Chap. 8: Ambiguities in Rulemaking
Brief Review:
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There are NO constitutional due process
requirements for rulemaking; statutes (including
the APA) may impose procedures
Because of this fact, agencies would rather
engage in rulemaking than adjudication
Agencies would also rather engage in informal
rulemaking than formal rulemaking
The advantage to agencies of informal
procedures is efficiency in use of time and
resources
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Administrative law is an attempt to impose the
rule of law on the administrative state, which
inevitably restricts/restrains the efficient
operation of administration
Administrative law is therefore fundamentally
at odds with the ideal of the administrative
state
Administrative law, by imposing procedures in
the name of promoting rationality, fairness, etc.
sacrifices some level of efficiency to achieve
another desirable objective
Efficiency=informality
Rationality = formality
The Case for Informal Rulemaking
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Prof. Kenneth C. Davis, best known and
most widely respected admin. law scholar,
believes that informal rulemaking is
“perhaps one of the greatest inventions of
modern government.” The whole purpose
of the administrative state would be
thwarted if agencies could not make rules
informally, as through the “notice &
comment” feature of §553 of the APA
The Case for Informal Rulemaking
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Agencies can gather and examine any info they
wish from any source
Any one is able to submit evidence
Decisions are not limited to info generated by
parties on the record of a hearing
Speedy decision making
Decisions are fairer than trial-type proceedings
because no fault is assigned for past behavior,
no costly legal battles required to defend
anyone from sanctions; looks only forward
toward future compliance rather than backward
to punish wrongdoing
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The parallel between legislating (statutory
law) and rulemaking (regulatory law)
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Congress doesn’t have to have formal
hearings with Goldberg ingredients when it
legislates
Therefore, agencies shouldn’t have to have
them either when they make rules (which is
the equivalent of generating statutes)
HOWEVER
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The parallel breaks down when you
consider the following points:
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The Constitution does impose two very
important procedures on Congress
Bicameralism
 Presentment
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Congressmen are elected; agency personnel
are not
The Senate provides equal representation for
our diverse states; there is nothing equivalent
in the functioning of the administrative state
Congress has bound itself with more
formalized procedures at the committee level
when hearings are conducted pursuant to
enacting legislation
The Case for Formality in Rulemaking
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Since agencies are undemocratically
constituted and provide no recognition of
the federal nature of our national
government, perhaps it would be wise to
impose greater limits on their
discretionary power through procedural
mechanisms when they make national
rules that bind us all.
U.S. v FL. East Coast Railway (1973)
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The ICC’s challenged rule?
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A prohibitively high tax (rate) on leased
boxcars
Rationale?
Want to encourage purchase, not lease, of
boxcars to combat shortage of boxcars in U.S.
rail fleet
 It will be cheaper for RRs to purchase boxcars
than to pay the newly-imposed tax on leased
ones
 ICC has opted for the “stick” approach over the
“carrot” approach for achieving goal
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The ICC adopted this rule after §553 “noticecomment” procedures
However, the ICC’s historical practice had been
to make rules more formally
Its authorizing legislation requires it to make
rules “after hearing”
RR’s claim?
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ICC’s procedure violates APA and general common law
principles of admin. law—when a statute says rules
can only be made “after hearing,” that means a formal
trial-type hearing must be provided; notice/comment
isn’t enough
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Why didn’t RR raise a constitutional due process
issue?
What does the APA require when agency’s
statute requires rulemaking “after a hearing”?
Is there a difference between statutory
language “after a hearing” and “after a hearing
on the record”?
Court revisits distinction between the nature of
rulemaking and the nature of adjudication and
reaffirms that the former can be more informal
than the latter
Dissent’s point?
