Administrative Law Outline-Prof.

Araiza Fall 2021)

Table of Contents
I. CONSTITUTIONAL AND POLITICAL BRANCH RESTRICTIONS ON AGENCY ACTION....5
 Constitutional Restrictions on the Delegation of Power to Agencies........................................5
A. Agency Legislation.......................................................................................................................5
 The Non-Delegation Doctrine Function (NDD):.....................................................................6
 RULE: Intelligible Principle....................................................................................................6
 ALA Schechter Poultry Corp. v. US (1935)................................................................................7
 Panama Refining Co. v Ryan (1935)..........................................................................................7
 Modern Use of Non-Delegation Doctrine:..............................................................................7
 Non-Delegation Doctrine as a Tool: (Whitman).....................................................................8
 Whitman v. American Trucking Assoc., Inc. (2001)...................................................................8
 Gundy v. United States (2019)....................................................................................................9
B. Agency Adjudication: Separation of Power...........................................................................9
 Schor and the Modern Rule........................................................................................................9
 Commodity Futures Trading Commission v. Schor (1986).......................................................10
 The Constitution and Political Branch Control of Agencies....................................................13
o Political Accountability-President Attempt to Control Agency..............................................13
1. Myers............................................................................................................................................14
2. Humphrey’s Executor...............................................................................................................14
 Morrison v. Olson (1988).........................................................................................................15
 Double Insulation is Unacceptable........................................................................................16
 Free Enterprise Fund v. Public Company Account Oversight Board (2010)............................16
Congress- Legislative Veto and the Congressional Review Act...................................................17
 INS v. Chadha (1983)...............................................................................................................17
II. ADMINISTRATIVE RULEMAKING PROCEDURES.....................................................................18
 The Choice Between Adjudication and Rulemaking................................................................18
 Londoner v. City & County of Denver (SCOTUS 1908)..........................................................19
 Bi-Mettalic Investment Company v. State Board of Equalization (SCOTUS 1915).................19
 NLRB v. Wyman Gordon (1969)...............................................................................................19
 Storer Broadcasting (1956)......................................................................................................20
RULE: Rule making or Adjudication............................................................................................20
 Securities Exchange Commission v. Chenery I (1943).............................................................21
 Chenery Factors:....................................................................................................................21
 Exceptions/Limitation............................................................................................................21
 NLRB v. Bell Aerospace,( 9th Circuit, 1974).............................................................................21
 Ford Motor Company v. FTC (9th Circuit, 1974)......................................................................22
 Formal versus informal rulemaking..........................................................................................22
United States v. Florida East Coast Railroad (SCOTUS 1973) – When Formal Rulemaking
Required............................................................................................................................................23
The problem with formal rulemaking?.........................................................................................23
 Informal Rulemaking.................................................................................................................24
 United States v. Nova Scotia Food Products Corp. (1977).......................................................25
  The 1st APA §553 problem......................................................................................................25
 The 2nd problem......................................................................................................................26
 The 3rd problem.......................................................................................................................26
Logical Outgrowth Test : NRDC v. EPA........................................................................................26
 Hybrid-rulemaking.....................................................................................................................27
 E-rulemaking..............................................................................................................................27
 Vermont Yankee Nuclear Power Corp. v. NRC (1978).............................................................27
 Exceptions to the Notice-and-Comment Process......................................................................28
a. Procedural rules.....................................................................................................................29
b. Good Cause Exception...........................................................................................................29
c. Interpretive rules....................................................................................................................29
d. Policy statements....................................................................................................................29
Procedural Rules.............................................................................................................................30
Good Cause Exception....................................................................................................................30
 Telephone Association v. FCC (1994)......................................................................................30
American Mining Congress v. Mine Safety & Health Administration..............................................31
 The Integrity of the Rulemaking Process..................................................................................31
 External ex parte contacts:.....................................................................................................31
 HBO v. FCC (1977)..................................................................................................................32
 Internal Ex parte contacts......................................................................................................32
 Sierra Club v. Costle (DC Cir. 1981).......................................................................................33
Bias and Prejudgment....................................................................................................................34
 United Steelworkers of America v. Marshall (DC Cor. 1981)..................................................34
 Executive Oversight of the Rulemaking Process......................................................................34
WHITE HOUSE REGULATORY REVIEW – OMB REVIEW.....................................................35
III. AGENCY ADJUDICATIVE PROCESSES......................................................................................37
 Formal versus Informal Adjudication......................................................................................37
 The requirements of Formal Adjudication Under the APA....................................................38
 The requirements of Informal Adjudication Under the APA.................................................38
 Procedural Due Process..............................................................................................................39
PROCEDURAL DUE PROCESS......................................................................................................42
Question #1: is there a due process interest (i.e. life, liberty or property) at stake?...........................43
 Board of Regents v. Roth (1972)..............................................................................................43
Paul v. Davis (1976).........................................................................................................................43
Question 2: Has there been a “deprivation” of that interest?.............................................................44
 Question 3: How much Process is Due?...................................................................................44
 Goldberg v. Kelly.....................................................................................................................44
 Goss v. Lopez (1975):...............................................................................................................44
 Matthews v. Eldridge (1976)....................................................................................................45
Application of Matthews................................................................................................................45
 Gray Panthers v. Schweiker (DC Cir. 1980)............................................................................46
 Cleveland Board of Education v. Loudermill (1985)................................................................46
ADJUDICATIVE INTEGRITY.........................................................................................................48
Prejudgment....................................................................................................................................48
 Withrow v. Larkin (1975) – PG. 120 of “Short & Happy”.......................................................48
  Tumey v. Ohio (1925)...............................................................................................................49
 Two Standards to Analyze Prejudgment DP Violation............................................................49
 Cinderella Finishing Schools v. FTC (1970) Entrenchment.....................................................49
o FTC v. Cement Institute (1948) Closed Mind...........................................................................49
C. Internal Ex parte Contacts.........................................................................................................50
D. External Ex parte Contacts........................................................................................................52
E. Congressional Pressure..............................................................................................................52
IV. THE AVAILABILITY OF JUDICIAL REVIEW-§701....................................................................53
 Jurisdiction..................................................................................................................................54
 Reviewability...............................................................................................................................54
 § 701-First Exception: The Statute Precludes Judicial Review...........................................54
 Block v. Community Nutrition Institute....................................................................................54
 § 701-Second Exception: The Action is Committed to Agency Discretion by Law...........55
 Rule for § 701: No Law to apply because the statute is written broadly............................55
 Citizens to Preserve Overton Park v. Volpe(1971)...................................................................55
 Webster v. Doe (1988)..............................................................................................................55
 Decisions by agencies not to prosecute:................................................................................56
 Dunlop v. Bavhowski,...............................................................................................................56
 Decisions by agencies to not commence a rulemaking.........................................................57
 American Horse Ass’n v. Lyng.................................................................................................57
 Defining “Agency Action” for Review Purposes..................................................................57
 Norton v. Southern Utah Wilderness Alliance(SUWA).............................................................57
STANDING § 702....................................................................................................................................58
 Article III Standing Requirements............................................................................................58
 Application of the Standing requirements................................................................................58
 Lujan v. Defenders of Wildlife..................................................................................................58
 Simon v. Eastern Kentucky Welfare Rights Organization (1976).............................................59
 Spokeo, Inc. v. Robins:.............................................................................................................59
 Probabilistic Standing:...............................................................................................................60
 Statutory Standing- The Zone of Interest.................................................................................60
 Association of Data Processing Service Organizations v. Camp..............................................60
 Air Courier Conference of America v. American Postal Workers Union.................................61
 Cetacean Community v. Bush...................................................................................................61
 Associational Standing...............................................................................................................61
SOVEREIGN IMMUNITY......................................................................................................................62
TIMING § 703..........................................................................................................................................62
 Ripeness.......................................................................................................................................62
Ripeness RULE...............................................................................................................................62
 Abbot Laboratories v. Gardner (1967).....................................................................................62
 Toilet Goods Association v. Gardner (1967)............................................................................63
 Finality.........................................................................................................................................64
 Bennett Test:...........................................................................................................................64
 Applications of this Test.........................................................................................................64
  Sackett v. EPA (2012): an Administrative Order is final – it has legal obligations now...........64
 Corps of Engineers v. Hawkes (2016): The 2nd part of the Bennett test could be met when an
agency action exposes a party to an increased risk of consequences that are not yet legally mandated
64
 Laundry Council v. Schultz (DC Cir. 1971): a statement on the phone....................................64
 Appalachian Power v. EPA (DC Cir. 2000):............................................................................64
o Facts: The agency issued guidance document, however, the document had strong mandatory
language and was detailed in nature. Holding: the court held that the detailed nature of the
document & its use of mandatory language strongly suggested to regulated parties that the document
had legal consequences.....................................................................................................................64
 Exhaustion-704...........................................................................................................................64
The reasons for requiring exhaustion................................................................................................64
 Three circumstances when the exhaustion requirement is waived:....................................65
 McCarthy v. Madigan (1992)...................................................................................................65
 Facts:.......................................................................................................................................65
 How to resolve? Generally require exhaustion, but not when more agency consideration
would not help resolve the issue. McCarthy.....................................................................................65
THE SUBSTANCE OF JUDICIAL REVIEW §706...............................................................................66
 Judicial Review of Fact Finding................................................................................................66
 What Standard of Review?:......................................................................................................66
T-Mobile South, LLC v. City of Roswell............................................................................................67
Pension Benefit Case........................................................................................................................67
 Factfinding Issue: What to do when Agency Head Disagrees with ALJ on Appeal..........67
 Universal Camera Corp. v. NLRB-Primary Inference..............................................................68
 Penasquitos Village, Inc. v. National Labor Relations Board(NLRB)-Secondary or Derivative
Inference...........................................................................................................................................68
 Judicial Review of Agency Policy Making................................................................................69
 Citizens to Preserve Overton Park v. Volpe(1971)...................................................................70
 Motor Vehicle Manufacturers Association v. State Farm (1983).............................................71
 The theoretical basis for hard look review................................................................................73
 FCC v. Fox Television Stations, Inc.........................................................................................73
 Pacific States Box & Basket Co. v. White.................................................................................74
 Judicial Review of Agency Interpretations of Law..................................................................74
The Basic Rule: Chevron's Two-Step Inquiry..............................................................................74
 Chevron v. NRDC (1984).........................................................................................................74
The Basis of the Chevron Rule.......................................................................................................74
 Barnhart v. Walton...................................................................................................................75
 The Applicability of Chevron................................................................................................75
 US v. Mead Corp (2001) – PG. 207.........................................................................................75
 Skidmore Difference...............................................................................................................78
 Skidmore v. Swift & Co (1944) – PG. 192................................................................................78
 NCT Ass’n v. Brand X Internet (2005).....................................................................................79
What are those statutory interpretation tools?...................................................................................80
Deference when Agencies interpret their own regulations...............................................................82
 Seminole Rock/Auer Deference.............................................................................................83
o Gonzalez v. Oregon Exception...............................................................................................83
 Auer applies when there’s genuine ambiguity, as determined by application of the traditional tools
of statutory construction....................................................................................................................83
Kisor.................................................................................................................................................83

