Administrative Law

1) Overview
a) All agency actions are characterized by “If x, you
may/shall do y”.

b) Three questions to ask for all agency actions:

i) What is the governmental action that gives rise to the issues
in the case before us? i.e.:
(1)Is it a school board’s decision to suspend a student?
(2)A highway commission’s decision to build a highway?
(3)A warden’s decision to place a prisoner in solitary
confinement?
(4)A health commissioner’s determination to ban smoking in
public places?
(5)An environmental agency’s decision to ban the emission of
certain chemicals into the air or water?
ii) How does the law characterize those actions?
(1)Rules – general, prospective statements of law that apply
to a class of persons or entities
(a) Involves legislative-like processes
(b)Legislative act addressed to a population
(2)Orders – are more specific, particularized statements of law
that usually apply to a single individual or entity and
involve the determination of facts that have already
occurred.
(a) Involves adjudicatory processes
(b)Individual act addressed to a person
iii) What are the legal consequences of those characterizations?
(1)How do agencies differ from courts when they adjudicate
and how should those differences be reflected in the
procedures that they use?
(2)How do agencies differ from legislatures when agencies are
formulating rules and how should these differences be
reflected in the procedures they use?

c) Two types of agency actions

i) Adjudication
(1)Seeks to determine consequences of previous actions.
(2)Orders are example of adjudication
(a) Orders are given to a small group of people or an
individual
ii) Rule-making
(1)Seeks to modify future behavior.
(2)Given to large groups

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 (3)NO Constitutional Due Process rights in Rule-making
process
d) Two grounds to attack agency decisions – Process v. Substance
(1)Process means you are upset about the procedure of the
act
(a) If you win on process, the case is remitted back to the
agency to hear it again and you might still loose
(2)Substance means that the agency made an error of law
and got the point wrong
(a) If you win on substance ground, then you have a
stronger suit and you are likely to get compensation
e) Who are Administrative Agencies?
- Local: tax assessors, zoning boards, planning commissions and school
boards
- State: public service commissions, departments of motor vehicles, the
environment or consumer affairs
- Federal: Securities and Exchange Commission, the Internal Revenue
Service, the Department of Labor or the Environment Protection
Agency

The Relationship of the Individual to the State

A. Three Questions
1. What is the nature of the government action at issue?
2. How the law does or should characterize that action? Rule or
order.
3. What are the procedural and substantive consequences of
that characterization?
B. Rules or Orders
1. Londoner v. City and County of Denver
Challenge to an assessment for cost of tax levy of widening or
paving of a street - Order
No opportunity for a formal hearing entitled to due process –
Constitution demanded they would be given some greater
process.
2. Bi-metallic
Increase in value of all taxable property in Denver of 40% -
Rule
Constitutional process does not apply to rulemaking
Holmes arguments:
1. Efficiency – process of government would be unduly
incumbent
2. Modern large democratic society – it is impossible to
have direct form of democracy. Instead, we have a
representative form of democracy
3. Assume state power is exercised properly
3. Bowles v. Willingham
Challenge of act of maximum rent control

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 Rule by Congress delegated to admin agency, but order
directed toward an individual landowner
Really a challenge of regulation on which the individual order
was based
Most instances, one will not challenge a regulation until it is
applied to you
Constitutional due process prior to the order is not required
because
1. Judicial review after order is made satisfies
requirements of due process.
2. Exigencies of wartime condition (policy reason

Due Process Clauses of the 5th and 14th

Amendments and Administrative Adjudication
Although something was an order, it was still not a sufficient
condition for the application of due process. Certain individual
orders were held not entitled to Constitutional due process.
Questions to consider:
1. Right v. Privilege – Are you able to open the door to the 5th and 14th
Amendment?
2. What is the difference between a right and a privilege? You must
have a right in order to have constitutional due process

1. Bailey v. Richardson
a. Denied reinstatement w/o revelation of the names of
those who informed against her
b. Not entitled to Constitutional due process because:
i. Not life, liberty, or property interest
ii. Government EES serve at-will of exec branch,
President has power of appt and power of
removal w/o notice
iii. Due process only applies if you are being
deprived of something to which you have a
substantive right (Right vs. Privilege Distinction)
2. Cafe & Restaurant Workers Union v. McElroy
a. Due process not a fixed content, unrelated to time,
place, or circumstances
b. Qualify right vs. privilege distinction – due process is
allowed to those excluded on an arbitrary or
discriminatory basis (circumvents Bailey’s right vs.
privilege distinction)
3. Dixon v. AL Bd of Educ
a. Private (education & ability to earn livelihood) vs. public
(power to expel) interest balancing test
b. Also circumvents Bailey

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 4. McElroy and Dixon are wrong bc they circumvent
Bailey
a. Before you use a balancing test to determine how much
due process is due, you first must determine whether
there is a basis for Constitutional due process, such as a
life, liberty, or property interest (under 5th or 14th
Amendments)
b. Is it applicable? If so, how much (amount) of due
process is one entitled to? This is where you employ the
balancing test.
B. The Demise of the Right/Privilege Distinction
1. Hornsby v. Allen
a. Agency acts as a judicial body because it is making
determinations of factual issues. Thus, it has
requirements of due process
b. Problems:
1. No connection made to Constitutional language,
i.e. life, liberty, and property
2. Any law will require interpretation when applied

Adjudication - Constitutional Due Process Claims

a) Goldberg v. Kelly
i) Action involved: Recipients of federal and state welfare
were deprived of benefits. They were given a hearing
AFTER termination.
ii) Characterized as: an order
iii) Legal consequences:
(1) Complainants have Constitutional DP rights
iv) Rationale:
(a) Welfare benefits are property, thus protected
by DP clause of 14th Am.
(i) Recipients were given a statutory entitlement to
the benefits
v) Extent to which procedural rights must be granted
(1) Court used balancing test: the gov’t. interest in
efficiency v. the importance of the personal interest
vi) Process granted:
(1) Right to confront witnesses
(2) Adequate notice
(3) Opportunity to orally present your side
(4) Right to retain an attorney
(5) Pre-termination hearing
b) Board of Regents v. Roth
i) Action involved: Professor’s employment contract was not
renewed.