Evolution of Admin. Common Law on Rulemaking
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From the late 1950s to the mid-’70s several
district & circuit courts moved to restrict agency
rulemaking power (as noted in the previous case)
by requiring more formality than APA §553
allowed, but stopping short of the formality of
APA §554-557 hearings
Thus emerged something called “hybrid
rulemaking” which required agencies at least to
have to develop an evidentiary basis for their
rules
The Court struck down this requirement in the
following case, anticipated by the previous one
Vermont Yankee NPC v NRDC (1978)
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Atomic Energy Commission (now called the Nuclear
Regulatory Commission) grants licenses to nuclear
power plants after they meet certain rules assuring safe
operation
When Vermont Yankee applied for a license it had no
plan for long-term disposal of the waste it would
generate
AEC granted a license, then issued a “rule” that failure
to specify a plan for waste disposal would not, alone,
prevent issuance of a license
The rule was adopted pursuant to §553 of the APA,
although the agency did include oral argument and AEC
questioning (but not cross-examination) of witnesses
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Natural Resources Defense Council sued
claiming that const. due process required more
than those procedures because of the technical
nature of the evidence and the fact that it is “an
issue of great public import” even though the
AEC’s statute did not require a “hearing on the
record”
The lower courts agreed, thus endorsing a
constitutional requirement for “hybrid
rulemaking” and for all practical purposes
overturning §553 of the APA
Court overruled lower courts and put an end to
the era of “hybrid rulemaking” common law
development
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The Const. doesn’t require due process in
rulemaking
If the Bi-Metallic criteria for distinguishing
adjudication from rulemaking are present, the
Const. would require more than §553
The Court will look past the terminology used
by an agency to the substance of its actions, so
when “rulemaking” really partakes of the
qualities of “adjudication,” more than §553 will
be required, but only when that is the case.
That was not the case in the present instance
What About “Deregulatory” Rulemaking?
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Since more formality = more fairness, wouldn’t
those opposed to the “administrative state”
favor stricter admin. law as a way of hampering
agency rulemaking?
But what if agency rulemaking is being used to
accomplish “deregulation” objectives?
Strengthening admin. law (procedural
formality) then could hamper the process of
deregulation
Motor Vehicles Manuf. Assoc. v State Farm (1983)
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NHTSA adopted rule in 1977 requiring “passive”
safety system (either airbags or seatbelts) in all
cars manufactured after Sept., 1982
By 1981 it was clear that almost all new cars
had seatbelts, rather than expected 60%-40%
split
Reagan’s new NHTSA head then rescinded the
rule before its effective date
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Safety benefits of airbags would not be realized
Automatic seatbelts too easily disabled
Thus, no real safety benefits accrue BUT
c. $1 billion cost to consumers from implementation
of rule would depress auto sales and poison public’s
attitude toward safety regs in general
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State Farm sued to prohibit application of the
new rule (rescinding the original rule) and to
compel the application of the original rule
The new rule, as was the case with the original
rule, was made under APA §553
No allegations of procedural irregularities or
agency excess of statutory authority
Rather, claim of “arbitrary & capricious”
rulemaking (revoking rule w/o justification and
in way as to thwart congressional intent)
Agency’s authorizing statute provides for
judicial review of agency “action”
Court holds “action” to include “revoking” a
regulation as well as imposing one
Court’s ruling:
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Agency action is “arbitrary and
capricious” which is prohibited by
§706(2)(A) of the APA
What constitutes “a/c” action?
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No rational relationship between facts found and
choice made
Agency relied on factors Congress didn’t want
considered
Agency ignored important aspects of the problems it’s
charged with addressing
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What made NHTSA’s action “a/c”?
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Didn’t explain why rule couldn’t require air bags
 agency’s lawyers supplied this ex post facto
rationale in brief
 but there was no evidence that the agency had
relied on this line of reasoning in its decisionmaking process
Agency didn’t explain why it couldn’t require some
kind of non-detachable automatic seat belt
Agency rejected statistical evidence it had before it as
invalid but didn’t conduct alternative studies to
resolve uncertainties over the impact that the original
rule would have on seat belt use
Note: this case came a year BEFORE the
Chevron case covered in Ch. 4