Sources of Law that Governs the Operation of Administrative Agencies in Order of

Hierarchy
Sources of Law that Governs the procedures and adjudication by which agencies operates are:
1. 5th(Federal Government) and 14th(States)Amendments: Specifically the Procedural
Due Process Clause -Sets Limits for agencies
2. The Agency Organic Statute/Enabling Statute/authorization Statute. For example:
The Clean Water Act
3. APA
4. Administrative Law Common Law*
o Marbury vs. Madison is in some ways the first administrative law case because in
Marbury, one of the question that Justice Marshal has to answer is Can courts
review the legality of Madison's decision not to turn that commission over to
William Marbury?
 Madison is an he's an agency, is the head of the State Department, is the
secretary of state.
 Marshall has to ask, is judicial review available at the behest of
Marbury to challenge the failure to turn that commission over?
 Marshall answers the question by applying the common
law because there was no APA.
5. Binding Regulations: The agency, when they promulgate, they get regulations, and that
regulation becomes law.
 
The Basic Problem of American Administrative Law: Combination of Functions
 Agencies combine the three classic sovereign powers: executive, judicial, and legislative;
and thus, exhibit vast discretion when wielding such combined functions
Universal Circuits Case
 Case will be used as an Example to show basic systematic issues that occurs daily in
Administrative Law.
1. What roles did EPA play in this case?
o Enforcement of the EPA by
 Visits the Sites
 Review Water
 Approve
 The agency instead of an investigation agency(FBI) is allowed to
enforce the act because of
 Expertise in the area.
 Efficiency - consolidating roles
 Quasi-Enforcement /Flexibility - being experts allows them to
recognize serious or not so serious cases and enables vast
amount of discretion
 Question: is this prosecutorial authority troublesome?
 Think neutrality and impartiality
 
o They promulgated the regulations; acted as a Legislatures
o Acting as Adjudicator
 Based upon the different types of roles that EPA plays, there is a big Separation of
Power Issue.
2. Why these roles?
a. Legislature
i. Expertise
ii. Time/attention
iii. Flexibility: Dynamic nature of the issue – as the science changes there
may be a problem with keeping the regulations up to date
iv. Political gridlock
v. Effectivity
b. Executive
i. Expertise
ii. Resources
iii. Commitment to the agency’s mission
c. Adjudication
i. Informality/Quicker Justice Because there would be a delay in federal
court
ii. Consistency
iii. Efficiency-Judicial Review may still occur
iv. Expertise(Specialization), whereas Article III judges have more general
knowledge
3. How much discretion does the agency enjoy?
o EPA holds vast discretion in their functions of investigation, enforcement,
adjudication, and quasi-legislation.
o Problem because they are the one body in our system not explicitly
mentioned in the Constitution
How could we legitimate this structure?
o Structure it so that it is politically accountable-Democratic Process
o Structure it so that it can make full use of its expertise
o Insist that it act via procedurally fair rules
 o Arbitrary Capricious Review: means courts making sure that when agencies
act, they're at least reasonable in their decision making.
o Substantive Reasonableness(Needs Further Explanation) and sort of not
make a really bad mistake when you decided that the regulation should be
this rather than that
 Administrative Law’s Legitimating Models
i. Political accountability Model
 The system is responsive to elected officials and political actors
oversee the system
 Don’t immunize administrators too much, because the people have to
have some say through democratic process (agency heads appointed
by President)
ii. Expertise Model
 Agencies are necessary to solve extremely complex and dynamic
problems – technocritical issues
 You want to give broad discretion to experts
 You want to immunize experts from political pressure
iii. Procedural fairness
 Agencies must follow Due Process
 These agencies act in a fundamentally fair way and that’s what the
Constitution is really all about
 Points about these models
i. They stand in significant tension with each other
 For example, political accountability would mean controlled by a political
actor (I.e. the president), but they likely would not have the necessary
expertise. If you want expertise, you may not want a lot of procedure that
would slow down the experts.
ii. For that and other reasons, no one model ever fully dominates...and over time the
balance between them shifts
iii. Reason for administrative law looking very different across history
 The development of administrative law in a given era is dependent on
which model is most prevalent among scholars
Brief History of Administrative Law
 
>1887
 Pre-Administrative Era:
 Even at the federal level there was some regulatory apparatus similar to
administrative agencies
 States did a majority of regulating and had to set up (sort of) administrative law
 Governed by common law forms of proceeding (writ of mandamus)
 Concerns Moving Forward: how do we protect public interest?
 
