Study Guide for Adminstration law
SECTION II - THE APA AND RULE-MAKING
Administrative Procedures Act (1946)
Six Major Sections:
1) Introduction: definitions and key terms
- “administrative agency” should be read broadly
2) Fair Information Practices rules
- Freedom of Information Act
- Privacy Act of 1974
- Government in Sunshine Act
3) Rulemaking
4) Adjudication
- minimal due process: notice, hearing, impartial decision maker
5) Guidelines for Hearings
- procedures
- presiding officer’s independence
6) Guidelines for judicial review
Federal Register Act of 1935 (since amended):
Federal Register: place where rule-making actions and many other federal announcements are published. Publishes things daily.
Final federal rules are published in the Code of Federal Regulations (CFR)
The regulations are integrated into the large law framed by statutes in the United States Code Annotated (USCA)
Rulemaking is “quasi-legislative”: developing details of laws to operationalize them
Rule are absolutely binding law
– no estoppel possible: “ignorancia juris non excusat”: not knowing the law, or acting on an agency’s misinformation does not change legal requirements
- Merril (1947) and welder case: OPM v. Richmond (1990)
SECTION II - THE APA AND RULE-MAKING
Rulemaking: Three Guiding Questions
1) What is a rule?
2) How are rules made?
3) Where is rulemaking going?
“Rule”: (aka “regulation”)
“the whole or part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or proscribe law or policy or describing the organization, procedure, or practice requirements of an agency”
- statement by agency clarifying how a statute will be implemented. (this is the definition boiled down). Know this.
“Rulemaking”:
agency process for formulating, amending or repealing rules (quasi-legislative)
rules are often confused with orders.
A rule applies to everybody
“Order” - final deposition of an agency in a matter other than rulemaking, but including licensing (aka “decisions”)
“Adjudication” - “agency process for the formulation of an order” (quasi-judicial)
Separating Rules from Orders:
Kenneth Warren’s two simple tests
guidelines, but definitely not absolute
Test One (ways to differentiate orders from rules): Past-Future Test – does the action evaluate a past action or is the focus on future behavior?
Generally, orders are judgments regarding past action, rules are for the future.
Test Two: Specific-General Test – does the action regard a particular party or is it directed to broad group or general public?
Orders are directed to specific parties, rules are for general public.
If it’s a broad applicability it’s a rule.
Courts generally defer to agency choice of using adjudication or rulemaking, although two areas create concern:
1) When adjudication is used to create policies with strongly negative consequences or retroactive harms to parties not part of the original order
2)Agencies are expected to implement rules more consistently
Ordermaking (adjudication) verse Rulemaking:
Procedural differences in how they are done: Rulemaking is legislative
- Adjudication is very different it has due process concerns since specific parties are negatively affected. It concerns a particular party and if they don’t treat that party right they will say that you better treat them right. Each party has different tools to fight with.
rulemaking is not quite political
Uniformity and broad reach of rules, orders are more specific to one circumstance or party
- rules and rulemaking are broadly publicized, more transparent and recognized by the public and courts
Policy planning: trade-off of broad, open, one-shot approach of rulemaking versus the case-by-case adaptive adjudication
NLRB’s (national labor relations board) reliance on adjudication has weakened its legitimacy in courts and its institutional standing
Regulated parties generally prefer rulemaking: cheaper, more transparent, more stable
General public (actually interest groups since the general public is ignorant of it all): generally favors rulemaking may reduce capture or cozy deals with regulated. Cheaper, more transparent, more stable
Cheaper to participate in rulemaking, easier to track
For the most art agencies use rulemaking. They only use adjudication when they want to make a particular party unhappy.
Agency officials: mixed view, rulemaking cheaper but general policies may create inequities and limit discretion and adaptability.
Rulemaking may force adoption of policies not ready for broad application
General Limitations of rule-making powers:
1) power comes from enabling or organic acts
2) courts will strike down rules that are
a) “arbitrary”, “capricious”, and abuse of discretion or otherwise not in accordance with law
b) “made without proper observance of procedure required by law”
courts will strike down cases that are substantial
Motor Vehicles Association v. State Farm (1983): automatic seatbelts verse waiting for airbags
If you want a law you need to undo rulemaking and make a law.
There are three Types of rules:
Interpretive(interpretative): non-legislative
- operational definitions, guides for action, “advisory”. Ex, if you want to talk about how many hours you could work a day. You need to define a day. Fundamentally, it is just a clarification.
Should not have “substantial impact”.
Substantial impact has been largely replaced by:
- “force of law” test, is it “legally binding”?
