ADMINISTRATIVE LAW
CASE, SPRING 2011
1/13: What Is Administrative Law and Why Should We Study It?
p. 5-21
Video: The Regulators
 Bureaucratic monster of unnecessary rules vs. necessary to make government run
smoothly and without abuse
 Finding a key legislator who would help point out the abuse (clean air in national parks)
 Regulators = enforce the will of the legislatures
 But must balance government vs. free enterprise
 Spectrum of interpretations of laws enacted by legislatures
 To modify legislation: form relationships with other members of Congress and agencies
o But each representative brings its own marching orders from its agency
 500 pages of regulation to explain 5 pages of law
 Compromise: protecting parks, concessions for power plants (states get final say on
integral vista)
 Final regulation did not solve problems that originally brought about the discussion
 Lawsuits begin after regulation is passed by agency (arbitrary and capricious)
1/18: A Walk Through the APA
p. 22-30
 Institutional differential variation: oversight and overlap of multiple agencies
 Point of regulation is to reduce risk…have to balance with economic incentives
Overview:
1. Rulemaking: an agency’s “quasi-legislative” role – creating law to govern future
conduct
o Quasi-legislative: we say this for constitutional reasons but this is fiction…they
create substantive rules
2. Adjudication: an agency’s “quasi-judicial” role – applying existing rules to make
decisions regarding past conduct
3. Judicial Review: how may review of rulemaking and adjudicatory action be obtained?
Rulemaking:
 5 U.S.C. § 551(5) – “rule making” means agency process for formulating, amending, or
repealing a rule
 5 U.S.C. § 551(4) – “rule” means the whole or 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 the
agency….
o Law will apply broadly and will apply in the future
o Definition recognizes the difference between process and substance
Adjudication:
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5 U.S.C. § 551(7) – “adjudication” means agency process for the formulation of an
order
5 U.S.C. § 551(6) – “order” means the whole or 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
o Everything that is not rulemaking is an order
Three types of rulemaking: informal, formal, and hybrid
Informal Rulemaking:
Most rules are made this way!
Three-Step Process in 5 U.S.C. § 553:
1. Notice
a. 5 U.S.C. § 553(b) – 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
b. Two Exceptions to Notice Requirement:
i. 5 U.S.C. § 553(b)(3) – Unless notice or hearing is required by statute, this
subsection does not apply…
1. to interpretative rules, general statements of policy, or rules of
agency organization, procedure, or practice; or
2. when the agency for good cause finds … that notice and public
procedure thereon are impracticable, unnecessary, or contrary to
the public interest
2. Comment –
a. 5 U.S.C. § 553(c) – After notice required by this section, the agency shall give
interested persons an opportunity to participate in the rule making through
submission of written data, views, or arguments with or without opportunity for
oral presentation.
b. Written public comments
c. Not required to present live comments (like hearings from video)
3. Publication –
a. 5 U.S.C. § 553(d) – The required publication or service of a substantive rule shall
be made not less than 30 days before its effective date
b. 5 U.S.C. § 553(c) – After consideration of the relevant matter presented, the
agency shall incorporate in the rules adopted a concise general statement of their
basis and purpose
c. [Both the final rule and statement of basis and purpose appear in the Federal
Register]
Formal Rulemaking:
 5 U.S.C. § 553(c) – 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.
 Agency must require formal rulemaking. The italicized language must be in the statute
(or close to it).
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Hybrid Rulemaking:
 Congress can, and often does, impose specific rulemaking procedures within specific
statutory schemes
 These rulemaking procedures may be more detailed than the informal rulemaking
procedures of § 553 but less detailed than the formal rulemaking procedures of §§ 556
and 557
 Often a mix between formal and informal rulemaking
 Congress will dictate this in the statutes…always must check the statute to see if they
proscribed a different process than what the APA defaults to
Formal Adjudication:
 5 U.S.C. § 554(a) – This section applies … in every case of adjudication required by
statute to be determined on the record after opportunity for an agency hearing….
 THIS IS A TRIAL
Informal Adjudication:
 If formal adjudication under § 554(a) – “adjudication required by statute to be determined
on the record after opportunity for agency hearing” – is not required, informal
adjudication (not governed by the APA) may nonetheless be necessary if:
a. Statute authorizing agency action requires use of some hearing procedures, or
b. Constitutional principles of due process obligate the agency to follow some type of
hearing process (notice and opportunity to be heard--this is more often the case for
informal adjudication)
Judicial Review:
 5 U.S.C. § 701 – [Judicial review] chapter [of APA] applies … except to the extent that–
o (1) Statutes preclude judicial review; or
o (2) Agency action is committed to agency discretion by law
 Is not reviewable
 5 U.S.C. § 702 – 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.
o This provision can provide constitutional “standing” (i.e., a legal right to
review) if another statute does not provide such a right to review of agency action.
 Scope of Review: 5 U.S.C. § 706 – 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;
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(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
1/20: The Delegation Problem
Creation of Agencies
 Under the American constitutional system, agencies are creatures of the legislature and
function only in so far as a legislature has given them authority to function
o Not mentioned anywhere in the Constitution
 Thus, a legislature must enact a statute creating an agency (organic or enabling act)
o Exists as long as Congress wants it to exist
o Authority comes only from Congress
 The principle that legislatures create agencies and set limits on their authority by statute
is a cardinal rule of administrative law
Constitutional Separation of Powers
 Art. I, § 1 – vests “all legislative powers” in Congress
o If you read this literally (strict construction), then legislative power is given
exclusively to Congress and so the administrative system would be completely
unconstitutional under this view
o BUT…administrative agencies operate in a totally legislative manner
 Art. III, § 1 – vests “judicial power” in the Supreme Court and in such “inferior courts”
as established by Congress
 Art. II, § 1 – vests “executive power” in the President of the United States
Constitutional Tension
 Art. I, § 1 – “All legislative powers herein granted shall be vested in … Congress”
o Read literally, the Constitution gives legislative powers exclusively to Congress
 Art. I, § 8 – Congress has the power “[t]o make all laws which shall be necessary and
proper for carrying into execution” the other powers of Article I
o Can be read to allow Congress to authorize other entities to act on its behalf, even
if delegated actions resemble the exercise of legislative power
 Under a literal reading of Art. I, § 1, any exercise of legislative power by an agency is
unconstitutional
 However, a very busy Congress has neither the time, resources, or expertise to effectively
or even meaningfully supervise on a day-to-day basis every detail of the functioning of
the national government
 Thus, under the language of Art. 1, § 8, some delegation of congressional authority is a
compelling necessity
 See Mistretta v. U.S., 488 U.S. 361, 372 (1989) (“in our increasingly complex society …
Congress simply cannot do its job absent an ability to delegate power”)
Overview of Non-Delegation Doctrine
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Under the Constitution, Congress may delegate its powers to an agency only under
carefully controlled conditions, and those conditions must be expressly set out in the
agency’s enabling act
Through Supreme Court precedents, this has evolved into the “intelligible principle”
requirement -- when Congress delegates decision-making power to the agency, Congress
must establish some “intelligible principle” within the language of the statute itself that
constrains or limits the agency’s discretion in acting under its particular grant of authority
o Need some constraint on the power of the agency in the statute. If there is not, we
have a delegation problem
Whitman v. American Trucking Association
 DC Circuit: EPA’s interpretation of the statute did not have an intelligible principle to
guide the agency’s exercise of authority
o There is not sufficient limitations and no principle to guide you in order to make
the decision you had to make
 Supreme Court: cannot cure an unlawful delegation of legislative power by adopting in
its discretion a limiting construction of the statute
 Key to Non-Delegation Doctrine
o Spotting and resolving the issue of a proper standard – an “intelligible principle”
to guide and constrain agency discretion – is a matter of searching the enabling
act in question for words that set out a standard [IN THE STATUTE, CANNOT
BE IN A REGULATION]
o Said another way, the issue of non-delegation is one that must be decided by
examining the language of the enabling statute itself
 Clean Air Act statute in question: EPA must establish “ambient air quality standards the
attainment and maintenance of which in the judgment of the Administrator, based on
[the] criteria [documents of § 108] and allowing an adequate margin of safety, are
requisite to protect the public health.”
o Requisite: sufficient but not more than necessary
o Looked at precedent to see if it fits in an intelligible principle
 Court doesn’t feel like it is in a better position than Congress to second guess them (only
two times has the non-delegation problem been found unconstitutional)
 Scalia’s response to DC Circuit’s concern about amount of discretion: cannot put exercise
of judgment in a tightly controlled box. EPA should have some requisite discretion
because there are some uncertainties about these tradeoffs.
 Note 1: Scalia vs. Stevens’ Concurrence
o Scalia (strict constructionist): only Congress has legislative power; delegation to
EPA is not legislative authority; if we have an intelligible principle, they are just
carrying out the law
o Stevens: lets call it what it is: legislative authority. But its not an unconstitutional
delegation of legislative authority because it has an intelligible principle.
OSHA case
 Enabling language in OSH Act
 OSHA § 3(8): “The term ‘occupational safety and health standard’ means a standard
which requires conditions, or the adoption or use of one or more practices, means,
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methods, operations, or processes, reasonably necessary or appropriate to provide
safe or healthful employment and places of employment.”
Benzene case: Industrial Union Dept. v. American Petroleum Institute (U.S. 1980) – a
plurality of the Supreme Court interpreted § 3(8) of the Occupational Safety and Health
Act to require OSHA to find, as a threshold requirement to regulating under § 3(8), that a
toxic substance poses a “significant health risk in the workplace.”
o Rehnquist said that the statute was unconstitutional delegation of legislative
authority because it gave no guidance to OSHA on where to draw the line
o Threshold finding that it poses a significant health risk in workplace…
o Interpreting statute for OSHA
Significant risk, avoiding is feasible, then we can step in
o OSHA means feasible, i.e. when its possible
Court: come up with a narrower interpretation--cost-benefit analysis (economic
feasibility) but remands to agency for them to cure (OSHA declined opp to interpret
statute to require cost-benefit analysis)
o OSHA instead interprets the statute to mean safety standards that impose a high
degree of worker protection (Court upholds this)
Reconciling Whitman and OSHA?
 It looks like Whitman would say OSHA is not okay…also calls into question Benzene
 Cannot give an interpretation of the statute to limit the discretion of the agency
 Scalia says you cannot fix statute through an interpretation, as was done in OSHA
 Congress sets out guiding principles, not the agency
 Whitman would probably say language of OSHA statute is okay
1/25: Legislative Veto and Appointment Power
LEGISLATIVE VETO
Presentment and Bicameralism
INS v. Chadha
 Facts: Immigration judge found that Chadha met the “extreme hardship” requirements to
avoid deportation
 Attorney General then conveyed its decision to Congress for possible veto…the House,
without debate or recorded vote, passed a resolution of disapproval
 Constitutional Framework:
o Legislative Powers Clause (Art. I, § 1) – vests the legislative power of the
federal government in both the House and the Senate
o First Presentment Clause (Art. I, § 7, cl. 2) – requires that a bill passed by both
Houses be presented to the President for signature
o Second Presentment Clause (Art. I, § 7, cl. 3) – requires the President either to
sign or veto legislation and permits Congress to override a veto only by a twothirds vote of each body
 Violated legislative powers clause and presentment clause (because 1 house vote and was
not presented to President for signature
 How do you tell if Essentially legislative in person and in effect
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o Test: The action taken by the House was “essentially legislative” because “the
House took action that had the purpose and effect of altering the legal rights,
duties, and relations of persons…”
Justice White’s Dissent: presented with a problem here because either (a) refrain from
delegating necessary authority or (b) abdicate its law-making function to the executive
branch and agencies
o Article I is satisfied because President’s approval is found within Attorney
General’s approval and the legislative powers clause is satisfied because House
and Senate indicate their approval of the Executive’s action by not passing a
resolution of disapproval within statutory period
o If we decide we are okay with the non-delegation (delegation of legislative
authority) because of concerns of running a modern government…why can’t
Congress keep some of their legislative powers with the legislative veto (another
kind of check)
Post-Veto Development
Congressional Review Act
 Wasn’t used by Congress until 2000 for an OSHA provision; rarely used
 Suspends every substantive agency rule for 2 months
 5 U.S.C. §§ 801-808 process:
- Substantive rules and an accompanying agency report must be submitted to Congress and
GAO
- For “major rules” the GAO must submit a separate report to Congress within 15 days
from receipt of agency report
- Effective date of rule is suspended for 60 days
- Congress may vote a joint resolution of disapproval
- Joint resolution is presented to President
- Congress may overturn any Presidential veto of joint resolution by normal veto override
procedure
Problem 6-5 (p.559)
a. Any congressional committee may by majority vote further stay the effective date of a
major rule for 90 additional days beyond the statutorily required 60.
 One committee of one house of Congress
 Is this legislative in effect? Chadha test. Does it alter legal rights? An extra 90
days is more than double the normal time allotted.
 Alternative argument: its just a postponement
b. Director of the Office of Management and Budget may suspend indefinitely the effect of
any rule adopted by any federal agency, if the Director finds that it does not maximize the
net benefits to society.
 Director of agency, not Congress, is wielding the power
 As long as there is an intelligible principle, it would be okay
c. No major rule adopted by any federal agency shall be effective unless approved by joint
resolution of Congress.
 As long as both bodies of Congress will act, there is no bicameralism problem
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But this would be overly burdensome on Congress so probably would never
happen
Defeats the whole purpose of the non-delegation doctrine
APPOINTMENT POWER
Appointment of “Officers of the United States”
Buckley v. Valeo
 Appointments Clause: U.S. Const. art. II, § 2 provides that the President “shall nominate,
and by and with the Advice and Consent of the Senate, shall appoint … all … Officers of
the United States…; but the Congress may by Law vest the appointment of such
inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in
the Heads of Departments.”
 Problem is that President only appointed 2 officers, other 4 were appointed by Congress
 Test for “Officers of the United States”
o “…any appointee exercising significant authority pursuant to the laws of the
United States is an `Officer of the United States,” and must, therefore, be
appointed in the manner prescribed by § 2, cl. 2 of … Article [II]….”
o FEC exercises (1) enforcement powers, (2) rulemaking, and (3) adjudication
 However, Congress can appoint officers whose duties are limited to an investigative or
informative nature
o Aids lawmaking
o Necessary part of legislative process
Inferior Officers
Morrison v. Olson
 Independent Counsel Act--attorney general appoints independent counsel. This is being
challenged because they argue that independent counsel is a principal officer and thus
should be appointed by President (Court upholds ICA)
 Provides no definition of inferior officer
 But factors influencing the Court included:
o Subject to removal by a higher Executive Branch official
o Performed only certain, limited duties which do not include the formulation of
policy
o Office limited in jurisdiction and tenure (case-specific)
 Independent counsel is NOT principal office
Problem 6-7 (p.570)
 Inferior officers:
o Subject to removal by chief judge
o Perform certain limited duties (only hear certain cases) and do not formulate
policy because chief judge has final say
o Office is limited in jurisdiction (only hear assigned cases) and tenure (do not
serve for life)
 Congress has not vested power in anyone--is the tax court a Court of Law? Because tax
court is not an Article 3 court
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BUT chief judge of tax court is head of department
Principle officers? Do not meet Buckley test
1/27: Rulemaking Initiation
Sources of Proposed Regulations
 Statutory command – specific or general statutory mandate by Congress requiring the
agency to adopt rules
 Bottom-up – rulemaking initiated through recommendations of agency staff
 Top-down -- rulemaking initiated through political pressure from the legislative or
executive branches
 Public – rulemaking initiated by directly lobbying agency officials or staff, or indirectly
by enlisting the help of elected officials, or by filing a rulemaking petition
Rulemaking Petition
 5 U.S.C. § 553(e) – “Each agency shall give an interested person the right to petition for
issuance, amendment or repeal of a rule.”