1887-1946
 Progressive Era:
 Congress enacts the Interstate Commerce Act, creating the Interstate Commerce
Commission
 Inaugurates a fruitful of development federal regulation, the creation of many
agencies: Federal Trade Commission, Federal Communications Commission,
Securities and Exchange Commission
 New Deal Era:
 Lots of faith in expertise and science
 Revolved around managerialism and expertise as the legitimating model
 Broad statutory mandates, political immunity
 EPA, FCC are established
 Concerns Moving Forward: how do we regulate these agencies processes?
 The ever-growing administrative state resembling fascism/corporatism too much
 Not enough process before APA
 
1946-1965
 Era of the APA:
 The APA is passed, creating regularized default processes
 APA added procedural fairness to the legitimating models
 Concerns Moving Forward: how do we crack open agencies and prevent revolving doors?
 Revolving door - agencies carving up intimate relationships with the regulated
entities and public interest is not being represented in the regulatory process
 Public Choice Theory - neoliberal critique of managerialism and trust in market as
self-regulating entity
 
1965-1980
 Regulatory Reform Era:
 Rule making process being opened up (and made more elaborate) – Goldberg v.
Kelley (1970)
 Judicial review of agency action became easier
 Members of the public could sue agencies
 Ripeness was sooner and mootness was later
 Concerns Moving Forward: Presidents (Reagan) became frustrated by too much
procedural process within agencies preventing quick and decisive action by the President
 
1980-2008
 Deregulatory Response Era:
 Procedural fairness model declines and the political accountability rises
 Executive orders
 Agencies need approval from White House before making new regulations
 Cost Benefit analysis became a requirement before promulgating new
regulations
  Cheveron USA v. NDRC (1984) - vague statutes allow president to push for the
regulatory interpretation he favors
 
2008- ???
 Modern Administrative Era:
 Financial Crisis
 The Financial Regulatory industries f*** up
 We don’t know where this is going yet
 
 

I. CONSTITUTIONAL AND POLITICAL BRANCH RESTRICTIONS ON

AGENCY ACTION

 Constitutional Restrictions on the Delegation of Power to Agencies

The basic problem: We know that agencies should be able to "administer," or enforce, statutes.
But should they also have the power to legislate and adjudicate?

A. Agency Legislation

1. The problem: Article I vests "the legislative power of the United States" in
Congress. How can agencies draft regulations then, that look like statutes (i.e.,
that are generally applicable and normally prospective)?

2. View the agency as an expert, dealing with a technical issue. Under this idea,
there is no "legislating" going on, to the extent that legislation implies a value
choice.

a. Theme: The "technical expertise" justification for administrative action.

b. This is the rationale for many of the "independent" agencies we have in

the federal (and state) systems, e.g., the Federal Reserve Board.

3. Try to pretend that Congress has in fact made the basic policy choice, with the
agency just "filling in the blanks" or following the "intelligible principle"
discernable in the statute.

a. This is difficult to defend as a position, as starting with the New Deal

Congress grants extraordinarily broad latitude to agencies, under very
broad mandates, e.g., authorizing the FCC to regulate broadcasters "in the
public interest."

b. The modern rule: the “intelligible principle” standard.

 c. That doctrinal formula is best understood as requiring an examination of
the breadth of the goals Congress seeks to achieve in a statute and the
means (or tools) Congress gives the agency to accomplish those goals.

 Under these criteria, only the NIRA fails the standard by having both
overbroad goals and means

 Today, the non-delegation doctrine itself is not considered an effective

tool for limiting agency discretion

 But note that even the possibility of a non-delegation strike down

encourages courts to construe statutes narrowly. E.g., Whitman.

d. What this suggests is that the non-delegation doctrine can act as a

shadow, overhanging courts’ statutory interpretation decisions

4. But Gundy offers the prospect of a more tightened up non-delegation doctrine in

the future.

 
 The Non-Delegation Doctrine Function (NDD):
o Serves Three Functions:
1. Ensures to the extent consistent with orderly governmental administration
that important choices of social policy are made by Congress, the branch
most responsive to the popular will
2. Guarantees that, to the extent Congress finds it necessary to delegate
authority, it provides the recipient of that authority with an “intelligible
principle” to guide the exercise of the delegated discretion
3. Ensures that courts charged with reviewing the exercise of delegated
legislative discretion will be able to test that exercise against ascertainable
standards.
 RULE: Intelligible Principle – Congress may delegate if, in the statute authorizing
agency action, Congress articulated an intelligible principle (i.e. clear guidance) that
could serve to guide the agency’s action. (Mistretta)

 Mistretta v. United States (1989)

o Takeaway: Established “intelligible principle” standard
 So long as Congress shall lay down by legislative act an
intelligible principle to which the person or body
authorized to exercise the delegated authority is directed to
conform, such legislative action is not a forbidden
delegation of legislative power.

 Despite the logic of the NDD, from the earliest says it was recognized that Congress had
to be able to delegate some authority
  The Big Aurora (1813): congress is allowed to delegate to the President the
power to impose an embargo on one nation if its rival stops interfering with US
shipping. Court: the delegated power was simply the power to find facts
 US v. Grimaud (1911): Congress is allowed to delegate the power to draft
regulations governing the management of federal forests. Court: the delegated
power was simply the power to “fill in the details”
 JW Hampton v. United States (1928): Congress is allowed to delegate power to
prescribe customs duties. Court: the delegation was constitutional because the
statute contained an “intelligible principle”
 Only 2 NIRA (National industrial Recovery Act) cases struck down by Non-
Delegation Doctrine (PG. 15)
 ALA Schechter Poultry Corp. v. US (1935)
o Court found that NIRA did not provide POTUS with meaningful guidance on
what the codes of fair competition should include of what goals they should aim
to accomplish.
 Panama Refining Co. v Ryan (1935)
o Court found that NIRA did not provide any standard governing the POTUS’
authority to restrict oil shipments.

 Modern Use of Non-Delegation Doctrine: Today, NDD is mainly used as a

canon of statutory construction, pushing courts toward more modest reading of
statutes, rather than as a judicially-enforceable constitutional limit on legislation
 EXAM TIP (PG. 17): Usually the wrong answer to say statute violates NDD,
unless it closely resembles the NIRA


  GOALS TOOLS

NIRA (Schechter Poultry) BROAD BROAD

“New Deal Statutes” (i.e. the Federal BROAD (the (RELATIVELY)

Communications Act) public good) NARROW

“Health & Safety Statutes” BROAD (public NARROW?

health)

 
 
Non-Delegation Doctrine, Article I Tension:
 Article I, § 1 provides that “[a]ll legislative Powers herein granted shall be vested in a
Congress of the United States which shall consist of a Senate and House of
Representatives.”
 Issue:
 Whether agencies can create rules that carry the force of law ( i.e. , “legislative
rules”)? Yes, because of their expertise
 Is this agency legislative authority acceptable or a violation of the Non-
Delegation Doctrine? If both the goal and the tools are broad similar to Schecter
Poultry and Panama Cases
 
Evaluating Agency Legislative Authority: the “Intelligible Principle” Standard
(Mistretta)
 Examine the breadth of the goals Congress seeks to achieve in a statute
 And the means (or tools) Congress gives to the agency to accomplish these goals
 Under these criteria, only the NIRA fails the standard by having both overbroad goals
and means
  
 Non-Delegation Doctrine as a Tool: (Whitman)
 “The statute probably fails the nondelegation doctrine” is usually never the right
answer
 The NIRA is the only thing that ever violated nondelegation – an overbroad goal with
an overbroad means of achieving such goal
 Today, rather than say the statute violated nondelegation, judges will construe the
statute narrowly enough that it does not violate nondelegation
 Non-Delegation Doctrine is used not as a tool to strike down statutes, but as a tool
used to adopt a narrowing construction of a statute which in turn satisfies the
“intelligible principle” and avoids scrutiny
 
Moving Forward:
 In Gundy (2019), the Court seemed to be leaning toward stricter enforcement of the NDD
 
Cases:
 
 Mistretta v. United States (1989)
o Takeaway: Established “intelligible principle” standard
 So long as Congress shall lay down by legislative act an
intelligible principle to which the person or body authorized to
exercise the delegated authority is directed to conform, such
legislative action is not a forbidden delegation of legislative
power.
 