- Would absence of rule prevent enforcement action?
Interpretive rules: Courts review to ensure interpretive rules are not binding in practice and do not alter legal rights
- Will consider if they amend longstanding interpretative rules (supporting that they are legislative rules) and whether agencies explicitly note they are interpretive (supporting that they are interpretive)
Not interpretive if they alter existing legislative rules
Courts respect agency need for flexibility:
Chevron v. NRDC (1984): “stationary source” decision
- Defer to agency interpretation of law if legislative intent is silent or ambiguous
Courts allow “general statements of policy” that are not rules
Examples: Corps of Engineers can say that they will generally permit wetlands filling if twice the acreage is protected or in other unspecified conditions
– but it would be a legislative rule if protecting twice the acreage was a condition for all permits
FDA could not state as a “general statement of policy” that it would only enforce food contamination if it reached certain “action levels”
– seemed to prevent action in specific situations and therefore was a rule
Procedural – legislative: not always binding
- foster fairness and impartiality, generally agency decides whether and how to make them. Says this is how things are done etc. to enact fairness.
- if adopted through rulemaking then legally binding. Should use rulemaking process if there is substantial impact on public
Morton v. Ruiz (1974): Indian benefits: procedures for determining eligibility required by agency’s own rules
- would still have “substantial impact”
3)Substantive: Legislative – make law
Legislative (substantive) – major focus of concern. Make law. Substantive rules are the law.
Creating legislative rules requires specific rulemaking procedures
Test one stopped here:
Exemptions from rulemaking procedures (When you do not have to make rules):
Interpretive Rules
Procedural Rules
Military and foreign relations policymaking
“proprietary matters”: business actions such as personnel, contracting, grant actions
“Good cause”, including Emergency rules: allowed when regular rulemaking is impractical or would be too slow (example: post 9/11 protective actions). In these scenarios you do not have to go through rulemaking. Just do what you got to do.
Interim rules: especially by state
Types of rules:
Legislative (substantive) – major focus of concern. Make law.
Creating legislative rules requires specific rulemaking procedures
Exemptions from rulemaking procedures
Interpretive Rules
Procedural Rules
Military and foreign relations policymaking
“proprietary matters”: business actions such as personnel, contracting, grant actions
“Good cause”, including Emergency rules: allowed when regular rulemaking is impractical or would be too slow (example: post 9/11 protective actions)
Interim rules: especially by state
Methods of Rulemaking: (Required for Legislative Rules)
1. Informal (Notice and Comment) rulemaking. Still formal but not as formal as formal. Still have to follow procedure.
2. Formal rulemaking (Section 554)
2. Hybrid rulemaking (553+) – a mix of informal and formal
4. Negotiated Rulemaking
Methods of Rulemaking: for making legislative(substantive) rules
Informal (notice and comment) rulemaking - basic requirement: APA Section 553
Step 1: Notice in Federal Register (Oregon State Bulletin)
- time, place, contact person
- legal authority of action
- description of action
Step 2: Participation
- usually written
- state commonly has hearings
Step 3: Publication of Rule –
at its core it can be quite simple but its announced publicly in the beginning and the end. There is a single place you go to look at it for the beginning and end.
Methods of Rulemaking: for making legislative(substantive) rules
Informal rulemaking: default method:
U.S. v. Florida East Coast Railway (1973) : informal process is default requirement. Any greater requirements must be explicit in legislation. They said the word hearing is in the statue. but the courts said notice in content/ written was enough.
1. Informal Rulemaking
Courts may be concerned about whether additional rulemaking is necessary when final rules differ greatly from proposed rules: They apply the “logical outgrowth” test.
Chocolate milk manufacturers successfully challenged a USDA food stamp rule where a proposed rule reducing sugar in cereals evolved to include flavored milk without any public notice. This was a big rambling debate. But the rule outcome came out different they attacked chocolate milk. The court said they had gone too far. But if it is publicized its ok. But it wasn’t. rules can evolve in this process
If there is commentary on a topic during process on an issue, courts will generally not require more hearings after final rule is published.
Methods of Rulemaking: for making legislative(substantive) rules
2. Formal rulemaking (APA Section 554) - adversarial court-like context
- Required when the statute states that a rule be “on the record after an opportunity for an agency hearings”: explicit requirement
Criticized for complexity and delays: over 10 years to determine whether 87.5% or 90% was appropriate peanuts in peanut butter. Delay is not a permeant solution but it could be satisfactory because president could change.