 5 U.S.C. § 555(d) – “Prompt notice shall be given of the denial … of a …petition….
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.”
Problem 2-1 (p.51-52)
 Lobbying the agency from different sides to amend the rule. How does your firm
convince EPA to amend the rule?
o Statutory command does not exist
 (a) Biotech company
o Bottom-up: lobby EPA staff
 Should we talk Atlanta regional office first? At least get insight from
them, especially if you are an Atlanta law firm (with connections).
BUT…purpose of regional office is enforcement and implementation but
do not have rulemaking capabilities
 Probably want to bring a scientist along
 Start with staff, not with the politically appointed assistant administrator
 Could start in Registration Division or Field Operations (see chart)--talk to
regional folks to decide which office/right person to start with
 Frame your argument in a way that is beneficial to the agency
 (b) National Wildlife Federation
Petitions for Rulemaking
 Advantages: the agency has to respond…and that decision will be reviewable
 Disadvantages: time delay, lack of clear procedural rules
Agency Delay
5 U.S.C. § 706 (Scope of Review):
The reviewing court shall –
(1) Compel agency action unlawfully withheld or unreasonably delayed;
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(2) Hold unlawful and set aside agency action … found to be –
(A) Arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
5 U.S.C. § 551(13) – “Agency action” includes the whole or part of an agency rule, order,
license, sanction, relief, or the equivalent or denial thereof, or failure to act;
Problem 2-2 (p.64)
 Compel agency action (which can include a failure to act)
 At some point, failure to act can become arbitrary and unreasonable
 Factors applied below
TRAC v. FCC Rule of Reason Test for Agency Delay
1. Where Congress has supplied a timetable (or other indications of its expectation
concerning the agency’s speed), the statutory scheme may supply the definition of
“unreasonable delay.” NO. Not applicable.
a. Even if there is statutory deadline, the courts are reluctant to enforce those
timetables if the agency has a reasonable explanation (over burdened, under
staffed, limited resources)
2. Delays that might be reasonable in the sphere of economic regulation are less tolerable
when human health and welfare are at stake.
a. Point of existing regulation is to protect human health
b. Because they don’t know the environmental effects (unregulated activity could
expose humans to danger), human welfare is at stake if this amendment were to
be added
c. Delay seems to be more promotive of human health
3. A court should consider the effect of expediting delayed action on agency activities of a
higher or competing priority.
a. Weighs against client because right now testing of other pesticides are more
important. Have to deal with backlog first
4. A court should take into account the nature and extent of the interests prejudiced by the
delay.
a. Interests that underlie this particular rule, aligned with interests of statute
b. Opp to create something that will have beneficial social and environmental effects
5. A court need not find any impropriety to conclude delay is unreasonable.
a. Presumption of unreasonableness if there is impropriety (though this is hard to
prove, because not privy to inner-workings of agency)
b. Absence of impropriety is not a reason for court to find unreasonable delay
Reviewing Denial of Rulemaking Petition
Arkansas Power v. ICC – the court asks whether the agency has adequately explained the facts
and policy on which it has relied and whether the facts have some basis in the record
 Court will only compel an agency to institute rulemaking proceedings only in extremely
rare instances
Northern Spotted Owl v. Hodel – an action is arbitrary and capricious when an agency fails to
articulate a “satisfactory” explanation for denial of the petition, including a rational connection
between the facts found and the choice made.
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The reviewing court must determine if the agency’s decision is based on relevant factors
and whether the agency engaged in a substantial inquiry into the facts that was searching
and careful.
Massachusetts v. EPA – Refusals to promulgate rules are … susceptible to judicial review,
though such review is “extremely limited” and “highly deferential”
 “[O]nce EPA has responded to a petition for rulemaking, its reasons for action or inaction
must conform to the authorizing statute. Under the clear terms of the Clean Air Act, EPA
can avoid taking further action only if it determines that greenhouse gas emissions do not
contribute to climate change or it if provides some reasonable explanation as to why it
cannot or will not exercise its discretion to determine whether they do.”
Problem 2-3 (p.68)
 Dealing with abuse of discretion standard; highly deferential to agency
 Arbitrary and capricious review: probably not (not a big burden to produce an adequate
statement of denial)
o List several reasons
o Related to statute
o Current rule works well; lack adequate resources
What is the remedy if the denial was found to be arbitrary and capricious? Usually do not order
them to engage in rulemaking. Just remanded to agency to explain itself better
2/1: APA Rulemaking Procedures
Informal Rulemaking Three Step Process:
5 U.S.C. § 553:
–Notice
 5 U.S.C. § 553(b) – 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.
–Comment
 5 U.S.C. § 553(c) – After notice required by this section, the agency shall give interested
persons an opportunity to participate in the rule making through submission of written
data, views, or arguments with or without opportunity for oral presentation.
–Publication
 5 U.S.C. § 553(d)
Rulemaking: General Exceptions
5 U.S.C. § 553(a) – This section applies … except to the extent that there is involved–
1. A military or foreign affairs function of the United States; or
2. A matter relating to agency management or personnel or to public property, loans,
grants, benefits, or contracts.
Informal Rulemaking – Exceptions to Requirements
5 U.S.C. § 553(b)(3) – Unless notice or hearing is required by statute, this subsection does not
apply –
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A. To interpretative rules, general statements of policy, or rules of agency organization,
procedure, or practice; or
B. When the agency for good cause finds … that notice and public procedure thereon are
impracticable, unnecessary, or contrary to the public interest.
Problem 2-4 (p.76)
 Facts: EPA has 7 days to decide whether they want to do something specific with this
permit, or otherwise, it is automatically granted
 Issue: Whether this regulation could be adopted immediately, without prior notice and
comment, under one or more of the APA exceptions to the requirement of notice-and
comment-procedures
 Does the rule of procedure exception apply? See rules from cases below.
 FIRST PART: Does this change the substantive way the agency will act?
o Still reviewing applications, but now in a different way (like in JEM, created a
“hard look” window to look at applications that were substantially complete; but
if you filed outside of window, it had to be complete and if it were only
substantially complete, you were out of luck and application would be denied)
o Changes the way in which company presents its application to the agency
o Shifting review from front-end to back-endprocedural
 Alternatively, what has changed substantively? All of theses applications will go through
without agency review (now, there is no substantive review of agency applications)
 SECOND PART: are there interests that would be promoted by public participation that
are outweighed by effectiveness, efficiency, and reduction in expense?
o Interests promoted: public as watchdog (public will not want generic conditions
unless they know what they are); opportunity to give opinions, data, etc. These
concerns are related to health and safety
o Agency’s response: certainly reduces expenses, less of a burden on agency
 Though this is procedural, second part dictates that notice and comment should occur
because there are still substantive impacts
1. American Hospital Assn. v. Bowen
 D.C. Circuit initially applied the “substantive impact” test – if an agency rule had a
“substantive impact,” notice and comment procedures were required
 AHA v. Bowen court abandons this test because “even unambiguously procedural
measures affect parties to some degree”
o Every procedural rule has some sort of substantive impact
 Court asked, instead, “whether the agency action … encodes a substantive value
judgment or puts a stamp of approval on a given type of behavior”
2. Air Transport Association of America v. Dept. of Transportation
 Comes up with a different test, other than the one given in Bowen
 Divided panel attempts to change test, holding that notice and comment procedures must
be used when the agency’s procedural decisions involved “substantive” choices about
procedural issues
 Here, the DOT made “highly contentious choices concerning what process civil penalty
defendants are due”
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o This is a substantive choice about a procedural issue (therefore, notice and
comment should have been complied with)
Dissent: tries to apply Bowen case
3. JEM Broadcasting Company, Inc. v. Federal Communications Commission
 Disowns Air Transport test and creates a two-part test:
 First, JEM emphasizes that a procedural rule is one that does not itself directly alter the
rights or interests of the parties, although it may alter the way in which the parties present
themselves or their viewpoints to the agency. If the rule does directly alter the rights or
interests of parties, it is substantivenotice and comment. If not, go to second part!
o [Said another way, does the rule “change the substantive standards (altering rights
or interests)” by which the agency will act? This part of test comes from AHA v.
Bowen]
 Second, even if a rule does not directly alter the rights of parties, notice and comment is
necessary if the substantive effects of procedural rules are “sufficiently grave so that
notice and comment are needed to safeguard the policies underlying the APA.”
o In this regard, the court asks whether the “interests promoted by public
participation in rulemaking” are outweighed by “the countervailing
considerations of effectiveness, efficiency, and reduction in expense” (by not
having public participation)?
o Balancing test: interest in losing public participation vs. what the agency would
be gaining for not having to go through it for what is a procedural rule
 The second part of the JEM test recognizes the difficulty of distinguishing procedural and
substantive rules in light of the fact that procedural rules have substantive impacts.
 Thus, the second part of the test asks the broader question: does it serve the purposes of
notice and comment rulemaking to exempt the rule?
“Good Cause” Exception – Legislative History:
Statute: When the agency for good cause finds … that notice and public procedure thereon are
impracticable, unnecessary, or contrary to the public interest.
 “Impracticable” means a situation in which the due and required execution of the
agency functions would be unavoidably prevented by its undertaking public rule-making
proceedings.
 “Unnecessary” means unnecessary so far as the public is concerned, as would be the
case if a minor or merely technical amendment in which the public is not particularly
interested were involved.
 “Public interest” supplements the terms “impracticable” or “unnecessary”; it requires
that public rulemaking procedures shall not prevent an agency from operating and that,
on the other hand, lack of public interest in rulemaking warrants an agency to dispense
with public procedure.
 A lot of times, some sort of emergency gets thrown into this exception
o Safety mechanism
o What about experimental use permits? There is no emergency here
Formal Rulemaking:
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5 U.S.C. § 553(c) – 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.
[For formal rulemaking, the detailed requirements of §§ 556 and 557 replace the
comment and publication portions of the informal rulemaking process in § 553]
US v. Allegheny: must say “hearing on the record,” (although not explicitly), to invoke
formal rulemaking
If Congress wants to invoke formal rulemaking, it is really easy to do so
Vermont Yankee v. NRDC
o Absent extremely compelling circumstances, up to agency to create its own
procedural rules (cannot impose more procedural rules than are required by
informal rulemaking in 553)
“On the Record”
 5 U.S.C. § 556(e) – “The transcript of testimony and exhibits, together with all papers
and requests filed in the proceeding, constitute the exclusive record for decision in
accordance with section 557 of this title…. 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.”
2/3: Informal Rulemaking
Problem 2-5 (p.98-99)
 Changing dietary standards for free lunches served at school
 Received comments from VEGI, which advocated that schools should be required to
serve a minimum of five vegetarian meals per month
 Lawyer for Beef Producers: have not complied with 553(b)
o Final rule does not give notice that a minimum of 5 vegetarian only meals must be
given each month
o Could argue that there are all kinds of ways to increase dietary fiber, limit on
calories, etc.
 Could use leaner meat
 No specific mention of veggie only meals
 Lawyer for USDA: have complied with 553(b)
o In Chocolate Manufacturer, explicitly say that they can have flavored milk and
then the final rule does a complete reversal…however, here, there is not explicit
provision for beef meals
 Notice is not misleading here as it was in Choc; reaches conclusion
exactly opposite to that proposed
 Notice in this case is about ways to reduce fat content and sodium, etc.;
not a complete reversal
 Puts them on notice that you do have interest at stake, that there will be
reduction in school lunches
o Logical outgrowth test
A. Notice (5 U.S.C. § 553(b))
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General notice of proposed rulemaking shall be published in the Federal Register, unless persons
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
3. Either the terms or substance of the proposed rule or a description of the subjects and
issues involved.
“Logical Outgrowth” Test
 The courts test whether the description of a rule is adequate to satisfy the notice
requirement by asking whether a rule is the “logical outgrowth” of the proposal and
comments.
 “If the final rule materially alters the issues involved in the rulemaking or, if the final rule
substantially departs from the terms or substance of the proposed rule, the notice is
inadequate.” Chocolate Mfgs. Assoc. v. Block (4th Cir. 1985)
 “The crucial issue … is whether parties affected by a final rule were put on notice that
their interests were at stake.”
 “In other words, the relevant inquiry is whether or not potential commentators would
have known that an issue in which they were interested was “on the table” and was to be
addressed by a final rule.” American Medical Ass’n v. U.S. (7th Cir. 1989)
 See Note 1 (p.108)
Chocolate Manufacturer’s v. Block
 Rule specifically included flavored or unflavored milk
 Notice wasn’t adequate because there was no indication in the notice that elimination of
chocolate milk was being considered
 Logical outgrowth test: “if the final rule materially alters the issues involved in the
rulemaking or if the rule substantially departs from the terms or substance of the
proposed rule, the notice is inadequate”
o Sufficient to know that your interests are on the table
o Changes to rule are inevitable; they are looking for input and will respond to it
B. Ex parte Communications
Problem 2-6 (p.112)
 Proposed rule goes through…final rule has not been issued; comment period has ended,
but deliberations still go on
 Beef producers want to “lobby” USDA as to its opinions
 USDA could argue that Sierra doesn’t apply to them because it does not have a similar
requirement as the Clean Air Act
o So they can have a secret record here so HBO should apply
o Ex parte communications should be considered improper for the same reasons
that HBO said they were improper
Four sources of potential rules against ex parte contacts:
1. Due Process
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Under Sangamon Valley Television Corp. v. United States (D.C. Cir. 1959), due process
prohibits ex parte contacts when rulemaking involves “conflicting claims to a valuable
privilege”
 Have the right to be heard and to be given notice
 We need a more tangible property interest under Problem 2-6
o Constitution is not the right move under this situation
2. APA
 5 U.S.C. § 551(14) INFORMAL – “ex parte communication” means 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 Exception for status inquiries
 5 U.S.C. § 557(d) FORMAL– contains detailed prohibitions on ex parte communication
in formal rulemaking (and adjudication) procedures
o These prohibitions serve the purposes of 5 U.S.C. § 556(e) which requires
decisions made pursuant to § 557 in formal rulemaking (and formal adjudication)
to be made on the “exclusive record for decision”
o Formal rulemaking is made exclusively by the record
HBO v. FCC
 APA prohibits (implicitly) ex parte contacts in informal rulemaking for two reasons:
1. Such contacts create a “secret record” preventing effective exercise of court’s
judicial review function
2. There is a lack of advocacy surrounding such communications. The lack of an
adversarial process among parties also hinders the court’s judicial review
function.
