in the superior court under very specific
statutory requirements. In California, the judgment of condemnation has to contain specific fact findings and reasons (see
CCP Section 1230.010 to 1268.50). In Alaska at the time of this case, there were statutory criteria that had to be satisfied, but
the condemnation judgment did not require a statement of findings or reasons to explain how those factors were applied to
the facts of the condemnation case. The court used the term “decisional document” to describe a decision that had both
findings and reasons.
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-
The court adopted a findings and reasons requirement as a matter of common law. The policy reasons for such
requirements are that courts ( and agencies) make better decisions, limits on agency authority are more likely to be
respected, judicial review is more effective because the bases of the decision are made clear, and the affected private
party has an explanation for why they lost their case, and whether they should appeal. While this case was not under
an APA, The stated rationales for the requirement of a statement of findings and reasons apply to administrative law
decisions that are adjudicative, whether or not the APA applies. These rationales support the APA findings and
reasons requirements.
JS v. Bethlehem Area School: In this case, a middle school student was expelled from a public middle school for violating
the student code of conduct when the student created a website that contained derogatory, profane and threatening comments
about the student’s math teacher and the school principal. After a two day disciplinary hearing before the school board, the
board voted to permanently expel the student. The student had legal representation before the school board. The board’s
expulsion decision was upheld on judicial review in the Pennsylvania courts. The student filed a separate 1983 claim in state
court and claimed that the students due process rights were violated in that there was not a full and fair opportunity to litigate
the issues before the school board because of lack of discovery, the school board was not an independent fact finder, the
student could not testify on his own behalf, and the school board was not a court of competent jurisdiction.
- The appellate court in the 1983 case court applied collateral estoppel principles based upon the expulsion decision by
a school district to preclude a student from litigating a section 1983 claim based upon issues already litigated in the
expulsion case. The court held that the student (with parents and lawyers) had a full and fair opportunity to litigate
constitutional issues in the administrative expulsion proceeding, and therefore could not relitigate the same issues in
court under Section 1983.
- Section 1983 litigants are not required to exhaust administrative remedies, Patsy v. Board of Regents of Florida,
(1982) 457 U.S. 496. Thus, JS and his parents could have gone straight to court to sue under Section 1983. while
they could have recovered damages if they won their case on the merits, it is less clear whether they could have
gotten the expulsion overturned. However ,while exhaustion is not required, this could have been a good option if the
student would have won at the administrative level. Having failed at that option, the principles of issue preclusion
applied to the administrative adjudicatory decision of the school board.
- The US Supreme Court held in University of Tennessee v. Elliott (1986) 478 U.S. 788, that unreviewed state
administrative proceeding determinations (with no judicial review of the administrative determinations) did not have
preclusive effect on Title VII claims for racial discrimination, but did have preclusive effect on Section 1983 claims
for racial discrimination. As to the latter, this was because the employee had a full and fair opportunity to litigate the
discrimination issue in an administrative proceeding. This ruling was based upon the common law of preclusion
articulated by the US Supreme court.
PRECEDENT & EQUITABLE ESTOPPEL:
2010 Revised MSAPA Section 418 (a),(d) provides:
(a) Except as otherwise provided in subsections (b) and (c), an agency shall create an index of all final orders in
contested cases and make the index and all final orders available for public inspection and copying, at cost, in its
principal offices….
(d) An agency may not rely on a final order adverse to a party other than the agency as precedent in future
adjudications unless the agency designates the order as a precedent, and the order has been published, placed in an index,
and made available for public inspection.
California Government Code § 11425.60. Precedent; designation; index
(a) A decision may not be expressly relied on as precedent unless it is designated as a precedent decision by the
agency.
(b) An agency may designate as a precedent decision a decision or part of a decision that contains a significant legal
or policy determination of general application that is likely to recur. Designation of a decision or part of a decision as a
precedent decision is not rulemaking and need not be done under Chapter 3.5 (commencing with Section 11340). An
agency's designation of a decision or part of a decision, or failure to designate a decision or part of a decision, as a
precedent decision is not subject to judicial review.
(c) An agency shall maintain an index of significant legal and policy determinations made in precedent decisions.
The index shall be updated not less frequently than annually, unless no precedent decision has been designated since the
last preceding update. The index shall be made available to the public by subscription, and its availability shall be
publicized annually in the California Regulatory Notice Register….
2010 Revised MSAPA Section 311(d) Guidance documents provides:
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(d) If an agency proposes to act in an adjudication at variance with a position expressed in a guidance document, it
shall provide a reasonable explanation for the variance. If an affected person in an adjudication may have relied
reasonably on the agency’s position, the explanation must include a reasonable justification for the agency’s conclusion
that the need for the variance outweighs the affected person’s reliance interest.
Waiver: Waiver is a concept that is widely used in civil procedure, criminal procedure, and remedies. A waiver is an
intentional, voluntary, and understanding relinquishment of a known right. Waiver is closely related to estoppel as a
defense. Waiver is at one end of the spectrum, focusing on the actor's intentional giving up of a right, and estoppel is at
the other end of the spectrum, focusing on the reliance of the other party. Waiver can be applied to preclude both legal
and equitable remedies and to preclude defenses as well as claims.  it is ok to depart from prior precedent but must cite
it and explain why you are departing from it (UAW Case)
UAW v. NLRB: Facts: The NLRB held in an adjudication decision that a union’s agreement to discuss relocation of a
plant was a waiver of the union’s right to negotiate over the issue. Prior NLRB decisions held that a waiver of a statutory
right had to be clear and unmistakable. The Board did not discuss or cite any of those NLRB decisions in concluding that
the union had waived its right to negotiate. Under those decisions, the agreement to discuss would not have been
considered a clear and unmistakable waiver. The 7th circuit reversed and remanded the case back to the NLRB based
upon the unexplained departure from its prior precedents. If the NLRB wanted to depart from its prior precedents, it must
adequately explain the reasons for the departure.
Estoppel: Estoppel is not only a defense to legal or equitable remedies it is also a theory of liability in contracts
(promissory estoppel), and a basis for preclusion by judgment (collateral estoppel). There are a number of tests for
estoppel in the case law, but the most important focus should be the purpose of estoppel which is to protect against the
consequences of harmful reliance. as Professor Dobbs, in Law of Remedies, at p. 65, has clearly stated, Estoppel can be
broken down into four elements: 1) Act; 2) Reliance; 3) Injury; and 4)Actor's knowledge of reliance.
^1) The Actor, (party to be estopped), knowing the true facts, communicates something to the relying party (party
asserting estoppel) in a misleading way, by words, conduct, or silence; (the communication is usually inconsistent with a
right or position later asserted by the actor). 2) The Relying party, actually and reasonably, relies upon that
communication; 3) The Relying party would be injured or harmed in some way if the actor later raises a claim that is
inconsistent with the earlier communication; and 4) The Actor knows that the Relying party would rely on the actor's
communication. Estoppel is more likely to apply when there is a strong argument in the facts for harmful reliance by the
relying party
- Foots Handy Dixie Case: —Facts: In this case, the employer relied on the advice (which was erroneous) of the
state field auditor for the ESD (Yates) that it did not have to file a form that requested a transfer of an unemployment
record ( and that would have resulted in a low tax rate) when it separately incorporated one of its grocery stores.
After Yates retired, a new auditor discovered the failure to file the transfer form. As a result, the state assessed
20,000 dollars in additional taxes against the employer for 1971-1976. The court applied equitable estoppel against
the State of Arkansas, and allowed the parties on remand to litigate the estoppel related issues.
Equitable estoppel is not recognized by the US Supreme Court so that the federal government is not bound by the
mistakes of government employees that cause detrimental reliance by private citizens.
- OPM v Richmond (note 1, page 187) is illustrative. Erroneous advice by a navy personnel officer that Richmond
could safely take an extra job without jeopardizing his Navy retirement benefits caused Richmond to lose benefits for
6 months. The mistake was based upon a change in the law that the Navy officer was not aware of. Estoppel was
rejected in part because it would require the payment of money from the Treasury contrary to statutory appropriation.
- Heckler v. CHS [note 3, page 189]: Estoppel was rejected here because CHS did not show detrimental reliance and
any reliance was not reasonable. Thus, the government could recoup federal reimbursement moneys paid to CHS
erroneously that CHS was not entitled to receive.
- Fair notice cases [note 5, page 190]may be an exception but defenses based upon inadequate notice are not the same
thing as actions based upon mistaken government advice.
Declaratory Orders: Declaratory judgments are available in civil litigation based upon 28 U.S.C. Section 2201 which
provides:  binding advice
- (a) In a case of actual controversy within its jurisdiction….any court of the United States, upon the filing of an
appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration,
whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final
judgment or decree and shall be reviewable as such.
- FAPA Section 554(e) provides: “The agency, with like effect as in the case of other orders, and in its sound
discretion, may issue a declaratory order to terminate a controversy or remove uncertainty.”
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Declaratory Relief: Declaratory remedies prevent harm without coercion. Thus, they are very much like preventive
injunction proceedings. Declaratory Judgments resolve uncertainty as to the parties' rights and thereby prevent harm that
would otherwise occur if the parties were required to act in a state of uncertainty. Declaratory remedies can be awarded with
proof of a ripe dispute, and uncertainty about legal rights. The declaratory judgment will decide the legal dispute, and make
an authoritative determination as to those rights.
- —Binding Advice is the major benefit of declaratory orders.
2010 Revised MSAPA Section 311 provides
(a) An agency may issue a guidance document without following the procedures set forth in Sections 304 through
307.
(b) An agency that proposes to rely on a guidance document to the detriment of a person in any administrative
proceeding shall afford the person an adequate opportunity to contest the legality or wisdom of a position taken in the
document. The agency may not use a guidance document to foreclose consideration of issues raised in the document.
(c) A guidance document may contain binding instructions to agency staff members if, at an appropriate stage in the
administrative process, the agency’s procedures provide an affected person an adequate opportunity to contest the legality or
wisdom of a position taken in the document.
(d) If an agency proposes to act in an adjudication at variance with a position expressed in a guidance document, it
shall provide a reasonable explanation for the variance. If an affected person in an adjudication may have relied reasonably
on the agency’s position, the explanation must include a reasonable justification for the agency’s conclusion that the need for
the variance outweighs the affected person’s reliance interest.
^ The FAPA equivalents of guidance documents are interpretive rules and general statements of policy under 5 U.S.C.
Section 553(b)(3)(A).
^ Guidance documents do not provide binding advice but there are safeguards as stated in Section 311 (b), and (d) that are
designed to provide procedural safeguards to protect against detrimental reliance.
RULEMAKING PROCEDURES:
- Rulemaking advantages 
o —1. Broad participation by all affected parties;
o —2. Appropriate procedure
o —3. Prospective law application
o —4. Uniformity
o —5. Political Input
o —6. Agency Agenda Setting
o —7. Definitiveness
o —8. Accessibility
o —9. Oversight
- Adjudication Advantages 
o —1. Flexibility
o —2. New and unexpected issues
o —3. Resource savings
o —4. Resolution of disagreements
o —5. Residual adjudication
- FAPA and MSAPA codify rulemaking procedures that agencies must follow when they adopt rules.
o Rulemaking authority must be delegated in the agency enabling act.
o The scope of rulemaking authority is also based upon the authority delegated to the agency in the agency
enabling act. Federal courts will interpret the scope of that authority based upon a type of necessary and
proper clause [reasonable relation to statutory purposes]. Some states, like Florida, are stricter.
- FAPA Section 551 definitions include:
o (4) “rule” means the whole or a part of an agency statement of general or particular applicability and future
effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure,
or practice requirements of an agency and includes the approval or prescription for the future of rates, wages,
corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or
allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing;
o (5) “rule making” means agency process for formulating, amending, or repealing a rule;
o (6) “order” means the whole or a part of a final disposition, whether affirmative, negative, injunctive, or
declaratory in form, of an agency in a matter other than rule making but including licensing;
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o (7) “adjudication” means agency process for the formulation of an order;
The purpose of these definitions is to specify what APA procedures apply to which agency actions (rulemaking
versus Adjudication)
Informal Rulemaking Procedures 
o A. Notice [Section 553(b)provides: “General notice of proposed rule making shall be published in the
Federal Register, unless persons subject thereto are named and either personally served or otherwise have
actual notice thereof in accordance with law.” 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 (cite 553 and the Enabling
Act)
(3) either the terms or substance of the proposed rule or a description of the subjects and issues
involved….”
o B. Comment [Section 553(c) provides “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. There is no right to a trial type hearing in
informal rulemaking under section 553. This is consistent with the Bi-Mettalic U.S. Supreme court decision
stating the there was no due process right to a hearing when an agency was engaging in legislative action.
 CMA v. Block 1: Facts: The FNS, a part of USDA, administered the WIC program (established in
1972)which provided cash or vouchers for indigent pregnant women and women with infants and
small children to supplement the food supplies that they could afford. The premise behind the
program was to limit nutritional deficiencies suffered by children at the stage of life when those
deficiencies would be the most damaging to the long term health and growth of children. In 1978,
Congress authorized the USDA Secretary (Block) to adopt regulations regulating the fat sugar and
salt content of the eligible foods based upon “appropriate standards” [based upon nutrition
principles]. Notice of the proposed rule at issue in this case was published in 1979. The test of the
proposed rule and a preamble discussing the general purpose of the rule considered high sugar
content in foods particularly cereals but did not mention flavored milk (chocolate milk). After
comments from WIC program administrators were received (60 day comment period) that advocated
the deletion of flavored milk from the list of approved supplemental foods, the agency adopted the
final rule that deleted flavored milk. CMA challenged the adoption of the rule on grounds that
USDA did not give notice that deletion of flavored milk would be considered. The agency argued
that there was sufficient notice of this possibility in the discussion of high sugar content foods in the
preamble. The court of appeal noted that the benefits of public participation in the rulemaking
process would be substantially limited if agencies were prohibited from making any changes to the
rules proposed when final rules were adopted. On the other hand, a too serious departure from the
proposed rule would be unfair to affected interests who also have the right to make comments.
Comments should be directed toward the issues and proposals being considered by the agency.
 This is the rulemaking version of the problem of variance. The court here uses the logical
outgrowth test to determine whether or not fair notice was given to affected parties. If the final rule
substantially departs from the terms of the proposed rule, then fair notice has not been provided, and
the agency adopting the rule will have to provide a new comment period on the new issues before
the rule can be readopted.
 Holding: The Court of Appeals found that the deletion of flavored milk provisions in the final rule
was not a logical outgrowth of the proposed rule. It was a substantial departure from the proposed
rule and there was a lack of fair notice to the CMA. The court of appeals reversed the judgment of
the district court that upheld the adoption of the rule, and remanded the matter back to the USDA.
 The court’s decision illustrates how APA procedural requirements are enforced against agencies. If
an agency fails to comply with an applicable APA procedural requirement, the reviewing court will
invalidate the agency action and remand the matter back to the agency to comply with the
procedural requirement. On the issue in the CMA case, the courts have had to develop their own
standards because the FAPA provisions [Section 553(b)(c) does not address this issue)
 The U.S. Supreme Court endorsed the “logical outgrowth” test in Long Island Care at Home, Ltd v.
Coke 551 U.S. 158(2007). The purpose of the test is fair notice. The proposed rule included
consideration of employers of companionship workers if the employers were covered enterprises
subject to FLSA requirements before 1974. The final rule did not take that position. It exempted
from FLSA wage and hour requirements all third party employed companionship workers (
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including the rules challenger). The court concluded that the “logical outgrowth” test was satisfied
because it was reasonably foreseeable from the proposed rule that the agency would take the
approach adopted in the final rule.
 US v. Nova Scotia Food Products Corp.: —Disclosure of supporting scientific data;  In this case,
the Second Circuit Court of Appeals vacated an injunction and dismissed a complaint brought by the
US Government to enjoin defendant Nova Scotia form processing hot smoked whitefish except in
compliance with Time Temperature and Salinity (TTS) regulations adopted by the Food and Drug
Administration. The basis for the court action was: 1) the failure of the FDA to disclose to interested
persons the scientific data relied upon by the FDA in adopting the regulations. Disclosure would
have permitted interested persons, including Nova Scotia, to make comments upon the scientific
data. Without the data, the commenters would not have the ability to comment because the scientific
data was known only to the FDA. Must Disclose scientifically relied upon data before adopting the
rule.
o C. Statement [Section 553(c) provides: “After consideration of the relevant matter presented, the agency
shall incorporate in the rules adopted a concise general statement of their basis and purpose.”
o D. Publication [Section 553(d) provides: “(d) The required publication or service of a substantive rule shall
be made not less than 30 days before its effective date……
Prospectivity v. Retroactivity
- Rules normally establish law or policy for the future whereas orders concern past events and have retroactive effect.
The FAPA definition of rule includes the phrase “and future effect”. The MSAPA definition does not have that
terminology. Nevertheless prospective application of rules is the norm. In that sense rules are like statutes that take
effect on a particular date and apply in the future. With legislation in the state of California, most enacted statues will
take effect on January 1st of the next calendar year. Urgency statutes will take effect shortly after the law is enacted
which is usually by signature of the governor. Retroactive statutes can be applied unfairly.
- Bowen Case: Facts: HHS adopted a rule in 1981 that revised the formula for reimbursements to hospitals for services
provided to Medicare beneficiaries. The rule was successfully challenged in court because HHS failed to use notice
and comment procedures. HHS readopted the rule in 1984 using proper notice and comment procedures. The
readopted rule imposed the same reimbursement formulas for hospitals as the invalid 1981 rule and did so
retroactively. The effect of the retroactive rule is that the seven plaintiff hospitals would have to pay 2 million dollars
back to HHS for recoupment of amount s paid to the hospitals between 1981 to 1984.
o Holding: The U.S. Supreme Court held that the retroactive effect of the 1984 rule was invalid. The court
noted that retroactivity is not favored in the law. This is because of concerns about lack of fair notice and
detrimental reliance by persons subject to retroactive legislation. Thus, there has to be express statutory
language authorizing an administrative agency to adopt retroactive rules. No such language existed in
the HHS Medicare statute to allow HHS to adopt retroactive cost limit rules. .
o The Justice Scalia concurrence relied in part upon the “and future effect” language from the FAPA definition
of Rule. Rules have legal consequences only for the future. Departing from that understanding would make it
difficult to differentiate between rulemaking and adjudication because orders, another APA term, have both
past and future legal consequences (precedents may not be departed form in the future without reason), and
rules are supposed to have only future consequences.
o There are two types of retroactivity: 1) primary retroactivity [changing the past legal consequences of past
actions- lack of fair notice and detrimental reliance] and 2) secondary retroactivity [changing the future
legal consequences of past actions.  secondary retroactivity is ok
o Abolishing the mortgage interest deduction for tax years starting with 2014 would make housing more
expensive for people who bought houses in the past when that deduction was part of the tax code. [This
would be secondary retroactivity]
o —Abolishing the mortgage interest deduction in 2014 for tax years going back to 2005 would require
taxpayers to pay more tax retroactively for those tax years including interest and penalties. [This would be
primary retroactivity]
o While Congress may enact retroactive legislation [subject to constitutional challenge] administrative
agencies may not do so under FAPA.
- Canons (presumptions) of statutory interpretation:
1. Statutes and rules do not apply retroactively [the legal effect of conduct should be assessed under the law that
existed when the conduct took place]. This is premised upon basic notions of fairness.
2. An administrative agency may not adopt retroactive legislative rules unless Congress expressly authorizes
retroactivity.
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3. Combs case holding; Removal of the presumption was not retroactive action
4. Bernklau case holding: Section 3(a) presumption not applied to claimant (claimant was better off)
5. Figueroa case holding: new regulations applied to claimant’s case and she prevailed
TYPES OF RULEMAKING:
1. Informal rulemaking governed by Section 553 of FAPA, and Article 3 of the 2010 Revised MSAPA. [notice and
comment procedures are used].
- US v. Florida East Coast Case: The ICC commenced a rule making proceeding using Section 553 notice and
comment rulemaking procedures to increase rental charges for borrowed box cars as was required by Congress. The
regulated railroads challenged the ICC’s failure to use formal rulemaking procedures [which would have been more
time consuming and expensive]. The US supreme court held that the applicable language in the agency enabling act
that the ICC could adopt rules “after hearing” did not trigger the Section 553(c) formal rulemaking language. The
term “after hearing” was satisfied in this case by notice and comment procedure. The court also held that neither due
process nor the enabling act itself required any more procedures than those followed by the ICC.
2. Formal rulemaking governed by Sections 556, and 557 of FAPA. There is nothing comparable to this in the
MSAPA.[trial type adjudication procedures are used].  Formal rulemaking under the APA is triggered by Section 553(c)
[and enabling act provisions] language which states: When rules are required by statute to be made on the record after
opportunity for an agency hearing, sections 556 and 557 of this title apply instead of this subsection. When this approach
applies APA adjudication procedure under Sections 566 and 557 are used for rulemaking NOT the notice and comment
procedures we have already studied.
- Formal rulemaking procedures follow trial type procedures mandated by Sections 556 and 557, including the right to
present evidence, to cross examine witnesses, a ban on ex parte communications, and a decision on the agency
record.
- To invoke formal rulemaking procedures, Congress has to specify in an agency enabling act that rules must be
adopted after a hearing on the record
- Formal rulemaking procedures are far more time consuming and expensive. See the peanut butter cases described in
the notes [9 year proceeding with over 7,000 pages of transcripts].
- Using trial type hearings for rulemaking has been found to obstruct agency action and frustrate agency regulatory
goals.
3. Hybrid Rulemaking governed by a few federal enabling acts. There is nothing comparable to this in the MSAPA. [a
mixture of trial type and rulemaking procedures are used].
Sources of Procedure Law:
1- APA Provisions
2- Due Process of Law
3- Agency Enabling Act
- Public hearing or oral hearing requirements [not trial type hearings].
- The right to question or cross-examine opposing witnesses.
- Rationales included: 1) the growing complexity of issues in rulemaking (scientific complexity), the perceived need to
probe the accuracy of public comments on issues, and the value of of oral communications between regulators and
the regulated.
- Vermont Yankee Case:
1) Facts: AEC/NRC federal agency regulates the nuclear power industry. Power plant operators [like Vermont
Yankee] have to apply for a construction permit from the NRC to build a reactor and then separately apply
for an operating permit. The construction permit review process includes safety and environmental review by
agency staff as well as an adjudicatory hearing before the permit can issue. A major issue in the application
process was the environmental effect of the disposal and storage of highly toxic nuclear waste produced from
operating the plant. The AEC/NRC commenced a rulemaking proceeding to address these issues generally.
This would avoid re-litigation of the same issues in each construction permit adjudication. AEC issued
proposed and final rules that specified numerical values for the environmental impact of nuclear waste which
would be factored into the cost benefit analysis assessment for construction permits. The values were very
low, based on an assumption that future methods of storage of nuclear waste would be developed to make
the waste not hazardous. The impact of the low values was that the waste disposal problem could be ignored
by the agency. The only basis in the rulemaking record for the conclusions stated above was a 20 page report
prepared by an AEC staff scientist. The NRDC ( an environmental advocacy group) sought to cross examine
Dr. Pittman about the basis for his future waste disposal conclusion. The AEC refused to allow cross
examination, but on judicial review, the DC Circuit court of appeals reversed the adoption of the rules on
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the grounds that Dr. Pittman’s report offered “conclusory reassurances” but little detailed backup for his
conclusion. The US Supreme court reversed the court of appeals and held that the court of appeals could not
add a new requirement of cross-examination in a matter governed by section 553 notice and comment
rulemaking procedures. The AEC complied with the Section 553 procedures, and those were the procedural
maximums as far as the courts were concerned.
2) Rule: Courts can dictate required procedures when acting under the mantle of due process of law, or in areas
of administrative common law, such as preclusion law or standards of judicial review but not when
interpreting the APA or agency enabling acts. The courts role is limited to interpreting the statute and NOT
to adding new procedures once the statutory minimums have been satisfied. The statutory minimums become
the statutory maximum under the court ruling. This is mostly a matter of separation of powers.
3) Rationale: The court offered several rationales for its conclusion that the reviewing court could not add on
more procedures that required by the APA, Section 553. First allowing the courts of appeal to mandate new
agency procedures would make judicial review unpredictable, and would lead agencies to adopt adjudicatory
procedures across the board for rulemaking to avoid reversal. This would destroy the advantages of notice
and comment rulemaking. Second, the court of appeal improperly reviewed the choice of procedures based
on the record produced at the rulemaking hearing rather than based on the information available to the
agency when it chose to start the rulemaking proceeding. —Third, the court of appeals misconstrued the
standard of review for rulemaking which does not have to be based upon a record and instead focuses upon
whether the agency followed Section 553 procedures in adopting the rule. The Supreme court remanded the
case back to the DC Circuit for a second review of whether the challenged rules find sufficient justification
in the administrative proceedings to be upheld by the reviewing court. The prohibition is upon judicially
created rulemaking procedures in addition to those required by Section 553.
4) Adding procedures: Courts can add procedures when reviewing the adequacy of existing procedures under
due process of law, or in areas of administrative common law. That would not work in the VY case, because
rulemaking does not require any trial type procedures under due process of law(See the Bi Metallic case).