 Whitman v. American Trucking Assoc., Inc. (2001)
 Background: Clean Air Act instructs the EPA to set “ambient air
quality standards the attainment and maintenance of which in the
judgment of the administrator, based on the criteria and allowing an
adequate margin of safety, are requisite to protect the public health.”
  Issue: Does it violate nondelegation doctrine – whether the statute has
delegated legislative power to the agency
 Holding: Well within the outer limits of the nondelegation precedents
 Reasoning: (Scalia)
 Narrow Interpretation of statute:
 “Requisite” means “sufficient, but not more than
necessary.”
 “not lower or higher than necessary to protect the
public health with an adequate margin of safety”
 This fits well within the scope of discretion permitted
 Court has only found the requisite “intelligible
principle” lacking in two statutes:
 One provided for literally no guidance for the
exercise of discretion
 The other conferred authority to regulate the entire
economy on the basis of no more precise a standard
than stimulating the economy by assuring “fair
competition”
 Takeaway: court will construe a broad statute more narrowly in order
to fit it into nondelegation precedent and avoid striking it down on that
ground.
 
 Gundy v. United States (2019)
 FACTS: Congress delegated “the authority to specify the applicability” of the
registration requirements to pre-act offenders to the United States attorney general
(AG). After his release from prison, Gundy lived in New York without registering
there as a sex offender and was convicted for failing to register a few years later.
 ISSUE: The AG’s power to prescribed regulation requirements for sex offenders
convicted before the enactment date of the SORNA (Sex Offender Registration &
Notification Act) law.
 HOLDING: Read SORNA so as to include standards, and in turn those standards
avoid a NDD problem. SORNA’s text, context, purpose, and history clarify that
the AG holds discretion only over feasibility issues, not over who must register.
The text plainly states that SORNA’s purpose is to establish a comprehensive sex
offender registration system that includes those who committed offenses before
SORNA’s passage. That purpose and the legislative history establish clear
congressional intent for SORNA to apply to pre-act offenders.
 DISSENT: Calls for a stronger NDD. Situations where Congress can delegate
include: 1) to authorize action upon the agency finding a fact, 2) to “full up the
details” of a statute, & 3) when POTUS already has some Article II authority over
the area.
 Takeaway: courts may be reevaluating the non-delegation doctrine

B. Agency Adjudication: Separation of Power

 Question: “to what extent does the constitution limit the abilities of agencies
to adjudicate as in Universal Circuits?
  The textual source of this issue? Article III: “the judicial power of the US
shall be vested in [Article III courts]”
 What makes an Article III court?
o Life tenure
o Salary protection
Note** Neither of which agency judges (“ALJs”) enjoy

 Schor and the Modern Rule

 Evaluate three factors:
1. Essential Attributes - jurisdictional scope, scope of judicial review, and power
exercised
 Limited Jurisdiction(Compared to Bankruptcy courts that can hear all
Bankruptcy cases(Northern Pipeline))
 Limited Power to enforce its own judgement
 Article III court Review
2. Nature of the Right - private or public right
3. Reasons for Delegation of Power

1. In Schor (1986) the Court repudiates complete reliance on the public/private rights
distinction, instead balancing several issues:

a. To what extent does the agency court look like an Article III court in terms of
how it operates – as the Court put it, to what extent does the agency court
possess the “essential attributes” of Article III power?

i. the powers exercised by the agency court (e.g., did the agency
court have the power to enforce its own judgments, or to issue
writs);

ii. the scope of the agency court's jurisdiction (in Schor, the agency
court only adjudicated commodities cases; in Northern Pipeline
(the 1981 bankruptcy case distinguished in Schor) the agency court
could adjudicate any claim that was related to the bankrupt party);
and

iii. the scope of Article III court review of the agency court (that is,
under what standards of review did the Article III court review
what the agency court did – in particular, the legal conclusions the
agency reached);

b. the type of right at issue (public v. private) remained a factor, but it was
not dispositive; and

c. whether Congress had a good or a bad motive in giving adjudicatory

power to the agency (e.g., was it intending to reduce Article III courts'
 authority, or did it have a legitimate reason, such as expertise, for the
delegation).
 Commodity Futures Trading Commission v. Schor (1986)
 Issue: Article I courts versus Article III courts
 Facts: a commodities customer (Schor) sues his broker (Conti). Alleges the
broker violated federal commodities law. He sues in the agency court.
 The broker counter sues on a common law contract claim, in federal court.
 But is convinced to refile the counter claim in the agency
 Then the customer claims that counter claim can’t be heard in the
agency
 Court concludes he waived his due process claim, but not his
separation of powers claim
 DISSENT: For Justice Brennan, the public/private rights distinction
should govern the case. A rigid rule demarcating when Article I courts can
adjudicate.
 Takeaway: Established a multi-factor test to evaluate the issue of whether if an
Article I court acts / operates like such or acts / operates like an Article III court
 Addresses: Article III separation of powers challenges
 Schor Factors:
 Factor 1: To what extent does the Article I court (ALJ court) have the
attributes of an Article III court? (were the essential attributes of judicial
power reserved to Article III courts? Or were they delegated to the agency
(Article I) court?)
 Essential Attributes
1. Limited Jurisdiction. Article I court is given narrow
jurisdiction; CFTC court only has claims over commodities
claims. In contrast, bankruptcy court in Northern Pipleline
had broad jurisdiction to hear any & all bankruptcy cases.
2. Limited Powers. Article I agency court does not have the
power to enforce its own judgment. The winner of the
case has to go somewhere else (I.e. an Article III court) to
enforce the order.
a. Article I court also cannot issue writs of habeas
corpus & cannot convene jury trials.
3. Article III court review. The level of Article III control
over the decisions of the Article I court. How leniently &
carefully does Article III court look over the Article I
court’s ruling. Article III courts are deferential to Article I
agency court’s ruling on weight of the evidence standard,
fact findings, etc.
a. Legal decisions made by the Article I agency
court is de novo (always reviewed) by Article III
court
 b. It is an essential attribute of Article III courts
that they get to interpret law & decide what the
law is
Factor 2: Origins / Nature of the Right
Public Right - Private Right Dichotomy
Public Rights J - if the right the agency court is adjudicating is
a public right it will count for the constitutionality of the
scheme
a. Disputes to which the federal gov’t is a party:
Private Party 1 v. Federal Government Party
b. Based on statutory law
a. If the claim is against the gov’t, then the
gov’t could always just asserts its
sovereignty
b. IF the claim is over a statutorily created
right, congress could just take the right away
2. Private Rights - if the right the agency court is
adjudicating is a private right it will count against the
constitutionality of the scheme
a. Dispute between two private parties: Private Party 1
v. Private Party
b. Special at common law (Congress could not destroy
these claims before Lochner) - not really the case
anymore
 Factor 3: The Reasons why Congress gave Adjudicative power to the
Article 1 court
 Congresses must have had a legitimate reason for the delegation of
power to an Article I court – i.e. expertise
 Congresses’ intention in the delegation of power shall not exist to
reduce Art. III courts’ authority – aggrandizement of power
concern
 
 

Evaluating Agency Adjudicative Authority: the Schor Multifactor Balancing Test

 Evaluate three factors:
1. Essential Attributes - jurisdictional scope, scope of judicial review, and power
exercised
 Limited Jurisdiction(Compared to Bankruptcy courts that can hear all
Bankruptcy cases(Northern Pipeline))
 Limited Power to enforce its own judgement
 Winners in Article I courts has to go somewhere else to get their
judgment enforce unlike an Article III court
 Article III court Review
 Article 1 court decisions are reviewable by article III courts
  Article III courts essential function is to interpret the law and
decides what the law is.
2. Nature of the Right - private or public right
3. Reasons for Delegation of Power-Expertise, inexpensive, and fast
Varying Approaches to the “Public Rights Doctrine”
 Bright-Line / Categorical Approach (Northern Pipeline)
 The category of “public rights” encompasses only disputes to which the federal
government is a party
 Looser Definition / Balancing Approach (Union Carbide and Schor)
 “Public rights” includes disputes between private parties that are “closely
integrated into a public regulatory scheme.” (Union Carbide)
 A “private right” does not, by itself, block resolution of that claim by a non-
Article III federal tribunal. (Schor)
**Union Carbide and Schor thus: (a) blurred the outlines of the distinction
between “public” and “private” rights; and (b) established that this distinction
was not, in any event, dispositive.**
 Constitutional Interpretation: Formalism vs. Functionalism
 “Formalist” Approach (Schor dissent, Justice Brennan)
 Takes the view that the Court should dispose of separation-of-powers disputes by
applying the definitions of the “legislative,” “executive,” and “judicial” powers.
 “Functionalist” Approach (Schor majority opinion, Justice O’ Connor)
 Expressly rejects the proposition that “formalistic and unbending rules” should be
used to determine claims that administrative adjudication infringes on Article III.
 

