Chap. 8: Ambiguities in Rulemaking

Brief Review:• 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

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

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

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

The parallel between legislating (statutory law) and rulemaking (regulatory law) 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)

HOWEVERHOWEVER The parallel breaks down when you consider

the following points: The Constitution does impose two very important

procedures on Congress Bicameralism Presentment

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

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) The ICC’s challenged rule?

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

The ICC adopted this rule after §553 “notice-comment” 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? 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

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

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) 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

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

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?What About “Deregulatory” Rulemaking?

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”“deregulation” objectives?

Strengthening admin. law (procedural formality) then could hamper the process of deregulation

Motor Vehicles Manuf. Assoc. v State Farm (1983)

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 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

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:

Agency action is “arbitrary and capricious” which is prohibited by §706(2)(A) of the APA

What constitutes “a/c” action? 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

What made NHTSA’s action “a/c”? 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 decision-making 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