Congress can add procedures by enacting new statutes (enabling acts) or by amending the APA. An agency
can adopt procedural rules that may allow cross examination in certain rulemaking proceedings. Why do we
allow an agency to do this but not the courts?
The decision maker in Rulemaking:
-
-
-
-
The Morgan IV decision (no probing of the mental processes of the decision maker) was applied to the FDA head in
the National Nutritional Foods Ass’n V. FDA case [problem, page 289], in which the court held that absent a
showing of bad faith, the court would deny a motion for an order compelling the taking of the deposition of the
agency head, the FDA director. The short amount of time in which the director had to sign voluminous regulations
was not controlling because the agency head could rely on staff advice and summaries.
Ex Parte Contacts in Rulemaking  FAPA: With notice and comment rulemaking under Section 553, ex parte
contacts are permitted (or at least not prohibited). With formal rulemaking under Section 553(c), last sentence, and
sections 556 and 557, ex parte contacts are prohibited. Section 553 does not have an express rulemaking record
requirement.
Home Box Office Case:
1) Facts: Numerous ex parte communications were made at meetings between Commissioners of the FCC and
various industry interests ( cable and network interest) while the FCC was considering the final adoption of
rule limiting the number of shows that could be available to cable interests. The DC Circuit held that while
ex parte communications before the commencement of rulemaking (before a notice of proposed rulemaking
is issued) are legal and proper, once the notice of proposed rulemaking is issued and thereafter ex parte
communications are improper. If they occur, there must be disclosure of the substance of the
communications in the rulemaking record and an opportunity to comment or offer rebuttal. This holding was
based upon concerns for secrecy, fundamental fairness, and the opportunity for other interests to hear and
respond to the comments.
Sierra Club v. Costle Case:
1) Facts: The EPA conducted a rulemaking proceeding related to emissions of sulfur dioxide in coal fired
electricity generating plants. There was a blitz of ex parte communications after the close of the comment
period between the agency and private persons, executive branch officials, and elected officials. The agency
backed away from adopting stricter limits after white house influence to adopt less costly solutions and
eastern coal interests and U.S. Senator Robert Byrd from West Virginia lobbying for less strict standards
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(high sulfur coal is mined in the Eastern US). The court held that the ex parte contacts were not prohibited by
either Section 553 or by provisions of the Clean Air Act that required a rulemaking record.
2) Holding: the court held that post comment period meetings between the President or his staff and the
agency were not improper in this setting as the EPA is a cabinet agency. Neither were meetings between the
agency and a U.S. Senator improper. The EPA has discretion as to whether to docket (provide a written
record as part of the rulemaking record) these oral face to face discussions but must only do so when the
information or data is relied upon by the agency to support the rule that it has adopted. The rulemaking
process has political dimensions to it in a democracy.
Bias & Prejudgment in Rulemaking  ANA v. FTC Case:
1) Facts: In this case, the FTC issued a notice of proposed rulemaking to consider restrictions on TV
advertising directed toward children. Several trade Associations impacted by the rulemaking filed a lawsuit
to prohibit the Chairman of the FTC, Michael Pertschuk (P) from participating in the rulemaking proceeding
because of bias. The bias claim was based upon numerous statements made by P condemning children’s TV
advertising and the commercial exploitation of children. The district court disqualified P for prejudgment
based upon the Cinderella case we studied in the chapter on adjudication. The DC Circuit court of appeals
reversed the district court and held that it applied the wrong standard. The prejudgment test applies only to
adjudication not to rulemaking. For rulemaking the test for disqualification is much harder to satisfy. Here,
you would have to show by clear and convincing evidence that the Commissioner had “an unalterably closed
mind” on matters critical to the disposition of the rulemaking.” That standard was not met in this case, so P
could not be disqualified from participating in the rulemaking proceeding. I was improper to impose judicial
roles and rules upon agency decision makers that have policy making responsibilities.
Findings & Reasons in Rulemaking
1) Reasons requirement: Most APA’s require an agency to provide a statement of reasons to accompany its
final adoption of a rule. Both FAPA and MSAPA have this requirement framed in different language
2) FAPA section 553(c) [2nd sentence] provides: “After consideration of the relevant matter presented, the
agency shall incorporate in the rules adopted a concise general statement of their basis and
purpose….”
3) Nat’l Ass’n of Independent Insurers Case: —
 Facts: the Texas Supreme court invalidated two rules adopted by the Texas State Board of
Insurance for failure to substantially comply with the Texas APA rulemaking provisions in not
providing a reasoned justification for the policy choices in the rule.The first rule, Rule 1000,
prohibited insurance companies from refusing to sell policies to purchasers who had had an
insurance policy cancelled by another insurer. The court concluded that the agency had not
supported its conclusion with reasons as to why considering a previous denial was unfair or anti
competitive or unacceptable. The agency needed to state those reasons to satisfy the APA
requirements. The second rule, Rule 1003, prohibited the use of the number of vehicles as a basis for
insurability of the insured or dictating the price and scope of coverage of the policy sold to that
insured, and limited the use of policy tie ins (e.g. home owners insurance plus automobile insurance
). The agency failed to provide reasons to justify its conclusion that the prohibited practices are
unfairly discriminatory or how prohibiting these practices will lead to greater availability or
affordability of insurance policies.
 State Rules: The Texas reasons requirement, as interpreted by the Texas Supreme Court in the Nat’l
Ass’n case, is pretty robust and challenging to satisfy. It does not go as far as the requirement of
findings of fact and conclusions of law in adjudication, but a detailed statement is required. Some
states do not require a statement of reasons ( See note 1, page 267) and others, like California,
require even more detailed statements(See California Government Code Sections 11346.2, 11346.9).
Section 313 of the 2010 revised MSAPA is not quite as strict as the Texas rule, but a lot will turn on
how intensive a look a reviewing court takes of the stated reasons for a rule. The Texas majority
was pretty tough in enforcing the reasons requirement.
 FAPA provisions: While Section 553(c) reasons requirement is much more general and non specific
with notice and comment rulemaking, the Federal appellate courts have interpreted that requirement
to include the following: “We do not expect the agency to discuss every item of fact or opinion
included in the submissions made to it in informal rule making. We do expect that, if the judicial
review which Congress has thought it important to provide is to be meaningful, the ‘concise general
statement of * * * basis and purpose’ mandated by Section 4 will enable us to see what major
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issues of policy were ventilated by the informal proceedings and why the agency reacted to
them as it did.”
- Issuance & Publication: —FAPA publication requirements: Section 552(a)(1) [part of FOIA]
—§ 552. Public information; agency rules, opinions, orders, records, and proceedings
—(a) Each agency shall make available to the public information as follows:
—(1) Each agency shall separately state and currently publish in the Federal Register for the guidance of the public-—(A) descriptions of its central and field organization and the established places at which, the employees (and in the case of
a uniformed service, the members) from whom, and the methods whereby, the public may obtain information, make
submittals or requests, or obtain decisions;
—(B) statements of the general course and method by which its functions are channeled and determined, including the nature
and requirements of all formal and informal procedures available;
—(C) rules of procedure, descriptions of forms available or the places at which forms may be obtained, and instructions as to
the scope and contents of all papers, reports, or examinations;
—(D) substantive rules of general applicability adopted as authorized by law, and statements of general policy or
interpretations of general applicability formulated and adopted by the agency; and
—(E) each amendment, revision, or repeal of the foregoing.
Except to the extent that a person has actual and timely notice of the terms thereof, a person may not in any manner be
required to resort to, or be adversely affected by, a matter required to be published in the Federal Register and not so
published. For the purpose of this paragraph, matter reasonably available to the class of persons affected thereby is deemed
published in the Federal Register when incorporated by reference therein with the approval of the Director of the Federal
Register.
The Federal Register: The Federal Register Act [44 U.S.C section 1501-1511] codified the requirement of rules publication
and provided a for a daily (each federal working day) publication of the federal register which contained among other things
the text of each notice of proposed rulemaking and of each adopted rule. Adopted rules were also codified in the code of
Federal Regulations (C.F.R.)
Some of the other ways that agencies develop policies. These include:
A) case by case adjudication (like common law courts), with a system of administrative
precedent;
B) Adopting a rule without using rulemaking procedures;
C) granting waivers from existing policies;
D) not adopting new policies because of other priorities; or
E) using guidance documents to explain statutory policies.
Good Cause Exception: FAPA Section 553(b)(B) provides Except when notice or hearing is required by statute, this
subsection does not apply—
—(B) when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefore in the
rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.
FAPA Section 553(d) provides:
—(d) The required publication or service of a substantive rule shall be made not less than 30 days before its effective date,
except— (1) a substantive rule which grants or recognizes an exemption or relieves a restriction;
—(2) interpretative rules and statements of policy; or
—(3) as otherwise provided by the agency for good cause found and published with the rule.
^ The first FAPA good cause exception [Section 553(b)(B)] exempts rules from notice and comment procedure when the
agency makes an explicit finding at the time of issuance of the rule that good cause exists and provide supporting reasons.
The second good cause exception [Section 553(d)] exempts rules from the 30 day effective date requirement. Agencies that
invoke good cause will often use both exemptions in the rule adoption. Courts have interpreted the good cause exception
narrowly but a study of federal register filings indicated that ¼ (25%) to 1/3 (33.3%) of federal rules issued fall into the good
cause category.
- Jifry v. FAA: Facts: Two non resident alien pilots challenged post 9/11 aviation regulations adopted by the FAA.
The regulations authorized the automatic suspension of airman certificates on national security grounds when the
TSA made written notification that a pilot posed a security threat to the US and therefore was not eligible to hold an
airman’s certificate. The regulations were adopted without using notice and comment procedures under the good
cause exemption. The airman challenged the use of the good cause exception for these rules.
- Holding: The Court of Appeals rejected the challenge and held that the good cause exception was properly used in
this setting based upon the concern that delay in adopting the rules could result in serious harm to the US, and the
rule was needed to minimize security threats and security vulnerabilities after 9/11. The rules streamlined the
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process of suspending and revoking a pilot’s certificate and made this mandatory for security threats. The regulation
supplanted the permissive revocation with hearing rights approach that had applied before 9/11, and the creation of
DHS and the TSA.
- The good cause criteria includes three categories: impracticable, unnecessary, or contrary to the public interest.
The first and third categories have been applied when there was urgency, that an agency had an overriding need to
take immediate action, and therefore could not wait until notice and comment procedures were completed. Statutory
deadlines and terrorist threats are other examples of grounds that agencies used under these two criteria to justify
adoption of rules under the good cause exception. Some courts will carefully scrutinize the stated justification and
reject the rules if the good cause rationale is not adequately supported by the agency.
- Federal agencies that use these good cause criteria will usually (but not always) adopt interim final rules, and request
public comments on the rules after they have been adopted. Once the comments have been received the agency will
adopt a final rule.
- The “unnecessary” category for the good cause exception is different. It has been applied when public comment is
considered unnecessary because the agency is making technical corrections in the rules, or the agency has no
discretion as to the contents of the rule. Also as illustrated by the State Implementation Plan rules mandated for air
quality enforcement, the EPA adopted these rules under a congressional deadline. The plans details were discussed at
state level proceedings.
Subject Matter Exemption: FAPA subject matter exemptions are categorical in nature unlike the good cause exemptions.
The FAPA list of exempt categories is much broader than the MSAPA exempt categories. Section 553(a) provides:
a) This section applies, according to the provisions thereof, except to the extent that there is involved—
a. a military or foreign affairs function of the United States; or
b. a matter relating to agency management or personnel or to public property, loans, grants, benefits, or
contracts.
Procedural Rule: FAPA Section 553 (b)(A) exempts procedural rules from notice and comment rulemaking requirements.
This subsection provides that “ this subsection does not apply (A) to interpretative rules, general statements of policy, or
rules of agency organization, procedure, or practice;” Section 553 (d)(2) exempts interpretative rules, and general
statements of policy from the 30 day effective date requirement. These rules can be published and will take effect
immediately. Procedural rules adopted by the agency can be and are binding rules, both as to private parties, and as to the
agency. Both are bound by the rules provisions.
- The two tests used for determining whether a rule is substantive are: 1) substantial impact on the parties; and 2) the
substantive value judgment test.
- Public Citizen Case: Facts: The state department applied a “date of request cutoff” policy for complying with FOIA
requests for document searches. Public Citizen challenged the policy because it was not adopted using notice and
comment procedure. The court rejected the challenge, because it concluded that the rule was procedural because it
did not encode a “substantive value judgment.” Efficiency policies are not substantive under this approach. The
court did not follow the substantial impact on the public test. Procedural rules often will have a substantial impact,
but are not substantive for purposes of this exception. However, the court did invalidate the cutoff policy on the
merits, holding that it was unreasonable because it unnecessarily curtailed FOIA rights. This holding was based upon
FOIA provisions as interpreted by the Circuit Court of Appeal ( not the APA).
Legislative rules are “issued by an agency with an express or implied grant of authority to issue rules with the force of law.”
[CB, page 319]. Legislative rules are binding and can “alter the rights and obligations of citizens” [CB, page 319].
Substantive rules is an often used synonym for legislative rules, but it is not accurate because procedural rules that are
adopted by agencies have the force of law and are binding on the adopting agency. See the Service and Vitarelli cases, in that
same set of notes. [CB, page 319] Rules that have the force of law, whether substantive or procedural, fall within the
legislative category. Rules that have the force of law are like little statutes, binding both affected private parties and the
agency that adopted the rules. Civil and/or criminal sanctions can be imposed on parties who violate valid legislative rules.
- By contrast, non legislative rules do not have the force of law, either because the agency lacked delegated authority
to issue such rules, or because the agency chose not to adopt legislative rules governing this subject. Non legislative
rules are also called guidance documents. They are not binding on either the affected private party or the issuing
agency. Under the federal APA, non legislative rules are split into two further subcategories, interpretive rules, and
general statements of policy. [CB, pages 320-321] These two categories are exempt from notice and comment
procedures under Section 553(b)(A) and the delayed effectiveness procedures of Section 553(d)(2). Most state APA’
do not contain similar exemptions.
1) General Policy Statements are exempt from APA rulemaking procedure requirements. These statements are
meant to be explanations of agency policy not binding norms. Many of these statements explain how the
agency will apply enforcement discretion in areas of regulation. There is no clear bright line between
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legislative rules (binding norms) and policy statements (non binding policy explanations). Providing a list of
discretionary factors does provide guidance to the regulated industry and is probably better than the exercise
of discretion without those factors. Regulated parties worry that discretionary factors will be administered by
the agency as if they are binding norms.
 P2C2 v. Shalala: A trade association [P2C2] (pharmacy practice) challenged an FDA developed
policy called the Compliance Policy Guide 7132.16 on the grounds that it was a substantive rule that
had to be adopted using Section 553 notice and comment procedure. Since the CPG was issued as a
policy statement and not so adopted, the trade association sued in court and argued that it was invalid
and unenforceable. The District court rejected the challenge and that decision was affirmed by the
5th circuit court of appeals. The FDA developed the CPG developed to address a marked increase in
drug manufacturing by retail pharmacies operating under the traditional compounding exemptions
from FDA regulation. Retail pharmacies that engaged in widespread compounding through buying
large quantities of bulk drug substances that were marketed to doctors and patients were often in
violation of the compounding exemption and were subject to the stricter drug manufacturing
requirements of the FDCA.
 The FDA intended the CPG to be used internally by FDA district offices to assist in identifying
pharmacies that manufacture drugs under the guise of traditional compounding. The CPG identified
nine factors to be used by the agency in exercising discretion whether to begin an enforcement action
against a pharmacy. The nine factors were not exclusive. Policy statements establish agency policy.
Here, the FDA listed discretionary factors to guide its exercise of enforcement authority. Policy
statements are not meant to establish binding norms that have the force of law . The line between
legislative (substantive) rules and non legislative (general policy statements) rules is not clear and
indeed is a bit murky.
 The reviewing court will give some deference to the agency characterization of the pronouncement.
Here the FDA called its CPG a policy statement. Nevertheless the label (the agency characterization)
is not conclusive. In the court’s approach, the nine factors are considered not to be binding norms
but rather factors for the exercise of enforcement discretion. FDA employees use these factors to
determine whether a pharmacy is engaged in traditional compounding (which is exempt) or drug
manufacturing (which is heavily regulated). Warning letters sent to pharmacies that cite the factors
are not sufficient to convert the CPG policy into a substantive rule. Narrowing of FDA enforcement
discretion through the articulation of the nine factors does not eliminate enforcement discretion.
Channeling that discretion is what policy statements will do.
2) Guidance Documents: The 2010 Revised MSAPA contains a provision for guidance documents. These are
the equivalent of general policy statements and interpretive rules under FAPA. They are defined as : Section
102 (14) “Guidance document” means a record of general applicability developed by an agency which lacks
the force of law but states the agency’s current approach to, or interpretation of, law, or describes how and
when the agency will exercise discretionary functions.
 “Rule” means the whole or a part of an agency statement of general applicability that implements,
interprets, or prescribes law or policy or the organization, procedure, or practice requirements of an
agency and has the force of law. The term includes the amendment or repeal of an existing rule. The
term does not include:….(f) a guidance document.”
 CA doesn’t recognize guidance documents
3) Interpretive rules are non- legislative and therefore do not have to be adopted using Section 553 procedure.
 When classifying a rule as either legislative or interpretive, courts ask whether the agency
intended to exercise delegated authority to make law, as opposed to interpreting existing
text.
 Another test here is to ask whether the agency is clarifying existing law or making
substantive changes [CB pp. 393].
 Some agencies issue interpretive rules because they do not have legislative rulemaking authority
[eg., EEOC CB page 393 note 1]. Even if the agency does have such authority, it may intend that a
particular rule explains how an agency interprets a specific provisions of its enabling act.
Determining agency intentions can be difficult. A further problem is that a rule interpreting a
statutory term can be either interpretive or legislative [See Chevron case, discussed in note 1 page
393 CB]. Agency intentions or characterizations [labels] are not controlling when the courts consider
this issue.
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Hoctor v. USDA: USDA has statutory authority to adopt rules governing animal handling by dealers. The USDA
adopted structural strength rules for animal housing facilities using Section 553 procedures. Later, the agency
adopted an internal memorandum for inspectors concluding that all dangerous animals must be inside a perimeter
fence at least 8 foot high. Hoctor kept exotic cats but his containment fence was only 6 feet high. It would be very
expensive for him to replace the 6 foot fence with an 8 foot fence. He challenged the validity of the rule on the
grounds that it was not an interpretive rule and thus had to have been adopted using section 553 procedure. Since the
USDA issued the internal memorandum without following 553 procedure, the rule would be unenforceable if
Hoctor’s argument was correct. The court rejected agency arguments that it was interpreting the structural strength
regulation because the 8 foot fence interpretation was a classic line drawing arbitrary rule (as opposed to 7.5 feet or 9
feet) that is legislative in nature and not interpretive. Thus, this rule could not fit within the APA interpretive rule
exception and could not be enforced against Hoctor without promulgation of the rule using notice and comment
procedures under Section 553.
 The court went on to explain that lot of other animal dealers would have been impacted by this rule
and they had the right to comment on the 8 foot rule. The outcome may have been different if USDA
used the 8 foot rule as a rebuttable presumption. That might not have been a legislative rule. Agency
intent was not controlling because the agency intent is to adopt a rule. The court’s role is to
determine if the rule was properly adopted. In this case, the 8 foot high rule can not be properly
derived from interpretation, either of the statute or the structural strength regulation. If based on the
statute, it would have been a legislative rule. This is because the statute does not impose a secure
containment duty on animal dealers. The statute authorizes the agency to impose such a duty. The
court gave little weight to the agency practice of using notice and comment rulemaking to prescribe
perimeter fences for dogs and monkeys because it did not want to penalize the agency for complying
with the law in those other rulemaking proceedings.
Agency statutory authority and legislative rules.
- The DC circuit court of appeals invalidated the FCC net neutrality rules in Verizon v. FCC (D.C. Cir., 2014) 740 F.
3d 623). The purpose of the rules was to require broadband providers, such as Verizon, to treat all internet traffic the
same regardless of source. Thus, Verizon could nor favor its own movie streaming service over competing services
from Netflix, or Amazon. The rationale for invalidating some of the rules provisions is that: “[ the FCC]… may not
impose requirements that contravene express statutory mandates. Given that the Commission has chosen to classify
broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act
expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to
establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we
vacate those portions of the Open Internet Order.”
Lack of statutory authority and legislative rules.
- The DC Circuit Court of Appeals held in Loving v. IRS (D.C. Cir., 2014) 2014 WL 519224, that IRS rules regulating
tax preparers and requiring that those preparers be certified and comply with continuing education requirements
were invalid because the IRS did not have statutory authority to regulate tax preparers.
Required Rulemaking: Must agencies use rulemaking to make binding norms or can you make agency law through
adjudication (precedent)?
- In federal administrative law, the courts have given federal agencies broad discretion to proceed either by rulemaking
or adjudication to develop policy. Most states but not all follow a similar approach. In federal labor law, the NLRB
uses adjudication rather than rulemaking almost exclusively to make policy. This became an issue in the NLRB v.
Bell Aerospace Case [CB page 399]. In that case, one of the issues was whether the Board was required to use
rulemaking (not adjudication) to determine whether buyers who worked for Bell Aerospace were “managerial
employees”. Managerial employees are not covered by the federal labor laws, meaning that they can not be
unionized.
- The NLRB had decided in an adjudicative proceeding that the 35 buyers were covered by federal labor law and thus
were not managerial employees. The Court of Appeal held that the NLRB had applied the wrong legal standard. In
reversing and remanding, the court of appeal instructed the NLRB to commence a rulemaking proceeding to address
whether the federal labor laws covered managerial employees. The court of appeals noted that the board had adopted
a new policy related to managerial employees in this case, and the various affected interests (labor and management
in various industries) should have been given notice of the new policy and the opportunity to comment on that
policy. The supreme court affirmed the court of appeals holding on the substantive labor law issue.
- On the APA procedural issue, the Supreme court held that the NLRB had discretion to decide whether to proceed by
rule (rulemaking) or order (adjudication), to resolve the managerial employee issue, whether or not a new policy was
being adopted without going through rulemaking procedures. It was up to the agency how to proceed. The Supreme
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-
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Court relied upon the SEC v. Chenery Corp. decision (Chenery II) which held that the informed discretion of the
agency to proceed by rule or order was the controlling law. The federal courts are reluctant to mandate that agencies
use rulemaking for all matters of new policy. While rulemaking may be desirable, it is not mandatory.
Some states have presumptive rulemaking requirements. One of the leading judicial presumptive rulemaking cases is
the Megdal case [CB, page 406, note 7]. Other similar state cases are found in CB, page 407, note 9. Unlike the 1981
MSAPA, [CB page 407, note 10], the 2010 revised MSAPA does not contain a mandate for agencies to adopt rules.
California does not have a required rulemaking statute. Thus, through the definition of rules under the Cal APA is
very broad and most rules, including interpretive rules, have to be adopted using the California rulemaking
procedures, agencies have the option of proceeding by adjudication and developing a body of agency precedents.
AGENCIES HAVE FLEXIBILITY IN FEDERAL RULEMAKING LAW
Rulemaking Petitions: —
- FAPA : Section 553(e) provides “(e) Each agency shall give an interested person the right to petition for the
issuance, amendment, or repeal of a rule.”
- FAPA Section 555(e) provides: “(e) Prompt notice shall be given of the denial in whole or in part of a written
application, petition, or other request of an interested person made in connection with any agency proceeding. Except
in affirming a prior denial or when the denial is self-explanatory, the notice shall be accompanied by a brief
statement of the grounds for denial.
- Reasons Requirement [See Auer v. Robbins case, page 355] These requirements make it harder for agencies to
quickly dismiss rulemaking petitions without thoughtful consideration of the petition. Reasons requirements also
facilitate judicial review.
- —Section 318:Petition for Adoption of a Rule
1) —Comment: This section is substantially similar to the 1961 MSAPA Section 6.. See also Section 3-117 of
the 1981 MSAPA. Agency decisions that decline to adopt a rule are judicially reviewable for abuse of
discretion (See Massachusetts v. EPA 127 S. Ct. 1438 (2007) (EPA decision to reject rulemaking petition
and therefore not to regulate greenhouse gases associated with global warming was judicially reviewable and
decision was arbitrary and capricious.). When an agency grants a rulemaking petition in part, and denies the
petition in part, the agency should explain the partial denial to comply with the requirements of Section
318(1).
- California has similar rulemaking petition statutes. See Gov. code Sections 11340.6 and 11340.7
- Reasons for Petitions’ use:
A) Reexamination of the regulatory status quo of the agency.
B) Public participation for rules adopted by an agency under one of the exceptions.
C) Potential for modification of existing final rules.
- Agency agenda setting and determination of regulatory priorities are impacted by petitions.