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 ii) Refined Goldberg
(1) The Court must determine if the right which
has been denied is protected by the Fourteenth
Amendment BEFORE they apply the balancing
test
(a) The NATURE of the interest is important, not
the WEIGHT of the interest - balancing comes in later, to
determine how much process is due, but not to determine
applicability of due process
(2) In order to claim a property right, a person must
show a basis for that right in a source independent of
the Constitution.
(a) Three sources of property rights:
(i) Statutory entitlement
(ii) Common law entitlement
(iii) Rules and understanding as securing certain
benefits
**Perry expanded this category by ruling that a
property right can be created by implication**
(3) Four sources for Liberty interest
(a) Constitution
(b) Common Law
(c) Statute
(d) Absence of prohibition - You have a Liberty
interest if you can point to a source, or derived from the
constitution- freedom of religion, speech, etc., or if you
can convince the court because there is an absence of
any legal rule preventing you from doing the thing in
question.

c) Arnett v. Kennedy
i) “Bitter with Sweet” - Rehnquist
(1) If a property interest is created by state law, and that
law explicitly specifies procedural rights, then those are
the only rights allowed.
(2) Rehnquist says that you have to take the bitter with the sweet:
the property right was created by state law (Lloyd act), but that act
not only gives the property right, but it also lays down limited
procedures to vindicate the property right if it was taken away from
you.
(i) If you ground your property right on an independent source,
where that state law says something about procedures, then
that’s the maximum procedure you can get and you can’t argue
that the 5th and 14th amendment gives you other rights.

d) Loudermill – “bitter with sweet” reasoning is wrong

i) Clarified Arnett by holding that the procedural rights given
must be at least as much as given by the Constitution.

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 ii) The court reasoning for deciding that “the bitter with the
sweet” reasoning is wrong is because the state or federal
government will lock on to Rehnquist’s reasoning and then
grant property rights but then give minimal safeguards.
e) Sandin v. Conner (another Rehnquist case)
o Should the prisoner of this case be regarded as having a
liberty interest not from a source, but from the constitution
itself
o Rehnquist’s reason was to focus entirely on is there an
independent source and they didn’t look at constitutional
itself – Rehnquist said, no there is no source of liberty
interest
o Ginsburg dissented and said, there is a liberty interest and
it is derived from the constitution. Ginsburg says he is not
basing judgment on whether there is state code, because it
will differ between states.
Message to take away: courts have considerable discretion in
determining whether to characterize something out there in
state law as giving rise to a liberty interest - Rehnquist. They
also have some latitude to find a source somewhere else -
Ginsburg

f) Matthews v. Eldridge
i) Used balancing test to determine sufficiency of procedure-
Matthews v. “Matthews v. Eldridge Calculus”
Eldridge (1) Three factors to consider:
Calculus (a) Private interest affected by action
(b) Risk of erroneous deprivation of such an
interest through procedures used, AND probable
value of additional/substitute procedural safeguards
(c) Gov’t. interest (fiscal & admin burdens of
additional procedure)
- Application of due process test:
1. They regard disability benefits as less important than
the welfare benefit in Goldberg because it is not the
bottom safety net in the social welfare scheme of things
and there are other forms of welfare benefits
2. Predetermination hearing is not as important here
because it is based on medical evidence and is more
objective than the determination of the issue of need
(Goldberg). In addition, the existing regime did allow
the applicant prior determination of written
representations and he wants an oral representation.
The written representations are effective in protecting
the applicants’ interest in this case, more so than in
Goldberg.

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 3. if you give a full evidentiary hearing in this case, before
you withdraw disability, you will have to give it to
everyone else and this places a burden to the system.
In addition, we shouldn’t imagine that we can just cut
and paste ideas of due process taken from ordinary civil
litigation and apply them in front of ordinary agencies

Adjudication and the APA - Due Process rights

under the APA
i) Unlocking the APA
(1)APA applies only to formal, not informal adjudication
(2)It must be activated by the agency’s enabling act
(3)To determine if APA applies, look at the intent of the
enabling act and the intent of the APA
(4)Section 554 of the APA requires that the APA apply “in
every case of adjudication required by statute to be
determined on the record after an opportunity for an
agency hearing.” (Exceptions are listed in Appendix B, 10).
(a) Thus, the APA applies to all formal adjudications
unless exempted by the APA or by the enabling act.
(5)If you successfully invoke the APA’s procedural
requirements, you get all of the procedure specified by the
APA, and you avoid the Matthews v. Eldridge Calculus.
ii) Even though constitutional due process is the highest in a
hierarchical sense, why might the APA be a better argument
for your client?
(1)When we dealt with constitutional due process, we dealt
with applicability and extent. With the APA you must also
show applicability, but if you do unlock the door to the APA,
then you get the full set of rights laid down by the APA and
not just a balancing test.
(2)Both the constitution and the APA require keys to unlock
the door. The keys are different, the keys are different.
(3)In one hand, If you manage to unlock the door, then if you
go down to sit at the table, then what you get is an
alacarte meal, Matthews v. Eldridge and Roth.
(4)In the other hand, If you sit down at the table of the APA,
you get a fixed meal. In that sense, although the APA is
lower in the hierarchy, it may be more advantageous.

