Admin Law

What’s the Nature of the Agency Action?

Has the agency actual taken action? If not, this could be a TIMING ISSUE; If so, DISTINGUISH BETWEEN RULEMAKING AND ADJUDICATION

There are two basic procedural modes that agencies use when they make and apply policy: rulemaking and adjudication.  Procedural requirements for these agency actions come from five basic sources: 1) the organic statute creating an agency or vesting it w/ powers, 2) the agency’s own procedural regulations, 3) the APA (requirements of general applicability), 4) federal common law, and 5) Constitutional requirements of due process

What is Required of the Agency?

1. Rulemaking – Good statement to use on an exam: A rule promulgated by an agency that is subject to the APA is invalid unless the agency first issues a public notice of proposed rulemaking, describing the substance of the proposed rule, and gives the public an opportunity to submit written comments; and if after receiving the comments it decides to promulgate the rule it must set forth the basis and purpose of the rule in a public statement. These procedural requirements do not apply, however, to “interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice.”
   1. Legislative Rules – Issued by an agency pursuant to an express or implied grant of authority to issue rules with the binding force of law
      1. Must have statutory authority to adopt such rules
      2. Subject to formal or informal rulemaking

• A rule that turns on a number tends to be arbitrary and is thus legislative

1. Arbitrary choices in rulemaking is inherently legislative by definition; it is the legislature whom we elect to make those arbitrary choices

1. Non-legislative Rules (also called interpretive rules or statements of policy or guidance documents) – agency rules that do not have the force of law because they are not based upon any delegated authority to issue such rules
   1. No statutory authority required to adopt non-legislative rules
   2. Generally only subject to some of the requirements of § 553

• Includes:
  1. Factors to consider whether a rule is an interpretive rule, policy statement, guidance document rule VERSUS a legislative rule
     1. (Remember the Ligers and Tigons case (picking a number for how high a fence must be is legislative))
     2. What does the agency call it? Interpretive rule? Policy statement?
     3. What procedure did the agency follow in adopting the rule?
     4. Binding-ness? Look at this with respect to three different entities:
        1. The agency  How does the statement by the agency treat the rule? How do they deal with the rule?
           1. What does the plain language look like? Does it say it’s absolutely binding or does it appear to be more discretionary?
              1. g. “Here are the factors that must be considered” vs. “Firefighters may do the following”
           2. How is it used in practice? What is the binding effect?
        2. Regulated parties  What’s the practical effect on the regulated parties?
           1. Is it an absolute—what happens if the parties don’t comply? DO they have an opportunity to argue why they shouldn’t be punished? Or, if they fall into the regulated category, is that the end of the inquiry?
           2. You’re looking at enforcement and
           3. Compliance

• Binding-ness on the courts
  1. Chevron deference—deference to the agency with respect to what they’re doing?
  2. Whether the agency’s statement has the force of law

1. Whether the questioned rule is legally binding on persons outside the agency, by creating rights, imposing obligations, or effecting a change in existing law
2. Whether the agency is calling it an interpretive rule or not
3. Whether the agency is intending to speak with the force of law or giving advice
4. The procedure followed by the agency in adopting the rule

1. Formal – Rarely used, trial-type procedure governed by § 556-557 (DOES NOT APPLY TO STATE APAs)
   1. Required “when rules are required by statute to be made on the record after opportunity for an agency hearing”
   2. Trial-type hearing: ALJ takes evidence, testimony, cross examination, record, recommend decision, appealable
      1. Basically the same as § 553, but after the notice, instead of receiving written comments, the agency holds a hearing which meets the requirements of § 556 and § 557
         1. HOWEVER, the agency MAY provide only a paper hearing if no party would be prejudiced

• In formal rulemaking, the decision must be made based on the evidence adduced at the hearing itself

1. Informal – § 553
   1. EXCEPTIONS: 553(a): Required of all rules, except:
      1. One of the exemptions below (military/foreign affairs exemption or agency management exemption)
      2. When rules are required by statute to be made “on the record” after opportunity for an agency hearing; if you see this, then this requires formal rulemaking of § 556-557
   2. NOTICE: 553(b): Notice of proposed rulemaking issued to public
      1. The notice must include:
         1. A statement of the time, place, and nature of public rulemaking proceedings
         2. A reference to the legal authority under which the rule is proposed
         3. Either the terms or substance of the proposed rule or a description of the subjects and issues involved
      2. Logical Outgrowth Test (apply when the final rule differs substantially from the rule proposed): Notice is adequate if the changes in the original plan are in character with the original scheme and the final rule is a logical outgrowth of the notice and comments already given (chocolate milk case)
         1. Stated differently, if the final rule materially alters the issues involved in the rulemaking or substantially departs from the terms or substance of the proposed rule, then the notice is inadequate
      3. 553(b), § 553(c), and § 553(d) do not apply to nonlegislative rules or rules when the agency finds for good cause (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest
         1. The good cause generally refers to some kind of emergency
         2. APA § 553(b)(B) and 1981 MSAPA § 3-108 – When the agency for good cause finds that notice is impracticable, unnecessary, or contrary to the public interest, notice of rulemaking and public procedure are not required
            1. The agency must make an explicit finding at the time of issuance that good cause exists and give reasons to support its finding