- Massachusetts v. EPA:
 Facts: The state of Mass. and other parties petitioned the EPA to regulate greenhouse gases emitted
by new motor vehicles to combat global warming. The clean air act required the EPA to adopt
regulations limiting air pollution [any air pollution agent] when public health and welfare is
endangered. The EPA declined to adopt such rules and concluded that the term “air pollutant” did
not include carbon dioxide, the principal greenhouse gas emission source. The EPA also concluded
that there was not a clear [unequivocally established] causal link between global warming and
greenhouse gases produced by human activities. The EPA also noted that it might not be effective or
appropriate to adopt emission standards for motor vehicles at this point in time.
 Holding: The US supreme court held ( 5 to 4) that the state of Massachusetts had standing to sue,
and that the EPA’s decision not to engage in rulemaking was arbitrary and capricious because The
EPA refused to comply with a clear statutory command and failed to offer a reasoned explanation
that was consistent with the statutory command of the Clean Air Act. The requirements of that act
trumped agency discretion to set its own priorities and agenda for regulation. The court majority
noted that judicial review of an agency’s refusal to commence a rulemaking proceeding is available
under the arbitrary and capricious standard but it is extremely limited. That is partly due to agency
expertise and other factors not easily decided by reviewing courts
 The case law prior to Mass v. EPA held that review of denials of rulemaking petitions was very
deferential. Some commentators had critiqued the court decision as not being very deferential, and
for having a major impact on agency discretion to set priorities. Since then, the change in President’s
from Bush to Obama led to a change in approach. The EPA has now made the endangerment finding
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[referred to in the court decision] and is proceeding to adopt greenhouse gas emission limits through
the rulemaking process. Legislation to regulate greenhouse gases has been proposed but not enacted
by Congress. California has a state level greenhouse gas statute, and recently adopted regulations to
implement that statute.
Waiver of Rules:
- —Rules operate across the board. Parties that are subject to those rules rule may request waiver of the rules when
the rules do not work appropriately in the individual case.
- Waivers can undermine the rule of law, or become tools of favoritism for powerful interests.
- Wait Radio v. FCC: Facts: A radio station that was licensed by the FCC sought a waiver of the clear channel rules
so that it could provide night time radio service. The FCC rejected the application of the station to operate 24 hours
per day. The Court of Appeals [DC Circuit] overturned the FCC decision, and held that it did not give adequate
reasons for denying and refusing to hold a hearing on the waiver request. The FCC decision to deny the application
was not based upon a reasoned explanation. On remand, the FCC denied the application with a longer explanation of
why it denied the application, and its second decision was upheld by the same court.
_________________________________________________________________________________________________
____
3. Common Law (federal and state appellate decisions)
4. Regulations: Regulations as promulgated by the agency are usually demonstrative of an agency doing its duty to
expand or flesh out legislation or executive orders.
a) Gilmore v. Lujan: Gilmore filed an oil and gas application with the BLM. The BLM sent him their decision
on August 26th, which he received on August 29th. The letter said he had to properly file with the State
office all the paperwork within 30 days, by the September 28th. He mailed the paperwork on the 21st of
September. But, on the morning of the 28th, his secretary learned the BLM had not received the paperwork.
They sent a faxed copy that day that the BLM received by 11:15, and the actual paperwork was received in
the mail the next day. Gilmore’s application was denied and he appealed based on the fact that someone at
the BLM had told his secretary that the fax would be ok. The appeals court affirmed all lower decisions to
deny, giving great weight to the interpretation of the plain language of the statute.
(1) Agency regulations are controlling and enforceable.
(2) What happens if you rely on wrongful advice? TOO BAD - courts are mostly going to ignore that and
tell you to get over it [even though it seems unequitable].
(3) Deference: Just because the balance of equities seems to warrant an exception, that’s not the role of the
courts. They are only going to decide if the decision was proper.
INVESTIGATION & DISCOVERY:
- —Most administrative agencies have regulatory and law enforcement powers. The agency mission is to enforce the
provisions of the enabling act that creates and empowers the agency. This is why agencies fit into the executive
branch structure to carry out law enforcement functions.
- the term “law enforcement” in administrative law is much broader than criminal law (though some administrative
law violations are punished criminally through the regular criminal court systems) because it includes civil and
administrative enforcement systems.
- To carry out the law enforcement responsibilities, agencies need information from regulated parties. Four methods
are used to obtain relevant information.
o A. Record Keeping required by law (e.g., employers have to keep records of wage payments to employees;
people subject to income tax liability have to keep records of income and expenses).
o B. Report writing (and filing) (e.g., employers have to prepare and file with the IRS employee income
information (W-2 reports) or independent contractor income (IRS 1099 form); Taxpayers have to file annual
IRS 1040 forms.) - The first two methods (record keeping and report writing)rely primarily on voluntary
compliance by the regulated parties, but lots of time and money can be spent to comply with these methods.
o
C. Investigative subpoenas to compel testimony and production of records ( e.g., employer in Craib v.
Bulmash case had to produce wage records for caregivers for his sister to determine compliance with state
wage and hour laws). They are used by agencies to compel disclosure of information by regulated parties.
Sometimes these are called subpoenas duces tecum (SDT),a term familiar to civil litigators for the
production of documents. The other term used is a civil investigative demand (CID). It is not an inherent
power but must be allowed under the agency enabling act. Investigative subpoenas are used before an
enforcement adjudication is started. Subpoenas to compel a witness to appear at an administrative hearing
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(with or without the production of records) are different in usage and standards for issuance (See FRCP Rule
45 for the civil litigation equivalent of administrative hearing subpoenas).
 FAPA section 555(c), and (d) provide that: (c) Process, requirement of a report, inspection, or other
investigative act or demand may not be issued, made, or enforced except as authorized by law. A
person compelled to submit data or evidence is entitled to retain or, on payment of lawfully
prescribed costs, procure a copy or transcript thereof, except that in a nonpublic investigatory
proceeding the witness may for good cause be limited to inspection of the official transcript of his
testimony.
 4.5 This provision provides for investigative subpoenas when authorized by law. The agency
enabling act must give the agency the power to issue investigative subpoenas. This is not an inherent
power. That is why the APA provision stated “except as authorized by law” which refers to the
enabling act.
 FAPA Section 555 (d) Agency subpoenas authorized by law shall be issued to a party on request
and, when required by rules of procedure, on a statement or showing of general relevance and
reasonable scope of the evidence sought. On contest, the court shall sustain the subpoena or similar
process or demand to the extent that it is found to be in accordance with law. In a proceeding for
enforcement, the court shall issue an order requiring the appearance of the witness or the production
of the evidence or data within a reasonable time under penalty of punishment for contempt in case of
contumacious failure to comply. [This provision authorizes hearing related subpoenas].
 Craib v. Bulmash: California Labor Code investigative subpoena provisions are Sections 7, and 74.
Section 74 provides that, "for the purpose of enforcing [Commission] orders and provisions of this
code," the Division chief "may issue subpoenas to compel the attendance of witnesses and
production of books, papers, and records. Obedience to [such] subpoenas ... shall be enforced by the
courts." Section 7 allows Division deputies to exercise the subpoena power. Judicial enforcement is
mandated by statute. —Facts: The labor commissioner (Craib)has the responsibility to enforce
California wage and hour laws, including the minimum wage requirements. Craib issued and had
served a subpoena duces tecum that required Bulmash (B) to produce three years of wage records as
well as the names and addresses of caretakers for his sister Serena. The purpose of the subpoena was
to investigate whether B had failed to pay minimum wages to the caretakers. B was required to keep
these records by law, and was directed to appear at the Santa Barbara office of the labor
commissioner and produce those records. B failed to appear and a judicial enforcement proceeding
was brought. The lower court quashed the subpoena on 4th and 5th amendment grounds. 4th
amendment issues: The text of the 4th amendment to the U.S. Constitution (part of the bill of rights)
states: “The right of the people to be secure in their persons, houses, papers, and effects, against
unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon
probable cause, supported by Oath or affirmation, and particularly describing the place to be
searched, and the persons or things to be seized.” [underline added].
 B argued that 4th amendment standards used for search warrants applied to investigative subpoenas,
particularly the probable cause standard, and that probable cause standards were not met in his case.
The Labor Commissioner (Craib) argued for the application of controlling federal law based on the
Oklahoma Press Publishing v. Wallace case. The California supreme court had the option of
following federal law, or adopting a stricter standard under the California constitution. The Supreme
court majority opted to follow the federal law standard for required records.
 The court held that while the 4th amendment applied to the issuance of subpoenas, the rules were
different than for search warrants, because enforcement of the subpoena did not require a search or
seizure of the nonpublic parts of a home or business. Rather, the party subject to the subpoena was
required to produce the records at a location designated by the agency. That distinction is
fundamental to understanding the federal standards for enforcement of an investigative subpoena.
 The probable cause standard does not apply to the issuance of an investigative subpoena. What that
means is that the Labor Commissioner (Craib) did not have to show that it had reasonable grounds to
believe that the minimum wage law was being violated by B to justify the issuance of the subpoena.
In most cases, the Cr will issue an SDT when there is a complaint by an employee but the Cr is not
required to assess the reasonableness of the complaint or undertake any other investigation before
the subpoena is issued. The Cr has discretion whether to issue a subpoena of this type.
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However, the subpoena has to be authorized by law [see Cal. Labor Code Section 74] and there has
to be an opportunity for the recipient of the subpoena to object to enforcement of the subpoena [in
the Superior Court in California]. Subpoena standards for issuance and enforcement include:
 The Standard of Review used is Lawfully authorized purpose within the legislative power to
command [satisfied in this case because Cr had regulatory authority to investigate wage and hour
violations]. Subpoenaed records have to be reasonably relevant to the lawful inquiry (Probable cause
substitute) [satisfied here because the records demanded were the minimum that would have to be
kept under the required records mandate of the wage and hours laws]. The records to be produced
have to be adequately (but not excessively) specified (for the purposes of the relevant inquiry) in the
subpoena ( partial warrant substitute). [satisfied in this case because the records that were subject to
the subpoena were described with particularity)
 Opportunity for judicial review before enforcement and non compliance penalties are imposed.
[satisfied in this case].
 No 4th amendment privacy claim can be made when the subpoena is limited to the production of
records required to be kept by law.
 5th amendment issues: The 5th amendment to the U.S. Constitution provides: No person shall be held
to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a
Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual
service in time of War or public danger; nor shall any person be subject for the same offence to be
twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness
against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall
private property be taken for public use, without just compensation.
 The 5th amendment privilege against self incrimination does not apply to records required to be kept
by law (such as regulatory records) under controlling federal law based upon the Shapiro v. United
States case. The court majority adopted the federal standard as the California standard. The dissent
disagreed and argued for a stricter California constitution standard that required granting use
immunity for any information obtained from the required records production. Under the federal
standard, the 5th amendment does not apply to these subpoenaed records which are to be kept under
the requirements of a lawful regulatory scheme, and not focused on criminal law enforcement (
Marchetti and Grosso case exceptions for gambling records)
 Shapiro standards include; 1) the records demanded are the appropriate subject of a lawful
regulatory scheme; 2) the reporting law is intended to encourage voluntary compliance; 3) laws are
enforced with a regulatory purpose not criminal law enforcement or punishment purpose; and 4)
both employers and employees are protected by enforcement of minimum wage laws. All standards
are satisfied here.
 Other defenses to subpoena enforcement:
 A. Lack of regulatory jurisdiction;
 B. Failure of the agency to follow required procedures;
 C. Bad faith or improper purpose;
 D. Privileges (attorney client and work product privilege) See the Upjohn v. US case---
Upjohn v. US, 449 U.S. 383 (1981),the US Supreme court held that the corporate attorneyclient privilege applicable in federal court applies to not only corporate management but also
to any employee from whom corporate counsel seeks information and to whom corporate
counsel provides legal advice when corporate counsel is acting on behalf of the corporation
to provide legal services or representation to the corporation. Thus, the report prepared by
the legal counsel to Upjohn corporation that contained the results of interviews with
corporate employees was subject to the attorney client privilege and could not be
subpoenaed by the IRS. The IRS could interview these employees. Thus, the statements to
legal counsel were privileged but not the underlying facts. —The IRS subpoena was part of
an investigation by the IRS into foreign payments made by Upjohn employees that were
deducted as business expenses. The IRS suspected that the payments were “bribes” paid to
do business in countries that permitted those types of payments. The bribes were illegal
under American Law, and would violate the Internal Revenue Code.
D. Administrative Searches for inspection of the non public parts of homes and businesses to determine
compliance with health and safety standards (e.g., OSHA safety standards compliance in Marshall v.
Barlow’s note case)  The 3rd and 4th techniques ( subpoenas and administrative inspections) are not
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voluntary. Disclosure of information is compelled, sometimes to determine if the law has been violated, and
sometimes to gather evidence for an enforcement proceeding.
 When employees of an administrative agency physically search the nonpublic parts of a home or
business, a search warrant is required under the holding of the Marshall v. Barlow’s [436 U.S. 307
(1978)] U.S. Supreme court case (inspection of business premises necessary to determine
compliance with OSHA safety standards governing work spaces). Search warrants are issued by
judges based upon an ex parte showing by the seeker of the warrant. However, criminal probable
cause is not required. It is enough if the agency conducts the search based upon neutral legislative or
administrative standards. The warrant is still useful for the business owner because the parameters of
the search have to be specified in the warrant
 Exceptions to the search warrant requirement include:
 Consent to the search; [express or implied consent]
 Plain view (or open fields) [Dow Chemical Co. v. U.S. 476 U.S. 227 (1986) (EPA mandated
aerial observation of chemical plant by plane with photographic and mapping cameras
within navigable airspace did not require a search warrant because plain view open fields
exception applied.
 Pervasively regulated industries: New York v. Burger 482 U.S. 691 (1987) ( junkyards and
vehicle dismantlers).Other cases applied this exception to the gun and liquor industries.
Surprise or unannounced inspections without a warrant are acceptable when this exception
applies.
o Pervasively regulated industries (cont.): Four criteria must be satisfied for this
exception to apply: 1) substantial governmental interest in business regulation; 2)
unannounced inspections must be necessary to further the regulatory scheme; 3)
the statute must advise the business owner of the periodic inspection program;
and 4) the searches must be limited in time, place, and scope. In Burger, the US
supreme court upheld the regulatory statute because the four criteria were satisfied.
o California code of Civil Procedure Section 1822.50 provides: An inspection warrant
is an order, in writing, in the name of the people, signed by a judge of a court of
record, directed to a state or local official, commanding him to conduct any
inspection required or authorized by state or local law or regulation relating to
building, fire, safety, plumbing, electrical, health, labor, or zoning.
o California Code of Civil Procedure Section 1822.51 provides: An inspection
warrant shall be issued upon cause, unless some other provision of state or federal
law makes another standard applicable. An inspection warrant shall be supported
by an affidavit, particularly describing the place, dwelling, structure, premises, or
vehicle to be inspected and the purpose for which the inspection is made. In
addition, the affidavit shall contain either a statement that consent to inspect has
been sought and refused or facts or circumstances reasonably justifying the failure
to seek such consent
o California Code of Civil Procedure Section 1822.52 provides: Cause shall be
deemed to exist if either reasonable legislative or administrative standards for
conducting a routine or area inspection are satisfied with respect to the particular
place, dwelling, structure, premises, or vehicle, or there is reason to believe that a
condition of nonconformity exists with respect to the particular place, dwelling,
structure, premises, or vehicle.
o —Typical examples of business subject to the pervasively regulated industries
exceptions under California law include the following:
1. Massage parl0rs [Kim v. Dolch (1985)
2. Wholesale fish dealers [People v. Harbor Hut Restaurant (1983)
3. Skilled nursing facilities [People v. Firstenberg
4. Convalescent hospitals [People v. White ( 1968) 259 Cal. App. 2d Supp. 936];
5. Public bars [People v. Lisner (1967)
 The rationale for these exceptions is that many of these businesses engage in activities that have a
high risk of illegal conduct or serious danger to the public such that frequent unannounced
inspections are essential for the protection of the public or for the enforcement of the statutory
purpose. [Pinney v. Phillips (1991)230 Cal. App. 3d 1570]
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People v. Maikhio (2011) 51 Cal. 4th 1074, 1078-1079, 253 P. 3d 247, 126 Cal. Rptr. 3d 74, the
California Supreme Court upheld the constitutionality under the Fourth Amendment of the
provisions of Fish & Game Code § 2012 which authorizes fish and game wardens to require anglers
to exhibit their catch upon demand by a warden. In this case, the fish and game warden observed the
defendant fishing with a hand line on a public pier. The warden used a spotting telescope in his truck
that was located 200 yards from the Ocean Beach public pier in San Diego. The warden observed
the defendant catching something and putting it into a black bag. After the defendant left the pier and
drove away in a car, the warden stopped the defendant’s car and asked the defendant if he had any
fish or lobsters in this vehicle. When the defendant said no, the warden believed that the defendant
had lied to him. The warden then searched the inside of the vehicle and found the black bag with an
out of season spiny lobster inside. The warden cited the defendant who was later charged with two
misdemeanors. The superior court granted the defendant’s motion to suppress evidence concluding
that the warden did not have probable cause to make the initial stop and therefore evidence related to
that stop would be suppressed. The California Supreme Court reversed that decision. the California
Supreme court held that the stop and demand provisions of the statutory procedure [Fish & Game
Code § 2012] are reasonable warrantless administrative search procedures under the Fourth
Amendment that do not require probable cause because of the state interests protected by the
enforcement of the fish and game laws. First, California has a strong interest in protecting the
wildlife of this state for current and future California residents and visitors and this interest is distinct
from crime control interests. Second, the statutory and regulatory limits on numbers, size, species,
time of year, and location of fish and game would be extremely difficult to enforce if the wardens
were limited to probable cause requirements for stop and demand enforcement. Third, there are
minimal infringements on the privacy of fishers and hunters from stop and demand procedures
because fishing and hunting are heavily regulated and the demands are limited to items directly
related to fishing and hunting. The Supreme court also held that the later search of the vehicle was
supported by probable cause.
Another technique is compliance audits ( e.g., audit of client trust accounts held by lawyers.). Some of the
investigative techniques are used to determine whether or not possible violations of the law have occurred. These
techniques would precede any adjudicatory enforcement action brought by the agency.
Compelled disclosure of information raises questions under the Fourth and Fifth Amendments to the U. S.
Constitution
Evidence at Hearing  —IN ADMIN LAW, ALL HEARSAY IS ADMISSIBLE BUT WEIGHT OF EVIDENCE IS
RESTRICTIVE (1) Except as otherwise provided in paragraph (2), all relevant evidence is admissible, including
hearsay evidence, if it is of a type commonly relied on by a reasonably prudent individual in the conduct of the
affairs of the individual.
o (2) The presiding officer may exclude evidence in the absence of an objection if the evidence is irrelevant,
immaterial, unduly repetitious, or excludable on constitutional or statutory grounds or on the basis of an
evidentiary privilege recognized in the courts of this state. The presiding officer shall exclude the evidence
if objection is made at the time the evidence is offered
o —FAPA Section 556 (d) provides: Except as otherwise provided by statute, the proponent of a rule or order
has the burden of proof. Any oral or documentary evidence may be received, but the agency as a matter of
policy shall provide for the exclusion of irrelevant, immaterial, or unduly repetitious evidence. A sanction
may not be imposed or rule or order issued except on consideration of the whole record or those parts thereof
cited by a party and supported by and in accordance with the reliable, probative, and substantial evidence.
o —Admissibility standards in administrative hearings are more relaxed than in court trials particularly in jury
trial cases. For example, hearsay evidence is admissible in administrative hearings whether or not a hearsay
exception applies. In court, the hearsay evidence would not be admissible unless a hearsay exception applies
(such as an admission of a party opponent). Thus, more hearsay evidence gets into the record than in court
trial cases.
o —Persuasiveness: The party with the burden of proof has the responsibility to present evidence (burden of
production) and the responsibility to provide the most persuasive evidence (preponderance of the evidence)
on the issues in the case as to which they have the burden of proof. This party will also suffer the
consequences if there is a failure of proof. The fact finder has to base their fact findings on the evidence in
the record.
o 2010 Revised MSAPA Section 413 provides in relevant part:
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Alternative A: (f) Hearsay evidence may be used to supplement or explain other evidence, but on
timely objection, is not sufficient by itself to support a finding of fact unless it would be admissible
over objection in a civil action. (legal residuum rule)
 Alternative B: (f) Hearsay evidence is sufficient to support a finding of fact if it constitutes reliable,
probative, and substantial evidence. (reliability standard)
o The legal residuum rule was adopted in the Carroll v. Knickerbocker Ice Company case [cited in the
Reguero case]. In the Carroll case, a workers compensation award was set aside because it was based solely
upon a deceased worker’s statement that he was injured on the job. That statement was made to another
witness who testified at the hearing. The deceased workers statement did not fall within the dying declaration
exception to the hearsay rule. The residuum rule requires the inclusion of some other evidence that would
have been admissible in court to support a fact finding that the injury was job related. An example of such
evidence would have been the testimony of a fellow worker that he or she saw the deceased worker slip and
fall while delivering ice to a customer in the wintertime.
o The states are split almost evenly between the legal residuum rule and the alternative reliability standard
The reliability standard is illustrated by the case of Richardson v. Perales 402 U.S. 389 (1971). In
Richardson, the supreme court held that the SSA denial of a claim for disability benefits was factually
supported (under the substantial evidence standard)even though it was solely based upon written evaluations
of doctors who had examined the claimant and concluded that his back disability was not severe enough to
meet the requirements for disability benefits. The medical reports were considered to be very reliable.
o California follows the legal residuum rule (Gov. Code S 11513 (c)) while federal follows reliability rule;
Lake v. Reed (1997) 16 Cal. 4th 448, 65 Cal. Rptr 2d 860, 940 P. 2d 311 (hearsay evidence admissible in
court because within hearsay exception can be used to supplement evidence within hearsay rule).
o Roze v. Department of Motor Vehicles (2006) 141 Cal. App. 4th 1176, 1188-1190, 46 Cal. Rptr. 3d 829. In
this case, the California Court of Appeal held that breath alcohol test results were admissible in DMV
administrative per se driver's license suspension hearing but the results were not entitled to much weight
because the results were unreliable in that the administering officer failed to follow the guidelines contained
in administrative regulations [5 Cal. Code Regs. SS 1215.1(b), 1219.3] which required a 15 minute
observation period before the administration of the breath test. Because the test results had so little weight,
that did not adequately support a fact finding that the motorist was driving with a blood alcohol level in
excess of 0.08. Thus, the DMV order suspending the motorists license was reversed because the blood
alcohol level fact finding was not supported by evidence of sufficient reliability.
o Reguero Case: In this case, the Oregon Teacher’s Licensing Commission (TPSC) had denied Reguero’s
application to reinstate his teaching license because of his alleged sexual misconduct with two of his sixth
grade female students. The commission had the burden of proof in this administrative proceeding. At the
administrative hearing, the commission introduced hearsay evidence from school officials but did not have
the two students testify about the conduct of the teacher. Reguero presented contrary evidence The Oregon
Supreme Court reversed the Commission’s denial and held that there was not substantial evidence to support
the Commissions’ fact findings related to sexual misconduct. Reguero asked the court to adopt the legal
residuum rule. The Supreme Court rejected the application of the legal residuum rule and adopted the
reliability standard for assessment of hearsay evidence. Based on that standard, the court found that there
was not substantial evidence supporting the fact findings because the agency had relied upon hearsay
statements of a school counselor, police officer and deputy district attorney, which had interviewed the two
students. The court concluded that the two students should have testified about the two incidents, and
offering only hearsay testimony and not the students was not substantial evidence, that is was not reliable
enough under that standard.
Foundation deals with relevance and reliability  The requirements of FRE 104 are also called foundation
requirements (e.g., establishing a proper foundation for the admission of documents, and exhibits).See, e.g.,
California Evidence Code Sections 403, and 405 (determination of foundational and other preliminary facts)
o White v. Board of Medical Quality Assurance (1982) 128 Cal. App. 3d 699, 705-706, 180 Cal. Rptr. 516
(Failure to establish foundation justified ALJ, and Board in refusing to admit document of hundred pages
because lack of foundation required court to speculate as to the relevance and reliability of documents.)
Authentication: FRE 901-903 Rule 901. Requirement of Authentication or Identification (a) General
provision. The requirement of authentication or identification as a condition precedent to admissibility is satisfied by
evidence sufficient to support a finding that the matter in question is what its proponent claims.
o Ashford v. Culver City Unified School District (2005) 130 Cal. App. 4th 344, 349-351, 29 Cal. Rptr. 3d 728
(videotape are writing that must be authenticated before being admitted into evidence. An unauthenticated
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videotape is not admissible in evidence, does not have the proper foundation, and is considered to be both
irrelevant and unreliable evidence; videotapes of a fired employee were not authenticated as school district
employee who testified about tapes did not make the tapes, did not know who made the tapes, and was not
present when the tapes were made. The videotapes allegedly showed that the fired employee was working on
his personal plumbing business on days when the employee claimed to be sick, received sick pay, and did
not show up at work for the school district.).