Formalistic iii)“Magic Words” approach

Approach (a) In order for the APA to be applicable, the statute
must contain the phrase “hearing on the record”
(b) Not widely accepted
iv)Seacoast Anti-Pollution League v. Castle

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Seacoast Substantive (a) Introduced Substantive Test
Test (i) To determine whether to apply APA procedure, you
look to the substantive nature of the hearing
Congress intended to provide, and compare it to the
intent of the APA
(b) TEST: APA can apply even though triggering words in §
554 are not there, provided that the substantive nature
that Congress intended to provide are of the kind the APA
should apply: two stage approach
(i) Identify the type of hearing provided under this
particular statute
(ii) Determine whether in the light of the findings it
has made about this particular statute, the court then
decides whether the type of proceedings are one that
the APA naturally intended to apply.
v) Buttery v. U.S.
(a) Applied Seacoast Substantive Test
(i) Congressional intent was to allow people to air their
views, thus, no formal trial required.
vi)Chemical Waste Management v. EPA
Chemical Waste (1)Complaint that a hearing requirement should be governed
Test by procedures of APA and not subject to informal
procedures
(2)Court uses Chevron test
(a) Court asks whether Congress has spoken directly to
the matter. If so, Court applies the intent of Congress.
(b) If not, Court evaluates the reasonableness of the
agency’s interpretation and only overturns if it is
unreasonable or irrational.
(c) Court will NOT find that Congress intended the APA to
apply unless they find the “magic wording” of the APA –
“on the record” – the wording from §554
On the test, you apply both approaches, Seacoast and Chemical waste if
you are unsure as to whether APA applies.

Specific DP rights under the APA

(1) Asbaker Radio v. FCC

(a) Two radio companies filed an application to build a radio
station and to increase frequency. The agency granted
the new radio station, but did scheduled a trial for new
frequency – but you can’t have both so they must have
already made up their mind
(b)We only hold that where two bona fide applications are
mutually exclusive the grant of one without a hearing to
both deprives the lose of the opportunity which
Congress chose to give him.

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(2) United Church of Christ v. FCC
(a) Court ruled general public had a right to intervene in an
APA hearing
(b)However, the agency could use rule-making to limit that
scope.
(c) The court holds that some “audience participation”
must be allowed in license renewal proceedings and the
FCC should be afforded broad discretion in establishing
and applying rules for such public participation.
(d)Intervention (parties at time agency make the original
decision) vs. Standing (ability of a group or person to
challenge an agency one a decision is made)
(e) Intervention and standing are linked bc there is a strong
argument that if you have intervention rights you should
also have standing to challenge that decision before a
Court
(f) Mere fact that a person has standing does necessarily
mean a court will afford them intervention
(g)Commission able to develop rulemaking procedures in
order to specify who should be allowed to participate. If
too narrow, then Court can challenge them.
(3) Capture Theory – UCC philosophy prevents “capture”
by allowing public interest to participate, lessening the
effect of those regulations on the agency
(4) Process Rights
(a) Participation or consultation rights – rationale for
allowing them to participate are instrumental and non-
instrumental.
(i) Instrumental v. non-instrumental
1. Instrumental – such participation will not only
improve the quality of agency decisions
a. If you give the UCC rights more participation,
then if the allegation is correct, the FCC will
make a better decision
(ii) Non-instrumental – Gives people a sense of taking
part in governance and in particular decisions that
are important to them.

(5) Richardson v. Perales

(a) All relevant and material (rational and probative)
evidence is admissible in an APA hearing
(b)Hearsay evidence will be admitted provided that it is
reliable in a probative value.
(c) Hearsay evidence must be relevant to the matter at
hand.

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 (d)Holding: the court sees nothing wrong with the
procedures used by the agency and it does not fall short
of procedural due process.
(6) Banks v. Schweiker (official notice)
(a) It is fine for the ALJ to take official notice of the facts
that is important to the making a decision (i.e. that it is
not customary practice for SS employees tell claimants
to cash and spend checks when there is some doubt of
over payment) as long as the claimant has an
opportunity to rebut.
(b)According to APA § 5 – requires that when an agency
decision rests on official notice, a party be given “on
timely request, an opportunity to show the contrary.
(c) What is official notice? An administrator can take
account of certain knowledge about how things operate
within a certain area. Judicial notice is used when a
Judge takes account of certain things out there.

(7) Steadman v. SEC (standard of proof)

(a) Preponderance of the evidence standard is the
appropriate Burden of Proof in APA hearings.
(b)Question whether preponderance of evidence is the
adequate standard of proof. Court defers to legislative
history of Congress
(i) Whether SEC triggers APA
(ii) If yes, then legislative intent of APA was
preponderance of evidence
(c) Rule
(i) Look first to actual standard to see if it triggers the
APA
(ii) If it does, then look to APA to see what it says on the
matter. Next, look to legislative intent if APA does
not answer it directly.
** Even if standard uses exact wording of statute, then you
must still look to the statute bc it is always Congress’
prerogative to place more onerous obligations than those by
APA

Combination of Functions under the APA

1. § 554(d) – separation of investigatory and prosecutorial functions
from adjudicative responsibilities