• COMMENT: 553(c): Agency gives interested persons an opportunity to participate in the rulemaking through submission of written data, views, or arguments with or without opportunity for oral presentation
  1. After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose
     1. When rules are required by statute to be made “on the record” after opportunity for an agency hearing, this triggers formal rulemaking
  2. THE FINAL RULE: The APA requires the agency to incorporate in the rules adopted a concise general statement of their basis and purpose
     1. When an agency adopts a rule, it must at the same time state a reasoned justification for the rule
        1. That is, the agency must explain how and why it reached the conclusions it did. The agency’s order must present its justification in a relatively clear, precise, and logical fashion (National Ass’n of Independent Insurers v. Texas Dep’t of Insurance)
     2. In addition to a reasoned justification, the order adopting the rule must include ()
        1. A summary of the comments the agency received from interested parties;
           1. In other words, it must summarize the evidence it considered
        2. A restatement of the factual basis for the rule; and
           1. In other words, it must state a justification for its decision based on the evidence before it
        3. The reasons why the agency disagrees with the comments
           1. In other words, it must demonstrate that its justification is reasoned
        4. If an order does not substantially comply with the above requirements, then the rule is invalid ()
           1. An agency’s order substantially complies with the reasoned justification requirement if it
              1. Accomplishes the legislative objectives underlying the requirement, and
              2. Comes fairly within the character and scope of each of the statute’s requirements in specific and unambiguous terms
           2. Reasoning for the above rules
              1. Requiring an agency to demonstrate a rational connection between the facts before it and the agency’s rules promotes public accountability and facilitates judicial review
              2. It also fosters public participation in the rulemaking process and allows interested parties to better formulate “specific, concrete challenges” to a rule
              3. Judicial review of administrative rulemaking is especially important because, although the executive and legislative branches may serve as political checks on the consequences of administrative rulemaking, the judiciary is assigned the task of policing the process of rulemaking
           3. Modern federal cases have declared that an agency must explain how and why it reacted to important comments it received during the course of the rulemaking proceeding
              1. Note that the agency need only respond to arguments that are important and material; The test is:
                 1. Whether the comment, if true, would require a change in the rule
                 2. Comments that are speculative, or that do not show why or how they are relevant to the proceeding, need not be considered or answered
              2. Cost Benefit Analysis: Unfunded Mandates Reform Act of 1995 requires that any agency rule that imposes costs of $100mm on state or local governments, or on the private sector, must be accompanied by a cost-benefit statement
                 1. Most states require CBA or other regulatory analysis in rulemaking
                 2. Benefits of CBA
                    1. Consequences of regulations are analyzed
                    2. Agencies should generally not promulgate rules for which the costs exceed the benefits, except for certain circumstances where children and the disadvantage are negatively affected

• Provides for an efficient allocation of limited resources

1. More transparency and better presentation of both arguments to the public and relevant officials
2. Prevents irrational, emotionally charged rulemaking

1. Shortcomings of CBA
   1. CBA cannot produce more efficient decisions because the process of reducing life, health, and the natural world to monetary values is inherently flawed
   2. The use of discounting systematically improperly downgrades the importance of environmental regulation

• CBA ignores the question of who suffers as a result of environmental problems and threatens to reinforce existing patterns of economic and social inequality
  1. CBA treats questions about equity as side issues, contradicting the widely shared view that equity should count in public policy and thus imposes greater environmental burdens on the poor

1. CBA fails to produce the greater objectivity and transparency promised because it rests on a series of assumptions and value judgments that aren’t objective

1. PUBLISH: 553(d): Must be published not less than 30 days before its effective date in the Fed. Reg.
   1. Exceptions:
      1. Good cause (explanation must be published with the rule)
         1. APA § 553(b)(B) and 1981 MSAPA § 3-108 – When the agency for good cause finds that notice is impracticable, unnecessary, or contrary to the public interest, notice of rulemaking and public procedure are not required
         2. The agency must make an explicit finding at the time of issuance that good cause exists and give reasons to support its finding