 Hasn’t been overruled but has not be cited since case came out
Sierra Club v. Costle
 Refused to follow HBO case
 Ex parte contacts are not prohibited in informal rulemaking for three reasons:
1. Language of § 533 does not prohibit them, like it does in formal rulemaking
1. Look to Congressional intent…included in formal, but not in informal
2. Legitimacy of policymaking performed by unelected administrator depends on
openness and accountability to needs and ideas from members of the public
3. Agency can learn valuable information and win valuable support for proposed
rules through such contacts
 Not worried about secret record…because Clean Air Act expressly prohibited rulemaking
based on other materials not available in the record
 Decision must be based in record; if it is not, court will set it aside as arbitrary and
capricious
3. Legislative Mandate
 Congress can, and sometimes does, limit ex parte communications in express language in
the agency’s enabling statute
 Such statutory procedural requirements are an example of “hybrid rulemaking”
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4. Agency Regulations
 The agency can, and sometimes does, itself limit ex parte communications through
internal agency rules
2/8: Hybrid & Negotiating Rulemaking
A. Hybrid Rulemaking:
Three step analytical approach:
 What is the statutory trigger? That is, when does the statute require the agency to
undertake these procedural requirements?
 If there is a trigger, what analysis does the statute require the agency to undertake?
 Is agency compliance with the requirements subject to judicial review and to what
extent?
Problem 2-7 (p.131-32)
 RFA Trigger:
o Department of Ag is clearly an “agency”
o Whole school lunch is about the adequacy of notice of proposed rulemaking
o Exemptions?
 Would a school district meet any of these exemptions?
 School district is a small government jurisdiction…but this is a national
program so there is no question that this will have significant impact on a
substantial number of school districts
 EO Trigger:
o $100M economic effect (significant regulatory effect) so EO probably applies
primarily because this is a national program
Regulatory Flexibility Act (RFA): requires agencies to create a Regulatory Flexibility Analysis
(RFA) whenever they propose a rule that may have a significant economic impact on a
substantial number of small businesses, organizations, or governments.
RFA --What is the trigger?
 Applies to an “agency” as defined in 5 U.S.C. § 601 (and by reference 5 U.S.C. § 551(1))
 5 U.S.C. § 603(a) – requires a regulatory flexibility analysis any time that § 553
(informal rulemaking) requires a general notice of proposed rulemaking (NPR)
 Possible exemptions:
o 5 U.S.C. § 605(b) – exempts rules that will not “have a significant economic
impact on a substantial number of small entities”
 5 U.S.C. § 601(6) – defines “small entity” to include “small business”,
“small organization” and “small governmental jurisdiction”
 5 U.S.C. § 601(5) – defines “small governmental jurisdiction” to
include “school districts … with a population of less than fifty thousand”
RFA – What analysis does the statute require the agency to undertake?
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5 U.S.C. § 603(b) – requires, among other things, an estimate of the classes of small
entities impacted by paperwork requirements (reporting, recordkeeping and other
compliance requirements) and of professional skills necessary to meet the requirements
of the proposed rule
o Reason for this is small entities do not have personnel, staff, etc. to handle
paperwork burdens; burden/cost will be greater than what would be imposed on
larger entities
5 U.S.C. § 603(c) – requires the agency to consider alternatives and methods for
reducing the regulatory impact on small entities
5 U.S.C. § 603 – requires § 603’s “initial regulatory flexibility analysis” [previous
slide] to be published in the Federal Register at the time the general notice of proposed
rulemaking is published
o This analysis becomes part of the notice so that people can offer comment on this
information
5 U.S.C. § 604 – requires a “final regulatory flexibility analysis” (or a summary) to be
published in the Federal Register at the time the final rule is published
RPA -- Special procedural requirements?
 5 U.S.C. § 609(a) – imposes special procedures to notify small entities potentially
impacted by the NPR
 5 U.S.C. § 609(b) – imposes special procedures to review comments of small entity
representatives
Judicial Review
 5 U.S.C. § 611(a)(1)-(2) – specifically authorizes judicial review of agency compliance
with procedural requirements
 5 U.S.C. § 611(a)(4) – in the event of noncompliance, court can remand rule or stay
enforcement against small entities
 5 U.S.C. § 611(b) – the regulatory flexibility analysis for the rule becomes part of the
rulemaking record
o Can’t come under RFA to get to substantive rule itself
o More of a “hard look” standard
o Could set it aside as not a good enough job…remand to do it right or can’t enforce
it against small entities
Executive Order 12866: issued by President Clinton and subsequently adopted by President
George W. Bush – requires agencies to assess the benefits and costs of proposed and final
“significant regulatory actions”
 The Office of Information and Regulatory Affairs (OIRA), part of the Office of
Management and Budget (OMB), is responsible for overseeing agency compliance
 On January 18, 2011, President Obama issued a new Executive Order, “Improving
Regulation and Regulatory Review,” that authoritatively referenced Executive Order
12866 indicating that it continues to be in force under the Obama Administration.
What’s the trigger for EO 12866?
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Sec. 3(b) – EO 12866 applies only to executive agencies and expressly excludes
independent agencies
Sec. 6(a)(3) – imposes procedures with respect to matters determined to be a “significant
regulatory action”
Sec. 3(f)(1) – “significant regulatory actions” defined as regulations with an annual
affect on the economy of $100 million or more, or which “adversely affect in a material
way … State [or] local … governments or communities”
What analysis does the order require the agency to undertake?
 Sec. 6(a)(3)(C) – requires an agency to undertake a cost-benefit analysis of the proposed
rule and of other feasible alternatives
Special Procedural Requirements:
 Sec. 6(a)(1) – (i) should involve in the regulatory process, where appropriate, interested
persons, such as governmental officials, and (ii) allow for not less than a 60 day comment
period
 Sec. 6(a)(3)(E) – agency must make the cost-benefit analysis available to the public
Special Substantive Requirement:
 Sec. 1(a) – “agencies should select those approaches that maximize net benefits … unless
a statute requires another regulatory approach”
 Sec. 1(b)(5) – agencies should design regulations in the most cost effective manner
 Sec. 1(b)(11) – agencies should tailor regulations to impose least burden on society
Judicial Review?
 There is no judicial review of EO 12866
 However, sec. 6(b) provides for executive enforcement through OIRA oversight
 Sec. 7 – Conflicts between agency heads or between agencies and OIRA are to be
resolved by the President (with assistance by the President’s Chief of Staff)
B. Negotiated Rulemaking
 Negotiated rulemaking is an idea to reform the rulemaking process to address concerns
with undue delay in achieving final rules, increased costs, and the litigious nature of the
rulemaking process
 In this process, the agency and representatives of all major groups affected by a particular
regulation assemble to negotiate agreement on regulatory requirements
Benefits:
 Reduce total agency resources devoted to rulemaking
 Reduce total agency resources devoted to defending against administrative and judicial
challenges to rules
 Increase public acceptance of rules
 Produce better rules informed by wider sharing of critical information
Problems:
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Cannot require interested groups to participate – some may choose to opt out of the
process
Cannot guarantee that litigation will not follow the process if some participants are
nonetheless unhappy with the result
Cannot guarantee that all participants will approach the process in good faith
Agencies are not required to engage in negotiated rulemaking
When agencies do engage in negotiated rulemaking, they have the authority to pull the
plug on the process at any time and that decision cannot be reviewed
2/15: Judicial Review: Statutory Interpretation
Scope of Review:
5 U.S.C. § 706 – 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 and applicability of the terms of an agency action.
Constitutional Violation
 5 U.S.C. § 706(2)(B) – The reviewing court shall … hold unlawful and set aside agency
action, findings, and conclusions found to be … contrary to constitutional right, power,
privilege, or immunity
 Scope of judicial review – de novo
Statutory Compliance
 5 U.S.C. § 706(2)(C) – The reviewing court shall … hold unlawful and set aside agency
action, findings, and conclusions found to be … in excess of statutory jurisdiction,
authority, or limitations, or short of statutory right
 Scope of judicial review – Chevron v. NRDC test
Procedural Violation
 5 U.S.C. § 706(2)(D) – The reviewing court shall … hold unlawful and set aside agency
action, findings, and conclusions found to be … without observance of procedure
required by law
 Scope of judicial review – de novo
Findings and Conclusions (Informal Rulemaking)
 5 U.S.C. § 706(2)(A) – The reviewing court shall … hold unlawful and set aside agency
action, findings, and conclusions found to be … arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law
 Scope of judicial review – arbitrary and capricious standard
Findings and Conclusions (Formal Rulemaking)
 5 U.S.C. § 706(2)(E) – The reviewing court shall … hold unlawful and set aside agency
action, findings, and conclusions found to be … 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
 Scope of judicial review – substantial evidence test
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Chevron v. Natural Resources Defense Counsel
 Agency: existing plant that contained several pollution emitting devices could install or
modify one piece of equipment without obtaining a permits if the alteration did not
increase the total emissions from the plant
o Stationary source: includes all pollution devices within the same industrial group
as though the plant was encased within a single “bubble”
 NDRC: source meant each individual pollution-emitting piece of equipment
 Court of Appeals sides with NDRC
 USSC: overturns Court of Appeals, starting point for review is with what the agency has
done…cannot ignore agency because they are the ones with experience
Chevron Two Step Test for Statutory Interpretation by Agency
STEP ONE: Is the statute silent or ambiguous on the precise interpretive question at issue?
 If not, the court must apply (and the agency must follow) the unambiguously expressed
intent of Congress and the inquiry ends.
 If the answer is yes, then move to Step Two.
STEP TWO: Is the agency’s interpretation based on a permissible (reasonable) construction of
the statute?
 If yes, the court defers to the agency’s interpretation.
 If not, the court will proceed to provide a reasonable interpretation.
 [NOTE: The agency typically prevails if the court gets to Step Two.]
Justifications for Agency Deference:
 Gap filling –
– Congress has made a legislative delegation of authority to the agency to make
policy judgments to fill gaps in the statute
– Because Congress has delegated this policymaking authority to the agency, the
court should not substitute its own judgment for a reasonable interpretation made
by the agency
 Agency expertise –
– Agencies have the expertise, time, and resources to consider technical and
complex regulatory policy questions in a detailed and reasoned fashioned
– Courts do not have the same luxury of time, resources, and expertise to focus on
these issues and thus the agency is in the better position to make these decisions
 Legal realism –
– The federal judiciary is not an accountable political branch as is the executive
branch (of which the agency is a part)
– It is more appropriate for a political branch of government to make policy choices
that reconcile competing political interests
Note 2: agencies want to show that a statute is ambiguous; persons challenging the agency
interpretation want to show that it is not
Problem 2-9 (p.152-53)
 Poultry Products Inspection Act:
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o Poultry imported from countries other than Canada and Mexico are “subject to the
same inspection, sanitary, quality … standards applied to products produced in
the” U.S.
o Poultry imported from Canada and Mexico are “subject to inspection, sanitary,
quality … standards that are equivalent to” U.S. standards
Proposed USDA Regulation (regulation in question):
o All foreign countries desiring to import poultry to U.S. must ensure compliance
with inspection and processing standards “at least equal to” U.S. standards
Motivations of different parties:
o Agency: if we construe “same” strictly, then same means “identical”
 No one uses exactly the same processes as US…concern is that we cannot
then import chicken because no other countries standards will be like the
US
 Could end up with chicken shortage
 Dilute strict construction of the word “same” by saying “at least equal to”
o National Broiler Association: worried about foreign competition
 “Same” is more protective of public health
o Australian Trade Association: concerned that they cannot import chicken to US
because they have higher standards than the US does (because of use of radiation)
STEP ONE: How do you decide if there is ambiguity? Notes 2 & 3 (p.148-49)
Plain Meaning Approach:
 Plain meaning: forgo legislative history or inferring legislative intent from statute’s
animating principles
 At Step 1, the court determines whether a statute is ambiguous under a “plain meaning”
test that foregoes the use of tools of statutory construction such as legislative history or
inferring legislative intent from the statute’s animating principles.
 K Mart Corp. v. Cartier, Inc. (U.S. 1988) – “In ascertaining the plain meaning of the
statute, the court must look to the particular statutory language at issue, as well as the
language and design of the statute as a whole.”
 Problem 2-9:
o Look at “same” and other words in the statute
o NBC: will look to Random House definition…same=identical
 Congress used words “same” with foreign countries
 But with Canada and Mexico, used “equivalent”
 Must give some effect to difference in language…created a
different standard for Canada and Mexico
o ATA/Agency: Black’s Law definition…”of the kind or species, not the specific
thing”
 Black’s uses the word “equal” to define same…also rejects identical as the
only possible meaning of same
Statutory Construction (Plain Meaning Plus):
 At Step 1, the court determines congressional intent by using traditional tools of statutory
construction.
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Dole v. United Steelworkers (U.S. 1990) – the starting point is “the language of the
statute,” but in “expounding a statute,” a court is “not guided by a single sentence, but
looks to the provisions of the whole law, and to its object and policy.”
CMA v. NRDC (U.S. 1985) – examine “the legislative history or the purpose or
structure” of the statute to determine whether an interpretation is contrary to the intent
of Congress
Problem 2-9:
o Purposes:
 NBC: where will “at least equal to” lead us that “identical” will not?
Identical is not as subjective as at least equal to is
o Legislative History:
 NBC: Congressional Record wants to delete “at least equal to” and replace
it with “same”…characterizes it as a clerical error
 ATA: Agricultural Committee uses the word “at least equal to” in
markup…intent of committee is stated that they meant “at least equal to”
 Congressional Record misstates what intent of committee was
If court goes to STEP TWO, i.e. if the decide ambiguity exists, the question is: is this
interpretation of agency a reasonable construction of the statute? Agency usually wins here.
2/17: Judicial Review: Substantive Decisions
Problem 2-10 --FTC Mechanical Defects Disclosure Rule (p.164-65)
 Original rule – Used car dealers must check off defects on a list of mechanical systems
posted on a window of which the dealer had knowledge, although no pre-sale
inspection by the dealer would be required.
 Revised rule – FTC eliminated this requirement.
FTC Substantive Decisions in Issuing the Rule
 When issuing the Mechanical Defects Disclosure Rule (and later revoking it), the FTC
made two types of substantive decisions:
o Factual findings on the issues of car dealer knowledge and consumer awareness
o An ultimate conclusion that, in light of the facts found, mandating dealer
disclosure would not eliminate unfair and deceptive acts and practices
FTC Factual Findings (Dealers)
 In the first rule, the FTC found that dealers often know of defects at the time of sale
because they routinely inspect cars before purchase at auction and appraise privately
owned vehicles before purchase.
 In the second rule, the FTC found that –
o Careful inspections do not always reveal or predict mechanical problems that may
occur shortly after the sale;
o Dealer knowledge about general conditions of a car does not necessarily mean
that the dealer has knowledge of specific defects; and
o Although the record has anecdotal evidence that dealers know about specific
defects, the record has other evidence, which supports the conclusion that most
dealers do not.
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FTC Factual Findings (Consumers)
 In the first rule, FTC found consumer awareness of defects would improve, relying on a
study finding that more buyers received pre-purchase information from dealers after a
Wisconsin known defects disclosure rule went into effect.