OFFICIAL NOTICE: 2010 Revised MSAPA Section 404(7) provides: The presiding officer may take official notice
of all facts of which judicial notice may be taken and of scientific, technical, or other facts within the specialized
knowledge of the agency. A party must be notified at the earliest practicable time of the facts proposed to be noticed
and their source, including any staff memoranda or data. The party must be afforded an opportunity to contest any
officially noticed fact before the decision becomes final.
o 2010 Revised MSAPA Section 413(e) provides: Findings of fact must be based exclusively on the evidence
and matters officially noticed in the hearing record in the contested case
o FAPA Section 556(e) provides: The transcript of testimony and exhibits, together with all papers and
requests filed in the proceeding, constitutes the exclusive record for decision in accordance with section 557
of this title and, on payment of lawfully prescribed costs, shall be made available to the parties. When an
agency decision rests on official notice of a material fact not appearing in the evidence in the record, a
party is entitled, on timely request, to an opportunity to show the contrary.
o Circu v. Gonzales: Facts: A family of Pentecostal Christians from Romania sought asylum in the US based
upon a well founded fear of persecution claiming that they were persecuted for their religious beliefs. The
dominant religion in Romania was Orthodox Christianity (Greece Russia, and Serbia are other countries
with substantial Orthodox Christian populations). The IJ relied upon the 1999 US State Department report
that open worship was possible, and that harassment has lessened and used official notice to deny the asylum
claim. The family (Circu) was not given notice of the use of the asylum report and was not given the
opportunity to respond. The 1999 report was published 19 months after the case was argued and submitted,
and no mention was made of the 1997 report which was consistent with the family’s claims and was
admitted into evidence at the hearing. The court reversed and remanded the case because procedural due
process was denied in the lack of notice and a timely opportunity to respond.
SCOPE OF JUDICIAL REVIEW:
- Standard of judicial review, doctrines apply when a court is conducting judicial review of the merits of an
administrative agency decision. Most of these courts [but not all] are appellate courts that review final agency
decisions. Judicial review is essential to the constitutional validity of the administrative state. Different standards of
review apply to each type of issue. These courts will review three distinct types of questions:
o 1) issues of fact (agency fact findings)  With fact issues, there are several standards of review that may
apply.
o 2) issues of discretion (agency policy choices); and
o 3) issues of law (statutory, constitutional, or procedural issues related to agency action).
-
Section 706 of the Federal APA provides that: To the extent necessary to decision and when presented, the reviewing
court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the
meaning or applicability of the terms of an agency action. The reviewing court shall-o (1) compel agency action unlawfully withheld or unreasonably delayed; and
o (2) hold unlawful and set aside agency action, findings, and conclusions found to be- (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
 (B) contrary to constitutional right, power, privilege, or immunity
 (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 or
otherwise reviewed on the record of an agency hearing provided by statute; or
 (F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing
court.
- In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party,
and due account shall be taken of the rule of prejudicial error.
Basic Fact Determinations: These determinations are the who, what, when, and where of a particular case. For example, in
basic tort cases, this would include the condition of the light, red or green, when the defendant driver entered the intersection
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and struck plaintiff’s vehicle. Another example in a worker’s compensation case, this would include the question of when
and where was the employee injured in an accident, during the employee’s regular delivery route (as the driver of a UPS
truck), or on the way to or from the workplace at the beginning or end of the employee’s shift. Many basic fact issues turn on
the credibility of witnesses. In most civil litigation, these questions would be decided by a jury. In administrative law, these
would be decided by the administrative law judge.
Ultimate Fact Determinations (Mix of Fact and Law): These determinations are mixed questions of law and fact. For
example, a mixed question of law and fact in our tort scenario would be: Does it constitute negligent driving for the
defendant driver to enter an intersection on a red light and strike the plaintiff’s vehicle? [probably yes] In the worker’s
compensation scenario, the example would be: Does the employee’s injury arise out of the course and scope of employment
when the injury occurred on the way to work in the morning? [probably no]. Most reviewing courts will apply the substantial
evidence test to these mixed questions unless there is a real issue as to the accuracy of the definitions of the law being
applied, the law of negligence in our first example, and the law of worker’s compensation in our second example. In the
latter case, the independent judgment test would be applied and this would be considered a question of law.
- Substantial Review under Federal Admin Law  Universal Camera
o Facts: The employer, Universal, fired an employee. The reasons for the termination were disputed. The
employee claimed that his termination was based on retaliation for his testimony at a previous NLRB
hearing. The employer claimed that the termination was the result of insubordination by the employee a
month after the testimony. If the employee’s version of the facts prevailed, the employer would be found to
have committed an unfair labor practice in violation of federal labor law. If the employer’s version prevailed,
then there would be no unfair labor practice charge. As is sometimes the case, the fact findings were based
upon the assessment of the credibility of witnesses. The hearing examiner believed the employer’s witnesses,
found them to be credible, and found no unfair labor practice charge. The NLRB members went the other
way, found the employee to be credible, found that there was an unfair labor practice charge and awarded
reinstatement and back pay to the employee.
o The Second circuit court of appeals affirmed the Board decision, found substantial evidence for the fact
findings of the Board and did not find significant the Board’s rejection of the hearing examiner’s fact
findings. The U.S. Supreme Court vacated the decision of the second circuit and remanded the case back to
that court to decide the appeal a second time based upon the guidance provided by the Supreme Court in its
decision. The supreme court applied the substantial evidence test as articulated in the federal APA and the
Taft Hartley Act. The test is defined as: “substantial evidence is more than a mere scintilla. It means such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion….. It must be
enough to justify, if the trial were to a jury, a refusal to direct a verdict when the conclusion sought to be
drawn from it is one of fact for the jury. ” [CB, page 506]. While this is a deferential standard, the Supreme
court also held that the test is applied based upon the whole record. The reviewing court must find
substantial evidence on the record as a whole. This standard is codified in 5 U.S.C. Section 706 (2)(E). The
reviewing court can not look only at the evidence supporting the fact findings found by the agency. Looking
at the whole record requires the court to consider the evidence that does not support the fact findings found
by the agency, as well as the evidence that does support those fact findings.
o Applying the substantial evidence test in this case, the court addressed the issues related to the Board’s
rejection of the hearing examiner’s fact findings. The court held that the Board has the responsibility to make
fact findings under the enabling act, and that the Board is not required to defer to the Hearing Examiner’s
fact findings. The Board can independently consider what facts are supported by the evidentiary record.
However, the hearing examiners report [this is the same as a proposed or recommended decision today] is
part of the record for judicial review and should be considered by the reviewing court in assessing whether
the fact findings are supported by substantial evidence based on the whole record. The Board can consider
the HE’s opportunity to observe witnesses in making a credibility assessment. The HE’s findings are to be
given the weight they deserve given judicial experience and reason. They are not to be deferred to. The SE
test is the same whether or not the board and the HE agree or disagree on basic fact findings. However,
Board fact findings that are contrary to the HE’s fact findings may affect the review process. The court
noted that “The evidence supporting a conclusion may be less substantial when an impartial experience
hearing examiner who has observed the witnesses and lived with the case has drawn conclusions different
from the board’s than when he has reached the same conclusion .” [CB, page 510]. This will especially be
the case when fact findings turn on credibility issues. In those cases, the HE’s ability to observe witness
testimony and to assess credibility factors such as demeanor, as well as content based factors such as
consistency and plausibility will give the HE a stronger basis for making fact findings.
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Under the Universal Camera test, when the agency rejects the ALJ’s fact findings, that is often treated as a
minus factor by a reviewing court, especially if the fact finding turns on issues of credibility, and even more
so if it includes demeanor evidence
o California Government Code Section 11425.50(b) adopts a more deferential standard for ALJ fact findings
based upon credibility when the credibility determination is based upon demeanor evidence. That statute
provides: “If the factual basis for the decision includes a determination based substantially on the credibility
of a witness, the statement shall identify any specific evidence of the observed demeanor, manner, or attitude
of the witness that supports the determination, and on judicial review the court shall give great weight to the
determination to the extent the determination identifies the observed demeanor, manner, or attitude of the
witness that supports it.”  This California statute adopted a more deferential standard to ALJ fact finding
than the Universal Camera rule at least when demeanor based credibility determinations are at stake.
o The “clearly erroneous” test for judicial review of agency fact findings is found in the 1961 MSAPA [but not
the 1981 or 2010 revised MSAPA, which use the substantial evidence on the whole record test], and is also
used occasionally in federal administrative law. This test is also applied to fact findings by federal district
court judges in judge tried cases. See Rule 52 (a)(6) which states: “ “Setting Aside the Findings. Findings of
fact, whether based on oral or other evidence, must not be set aside unless clearly erroneous, and the
reviewing court must give due regard to the trial court's opportunity to judge the witnesses' credibility.”
o In a few limited circumstances, the courts will not defer to the agency fact findings, but will apply its
independent judgment based on the agency record, or in some circumstances will conduct a trial de novo. In
the 1920’s and 1930’s some US Supreme court cases held that constitutional facts [See the St. Joseph Stock
Yards and the Ohio Valley Water cases, page 596] and jurisdictional facts [the Crowell and Ng Fung Ho
cases, page 596] were subject to the independent judgment test. Those cases are no longer good law and are
not followed today in federal administrative law. There is a limited constitutional fact doctrine today in
which there is do novo review of facts in certain types of constitutional rights case [See Gonzales and Bose
cases, page 597]. These cases do not fall within the realm of administrative law.
o Examples of de novo review today include: 1) administrative disqualification of retailers from participating
in the food stamp program [See Warren case, note 2, page 597]; 2) School Board decisions under the IDEA
[see Ojai case, note 2, page 597]; and 3) federal agency decisions under FOIA [page 597-598]. Fact review
in these cases would be based upon Section 706(2)(f) which states that “unwarranted by the facts to the
extent that the facts are subject to trial de novo by the reviewing court.”
o California follows the independent judgment test for judicial review of fact finding for agency
decisions that affect a “fundamental vested right”
INDEPENDENT JUDGMENT TEST: 5 U.S.C. Section 706 has three subsections in which reviewing courts apply the
independent judgment test to legal issues that are considered to be questions of law. With the exception of legal
interpretation of the enabling act by the agency, courts give no deference to agency determinations on these issues. As to
constitutional issues, many agencies are prohibited from deciding constitutional issues. As to all three types of issues, the
reviewing court’s expertise in decision making is considered to be greater than the agency expertise, and the agency
typically does not develop expertise in these areas.
—(B) contrary to constitutional right, power, privilege, or immunity;  Goldberg v Kelley [CB, page 17]; Matthews v.
Eldridge [CB, page 44].
—(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;  Bowen case [CB, page 243].
—(D) without observance of procedure required by law;  Dominion Energy , [CB page 75]
o
Sec. 3.5. An administrative agency, including an administrative agency created by the Constitution or an initiative
statute, has no power:
—(a) To declare a statute unenforceable, or refuse to enforce a statute, on the basis of it being unconstitutional unless an
appellate court has made a determination that such statute is unconstitutional;
—(b) To declare a statute unconstitutional;
—(c) To declare a statute unenforceable, or to refuse to enforce a statute on the basis that federal law or federal regulations
prohibit the enforcement of such statute unless an appellate court has made a determination that the enforcement of such
statute is prohibited by federal law or federal regulations.
Issues of legal interpretation: [CB, 600] Agencies interpret their governing statute regularly in the course of making
adjudicative decisions, in adopting legislative or interpretive rules, in enforcing the enabling act, and in giving advice to the
public. When an agency interpretation is challenged in a reviewing court, the courts generally will take one of three
approaches:
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1) No deference is given to the agency interpretation (this is rare). The court decides the interpretive issue on its own [See,
e.g., the Industrial Union case, page 436];
2) Strong deference is given to the agency interpretation and the court will accept the agency interpretation if it is
“reasonable” [See, e.g., Chevron, CB page 608]; or
3) weak deference in which the court will ultimately decide the interpretive issue but will give some weight to the agency
interpretation based upon its power to persuade
- Connecticut Medical Case: Facts: In this case, the Podiatry Board issued a declaratory ruling that claimed the ankle
was a part of the foot for purposes of allowing podiatrists to treat ankle ailments not merely foot ailments. The board
based its interpretation on the language of the Connecticut statute Section 20-50 which states “Podiatry is defined to
be the diagnosis, prevention, and treatment of foot ailments.” The term foot is not defined in the statute. The
professional association for physicians sued the Podiatry Board and challenged the declaratory ruling. The trial court
overturned the ruling relying upon a dictionary definition of the foot. On appeal the Board challenged the court
ruling. A critical question for the appellate court was the issue of what standard of review applied to the Board ruling
. The Board argued for deference to its interpretation and claimed that this issue was a question of fact, or a mixed
question of law and fact, either of which would have led to the application of a more deferential test, such as
substantial evidence. The Board strategy here was to make it harder for the reviewing court to invalidate the ruling.
- Holding: The appellate court rejected that characterization of the type of issue, and concluded that the issue was one
of law. The court also concluded that it would not defer to the agency interpretation. This was for three reasons: 1)
the Board interpretation was recent and not a long standing one applied by the agency; 2) the statutory language was
not ambiguous; and 3) the basis for the agency interpretation, claims that podiatrists had treated ankle ailments for a
long period of time, was not a reasonable one. These three reasons illustrate weak deference factors that are followed
in some case but which were not followed by the court in this case. In interpreting the statue, the court affirmed the
trial court ruling, that podiatry practice is limited to the foot. The court followed well established legislative
interpretation guidelines. It looked at the language of the statute, legislative history and purpose, and circumstances.
This included a comparison of the podiatry statute with the statute governing the practice medicine, which was not so
limited. The court also accepted the dictionary definition of the foot, and concluded that the statute with that
definition did not authorize podiatrists to treat ankle ailments.
- Sherman case, The New York Court of Appeal affirmed a ruling of the appellate division in the Sherman case cited
at the end of the problem on page 608. The court held that: “The Appellate Division entered an order which annulled
the determinations by the Board of Regents and dismissed the charges against the physician, and held that physician,
a specialist in the problem of obesity, who used a method of examination and medication which in his judgment was
proper, based on his experience, observation, study, and research, could not be found guilty of fraud and deceit in
practice of medicine on grounds that he prescribed and delivered or caused to be delivered certain medication to
various persons without proper or adequate physical examination to determine whether condition of patients was
such that medication could be taken without injury. The Board of Regents appealed to the Court of Appeals. Order
affirmed, with costs, upon the ground that the conduct of petitioner, as charged and found, does not constitute fraud
or deceit within paragraph (a) of subdivision 2 of section 6514 of the Education Law.” [225 N.E. 2d at 559].
- Holding: The lower court had held that the findings of fraud and deceit were not sustained by the record of the
doctor’s treatment of his patients, such that the legal definition of fraud could not be lawfully applied to the facts of
the doctor’s treatment of his patients. The courts did not defer to the findings of the agency treating this as a mixed
question of law and fact with the law component being controlling, and thus there was no deference to the agency.
- Chevron Case: 2 step process (Look to see if statute is ambigious, if not then follow the statute. If it is ambiguous,
then go to step 2 and see whether agency interpretation is sound)
- Facts: The EPA adopted legislative regulations that interpreted the language “stationary source” in the Clean Air Act
[CAA] to mean an entire plant (such as an oil refinery) under the “bubble” concept. The alternative would have
defined the term “stationary source” as a single pollution emitting piece of equipment in a plant. The energy industry
preferred the “bubble” concept because it gave them greater flexibility. The CAA did not define the term “stationary
source” The issue was whether or not the CAA could be interpreted in the manner that the EPA had done in the
regulation. The Court of Appeals had invalidated the regulation on the grounds that it was inconsistent with the
congressional purpose to improve air quality in non attainment areas. The Supreme Court reversed the court of
appeal and held that “ …the EPA’s definition of the term “source” is a permissible construction of the statute which
seeks to accommodate progress in reducing air pollution with economic growth. ‘the regulations which the
administrator has adopted provide what the agency could allowably view as ….[an[ effective reconciliation of these
twofold ends’”
- Approach: The Chevron case adopted the two step test for judicial review of agency legal interpretations of the
governing statute [enabling act]. The first step requires the reviewing court to determine whether the governing
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statute expresses a clear congressional intent on the issue in question [See footnote 9, CB page 529]. For this step,
the reviewing court will use the traditional tools of statutory analysis which include looking at the language and
purpose of the statute as well as any relevant legislative history. If congressional intent is clear, then congress has
spoken and the agency interpretation can not be contrary to that intent. However, if congress has not spoken clearly,
and the statute is ambiguous, then the second step of Chevron is applied when there is an agency interpretation of the
ambiguous statutory term. If there is no agency interpretation, then the court will resolve the issues of statutory
construction. When there is an agency interpretation, the court will determine if that interpretation is based on a
permissible construction of the statute, i.e., the agency interpretation is a reasonable one. If so, The reviewing court is
required to defer to that agency interpretation. Some of the factors supporting that deference include: 1) the agency
balanced environmental objectives and reasonable economic growth in a rational manner that reasonably
accommodated competing interests; 2) the regulatory scheme is technical and complex; and 3) the agency considered
the matter in a detailed and reasoned fashion. [CB, page 530]Finally, the EPA is subject to indirect political
accountability because it is in the executive branch and subject to Presidential control and influence.
FDA v. Brown & Williamson: Court ruled against agency
Facts: In 1996, the FDA asserted regulatory jurisdiction over tobacco products for the first time. This was a change
in position by the FDA which had previously concluded that it did not have such authority. The FDA adopted
administrative regulations that sought to reduce tobacco consumption by children and adolescents. Tobacco industry
parties including the B & W tobacco company challenged those regulations for lack of statutory authority of the FDA
to regulate tobacco products. The Supreme court invalidated the regulations and held that Congress had precluded
the FDA from regulating tobacco products. This congressional intent was expressed in the overall statutory scheme
of the FDCA, as well as with later tobacco specific legislation enacted by Congress.
Statutory Interpretation: The FDCA is given the authority to regulate “drugs” and “devices”. The FDA determined
in its regulations that nicotine is a drug and that cigarettes and smokeless tobacco are drug delivery devices. The
regulations restricted tobacco consumption by minors (customers under the age of 18) with a number of regulatory
standards and restrictions [See CB page 622. The FDA argued that there were pharmacological effects for nicotine
use (e.g., weight control) that allowed the FDA to regulate tobacco use notwithstanding that there were no claims of
therapeutic or medical benefit. Usually, the FDA will extensively review and then sometimes approve drugs that
have such benefits [e.g., statins that lower cholesterol in the body]. The FDA construction of this act that it
administers is governed by the Chevron doctrine. Under Chevron step one, the court will review the statute to
determine whether the statutory meaning of the precise issue before the reviewing court is clear or not. If it is clear,
then the court will not go on to step two and it will decide the issue before it based upon the clear statutory meaning.
In step one analysis, the court will look at the statutory term and decide its meaning in the context of the overall
statute. The court will also review other statutes that may impact this statute especially when congress has spoken
subsequently and more specifically on the same subject. Legislative history is also considered as well as “by
common sense as to the manner in which Congress is likely to delegate a policy decision of such economic and
political magnitude to an administrative agency.”
FDCA Application: The FDCA has major objectives to ensure that regulated products are “safe” and effective for
their intended use. The agency documented the unsafe nature of tobacco products in the findings in the regulatory
record, that justified tobacco regulation by the FDA. Logically, those findings would justify removal from the market
of devices with tobacco products. However, the FDA also concluded that tobacco products are “safe” within the
meaning of the FDCA. The FDA reasoned that a total ban on tobacco products would cause many health problems
for tobacco users who are addicted to nicotine. Thus, the FDA reasoned that leaving the products on the market but
regulating the sale and advertising of tobacco products would be more effective in achieving public health goals.
However, the court noted that the FDCA required specific safety determinations before a drug and a drug delivery
device can be approved. Under this statute, there is “no room for tobacco products within the FDCA’s regulatory
scheme. If they cannot be used safely for any therapeutic purpose, and yet they can not be banned, they simply do not
fit.”
INFORMAL INTERPRETATION:
The Skidmore alternative [CB, page 634-635]: The issue here was the deference to be given in the courts to the interpretive
bulletins of the Wage and Hour Administrator who enforced the Fair Labor Standards Act and interpreted its provisions for
the guidance of employers who had to comply with the requirements of the FLSA. The administrator’s interpretation were
held not to be binding but could be relied upon if they were persuasive. This is considered to be the weak deference standard
in federal administrative law. The factors considered by the court under weak deference [See the last paragraph of the
casebook excerpt at the middle of page 554] include thoroughness, validity, consistency, and other persuasive factors. We
will discuss these factors in class. Informal interpretations include the same types of materials in both state and federal
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administrative law. The difference in the two approaches, the state majority rule of weak deference for all materials , versus
the federal approach of strong deference for some materials and weak deference for other materials turns on the weight, or
persuasive value, of the particular interpretive materials. In state weak deference law, formally adopted interpretations (such
as legislative regulations or precedent decisions in adjudication) are likely to have much greater weight or persuasive value
than informal interpretations that are not so thoughtfully considered.
- Christensen v. Harris County:
o . Facts: Deputy sheriffs in a Texas county sued the county based on claims that the county violated FLSA
requirements for compensatory time (an alternative system to overtime payments to employees who work
overtime in the public sector). Comp. time allows employees who work extra hours beyond 40 hours per
week to take time off work for full pay. Employees can accumulate comp. time up to maximums se by the
employer. Alternatively, these employees can receive cash payments as a substitute for taking time off of
work. Some employees had accumulated the right to receive a substantial amount of cash payments in lieu of
comp. time. In this case, the county sought to minimize its liability for cash payments for comp time which
would otherwise accrue if employees did not take time off and use their comp time credits. The county also
wanted to reduce accumulated comp time to minimize future cash payments. The county asked for guidance
from the US DOL wage and hour division as to whether the county could, consistent with FLSA
requirements, require employees to use or take comp time rather than to let the time accumulate. The
administrator wrote back in a letter that this would be improper under the FLSA unless there was a prior
agreement with the deputy sheriffs permitting such an arrangement. The county ignored the letter and went
ahead and adopted a policy that allowed supervisors to set a maximum number of hours that may be
accumulated, even though there was no prior agreement between the county and the deputies permitting this
to be done. The impact of the County policy is that once employees reached the maximum number of hours
for comp. time accrued, they were required to take time off from work. The deputy sheriffs lawsuit
challenged the county practice claiming that it violated the FLSA.
o Holding [cont.]: The supreme court rejected that argument concluding that the FLSA statutory requirement
was that employees must be allowed to use comp time. The act was silent on whether employees can be
compelled to use comp time. The FLSA did not prohibit compelled use of comp time .Thus the county
practice was not invalid under the FLSA. The claimants (deputy sheriffs) and the federal government argued
that the DOL opinion letter (which interpreted the FLSA to permit employers to compel use of comp time
only when the employee had agreed in advance to this practice) should be given Chevron deference as an
interpretation of the act by the agency charged with enforcement of the law. If the court had accepted this
argument, the deputy sheriffs would have won their lawsuit. However, the Court rejected the argument and
held that the agency opinion letter was not entitled to Chevron deference. The opinion letter (like other
informal interpretations, such as policy statements, agency manuals, and enforcement guidelines) lack the
force of law and have not been adopted using APA procedure. These agency interpretations are entitled to
Skidmore deference such that they are entitled to respect based on their power to persuade but they are not
binding on the courts. The court rejected the agency interpretation as being inconsistent with the FLSA. Nor
was the issue addressed in DOL regulations, which would be subject to chevron deference. The court also
rejected AUER deference (agency interpretations of its own regulations) because this regulation was not
ambiguous. It was permissive.
- US v. Mead Corp.:
o Facts: In this case, Mead Corp. challenged the customs tariff applied to importation of its day planners,
which were manufactured overseas. The customs tariff classification ruling was issued by the US Customs
Service. It was provided in a letter from the agency head office and contained some reasoning in support of
the classification of the day planners as diaries bound. This qualified the day planners for a certain level of
customs tariff (charge for importing the good into the US). Mead challenged the classification in the US
Court of Appeals for the Federal Circuit. The agency defended the ruling by arguing that the ruling should be
given Chevron deference. The court of appeals held that the ruling was not entitled to Chevron deference.
The Court of appeals gave no deference at all to the ruling and rejected its reasoning on both grounds
(“diary” and “bound”). On review before the US Supreme court, the court held that the ruling letters
were not entitled to Chevron deference. The ruling letters are not promulgated using APA notice and
comment procedure, and these letters do not have the force of law. Classifications are conclusive between
the agency and the importer and do not apply to third parties. Further, the agency issued 10,000 to 15,000 of
these rulings each year. However, the court also held that these ruling letters are entitled to Skidmore
deference based on their power to persuade. Factors considered here include the highly detailed regulatory
regime, the value of uniformity as well as agency expertise in enforcing the law. On remand, the court of
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appeals applied Skidmore and set aside the tariff ruling concluding that it did not have the power to
persuade.
REGULATION INTERPRETATION:
- An agencies interpretation of its own legislative regulations have been given strong deference under the authority of
two supreme court cases, Bowles v. Seminole Rock (1945) and Auer v. Robbins (1997)[CB, page 649]. Under the
test of those cases the agency interpretation is given “controlling weight unless it is plainly erroneous or inconsistent
with the regulation” [CB, page 649]. In the next case, this approach was not followed, and the court majority applied
factors used with weak deference tests to reject the agency interpretation.