• The “good cause” exception to notice and comment rulemaking is to be “narrowly construed and only reluctantly countenanced”

1. The exception excuses notice and comment in emergency situations, or where delay could result in serious harm
2. Nonlegislative rule – Interpretive rules and general statements of policy may be effective immediately (see 553(d)(2))
3. Otherwise exempted by statute

1. If a rule which should have been published but was not, then the rule is unenforceable (APA § 552(a)(1))

1. Exemptions – Rules which only need be published in the Fed. Reg.
   1. Some rules don’t even require notice and comment, only that the final rule be published in the Fed. Reg.
   2. These are:
      1. Military and Foreign Affairs Exemption
         1. The courts seem to look to whether notice & comment would interfere with our execution of foreign affairs
      2. The Exemption for Matters Involving Agency Management or Personnel, Public Property, Loans, Grants, Benefits, and Contracts
         1. Although broad on its face, in the 1960s many agencies adopted rules which voluntarily waived this exemption and subjected them to the provisions of § 553
            1. Among these are: Depts. Of Housing and Urban Dev., HHS, Transportation, Interior, Agri., Labor
         2. Vermont Yankee – Courts may not impose additional requirements on agencies beyond the APA
         3. Ex Parte Communications – communications not on the public record to which reasonable prior notice to all parties is not given. Excludes requests for status reports.
            1. Formal rulemaking – FORBIDDEN; if occurs, it must go in the record (§ 557)
            2. Informal rulemaking
               1. Communications received prior to issuance of a formal notice of rulemaking do not have to be put in the public file. However, if the information contained in the communication forms a basis for agency action, it must disclosed to the public in some form.
               2. Once a notice of proposed rulemaking has been issued, any agency official or EE who is reasonably expected to be involved in the decisionmaking process of the proceeding should refuse to discuss matters related to the disposition of the rulemaking with any interested party.
               3. If the agency relies on the ex parte communication, then the ex parte communication has to be put on the record (Sierra Club v. Costle)
               4. The scope of this is not limited to White House officials or members of Congress—it also applies to lobbyists, law professors, etc.—anyone who submitted a comment of which the agency relied ()
               5. Any rule issued must have the requisite factual support in the rulemaking record ()
               6. There are two conditions that must be met before an administrative rulemaking may be overturned simply on the grounds of Congressional pressure:
                  1. The content of the pressure upon the agency head is designed to force him to decide upon factors not made relevant by Congress in the applicable statute, and
                  2. The agency head’s determination must be affected by those extraneous considerations ()
               7. The 1981 MSAPA requires all written materials received or considered by an agency to be included in the record, but does not prohibit oral ex parte communications, nor require disclosure of them in the rulemaking record
               8. APA – Silent on the matter, but the Sierra Club rule prevails—it must go on the record, regardless of if it’s oral or written, if the agency relies upon it in making its decision
            3. BIAS
               1. In the case of perceived bias in rulemaking, an agency member may be disqualified from such a proceeding only when there is a clear and convincing showing that he has an unalterably closed mind on matters critical to the disposition of the rulemaking (Association of National Advertisers, Inc. v. FTC)
            4. RULEMAKING PETITIONS
               1. Members of the public may petition an agency for the issuance, amendment, or repeal of a rule (see APA § 553(e), 1961 MSAPA § 6, and 1981 MSAPA § 3-117)
               2. Both MSAPAs require a statement of reasons upon denial of a rulemaking petition

• APA § 555 requires a brief statement of the grounds for denial of any application or petition filed with an agency

1. An agency’s refusal to initiate enforcement proceedings is ordinarily not subject to judicial review (Massachusetts v. EPA)
2. An agency’s denial of a rulemaking petition, however, is subject to judicial review, but such review is extremely limited and highly deferential ()
3. Agencies have wide latitude as to the manner, content, timing, and coordination of its regulations with those of other agencies, but once an agency has responded to a petition for rulemaking, its reasons for action or inaction must conform to the authorizing statute ()

1. WAIVERS OF RULES
   1. Agencies often entertain requests for waivers in cases in which the applicants can demonstrate that the rule does not work appropriately in their cases
   2. An agency does not need to reconsider the entire problem de novo and reconsider policy every time it receives an application for waiver of a rule

• When applicant seeks a waiver of a rule, it must plead with particularity the facts and circumstances which warrant such action
  1. When this has been satisfied, an agency must give the application a hard look rather than perfunctory (cursory) treatment

1. Waivers are necessary to correct the rigidity of rules
2. The advantages of waiver are outlined on pp. 366-67
3. Courts review waivers under an abuse of discretion standard