 In the second rule, the FTC discredited this study –
o More consumers in Minnesota (with no disclosure law) reported more awareness
of defects prior to sale than consumers in WI (with disclosure law)
o Number of buyers indicating they lacked needed information declined from 32%
(pre-law) to 28% (post-law); thus the law’s impact was small
o Number of buyers who indicated that the dealer gave them good information
stayed the same (62%)
FTC Ultimate Conclusions
 The FTC ultimately concluded that a known defects disclosure rule would –
o Not provide used car buyers with a reliable source of information
o Have the unintended and perverse effect of discouraging, rather than encouraging,
inspection and disclosure of defects
o Confuse consumers and cause them to make inaccurate assumptions about the
condition of the car after reading the defect disclosure
Scope of Review – Findings and Conclusions (Formal Rulemaking)
 5 U.S.C. § 706(2)(E) – The reviewing court shall … hold unlawful and set aside agency
action, findings, and conclusions found to be … 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
Scope of Review (APA) – Findings and Conclusions (Informal Rulemaking)
 5 U.S.C. § 706(2)(A) – The reviewing court shall … hold unlawful and set aside agency
action, findings, and conclusions found to be … arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law
BUT…Congress enacted a hybrid standard of review in promulgating the Act.
Scope of Review – FTC Act (hybrid rulemaking)
 15 U.S.C. § 57a(e)(3)(A) – “The court shall hold unlawful and set aside the rule … if …
the court finds that the Commission’s action is not supported by substantial evidence in
the rulemaking record … taken as a whole.”
How has the Court defined “substantial evidence”?
 Consolidated Edison v. NLRB (U.S. 1938) – A court should uphold a rule under the
substantial evidence standard if it finds the agency’s decision to be “reasonable,” or if the
record contains “such evidence as a reasonable mind might accept as adequate to support
a conclusion.”
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This standard does not require that the court agree with the agency’s conclusions; it only
requires that the agency’s choice is a reasonable one, even if the court would have made
another choice.
What is the “rulemaking record” under the FTC Act?
15 U.S.C. § 57a(e)(1)(B) – “For purposes of this section, the term `rulemaking record’ means the
rule, its statement of basis and purpose, the transcript required by subsection (c)(5) of this
section, any written submissions, and any other information which the Commission considers
relevant to such rule….”
VERSUS “ARBITRARY AND CAPRICIOUS”
How would review of the rule compare under the APA?
 Citizens to Preserve Overton Park v. Volpe (U.S. 1971) – the Court said that the
“arbitrary and capricious” standard requires the agency to base a decision on a
“consideration of relevant factors” and to avoid a “clear error of judgment”
 Under 5 U.S.C. § 706 (last sentence), the APA requires judicial review based on the
“whole record”
How are they different?
 Courts tend to impose same obligation on agency to explain itself (give a rational
explanation)
 Not a lot of difference between substantial evidence and arbitrary
Agency must give an “Adequate Explanation”
 Motor Vehicle Mfgs. v. State Farm (U.S. 1983) – “the agency must examine the relevant
data and articulate a satisfactory explanation for its action including a rational connection
between the facts found and the choice made.”
 •Motor Vehicle Mfgs. v. State Farm (U.S. 1983) – In reviewing the agency’s explanation
for its conclusions, the court will consider whether –
o “The agency has relied on factors which Congress has not intended it to
consider”;
o “Entirely failed to consider an important aspect of the problem”;
o “Offered an explanation that runs counter to the evidence before the agency”; or
o “Is so implausible that it could not be ascribed to a difference in view or the
product of agency expertise”
As applied to the problem:
 Consumer Union: Dealers
o Dealers know defects because they take them through many different inspections
 Agency: inspections do not always reveal mechanical problems; dealer
may not know specific defects, just general ones
 Consumer Union: Consumers
o Consumer awareness of defects may improve
o Not much explanation as to what is going on in Minnesota
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Agency: Don’t think it will change the consumers knowledge of defects
pre-law
Consumer Union: Ultimate Conclusions/Adequate Explanation
o Agency: this rule won’t work it reality…dealers aren’t forced to do a pre-sell
inspection so they won’t have to check off defects (willful blindness)
 Also, difficulty of inspection
o Consumer Union: ultimate conclusions are not based on facts
2/22: Challenging the Agency Rule
Questions to Address in Deciding to Appeal an Agency Decision
1. Are there alternatives to litigation?
2. Is the rule vulnerable to challenge?
3. What results would be obtained by a successful challenge?
4. What will a challenge cost?
Alternatives to Litigation:
 Ask the agency (or the White House) to reconsider the rule
 Seek to persuade Congress to legislatively override the rule
 Ask the agency to interpret the rule in a manner that lessens its unacceptable impact
Is the rule vulnerable to challenge?
 Does it exceed the agency’s statutory authority? (cf. 5 U.S.C. § 706(2)(C))
 Is it unconstitutional? (cf. 5 U.S.C. § 706(2)(B))
 Is it unreasonable? (cf. 5 U.S.C. § 706(2)(A))
 Is it supported in the agency’s record? (cf. 5 U.S.C. § 706(2)(A))
 Is it otherwise procedurally inadequate or improper? (cf. 5 U.S.C. § 706(2)(D))
Is the rule vulnerable to challenge? (Statutory Interpretation, i.e. Chevron analysis)
 Chances of prevailing on an appeal raising a statutory interpretation issue are worst when
the inconsistency claimed is only “implicit.”
 Chances of prevailing on an appeal raising a statutory interpretation issue are best when
there is a substantial conflict between a rule and statutory language, or when the rule
sweeps beyond the statutory purpose and scope.
Is the rule vulnerable to challenge? (Unreasonable Rule)
Reasoned decision-making requires that –
 The decision be supported by facts in the record
 The agency provide reasons for the decision
 The agency has considered clearly viable alternatives
What results would be obtained by a successful challenge?
Likelihood of a successful challenge should be evaluated on whether the decision is –
 Within the scope of the agency’s competence
 Based on solid data (i.e., did the agency ignore substantially conflicting data)
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
The result of the agency’s use of an adequate process (i.e., courts might be more
suspicious if an agency did not give the public an adequate opportunity to participate)
What will a challenge cost?
 Will it be financially feasible to attack the rule?
 Ultimate cost of a judicial challenge is principally a function of two factors –
o The size of the regulatory record on a given issue
o Whether a further appeal will be necessary to resolve the issue (i.e., is the issue
addressed so significant that the losing party is likely to appeal the initial
reviewing court’s decision)
Problem 2-11 (p.183)
 Alternatives to litigation:
o Ask agency to reconsider, but in Problem 2-4, they have asked the agency to
reconsider through lobbying efforts and were unsuccessful
 Agency is of the view that they have already spent too much time on this
than its worth
o Seek to persuade Congress: uncertain as to whether you could garner enough
political capital and support of members of Congress
 Difficult to get Congress to override something when they have broadly
delegated these powers to the agency…Congress does not want to deal
with day to day issues
 Further, this is procedural agency rule…not substantive. Would be hard to
get the whole Congress to care about it enough to override it
 Congressional Review Act has only been invoked once…usually applies
to substantive rules, not to procedural rules
 Vulnerable to challenge:
o Statutory interpretation: no, because this is not a statutory interpretation of a rule
o As arbitrary and capricious: no
 Cost considerations
Problem 2-12 (p.188): Can the benefits of delay be weighed at all?
 Beef Producers want to appeal to push day that rule is effective off into the future
 Can they do this?
Lawyer as adviser –
 Should give “professional opinion as to what the ultimate decisions of the courts [are]
likely to be” (EC 7-3)
 “Primarily assists [the] client in determining the course of future conduct and
relationships” (EC 7-3)
 “Should give his professional opinion as to what the ultimate decisions of the courts
would likely be as to the applicable law” (EC 7-3)
 Furthers the client’s interest by “giving a professional opinion as to what he believes
would likely be the ultimate decision of the courts on the matter … and the practical
effect of that decision” (EC 7-5)
27
Lawyer as advocate –
 Authority to make decisions affecting the merits of the cause – i.e., to appeal – is that of
the client (EC 7-7)
 “May continue to pursue a course of conduct contrary to the lawyer’s advice … so long
as the lawyer does not thereby knowingly assist the client to engage in illegal conduct or
to take a frivolous position” (EC 7-5)
o Lawyer must say no to these, even if client wants to do so
 Has the duty “to represent the client zealously within the bounds of the law”
Is it Improper to Bring a Lawsuit Solely to Obtain Delay? YES. Cannot be your sole purpose.
 Rule 3.2 of the Model Rules of Professional Conduct requires that a lawyer must make
reasonable efforts to expedite litigation consistent with the interests of the client.
 According to the comment: “Delay should not be indulged merely for the convenience of
the advocates, or for the purpose of frustrating an opposing party’s attempt to obtain
rightful redress or repose … Realizing financial or other benefit from otherwise
improper delay in litigation is not a legitimate interest of the client.”
Is it Improper to Bring a Lawsuit Primarily to Obtain Delay?
 Rule 3.1 (MRPC) – a lawyer must have a basis for a position that is not “frivolous, which
includes a good faith argument for an extension, modification, or reversal of existing
law….”
 Comment to Rule 3.2 indicates that the “question is whether a competent lawyer acting in
good faith would regard the course of action as having some substantial purpose other
than delay.”
o Beef Producer’s lawyers say that the chance of winning is “very, very small.”
3/1: Formal or Informal Adjudication
Definitions:
5 U.S.C. § 551(7) – “adjudication” means agency process for the formulation of an order
5 U.S.C. § 551(6) – “order” means the whole or 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
Formal (APA) Adjudication:
5 U.S.C. § 554(a) – This section applies … in every case of adjudication required by statute to be
determined on the record after opportunity for an agency hearing….
[5 U.S.C. §§ 554(b)-(e), 556 and 557 contain the specific procedures that govern formal
adjudication]
Informal (non-APA) Adjudication:
 If formal adjudication under § 554(a) – “adjudication required by statute to be determined
on the record after opportunity for agency hearing” – is not required, informal (non-APA)
adjudication may nonetheless be necessary if:
 Statute authorizing agency action requires use of some hearing procedures, or
 Constitutional principles of due process obligate the agency to follow some type of
hearing process
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

The APA contains no requirements applicable specifically to informal adjudication
However, the minimal requirements of 5 U.S.C. § 555 (Ancillary Matters) are applicable
to all agency proceedings (which would include proceedings constituting “informal
adjudication”)
Ancillary Matters:
 § 555(b) – right in any proceeding to be represented by counsel or, if allowed by the
agency, by an other-qualified representative
 § 555(b) – the right of interested persons (as opposed to parties) to appear before an
agency in any proceeding “so far as the orderly conduct of public business permits”
 § 555(b) – the right to have an agency conclude a matter presented to it within a
“reasonable time”
 § 555(c) – the right to retain (or obtain) copies of materials required to be submitted to an
agency
 § 555(d) – the right to utilize agency subpoena power upon a showing of general
relevance and reasonable scope of the evidence sought
 § 555(e) – the right to receive prompt notice of a denial of a request, application, or
petition, as well as a “brief statement of the grounds for denial”
Seacoast v. Costle (1st Cir. 1978)
 Permit proceedings under CWA allowed point source to demonstrate entitlement to
exemption from EPA permit requirement “after opportunity for public hearing”
 5 U.S.C. § 554(a) applies “in every case of adjudication required by statute to be
determined on the record after opportunity for an agency hearing….”
 Supreme Court precedent does not require precise words “on the record” to trigger the
formal requirements of §§ 554, 556, and 557
 1st Circuit distinguishes between adjudication and rulemaking
 Rulemaking is the agency equivalent of legislation and legislation rarely involves a trialtype hearing
 When rulemaking is the type of procedure at issue, there is a presumption against a
trial-type proceeding that can only be overcome by clear statutory language indicating
that Congress intended a different result
 On the other hand, where the procedure at issue is adjudication, because adjudication is
the agency equivalent of judicial action, the presumption is in favor of a trial-type
proceeding
 Thus, any requirement for a hearing, where the proceeding at issue is an adjudication,
triggers the APA requirements for formal adjudication, absent clear language in the
statute indicating that Congress intended a different result
 PRESUME FORMAL ADJUDICATION UNLESS YOU CAN REBUT IT WITH
SPECIFIC LANGUAGE IN THE STATUTE
City of West Chicago v. NRC (7th Cir. 1983)
 Atomic Energy Act requires NRC to grant a “hearing” if requested in any proceeding to
grant, revoke or amend a license or permit
29
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


The language of APA section 554(a) notwithstanding, the precise words “on the record”
are not required to trigger the formal, on the record hearing provisions of §§ 554, 556,
and 557
7th Circuit disagrees with the 1st Circuit and Seacoast v. Costle and creates an opposite
presumption against formal adjudication absent clear language in the statute indicating
a contrary intent from Congress
7th Circuit applies the same test for finding that formal adjudication is required as the
Supreme Court established for finding that formal rulemaking is required – clear
legislative language indicating Congressional intent to require the formal hearing
provisions of the APA
PRESUMPTION AGAINST USING FORMAL ADJUDICATION ABSENT CLEAR
LANGUAGE IN THE STATUTE
Chemical Waste Management v. EPA (D.C. Cir. 1989)
 RCRA requires EPA to “promptly conduct a public hearing” on challenges to orders
assessing civil penalties or suspending or revoking permits for RCRA violations
 D.C. Circuit holds that a presumption that a statutory requirement for a hearing in an
adjudication requires formal, “on the record” APA hearing procedures is inappropriate in
the light of the Supreme Court’s decision in Chevron v. NRDC (U.S. 1984)
 The question of whether formal adjudication procedures are required must be answered
applying the two-step Chevron test
o STEP 1: Is the statute silent or ambiguous on the question of whether Congress
intended the APA’s formal adjudicatory procedures to apply?
o STEP 2: If yes, then the agency must resolve the ambiguity and the court should
defer to a reasonable interpretation by the agency as to whether such procedures
are required by the statute
Dominion Energy v. Johnson (1st Cir. 2006)
 First Circuit overruled Seacoast and instead applied Chevron to determine whether
formal adjudication is required.
 First Circuit felt compelled to overrule Seacoast in Dominion Energy because Chevron
was an intervening decision of the U.S. Supreme Court.
3/3: Adjudicatory Procedures
Notice of Hearing
5 U.S.C. § 554(b) – “Persons entitled to notice of an agency hearing shall be timely informed
of:
(1) The time, place, and nature of the hearing;
(2) The legal authority and jurisdiction under which the hearing is to be held; and
(3) The matters of fact and law asserted.”
Informal requirement, like the complaint (if comparing it to a civil case)
Reply to Notice
5 U.S.C. § 554(b) – “When private parties are the moving parties, other parties to the proceeding
shall give prompt notice of issues controverted in fact or law; and in other instances agencies
may by rule require responsive pleading.”
30

Ex. EPA requires a responsive pleading
Intervenors
5 U.S.C. § 555(b) – “As far as the orderly conduct of business permits, an interested person may
appear before an agency or its responsible employees for the presentation, adjustment, or
determination of an issue, request, or controversy in a proceeding, whether interlocutory,
summary, or otherwise, or in connection with an agency function.”