It use to be made mainly for food but it can be used for any law. Ex, if trump wants to regulate regulations over stock brokers they can write any laws that will empower the SCC and any regulation in the areas would have to go through this.
Methods of Rulemaking
Characteristics of Formal Rulemaking
Agency needs “substantial evidence” to make rule. Less agency discretion and enhances importance of the record
Full opportunity for participation
Thorough record of decision – means when they issue the product as a formal rulemaking they have to say this rule is approved for these reasons. They have to take every coment and address it. for example for peanut butter ratio swould have to address every decimal proposal e
No “ex parte” communication – cannot just have one parties opinion
Actual outcome is often a recommendation to board or agency head
Methods of Rulemaking:
3. Hybrid rulemaking (553+): Combines elements of formal and informal: especially enhanced decision record and more opportunity for participation or cross-examination of information.
Hybrid tries to combine the two.
Why might an agency choose this option? For legal backing.
Required by legislatures frequently in 1970s in specific enabling legislation
Agency still in favored legal position
Record of decision makes rule more defensible in court
Hearing may serve political as well as informational purposes
Methods of Rulemaking:
Hybrid Rulemaking:
Vermont Yankee v. NRDC (1978) : appellate court required and defended hybrid process.
Supreme court reversed. Only statutory requirements need to be met even if hybrid might be better.
This is the ultimate court case for hybrid. Vermont Yankee is a nuclear power plant.
What happened is that that the NRC nuclear regulatory commissions . This case s basilcy againt the NRC saying you cant account for
Problem is that they should have to go through formal rulemaking before they get a rule that is going to have a strong effect.
4. Negotiated Rulemaking: “Reg-Neg” - seeks to avoid confrontational approach
– promote problem resolution rather than adversarial obstructionism
Demonstrates long term relationship between agencies and outside parties
Trying to avoid outside obstruction. In Oregon its very common.
Here is how it works:
Negotiated Rulemaking Steps:
1. Facilitator assembles stakeholders
2. Second (often different) facilitator manages a negotiation process
3. If rule is agreed upon, it goes to regular notice and comment process – they don’t presume the rule but they draft it.
Negotiated Rulemaking:
- Limited usefulness
-Encouraged in federal system by 1990 Negotiated Rulemaking Act
- Very common in Oregon state rulemaking
- Insider bias
-Hard for agency to walk away from negotiations
Other legal concerns about rulemaking
Most basic question: Can agencies make decisions that affect private interests without due process protection?
Before the the APA these cases continue to come up
Bimetallic Investment (1915) v. Londoner v. City of Denver (1908):
Local governments have power to make general policy changes without due process: Bimetallic
but when a small number are individually and specifically affected, due process of notice and hearing are required: Londoner
the said we are going to assign tax to all these fees and they did it through regulation, but Londoner said where is my due process. I’m getting harmed here. So the courts said if you get armed by this regulation then you get titled to a hearing. So you got to have a hearing for each individual who is affected.
Bimetallic is important precedent for keeping due process considerations out of rulemaking
Bimetallic was raising taxes generally over a large area so thousands of property owners were affected. If it’s a small group you get a due process. Ex, if they do raise tuition students really don’t have a case as long as they followed the rulemaking process. But if they suspend you personally you can get a due process individually.
Courts generally view it as legislative process:
Ex parte communications generally allowed before rulemaking process formally starts and in general, particularly if put into records.
Legally challengeable if there are contending parties and if there are few specific affected parties
Leading statements by administrators do not disqualify their participation, unless “clear and convincing evidence demonstrates they have an “unalterably closed mind”.
Political pressure:
Presidents and their appointees can discuss rulemaking with administrators as part of executive powers.
Ex, trump was voted in to deregulate however, if they say ignore this mandate in the law there will be trouble.
Cannot push agencies to disregard or counter legislative mandates.
Legislative pressure may be invalid if: 1) it introduces irrelevant considerations into decision-making; and 2) if it determines final rule content
Oregon’s rulemaking system
generally requires oral hearings: in a way notice and comments are hybrid at least on the hearing part.
temporary rules can be used
public can petition for rule to be made: if you see a law that can be enforced better you can petition. You can draw a petition and they have to respond to it and say why they are not taking care of it.
negotiated rulemaking common practice
Negotiated rulemaking examples: (examples in readings)
Sick leave: Oregon Agency worked with advisory committee containing: employers, labor organizations, legislators, agricultural representatives and family policy advocates
Multiple hearings to evaluate proposed rules produced by advisory group
Edible marijuana: Rules advisory committee is working with Oregon Health Authority to develop guidelines for edible marijuana products
THREE NOTABLE ISSUES IN RULEMAKING:
1. Impacts and nature of “public comments”: how do they use those public comments
2. Some laws cross normal legislative boundaries and open policy to outside agencies.
3. Regulatory Analysis and Executive Preclearance
Impacts and nature of “public comments”
how can agencies absorb and properly weigh comments that equal 700,000(minor tabacco regulation) or 450,000 (defining “organic”)
they get so many comments and someone is suppose to read them. A lot of them are repetitive. That’s part of the law. If its shown that they ignored it the rule can be thrown out because violation of hearing everyone.