1. Delay – Courts can order agencies that unreasonably delay required actions to issue a rule, but there’s factors laid out in the International Chemical Workers Union, p. 362:
   1. The court should ascertain the length of time that has elapsed since the agency came under a legal duty to act;
   2. The reasonableness of the delay must be judged in the context of the statute which authorizes the agency’s action

• The court must examine the consequences of the agency’s delay

1. The court should give due consideration in the balance to any plea of administrative error, administrative convenience, practical difficulty in carrying out a legislative mandate, or need to prioritize in the face of limited resources

1. Comparing the Federal with the Oregon Rulemaking Process
   1. Federal
      1. NPRM (in Fed. Reg.)  Notice and comment  Final rule (has to be a response to the comments) (again in Fed. Reg. with response to comments)
         1. Judicial review: Arbitrary and capricious standard, allows the courts to get into the substance of the rule, check the final rule against the record and the final explanation; in Oregon this check does not exist
      2. Oregon
         1. NPRM (in Oregon Bulletin)  Comments? Hearing? Depends on whether interested individuals triggered things which may require a hearing  Agency doesn’t have the same obligation at the end to demonstrate that the final rule is responsive to those comments, so not in Oregon Bulletin as it’s not required
            1. In Oregon, judicial review of rulemaking is VERY limited; the only basis in Oregon is, if it wasn’t promulgated using the right process, if it’s contrary to statutory authority, or if its contrary to constitutional requirements
            2. So what ends up happening, is Oregon rules end up looking like these direct final rules; if someone wants to get up and waive their hands and demand comment, the agency may do that; it’s not under obligation to do that
         2. Public comments
            1. State rulemaking is less formalized, as a general matter – The Oregon APA includes similar language—the agency must give notice of its intended action with a reasonable opportunity for interested persons to be notified of the agency’s proposed action
               1. This includes publishing in the Oregon Bulletin
               2. Send out email or mail to those that have requested notice in advance
               3. People specifically identified that must be notified; for instance, you have to tell the relevant, sponsoring legislator that sponsored the legislation for which the rules are being made
               4. Not obliged to give an opportunity for an oral hearing, but a hearing may be requested, if 10 persons or an association of > 10 members request one, at which point a hearing must be granted

• Adjudication Procedures
  1. The Pre-Hearing Phase: Notice
     1. Due process requires fair notice of reasonably specific charges against the defendant so that he or she has an opportunity to prepare and present an adequate defense and be heard
        1. APAs require notice of pending adjudicatory action that is sufficiently detailed to enable the private party to prepare for the hearing, but neither the APAs nor due process require notice of specific details, such as the dates on which the misconduct occurred
     2. License suspension: a licensing agency normally has power to suspend a licensee from practice during the pendency of the hearing process if the licensee poses a threat to the public
  2. The Pre-Hearing Phase: Investigation
     1. 4^th Amendment Analysis:
        1. A subpoena does not need to comply with the literal 4^th Amendment requirements for a criminal warrant; the judicial standard for a subpoena is constitutionally permissible under a standard which is less exacting than that required for a search in a criminal prosecution
        2. Limitations on subpoenas:
           1. The investigation must be for a lawfully authorized purpose, within the power of the legislative or administrative body to command
           2. As long as the subpoenaed documents are relevant to the inquiry, the “probable cause” requirement is met
           3. Reasonableness—particularity and specificity in the documents to be produced must be adequate and reasonable
           4. The subpoenaed party must have the opportunity for judicial review before suffering any penalties for refusing to comply
        3. The Hearing Phase
           1. Bare minimum: You have to be given notice and the opportunity to be heard
           2. Goldberg v. Kelly lays out the maximum for informal adjudications
              1. Only function is to produce an initial determination of the validity for discontinuation of benefits; thus, only minimal procedural safeguards are necessary
                 1. No particular order of proof or mode of offering evidence is necessary; informal procedures will suffice
              2. Must be at a meaningful time and in a meaningful manner; Recipient must have
                 1. Timely and adequate notice of benefits termination
                 2. An effective opportunity to defend by confronting adverse witnesses and orally presenting arguments
              3. Recipient must be allowed to testify orally
              4. Recipient must be given an opportunity to confront and cross-examine the witness relied on by the department
              5. Although counsel need not be provided, the recipient has a right to retain an attorney
              6. The decision maker’s conclusion as to a recipient’s eligibility must rest solely on the legal rules and evidenced adduced at the hearing
                 1. To demonstrate compliance, the decision maker should state the reasons for his determination and indicate the evidence he relied on
              7. The decision maker must be impartial

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