 [NOTE – “interested person” means someone other than a party initiating agency action
or a party compelled to respond in such an action]
Settlement
 5 U.S.C. § 554(c)(1) – “The agency shall give all interested parties opportunity for … the
submission and consideration of … offers of settlement….”
 5 U.S.C. § 556(c)(6) – “…employees (i.e. ALJs) presiding at hearings may … hold
conferences for the settlement … of the issues by consent of the parties….”
Administrative Law Judges
5 U.S.C. § 556(b) – “There shall preside at the taking of evidence –
(1) The agency;
(2) One or more members of the body which comprises the agency, or
(3) One or more administrative law judges appointed under section 3105 of this title.”
*Up to agency to decide who they want to preside at adjudication. Usually, it is (3) ALJs.
5 U.S.C. § 556(c) – “Subject to published rules of the agency and within its powers, employees
presiding at hearings may–
(1) Administer oaths and affirmations;
(2) Issue subpoenas authorized by law;
(3) Rule on offers of proof and receive relevant evidence;
(4) Take depositions or have depositions taken when the ends of justice would be served;
(5) Regulate the course of the hearing;
(6) Hold conferences for the settlement or simplification of the issues….
(7) Inform the parties as to the availability of … alternative means of dispute
resolution…;
(8) Require the attendance at any [settlement] conference [of a representative of a party
with authority to negotiate];
(9) Dispose of procedural requests or similar matters;
(10) Make or recommend decisions in accordance with section 557…;
(11) Take other action authorized by agency rule consistent with this subchapter.
5 U.S.C. § 556(e) – “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, an opportunity to
show the contrary.” [“judicial notice” provision]
5 U.S.C. § 554(d) – “The employee who presides at the reception of evidence … shall make the
recommended decision or initial decision required by section 557….”
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5 U.S.C. § 554(d) – “An employee … 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 advice in the decision, recommended decision, or agency review pursuant to
section 557… This … does not apply– …
(C) to the agency or a member or members of the body comprising the agency.”
 [NOTE: this is the “separation of functions” provision – separating the prosecution from
the adjudicative functions within the agency, but with an exception for the “head” of the
agency which is permitted by the APA to engage in both functions]
Burden of Proof
5 U.S.C. § 556(d) – “Except as otherwise provided by statute, the proponent of … [an] order has
the burden of proof.”
 [NOTE: The Supreme Court has clarified that this means “burden of persuasion” rather
than “burden of production.”]
 Less formal than trial procedures
Evidentiary Standard
 5 U.S.C. § 556(d) – an agency decision must “be supported by and in accordance with
the reliable, probative, and substantial evidence”
 5 U.S.C. § 556(d) – “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.”
Testimony & Documents
5 U.S.C. § 556(d) – “A party is entitled to present [a] case or defense by oral or documentary
evidence, to submit rebuttal evidence, and to conduct such cross-examination as may be
required for a full and true disclosure of the facts.”
Record
5 U.S.C. § 556(e) – “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….”
Ex Parte Communications
 5 U.S.C. § 557(d)(1)(A) – “no interested person outside the agency shall make or
knowingly cause to be made to any member of the body comprising the agency,
administrative law judge, or other employee who is or may reasonably be expected to be
involved in the decisional process of the proceeding, an ex parte communication relative
to the merits of the proceeding;”
 5 U.S.C. § 557(d)(1)(B) – “no member of the body comprising the agency,
administrative law judge, or other employee who is or may reasonably be expected to be
involved in the decisional process of the proceeding, shall make or knowingly cause to be
made to any interested person outside the agency an ex parte communication relative to
the merits of the proceeding;”
Proposed Findings & Conclusions with Supporting Reasons
32
5 U.S.C. § 557(c) – “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 subject for the consideration of the employees participating in the decisions–
(1) Proposed findings and conclusions; …
(3) Supporting reasons for the … proposed findings or conclusions.”
Problem 3-1 (p.209)
 Facts: Lane’s Autobody workers were not wearing respirators while painting (or even
while not painting)
 Adequate notice issue: whether there was adequate notice
o Problem: agency cited the wrong section when given out a citation
o NLRB case is distinguishable because after hearing there
o Lane’s knew very well what they were being cited for…can’t really say that they
were surprised about what they would have to deal with
 Made arguments “even assuming respirators weren’t being used…”
o Southwest Sunsites, Inc. v. Federal Trade Commission (9th Cir. 1986):
o “The purpose of the notice requirement in the [APA] is satisfied … if the party
proceeded against `understood the issue’ and `was afforded the full opportunity’
to justify his conduct.”
 Interpretation issue: when OSHA interprets statute to say that painters must be wearing
respirators even when they are not painting
o Martin v. OSHRC (U.S. 1991): An agency’s construction of its own regulations
is normally entitled to deference when that construction is subject to review. The
deference reflects the assumption that Congress delegated to an agency the
primary responsibility to clarify its regulations. This arrangement recognizes the
agency’s expertise and permits it to develop consistent policies.
o Deferring to agency expertise and judgment…have a rational, reasonable reason
for doing it this way
 Get even more deference when it comes to interpreting their own
regulations (even more so than statutes)
 Not a whole lot of room for Lane’s because OSHA has provided a rational
reason
 Evidentiary issue: did OSHA fail to meet its burden of persuasion because it was based
on hearsay?
o Admission of Hearsay Evidence:
 Residuum Rule (prohibiting decisions from being rendered based solely
on hearsay evidence) undercut by Richardson v. Perales (U.S. 1971)
 Thus, hearsay evidence alone can form the sole basis of decision in some
situations, where the nature of the hearsay is relatively “reliable,
probative, and substantial.” This means, of course, that not all hearsay can
support decisions by itself if it does not meet this standard.
o Wallace case: must be able to cross examine affadavit (decision relied heavily
upon testimony by doctors post-hearing)…he didn’t have a chance to crossexamine because he didn’t know that it was being relied upon
o However, in the problem, Lane’s didn’t really raise this issue. Further, they could
have subpoenaed the inspector but elected not to
33

Not disputing what the inspector is saying substantively
3/8: Ex Parte Communications
Separation of Powers:
 5 U.S.C. § 554(d) – “An employee … 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 in the decision, recommended decision, or agency review pursuant
to section 557, unless he becomes unavailable to the agency.”
Ex Parte Communications:
 5 U.S.C. § 557(d)(1)(A) – “no interested person outside the agency shall make or
knowingly cause to be made to any member of the body comprising the agency,
administrative law judge, or other employee who is or may reasonably be expected to be
involved in the decisional process of the proceeding, an ex parte communication relative
to the merits of the proceeding;”
 5 U.S.C. § 557(d)(1)(B) – “no member of the body comprising the agency,
administrative law judge, or other employee who is or may reasonably be expected to be
involved in the decisional process of the proceeding, shall make or knowingly cause to be
made to any interested person outside the agency an ex parte communication relative to
the merits of the proceeding;”
 5 U.S.C. § 557(d)(1)(C) – “[those persons] who [are] or may reasonably be expected to
be involved in the decisional process … who receive[], or who make[] or knowingly
cause[] to be made, a communication prohibited by this subsection shall place on the
public record of the proceeding:
o All such written communications;
o Memoranda stating the substance of all such oral communications; and
o All written responses, and memoranda stating the substance of all oral responses,
to the [section (i) and (ii)] materials described [above]”
 5 U.S.C. § 557(d)(1)(D) – “upon receipt of a [prohibited] communication…, the …
employee presiding at the hearing may, to the extent consistent with the interests of
justice and the policy of the underlying statutes, require the party to show cause why his
claim or interest in the proceeding should not be dismissed, denied, disregarded, or
otherwise adversely affected on account of such violation;”
Problem 3-2: Spotted Owls and Logging
 Endangered Species Committee (“God Squad”) can completely override the act and must
decide whether the agency can take action that would jeopardize a listed species (these
agencies must get an exemption from this committee)
 Requires formal adjudication, i.e. no ex parte communications are allowed
 Committee grants an exemption if at least 5 of 7 members of committee grant exemption
 Issue: several committee members were summoned to White House and were allegedly
facing political pressure to grant the exemption
 We assume that all alleged meetings are true for this problem…
 What are the communications we are focusing on as the problem?
o Discussions/conversations, but we don’t know actual content and who said what
 1. Determine if its someone on the outside of the agency
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2. Then determine if this person on the outside is an “interested person”
o Who is an “interested person” under 5 U.S.C. § 557(d)(1)?
 Legislative history states that the term covers “any individual or other
person with an interest in the agency proceeding that is greater than the
general interest the public as a whole may have. The interest need not be
monetary, nor need a person be a party to, or intervenor in, the agency
proceeding….”
 “…The term [“interested person”] includes, but is not limited to, parties,
competitors, public officials, and nonprofit or public interest organizations
and associations with a special interest in the matter regulated. The term
does not include a member of the public at large who makes a casual or
general expression of opinion about a pending proceeding.” PATCO v.
FLRA (D.C. Cir. 1982)
o Is Mr. Yeutter an interested person?
 Press reports suggest that WH has taken an interest
 Probably not hard to demonstrate that WH has a greater interest than the
public as a whole has
o Problem does not have a lot of specific detail on WH’s interest (must be specific)
So then, the question becomes: what are we going to do about it?
o PATCO: The mere fact of ex parte communications does not necessarily void
an agency’s decision.
 Rather, the decision is voidable if, “as a result of improper ex parte
communications, the agency’s decision-making process was irrevocably
tainted so as to make the ultimate judgment of the agency unfair, either to
an innocent party or to the public interest that the agency was obliged to
protect.”
Gravity of Communications:
o Factors relevant to decision to void agency decision (PATCO):
 The gravity of the ex parte communications;
 Whether the contacts may have influenced the agency’s ultimate decision;
 Whether the party making the improper contacts benefited from the
agency’s ultimate decision;
 Whether the contents of the communications were unknown to opposing
parties (who therefore had no opportunity to respond)
 Whether vacation of the agency’s decision and remand for new
proceedings would serve a useful purpose.
Knauss voted to support granting the exemption whereas Reilly ultimately voted against
the exemption…both were “pressured” but with different results
What if the decision had been 6-1 instead of 5-2?
What remedy would you expect?
o If you can void the process, the case just gets remanded to the committee for
another decision
o But the problem is that you can undue what they may have heard in ex parte
communications
Problem 3-3
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
Issue: clerk going and asking the other lawyers a question and speaking with Jones before
he formulated his own thoughts
o We don’t have the memo so we don’t know what it says
Stone v. FDIC (Fed. Cir. 1999)
“The introduction of new and material information by means of ex parte communications to
the deciding official undermines the public employee’s constitutional due process guarantee of
notice (both of the charges and of the employer’s evidence) and the opportunity to respond.
When deciding officials receive such ex parte communications, employees are no longer on
notice of the reasons for their dismissal and/or the evidence relied upon by the agency.”
Factors relevant in determining whether ex parte communication involved “new and material
information”:
 Is the information new or merely cumulative?
 Did employee know of the error and have the chance to respond to it?
 Was the ex parte communication of the type likely to result in undue pressure upon the
deciding official to rule in a particular manner?
“Ultimately, the inquiry … is whether the ex parte communication is so substantial and so
likely to cause prejudice that no employee can fairly be required to be subjected to a deprivation
of property under such circumstances.”
3/10: Due Process Hearings I
Missed Class: Notes from Dreda
When APA procedures don't apply, often the agency has adopted procedural
regulations for the type of procedure applicable to the adjudication
question of whether this complies with Due Process Clause
 5th Amendment (federal government)
 14th Amendment (state and local government)
Due Process: no person shall be deprived of life, liberty, or property without due
process of law
 Substantive Due Process
 Procedural Due Process (this is what we deal with in Admin)
Two main questions to determine procedural requirements:
o Whether the DPC applies at all?
 Individualized decision making
 deprivation of a property or liberty interest
o Assuming the DPC applies, what procedures are required?
Individualized Decisionmaking
o individualized deprivations of property or liberty require due process
o policy-based deprivations affecting a class of individuals do not
o Londoner v. Denver
 Plaintiffs brought action to relieve lands owned by them from an
assessment of a tax for the cost of paving a street upon which the
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lands abutted
 Supreme Court held that the tax assessed was constitutional
 tax was assessed under Denver's charter which allows the city to
make local improvements and assess the cost of those improvements
upon the benefitted properties
 Steps to execute this power:
 Board of public works transmits to the city council the work
to be done, an ordinance authorizing it, and the assessment
district
o First there has to be a petition from the owners of the
properties to be assessed
 Ordinance will be passed by the city council once they
determine that the action was duly taken
 the cost will be assessed to the landowner
 this landowner is questioning whether the assessment was made
without notice and opportunity for hearing to those affected by it
 When the legislature doesn't levy the tax, but rather commits to a
subordinate body the duty of determining whether, in what amount
and on whom the tax shall be levied, due process requires that the
person against whom the tax will be levied shall be given notice and
an opportunity to be heard
 Bi-metallic Investment Company v. State Board of Equalization
o suit to enjoin the State Board of Equalization from putting in force an
order increasing the valuation of all taxable property in Denver 40%
o Question of whether all individuals have a constitutional right to be
heard before a matter can be decided in which all are equally
concerned
o It is impracticable that everyone should have a direct vote in its
adoption
 distinguished form Londoner where there were relatively few
property owners
Protected Interests
 Problem 3-4: Definition of Property and Liberty
o Student was reported for violating honor code (didn't include quotes
in certain cites and paraphrased whole portions of briefs)
o Honor Committee investigated and reviewed the charge. The student
was notified of the charge and requested council (but that was
denied). He responded to the charge, pleading ignorance of the rule
and presented various other assertions to support his position.
o Ultimately the committee unanimously found that Jeremy had
committed plagiarism, a violation of the Honor Code, and by a twoto-one vote recommended that Jeremy be suspended for one year.
These findings weren't presented to Jeremy before the Dean made the
37
decision to expel him.
o Is there a protected interest?
 Liberty interest: You can have an interest in your job, but not
everyone has an interest in their job.
 Also, where a person's good name, honor or integrity is at stake
because of what the government is doing to him, notice and an
opportunity to be heard are essential.
 Stigma-Plus test in Paul v. Davis
 In Codd v. Velger the future employment was the plus
factor.
 This honor code violation will stigmatize him
(admission into other law schools, character and fitness
issues, other non-law school employment opportunities)
 The letter that the Dean wrote also makes the action
seem much more nefarious than it actually was.
 Property Interest: look to see if there is something from which
Jeremy could infer what was expected of him as a student
(student handbook)
Property Interest
 Board of Regents v. Roth
o Professor hired for a fixed term of one year. Was informed that he
wouldn't be invited back afterward. Brought an action charging
that the decision not to rehire him for he next year infringed on
his 14th Amendment rights
o To have a property interest in a benefit, a person clearly must have
more than an abstract need or desire for it. He must, instead, have
a legitimate claim of entitlement to it.
o This is not within the interests protected by the 14th Amendment
o The 14th Amendment's procedural protection of property is a
safeguard of the security of interests that a person has already
acquired in specific benefits
o Note 3, page 249 (Perry v. Sinderman can be contrasted with Roth
case)
Liberty Interest
 Historically, liberty meant freedom from bodily restraint or injury (gov't.