- Christopher v. SmithKline Beecham:
o Facts: Outside sales personnel (called “detailers” in the industry) who worked for defendant pharmaceutical
company sued their employer under the Fair Labor Standards Act (FLSA) for overtime pay which they had
not been paid by the employer. Certain classes of employees are exempt from overtime payment
requirements, including managers and outside salesman. The issue here was whether the detailers, who
visited doctor’s offices to promote doctor’s use of the companies pharmaceutical products, were within the
exempt category of “outside sales personnel” and thus not entitled to overtime pay. DOL regulations defined
who was an outside sales person for purposes of the exemption. At the US Supreme Court, the DOL filed an
amicus brief for the plaintiff employees and offered an interpretation that supported the plaintiff’s case. The
DOL interpretation asserted that the exemption for outside sales personnel did not apply unless the employee
actually transfer title to the property in question to the consumer. Plaintiff employees would not qualify for
the exemption under that interpretation because doctors had to prescribe medications before a patient could
purchase that drug.
o Analysis: the Supreme court majority rejected the DOL interpretation. The court majority also rejected the
application of Auer deference in this case. Auer deference was not warranted in this case, because the
employer may be subject to “potentially massive liability” for conduct ( not paying detailers overtime pay)
prior to the announcement of the interpretation. This would violate the fair warning principle and would lead
to unfair surprise. In addition to lack of notice, DOL had not initiated enforcement actions as to detailers.
Deferring to all agency interpretations invites agencies to adopt vague and open ended regulations that can
be interpreted by the agency later on in ways that can be unpredictable. The Court majority instead applied
weak deference [similar to Skidmore deference to agency informal interpretations of the enabling act],
applied Skidmore factors, and rejected the agency interpretation as being unpersuasive. The court found that
the plaintiffs were outside salesmen and thus exempt from overtime pay requirements.
DISCRETIONARY DETERMINATION: Section 706(2)(a) applies to discretionary determinations in adjudication . This is
the familiar “arbitrary and capricious” and “abuse of discretion” standard of review which is considered to be the most
deferential of the review standards. This standard is used to review the discretionary elements of all types of agency action,
including formal (Salameda) and informal adjudications (Overton Park), administrative rules (State Farm), and fact findings
in informal proceedings. This standard also overlaps with the Chevron Step two reasonableness review. With discretionary
elements generally, the agency has much greater leeway in making decisions than when the issue is one of law or the scope
of the agency authority to act in a proceeding. The greater deference is also a function of the Congressional delegation to the
agency of authority to decide questions of discretion. These include policy decisions as well as questions that require the
weighing of different factors. An added dimension to discretionary determinations is that the agency has been delegated
authority to make those discretionary decisions, or to make policy choices as part if its responsibility to enforce the law (eg,
state farm case).
- Citizens to Preserve Overton Park:
o Facts: This lawsuit was used to challenge a grant funding decision made by the DOT secretary to provide
federal highway funds to build an interstate highway through a city park in Memphis, Tennessee. A statute
prohibited use of public parks for highways unless “there is no feasible and prudent alternative” route. That
statute was designed to make it more difficult for cities or states to select highway routes through publicly
owned land like parks. Using park land would be cheaper because the government would already own the
land. The DOT Secretary, Volpe, made the funding decision without explaining why there was no feasible
and prudent alternative route. The funding decision was an adjudicatory decision but the APA did not apply.
The required hearing was a public hearing seeking input from people in the affected community. Thus, this
was informal adjudication because no right to a hearing on the record was recognized in the grant funding
statute.
o Court analysis: The supreme court concluded that the term “no feasible alternative” meant that each
alternative route was not feasible from an engineering perspective. The court also concluded that the “not
prudent” test meant that there would be unique problems with other alternative routes. Because there were no
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fact findings, the court could not tell whether the DOT Secretary followed the statutory requirements or not.
This was a problem because the DOT secretary could not legally award grant funds for highway construction
without following the statutory requirements. The court reversed the funding decision and remanded the case
back to the District court to conduct a factual inquiry into the DOT Secretary’s reasons for the decision. This
approach would not be allowed today under Vermont Yankee. Today, the decision would be remanded to the
agency to make the fact findings and decide the grant funding issue a second time based on those findings. If
the secretary found that the park route was cheaper or more convenient but that other routes were acceptable
from an engineering point of view, but were more expensive, then the secretary could not lawfully award
grant funds to build the highway through the parkland.
o Standard of Review: The court held that the substantial evidence test for fact finding review did not apply
because the APA formal adjudication procedures did not apply to this decision. The DOT secretary was not
required to provide an on the record hearing before making the grant funding decision. As noted before the
public hearing requirement was not enough to invoke APA procedure. Also, the de novo review standard for
fact finding did not apply either, as the grant funding statute did not so provide that fact findings would be
reviewed do novo. Thus, the court concluded that the arbitrary, capricious, abuse of discretion standard of
review applied to the DOT secretary fact findings. This means that the court has to decide whether the
agency acted within the scope of delegated authority. To satisfy this test, the agency decision must be based
upon a consideration of the relevant factors and whether there has been a clear error of judgment. Judicial
review is to be searching and careful, but the ultimate standard for review is narrow. The court may not
substitute its judgment for that of the agency.
- Salameda v. INS:
o Facts: Salameda (S), his wife (A), and two month old son (L) came to the US from the Philippines in 1982. S
entered on a one year student visa. A and L entered as family members of a non immigrant student. Shortly
after the visa expired, S went to the INS to renew the visa and the INS started deportation proceedings
against him. Nine years later in 1991, S and his family appeared at a hearing before an IJ at which they
conceded deportability but requested suspension of deportation on grounds of “extreme Hardship” . The
Board (BIA) has the authority to suspend deportation and it has been delegated authority to decide what
counts as “extreme hardship”. Judicial review is limited to ensuring that the Board had made a reasoned
decision in considering the issue raised in the aliens application for suspension of deportation. The IJ
rejected the request to suspend deportation and that was affirmed by the Board. The 7th circuit court of
appeals reversed the denial of suspension of deportation by the board because the board failed to address in a
rational manner the issues raised by S and his family, including the impact of deportation on L, their 15 year
old son at the time of the court decision, and the impact of deportation on their 7 year old son born in the US
and thus a US citizen. Further, the board failed to consider sufficiently the extensive amount of community
and charitable activities engaged in by S and A.
o Court analysis: Both of these factors are part of the hardship analysis and should have been part of the Board
analysis that hardship was not extreme enough to justify suspension of deportation. In the absence of a
reasoned explanation, the board decision is arbitrary and capricious. The court remanded the matter back to
the agency to redecide the issue of suspension of deportation with a more reasoned explanation as to why the
existence of those two factors does not satisfy he requirements for extreme hardship. Note that it is not the
court’s job to decide whether extreme hardship has been met, it is the agencies job to do so. While the
agency could decide that extreme hardship has been met on remand, it is more likely that the agency will
reach the same decision the second time around and will provide a more specific and reasoned explanation.
If that is the case, there is nothing that S or the courts can do about it as this would be the agency decision
within their discretion to make.
o Standard of review: This case is governed by the arbitrary and capricious, abuse of discretion standard of
review as to the issue of whether or not the alien has shown that there would be extreme hardship if they
were deported thereby justifying suspension of deportation. The INS proceedings are not governed by the
APA, but their statutory proceedings are quite similar with an on the record hearing and a decision by an IJ
with review by the Board. As a result fact findings in immigration cases are usually reviewed under the
substantial evidence standard of review. However, the “extreme hardship” determination is one that is
within the discretion of the agency, acting under a delegation of authority, from Congress to the AG [ now
the DHS secretary] and then from the AG to the BIA. Since this is a discretionary decision, the arbitrary
capricious abuse of discretion standard of review applies to findings of whether or not there is extreme
hardship.
DISCRETIONARY REVIEW:
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The relevant factors part of judicial review examines whether the agency considered all relevant factors. Identifying
the relevant factors is a question of legal interpretation (with strong or weak deference based on Chevron or
Skidmore). It includes the analysis of which factors a statute [usually the enabling act] requires an agency to consider
and which factors it should not consider. If an agency fails to consider one relevant factor, or it takes into account an
improper factor, the reviewing court is likely to set aside the action as arbitrary and capricious. The PBGC case set
some limits to this principle as to arguably relevant statutory policies, particularly ones that do not arise form the
enabling act being enforced by the agency.
The clear error of judgment part of judicial review focuses on the agency exercise of discretion and looks at the
actual choice made. Here, facts, policy judgments, and discretion may all be called into question. When the court
decides that there has been a clear error of judgment by the agency, the court will set aside the agency exercise of
discretion under the arbitrary, capricious, abuse of discretion test. A modern court is more likely to hold that the
agency explanation is inadequate than to decide that the agency decision is unacceptable. The clear error of
judgment test is NOT the same as the clearly erroneous test for judicial review of fact finding by judges under FRCP
Rule 52(a).
Agencies are given greater deference on the imposition of sanctions than would be the case with other exercises of
discretion. In the Butz v. Glover case, the Supreme court upheld a 20 day license suspension by the USDA against an
agricultural licensee that had negligently weighed livestock. This was the first license suspension issued by the
agency for negligent conduct. In the past, only intentional or flagrant violation had led to license suspensions. The
court of appeals had reversed the suspension decision because of disparate treatment, but the Supreme Court reversed
the court of appeals. The supreme court held that the agency choice of sanction should be deferred to unless
“unwarranted in law or without justification in fact.” There was no legal requirement that licensee’s be treated
uniformly nor that license suspensions be limited to intentional or flagrant violations. Here, there was a factual basis
for the suspension because the licensee has been warned about short weighting in the past. The determination of what
remedy is appropriate in the circumstances is for the agency not the reviewing court. Thus, there is greater judicial
restraint in this area of agency decisions than in other areas. Occasional exceptions include the Morgan v. HUD case
at the end of note 3, page 576.
POLICY CHOICES IN RULEMAKING:
- Agencies are delegated authority by Congress to make policy choices as part of their mission to enforce the enabling
act. Some policy choices are not reviewable at all. An example would be an agency decision not to enforce the
enabling act in a certain set of circumstances [see Heckler v. Chaney. CB page 626, which applies the agency
discretion exception]. With other policy choices, such as enforcement or audit guidelines developed by an agency,
agencies have broad discretion to develop and implement those guidelines. The courts will defer to the agency use of
those guidelines. Manu of these guidelines are not even published to as to aid in the enforcement of the law.
However, most agency policy choices are subject to judicial review under the arbitrary, capricious, abuse of
discretion test for judicial review. Sometimes that review is very deferential (like rational basis review in
constitutional law). Other times, there is much greater scrutiny with so called hard look review. Even with hard look
review, the courts are limited as to what they can do. The reviewing courts can reverse the agency decision and
remand the matter back to the agency. The court can not substitute its own preferred policy choices for those of the
agency.
- State Farm Case: Facts: The NTMVS Act of 1966 delegated to the DOT Secretary or his delegate (NHTSA) the
authority to issue motor vehicle safety standards that satisfy statutory requirements [15 U.S.C. Section 1392(a)]. The
safety standards “shall be practicable, shall meet the need for motor vehicle safety, and shall be stated in objective
terms.” NHTSA was delegated the authority to adopt these standards by the DOT secretary. If the standards were
adopted as legislative rules, then they would have had the full force and effect of law. They would have to be
complied with by the auto industry. However, the statutory mandate delegated policymaking authority to the agency
to decide what policies met the statutory requirements. In part, this is based upon presumed agency expertise. In part,
it is based upon using rulemaking as a means to obtain widespread input for the various affected interests, including
the auto manufacturers, the auto insurance industry and consumer interests. Congress gave the agency the mandate to
study this issue and come up with safety standards. What makes this a policy choice by the agency? The way the
statute is worded? The nature of the mandate itself? The need for agency expertise? All of the above?
o Appeal: In making the rescission decision, the agency also had cost concerns (1 billion dollars to implement)
and was afraid that mandating automatic restraints would backfire and there would be greater public
resistance to mandated safety measures. The agency decision to rescind Standard 208 was challenged in the
court of appeals by the auto insurance industry. The D.C. Circuit held that the rescission decision was
arbitrary and capricious. The supreme court affirmed the decision of the court of appeals. The Court held
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that because safety standards were to be promulgated using Section 553 notice and comment rulemaking
procedures, both the adoption and the modification or rescission of a safety standard, such as standard 208,
was reviewable under Section 706(2)(A) to decide whether it is “arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with law.” Depending on the issues raised, judicial challenges to rules
adopted under Section 553 may be reviewed under the question of law independent judgment standard of
review (section 706(2)(B),(C), or (D). However policy choices made by agencies that are adopted as rules
are usually reviewed under section 706(2)(A).
o Supreme court analysis: In affirming the arbitrary and capricious determination, the Court engaged in what
has become known as so-called hard look review. The court carefully examined the agency explanation for
reaching the rescission decision, and found it to be inadequately reasoned. The court rejected the auto
industry argument that rescission decisions should be judged by the more deferential standard used when
agencies refuse to promulgate rules in the first place. Decisions to revoke safety standards are subject to the
same review test as decisions to establish safety standards under the NMVS Act and the APA. Revoking an
existing regulation is different than not acting at all. A revocation is a reversal of judgment by an agency that
must be justified by a reasoned analysis explaining the change in direction. While agencies need flexibility,
changes in current policy have to be justified by the rulemaking record. The court restated the traditional
approach to arbitrary and capricious review standards [see the two full paragraphs on page 584 before
Section V of the court opinion]. In affirming that the rescission was arbitrary and capricious, the supreme
court focused on the issues related to airbags and also seatbelts.
o Airbag analysis: The supreme court noted the absence of any discussion in the rescission decision of the
alternative of requiring the use of airbag technology in place of automatic seatbelts. When the agency
decided to rescind the passive restraint requirement, it did not explain why using airbags was not a good
alternative. It should have done so. Its failure to analyze the airbags only option makes its explanation of
why it dropped the safety standard requirement inadequate. The agency did not explain why it exercised its
discretion in a particular way. [See the excerpt from the Burlington opinion toward the bottom of page 585].
Auto industry opposition to airbags and preferences for detachable seatbelts is not a sufficient justification
by itself for the agency to rescind Standard 208. Safety mandates can be technology forcing. None of the
reasons raised on judicial review for why the agency did not adopt a mandatory airbag standard can be
considered by the court because these reasons were not discussed by the agency in the rescission proceeding.
They are post hoc rationalizations and can not considered under the principles from the Chenery case.
o Automatic seatbelts analysis: The court also held that the rejection of automatic seatbelts was also arbitrary
and capricious because the agency did not provide a reasoned explanation for why they made that decision.
The agency too quickly dismissed the benefits of automatic seatbelts. The agency failed to adequately
support its conclusion that automatic seatbelts would not lead to a significant increase in seatbelt usage by
motorists. They failed to analyze the continuous seatbelt option in its own right and the likelihood that it
would increase seatbelt usage. With greater seatbelt usage, the cost comparisons balance out more favorably
with the expected benefits. The agency did not also explain why the public would have the same adverse
public reaction to passive seatbelts as they would have had to ignition interlock devices.
o Outcome and partial dissent: The court reversed and remanded [See Section VI on page 589] and sent the
matter back to the agency for further consideration. On remand, the agency is not required to adopt airbags,
or to readopt Standard 208 with automatic seatbelts. The agency has discretion to do so, but is not requited
to do so. The agency can reach the same decision a second time so long as it provides a more fully developed
reasoned explanation for its decision. The partial dissent discusses the impact of a changed presidential
administration on agency policy
Open Record versus Closed Record: —Judicial review of agency decisions under the federal APA when formal
adjudication and formal rulemaking procedures are used by the agency is based upon a closed record. That is, the
reviewing court can only consider the materials considered by the agency. There are narrow exceptions under which
courts can consider new evidence on judicial review (eg, constitutional challenges to the agency structure that would
normally not be part of the adjudicatory hearing record). Notwithstanding that, the normal review is based upon the
closed record, only the materials considered by the agency. Historically, informal adjudication was not reviewed
based upon a closed record. In some cases, such as Overton Park, no agency record was compiled at all. That is not
true today. Federal law today mandates that judicial review of informal adjudication be based upon a closed record.
See the IMS, P.C. v. Alvarez case excerpt on page 685. There are four exceptions that are narrowly applied. See the
bottom of page 685.
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o
Most states, including California [See Western States Petroleum case cited in the note] follow the open
record approach for informal or ministerial actions. However, informal rulemaking, whether at the federal or
state level follows the closed record approach.
AVAILABILITY OF REVIEW:
- Preclusion of judicial review: Agency action is presumptively judicially reviewable. However, Federal APA Section
701(a)(1) provides for preclusion when “statutes preclude judicial review”. This is contrary to the normal
presumption, but Congress has authority to limit judicial review of some types of claims, particularly statutory
claims. If a statue expressly precludes judicial review of statutory claims, the court will enforce that express
preclusion. This is because the presumption of reviewability is rebuttable not conclusive. However, if a statue is
silent on whether or not specific types of decisions are judicially reviewable or not, most courts will apply the
presumption of reviewability and review that decision. However, the courts will not enforce statutes that preclude
constitutional review.
- Bowen v. Michigan Academy: Facts: Family physicians challenged HHS regulations authorizing lower Medicare
payments to allopathic family physicians under Medicare Part B. HHS argued that judicial review was precluded
because judicial review was not available for amount determinations under Part B. HHS argued that this statutory
omission precluded review of regulations that relate to the determination of amounts payable to part B providers. The
Supreme court rejected this argument and held that the strong presumption that judicial review is available for
administrative agency action applied to this case. To rebut that presumption for statutory review, there must be clear
and convincing evidence that Congress intended to preclude judicial review. There is not such evidence in this case.
The absence of judicial review to contest amount determinations under part B does not preclude judicial review of
regulations providing for the method of making Part B determinations.
o Implied preclusion: [CB, page 712]The U.S. v. Erika case was distinguished because the Part B claims that
were subject to exclusive review by insurance carriers were trivial in comparison to the major regulatory
challenges raise in the Bowen case. Thus, preclusion of judicial review of trivial claims is not the same as
preclusion of regulatory review challenges like those made in the Bowen case.
o Interpreting preclusive statutes: [CB page 713] courts will interpret preclusion statues in ways that will
allow some basis for judicial review. See S v. P case (treating statutory language stating that agency action is
final is interpreted to mean that agency action is final in the executive branch and this does not preclude
judicial review)
o Preclusion of constitutional claims: [CB, page 714]. The supreme court usually interprets preclusion of
judicial review statutes to not preclude constitutional review. See the Bowen footnote, and the Webster v.
Doe discussion in note 3.
o Time limits: [CB, page 715-716] Pre-enforcement review of rules is usually limited by short statutes of
limitations. In some circumstances the courts will allow substantive challenges to rules in enforcement
proceedings, but not procedural challenges
- Agency Discretion Exception: Federal APA Section 701(a)(2) recognizes that agency action “that is committed to
agency discretion by law” is not judicially reviewable. This contrasts with agency action that is reviewable under the
abuse of discretion standard in Section 706(2)(A). Agency enforcement discretion is similar in concept to the
doctrine of prosecutorial discretion in deciding what cases to charge and prosecute in the field of criminal law.
However, congress can constrain agency enforcement discretion by setting standards for enforcement or enforcement
mandates.
- Heckler v. Chaney: Facts: A death row prisoner petitioned the FDA to take enforcement action against states that
used lethal injection drugs for capital punishment. The prisoner claimed that the drugs had not been approved by the
FDA as “safe and effective” and thus use of the drugs violated the FDCA. The FDA commissioner refused to take
enforcement action, partly based on a different reading of the FDCA and also based upon agency enforcement
discretion when there is no serious danger to public health. The lower court found that the agency decision was
judicially reviewable and was an abuse of discretion. The supreme Court reversed.
o The court interpreted the agency discretion exception to apply in circumstances in which there is no law to
apply, that is no meaningful statutory standards against which to measure the exercise of agency discretion.
Agency refusals to take enforcement action are within the agency discretion exception. The presumption is
that these are not judicially reviewable. See the two full paragraphs on page 629 for the courts reasons for
this approach. See also note 2, page 627, for the separate issue of agency discretion not to invoke
rulemaking proceedings [See Mass v. EPA for the law governing that issue]. Congress could mandate
enforcement priorities in the enabling act but did not do so here. If there were statutory enforcement
priorities, then judicial review would likely be available because there would be law to apply.
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o
You can do motion to re-open to the agency in order to win in the administrative level instead of taking the
harder road of going to court.
- Markgraf case summary: the court “held that: (1) the Secretary of Agriculture is required to implement the section
providing that the Secretary may permit deferral of repayment or may forgo foreclosure on loans granted by the
Farmers Home Administration; (2) the Secretary was not required to implement the section by regulations; and (3)
there is no requirement that personal written notice of the availability of deferral relief be given to borrowers.
- Agency Inaction & Delay: Section 706(1) gives a reviewing court the authority to “compel agency action unlawfully
withheld or unreasonably delayed.” This review provision is easier to implement if there is a statutory deadline for
an agency to complete a particular type of action. For example, if an agency is required to adopt rules by a pre set
deadline, the reviewing court can compel the agency to complete the rulemaking process within the deadline or
shortly thereafter. Similarly, if there is a statutory deadline for an agency to compel an adjudicative decision, a
similar remedy exists. Usually, the challenging litigant will seek declaratory and injunctive relief. If the agency has
missed the deadline before the lawsuit is filed, the court will require the agency to complete the process as quickly as
possible. The courts will sometimes have to prod the agency to complete the process. However, these types of
decisions are discrete agency actions that are subject to Section 706(1) type of review. If agency action is not
sufficiently discrete, then 706(1) compulsion is not available.
- Norton v. SUWA: Facts: In this case, a public interest organization, SUWA, sued the Bureau of Land Management
(BLM), an agency within the US Department of the interior, over BLM’s stewardship of public lands, some 23
million acres, in the state of Utah. BLM’s land use management is based upon multiple uses under FLPMA. BLM
is required to strike a balance between a wide variety of uses, many of which may not be compatible. BLM has
adopted resource management plans (land use plans) using notice and comment rulemaking. BLM faced a
challenging set of incompatible uses: 1) wilderness protection; versus 2) ORV recreational uses. SUWA sued the
agency (and others) for declaratory and injunctive relief for BLM’s failure to act to protect public lands from
damages caused by ORV use. SUWA sought relief under Section 706(1) to compel the BLM to act. SUWA claimed:
(1) that BLM had violated its non-impairment obligation by allowing degradation in certain WSA’s (wilderness
study areas); and 2) BLM had failed to implement ORV use (restrictions) in its land use plans.
o Court holding: The district court had dismissed SUWA’s lawsuit, but the 10th Circuit Court of appeals
reversed. The Supreme court reversed the 10th Circuit and remanded back to the agency. As to the first claim,
that BLM should ban ATV use as part of its mandate to protect WSA’s, the supreme court held that the
statute was mandatory as to the object to be achieved, wilderness preservation, but the statute gave the
agency the discretion as to how to achieve that goal. The statute does not mandate a ban on ATV use. The
second claim was that the BLM failed to comply with land use plan provisions in failing to conduct an
intensive monitoring program focusing on ORV use, in the Henry mountains area. However, the court held
that land use plan statements were not legally enforceable commitments. Land use plans are statements of
agency priorities not commands to be compelled by reviewing courts. Too close of a judicial supervision of
these plans would be detrimental and would lead agencies to adopt vaguer plans in the future.
STANDING:
- Standing requirements: Standing requirements focus on the ability of a particular plaintiff to file a lawsuit
challenging governmental action. Parties who are directly impacted by governmental action, including regulated
parties, always have standing. These parties can challenge agency rules that apply to them, agency adjudicative
action against them, and agency law enforcement actions, such as inspections and subpoenas that apply to them.
Parties who were indirectly affected by agency action (such as competitors of licensees- Uber v. Yellow Taxi) were
less likely to have standing under federal administrative law principles unless a statute conferred standing on those
parties. Modernly, standing law is broader but a challenging party must show that they are aggrieved and adversely
affected by agency action (Federal APA Section 702).
- Constitutional standing requirements: In federal administrative law, standing requirements are part of the Article III
limitations on the subject matter jurisdiction of the federal courts. Those limitations stem from the “case or
controversy” language in Article III. Concepts that are part of this include “justiciability”, “standing”, “ripeness, and
mootness” and a few other technical doctrines such as “political question.” Our focus here will be on standing.
Because standing is an aspect of subject matter jurisdiction, standing issues must be decided before the merits of a
lawsuit. At a minimum, a plaintiff must have a stake in the lawsuit (e.g., “an injury in fact”)to meet standing
requirements.