Moving Forward:
 In Stern v. Marshall (2011), the Court returned to a more rigid reliance on public/private
rights distinction, but with a broad definition of “public rights”
 In Wellness Network International v. Sharif (2016), the Court returned to heavy reliance
on Schor’s multi-factor balancing test

2. In Stern v. Marshall (2011) (Note 4) the Court returned to a more rigid

reliance on the public/private rights distinction. However, consistent with
other precedent (such as Union Carbide (1984) (in the note material)), the
Court adopted a broader definition of “public rights.” Nevertheless, the Court
concluded that the right in Stern was in fact a private right, and thus held that
the Article I/agency court could not adjudicate it.

3. In Wellness Int’l Network v. Sharif (2016) (also Note 4), the Court again
returned to heavy reliance on Schor’s multi-factor balancing test.

 The Constitution and Political Branch Control of Agencies

 Political Accountability-President Attempt to Control Agency
 Appointment Power – power to name and remove high officials. Under
the appointments clause it is possible for a high-ranking official to be
appointed by the heads of other departments.
 Article II, section 2, clause 2 distinguishes between “inferior” and
“principle” officers. POTUS can appoint a principal officer and Congress
can appoint an inferior officer.

The Problem: With the Constitution not much of a limit on agency action, can the
President (who is more democratically accountable than agencies) effectively control
what agencies do? Can Congress?

A. Why is this even an issue? Aren’t agencies part of the executive apparatus?
Sometimes not; sometimes agencies are considered “independent.” But even if
they’re not, sometimes agencies have their own interests that may conflict with
those of the President.

All attempts by the President to control agencies can be viewed through the
theme of political accountability; that is, agency action can be viewed as
legitimate because it ultimately is traceable to a politically-accountable supervisor
(the President).

The most important way for the President to control agencies: threaten to fire the
agency head, or demand her resignation, because of policy disagreements

Does the President have the inherent right to fire agency heads for this reason?

1. Myers (1926) (discussed in Morrison v. Olson) suggests so; says that the
President needs to have confidence in the people who administer the laws,
if he is to faithfully execute the laws.

2. Humphrey’s Executor (1935) (also discussed in Morrison) limited Myers

to those agencies that performed executive functions. With regard to
agencies that performed “quasi-legislative” or “quasi-judicial” functions,
Congress could constitutionally limit the President’s power to fire.

3. Morrison (1988) opens the door to even wider congressional control over
the President’s power to fire.
a. The office at stake in Morrison: the Special Prosecutor, clearly an
executive function
b. But the Court still allows Congress to limit the President’s ability to
fire
c. The test: is the limitation "of such a nature that it impedes the
President's ability to perform his constitutional duty"?
  The fact the S/P is an “inferior officer” (for reasons similar to those
given in the different context of Schor—
o the SP’s limited jurisdiction
o and limited powers,
o the extent of Article II control (the good cause removal
power),
o and the SP’s limited tenure)
suggests that the President does not need the power to fire in order
to maintain his Article II authority.

 The “good cause” removal provision and the limits on the S/P’s
office (e.g., its limited jurisdiction and power) also suggest that
presidential removal power is not necessary.
Edmond v. United States (1997)
 “Inferior officers” are officers whose work is directed and supervised at some level by
others who were appointed by Presidential nomination with the advice and consent of the
Senate.
 Coast Guard ALJs are inferior officers
 “Inferior Officer” – “Principle Officer” Dichotomy
 If principal, then the President has the constitutional power to appoint or remove
 Factors Considered:
 Tenure - IO is “limited in tenure”
 Jurisdiction - IO office is “limited in jurisdiction”
 Article II Control - IO is “subject to removal by a higher Executive
Branch official”
 Duties - IO is empowered by the Act to perform only certain, limited
duties”

 
Security Exchange Commission v. Lucia
 Securities Exchange Commission ALJs are inferior officers
 
Myers v. United States (1926)
 Suggested that the President has the inherent right to fire administrator (President needs
to have confidence in the people who administer the laws, if he is to faithfully execute the
laws)
 
Humphrey’s Executor v. United States (1935)
 Expertise Model:
 “Congress had intended the FTC to function as a nonpartisan, expert body “free
to exercise its judgment” in carrying out legislative policies ‘without leave or
hindrance from any other official or any department of government.’”
 Limited Myers to those agencies that performed executive functions.
 Agencies that preformed “quasi-legislative” or “quasi-judicial” functions,
Congress could constitutionally limit the President’s power to fire
 The Test for Congress’s Ability to Limit the President’s Ability to Fire: What is the
nature of the power?

 Morrison v. Olson (1988)  

 FACTS: As part of the Ethics in Government Act (EIGA), Congress
appoints an independent counsel. During Reagan administration
there’s an allegation that ted Olson testified falsely which leads to the
appointment of an independent counsel (IC) to investigate if Olson
testified falsely before Congress. Olson says that violates
Appointments Clause b/c it limited POTUS’ power to fire the special
prosecutor.
 ISSUE: Whether the special counsel is an inferior officer (okay for
appointment to be vested in Article III judges) or a principle officer
(only POTUS has power to appoint that person) 
 HOLDING: IC is an inferior officer because:
o IC can be removed from a superior officer (I.e. the AG); IC
subject to Article II control***  
o IC has limited jurisdiction – only has authority to
investigate wrongdoing identified by Article II panel  
o IC has limited authority. For example, has no influence on
DOJ policy  
o IC has limited tenure – her job ends once she’s finished
with the investigation  
 Further Glosses on “Inferior” Officers 
o In later cases, the Court has emphasized control by a higher
official as key to the “inferior officer” question - Edmond and
Free Enterprise Fund (notes 4 & 5, pg. 82-83)
o But the Court still vacillates on this: 
 Armed forces “ALJs” are inferior (Edmond) 
 But conventional ALJs are principal (Lucia v. SEC,
note 3, pg. 81)  
The  Removal Analysis 
 The statute does not give Congress a role in removal 
 Therefore, the statute is more like Humphreys Executor v. US (1935)
o Court upheld Congress’ decision to limit POTUS’ power to fire
FTC commissions. Court concluded that b/c FTC’s powers
were quasi legislative and quasi adjudicatory, it didn’t violate
POTUS’ powers to limit his control over the tenure of FTC
commissions, by fixing a set term of office for them, and
limiting the circumstances under which a they could be
removed before the end of that term.
 In Morrison, the Counsel’s powers were clearly executive 
 Morrison Court’s Reasons 
 o Congress did not involve itself in the appointment or removal
of the officer; Congress not trying to aggrandize themselves 

4. The result of this jurisprudence is that Congress now has broad latitude to create
independent agencies, like the Federal Reserve Board

a. What’s an “independent agency?” Merely one whose heads are statutorily

immunized from firing at will by the President

E.g., set terms of office, and removable only for “good cause”

Theme: Morrison suggests that Congress may be able to insulate agencies from direct
presidential control, at the cost of political accountability but (potentially) to the
benefit of the expertise justification for agency action.