(1) Withrow v. Larkin

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 (a) Combination of roles of agency decision-makers
(investigator/prosecutor/judge) is not per se
unconstitutional
(b)Two-part inquiry
(i) Presumption that decision-maker is unbiased, and
plaintiff must overcome that presumption.
(ii) It is a rebuttable presumption in that plaintiff must
show that the decision-maker’s mind is “irrevocably
closed”
(2) Grolier v. FTC
(a) Agency decision-makers who were privy to ex parte
information are precluded from participation in the
adjudication of cases in which they performed
investigative or prosecutorial functions, OR in cases that
are factually-related, under §554(d) of the APA. (No
intermingling of prosecutorial/investigative functions
with adjudicatory functions.)
(b)Question whether ALJ could be an unbiased decision
maker bc he was the previous atty advisor to Sec while
agency investigated Grolier 8 yrs earlier
(c) Reasons for finding against an ALJ
(i) gained ex parte information as investigator
(ii) “will to win” - buried on one side of the issue
(d)It is not a per se approach to disqualification under §
554(d). Courts focus on the actual involvement and the
functions.

Ex Parte Communications
(8) PATCO v. FLRA
(a) Ex parte communications are banned if b/t an interested
party and an agency decision-maker
(b)Policy reasons against ex parte communications: 1)
avoid the appearance of impropriety, and 2) the other
party can only respond if they know the argument
(c) Remedies: 1) disclosure of the communication, 2)
dismissal if it becomes too tainted
(d)Ex parte communication makes it voidable but not void.
Factors to consider if it is to become void:
1. gravity
2. influence on the ultimate decision
3. if the party benefited
4. if the contact was unknown, giving the other party
no ability to respond
5. if vacating the judgment serves a purpose

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 (e) Applied criteria to the facts, but concluded that it didn’t
make a difference in the decision and it is not serious
enough to avoid the decision

(9) Cinderella v. FTC (prejudgement)

(a) An administrator must recuse himself from a matter if a
disinterested observer may conclude that he has in
some measure pre-judged the facts and law of a case.
(b) The test is whether a disinterested observer may conclude that the facts as
well as the law of a particular case have been adjudicated before the
hearing.

Informal Agency Adjudication

Informal agency action is a term of art in American law, which simply means that the
agency action is not subject to the formal adjudication requirements of the APA.
Informal agency action is all agency action which does not come within § 554 and
procedural requirements of APA that we have been considering in the previous
chapter.

i) Occur when the procedural requirements of the APA are not

triggered
ii) Overton Park
(1)Agency actions are subject to judicial review except in the
limited case where the statute is so broad, that there is no
relevant law to apply. In such instances, the law is
“committed to agency discretion”.
(2)Question whether informal agency action is subject to
judicial review.
(a) Neither substantive evidence test nor de novo review
apply.
(b)Appropriate test
(i) Whether Sec acted within scope of statutory
authority (Chevron inquiry)
(ii) Whether Sec’s choice was not “arbitrary, capricious,
an abuse of discretion, or otherwise not in
accordance with the law” (State Farm Question)
(iii) Whether Sec’s action followed the necessary
procedural requirements (Process rights
protect/facilitate substantive review)
(c) Without process requirements (Part III), you cannot
answer first two parts of Overton test
(d)Overton Park will give you independently of APA and
Constitution some process rights, but only if you can
forge a link between process right you are asking for
and the element of substantive review.

iii)Camp v. Pitts

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 (1)The focal point for review of agency action is the
administrative record that is already in existence, not an
ad hoc rationalization prepared for the courts.
(2) Can the SC review the Controller’s decision to determine whether it is
arbitrary or capricious?
(3)Process rights under Overton Park exist merely to require
the Secretary to give adequate reasons for his decision.
iv)PBGC v. LTV
(1)Agency actions are to be consistent with the goals of the
empowering statute, NOT with the general public good.
(2)An agency need not consider ALL statutes that may be
affected by their decision.
(3) Question whether PBGC’s decision to not take on benefits
was arbitrary and capricious. Court decides that LTV has
no procedural rights from APA or ERISA. Thus, there is NO
general right derived from procedural right under Overton
Park in order to make the substantive challenge viable.
There is no free standing process right based upon an idea
of fairness.

Rule-making
APA procedures for Rulemaking
i) Bowen v. Georgetown Univ. Hospital (retroactive rules)
(1)Unless the statute explicitly provides to the contrary,
retroactive rules by an agency are forbidden.

Established the difference between rules and guidelines

ii) Industrial Safety Equipment v. EPA (Agency
Publications)
(1)Agency publications are not necessarily rules. Not rules if:
(a) Their purpose is to clarify or explain current law,
(b)They are non-binding general policy statements of the
agency, OR
(c) They are rules of agency organization, practice, or
procedure.
(2)The key is that the publication did not modify existing
rights, duties, or law.
Three types of Rule-making
1) Informal: § 553 (notice and comment)
2) Formal: § 553(c) (formal adjudication: trial-like and on the record)
NOT REQUIRED UNLESS EXPLICITLY REQUIRED BY STATUTE.
a) Trigger – rule is made on the record after opportunity for a
hearing
3) Hybrid

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Formal rulemaking
- US v. Florida East Coast Railway– you will not be able
to convince a court that formal rulemaking is required
unless the magic words from §553 “there must be a
hearing on the record”
- Why make it hard to get formal adjudication for
rulemaking? If you have rulemaking, then you will have
multiple parties and then the practical problems of trying
to run something akin to formal adjudicatory hearings with
rights of discovery with multiple parties, quickly becomes
nightmarish