Ordinarily cannot restrain someone except as incident to the criminal
process)
 Liberty also includes all of those privileges long recognized...as essential to
the orderly pursuit of happiness by free men
 Paul v. Davis
o Whether respondent's charge that petitioner's defamation of him, on
its own, stated a claim for relief...under the 14th Amendment (It does
38
o
o
o
not)
Respondent's claim is grounded in his assertion that the flyer
distributed to local businesses included the phrase “Active
Shoplifters” and included his name and photograph
 designation as an active shoplifter would inhibit his ability to
enter business establishments and would impair his ability to
find employment
Imputing criminal behavior is generally considered defamatory per
se and actionable without proof of special damages (stigma
associated with it)
BUT reputation alone (without some more tangible interest) is not
“liberty” or “property”
This is the stigma plus test
o
Problem Materials
 Codd v. Velger
o Velger alleges that he had been wrongly dismissed and sought
reinstatement and damages from the resulting injury to his reputation
and future employment prospects
o He held only a probationary position so he had no property interest in the
position but says that he was entitled to a hearing based on the material
placed by the Police Department in his personnel file
o He said this material was what caused his dismissal
o Question addressed was whether the the police department, in
discharging Velger, imposed a stigma on him that foreclosed his
freedom to take advantage of other employment opportunities
 the material in his personnel file said that while he was still a
trainee, he put a gun to his head and tried to commit suicide
 Court of Appeals held that the finding of no stigma by the lower
court was clearly erroneous (this type of information would
necessarily impair future employment)
o Supreme Court found that it didn't need to reach the stigma finding
because there was no factual dispute between the employer and the
discharged employee having any bearing on the case
o Stevens dissent: If the charge, whether true or false, involves a
deprivation of liberty, due process must accompany the deprivation
(favors two-step process)
 establish truth or falsity of the charge, and
 provide a basis for deciding what action is warranted by the facts
 Shands v. City of Kennett
o Volunteer fireman dismissed because they attempted to undermine the
authority of the Fire Chief when they asked the city council to block the
appointment of the candidate requested by the Chief, and appoint a
friend of the plaintiffs' in his stead
39
o After a closed hearing, the council decided to dismiss the men. They
released a statement to dispel rumors and misinformation concerning the
discharges.
o Plaintiffs alleged (in spite of this) that the council had made false and
stigmatizing statements about them and implicated their 14th
Amendment liberty interests.
o They also alleged that the defendants had deprived them of procedural
due process (failing to provide a fair and meaningful hearing).
 To establish protected liberty interests, plaintiffs were required to
establish that a city official, in connection with discharging the
plaintiffs, publicly made allegedly untrue charges against them
that would stigmatize them so as to seriously damage their
standings and associations in their community, or foreclose their
freedom to take advantage of other employment opportunities
 The statements regarding their release (that their dismissal was the
result of a personnel matter) did not create the level of stigma
required to implicate a constitutionally protected liberty interest
3/22: Due Process Hearings II
Problem 3-5: Did the law school deny Jeremy due process by refusing his requests to be
accompanied by his lawyer when he addressed the HC and to call other students and practicing
lawyers to testify?
Matthews v. Eldridge
 “Due process is flexible and calls for such procedural protections as the particular
situation demands. According, resolution of the issue whether the administrative
procedures provided … are constitutionally sufficient requires analysis of the
governmental and private interests that are affected.”
 Analyzing the governmental and private interests affected requires consideration
(balancing) of three distinct factors:
o The private interest that will be affected by the official action;
o The risk of an erroneous deprivation of such [private] interest through the
procedures used, and the probable value, if any, of additional or substitute
procedural safeguards; and
o The Government’s interest, including the function involved and the fiscal and
administrative burdens that the additional or substitute procedural requirement
would entail.
Board of Curators v. Horowitz
 How can the law school use this case? Academic, higher-learning institution…both were
dismissals
o Court doesn’t want to put in judicial proceedings into academic settings
 How is it distinguishable?
o Medical student didn’t say he wanted a lawyer or to call witnesses (issues in law
school case are not at issue in Horowitz)
40
o Academic vs. conduct
 Academic is subjective…conduct hearing is more like a judicial setting
Osteen v. Henley
 Dismissal case based on conduct
 “Mathews v. Eldridge … applied to school or college disciplinary proceedings…,
requires consideration of the cost of the additional procedure sought, the risk of error if it
is withheld, and the consequences of error to the person seeking the procedure.”
 How does this case hurt Jeremy?
o
 How does this case help Jeremy?
o Osteen could attend another school…Jeremy could argue that he is in a
professional school and has been accused of professional misconduct
o Not having an attorney did not cause him anymore detriment
o Osteen had a student representative…Jeremy had no one
 Burdens of having lawyers present:
o Lawyers are zealous advocates…process becomes more adversarial
o Disciplinary hearing becomes a full blown trial
o University would have to get an attorney as well
 What other role could the lawyer play? Counselor
 Osteen pled guilty so he had much less of a need to have an attorney present whereas
Jeremy is asking them to apply many subtleties to guide him in this process
 Osteen pled guilty to a criminal charge so may have had more of a reason to need an
attorney present to advise him but he didn’t even have an attorney present so why should
Jeremy?
 Burdens of being able to call witnesses:
o Cost of attorney, time
 Risk of error if procedure sought is withheld:
o Jeremy doesn’t get his story fully told
o Law school could say that having a witness is irrelevant because even if we had
that testimony, it doesn’t change what he did
5 U.S.C. § 557(c)
 “Before 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 … exceptions to the … recommended decisions
of subordinate employees … and … supporting reasons for the exceptions….”
Neutral Decision-Maker:
Withrow v. Larkin
 A biased decision-maker is constitutionally unacceptable process as well as an
unacceptably large “probability of actual bias” on the part of the decision-maker
 A pecuniary interest in the outcome or having been the target of personal abuse or
criticism from the party being adjudicated are examples of an unconstitutional risk of bias
 The mere fact of a combination of investigative and adjudicative functions does not
create an unconstitutional risk of bias in the decision-maker
41
Problem 3-6: was Jeremy deprived of his right to a neutral decision-maker?
 What is the concern with respect to the dean’s statement? That he has already made a
decision before the panel convened
o Pre-judged the case
 What argument will the law school make? That he is just responding to what the
instructor said…triggering the initiation of the process but not pre-judging the case
o Not a determination that he did it but an opinion that if someone did that it’s a
violation of the HC
 “No decision of this Court would require us to hold that it would be a violation of
procedural due process for a judge to sit in a case after he had expressed an opinion as to
whether certain types of conduct were prohibited by law.” Withrow.
3/24: Judicial Review: Substantial Evidence
Scope of Review:
5 U.S.C. § 706(2)(E) – The reviewing court shall … hold unlawful and set aside agency action,
findings, and conclusions found to be … 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
Application of the Standard: this would be in federal court (ALJagencyfed. court)
 Substantial evidence standard applies only to formal (§§ 556, 557) agency action
 “Substantial evidence” has been defined as “more than a mere scintilla,” or “such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion”
 A court performing substantial evidence review must review the record as a whole,
examining both the evidence supporting and opposing the agency’s decision, to
determine whether the decision is supported on the entire record by substantial evidence
 The reviewing court’s role is not to weigh or reweigh the evidence – if a reasonable
person could have arrived at the same conclusion as the agency, based on the record
before the agency, the agency’s decision should stand (IT IS NOT DE NOVO REVIEW)
 Moreover, the mere fact that a reasonable person might reach some other conclusion is
insufficient for a reviewing court to overturn a reasonable conclusion by the agency if
supported by substantial evidence
Agency Review of an ALJ Decision:
 Generally, there are two stages important to the process of substantial evidence review –
o The fact gathering stage (essentially the proceeding before the administrative law
judge)
o The final agency determination stage
 An agency reviewing an appeal of an ALJ’s findings has de novo powers of decision and
may set aside the ALJ’s factual findings (AGENCY DOES NOT HAVE A
SUBSTANTIAL REVIEW)
 (See 5 U.S.C. § 557(b) – “On appeal from or review of the initial decision, the agency
has all the powers which it would have in making the initial decision….”)
42


However, this does not mean the agency may necessarily ignore ALJ findings and
conclusions – they are part of the overall record that must be reviewed and the ALJ’s
work cannot be totally disregarded
With respect to the ALJ’s findings as to the credibility of witnesses, agencies must be
especially sensitive (and give weight) to those findings because it is the ALJ who hears
the live testimony
Penasquitos Village, Inc. v. NLRB
 Identifies two different types of credibility determinations:
o “Testimonial inferences” or credibility determinations based on demeanor – the
way the witness appears and acts while testifying
o “Derivative inferences” or credibility determinations based on upon inferences
from what the witness says
 Because only the ALJ can assess a witness’s demeanor, testimonial inferences by the
ALJ should be given particularly strong weight by the reviewing agency (and the
reviewing court)
 However, based on agency expertise and experience, special deference is accorded the
agency regarding derivative inferences to be made from factual testimony,
notwithstanding contrary derivative inferences by the ALJ
 “The Board … is viewed as particularly capable of drawing inferences from the facts of a
labor dispute. Accordingly, … a Court of Appeals must abide by the Board’s derivative
inferences, if drawn from not discredited testimony, unless those inferences are
`irrational,’ `tenuous’ or `unwarranted.”
 “…However, the Board, as a reviewing body, has little or no basis for disputing an
administrative law judge’s testimonial inferences….”
 “We emphasize that we do not hold that the [ALJ]’s determinations of credibility based
on demeanor are conclusive on the Board. We simply observe that the special deference
deservedly afforded the [ALJ]’s factual determinations based on testimonial inferences
will weigh heavily in our review of a contrary finding by the Board….”
 Case says that when an ALJ gives testimonial inferences he doesn’t have to explain
himself. In fact, it is better if he doesn’t because then the reviewing agency will have
little opportunity to reverse him since he is afforded special deference since he observed
the witness first hand
o Agency DOES have to explain itself…ALJ does NOT.
Problem 3-7 (p.276)
Testimonial or Derivative?
 “…Mr. Darby struck me as sincere, forthright, and candid.” Testimonial.
 “He admitted dating secretaries, although he is married, but denied ever making the
alleged statements to Miss Jones.” Derivative. Inference: he admitted to dating his
secretaries (even though he’s married) so we believe him when he denies making
those statements to Miss Jones…makes his denial more believable.
 “…In his testimony he did not use the type of language which Miss Jones attributed to
him.” Derivative.
 “…Miss Jones struck me as wholly incredible. Her manner was brusque and
opinionated.” Testimonial.
43

“…She was unable to verify the times and places where the alleged conversations took
place, suggesting that she made them up.” Derivative.
3/29: Judicial Review: Mixed Questions of Law and Fact & Arbitrary and Capricious
Judicial Review of Agency Determinations
Three categories of issues that might emerge:
–Questions of basic fact,
–Mixed questions of fact and law (i.e., application of law to fact) (“ultimate facts”),
–Questions of “pure” law.
Question of Basic Fact
 Formal adjudication (§§ 556, 557) – substantial evidence test – a court may not reverse
unless after a thorough search of the entire record it concludes that the finding was not
supported by substantial evidence and that a reasonable person looking at the same record
would not have found the same thing. (5 U.S.C. § 706(2)(E))
o Reasonableness
o If answer is yes, then substantial evidence supports the finding
 Informal adjudication – arbitrary/ capricious test – Citizens to Preserve Overton Park v.
Volpe (U.S. 1971) – the Court said that the “arbitrary and capricious” standard requires
the agency to base a decision on a “consideration of relevant factors” and to avoid a
“clear error of judgment”
 Note: Supreme Court has not defined the difference between the standards, and some
(including Justice Scalia) have suggested there is no difference. Others suggest the latter
is simply rational basis review. The touchstone for both tests is reasonableness.
Questions of “Pure” Law
 5 U.S.C. § 706(2)(A-C) – a reviewing court is authorized to hold unlawful and set aside
agency action that is “contrary to constitutional right,” “in excess of statutory jurisdiction,
authority, or limitations, or short of statutory right,” or “otherwise not in accordance with
law.”
 This separation suggests that the substantial evidence or arbitrary and capricious
standards do not apply to questions of law (thus, a court may properly be less deferential
to the agency).
Mixed Questions of Fact and Law
 Identifying mixed questions of fact and law (sometimes referred as application of fact to
law or questions of “ultimate fact”) requires a preliminary determination of some of the
legal issues in the case and the impact the specific facts of the case are going to have on
those issues.
 Query: Should reviewing courts defer less to the agency’s decision on mixed questions
of fact and law than on questions of basic fact?
 Courts and the APA are of little help here
 NLRB v. Hearst (U.S. 1944) suggests that something like “substantial evidence” review
applies
 First, the court reviews the facts found by the agency and determines whether its
conclusions have a “warrant in the record”
44



Second, the court reviews the agency’s explanation for its decision to decide whether it
has a “reasonable basis in law”
Helpful hint: If there is little dispute on the legal question (i.e., definition of statutory
terms) and the dispute is primarily over whether the facts in dispute fit within the statute,
the substantial evidence test will apply
On the other hand, if the dispute is primarily over the legal question, a court may properly
be less deferential to the agency
Problem 3-8 (p.291)
 Legal issue: at the time of his death, was he acting within the scope of his employment?
 Fact issue: was he in the scope of his employment when he had his clothes off when a
non-employee…i.e. what was he doing at the time of his death?
o Three possibilities:
 Was he on work break?
 Was he on patrol/surveillance?
 In favor of surveillance:
o Told his wife he was going on patrol
o Nighttime hours…not an unusual time to be on patrol
o Illegal spotlighting had been going on
 Against:
o He was not wearing his clothes
o She is there at the time of death
o Uniform and weapon are out of his reach
 Not working
 In favor:
o He was naked
o With someone else who was naked
 Against:
o He is in his work vehicle
o No fixed hours of employment (had freedom to take lots of
breaks)
o No rule that he can’t have visitors with him
 Agency denied him because of his “immoral activity”
o Agency doesn’t actually say whether they believe he was on a break or was not
working…they do not make a finding like we made above
 Reviewing court may remand to make a specific finding of fact
 Durrah case: didn’t give notice that he was leaving his post to go get a soda…at the time
he was on a break, he had broken a rule. But even if he had told someone he was on
break, he still would have slipped
o How is this analogous? If Lund had been by himself (without this female), he
would still be dead
o Even if he was breaking a rule (and there is no indication that he was…), he still
would have had the same outcome
Problem 3-9 (p.304)
 Question: whether the denial of his waiver of regulation was arbitrary and capricious?