 Double Insulation is Unacceptable

 Free Enterprise Fund v. Public Company Account Oversight Board (2010)
 FACTS: PCAOB members were appointed to their terms by SEC
commissions and the commissions could only remove the members for good
cause. SEC members were similarly appointed by POTUS and could only be
removed by POTUS for good cause. Therefore, PCAOB members were
doubly insulated from presidential removal at will.
 HOLDING: 2 levels of immunity from presidential control is
unconstitutional.
 ALJs are doubly insulated from presidential removal at will: 1) they
are removable only for good cause and 2) the procedures for such
removal are set by a federal agency who leaders are themselves
removable by POTUS only for good cause. Makes it difficult for
POTUS to remove PCAOB members.
 Dissent: Consider the 2-level immunity in the context of the rest of the
statute 
 Seila Law: Immunizing the head of a single headed agency is
unconstitutional 
o Characterizes Morrison & Humphrey’s Executor as exceptions to the rule
of POTUS control

5. As with Congress’s power to impact the Article III judiciary, so too here, the Court in
recent years has cut back on Morrison’s more flexible approach in favor of a more
rigid approach.

a. Free Enterprise Fund v. PCAOB: Two layers of “good cause” immunity is

unconstitutional.

b. Seila Law v. CFPB: A single-person agency head cannot be immunized from at-
will presidential control.
Congress- Legislative Veto and the Congressional Review Act
B. Congress? One would think that if Congress is the entity that delegates the broad power to
begin with, it can surely add in a caveat that it (Congress) may, if it wishes, reverse any
agency decision made pursuant to that delegation.

But in Chadha the Court strikes down the legislative veto, on the straightforward, if
formalistic, ground that such “vetoes” constitute lawmaking (i.e., they change legal rights
and responsibilities) and hence are “legislative” actions which therefore must go through
bicameralism and presentment.

Clearly, this conclusion fits uneasily with the very broad authority the Court allows Congress
to delegate, while not violating the non-delegation doctrine.
 INS v. Chadha (1983)--strikes down legislative veto  
 Legislative Veto: Congress can overturn a regulation by enacting a
statute explicitly rejecting it. Pre-1983, Congress would insert a
legislative veto into an organic statute that disapproves/vetoes an
agency action. LVs becomes effective upon approval by both houses
of Congress without presentment to POTUS. Unconstitutional because
it violates Article I’s lawmaking process.
 FACTS: Under the INA, Congress granted AG the authority to
suspend the deportation of anyone who would otherwise be subject to
deportation. The INA also provided that either house of Congress
could disapprove of such a suspension decision. When the AG decided
to suspend Chadha’s deportation, the House voted to veto that
suspension.
 White’s Dissent: Congress needs legislative veto to make the system
work.
 Practical implications of Chadha (HYPO) 
o Concern about Business/Economy (POTUS)
<------------------------> Environment (Congress) 
o Negotiating over Clean Air Act (CAA), they compromise,
POTUS signs, CAA implemented by the EPA which is
controlled by POTUS. EPA Regulation A is closed to POTUS’
economically driven priorities.  
o Before Chadha, if Congress was able to insert a legislative veto
into the CAA, Congress could have vetoed Regulation A on its
own.
o After Chadha (where legislative veto was struck down),
Regulation A stays unless Congress & POTUS agree to an
amendment to get rid of Regulation A 
o ***Chadha shifts power from Congress to POTUS because
now POTUS must be a part of any decision to get rid of
Regulation A. 
o After Chadha, Congress could also find a plaintiff to sue the
EPA to say that Regulation A is in violation of the CAA 
  Result of Chadha – Limitation of the Congress’ power to
oversee/reject agency action.
 Under Morrison, POTUS lacks complete constitutional
authority over what agencies do
 Takeaway: The political branches do not have complete
authority over administration agency action
 Informal Mechanisms still exist:
 POTUS: control over budget requests and other
informal mechanisms
 Congress: control over the fate of the agency’s
budget; hearings, informal contacts

The ultimate result: The Constitution imposes few limits on either the combination of powers
agencies can possess, the depth of the discretion they enjoy under those powers, and even their
(relative) independence from the political branches. For checks on agency action we need to
look elsewhere.

II. ADMINISTRATIVE RULEMAKING PROCEDURES

 The Choice Between Adjudication and Rulemaking

A. The Constitutional Dimension: Londoner/BiMetallic

Londoner and BiMetallic set forth the basic template for when due process
requires that an agency provide a hearing, and when it can proceed by some
means short of a hearing. The basic points:

1. Are a relatively small number of individuals affected . . .

2. . . . on grounds particular to them?

If so, then due process requires a hearing if an agency acts (if a legislature acts
then no due process hearing is required, but there may be other constitutional
limits on the legislature, including the Bill of Attainder and Equal Protection
Clauses).

Legislature Acts Agency Acts

Few people affected, on NO DPC, but maybe equal DPC applies (Londoner)
individual grounds protection or (more
speculatively) Bill of
Attainder review
Many people affected, on NO DPC—instead, the NO DPC (BiMetallic),
broad policy grounds political process but the APA’s
 rulemaking process

 APA Section 551 definitions: “rule” (rulemaking) and “order” (adjudication) 

 Due Process only applies when government is acting in a way that is adjudicative.   

 Londoner v. City & County of Denver (SCOTUS 1908) 

 FACTS: The assessment of paving charges to a particular owner. City
of Denver decided to pave streets and cost will be paid by ppl who live
on the street getting paved. Londoner wants a hearing, saying that
they’re not receiving any benefit from the paving.  
 HOLDING: Londoner gets a due process informal oral hearing in
order to contest his share of the paving charges. A few people were
affected on facts unique to them. 
 TEST: Not about the number of people affected, but rather
about whether outcome depends on facts peculiar to the
individual case.
 Reason: Where arguments will be individualized (i.e. where
people will have different reasons to oppose the agency action),
need a hearing. Seems more fair to be burdened as a group than
to be burdened as an individual.


 Bi-Mettalic Investment Company v. State Board of
Equalization (SCOTUS 1915) 
 FACTS: State agency decides that all of the property in Denver has
been systematically undervalued. Government says they’re going up-
value all the property in Denver.  
 HOLDING: Bi-Metallic do not get a due process right to a hearing
where they can challenge the up-value of the property in the city.  

The Londoner/Bi-Metallic Distinctions

 Numbers – a lot of people (B) vs. A few people (L) 
 Decider – agency/sub-legislature (B) or the legislature itself (L)  
 Basis of decision – factors unique to the individual (L) or factors that were more
generalized (B) 

 NLRB v. Wyman Gordon (1969):

 Facts: The NLRB sneakily tried to make rules during an adjudication. Holding:
SCOTUS holds that the NLRB did not have discretion to do this without complying
with the statute. Demonstrates that you can’t be sure where the line is between
rulemaking & adjudication. In Excelsior decision, the court held was rule making
because the court made its decision prospective and did not apply in the present case.

 Storer Broadcasting (1956)

 Shows potential safeguards you have when you’re in rulemaking zone but you still
want a DP hearing – request a waiver or amendment. Here, Storer Broadcasting was
denied an FCC license because they owned too many other stations. They ask for a
hearing to prove their license would be in the public interest. SCOTUS acknowledges
that it is impracticable to give everyone a hearing & Congress didn’t intend for them
to waste time; however, SCOTUS concedes that a hearing might be called for when a
party wants (1) a waiver or (2) to amend a reg. § TO AMEND REG: APA §553(c)
gives statutory right to ask for amend & get hearing § TO APPLY FOR WAIVER:
Your arguments as to why you are different are founded on particularized facts and
thus you switch into an adjudicatory world in which a hearing is required.
 Note***: Even though the rule making process does not mandate a hearing, however,
an individual could ask for an exception based on individual facts. So under the 5th
Amendment, an individual singled out could request a waiver like in this case.

B. The Agency's Discretion to Choose Between Rulemaking and Adjudication

Choice Between Path A & B

Path A: StatuteRulemaking Enforcement

Path B: StatuteEnforcement

RULE: Rule making or Adjudication: Today, normally agencies have near-

complete discretion to choose between proceeding by rulemaking or
adjudication. (Bell Aerospace)

Very often, the claim is the opposite as that in a due process argument; i.e., the
agency proceeded by adjudication, but (according to the plaintiff) should instead
have done a rulemaking.