Informal Rule-making (Notice and Comment)

i) Chocolate Manufacturers Assoc. v. Block
(1)Notice of a change in a proposed rule is adequate if:
(a) Changes are in character with the original scheme, AND
(b)The final rule is a logical outgrowth of the notices and
comments.
(c) In other words, if rule substantially departs from terms
or substance of the proposed rule, then notice is
inadequate
(2)If you are in doubt when you apply the logical outgrowth
test, you can apply this test:
(a) Then you must turn on how well the notice that the
agency gave serves the policies underlying the notice
requirement.

ii) US v. Nova Scotia Food Products

(1)Agency must provide a concise statement as to why they
adopted the final rule
(2)The statement must reveal:
(a) What major issues of policy were discussed in the
informal proceedings, AND
(b)Why the agency reacted to them as they did.
(3)This case stands for - if an agency makes a rule and it
stands on scientific evidence, then that evidence must be
available to those who are putting in comments for them to
be able to respond.
(a) On the one hand we need to expose the scientific
evidence
(b)If the court pressed to far in this situation, you can get
“paralysis by analysis” – ossification of the rule making
process
(i) the agency feels they need to put in too much
scientific data and the reports are horribly long.

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 (ii) Some court have adopted the following attitude, if
the P can show pretty much any error about the
scientific data about the rule, then the rule falls. It is
deeply problematic if the court follows that method.
We need regulations that do not say unequivocally
what the toxic consequences are of something,
because we will not know until 20 years down the
road. Many agencies have to regulate using a precautionary
principal.
iii) Exception to § 553 Rulemaking Procedures
1. AHA v. Bowen – APA gives certain exceptions to notice
and comment in order to preserve agency flexibility in
dealing with limited situations where substantive rights are
not at stake
2. The court regarded this as coming under procedural rules.
a. The court goes through (421 – 422) and gives a legal
sense of what these exemptions are about:
i. Interpreted rules – allowing someone to make a
statement about the meaning of an existing
statute or regulation
ii. Policy statements - An agency is giving some
indications about what it is trying to do
iii. Rules for agency organization and procedural
practice – to enable agencies to obtain latitude
to organize internal practices
1. These rules were providing guidelines for
enforcement and it is simply a procedural
rule to the courts, but it does not change
the rights of anyone

Hybrid Rule-making
Rulemaking process is considered hybrid when Congress mandates
some extra procedures, but does not demand formal rulemaking.
Vermont Yankee
a) Courts may not force an agency to adopt greater procedural
process
(1)Uncertainty would arise and agencies would add a lot more
procedures just to play it safe
(2)Courts should not be Monday morning quarterbacks
(3)Not the intent of Congress when they developed this model
of rulemaking – the standard of review is linked to
procedures given.

b) Four Exceptions:
(a) Quasi-judicial rulemaking (effecting a small # of people,
etc.)

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 (b)If agency deviates from long-standing practices –
unjustified decision
(c) By statute – statute governing the area in question,
might mandate procedures going beyond notice and
comment
(i) This is ok, because it is not the court adding
procedures, it is the legislature adding procedures.
(d)When the agency voluntarily gives more procedural
rights.
c) Rehnquist gives us three reasons why he is enunciating the
general principle that subject to these exceptions it is not open
to the court to add to the APA:
1. Judicial review is unpredictable and agencies will be
defensive to judicial review and in effect give more
procedures than mandated by the APA and when the
legislature meant for it to be dealt with by notice and
comment.
2. Monday morning quarterbacking – saying what the
quarterback or agency should have done yesterday.
 When the court is deciding extra procedural
safeguards, the danger is that the court is
looking at the matter after the event and then
it is all too easy to say well you should have
done this or that. But that is not the
appropriate time frame – you should look at it
ex ante, when the agency made it’s decision
and not at the time of review – ex post facto.
3. Some people argue that the more procedures the
better because you will have a better record, but
Rehnquist is saying that would cause a full
adjudicatory hearing before every rule.

Industrial Union Dept. v. Hodgson (gives 2 reasons why it is hybrid

a. Statute called for informal rulemaking and substantial
evidence test
b. Court distinguishes b/t review of factual findings and
review of policy determinations, applies two different tests
to the two issues.
i. Factual Q – evidence on the record (similar to
substantial evidence test)
ii. Policy Q – “arbitrary and capricious” standard
- The court comes out with a 2-part test
o In relation to facts a substantial evidence test
o In relation of policy issues a test akin to the arbitrary and
capricious test
- Two things about the case that is relevant to hybrid rulemaking

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 o It can be difficult for a court to decide upon a correct
rulemaking test for hybrid rulemaking, because it is a
hybrid of formal rules and is bizarre
o It is important for you to be able to notice and identify in a
dark alley in a very rainy night as to whether you are faced
with hybrid rulemaking or not. So, looking at a particular
statute, we need to know how to figure it out. This case
provides a neat illustration about how hybrid rulemaking
arises – it is hybrid for 2 reasons:
1. the procedures that go beyond the APA but
derived partly from the statute itself goes
beyond notice and comment because the
primary statute says you promulgate and put
out a standard for comments and the what
goes beyond notice and comment, then the
statute says that someone can request a public
hearing within that time. Then if someone
requests a public hearing, the secretary sets a
time and place.
2. In effect, the OSHA statute empowers the
secretary to make procedural regulations
concerning how OSHA standards should be
made and their procedures and that is what
the secretary did. In those regulations, the
secretary added further procedural
requirements going beyond the APA notice and
comment and in particular, he provides for the
ability of cross-examination, and the hearing
should be reported verbatim for any interested
person.
o Test for substantive challenge to hybrid rulemaking
TEST FOR 1. When choice purports to be based on the existence
SUBSTANTIVE
of certain determinable facts, the secretary must, in
CHALLENGE IN
HYBRID from and substance, find those facts from the
RULEMAKING evidence in the record. Then a softer version of the
Substantial Evidence Test (see below) applies.
2. When the Secretary is obliged to make policy
judgments where no factual certainties exist or
where the facts alone do not provide the answer, he
should so state and go on to identify considerations
found persuasive. Then the Arbitrary and
Capricious Test (State Farm or Baltimore Gas)
applies.