45




Haven’t explained what you mean by “most unusual circumstances”
Not an adequate explanation of decision because there is no discussion of what is meant
by unusual circumstances
o Need to explain this so we then have a chance to decide
Inconsistent decisions are arbitrary and capricious: on two previous occasion, had granted
this type of waiver…haven’t explained why this situation is different
Reviewing court will probably remand back to agency to give adequate explanations
Choice of Procedures
MISSED CLASS 3/31: Notes from Dreda
Option 1: Adjudication
 Choice of Procedures – Option One: Adjudication
 Non-legislative rule is an agency pronouncement that advises the public of the agency's
view on an issue and does not have binding legal effect on third parties
o Need not be adopted by notice and comment rulemaking
 Rules adopted by the notice and comment process are called legislative rules
(rulemaking) because they are legally binding
 Also have a choice of adjudication
 Advantages and Disadvantages
o Rulemaking has only a prospective effect
o Rulemaking also avoids the problem that adjudication focuses only on one
defendant
o There is wide public participation in rulemaking
o The availability of substantive rulemaking gives the agency an invaluable
resource-saving-flexibility in carrying out its tasks of regulating parties subject to
its statutory mandate
o If the agency uses rulemaking, it can establish a bright-line policy, which is
clearer and more precise than a policy developed on a case-by-case basis
o Problems may be so specialized and varying in nature as to be impossible of
capture within the boundaries of a general rule
o Rulemaking insulates agencies from political pressure
o Rulemaking is more likely to engage national interests
o Proceeding against one individual or firm is likely to be significantly less
expensive and time consuming than a rulemaking applicable to the entire nation
o If the agency proceeds by adjudication, it gets to pick its defendant
o The substantial and increasing procedural requirements for rulemaking, such as
cost-benefit analysis and OMB and congressional reviews, can create burdens not
applicable to adjudication
 Problem 4-1: FTC Adjudication
o According to the UCC, a dealer is obligated to refund to the borrower any
“surplus” produced by the resale of the car, but the method to calculate whether
there is a surplus is not specified.
o Question of whether the calculation used by Country Bob's is unfair under the
FTC Act
o Consumer lawsuit is unlikely because the legal fee's are likely to be greater than
the amount that would be recovered.
46


o Should the FTC use (formal) adjudication or (informal) rulemaking?
Legal Constraints
o Choice lies primarily in the informed discretion of the agency
o Retroactivity must be balanced against the mischief of producing a result which is
contrary to a statutory design
Problem 4-2: FTC Adjudication
o Factors considered in RWDSU Balancing Test:
 Whether the case that the agency seeks to apply retroactivly is one of first
impression
 Whether a new rule is an abrupt departure from well-established practice,
or merely an attempt to fill a void in an unsettled area of law
 The extent to which the defendant has relied on a former rule
 The degree of burden which a retroactive rule imposes on the defendant;
and
 The statutory interest in applying a new rule despite the reliance of the
defendant on the old standard
4/5:
Option 2: Rulemaking
Legal Limitations on Agency’s Choice of Rulemaking
1. Does the agency have authority to promulgate substantive rules?
o Statutes have to authorize agency the authority to create legislative rules
o National Petroleum Refiners Association v. FTC
o But Congress usually wants agency to create legislative rules so usually included
in the statute
2. Can an agency give retroactive effect to a rule?
3. How does due process limit the agency’s ability to enforce ambiguous rules through
adjudication?
Agency Authority to Issue Retroactive Rules
Bowen v. Georgetown University Hospital (U.S. 1988) – “…congressional enactments and
administrative rules will not be construed to have retroactive effect unless their language
requires this result. By the same principle, a statutory grant of legislative rulemaking authority
will not, as a general matter, be understood to encompass the power to promulgate retroactive
rules unless that power is conveyed by Congress in express terms.”
Problem 4-3: Copyright Fees
 Statute where Congress established rulemaking authority; but makes no mention of
retroactivity expressly
 So this statutory language is not enough…cannot apply rules retroactively
Ambiguous Rules -- Due Process
 General Electric Co. v. EPA (D.C. Cir. 1995) – Due process “prevents … deference
from validating the application of a regulation that fails to give fair warning of the
47
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

conduct it prohibits or requires. In the absence of notice – for example, where the
regulation is not sufficiently clear to warn a party about what is expected of it – an
agency may not deprive a party of property by imposing civil or criminal liability.”
“…[W]e must ask whether the regulated party received, or should have received, notice
of the agency’s interpretation in the most obvious way of all: by reading the regulations.
If, by reviewing the regulations and other public statements issued by the agency, a
regulated party acting in good faith would be able to identify, with `ascertainable
certainty,’ the standards with which the agency expects parties to conform, then the
agency has fairly notified a petitioner of the agency’s interpretation.”
“Although the agency must always provide `fair notice’ of its regulatory interpretations to
the regulated public, in many cases the agency’s pre-enforcement efforts to bring about
compliance will provide adequate notice.”
The required notice can thus come from the regulation itself or the agency’s preenforcement efforts, but it cannot come from the citation itself. Once the citation is
issued, it is too late for a regulated entity to conform its behavior to the regulation.
Deference to Agency’s Interpretation of Its Own Regulation:
General Electric Co. v. EPA (D.C. Cir. 1995) – “We accord an agency’s interpretation of its own
regulations a `high level of deference,’ accepting it `unless it is plainly wrong.’”
Problem 4-4:
Bureau of Mines approved self-rescuers shall be available near the advancing face to equip each
face employee. Such equipment shall be on the haulage equipment and in other areas where
employees might be trapped by smoke or gas, and shall be maintained in good condition.
 OSHA’s Argument:
o Would have received the regulation and are expected to read it
o Clear on the statute
 “[A]nd in other areas where employees might be trapped by smoke or
gas…”
 JCC’s Argument:
o By reading the regulations
o Lack of an “also” in the second sentence
 Who does the case help?
o Case helps Johnson in the sense that that interpretation did not provide fair notice
with ascertainable certainty…so due process violation by giving them that fine
o But…also helps OSHA because there is not as much of a level of complexity as
there was in GE case
 Discussing “dissolution”
 However, in subsequent cases, this due process case with Johnson would constitute “preenforcement efforts,” and then OSHA would have put other regulated entities on notice
Option 3: Non-Legislative Rules
Section 553 of the APA recognizes two types of non-legislative rules –
 Interpretive rules – a statement “issued by an agency to advise the public of the
agency’s construction of the statutes and rules which it administers”
48

Statement of policy – a statement “issued by an agency to advise the public
prospectively of the manner in which the agency proposes to exercise a discretionary
power”

Why are non-legislative rules even considered to be rules?
 The APA defines a “rule” as an “agency statement of general or particular
applicability and future effect designed to … interpret, or prescribe … policy….” (5
U.S.C. § 551(4))
Non-legislative rules are exempt from § 533 notice and comment rulemaking procedures
(see 5 U.S.C. § 553(b)(3)(A))
An agency can make a non-legislative rule effective immediately upon publication in the
Federal Register (see 5 U.S.C. § 553(d)(2))
o As opposed to legislative rules: take effect after some time they are published
to make sure everyone has had adequate notice
The FOIA requires publication of non-legislative rules in the Federal Register and states
that a regulated entity cannot be “adversely affected” by a non-legislative rule if it has not
been so published (see 5 U.S.C. § 552(a)(1)(D))



Advantages of Non-Legislative Rules
 Easier to adopt and change than legislative rules (exempt from notice and comment
procedures and effective immediately upon publication)
 Despite being legally nonbinding, regulated entities may comply with interpretations
announced in a non-legislative rule
 If a non-legislative rule will stimulate sufficient compliance, the agency may decide not
to spend the additional time and resources required by a rulemaking
 Even if some entities may choose not to comply, the agency may use non-legislative rules
to warn regulated entities of its interpretation of the law
 This eliminates any surprise that can be claimed if the agency later seeks an adjudication
to declare certain conduct to be a violation of law
Disadvantages of Non-Legislative Rules
 The agency will not receive any public input and will thus lose valuable insights to be
gained from public comments that would assist in developing policy
 [NOTE: Administrative Conference of the United States recommends that agencies
voluntarily comply with notice and comment procedures for non-legislative rules unless
“impracticable, unnecessary, or contrary to the public interest”]
Problem 4-5: OSHA Policy Statement
Missed 4/7: Differentiating Legislative & Non-Legislative Rules
 Non-Legislative Rules are POLICY STATEMENTS. They clarify what an existing rule
meansmaking a statement about what the rule actually means.
Metropolitan School District v. Davila (7th Cir. 1992)
 “An interpretive rule simply states what the administrative agency thinks the [underlying]
statute means, and only reminds affected parties of the existing duties. On the other
49
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hand, if by its action the agency intends to create new law, rights, or duties, the rule is
properly considered to be a legislative rule.”
Two factors considered in Davila:
1. The “starting point … is the agency’s characterization of the rule. The
agency’s characterization is not dispositive, but is a relevant factor.”
2. Second, did the agency intend by its action “to create new law, rights or
duties”? (If so, the rule is legislative.)
Problem 4-7: USDA Internal Memorandum
 Memo says: “Dangerous animals must be inside a perimeter fence at least eight feet
high.”
4/12: Reliance on Non-Legislative Rules
Problem 4-8: USDA Interpretive Rule
 We assume that this is an interpretative rule (non-legislative)…so Jones lost her argument
in Problem 4-7
 Her arguments based on Alaska Professional Hunters:
o Definitive v. authoritative interpretation
 Previous interpretation by this veterinarian--6ft high gets the job done
o Changed in position where I am injured if I am required to ddo something
different (detrimental reliance): you made a statement; I followed it; and if you
change it, I will have to build a new fence which will put me out of business
Alaska Professional Hunters v. FAA:
“Once an agency gives its regulation an interpretation, it can only change that interpretation as it
would formally modify the regulation itself: through the process of notice and comment
rulemaking. …. When an agency has given its regulation a definitive interpretation, and later
significantly revises that interpretation, the agency has in effect amended its rule, something it
may not accomplish without notice and comment….”
Definitive Agency Interpretation?
 Alaska Professional Hunters v. FAA – FAA argued (unsuccessfully) that there had been
no previous “authoritative interpretation” of its regulations
 Metwest, Inc. v. Secretary of Labor – court held that Alaska Professional Hunters did not
apply because the agency had never established an “authoritative interpretation” of its
regulation on which a regulated party had “justifiably relied to its detriment”
Problem 4-8 Cont’d:
 Agency: not authoritative interpretation
o One statement, orally made, by low-level employee (under Metwest)
o Jones: reasonable reliance…this was their inspector who they sent out to decide
whether I was in compliance or not, and he said I was in compliance with a 6ft
fence
50
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
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In Alaska, the pilots were consistently told that they were not held to the rules of
commercial pilots and so they were not involved in the notice & comment portion of
creating those rules (doesn’t not apply to Ms. Jones; this beefs up Alaska’s
arguments…surprise!)
o Also, told the pilots across the board that they didn’t have to have commercial
pilot’s license
o Whereas Jones had one inspector tell her 6ft was okay
Jones has the reliance…but doesn’t have a lot of facts that were present in Alaska to rise
to an authoritative, definitive statement
How do we argue that notice & comment should still be required?
o Situation where we ought to have notice & comment to avoid justified
reliance…agency could elect to do this
Problem 4-9: Animal Welfare Act Advice
 Is low-90s “excessive” heat?
 When can you argue that the government is estopped to deny its oral representations?
 Was the reliance detrimental? Agency made a representation; we acted in reliance; and
now we are fined
 Reasonable reliance?
o Party had duty to familiarize itself with the relevant legal requirements (YES)
o Party understood the regulations were ambiguous (YES, they called to clarify)
o Party should have known the agent giving the advice was not in a position to offer
a definitive interpretation (YES, they were aware that there was a process to
determine something definitively under AWA--were told 8 to 10 weeks so they
didn’t want to wait)
o Party failed to seek a definitive interpretation (YES)
o Advice obtained by the party was oral and not written (YES)
 Applying Heckler suggests that even though you did change you position in reliance, it
wasn’t reasonable or justifiable reliance
Heckler v. Community Health Services
 Court refuses to declare a flat rule that estoppel – precluding an agency from enforcing a
law because of the “misconduct” of its agents – may never run against the Government
 Suggests that there may be “cases in which the public interest in ensuring the
Government can enforce the law free from estoppel might be outweighed by the
countervailing interests of citizens in some minimum standard of decency, honor, and
reliability in their dealings with their Government.”
 Traditional elements of estoppel – “… the party claiming the estoppel must have relied
on its adversary’s conduct `in such a manner as to change his position for the worse,’ and
that reliance must have been reasonable in that the party claiming the estoppel did not
know nor should it have known that its adversary’s conduct was misleading.”
 Detrimental change in position in reliance on regulatory advice?
o Required to pay back money to the Government to which the party was not
entitled, but this meant the party had received an interest-free loan for a period of
two or three years
 Reasonable reliance on regulatory advice?
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o Party had duty to familiarize itself with the relevant legal requirements
o Party understood the regulations were ambiguous
o Party should have known the agent giving the advice was not in a position to offer
a definitive interpretation
o Party failed to seek a definitive interpretation
o Advice obtained by the party was oral and not written
Appeal of Eno
 Can ultimately incorrect regulatory advice from an agency employee as to what conduct
is required under an ambiguous statute rise to the level of a due process violation?
 In Appeal of Eno, the New Hampshire supreme court held that due process was violated
when agency employees affirmatively misled an applicant for workers compensation
concerning what steps she had to take to be eligible for benefits
 Doesn’t change analysis in 4-9 says Case
4/14: Judicial Deference
*Barnhart applies now! Tells you whether to apply Chevron or Skidmore deference.
Chevron Deference – Legislative Rules
 STEP ONE: Is the statute silent or ambiguous on the precise interpretive question at
issue?
o If not, the court must apply (and the agency must follow) the unambiguously
expressed intent of Congress and the inquiry ends.
o If the answer is yes, then move to Step Two.
 STEP TWO: Is the agency’s interpretation based on a permissible (reasonable)
construction of the statute?
o If yes, the court defers to the agency’s interpretation.
o If not, the court will proceed to provide a reasonable interpretation.
Skidmore Deference – Interpretive Rules
 “We consider that the rulings, interpretations and opinions of the [agency] …, while not
controlling upon the courts by reason of their authority, do constitute a body of
experience and informed judgment to which courts and litigants may properly resort for
guidance. The weight of such a judgment in a particular case will depend upon the
thoroughness evident in its consideration, the validity of its reasoning, its
consistency with earlier and later pronouncements, and all those factors which give
it power to persuade, if lacking power to control.”
 Very weak form of deference
 What is the court’s position on Skidmore? We are willing to defer to agency
interpretation if we are persuaded by it (more freedom)
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o Under Chevron, even if court is not persuaded by the agency but it is still
reasonable, it is required that the court defers to the agency
Problem 4-10:
 12 U.S.C. § 2607 (RESPA) – Referral fees or kickbacks in mortgage loans are illegal, but
fees for “services actually performed” are not prohibited
 Culpepper v. Irwin Mortgage (11th Cir. 2001) – statutory meaning of “services actually
performed” does not include YSPs and are thus prohibited by RESPA (YSPs are per se
illegal)
 HUD Statement of Policy 2001-1 – “services actually performed” may include YSPs in
appropriate circumstances and as such would not be prohibited by RESPA
 Yield Spread Premium (YSP) = difference between the mortgage company’s offered
mortgage interest rate and the interest rate actually negotiated by the mortgage broker, if
the broker negotiates a higher interest rate with the customer than the company offers
 The fight in this problem is which deference should this HUD statement receive—
Chevron or Skidmore? It WILL receive one or the other.