1. Why would a party make this argument? A number of arguments,

including (but not limited to):

a. Adjudication singles out the defendant, while rulemaking applies

across the board to everyone similarly situated; thus, a rulemaking
will uniformly affect the entire industry, while an adjudication will
only impose burdens on individual members.

b. Rulemaking is usually (though not always) prospective;

adjudication is usually (though not always) retroactive. Thus,
rulemaking gives more notice of the precise requirements the
agency will apply when implementing the law.
 2. The Rule: Today, normally agencies have near-complete discretion to
choose between proceeding by rulemaking or adjudication. (Bell
Aerospace)
The only possible exceptions:
a. When an agency adjudication impacts reliance interests -- i.e.,
when it threatens to change the law in a retroactive way so as to
affect reliance interests (e.g., by imposing a fine for past conduct
that was thought at the time to be legal). The retroactive effect of
the law has to be steep, and unacceptable (to a court) in
comparison to the public benefits of applying the new legal
standard retroactively.

b. If the agency “abuses its discretion” in making this choice. The

Supreme Court has not fleshed this idea out other than to have
found the agency not to have abused its discretion in Bell
Aerospace. However, the Ninth Circuit in Ford Motor imposed a
limit on agency, but that limit has not generally been embraced.
 Securities Exchange Commission v. Chenery I (1943)
 Facts: The statute gave the agency the authority to approve or disapprove of
corporate reorganizations from within the company. Chenery was an insider of
one of these companies, he sued when the agency disapproved of his attempted
reorganization
 Holding: SCOTUS said this rationale was incorrect. Since the Court could
uphold the SEC only on grounds articulated by the agency, the Court remanded to
the SEC for further proceedings
 Securities Exchange Commission v. Chenery II (1947)
 The agency gave an alternate theory
 Holding: SCOTUS decided that the second legal theory was good
enough and the agency won
 Reasoning: the agency said they disapproved based on general principles of
corporate law
 Chenery Factors: The Court acknowledges that there are benefits to going
this way because (1) better to adjudicate first because then you can learn and
improve your regulatory role and then do rulemaking, (2) better for agencies
to have this flexibility/discretion to handle issues on case-by-case basis (fact
pattern too diverse for 1 rigid rule)
 Exceptions/Limitation
 Abuse of such discretion(Ford Motor)
 Adjudication could lead to imposition of retroactive liability
that would be extremely unfair- in such case you will balance
the mischief to the unfairness
 First peek at contemporaneous rationale rule
 NLRB v. Bell Aerospace,( 9th Circuit, 1974)
 Background: Managers can’t unionize, employees can. NLRB can’t make a
rule that encompasses the definition of manager vs. employee for every
situation. Therefore, they use ad hoc adjudication.
 Issue:
 Court of Appeals held that the NLRB could deem some people
“managerial employees,” but that a long line of the Board’s own decisions
to the contrary meant that the Board would have to make this change of
position in rulemaking, rather than through adjudication
 Holding:
 The Board is not precluded form announcing new principles in an
adjudicative proceeding and the choice between rulemaking and
adjudication lies in the first instance within the Board’s discretion
 The NLRB has discretion to decide whether this is determined through
adjudication or rulemaking.
 Unless there is an abuse of discretion, they can do what they want
 Reasoning:
 Hundreds of thousands of these people and their situations are often very
different
 So the board has reason to proceed with caution and develop standards
in a case-by-case manner
 The Board’s judgment that adjudication best serves this purpose is entitled
to great weight
 There are no substantial adverse consequences ensuing from reliance on
previous decisions that the board should be precluded from reconsidering
the issue in an adjudicative proceeding
 Not a case where some new liability is sought to be imposed on
individuals for past actions which were taken in good faith reliance on
Board pronouncements
 And those immediately affected have a full opportunity to be heard
before the Board makes its determination

 Ford Motor Company v. FTC (9th Circuit, 1974)

 Facts: the agency began enforcement actions (adjudication) against car dealers and
manufacturers, to challenge how dealers estimated the value of cars they repossess for
purposes of determining how much money the former owner would be due. The
agency clearly intended the result of those actions to apply to the entire industry;
indeed, the agency had prepared a statement to be sent to all dealers upon conclusion
of the cases, advising them of the decisions.
 HOLDING: The Appellate court held that the decision should have been rendered
via a rule making because the decision would be binding industrywide. This case fell
under the exception because such decision to adjudicate was an abuse of discretion
o 9th Circuit has disallowed agency requirements because the requirements
changed past practices through “prospective pronouncements of a broad,
generally applicable requirement, amounting to ‘an agency statement of
general or particular applicability and future effect”
  Abused discretion by doing this
 Rulemaking is used for promulgating general

 Formal versus informal rulemaking

A. Formal rulemaking
 governed by APA sections 556 and 557 (as well as by the notice, Federal
Register publication, and citizen petition rights in Sections 553(b), (d), and (e),
respectively).
 Essentially it looks like a trial,
o with oral presentation
o and an adversarial setting.
 It entails a formal process, with the creation of a trial-type record that must
provide the sole support for the final rule.

B. Informal rulemaking is governed by APA section 553. More on the informal

rulemaking process below.

C. The presumption, when looking at a statute, is that Congress only requires

informal rulemaking. In order for a court to hold that Congress intended formal
rulemaking, Congress essentially has to use the MAGIC WORDS the APA uses
to describe formal processes: "on the record after opportunity for an agency
hearing" (see APA section 553(c) for these words). Florida East Coast.
United States v. Florida East Coast Railroad (SCOTUS 1973) – When Formal Rulemaking
Required
 FACTS: The Interstate Commerce Act (Act) authorizes the ICC to engage in rulemaking
only “after hearing.” The statute does not require that such rulemaking be on the record.
Railroad believes the term “after hearing” should trigger formal requirements of
§556/557
 HOLDING: Court says the language is different enough that the statute’s language does
not trigger formal requirements in §556/557, only the informal requirements of §553. The
Interstate Commerce Act requires that rulemaking occur after a hearing, but does not
require that the rule be made on the record. APA requires the use of the “magic words”
(i.e. after hearing) to require formal process.
 TAKEAWAY: If congress wants to trigger formal hearing requirements under 556/557,
must include magic words (found in § 553(b)): “ to be made on the record after
opportunity for an agency hearing” If triggered  agency must follow § 553, and also
comply with § 556/557 requirements.
The problem with formal rulemaking?

1. lots of delays

2. formal, adversarial, processes are not necessary to accurate decision-

making in topics that are normally decided by rulemaking (i.e., topics on
which legislative/policy facts are more important, and topics of general
 applicability, as opposed to applicability to particular, identifiable parties).
E.g., the peanut butter hearings.
 Peanut butter hearing was a failure because there were so many
people that are interested in the subject. Interested partied include-
Peanut farmers, mothers, producers and whole salers of peanut
butter, skippy, Peter Pan, Jif
 When the case is like Bi-Metallic, and the magic words are not
specifically used but after hearing or hearing is used then no
formal rule making(556 nor 557) only informal(553). Conducting
hearings will be a waste of resources and lead to lengthy time and
transcripts
 Note***: In a Louisville case, “hearing meant something oral
because it was similar to Londoner. A specific railroad was
affected by specific facts related to them. Similar to Londoner.
However, the facts from East Coast Case are general and
applicable to not to a specific individual but the general public,
therefore, case is similar to Bi-Metallic case not Londoner. No
oral hearing.


 Informal Rulemaking

A. The Notice and Comment Process-553(b)(c)(d)(e), summarized: Basically,

section 553 (b) and (c) require that agencies do the following:

1. Give notice of a proposed agency action (everything from a proposed final

rule to a proposed decision to commence a rulemaking in a particular area)
(subsection (b));

2. Invite comment (usually written) from interested parties;

3. Consider the comments provided; and

4. Adopt a statement of the basis and purpose of the agency's final decision
(the latter three requirements deriving from subsection (c)).