US Steelmakers v. Marshall
a. Question of bias –rulemaker spoke out beforehand

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 b. Court held that Cinderella test only applies to adjudication
c. Test for bias in rulemaking is much less strict – the bias was
so bad that the decision maker was incapable of fact
finding or policy setting, clear and convincing evidence
test.
d. Talk about the Cinderella case and because she was acting
as rule maker and not adjudicator then it is not the same
and they will have a different test for rulemaking because
when congress creates an agency with an expressed
mission and they already have opinions as to how to carry
out the mission– test: clear and convincing showing that
she has an unalterably closed mind. The court was also
not willing to construe her comments retroactively.

When to use Rulemaking or Adjudication

The court may force an agency to use rulemaking or adjudication

i) SEC v. Chenery
(1)Agency may use either rule-making or adjudication, at its
discretion, because:
(a) Situations arise that could not be foreseen
(b)Lack of experience with a particular problem
(c) Specialized and varied in nature, so that could not be a
part of a general rule

Need for Agency use of Rules

1) Heckler v. Campbell (good illustration of Chenery case)

(1) Agency may use Rules in the process of Adjudication
(2) The court says these managerial employees are not
covered by the Act, so now the issue is whether the buyers
are managerial employees.
(a) Does the agency have to use rulemaking to answer this
question or a serious of ad hoc decisions? The court is
not going to mandate or order the agency to do it one
way or another.
(b)The court gives reasons why it is not going to force the
agency to use rulemaking:
(i) To force the agency to use rulemaking is silly
because the answer to whether the buyers are
managerial employees will vary from agency to
agency.

2) Allison v. Block

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 (1) Agency must have standards applicable to all,
regarding how rules/policies that will be used are
implemented
(2) Agency may use rulemaking or adjudication to
accomplish this.
(3) Every single statute always when it grants
power to a Secretary of state or agency or anyone
else, it always says: If X1, X2, X3...XN, you
may/shall do Y
(a) The test used for substantive review can differ as to
whether the issue is at the X level or the Y level
(b)Statue for this particular case: If upon a sharing by the
borrower out of the borrowers control, the borrower is
unable to make payments, without unduly impairing the
standard of living of the borrower, (if these particular
parts of the statute are met), then the Secretary may
permit at the request of the borrower a deferral of
interest.
(c) No one is arguing that the X conditions have not been
met in this case, the case turns on the way the
Secretary uses his or her discretion at the Y level.
(d)The secretary says he has unfettered discretion and can
do anything and the court comes back hard and says
no, you’re subject to constraints...you have an
obligation to develop standards. If there were no
standards, then the statute would look like a mere
window dressing. The broad discretionary standard the
secretary is arguing for, is only ok, if the secretary
develops standards and they don’t care how the
secretary develops standards, he just needs to do it.
Formal rulemaking would be the best, but they are not
supposed to make that decision.
(e) This case is authority for: even where there is no
instruction to make rules, and even where an agency is
given reasonably broad discretion to power, the courts
may force the agency to develop standards to flesh out
which the agency or secretary is going to use their
power – very sensible decision.

Substantive Challenges to Rule-making –

Judicial Control of Agency Discretion

- If you win on procedure – you get a remand back to the agency

mandating them to redo with proper procedure

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 - If you win on substantive review – then you may get the outcome
you want
- §706 sets out the guidelines for substantive review – but it does
not give very good guidelines or indication as to what the courts
will do
- Substantive review covers law, fact and discretion and different
legal tests apply to each.

§ 706 contains different substantive challenges, including

distinctions b/t fact and law, which indicates that we can
discern the difference.
(2)(e) – substantive review (evidence)
(2)(c) – power to set aside agency action found to be in excess of
statutory jurisdiction, authority, or limitations or short of statutory
right
(2)(b) – power to set a side agency action found to be contrary to
constitutional right, power, privilege or immunity

Four subjects
1. Test for fact finding
2. Substantive review of Qs of law
3. Meaning of arbitrary and capricious
4. To what extent (how far) does Court apply is control over agency
discretion

Findings of fact – substantial evidence test

O’Leary v. Brown-Pacific-Maxon
a) Standard of review is different when a question of law or a
question of fact. The court regards this case as a question of
fact, but it is really a legal interpretation of a statutory term,
which should be regarded as a question of law.
b) Facts are externally observable about which testimony is given
c) Inferences from facts as applied to law are questions of law.
d) Question of what the scope of review of findings of fact governed
by APA. The Court holds that this is a question of fact and they
must apply the substantial evidence test. The issue here is what
is the meaning of “course of employment,” which is not a matter
of primary fact, but statutory interpretation.