Christensen v. Harris County (U.S. 2000)
 “…We confront an interpretation contained in an opinion letter, not one arrived at after
… a formal adjudication or notice-and-comment rulemaking. Interpretations …
contained in policy statements, agency manuals, and enforcement guidelines, all of
which lack the force of law – do not warrant Chevron-style deference. Instead,
interpretations contained in formats such as opinion letters are `entitled to respect’ under
our decision in Skidmore, but only to the extent that those interpretations have the “power
to persuade.”
 If we applied this to the problem, the HUD policy statement would get Skidmore
deference because the statement lacks the force of law
But then came Mead…
United States v. Mead Corp. (U.S. 2001)
 “This Court in Chevron recognized that Congress not only engages in express delegation
of specific interpretive authority, but that `sometimes the legislative delegation to an
agency on a particular question can be implicit.’ It can … be apparent from the agency’s
generally conferred authority and other statutory circumstances that Congress would
expect the agency to be able to speak with the force of law when it addresses ambiguity
in the statute or fills a space in the enacted law, even one about which `Congress did not
actually have an intent’ as to a particular result.”
o Expectation is that agency can speak with force of law when addressing
ambiguities
 “When circumstances implying such an expectation exist, a reviewing court has no
business rejecting an agency’s exercise of its generally conferred authority to resolve a
particular statutory ambiguity simply because the agency’s chosen resolution seems
unwise, but is obliged to accept the agency’s position if Congress has not previously
spoken to the point at issue and the agency’s interpretation is reasonable.”
o Reiterating what Chevron is about
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
o If this is Congress’ intent (to have the agency fill in the interpretative gaps), then
the court has no business getting in the middle
o Agency’s role
“...The overwhelming number of our cases applying Chevron deference have reviewed
the fruits of notice-and-comment rulemaking or formal adjudication. …[A]s significant
as notice-and-comment is in pointing to Chevron authority, the want of that procedure
here does not decide the case, for we have sometimes found reasons for Chevron
deference even when no such administrative formality was required and none was
afforded. The fact that the [interpretive choice] here was not a product of formal
process does not alone … bar the application of Chevron.”
o We don’t think it is this bright line as it is in Christensen…the want of
procedural aspects should not (in itself) preclude an interpretative statement from
receiving Chevron
o Some informal, non-legislative interpretations may have the force of law
Problem 4-10 Cont’d
 Is this an interpretative rule or a policy statement? Interpretative rule (interpreting a
current rule…not making a prospective policy statement)
o Applies now
 Does agency have authority from Congress? Yes, see 12 USC § 2617: Authority of
Secretary (“to make such interpretations”)
Barnhart v. Walton (U.S. 2002)
 “…The fact that the Agency previously reached its interpretation through means less than
formal “notice and comment” rulemaking does not automatically deprive that
interpretation of the judicial deference otherwise its due. Mead pointed to instances in
which the Court has applied Chevron deference to agency interpretations that did not
emerge out of notice-and-comment rulemaking. It indicated that whether a court should
give such deference depends in significant part upon the interpretive method used and the
nature of the question at issue.”
 Factors to consider in determining whether to apply Chevron deference to an interpretive
rule –
o The interstitial nature of the legal question; i.e. identify the interpretative question
 Meaning what is the ambiguity? Are we filling something within in the
statutory text that is ambiguous or are we “interpreting” something that is
not ambiguous to begin with—if not ambiguous, there is no need for
interpretation and therefore no deference will be shown
 Place of ambiguity in overall statutory scheme
o The related expertise of the agency;
 Is the gap related to the agency’s expertise?
o The importance of the question to administration of the statute;
o The complexity of that administration; and
o The careful consideration the agency has given over a long period of time.
 Even if the process was not formal rulemaking, how formal was the
procedure involved? What steps did the agency take?).
 As applied to Problem 4-10:
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o Interstitial nature: what is a YSP under the statute? Is it a referral fee or can it be a
payment for service?
o Related expertise: agency definitely wins this one…common man does not know
what a YSP is
o Importance of the question to the administration of the statue: in favor of Chevron
 Important issue
 There are probably thousands of Betty Simmons (from problem) out there
o Complexity of administration
 In favor of Chevron
 Complex matters
o Careful consideration the agency has given over a long period of time
 This could be argued either way
Deference to Agency Interpretation of Its Own Regulations
 Bowles v. Seminole Rock & Sand Co. (U.S. 1945) – an agency’s interpretation of its own
regulations is given “controlling weight unless it is plainly erroneous or inconsistent
with the regulation”
 Why give greater deference to an agency’s interpretation of its own regulations than to an
agency’s interpretation of its statutory mandate?
*Notes 7-9
4/19 & 21: Standing
Access to Federal Courts
There are three necessary prerequisites for a plaintiff to have access to the federal courts:
1. The court must have subject matter jurisdiction,
2. The plaintiff must have a private right of action, and
3. The plaintiff must have standing to sue
Subject Matter Jurisdiction
Two primary sources related to challenging administrative agency action:
 Specific grant of jurisdiction to the court under a relevant statutory regime, or
 General “federal question” jurisdiction under 28 U.S.C. § 1331 (“The district courts shall
have original jurisdiction under all civil actions arising under the Constitution, laws, or
treaties of the United States.”)
Private Right of Action
Two primary sources to demonstrate that Congress intended to provide plaintiffs a federal
remedy to challenge administrative agency action:
 A statute expressly grants the plaintiff a private right of action (i.e., the statute contains
language along the lines of “any person may commence a civil action on his own
behalf”), or
 Administrative Procedure Act establishes a “cause of action” for any “person suffering
legal wrong because of agency action, or adversely affected or aggrieved by agency
action within the meaning of a relevant statute” (see 5 U.S.C. § 702)
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Standing to Sue
 Even where Congress has conferred a private right of action, plaintiffs still must
independently satisfy standing requirements
 The standing doctrine is a constitutional limitation on the ability of Congress to grant
private rights of judicial review stemming from Article III which limits the power of the
federal judiciary to resolution of “cases” and “controversies”
 Four basic requirements for standing:
o The challenged action must cause plaintiff some actual or threatened injury-infact;
o The injury must be fairly traceable to the challenged action (causation);
o The injury must be redressable by judicial action; and
o The injury must be to an interest arguably within the zone of interests to be
protected by the statute alleged to have been violated
Injury-in-Fact
 Lujan v. Defenders of Wildlife -- “injury in fact” is defined as an invasion of a legally
protected interest which is –
o (a) Concrete and particularized (i.e., must affect the plaintiff in a personal and
individual way) and
o (b) Actual or imminent, not conjectural or hypothetical.
 Need proof to show that its reasonably certain…cannot be purely
speculative
Causation
 Lujan v. Defenders of Wildlife – “…there must be a 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.”
Redressability
 Lujan v. Defenders of Wildlife – “…it must be likely, as opposed to merely speculative,
that the injury will be redressed by a favorable decision.”
Problem 5-1:
 Plaintiff is ALDF (SMJ, private right, & standing themselves)
o Organization can get into court on behalf of its members in their own right
o “Associational” or “Representational” Standing:
 An association can sue in its own name on behalf of its members if:
 One of its members would have standing to bring the action,
 The lawsuit relates to the purposes of the organization, and
 Neither the claim asserted nor the relief requested requires the
participation of individual members (that is, declaratory or
injunctive relief is the goal, not individualized damages)
 Standing:
o Standing relating zoo:
 Would need to show that members attend zoo and that their aesthetic
interests are harmed by seeing primates isolated
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


Injury-in-Fact: Aesthetic Interest
 Lujan v. Defenders of Wildlife – “…the desire to use or observe
an animal species, even for purely aesthetic purposes, is
undeniably a cognizable interest for purposes of standing. But the
`injury in fact’ test requires more than an injury to a cognizable
interest. It requires that the party seeking review be himself among
the injured.”
 Cf. Sierra Club v. Morton – injury to “environmental, aesthetic, or
recreational interests” actually suffered by persons can qualify as
injury in fact
 Cannot be solely backwards looking…must show that they go to the zoo
and will go back to zoo again and will be disturbed againpast injury not
enough
 Lujan v. Defenders of Wildlife – “As we have said in a related
context, past exposure to illegal conduct does not in itself show a
present case or controversy regarding injunctive relief … if
unaccompanied by any continuing, present adverse effects.”
o Standing relating to the research facility:
 Going to be harder for them to argue that their members have access to the
research facility enough to be harmed by it
 Not enough for them to say that they know what is going on in there and it
bothers them
 No standing
Causation: is the injury complained of fairly traceable to statute that requires that they
keep the animals in environment appropriate to promote the psychological well-being of
primates
o Failure of agency to prohibit zoos from putting animal in these individual cages
o Traceability: inaction on part of the agency
 Regulations should be revised to put this in as an affirmative prohibition
Redressability:
o Court order setting aside regulation
Burden of Establishing Standing
 Summers isn’t breaking new ground in terms of organization standing…still look to
Sierra Club v. Morton & Lujan
 Lujan: “The party invoking federal jurisdiction bears the burden of establishing the[]
elements [of standing]. Since they are not mere pleading requirements but rather an
indispensable part of the plaintiffs’ case, each element must be supported in the same
way as any other matter on which the plaintiff bears the burden of proof, i.e., with the
manner and degree of evidence required at the successive stages of the litigation….”
 “To survive … summary judgment …, respondents had to submit affidavits or other
evidence showing, through specific facts, not only that listed species were in fact being
threatened by funded activities abroad, but also that one of more of respondents’
members would thereby be `directly’ affected apart from their `special interest’ in the
subject.” Organization standing!
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Standing to Challenge a Procedural Violation
 The mere violation of a procedural requirement by an agency (e.g., procedural
requirement for an environmental impact statement, or a procedural requirement for a
hearing prior to denial of a license application) is not an injury-in-fact sufficient to
support standing to challenge the procedural violation unless the procedures “are
designed to protect some threatened concrete interest of [the plaintiff] that is the ultimate
basis of his standing.”
 The procedural injury must impair a separate concrete interest (Kennedy, J., concurring
in Summers).
Summers:
 There was an injury that had been established but parties resolved that particular injury
during settlement…court said plaintiff cannot stick around and argue procedural
violations after he lost his standing by settlement (i.e. no standing)
 Majority vs. Dissent:
o Dissent test: whether there is a statistical probability that some of those members
are threatened with concrete injury
o Majority: this isn’t an actual and imminent injury…burden is on the party
invoking federal jurisdiction to establish standing
o Question about sufficiency of proof and evidence
 Kennedy’s Concurrence: does not want to foreclose on the possibility that Congress
“sought to provide redress for a concrete injury giving rise to a case or controversy where
none existed before”
 Is Kennedy inconsistent? Key for Kennedy is the Lujan concurrence quotes in
Massachusetts
o Past violation not enough
o Must be a continuing problem
4/26: Exclusions from Judicial Review Under the APA
Right of Review
5 U.S.C. § 702 – “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.”
Judicial Review: Exclusions
5 U.S.C. § 701(a) – “This chapter [“Judicial Review”] applies, according to the provisions
thereof, except to the extent that–
(1) Statutes preclude judicial review; or
(2) Agency action is committed to agency discretion by law.
1. Does the relevant statute “preclude judicial review”?
 Abbott Laboratories v. Gardner (U.S. 1967) – The APA “embodies the basic
presumption of judicial review to one `suffering legal wrong because of agency action,
or adversely affected or aggrieved by agency action within the meaning of a relevant
statute,” so long as no statute precludes relief or the action is not one committed by law to
agency discretion.”
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
o The APA’s “`generous review provisions’ must be given a `hospitable’
interpretation … [and] only upon a showing of `clear and convincing evidence’ of
a contrary legislative intent should the courts restrict access to judicial review.”
Block v. Community Nutrition Institute (U.S. 1984) – “Whether and to what extent the
relevant statute precludes judicial review is determined … from its express language,
[and] also from the structure of the statutory scheme, its objectives, its legislative history,
and the nature of the administrative action involved. … [A] statutory scheme [must be
examined] to determine whether Congress precluded all judicial review, and, if not,
whether Congress nevertheless foreclosed review to the class to which the [plaintiffs]
belong.”
o “The presumption favoring judicial review of administrative action is just that – a
presumption. This presumption … may be overcome by specific language or
specific legislative history that is a reliable indicator of congressional intent.”
o Block v. Community Nutrition Institute (U.S. 1984) – “the Court has found the
[clear and convincing evidence] standard met, and the presumption favoring
judicial review overcome, whenever the congressional intent to preclude judicial
review is `fairly discernible in the statutory scheme.’ … [T]he `clear and
convincing evidence’ standard is not a rigid evidentiary test but a useful reminder
to courts that, where substantial doubt about the congressional intent exists, the
general presumption favoring judicial review of administrative action is
controlling.”
 Note 1 (p.443)
2. Does a statute commit an action “to agency discretion by law”?
 Citizens to Preserve Overton Park v. Volpe (U.S. 1971) – Section 701(a)(1) is concerned
with whether Congress expressed an intent to preclude judicial review; subsection (a)(2)
applies “in those rare instances where statutes are drawn in such broad terms that in a
given case there is no law to apply.”
 Heckler v. Chaney (U.S. 1985) “Agency action is committed to agency discretion by
law” when a “statute is drawn so that a court would have no meaningful standard against
which to judge the agency’s exercise of discretion. In such a case, the statute (“law”) can
be taken to have “committed” the decision-making to the agency’s judgment absolutely.”
 Said another way, if a statute grants discretion to an agency, and the law does not
establish a standard against which to assess the exercise of that discretion (so that a court
can determine if there was an abuse of discretion), then Congress has committed that
action to agency discretion by law.
Webster v. Doe
 •National Security Act – Director of CIA “may, in his discretion, terminate the
employment” of employee “whenever he shall deem [it] necessary or advisable in the
interests of the United States.”
 •Court held terminations of the Director were unreviewable because of lack of any
meaningful standards against which to review whether termination was “necessary or
advisable in the interests of the U.S.”, and thus such decisions were committed under the
statute to the absolute discretion of the agency.
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Review of Agency Decision to Refuse Enforcement
 Heckler v. Chaney (U.S. 1985) – “…an agency’s decision not to prosecute or enforce …
is a decision generally committed to an agency’s absolute discretion.”
 “The general exception to reviewability provided by § 701(a)(2) for action “committed to
agency discretion” remains a narrow one, but within that exception are included agency
refusals to institute investigative or enforcement proceedings, unless Congress has
indicated otherwise.”
Problem 5-5: Refusal to Waive Regulation
 Statute clearly says that secretary “in his discretion to waive…”
 Then you would look to see if there is a standard or any guidepost (no, or we would have
it in the problem)
 So cannot review the secretary’s decision BUT Webster says that that doesn’t mean that
the secretary has the authority to make a decision that is unconstitutional
o Disability Act says that this DOT statute could be unconstitutional, and this is
reviewable.
 Unreviewable under National Security Act but is reviewable against the Rehabilitation
Act
Exam:
 50% is one issue spotting essay problem
 25% short essay questions (e.g. compare one case to another)
 25% 10 multiple choice questions
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