- Lujan Case: Outer edges of standing
o Facts: The Interior secretary adopted a rule that limited Endangered Species Act (ESA) consultations by US
funding agencies with the Interior Department to domestic US projects, not international projects. As a
result, USAID funding for international projects that allegedly threatened the habitat of the Asian elephant
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and leopard in Sri Lanka, and the Nile crocodile in Egypt, were not subject to ESA consultations with
Interior. The rule was challenged in court by Defenders of Wildlife, an environmental advocacy
organization.
o Standing requirements: the US Supreme Court held in several cases that three requirements must be met for
constitutional standing: 1) [Injury]“injury in fact, an invasion of a legally protected interest which is (a)
concrete and particularized and (b) actual or imminent not conjectural or hypothetical.” [CB, page 739]; 2)
[Causation]“causal connection between the injury and the conduct complained of, the injury has to be fairly
….traceable to the challenged action of the defendant and not … the result of the independent action of some
third party not before the court.” [CB, page 739]; and 3) [Redressability] “ …it must be likely, as opposed
to merely speculative, that the injury will be redressed by a favorable decision….” [CB, page 739].
o Holding: In Lujan, the Supreme court reversed the court of appeal’s denial of the summary judgment motion
brought by the Secretary of the Interior. The motion was brought on lack of standing grounds. The court
found that injury and redressability were not satisfied. Plaintiff Defenders of Wildlife were not able to show
that any of its members were injured or directly affected by the asserted injury (increased rate of extinction
of endangered species). The two Defenders members who expressed a desire to someday return to the
countries in which the endangered species resided but who had no concrete plans to do so could not satisfy
the “actual or imminent injury” requirement. Without members who could satisfy the test, the organization
did not have standing to assert members interests. (plurality opinion) As to redressability, the Defenders
showing was also inadequate. The funding agencies were not parties to this lawsuit and thus would not be
bound by any court decisions favorable to plaintiffs. Also the funding agencies provide only a small fraction
of funds compared to the total cost of the development projects. Eliminating this funding might not stop the
project. The court majority rejected other standing theories including the “procedural injury” theory. Parties
that raise generalized grievances about government do not satisfy the standing requirements.
 —Note 1. [CB, page 744-745] Injury in fact: What is sufficient to satisfy “imminent” injury.
Probability is not enough (Clapper case stated a “clearly impending” test). However, “substantial
risk” of injury was enough in the Monsanto case (injury alleged was contamination of organically
grown alfalfa if genetically modified alfalfa seeds were permitted to be sold).
 —2. Note 2. [CB, page 745-746] Associational standing: Associations [organizations] can sue on
behalf of its members, so long as at least one member of the group can meet the injury in fact test.
See the Hunt case for the three requirements for associational standing. A lot of public interest
litigation is brought by associations that have a variety of perspectives.
 —Note 3 [CB, page 746-747] Public Actions: Many of the standing cases are so-called “public
actions” in which ideologically motivated plaintiffs seek to compel government to do something,
often to regulate others. In federal courts, public actions can not be brought unless an individual, or a
member of a group, satisfies the standing requirements. See Sierra Club v. Morton discussed in this
note.
 —4. Note 5 [CB, page 748-749] Mass. v. EPA: The supreme court (5-4) recognized that the state of
Massachusetts had standing to protect its coastal property which the state alleged was being
consumed by rising sea levels caused by global warming. The state’s standing was enhanced because
it was acting as a quasi sovereign litigating on behalf of its citizens. The three part standing test was
satisfied in this case. Interestingly enough, the judge in Texas v. United States relied upon the Mass
v. EPA decisions in support of his ruling that Texas had standing to challenge the DAPA program.
STANDING-FINAL AGENCY ACTION:
- APA Standing= The first sentence of section 702 of the federal APA (5 U.S.C. Section 702) provides: “A person
suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the
meaning of a relevant statute, is entitled to judicial review thereof.” Whether this statute codified existing standing
law or changed existing standing law, was answered (yes it changed existing law) in the next case, ADPSO v. Camp
- APDSO Case: Facts: Petitioners (ADPSO) were data processing service companies who sold their services to
businesses. ADPSO challenged a ruling of the Comptroller of the currency that allowed national banks (those
regulated by the federal government) to offer similar data processing services. The effect of the ruling was to add
national banks as competitors with ADPSO companies for data processing business. ADPSO challenged the ruling as
violating the National Bank Act. In this era, banks and savings and loans were heavily regulated. Banks were
regulated under the Glass Steaggel Act, which separated banks that performed commercial banking from banks that
did investment banking. The lower courts dismissed the case for lack of standing but the Supreme court disagreed.
o Holding: The Supreme Court held that ADPSO satisfied standing requirements. First, they properly alleged
that the Comptroller of the Currency ruling caused them injury in fact, economic in nature. They alleged that
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competition by national banks in the provision of data processing services that they also provided would
cause them future losses in profits. They also alleged that one bank (ANB&TC) was currently performing
data processing services for two prior customers of ADPSO. Second, the Supreme court added what is called
the zone of interests test as a second standing requirement. The court held that the ADPSO economic
interests were within the “zone of interests” protected by the relevant banking regulatory statute.
o Holding (cont.): The applicable banking statute was Section 4 of the Bank Service Corporation Act of 1962
which provided that : “ No bank service corporation may engage in any activity other than the performance
of bank services for other banks….” The court held that this statute arguably brought a competitor (like
ADPSO) within the zone of interests protected by the statute for purposes of standing. The court also held
that judicial review was not precluded, that the two banking statutes (the other statute was the National Bank
Act) were “relevant” statues within the meaning of section 702, and that ADPSO, as competitors of national
banks providing similar services, are “aggrieved” persons, who are entitled to judicial review under Section
702. Other questions, such as whether the banking regulatory agency violated the banking legislation with
this ruling, were to be decided on the merits.
o zone of interests test: the zone of interests test is derived from the “within the meaning of a relevant statute”
language from Section 702 0f the APA. The zone of interests test adds a second element to the standing test
(beyond the injury in fact test).
o zone of interests test application: The zone of interests test has been applied inconsistently by the US
Supreme Court.
Timing of Judicial Review=
o Final Agency Action: This requirement operates similarly to the final judgment rule in civil litigation ( and
the similar rule in criminal litigation). Ordinarily, a litigant must wait until the agency has fully completed its
decision making before filing an appeal challenging agency action. Interlocutory review of agency
decisions in the middle of the agency process ( such as an evidentiary ruling in the adjudicatory hearing) is
rarely available both in civil litigation and in administrative law judicial review. The finality rule is codified
in the Federal APA, 5 U.S.C. Section 704.
o U.S.C. Section 704 provides that: “Agency action made reviewable by statute and final agency action for
which there is no other adequate remedy in a court are subject to judicial review. A preliminary, procedural,
or intermediate agency action or ruling not directly reviewable is subject to review on the review of the final
agency action. Except as otherwise expressly required by statute, agency action otherwise final is final for
the purposes of this section whether or not there has been presented or determined an application for a
declaratory order, for any form of reconsideration, or, unless the agency otherwise requires by rule and
provides that the action meanwhile is inoperative, for an appeal to superior agency authority.”
FTC v Standard Oil: Facts: The FTC issued a complaint against major oil companies including SoCal (Chevron)
alleging that the commission had “reason to believe” the companies were engaging in unfair competition. The FTC
had to make a statutory finding of “reason to believe” before filing the complaint against the companies. SoCal filed
a motion to dismiss the complaint before the FTC on grounds that the agency did not in fact have reason to believe
that SoCal had violated the Act, but the FTC denied the motion. SoCal then filed a lawsuit in the district court
seeking judicial review of the FTC’s “reason to believe” finding. The issue is whether judicial review of the FTC
dismissal while administrative adjudication is pending before the FTC is “final agency action” within the meaning
of Section 704. The US Supreme court held that the complaint issuance was not final agency action under Section
704 not was it otherwise “directly reviewable” under section 704.
o Holding: In holding that the FTC issuance of the complaint was not final agency action, the Supreme court
followed a pragmatic test, that final agency action happens when the agency makes a “definitive statement of
position.” Issuance of a complaint with the “reason to believe” finding is not a definitive statement of
position. It is a threshold position of the agency that SoCal can challenge by going through the administrative
process before the FTC. Once the FTC proceeding is completed and a final decision is issued SoCal can then
seek judicial review of the outcome of the administrative proceeding. In contrast, publication of final agency
regulations by the FDA Commissioner was a definitive statement of the position of that agency according to
the Abbot Labs case discussed in the FTC opinion.
o Holding [cont.]: The second part of the pragmatic finality test followed by the Supreme court asked whether
the agency action would have a “direct and immediate…effect on the day to day business of the complaining
parties” (quoting from the Abbott Labs case [CB, page 763]. In contrast to Abbott Labs, in which new
labeling requirements were required to be complied with immediately or the regulated companies would face
substantial penalties, SoCal did not face any similar legal or practical effect as a result of the issuance of the
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complaint except for the substantial burden of responding to the complaint. This burden is different from the
burdens usually associated with compliance with final agency action.
o Holding [cont.]: Further, allowing immediate review would interfere with the agency adjudicatory process
and would unduly burden the reviewing courts. It would delay the resolution of the ultimate issue before the
agency. Other litigants would take the same route if immediate review were allowed. While SoCal may have
exhausted administrative remedies by asking the FTC to withdraw its complaint before SoCal went to court,
finality is a separate requirement for judicial review that is not satisfied here. SoCal also made an irreparable
harm argument based on the burden (expense and disruption) of defending itself in the FTC proceeding but
the court rejected that argument. Finally, SoCal made the argument that the “reason to believe” ruling would
be effectively unreviewable on appeal from a final decision of the FTC but the court rejected that argument
as well.
o See the Bennett v. Spear and Sackett v. EPA cases discussed in this note. The Bennett court summarized the
case law under Section 704 as to finality. There were two elements: 1) the agency action must be the
“consummation of the agency’s decision making process”; and 2) the action must determine legal rights and
obligations from which “legal consequences will follow” . In Sackett, the Supreme court applied this test to
finds that an EPA issued ACO was final agency action subject to judicial review.
EXHAUSTION OF AGENCY REMEDIES:
- Exhaustion of Administrative Remedies: Exhaustion addresses the issue of whether an agency administrative remedy
that is available to a party must be complied with before a regulated or other private party can go to court to
challenge agency action. The general rule, which is subject to a number of exceptions, is that the administrative
remedy must be exhausted first before the challenging party can go to court to challenge the agency action. A failure
to exhaust an available administrative remedy will lead the court to dismiss the judicial review proceeding. In that
case, the matter may be remanded to the agency so that the private party can now complete the administrative
process by invoking the administrative remedy that was previously skipped. However, if there are time limits for that
remedy to be requested, and those time limits have passed or ended, then the private party will not be able to invoke
that remedy. In that circumstance, the private party is out of luck, and the agency decision will then be final and
enforceable, and not subject to further judicial review. This can in some cases lead to a harsh result (See PortolaGonzalez case).
- Exhaustion is a very technical and complex doctrine. Exhaustion issues arise in matters that are typically subject to
administrative agency authority or jurisdiction. In this context, the courts usually act in an appellate capacity only.
For example, if a litigant wants to challenge the denial of government benefits, such as social security disability, or
unemployment, or welfare benefits, they can not initially file a lawsuit in the US District Court [or applicable state
court]. They have to pursue the administrative remedies that are available with the benefit determining agency, which
may be the Social Security Administration, the state unemployment office, or the state welfare office. Only after they
have completed the administrative process before the agency, can they go to court, but usually only to seek judicial
review of the agency decision.
- The number of administrative remedies that have to be exhausted before going to court can vary widely by agency.
For example, before a litigant can challenge a social security disability benefit denial, the litigant will be required go
through the following steps: 1) initial administrative determination; 2) reconsideration [a second level administrative
determination]; 3) an administrative hearing before an ALJ with a subsequent decision; and 4) administrative appeal
to the Social Security Appeals Council. Only then can the litigant seek judicial review in the applicable court [U.S.
district court for SSA cases]. In contrast, a plaintiff who is seeking to challenge employment discrimination in
private employment has one administrative step to complete, securing a right to sue letter from the EEOC, or from a
comparable state level agency, before filing a lawsuit in the district court [or comparable state court]. If there is no
employment discrimination claim brought by the employee, then the entire lawsuit is brought in the court system and
there
- Employment related litigation provides another example. An employee in the private sector who files a lawsuit
against their private sector employer to challenge employment conditions, such as compliance with state laws
governing overtime, lunch breaks of other conventional employment law issues, or to challenge their termination
from employment, can go directly to the California Superior Court to have their claims determined. An
administrative agency regulation, such as a Wage Order from the California Industrial Welfare Commission, may
provide a basis for one of the employee’s claims, but the civil court system will decide the plaintiff’s claims not an
administrative agency. The superior court may have to interpret the regulation, or may have to decide whether the
regulation is consistent with the enabling act, but there is no administrative process for the employee to go through
before going to court. Once the Superior court reaches a decision in that case, the court judgment is then subject to
appellate review in the District Court of Appeal.
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However, a public sector employee that brings a similar employment law claim against their public sector employer
will not be able to go to the Superior court initially. That employee will have to exhaust administrative remedies and
contest the employment condition, or their termination, through an administrative process. If the employee works for
the State of California, and they are suspended or terminated, they have the right to an administrative hearing before
an Administrative Law Judge, and the final decision will be made by the State Personnel Board in California. If the
employee works for the City or County of Los Angeles. There is a similar administrative process and a final decision
by a city or county personnel or civil service commission. The public employee will not be able to use the discovery
procedures provided for in the Code of Civil Procedure, but rather will be limited by the more restrictive discovery
rule provided for in the California APA, or local administrative procedures, if the employer is a city or county
agency that is not subject to the California APA. Once the appropriate agency, board or commission makes a final
decision, then the public employee can go to the Superior Court to seek judicial review using the California
Administrative Mandamus statute.
- The major policies that support exhaustion requirements include: 1) lessen the burden on overworked courts when
effective administrative remedies are available; 2) give administrative agencies an opportunity to exercise judgment
and discretion on matters within their areas of expertise without prior judicial interference; and 3) promote judicial
efficiency by facilitating development of a complete record that draws upon administrative expertise. When
exhaustion applies, the litigant must present all issues to the agency that will be later relied upon on judicial review.
Those issues must be fully presented to the agency at all of the prescribed stages of the administrative proceedings.
The litigant must complete all available administrative remedies, and must receive a final decision on the merits
before the agency. In California, the exhaustion requirement is jurisdictional, part of subject matter jurisdiction, and
thus can not be waived by the parties. Exhaustion doctrines are court developed law.
Exhaustion Exceptions:
- However, If a court recognized exception to exhaustion requirements is applicable, then the court will decide the
judicial review proceeding on the merits notwithstanding the challengers failure to exhaust administrative remedies.
o A. The administrative Remedy is unavailable or inadequate;
o B. The agency can not grant the relief sought or the procedures for obtaining the relief are inadequate;
o C. Exhaustion would be futile (narrow exception- must show its so clear cut agency won’t change their
position);
o D. Courts are vested with concurrent primary jurisdiction;
o E. The agency lacks subject matter jurisdiction [California rule];
o F. Facial constitutional attack on agency enabling act [California rule];
o G. Threat of irreparable injury [California rule];
o H. Public interest exception [California rule].
- Portola-Gonzales v. Secretary of the Navy: Facts: Portola Gonzalez (PG) was suspended without pay and then
terminated from her civilian employment position as sales manager of the Navy Exchange at the Roosevelt Roads
Naval Station in Puerto Rico for violating the Navy Exchange layaway policy that cost the exchange $ 197.32. PG
exhausted three of the four available administrative remedies, including a full evidentiary hearing, but did not pursue
the fourth and final administrative remedy, a final administrative appeal to a US Navy official in Washington, DC.
She skipped the last administrative appeal and sought judicial review in the US District Court. The District Court
granted summary judgment in favor of the Navy on two grounds: 1) PG’s failure to exhaust administrative remedies;
and 2) on the merits, holding that the termination of her employment was neither arbitrary nor capricious.
o Holding: The court of appeal affirmed the judgment granting summary judgment but only on exhaustion
grounds. The court of appeal held that the district court ruling on the merits was improper because none of
the recognized exhaustion exceptions applied to PG’s case. PG argued that the futility exception applied but
the court rejected the application of that exception concluding that pessimism about the outcome of the
fourth step in the administrative remedies is not sufficient to satisfy the futility exception. Thus, PG lost at
the court of appeal level on exhaustion grounds but not on the merits. Note that this was a federal case but
that the Navy proceeding is not subject to the federal APA, including Section 704, which in some
circumstances relaxes exhaustion requirements. Note that seeking reconsideration of an agency decision is
not required by exhaustion of administrative remedies rules. See Federal APA, Section 704.
RIPENESS:
- Ripeness: Ripeness is a part of the case or controversy requirement in Article Three of the US Constitution. Thus, all
federal courts, including those providing judicial review of the decisions of federal agencies, have to satisfy ripeness
requirements. Ripeness, and its counterpart, mootness, are aspects of case or controversy. A case is ripe is there is an
actual dispute between parties with adverse interests. However, an abstract disagreement is not a ripe dispute. In
administrative law, ripeness issues focus on whether the challenger of agency action must wait until the agency
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enforces its ruling or decision against that challenger to seek judicial review, or whether pre-enforcement review can
satisfy the ripeness test. A typical scenario is when a regulated private party may be threatened or potentially harmed
by anticipated agency action that has not yet occurred. This ripeness issue arises most frequently with challenges to
agency rulemaking proceedings.
Ripeness examples: Ripeness is not an issue when an agency has taken enforcement action against a regulated party,
or a government employee is terminated from their job, or when a government beneficiary benefits are being
terminated by an administrative agency. (See FTC v. Standard Oil, Portola- Gonzalez v. Secretary of the Navy,
Matthews v. Eldridge, or the the Farmers Insurance Exchange case). Ripeness is also not an issue when an agency is
seeking to enforce regulations against a party that is subject to those regulations. Pre-enforcement review of
regulations is another matter that straddles the line.
Abbot Labs v. Gardner: Facts: In this case, Congress amended the FDCA to require makers of trade name drugs to
also print the generic name for the drug on labels and other printed materials. Under the statute, the generic name
had to appear “prominently and in type at least as half as large as that used thereon for [the] proprietary drug.” The
purpose of this requirement was to raise public awareness of cheaper generic drugs that were identical to more
expensive trade name drugs. Generic drugs have the same chemical composition as trade name drugs and are thought
to have the same level of effectiveness for treatment of medical conditions. These drugs are much cheaper because
the generic manufacturer does not have to pay for the development and testing costs that new trade name drug
manufacturers have to spend to get FDA approval. Generally generic drugs become available after the expiration of
the patent protection period that is given trade name drug manufacturers that develop new drugs and receive FDA
approval for those drugs. During the patent period, only the trade name drug is available and this allows those drug
manufacturers to recoup their development costs.
o Facts [cont.]: In response to the statutory amendment, the FDA adopted a new rule that was assumed to be a
legislative rule and was therefore binding on the pharmaceutical industry. The rule promulgated an “every
time” requirement. This meant that every time the trade name appeared on a prescription label or on other
promotional materials the generic name had to also be included. The pharmaceutical industry filed a lawsuit
challenging the regulations on the grounds that they were inconsistent with the FDCA statute. The industry
sought declaratory and injunctive relief. Their lawsuit brought a pre enforcement challenge to the rules. The
industry did not want to wait until the rules were enforced against them. This was a classic case for
declaratory relief in that there was uncertainty about legal rights, and the declaratory judgment could prevent
harmful reliance by the industry. If the court found the rules to be invalid, then an injunction could be issued
blocking the enforcement of the rules.
o Lower Court Rulings: The court of appeals dismissed the appeal because of two issues: 1) pre-enforcement
review of FDA rules was precluded by statute; and 2) the regulation was not ripe for judicial review. If that
was correct, the manufacturers could only assert the invalidity of the rule as a defense to an enforcement
action brought by the government but could not obtain pre-enforcement review.
o Holding: The supreme court rejected the first rationale and held that Congress had not precluded preenforcement review of FDA regulations. The court went on to hold that pre-enforcement review of these
regulations satisfied the ripeness test for judicial review.
o Ripeness analysis: The Supreme Court adopted a two part test for assessing whether a pre-enforcement
challenge to agency rules was ripe: 1) the fitness of the issues for judicial decision [at the pre-enforcement
stage]; and 2) the hardship to the parties of withholding court consideration [at the pre-enforcement stage].
As to Test One, the court found that the issues were fit for judicial resolution because the issues were purely
legal, whether the FDA commissioner properly interpreted the statutory amendment to require the every time
regime codified in the administrative regulation. This issue was to be addressed based upon Congressional
intent. Note that this case was decided before Chevron. The interpretive issue would be decided by the courts
on their own. The court also held that the regulation was “final agency action” under the APA, Section 704.
The rule was published, was effective upon publication, and compliance by the industry with the terms of the
rule was expected. Violations of the rule can be punished by civil and criminal sanctions, and the FDA has
the authority to enforce the regulations. As to the second issue, hardship to the parties, the court held that the
impact of the regulations on the pharmaceutical industry is direct and immediate and thus judicial review is
appropriate at this time. The FDA expects immediate compliance by the industry with the terms of the rule.
The industry is faced with a tough choice: 1) either spend lots of money changing labels, throwing out old
labels, and investing in new printing type and new supplies; or 2) continuing to use the old labels that may
satisfy the statute but do not comply with the terms of the new regulation and thus risk imposition of civil
and or criminal penalties for non compliance. Declaratory relief avoids that dilemma by providing a
determination as to the legality of the regulation. If the regulation is found to be valid, then the industry
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o
o
o
could go forward with the new labelling. If the regulation is found to be invalid, then the industry can keep
using the old labels without fear of civil or criminal liability and penalties. Remember, this case arose well
before modern computer technology. The cost of new labels and new print type was far higher under that old
regime than is the case now.
The court denied pre-enforcement review of another FDA rule dealing with color additives in the Toilet
Goods case, decided on the same day as the Abbott Labs case [CB, page 784-785]. That rule was heled not to
be ripe for judicial review based on different facts that failed to satisfy the second hardship element. This
was because the color additive rule was not immediately enforceable.
Impact of Abbott labs holding: As a result of the Abbott labs case holding, pre-enforcement review of
legislative rules is routine today. In contrast, guidance documents are usually found to be unripe for
immediate review because they are not legally binding.
Note 5, CB pp 791-792, addresses the issues of judicial stays of enforcement of agency action pending
judicial review.
PRIMARY JURISDICTION:
- Primary Jurisdiction: This court developed doctrine has two branches: 1) exclusive primary jurisdiction in which
the administrative agency has the exclusive right to decide disputes and no original jurisdiction court lawsuit can be
brought to litigate the same disputes. Examples of this include Count I of the Attorney General’s lawsuit in the
Farmers Insurance Exchange case in which the AG sought judicial enforcement of the good driver discount mandate
in Insurance Code Section 1861.02. However, enforcement of that mandate is vested exclusively in the California
Insurance Commissioner. Thus, the civil lawsuit claim based on that statute was dismissed. Other examples of this
type of primary jurisdiction include the Abilene Cotton Oil case [cited in Farmers] in which the Supreme court
upheld the dismissal of a civil lawsuit challenging the reasonableness of rates charged to a shipper by a carrier
(railroad) that was subject to rate regulation by the Interstate Commerce commission. The court held that reparations
claims (essentially refund claims) were within the exclusive primary jurisdiction of the ICC, and could not be
brought in court. Another example of this type of primary jurisdiction includes the U.S. v. Western Pacific RR case,
cited in the Farmer’s case. This case turned on the construction of railroad tariffs for transporting “incendiary
bombs” (napalm). The supreme court held that the issue of tariff construction as well as the reasonableness of the
rates charged was within the exclusive primary jurisdiction of the ICC.
- 2) concurrent primary jurisdiction is the second type. Here, both the court and the agency have jurisdiction over
issues that have been brought in a civil lawsuit. The civil court has subject matter jurisdiction over the claims brought
by the parties. In these cases, the agency is nor typically a party to the lawsuit. However, one or more claims or
issues in the civil lawsuit overlaps with an area of agency regulatory jurisdiction. An example of this type of
jurisdiction is Count 2 of the Farmers Insurance Exchange lawsuit in which the Attorney General sued Farmers under
the unfair Business practices Act, Bus. & Prof. Code Section 17000, and sought injunctive relief and civil penalties.
Here, the court retains ultimate jurisdiction over the lawsuit but the lawsuit is stayed pending resolution by the
agency of the issue within the agency jurisdiction. Once the agency resolves that issue, then the stay is lifted and the
court lawsuit can move forward.
- No Primary Jurisdiction: Another variation is when an appellate court concludes that primary jurisdiction does not
apply because the issues in the court lawsuit do not require submission of the case to the administrative agency
because there is not a need for the agency to resolve issues of administrative or regulatory expertise before the court
decides the lawsuit. Nor are there fact issues that the agency has expertise in deciding. There is also not a need for
uniformity and consistency in result. The Nader v. Allegheny Airlines case (cited in the Farmers case) illustrates this
approach, as does the Merchants case also cited in the Farmers case. Note that in these cases, the agency is also not a
party to the lawsuit.
Farmer’s Case: Facts: The California Attorney General sued Farmer’s Insurance Company to require that the company offer
its customers good driver discounts. The first claim was based upon a provision of the Insurance Code, Section 1861.02,
which was added by a voter initiative. That claim was dismissed based upon the doctrine of exclusive primary jurisdiction.