Universal Camera Corp v. NLRB – test for questions of Fact

(1)Legal nutshell about the meaning of the substantial
evidence test:
(2)Prior to the UCC– some courts work on the basis that
substantial evidence test can be met provided that there is

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 substantial evidence in one part of the record, even if there
is significant counter-evidence in another part of the record
(3)Frankfurter says that, that should not be the test, the test
should be the same as under the APA and it should mean:
there has to be substantial evidence on the record
as a whole in order to uphold the agency’s finding
(this is a sensible test)
(4)General rules
(a) Substantial evidence test formally laid out to apply to
formal RM and ADJ, also applied in Hybrid RM
(b)Court will also apply a test a kin to SE test in informal
RM such as Overton Park
(c) Without formal record – more difficult to apply SE test bc
Court is faced with documentation not put together in
an organized fashion. Therefore, the Court is more
likely to take a less strict approach of fact finding.
Substantial
(5)Substantial Evidence Test
Evidence (i) Findings of fact by agency are considered conclusive
Test UNLESS:
1. The findings are not supported by substantial
evidence, OR
2. The findings of fact are against the manifest
weight of evidence.
(ii) This test is applied to the WHOLE record (both
evidence for and against)
Questions of Law
Chevron is still the leading case for the test of judicial review in the
context of law. But you can’t understand Chevron, without
understanding how the courts approached the problem prior to
Chevron.

Three types: 1) Constitutional, 2) Statutory, 3) Legal issues from

procedures used
Dispute arises over the interpretation of the X factors, i.e. if X then Y
Prior to Chevron:
1. Courts substituted judgment for agency or applied a correctness
test, decided de novo what the legal meaning should be
2. Courts adopted more deferential std of review – would review X
but would not substitute judgment, instead would employ
rationality test (Hearst) – reasonable in the light of history of
statute in question

i) NLRB v. Hearst

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 (a) An agency’s resolution of a question of law is to be
accepted if it has “warrant in the record” and a
reasonable basis in law.
 Hearst stands for an approach to review of questions of law,
which was basically deferential. This test is subject to the
condition that the agency’s definition of the term fits with the
overall wording of the statute.
 Prior to Chevron, the court applied rationality review when
asked to review questions of law in statutory issues
(2) Chevron v. NRDC
(a) When reviewing an agency’s interpretation of law, use a
two-part test:
(1)If Congress has spoken to the meaning of the legal term in
question, then Court applies that interpretation
(correctness test) and determines whether agency’s
meaning agrees with Congressional intent
(2)Where Congressional intent is ambiguous, then Court
applies the test of rationality – whether agency
interpretation is reasonable/rational in the light of the
overall agency program
ii) INS v. Cardoza-Fonseca
(a) If the agency’s interpretation violates first prong of the
Chevron Test, then the Court owes no deference to the
Agency decision
(b)Agency argues that they are entitled to deference under
Chevron #1. However, Court bases their argument
under Chevron #2 because Chevron #1has been
satisfied (Congress has already spoke on the issue).
(i) Stevens (broad Part I) vs. Scalia (narrow Part I-only
look at words (face) of statute)
(ii) Scalia’s dissent – Upon Stevens view of Chevron Part
I, you will never get to Chevron Part II
1. Language of the respective statute shows a clear
Congressional intent
2. Even if the plain language was not clear, then he
reads Stevens as saying that a case will come in
Chevron Part I if using ordinary tools of statutory
construction, the court can divine Congressional
intent (language and legis history)
(c) The court decides the case under Chevron part I. And
decides that the two terms in the legislative provisions
do not contain the same criteria for evaluation of proof
and that the initial decision maker was wrong by making
that assumption.
(d)On Stevens view of Chevron, part I locks on whenever
the court feels “ordinary rule of statutory construction”
that they can come up with a definition of the term.

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 iii)Rust v. Sullivan
(1)Interpretation of family planning and prohibition of funds
related to abortion under Title X. Court concludes:
(a) language of statute is ambiguous (Part I)
(b)looks to whether agency’s answer is based on a
permissible construction of the statute (Part III)
(i) plausible construction of plain language of statute
(ii) does not conflict with Congress’ express intent
(2)Steven’s dissent – Chevron Part I bc read in context of
entire statute prohibition directed at conduct rather than
dissemination of advice or information. Congress has
spoken under broad Steven’s view.

iv)FDA v. Tobacco - This decision is decided based on Chevron

part 1
(1)Supreme Ct says no, FDA cannot regulate tobacco as a
drug.
(2)Ct says you have to look to the entire statute to interpret
whether Congress has spoken directly to the issue. “the
meaning of words…when placed in context.” WE NEED TO
ADDRESS THIS IN THE BRIEF. WHAT ELSE IS THERE IN THE
RECORD?
(3)Rejection of narrow Rehnquist/Scalia approach. “The
meaning of one statute may be affected by other statutes
and acts.”
(4)O’Connor: approach based on broad Stevens-type analysis.
Approach:
1. Look to the entire statute to interpret whether Congress
has spoken directly to the issue
2. Look at how statute might be affected by other statutes
3. Common sense as to Congress’ delegation of policy
decision to an agency
4. Past agency practice in the area
5. Past statutes concerning the issue

Scope of Judicial Review

§ 706(2)(A) – Standard of review for agency rules – arbitrary and
capricious.

i) Motor Vehicle Manufacturer’s Assn. v. State Farm

(a) Arbitrary and Capricious Test (Hard-look
Doctrine)
(i) A rule is arbitrary and capricious if:
State Farm 1. The agency has relied on factors which Congress
Arbitrary & Capricious did not intend for it to consider,
Test (Hard Look Doctrine)

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 2. The agency has entirely failed to consider an
important aspect of the problem,
3. The agency has offered an explanation for the
decision that runs counter to the evidence before
the agency, OR
4. The rule is so implausible that it could not be
ascribed to a difference in view or the product of
agency expertise.
5. The agency decision must be based on reasons
given at the time of the decision. NO ex post
facto justifications.
(ii) Also referred to as the “Hard-Look” Doctrine
(iii) The Arbitrary & Capricious Test (Described as
narrow, but seems rather extensive) Examine the
relevant data and articulate a satisfactory
explanation for its action incl. a rational connection
b/w the facts found and the choice made Consider
whether the decision was based on a consideration
of the relevant factors and whether there has been a
clear error of judgment