Comments may reflect “astroturf” action : astroturf – fake grass roots. Manipulating people by acting like other people sent it or fake comments. Its deliberate effort to get comments.
– For profit schools generated most of the 90,000 comments on stopping ability of such institutions collecting money from students who had large debt and poor employment
Some laws cross normal legislative boundaries and open policy to outside agencies.
Most agencies have something stating whether its organic or enabling
National Environmental Policy Act(NEPA) gave the Council on Environmental Quality some oversight on many regulatory processes
An Environmental Impact Statement(EIS) is required unless there is a Finding of No Significant Impact (FONSI) on the environment for major federal initiatives: EIS would identify an easier way to do something, more cost efficient. What would happen to the original rule. EIS’s are public. If you don’t take federal money you don’t have this issue.
Regulatory Analysis and Executive Preclearance: Imposition of presidential priorities in process
- Overseen by OMB Office of Information and Regulatory Affairs (OIRA)
Regulatory Analysis and Executive Preclearance: Historical Background
Executive Order 12291 (1981): OMB reviews proposed rules for:
- adequate justification of government action
- impact on national economy and particular industry
- Social benefits verse costs: they have to create a benefits v cost to justify.
Regulatory Analysis and Executive Preclearance:
EO 12498 (1986) OMB reviews draft regulatory programs for consistency with administration goals : this is when agencies got mad because they realized they were doing the cost v benefits.
EO 12866(1993):Replaced EO 12498 and 12291 and also introduced review for envir and health risk assessment: economic kicks in at $100 m. know this one. The one Clinton put out
Other orders concerned federalism, the family, private property, small businesses, paperwork
Recent evolution: Congressional Review Act of 1996:
APA amendment created “report and wait” provisions – Congress can review rule
1. Agencies must file cost-benefit analysis and other regulatory impact report
2. GAO reviews, if major rule, 60 days waiting
3. Congress may pass joint resolution blocking the rule
Congressional Review Act of 1996:
Used only once before 2017.
Since 2016 election, GOP Congress and Trump are using it extensively: corporate sale of internet history, loosening coal mining regulations
Essentially a blanket legislative veto
Don’t worry about this picture don’t need to know it.
Recent evolution:
Interim Final Rules: announce implementation of rule prior to final adoption. Processes may or may not be completed
- Helps agencies avoid formal process
Recent evolution: future problems
Contracting: may appear as a reduction of rules, contracting makes government policy based on negotiation between specific parties
Explicitly excepted from APA requirements
Contracting:
Problem of balancing public control, consistency, flexibility, and accountability remains unsolved
We become obsessed with the little things that we cannot get to the big picture.
Eliminating rules and rulemaking does not eliminate need for, and utility of regulations
Analogous to case law.
SEC v. Chenery (1947): agency can decide if adjudication is proper way to resolve a problem where either rule-making or adjudication is possible
Insider trading was illegal despite no rule against it since SEC found it prevented a “fair and equitable” reorganization
- Court identifies virtues of ad hoc gradual elaboration of application of law
Excelsior (1966) did not bind Excelsior Underwear but stated that publication of union member lists would be required in future: they wanted a list and the company refused to do it. Reversed by NLRB v Wyman Gordon (1969)
NLRB v. Wyman Gordon (1969): court rules that policy cannot be based solely on Excelsior adjudication, but agency decisions could be considered in making determinations. Can use adjudication in the future.
NLRB v. Bell Aerospace (1974) affirms that agency may develop details of policy in adjudication
- Involved matter of determining who was supervisor and who can collectively bargain.
Morton v. Ruiz (1974) demonstrates that the courts will explicitly require rulemaking in some determinations
Perhaps the scope of the policy and the aspects of due process matter.
2011, over 550,000 cases for Social Security, 85% of federal ALJs, over $80 billion at stake
Millions and millions of hearings in government per year.
Oregon’s Office of Administrative Hearings has 65 professional administrative law judges and over 30,000 hearings a year for approximately 70 state agencies