The California Supreme court held that this statute could only be enforced by the Insurance Commissioner who is an elected
official that is the agency head for insurance regulation in the state of California. That agency regulates the insurance
industry, including the auto insurance industry in California. Thus, the California courts could not enforce this statute.
- The second claim was based upon another statute, Bus. & Prof. Code Section 17000 et. seq., the California Unfair
Practices Act. This act is enforceable by the California Attorney General, who can seek injunctive relief or civil
penalties for violations of the act. Private enforcement is also possible. This second claim was subject to the
concurrent primary jurisdiction doctrine. The California supreme court held that this claim should be stayed by the
courts pending resolution of the issue of whether the good driver’s discounts offered by Farmers complies with the
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-
-
-
-
statutory requirements. That issue will be decided by the Insurance Commissioner. After the administrative decision,
the superior court can lift the stay and resolve any remaining issues in the civil lawsuit. If the agency decides that the
discounts offered by Farmers satisfies the statute, then the lawsuit will not go forward. Once the stay is lifted, the
only remaining step will be to dismiss the lawsuit. If the agency decides that the discounts do not satisfy the statute,
then the lawsuit will go forward on the merits. The stay will be lifted, and the lawsuit will resume.
Use of Federal Case Law: The California Supreme court decision in the Farmer’s case relied significantly on Federal
case law governing primary jurisdiction. Two of the federal cases, Abilene And Western Pacific were exclusive
primary jurisdiction cases. In Abilene the need for uniformity of resolution was paramount. In Western Pacific, the
need for agency expertise was controlling. Two of the federal cases, Merchants, and Nader, were third variation or
no primary jurisdiction cases, in which the court did not grant a stay pending administrative agency resolution of an
issue in the lawsuit. In Merchants, the tariff issue was a question of law within judicial competence, there were no
disputed issues of fact, and there was no need for the exercise of agency expertise nor any need for uniformity of
result. In Nader, a lawsuit for fraudulent misrepresentation, there was also no need for agency expertise nor
uniformity of regulation and the courts were capable of deciding the relevant fraud issues in the case. Further, there
was also no administrative remedy available to the plaintiffs.
Holding: In staying the resolution of claim 2 of the lawsuit, the California Supreme Court held that the primary
jurisdiction doctrine (concurrent only): “advances two related policies: it enhances court decision making and
efficiency by allowing courts to take advantage of administrative expertise, and it helps ensure uniform application
of regulatory laws”. These two policies are the agency expertise and uniformity rationales for concurrent primary
jurisdiction. Both of these policies supported granting a stay of the court lawsuit in this case. Insurance rate making
raises “issues for which specialized agency fact-finding and expertise is needed in order to both resolve complex
factual questions and provide a record for subsequent judicial review.” Further, the Insurance commissioner has a
“pervasive and self-contained system of administrative procedure” to address these issues. [CB, page 796]. Fact
finding expertise and developing a record for judicial review are other rationales noted by the court for granting the
stay.
Analysis: Plaintiffs filing civil lawsuits usually oppose the court granting a stay under the concurrent primary
jurisdiction doctrine. That is because of two reasons: 1) the administrative process can be slow and cumbersome
thereby delaying resolution of the court lawsuit; and 2) the defendant is usually a party that is regulated by the
agency with primary jurisdiction. In extreme cases, there may be regulatory capture by regulated parties, so that the
agency is much more hospitable to the defendant than a court would be. [For a contemporary example, contrast Uber
or Lyft versus Yellow Cab taxi company in a jurisdiction such as New York City, that has a City Taxicab
Commission.] In less extreme cases, the defendant will still usually have an advantage over the plaintiff because of
greater familiarity with the administrative process at the agency. Plaintiffs will endure the court stay in hope of
eventually being able to prevail in court and receive remedies that are not available in the administrative process.
Western Pacific quote: Contrast between exhaustion of administrative remedies and primary jurisdiction [CB, page
795]: “ ‘Exhaustion’ applies where a claim is cognizable in the first instance by an administrative agency
alone; judicial interference is withheld until the administrative process has run its course. ‘Primary jurisdiction,’ on
the other hand, applies where a claim is originally cognizable in the courts, and comes into play whenever
enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within
the special competence of an administrative body; in such a case the judicial process is suspended pending referral of
such issues to the administrative body for its views.”
5. Agency Interpretations:
a) like the Chevron Doctrine
D. Administrative Agencies
1. What Are Agencies? a) Federal Administrative Procedure Act 5 U.S.C. Section 551 (1946): For the purposes of this subchapter (1) “agency” means each authority of the Government of the United States, whether or not it is within or
subject to review by another agency, but does not include (a) the Congress;
(b) the courts of the United States;
(c) the governments of the territories or possessions of the United States;
(d) the government of the District of Columbia; or except as to the requirements of section 552 of this
title;
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(e)
agencies composed of representatives of the parties or of representatives of organizations of the
parties to the disputes determined by them;
(f) courts martial and military commissions;
(g) military authority exercised in the field in time of war or in occupied territory; or
(h) functions conferred by by sections 1738, 1739, 1743, and 1744 of title 12; chapter 2 of title 41; or
sections 1622, 1884, 1891-1902, and former section 1641(b)(2), of title 50, appendix
b) Basically, an agency is everything that isn’t:
c) a court (Judicial)
d) Congress [Legislative]
e) the President [thanx in large part to Franklin v. Massachusetts, 505 U.S. 788 (1992).
Versus 2010 Revised MSAPA 102(3)
Agency means a state board, authority, commission, institution, department, division, office or other state
entity that is authorized by law of this state to make rules or to adjudicate. The term does not include the
Governor (because he doesn’t sign off on regulations, and is not an executive branch), legislature or
Judiciary. ALL THE AGENCIES ARE EXECUTIVE BRANCH
2. Appointments: We have a special system to appoint officers and inferior officers of the U.S.. Article II says
that officers of the U.S. government are appointed by the President with advice and consent of the Senate.
Article III says that for inferior officers, they can only be appointed by the President, Department Heads, or
Courts of Law.
a) Freytag v. Commissioner of Internal Revenue, 501 U.S. 868 (1991): So is the special trial judge in tax
court an inferior officer? And if so, can they be appointed by the Chief Judge of the Tax Court [as if the
Chief Judge were a department head]? In writing for the majority, C.J. Rhenquist concluded that they are
inferior officers, but because when Article III said “Courts of Law” it isn’t limited to Article III Courts of
Law, and it can be interpreted to include Article I Legislative Courts, the Tax Court counts. So, the Chief
Judge of the Tax Court is a Department Head. So, the IRS statute that provided for this appointment is
legitimate and enforceable.
3. Agency Characteristics:
a) EXECUTIVE BRANCH- admin agencies are located in the executive branch of federal and state
government. Agency characteristics include
(1) Law enforcement responsibilities: including inspections, searches, audit power, subpoena power,
benefit granting powers, regulatory powers.
(a) Example= Safety inspectors for OSHA or Mine Safety Agency inspect work places and cite
employers for violations of workplace safety standards).
(2) Appointment of agency heads: by the President (federal) or Governor (state) with advice and consent of
the Senate or state legislature
(a) Example= Attorney General or EPA administrator
(3) Cabinet Agencies: Policy preferences consistent with the President or Governor currently in office
(single head cabinet agencies); serve at the pleasure of the President or governor
(a) Example: State Department or Environmental Protection Agency
(4) Independent Agencies: policy independence for independent regulatory agencies that have multi
members boards (5-7 appointees) serving fixed terms in office with good cause removal standards and
political balance in membership (3 members are same political party as President and the other 2 are
not)  They set independent agencies because some agencies have large political influence, therefore
they made it independent from President so they can do their jobs effectively. They can’t disbar board
members for policy disagreements.
(a) Example= Federal Communications Commission or state public utilities commissions.
(5) Expertise in subject area of regulation: agencies are created to address specific public policy problems
by devoting full time attention to those problems as structured by Congress or a state legislature in an
agency enabling act (organic statute). Agencies have a permanent staff and budget, which allows the
development of expertise in addressing the problems that they are charged with regulating.
(a) Example= The environmental Protection Agency (EPA) or the CA Air Resources Board.
E. Agency Powers
1. Enforcement Powers= powers typically granted by agency enabling act including inspections, searches, audit
powers [executive powers]
2. Rulemaking Powers= authority to adopts rules granted by enabling act, but requires procedures for rulemaking
are governed by administrative law [Rulemaking powers agencies have are like legislative powers]
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3. Adjudicative Powers= authority to provide adjudicative hearings to resolve disputes granted by enabling act but
procedures used for adjudication governed by administrative procedure act applicable to the agency. Can go to
court only after agency decides on hearing [judicial powers]
F. Types of Agencies
Agencies have a variety of missions to carry out depending upon the enabling act that creates the agency and
gives the agency powers.
1. Industry Specific Regulation (i.e. public utilities)
2. Subject Specific Regulation (cutting across all industries) (i.e. FTC antirust law)
3. Benefit granting agencies (i.e. social security administration)
4. Licensing Agencies (i.e. Nuclear regulatory commission)
5. Labor Relations Agencies (i.e. national labor relations)
6. James Q. Wilson’s Four Periods of Bureaucratic Growth: James Q. Wilson asserts that there were four
periods in history when the political climate favored the rapid growth of regulatory agencies [and Oggy Ogden
added one period...]
Period
Focus
Key Acts Passed
1887 - 1890
control monopolies and rates
1. Interstate Commerce Act
2. Sherman Act
1906 - 1915
regulate product quality
1.
2.
3.
4.
1930 - 1940
extend regulation to cover various
socioeconomic areas, especially new
technologies
1. Food, Drug, and Cosmetic Act
2. Public Utility Holding Company
Act
3. National Labor Relations Act
4. Securities and Exchange Act
5. Natural Gas Act
1960 - 1979
Expand regulation to make America a
cleaner, healthier, safer, and fairer
place to live and work
1. Economic Opportunity Act
2. Civil Rights Acts of 1960, 1964,
& 1968
3. National Environmental Policy
Act
4. Clean Air Act
5. Occupational Safety and Health
Act
1978 - 1993
Deregulation movement as a reaction
to bureaucratic overexpansion
1.
2.
3.
4.
War on Terror
1. The Patriot Act
2001 - Present
Pure Food and Drug Act
Meat Inspection Act
Federal Trade Commission Act
Clayton Act
Paperwork Reduction Act
Air Deregulation Act
Radio and TV Deregulation Act
Banking Deregulation
II.
III. Separation of Powers
A. Two Viewpoints of Separation of Powers:
1. Watertight Compartment Theory: Each of the three branch of government maintains the monopoly on the
enforcement of its powers. Thus because most agencies are under the Executive Branch, their powers should be
restricted to those powers traditionally allocated for the Executive Branch. This is the more traditional view on
separation of powers. It’s not very practical however, as the rise in administrative agencies complicates the
execution of this theory due to a compounding of powers.
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2. Functionalism: This approach allows for permeability between the branches, arguing that Congress may by
statute adjust or alter the tripartite division of federal power so long as it does not undermine a core function or
responsibility of one of the branches. Under this theory, the Administrative Agency is permitted powers that
traditionally are allocated to each of the three branches of government.
a) Agency Executive Powers: Investigation, Inspection, Enforcement, Prosecution
b) Agency Legislative Powers: Rule Making, Interpretive Powers
c) Agency Judicial Powers: Adjudication
B. The Question of the Modern Allocation of Power: Compound Power Structures
1. Question for the Ages: If agencies have this compound nature, what is left of our theory of separation of
powers?
a) Answer: There are checks against their compound powers.
(1) each agency’s powers only extend so far as their enabling act provides
(2) there is ALWAYS an opportunity for judicial review after all administrative remedies have been
exhausted
(3) Congress can exert political power over agencies via the budget
(a) but really agencies are insulated from scrutiny and accountability
(b) over all there is little political influence
IV. Delegation of Powers: The basic principle governing administrative power is that of limiting agencies to the authority
delegated by statute.
A. Ultra Vires: The statute is the source of the agency authority as well as of its limits. If an agency act is within the
statutory limits (or intra vires) its action is valid; if it is outside them (ultra vires) it is invalid. This is why we can
call agencies arms of Congress - because they possess substantive powers because of a statutory delegation from the
legislature.
B. Exam Tip: Always ask yourself the following questions:
1. What powers are delegated?
2. Where did that delegation come from?
3. What limits are posed on the exercise of power?
4. Does this exercise of power fit within those limitations?
V.
Delegation of Executive Powers:
A. Removal Background:
1. Meyers v. United States, 272 U.S. 52 (1925): Prior to the 1920’s or so, the Postal Service was a large federal
beuracracy. Each district of the Post Office had a head that was appointed by the President. Congress then
passed a law that said certain postal officers couldn’t be removed without Congressional consent. The big S.C.
said Congress couldn’t create for itself the power to remove executive officials.
2. Humphrey’s Executor v. United States: A FTC Commissioner who had been removed by the President sought
back pay. The relevant statute said that only the President could remove him, and even then only with cause.
President Roosevelt tried to remove the Commissioner [because he was appointed by Coolidge] and said that he
didn’t need Congressional permission and that Congress couldn’t limit his removal powers. The S.C. said shut
up yes they could. They can’t give themselves the power but they can limit his.
B. Modern Removal Powers: Bowsher v. Synar, 478 U.S. 714 (1986): On December 12, 1985, the President signed
the Gramm-Rudman-Hollings Act, which was supposed to eliminate the federal budget deficit. The reporting
provisions of the act provided that each year, the Directors of the OMB and the CBO independently estimate what
they believe the deficit will be in the upcoming year. If that estimation puts the deficit higher than the targeted
federal deficit for the year, then the Directors of the OMB and the CBO would, again independently, calculate on a
program-to-program basis, what budget reductions were necessary. Then these two groups of people would jointly
report to the Comptroller General. After reviewing these reports, the CG would report his conclusions to the
President. The President would then issue a “sequestration” order mandating the spending reductions specified by
the CG. The CG was performing the role of executive branch official in all of this so the real question is - can the
CG do that while only being beholden to Congress? The answer I’m afraid, is NO. So Congress can’t give him
those duties...without accountability to the Executive branch.
C. The Independent Council Conundrum: In 1978, after Watergate, Congress passed the 1978 Ethics in Government
Act. The Independent Council Law comes from this.
1. Morrison v. Olson, 487 U.S 654 (1988): So this case questions the constitutionality of the IC Law. According to
this opinion, the I.C. are inferior officers because (1) they are subordinate to the Attorney General; (2) their
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duties are limited; (3) their jurisdiction is limited; (4) their tenure is limited. The issue here then, is with an
inferior officer, are we going to allow “inter-branch appointments” under the separation of powers theory? The
Big SC said in this instance, the inter-branch appointment was ok because judges appoint advocates from time to
time (special prosecutors, etc.). They rejected the separation of powers argument because, they said, the
Attorney General still controlled the Independent Counsel [too bad in FX that’s not true.]
a) Oggy & Kimec Don’t Buy It: When Congress gave the courts of law the ability to appoint, it was generally
presumed they’d be appointing judicial officials. And an independent prosecutor exercises an essentially
executive power - prosecution of the law.
b) Scalia didn’t buy it either. He says that if the Independent Counsel were removable by the Attorney General
then it would truly be an “inferior officer.”
D. Alternative Test for Inferior Officers: In Edmond v. United States, 520 U.S. 651 (1997), Scalia provides another
possible test for determining if an officer is an “inferior officer” for the purposes of the Appointments Clause. He
suggests that the term “inferior officer” connotes either someone with some higher ranking officer or some officer
below the President. Since the clause didn’t use the phrase “lesser officer” it can’t just mean that an inferior officer
is someone that occupies a position under some random officer with more power/responsibility or a higher rank.
“Rather, in the context of a clause designed to preserve political accountability relative to important government
assignments, we think it evident that ‘inferior officers’ are officers whose work is directed and supervised at some
level by others who were appointed by presidential nomination with the advice and consent of the Senate.”
1. Scalia, who dissented in Morrison, wrote the majority opinion in Edmond, noted that “Morrison did not purport
to set forth a definitive test for whether an office is ‘inferior’ under the Appointments Clause. To the contrary, it
explicitly stated: ‘We need not attempt here to decide exactly where the line falls between the two types of
officers because in our view [the independent counsel] clearly falls on the ‘inferior officer’ side of the line.”
VI. Delegation of Legislative Powers:
- Congress creates agencies to solve problems. Most administrative agencies are in the executive branch but have
quasi legislative powers. However, Congress may not delegate its entire legislative powers to agencies. All in all
though, administrative lawmaking powers have become fully comparable (both quantitatively and qualitatively) to
those exercised directly by the legislature. (Although quantitatively administrative exercise of legislative power
dwarfs the Congressional exercise of the same.) Law on delegation of legislative power has a vital relationship to the
proper diffusion of power in a democratic system. The foundation of a representative government is the position of
the legislature as the lawmaking organ of the polity.
- Separation of powers is part of the constitutional structure of our federal government [and all state governments in
the US]. Each of the three branches of the federal government have a primary constitutional function. The congress
has legislative powers [US Const., Art I, Section 1]. The President has executive powers [US Const., Art II, Section
1]. The US Supreme court and lower federal courts have judicial powers [US Const., Art III, Section 1]. The
structure of our US government was designed to limit the authority of government as a way to prevent tyranny.
- Legislative powers for congress include enacting legislation [such as the Dodd Frank Act and the Affordable Care
Act (Obama care)and adopting an annual budget for the federal government. These powers are subject to checks and
balances from the other branches of government. For example, the President has an independent role with legislation
with the signing requirement and veto option. The Supreme court can declare legislation to be unconstitutional
- Executive powers for the President include being commander in chief, appointing officers of the US, making
treaties, and taking care that the laws will be faithfully executed. These powers are subject to checks and balances.
For example, the Senate has advice and consent power over the ratification of treaties and the appointment of
Officers of the US. The Supreme Court can declare Presidential actions to be unconstitutional (e.g., Youngstown
sheet and Tube case)
o Administrative agencies, which are in the executive branch at both the federal and state levels, combine
functions that are in separate branches of the US or state government. Of course, the agencies are created by
legislation (Congress and the President), their leaders are appointed by the President ( with senate approval),
and their regulatory actions are subject to judicial review (the court system). However, agencies enforce the
law through inspections and searches(executive), they adopt agency rules (legislative), and they decide
administrative cases (judicial). This structure is very efficient.
o In some areas of regulatory law, there is partial separation of institutional functions such as worker’s
compensation law and labor law in which the adjudication function is in one agency and the enforcement and
legislative responsibility is in another agency. This separation is justified by the fear of command influence
if the adjudicative function is not separated. Central panel agencies are based on the same rationale.
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o
-
-
-
-
The selection of federal agency officials is by presidential appointment with the advice and consent of the
Senate. At the state level, some agency heads are elected officials [Attorney general of California]. At the
federal level, agencies are creatures of statute. At the state level, some agencies have constitutional status
[California Public Utilities Commission]. Elected officials have their own constituency and their own power
base, so they are more independent of the governor. Constitutional agencies have much greater autonomy
because they can not be abolished without a constitutional amendment. Constitutional agencies in
California (like the University of California) have broader authority than statutory agencies.
o Statutory authority: Unlike the constitutional branches of government, administrative agencies have no
inherent authority to do anything. They are creatures of statute. Administrative agencies are created by
statute and given their powers and mission by statute. Thus, Administrative law practitioners will work with
two bodies of law, the enabling act [e.g., Clean Air Act] and the APA [and other administrative law
principles.]
o The issue here is what limits does the constitution impose on congressional delegation of powers to an
agency. Congress is an institution that is accountable to the voters, as is the president, but administrative
agencies are not directly accountable to the voters. For both structural and accountability reasons, the
primary lawmaking power in our governmental system is vested in Congress.
o Delegation Law: Contingent delegation was upheld in the Marshall Field & Co., v. Clark case. In that case,
the President was delegated the power to raise tariffs and suspend trade with foreign countries when tariffs
imposed by those countries on American goods were found to be unequal and unreasonable. The court
upheld the delegation because Congress set the conditions under which the President could act. Other cases
upheld delegation of powers based upon broad statutory authority by characterizing the agency authority to
flesh out the details of broad statutory commands made by Congress in the statute[subordinate delegation].
o Intelligible principle doctrine: In a number of cases, in the 1920’s and the early 1930’s the Supreme court
upheld broad delegations of powers to agencies based upon the “intelligible principle” or “primary standard”
doctrine [See J.W Hampton Jr. & Co., v. US case]. If congress provided either of these two types of
guidance, then the delegation was limited enough to satisfy the nondelegation doctrine. This was true even
though the standard was very vague and general (e.g., public interest, convenience, or necessity for the
FCC).
Judicial Powers for the Supreme court and lower federal courts include the power to decide cases and controversies
within the federal courts subject matter jurisdiction, and the power to determine the constitutionality of legislation
and other matters. These powers are subject to checks and balances. For example, the President appoints all Article
III judges, and the Senate exercises advice and consent authority over those appointments. Congress created the
lower courts system through the legislative process, provided legislative authority for the courts to operate (e.g., 28
USC Section 1331)and enacts the budget for the federal court systems.
New Deal cases: In two new deal era Supreme Court decisions, the US Supreme court invalidated separate
provisions of the National Industrial Recovery Act on non delegation grounds. These included the Panama Refining
case (hot oil case) and the Schechter Poultry (sick chicken case). In the first case, the president’s authority to
implement an interstate ban on oil sales (Section 9 NIRA) was struck down because the Supreme court decided that
the legislation did not contain an adequate standard to guide the President’s decision making. In the second case, the
codes of fair competition authority (Section 3, NIRA) was invalidated for similar reasons.
Post New Deal cases: The US supreme court has upheld all delegations of legislative power to federal agencies
since the two new deal era cases. These cases included Yakus v. US, dealing with wartime price controls because
there was a price standard (prices prevailing in October, 1941) to guide the discretion of the price administrator. In
these cases, there were enough standards to guide the agency so that the ultimate legislative powers were decided by
Congress in the statute itself.
Industrial Untion Case: Facts: Here, there was a challenge to an OSHA standard limiting workplace exposure to
Benzene, a carcinogen, at the 1 ppm level (one part per million), when the agency did not find and the scientific
research did not support that standard, and the evidence supported a below 10 ppm standard but no more. The
plurality interpreted Section 3(8) standard of “reasonably necessary” and “to the extent feasible” to protect safety
and health of employees in the workplace narrowly to avoid non delegation concerns. Their interpretation required a
showing of a significant risk of material health impairment to justify the standard adopted. On that basis the 1 ppm
standard was invalidated because it exceeded statutory authority.
o —A major problem here is that Congress could not agree on what the correct standard should have been .
That is why Congress used the “to the extent feasible” language. It punted to the regulatory agency. There is
a major difference between economic feasibility and technological feasibility. The cost differences between
technically feasible and economically feasible are substantial. The former is far more expensive for industry
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to comply with. One of the big issues in the debates over this legislation was whether to use cost/ benefit
analysis as a measure of regulation.
Whitman v. ATA: Facts: Section 109(b) of the CAA authorizes the EPA to set NAAQs for air pollutants, including
particulate matters and ozone based upon statutory language of “requisite to maintain public health with an adequate
margin of safety.” The EPA adopted strict standards which were challenged in court by the trucking industry. The
lower court invalidated the standard based upon the non delegation doctrine but remanded back to the agency to try
again. The Supreme court reversed the lower court decision based upon a conclusion that the EPA did not have to
consider costs of compliance in implementing the requisite standard. The Supreme Court held that costs
consideration could not be required under this delegation and that the requisite standard supplied an intelligible
principle. An Intelligible principle is all that is needed to satisfy the modern federal non delegation doctrine
DELEGATION OF LEGISLATIVE POWER:
—State courts follow three approaches to the non delegation doctrine (See Rossi article, CB note 1 page 453).
—1. The first approach is the “ ‘strong’ non delegation doctrine which insists that the authority delegating statute contain
meaningful standards….”[CB, page 453]. 20 states follow this strong approach including Illinois, Florida, and Texas follow
this approach. [See Thygesen case]
—2. The second approach is the weak version of the non delegation doctrine. Seven states follow this approach including
Oregon, Washington and California [People v. Wright, 30 Cal. 3d 705, 712-713 180 Cal.Rptr. 196 639 P.2d 267 (1982)(
California supreme court upheld legislation changing from an indeterminate sentencing system to a determinate sentencing
system for prison terms for convicted felons.)
—3. The third approach is the “moderate approach “ to the delegation doctrine. 23 states follow that approach which
consider both standards and safeguards and accept legislative declarations of policy in place of more precise standards.
—4. The California approach is illustrated by the California Supreme court decision in the case of People v. Wright, 30 Cal.
3d 705, 712-713, 180 Cal.Rptr. 196, 639 P.2d 267 (1982).(Rules of Court provisions for aggravating and mitigating factors
that affected length of sentence were adopted based upon a valid delegation of legislative authority to the Judicial council.)