(2) Baltimore Gas v. NRDC

(a) When an agency uses the Hard Look Doctrine in its
decision-making process, the Court will only overturn if
their decision was arbitrary and capricious.
(b) This case gave the Court’s the flexibility to avoid the
Hard Look Doctrine in cases where they feel that the
agency’s decision is well-thought out.
(3) When to use State Farm and when to use
Chevron
Chevron v. (a) If the question of law involves conditions (the ‘x’ in If
State Farm x, you shall do y), use Chevron
(b) If the question of law involves agency actions (the ’y’
in the above), use State Farm

Chevron v Arbitrary and Capricious

- When does Chevron apply and when does the arbitrary &
capricious test apply?
- The division is not between rules and orders, that is incorrect.
Both apply to rules and orders.
- However, they apply to different issues-
o Chevron is a test to determine the legality of a formulation.
o Arbitrary and capricious applies to “you may or shall do…”
- When you have open textured terms (shall do y), you can apply
arbitrary & capricious. Arbitrary and capricious is a test to

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 control the exercise of discretion by an agency…how an agency
has exercised its discretion.
- When the x factors are discrete and unambiguous, use Chevron,
but in some case you will see arbitrary and capricious test being
applied at the “X” conditions.
- When the conditions under which the agency exercises its
authority (“all the X factors”) are couched in broad open-textured
terms such that Chevron cannot be applied to them then the
arbitrary and capricious standard will be used to control the
interpretation of tat factor.

US v. Mead Corp
- Clearly the agency gets no deference if Congress has spoken to
the meaning in question
- Even if congress hasn’t spoken to the meaning in question and
there is an ambiguity – agency still doesn’t get deference unless
it can point to some indication of congressional intent to
delegate authority to make binding rulings of law that deserve
deference
- This will haunt the court for years to come

Skidmore v. Swift
- Weak deference
- The ct may but need not treat the agency’s interpretation as
having more authority than that of some other litigant.

Factors related to weak deference

1. Consistency- more deference to agency interpretation if maintained
consistently
3. Contemporaneousness- interpretation is more worthy of deference if
adopted soon after the statute was passed, since the agency was
probably familiar with the legislative purpose
4. Thoroughness of consideration- interpretation is more worthy of
deference if the agency carefully considered it at a high level (as
opposed to the unstudied response of a low-level staff member)
4. Reenactment- more worthy of deference if leg reenacted the statue
with knowledge of the agency’s interpretation of it
5. Agency expertise- interpretation more worthy of deference if it
reflects agency expertise in dealing with the issues. Cts however have
more expertise in apply ing the common law or in construing non-
technical statutes
6. Public participation- greater public part more deference

Judicial Review of Agency Inaction

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Heckler v. Chaney
a) An agency’s decision not to prosecute or enforce, whether
through civil or criminal process, is a decision generally
committed to an agency’s absolute discretion. “Unreviewable”
b) Refusals to enforce are reviewable in the absence of “clear and
convincing congressional intent to the contrary.
c) The decision is only PRESUMPTIVELY unreviewable. This may be
rebutted where the substantive statute has provided an agency
with enforcement guidelines.
d) No judicial review of agency inaction because it is an internal
decision of the agency for the following reasons:
(1)allocation of assets
(2)refusal to act generally does not exercise its coercive
power over an individual’s liberty or property rights
(3)where the agency does act to enforce it does trigger
judicial review
(4)analogy between agency action and prosecutorial authority
which is not reviewable
e) Limits on the presumption of unreviewability:
(i) Where statute has provided facial guidelines as to
enforcement-reviewable
(ii) Congress may have set substantive priorities on how
agencies will pursue
(iii) If an agency believes it lacks jurisdiction, Court
may review
(iv) Agency conspicuously adopts a general policy
that is so extreme as to amount to an abdication of
its statutory responsibility (like systematic non-
enforcement)
(v) Constitutional violations

ii) The Availability of Judicial Review

(1) Webster v. Doe
(a) Under APA 702(a)(2), no review when statute “exudes
deference to the agency director”. (No meaningful
standard in the statute to review).
(b)Under APA 702(a)(1), no review when decision is
committed to agency discretion by statute.
(c) X condition extremely subjective and open-textured. X
comes after Y.
1. Language so open-textured that it is not subject to
judicial review at all – unreviewable
2. Exception – colorable Constitutional claim
(d)This statute did not accord the Secretary the broad
power to fire someone on a whim. Therefore, we are
allowed to get some reasons from the director. He

26
 needs to tell why being a homosexual will hurt the US
and the court says that not only looking at the reasons,
they need some evidentiary information behind the
reasons.

Delegation Doctrine Revival

The legislature is the starting point and are elected to make decisions,
and the legislature can’t do everything by themselves, so they
delegate power to either a secretary of state or an agency.
Congress needs to specify the real principles that the want to govern.
The legislature may be restricted because of lack of expertise or
foresight and cannot foresee the types of problems that may occur.

Industrial Union Department, AFL-CIO v. American Petroleum

Institute
o The majority says non-delegation doctrine isn’t irrelevant,
but you need to read in limits
Mistretta v. United States
- The court says that law can’t be made by anyone but congress
except when it is a lawful exercise under the executive or judicial
powers.

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