- —The Court in the Wright case held that: “An unconstitutional delegation of legislative power occurs when the
Legislature confers upon an administrative agency unrestricted authority to make fundamental policy decisions. …
“This doctrine rests upon the premise that the legislative body must itself effectively resolve the truly fundamental
issues. It cannot escape responsibility by explicitly delegating that function to others or by failing to establish an
effective mechanism to assure the proper implementation of its policy decisions.” …. The doctrine prohibiting
delegations of legislative power does not invalidate reasonable grants of power to an administrative agency, when
suitable safeguards are established to guide the power's use and to protect against misuse. ….. The Legislature must
make the fundamental policy determinations, but after declaring the legislative goals and establishing a yardstick
guiding the administrator, it may authorize the administrator to adopt rules and regulations to promote the purposes
of the legislation and to carry it into effect. …. [continued on next page]
- “Moreover, standards for administrative application of a statute need not be expressly set forth; they may be implied
by the statutory purpose.… Changing from the system of indeterminate sentences to determinate sentences and fixing
the alternative terms, the Legislature made the fundamental policy decision that terms were to be fixed by choosing
one of the alternatives on the basis of circumstances relating to the crime and to the defendant.… The Legislature
directed the Judicial Council to adopt rules establishing criteria for imposing the upper or lower terms in order to
promote uniformity. While promotion of “uniformity” in some circumstances may not provide a sufficient standard,
the Legislature established the standard in the correlative provision of Penal Code section 1170, subdivision (b),
providing that the criteria be based on the absence or presence of aggravating or mitigating circumstances.” [Wright
case at pages 712-713] [citations omitted].
- Thygesen Case: —Some state courts apply a stricter version of the constitutional delegation doctrine. The Thygesen
v. Callahan [CB page 450] is an example.
o Facts: A currency exchange challenged the provisions of a statute [Section 19.3 of the Currency Exchange
Act] as an undue delegation of legislative power to an administrative agency. The agency was delegated
substantive rulemaking authority to establish schedules of maximum rates for check cashing and writing of
money orders. The Illinois courts require that intelligible standards or guidelines must be part of legislative
delegations of power. Standards serve three purposes: 1) Guide the agency in applying the statutes within
legislatively set limits; 2) Prevent the legislature from abdicating its responsibility to make fundamental
policy choices; and 3) Ensure meaningful judicial review of agency action.
o —Intelligible standards require the legislature to “sufficiently identify: (1) the persons and activities
potentially subject to regulation; (2) the harm sought to be prevented; and (3) the general means intended to
be available to the administrator to prevent the identified harm.” [CB, page 451, excerpt from court opinion].
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(Commentary: This good be a part of a guide for effective legislative drafting, sort of a Strunk and White for
legislative drafters.). In the Thygesen case, the court held that while the first part of this test was clearly met,
the second and third parts were not met. The persons (community and ambulatory currency exchanges) and
activities ( cashing checks and issuing money orders) were specified but the harm to be prevented by setting
maximum rates and the standards for setting those maximum rates were not specified. The only criteria for
maximum rates is that they be reasonable and that does not provide enough guidance in the form of
standards to limit the agency authority to set those rates.” Thus, the statute is invalid as an unlawful
delegation of legislative power to set maximum rates.
Procedural Safeguards: —The Thygesen court ignored the procedural safeguards that are embedded in using APA
rulemaking procedures to set the maximum rates. What protections would those safeguards provide to challengers of
the rates set by rulemaking? Other states accept procedural safeguards as a substitute for express standards.
Public/Private Delegation Issues: People ex rel Lockyer v. Sun Pacific Farming Co (5th Dist, 2000) 77 Cal. App.
4th 619, 92 Cal. Rptr. 2d 115 Summary of court opinion : “The Attorney General, a joint powers agency formed for
the eradication of a certain virus that infects citrus trees, and a county pest control district brought an action for
abatement of public nuisance against a citrus grower. The trial court found that defendant's maintenance of citrus
trees infected with the virus constituted a public nuisance and issued an injunction mandating defendant to remove
all infected citrus trees. ….. The Court of Appeal affirmed. The court held that the Citrus Pest District Control Law
(pest control law) (Food & Agr. Code, § 8401 et seq.) did not improperly delegate legislative authority to citrus
growers on the boards of the joint powers agency and pest control district, since the Legislature properly exercised its
policymaking power in the law and did not delegate that power to the districts, and the legislation included sufficient
safeguards. The court also held that the pest control law did not improperly delegate judicial or quasi-judicial power
to growers on the boards, since implementation of the law with an eradication strategy that involved tree removal
required no exercise of judicial or quasi-judicial power, and when plaintiffs filed this suit, they did not adjudicate the
rights of the parties….”
Legislative Delegation of adjudicatory power to agencies: The federal case law relating to legislative delegations of
adjudicatory power to administrative agencies looks at two issues : 1) Article III limitations; and 2) the 7th
amendment right to jury trial. Two leading cases that precede the CFTC principal case are 1) Northern Pipeline
Constr. Co. v. Marathon Pipeline Co. (CB page 461) in which the court decided that bankruptcy judges could not
decide contract disputes in bankruptcy cases because they were not article III judges. Bankruptcy judges served 14
year terms (Not life tenure) and their salaries could be adjusted while in office. While there was no majority opinion
and thus no holding in the normal sense, a majority of judges did agree on the contract disputes limit ( these cases
had to be decided by Article III judges). Crowell v. Benson (CB page 460-461) in which the court upheld the
delegation of adjudicatory authority to a federal worker’s compensation agency to decide worker’s compensation
disputes. However, judicial review by Article III judges was required.
CFTC v. Schor: —Facts: In this case, the Commodities Exchange Act (CEA) created the Commodities Futures
Trading Commission (CFTC) to regulate the futures market. The CFTC had the authority to order reparations
(damages) to be paid to customers by their brokers for violations of the act or regulations. Reparations cases would
be adjudicated by ALJ’s with a final decision by the agency. These decisions were subject to judicial review. CFTC
regulations allowed brokers to submit counterclaims in the administrative case or to file a separate lawsuit. Schor had
substantial losses in commodity trading and owed his broker (Conti) a lot of money. Schor brought a reparations
proceeding against Conti before the CFTC, and Conti counterclaimed for the money Schor owed him. After Conti
prevailed both in Schor’s claim against him and on his compulsory counter claim, Schor brought a challenge to the
constitutionality of the CFTC deciding the counterclaim under article III of the US constitution.
o The Supreme court rejected the Article III claim, holding that a narrow exception for a specialized area of
law did not threaten the judicial independence of Article III judges or litigants that came before the agency.
This was a de minimis intrusion on the judicial branch of the government. The court also noted that there
was broad judicial review of the CFTC orders in the district court with a careful scrutiny of the basis for the
CFTC order (weight of the evidence), and with district court enforcement of the orders. The private rights
nature of this claim ( based upon state contract law) was not controlling and separation of powers was not
violated by this narrowly stated authority which is limited to compulsory counterclaims.
LEGISLATIVE VETO:
- INS v. Chadha: Facts: In this case, Section 244(a)(1) of the INA authorized the Attorney General to suspend
deportation of aliens in the US who were deportable on a discretionary basis when there was a showing of “extreme
hardship”. The authority of the AG was delegated to the INS. After an INS hearing, an immigration judge ordered
suspension of Chadha’s deportation on “extreme hardship” grounds. Section 244(c)(1) requires reporting deportation
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suspensions to Congress, and Section 244(c)(2) authorizes a veto of the suspension when one house of Congress
passes a resolution disfavoring suspension of deportation. The effect of that resolution is that suspension is
invalidated and the deportation order becomes effective again. In this case, the suspension of Chadha’s deportation
was vetoed by the passage of a resolution in the house of representatives. Chadha sued to challenge the
constitutionality of the one house legislative veto.
o —The Supreme court first held that the one house legislative veto section of the INA was severable from the
section that authorized suspension of deportation. The effect of this was that if the legislative veto was held
to be unconstitutional, Chadha could stay in the US because the decision to suspend his deportation would
still be effective. The Supreme court majority held that the Section 244(c)(2) one house legislative veto
violated the US constitution because it was legislative action undertaken without complying with the
requirements of Article I, including bicameralism (passage by both houses of Congress) and presentment
(signing or vetoing by the President, with the veto override option by two thirds vote of members of each
house of congress).
o The veto of the suspension of deportation decision was an exercise of legislative power subject to the
requirements of Article 1. Without Section 144(c)(2), Congress could not have compelled the attorney
general to deport an alien when the attorney general had suspended deportation unless congress had enacted
legislation ordering deportation. Congress must follow its prior delegation of authority until that delegation
is change by new legislation. None of the one house provisions action in the constitution (beginning
impeachment by the house and impeachment trials, approval of presidential appointments and ratification of
treaties by the senate) apply to the one house legislative veto. No matter how practical or efficient this
provision is, it is unconstitutional.
o Critics of the decision make a number of points. First, was the veto of the suspension of deportation decision
really “legislative” in nature? There is a good argument that this decision was adjudicative in nature, just
like the suspension of deportation decision made by the INS which was preceded by an adjudicative hearing
before an immigration judge. Most other congressionally adopted one house legislative veto provisions
applied to agency rulemaking not adjudication. Second, why was it not sufficient that the INA (in which the
legislative veto was one provision of the act) was itself properly enacted following bicameralism and
presentment under Article I of the U. S. constitution?
Congressional Review Act: —The Congressional Review Act was enacted in 1996 [5 U.S.C. Section 801-808]. It
was designed to provide for legislative review of agency rulemaking in a constitutionally appropriate manner.
o Section 801 requires agencies to submit to each house of congress [and to the CG’s office] a report including
a copy of the rule, the CGS for that rule , a major rule designation if applicable, and the effective date of the
rule. The agency must also submit detailed reports on cost benefit analysis, regulatory analysis, and other
required reports. The effective date of the rule is impacted by congressional review. Non major rules will
take effect after submission of the report to congress. Major rules, which are more likely to be disapproved,
are subject to a 60 day review period.
o Section 802 codifies the congressional disapproval procedure. Within 60 days of the submission of the
report on the rule (required by Section 801), a joint resolution of disapproval may be introduced and
submitted to the appropriate committee of each house of congress. If the joint resolution is enacted, then the
rule will not take affect. The enactment requires presidential approval in the form of a signature (or a veto
override by 2/3 vote of each house of congress). This process satisfies the requirements that the US Supreme
Court held in the Chadha case were necessary to satisfy the bicameralism and presentment clauses of the US
contitution,
o Section 803 codifies a one year deadline extension when a joint resolution of disapproval is enacted.
o Section 804 provides definitions including: 1) “agency” [applies to all federal agencies); 2) “Major
rule”[subject to more intensive review]; and 3) “rule” [broader than the rules that are subject to Section 553
required procedures. It includes “interpretive rules” and “general policy statements”].
o Section 805 provides that judicial review is not available to challenge congressional action under this Act.
California’s executive review of rulemaking system is unique in state administrative law. The Office of
Administrative law (OAL) manages the executive review system. This system was established by legislation adopted
when Governor Jerry Brown was in office in the 1970’s. The executive review statutes are found in California
Government Code Sections 11349-11349.6. The OAL has been delegated the power to approve or disapprove agency
regulations. Approved regulations are sent to the Secretary of State’s Office for filing. Disapproved regulations are
returned to the agency. There are specific statutory criteria that regulations have to satisfy for approval.
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A. Steps:
1. Congress makes fundamental policy decisions
2. Guidance to Agencies: the intelligible
3. Judicial Review by the Court
B. Professor R.E. Cushman’s Syllogism:
1. Major Premise: Legislative power cannot be constitutionally delegated by Congress.
2. Minor Premise: It is essential that certain powers be delegated to administrative officers and regulatory
commissions.
3. Conclusions: Therefore the powers thus delegated are not legislative powers. They are instead “administrative”
or “quasi-legislative” powers.
C. Pre 1935 Cases: In practice, the Big SC has only struck down Congressional delegation in two instances.
During the Depression, under National Industrial Recovery Act [NIRA]
Panama “Hot Oil” Case
Schecter “Sick Chicken” Case
Facts
Congress issued an act allowing
the President to limit shipment of
hot oil to protect supply and the
consumer.
Congress gave the President
authority to adopt private fair trade
standards in any given industry codes of fair competition or best
practices.
Rule:
Congress stuck it down for
insufficient standards.
Congress struck it down for
insufficient standards.
Count:
Cardozo dissents
Unanimous
D.
E. Post 1935 Cases: There are a few important post 1935 cases about the delegation of Legislative powers.
1. Yakus v. United States, 321 U.S. 414 (1944): The Supreme Court upheld the vadility of the Emergency Price
Control Act. Under the Act, the Price Administration was given the authority, when in his judgement, prices
were out of control. Congress though, provided that PA with a base superior price and a statement of
considerations. [Some claim that this case was upheld because it was a war time case.
2. Lichter v. United States, 334 U.S. 742 (1948): The Renegotiation Act of 1942 provided for the renegotiation of
war contracts and authorized administrative officers to recover profits they determined to be excessive. But the
Act didn’t define “excessive”. But there was still a statement of considerations, so the Supreme Court upheld it
in the face of a challenge that it represented an unlawful delegation of powers.
3. Fahey v. Mallonee, 332 U.S. 245 (1947): The Home Owner’s Loan Act of 1933 gave the Federal Home Loan
Bank Board the right to issue regulations that stated under what terms and conditions a conservator could be
appointed to take over a mismanaged federal savings and loan association. A suit was brought challenging the
constitutionality of the Act. The district court held that the Act was and invalid delegation because there were no
guidelines on how that authority was supposed to be exercised. The Supreme Court said yah, you’re right - those
guidelines aren’t there, but that doesn’t mean the statute is automatically unconstitutional. Discretion in
regulation is ok ;)
4. Industrial Dept. v. American Petroleum Inst. (448 U.s. 607):
5. Arbaugh Case, 126 S.Ct. 1235:
F. Modern Law - Intelligible Principle: The Supreme Court has moved to using a more realistic approach then the
syllogism. Instead of a rule that prohibits all delegation of legislative powers, the Supreme Court advocates a rule
that prohibits excessive delegation of legislative powers. In short, Congress has the power to delegate some
lawmaking power, so long as there are standards put on the exercise of that power that are codified in the
intelligible principle of the delegation. Congress just can’t do it’s job w/
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1. Mistretta v. United States, (488 U.S. 361): Congress set up, under the Sentencing Reform Act of 1984, the U.S.
Sentencing Commission & Sentencing guidelines. The defendant Mistretta was indicted on three counts
surrounding a cocaine sale. Defendant brought suit, contending that Congress delegated excessive authority to
the Commission when it gave it free reign to structure the guidelines for all federal criminal offenses. The
Supreme Court said the specificity Congress required of the Commission, and the Commission of Judges, in
forming the the guidelines, were enough. This is the case where we first see the “intelligible principle”.
a) “So long as Congress ‘shall lay down by legislative act an intelligible principle to which the person or body
authorized to [exercise the delegated authority] is directed to conform, such legislative action is not a
forbidden delegation of legislative power.”
G. Federal Delegation: After Mistretta, it seemed to be the consensus that the non-delegation doctrine was dead.
However, federal judges continue to use traditional language in determining the constitutionality of a delegation they are still looking for standards in statutes delegating legislative power.
1. American Trucking Assn. v. EPA, (175 F.3d 1027): Under the Clean Air Act, the EPA has to set and
periodically revise NAAQS [national ambient air quality standards) for each type of air pollutant that meets
certain statutory criteria. For each one, the EPA has to set what’s called a “primary standard,” which is the level
that is “requisite to protect the public health” with an “adequate margin of safety”, and a “secondary standard”
which is a level “requisite to protect the public welfare. In July 1997 EPA revised the primary and secondary
standards for particulate matter and ozone. The Supreme Court held that the statue, because it lacked articulated
standards by which to judge protecting the “public health” and and the “public welfare”, did not meet
constitutional muster.
a) “Here, it is as though Congress commanded EPA to select ‘big guys,’ and EPA announced that it would
evaluate candidates based on height and weight, but revealed no cut-off point. The announcement, though
sensible in what it does say, is fatally incomplete.”
2. Whitman v. American Trucking Association, (531 U.S. 457): This is the same case as above, but NOW we’re at
the Supreme Court. Here, they reversed, and upheld the statute. In writing for the majority, Scalia found that
under the statute, there WAS an intelligible principle The discretion given to the EPA to choose an intermediate
level was to reflect its desire to protect the public health. It turns out that the standard of “public health” is
slightly more specific than “public welfare”. While there are limits that prevent the EPA from regulating more
than necessary, they can pick whatever level they want (.08) as just barely above medically proven level of harm
and still be in bounds.
H. Individual Rights & Liberties: The real question of the day is whether or not administrative agencies should be
allowed to legislate in the area of individual rights and liberties [like regulating the ability of citizens to march in a
parade, or travel, or criminalizing things]?
1. Kent v. Dulles, (357 U.S. 116): Under the Passport Act of 1926, the Secretary of State was granted the right to
grant and issue passports. The Secretary then issued a regulation that provided that no passport should be issued
to anyone who was a communist. The Court said, um hey - so yah; you can’t do that because it’s beyond your
statutory power.
I. State Delegation:
1. State v. Broom, (439 So. 2d 357): Defendant Broom was charged with a felony under the Louisiana Explosives
code - he left a vehicle with explosives in it unattended. The applicable Louisiana statute, those making the
Explosives code, say that the director of public safety is responsible for setting minimum standards for all things
to do with fireworks [sale, possession, transport, etc.]. The statutes also say that the regulations are to be
whatever is “reasonably necessary” to protect the public’s “health, welfare, and safety”. Unlike the U.S.
Constitution, the Louisiana Constitution specifically prohibits any branch from exercising the power of another
branch, so the legislature cannot delegate the right to make law to an executive agency. So yah; the statutes suck
and are OVER.
VII. Delegation of Judicial Powers:
A. Delegation of Judicial Powers - Sources:
1. Article III Courts: Judges have a lifetime tenure
2. Article I Courts (bankruptcy court): Judges do not have lifetime tenure
3. Military Courts
4. Territory Courts
5. Administrative Agencies (quasi-judicial type thingies)
6. Arbitration
B. Essentials of the Judicial Process:
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1.
2.
3.
4.
5.
6.
hold hearings
take evidence
fact finding
apply law to facts
decide cases
award remedies
a) Administrative Remedies:
(1) License revoked or suspended
(2) $ benefits
(3) $ damages
(4) $ civil penalties
(5) Attorney’s fees
(6) Hearing costs
C. U.S. Constitution & Judicial Power:
1. Competition:
a) Federal Trade Commission Act of 1914: the U.S. Constitution prohibits “unfair competition” - which is
where one person attempts to impose upon the public his goods or his business as the goods or business of
another. The Act set up the FTC to monitor business competition. Under the Act, the FTC is given the
power to hear and decide cases in which businessmen and women are charged with “methods of unfair
competition”.
b) Humphrey’s Executor v. United States (295 U.S. 602): Leading Supreme Court Case upholding the
independent status of the FTC.
2. Regulation:
a) Thomas v. Union Carbide Agricultural Products Co., (473 U.S. 568): Under FIFRA [the Federal
Insecticide, Fungicide, and Rodenticide Act), companies which manufacture pesticides have to turn in
information about their products’ health, safety, and environmental effects, in order to get each pesticide
registered. The EPA is allowed to consider old data, even if it’s a different company’s. So they give
compensation to the other company for the use of the data, and if the other company doesn’t agree to the
compensation, the Act provides for binding arbitration. The arbitrator’s decision is final, and is only subject
to judicial review for “fraud, misrepresentation, or other misconduct.” The Appellees are firms engaged in
the R&D and marketing/manufacturing of pesticides. The EPA used the information of one of the appellees,
and invoked the Arbitration clause, and claimed that the final amount the arbitrator awarded was below the
just amount. They brought suit in the Federal District Court to challenge, inter alia, the constitutionality of
the arbitration provisions, claiming that the provisions give arbitrators the functions of judicial officers, and
limit review by Article III court. The S.C. held that yes, the right of compensation was really a sort of quasiprivate right. But, it was so closely integrated with the public regulatory scheme that Congress had the right
to
3. 7th Amendment Right to a Jury Trial: Ok, Congress may fashion causes of action that while very close to
common-law legal claims, but place them outside the 7th Amendment by assigning them to forums without jury
trials, Article III Courts - Administrative Courts for administrative hearings. But, Congress may only do it when
there’s a case involving a public right. A public right is a situation “where the Government is involved in its
sovereign capacity under an otherwise valid statute creating enforceable public rights. Basically, you cannot
change a legal right to an equitable one just by putting in front of a court of equity. In certain situations however,
a) Granfinanciera S.A. v. Nordberg: Chase & Sanborn Corporation filed for bankruptcy under Chapter 11.
After a Plan of Reorganization approved by the Bankruptcy Court gave the trustee the right to sue people for
recovery on caused of action for fraudulent conveyances, the trustee [Nordberg] sued the petitioners,
including Granfinanciera. Petitioners said they wanted a jury trial on all issues that were so triable. The
Bankruptcy Court denied the request, and after a bench trial ruled in part against the petitioners, the
petitioners went to the Federal District Court for review. The Federal District Court and the 11th Circuit
Court of Appeals affirmed. The Supreme Court however, reversed, holding that the petitioners were entitled
to a jury trial on the issue of fraud, as it was a public right.
(1) Test for Public Right: Well, you know for sure that when it’s the Government versus someone, it’s
probably a “public rights” matter. But what about when the government is NOT a party? Well then, the
question becomes “whether ‘Congress, acting for a valid legislative purpose pursuant to its
constitutional powers under Article I, [has] create[d] a seemingly ‘private’ right that is so losely
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integrated into a public regulatory scheme as to be a matter appropriate or agency resolution with
limited involvement by the Article III judiciary.’”
D. State Constitutions & Judicial Power:
1. Exercise of Power: The 2-prong test of Primary Legitimate Regulatory Purpose: We have to recognize that
in our increasingly complex government, administrative agencies exercise “judicial like” powers. And, if we
were to bar all nonconstitutional administrative agencies from adjudicating all money claims between private
individuals who are subject to administrative regulation,then these agencies would be precluded from exercising
the powers they routinely employ, but have never before been challenged on or questioned about.
a) McHugh v. State Monica Rent Control Board: Two tenants, Smith and Plevka, filed an administrative
complaint with the State Monica Rent Control Board, claiming that they had been overcharged by a landlord,
McHugh. The Board adjudicated the dispute, and ruled in favor of the tenants and awarded them restitution
in the form of the excess rent. So McHugh filed a writ of mandate to set aside the Board’s decision because
the Board’s adjudication of “excess rents” violated the judicial powers clause of the California Constitution.
(1) The Cal Supremes said it was ok and incorporated the test used by a number of other states: An
administrative agency may - consistently with the “judicial powers” doctrine - make restitutive money
awards provided:
(a) doing so is reasonably necessary to effectuate the administrative agency’s primary, legitimate
regulatory purposes, and
(b) the “essential” judicial power [i.e. the power to make enforceable, binding judgments) remains
ultimately in the courts through review of agency determinations.
(2) EXAM APPROACH: Ask the following questions in the following order:
(a) IS THE CHALLENGED REMEDIAL POWER AUTHORIZED BY LEGISLATION?
(b) IS THE CHALLENGED REMEDIAL POWER REASONABLY NECESSARY TO
ACCOMPLISH THE ADMINISTRATIVE AGENCY’S ASSERTED REGULATORY
PURPOSES?
i) for example, is the challenged remedial power incidental to a proper, primary regulatory
purpose [like a rent control board adjudicating a tenant’s claim of excessive rent and awarding
restitution], or is at attempt to transfer determinations of traditional common law claims from
the courts to a specialized agency who’s specific purpose is to adjudicate just those private
rights claims [like a rent control board in the same situation adjudicating the landlord’s
counterclaims against the tenant]?
2. The Administrative Adjudication of Traffic Violations: There are two viewpoints about the concept of
separation which are relevant to the exercise of judicial power in the adjudication of traffic offenses: application
of (1) The Watertight Compartment Theory; or (2) The Blended Powers Theory.
a) Rosenthal v. Hartnett: Petitioner was found guilty speeding by a Dept. of Motor Vehicles hearing officers.
Can the New York legislature (1) assign the adjudication of traffic infractions to administrative courts; and
(2) establish the standard for guilt as “clear and convincing evidence”, where this would result in a fine but
not imprisonment. Um, yes because there are lots of people breaking lots of traffic laws and mostly, we just
don’t have time for this nonsense.
(1) Rule: Criminal enforcements have to be in courts, except infractions. This exception is only allowed if
there is sufficient safeguarding.
E. Remedies and Penalties
1. Remedies
a) Vaino v. Brookshire:
b) In re Investigation of Lauricella:
2. Penalties
a) Texas Association of Business v. Texas Air Control Board:
VIII. Agency Adjudications
A. Basics
B. Parties:
C. Standing
1. Office of Communication v. FCC: During this era, there was only [really], one cable channel, and the FCC was
like the Supreme Court of Television. So, there was this TV Station, the Intervenor, that kept getting its
broadcasting license renewed, even though it had eggregious business practices [such as I dunno
RACISM...sigh...]
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