5. 553(d) requires that, in most cases, agency rules not be made effective
fewer than 30 days after publishing notice of the rule in the Federal
Register. 553(e) gives persons the right to petition the agency to adopt,
amend, or repeal a regulation.

The point of the notice and comment process: to create an informal method by
which interested parties can participate in agency decision making, without
unduly burdening the agency with unnecessary procedural formalities. (Recall
 the “compromise” Justice Rehnquist referred to early in his opinion in Vermont
Yankee.)

B. Transforming the Notice and Comment Process

1. The General Rule: Courts have interpreted section 553 aggressively, to

require significant improvements in agency rulemaking procedure. (e.g.,
Nova Scotia). But the Supreme Court does not allow courts to require
more procedure than that set forth in the APA (Vermont Yankee).

2. Rationale for the Aggressive Reading of 553:

a. Ensure the integrity of the process. E.g., ensure that the right to
comment is meaningful, by insisting that the agency respond to the
important comments made. (The procedural fairness model of
administrative legitimacy.)

b. Ensure that agency action is substantively rational. That is, if the

agency follows the procedure laid down by the court's
interpretation of 553 (e.g., providing reasons for its action and
explaining its responses to comments received), it becomes
possible for a court to determine whether the agency's action is
arbitrary. Moreover, the rule is more likely to be substantively
reasonable if the agency gave interested parties a real chance to
offer their arguments. (The expertise model of administrative
legitimacy.)

Theme: Procedural regularity helps ensure administrative

rationality and justifies an expertise-based rationale for agency
action, at least in this context.

3. The Most Important Interpretations of 553:

a. The agency's notice must provide the basis for its tentative
conclusions, so they can be critiqued by the commenters. (Nova
Scotia).

b. The agency must respond to the most important comments (Nova

Scotia).

c. The agency must restart the process if it receives information

during the comment process that leads it to change its position in a
way that is not a "logical outgrowth" of the original tentative
decision. (NRDC v. US EPA)

Issues that comes up in informal rule making

 Issues: Not following 553
o Nova Scotia I-Not Enough Data
o Nova Scotia II-No response to Comments
o Judicial Review-Logical Outgrowth test

 United States v. Nova Scotia Food Products Corp. (1977)

 FACTS: FDA promulgates a regulation that requires the
heating of fish to get rid of a particular toxin. Procedural
challenges include that when it promulgated the notice of
proposed rulemaking it did not make public the scientific data
that supported that proposed rule.
 The 1st APA §553 problem is that the failure to disclose the
supportive scientific data in the notice prevented the
submission of appropriate comments under §553(c). Without
the scientific data, the right to comment is not a robust &
effective right to comment.
o The agency's notice must provide the scientific &
technical basis for its tentative conclusions, so they can
be critiqued by the commenters.
 The 2nd problem is: §706 of the APA – Judicial Review under
Title VII of the APA
o Under §706 “the reviewing court shall hold unlawful
agency action that is found to be arbitrary & capricious,
an abuse of discretion, and otherwise not in accordance
with law”
o Authorizes court to set aside agency action they find to
be arbitrary & capricious
o State Farm case – Agency action can be set aside for being
arbitrary & capricious under §706 if “the agency failed to
consider the relevant factors”
o The greater opportunity to comment, the least likely the statute
is arbitrary & capricious
 Complaint over Proposed Rule: the problem here
o Consider all the relevant factors
o The right to comment is a hollow right if the agency is not
required to disclose the supporting data for its proposed
rule. Should provide enough information to provide an
effective opportunity to comment.
 The 3rd problem is: FDA did not provide a concise & general
statement under §553(c)
o FDA comes up with a final rule after reviewing the
comments it did receive. The FDA ignored questions raised
in the comments they received, such as how the proposed
rule would have a negative impact on the industry and that
 there was another way (i.e. salting the fish instead of
heating it) that would prevent botulism.
o Court says agency not expected to respond to every
comment, but expects that the most important
comments/major issues of policies should be noted & why
the agency reacted to it
o To satisfy the concise & general statement requirement,
Court says you need to show that you thought
about/considered/read the major issues & you responded to
them. Agency should err on the side of responding to more,
rather than less, of the comments so it doesn’t appear that
you didn’t provide an adequate statement.
Logical Outgrowth Test : NRDC v. EPA
 When agency releases data, and receives new comments, and wants to update the rule – the
agency has to start all over again with the notice & comment process, so there is a new
opportunity to comment on the new rule. Otherwise, it violates §553(c)
o If the final rule is the logical outgrowth of the proposed rule, then the agency does
not need to start all over again because the interested persons did in fact enjoy an
opportunity to provide relevant comments on what became the final rule.
o Even if agency correctly responded to the comments, but then the final rule is not
the logical outgrowth of the proposed rule, agency must still start over because the
interested persons never had prior notice of what the agency ultimately decided to
do and thus didn’t have a real chance to comment.
Other Concepts:
 Hybrid-rulemaking
o when Congress goes in a different direction than the APA and imposes its own
unique set of procedures for a particular regulatory program (PG. 186, NOTE 4)
 E-rulemaking
o rulemaking has moved online, including the notice & comment process. This
makes the process more accessible to average Americans.

4. But, again, courts must ground their rules in 553; they cannot impose more
process based on their own conception of appropriate administrative practice (Vermont
Yankee).

 Vermont Yankee Nuclear Power Corp. v. NRC (1978)

 FACTS: A rulemaking about how nuclear plants can safely dispose of fuel.
The agency provides more procedure than 553 requires (i.e. oral hearings,
etc.) or the nuclear regulatory statute that gave the agency the authority to act.
The lower court held it wasn’t enough because 1) the issue is too important
and 2) it requires more process to fully ventilate the issues.
 HOLDING: SCOTUS reversed lower court ruling. SCOTUS says that the
APA is a compromise between forces that want more procedure vs. forces that
 want less procedures. Courts had no authority to change the terms of that
legislative compromise, by imposing additional procedural requirements
beyond those set forth in the APA.
 When there’s no issue of adjudication (and thus constitutional hearing
rights), agencies can choose their own procedures
o Adjudications are subject to Due Process Clause &
Rulemaking is not (Londoner v. Bi-Mettalic Analysis). This
case is a Rulemaking issue.
 TAKEAWAY:
 Courts may not go beyond the APA (or the agency’s organic statute)
when evaluating whether the agency provided adequate procedures to
govern a rulemaking process. Supreme Court does not allow courts to
require more procedure than that set forth in the APA.
 Reasons:
o The APA represents the political compromise between those
who wanted more agency flexibility (based on an expertise
rationale), and those that wanted stronger controls on agency
action (based on a procedural fairness rationale).
o Such extra-APA rules would lead risk-averse agencies to use
more formal procedures simply to avoid judicial reversal; this
would destroy the usefulness of 553's more informal processes.

Rationales:

a. The APA represents the political compromise between those who

wanted more agency flexibility (based on an expertise rationale), and
those that wanted stronger controls on agency action (based on a
procedural fairness rationale).

b. Such extra-APA rules would lead risk-averse agencies to use more

formal procedures simply to avoid judicial reversal; this would destroy
the usefulness of 553's more informal processes.

 Exceptions to the Notice-and-Comment Process

Section 553 contains a mixture of exceptions for particular subject-matters

addressed by rules or particular types of rules.

1. Rules dealing with military, foreign affairs, and government personnel and
contracts are exempt from all of Section 553’s requirements (Section 553
(a)).

2. Interpretive rules and policy statements are exempt both from the notice-
and-comment requirements of Section 553 and the requirement of advance
publication of rules (Section 553 (b)(A) and (d)). The same exemptions
 apply when the agency for good cause finds that such requirements are
impracticable, unnecessary or contrary to the public interest.

3. Agencies can also be exempt from both of these requirements if they show
“good cause.”

4. Procedural rules are exempt from the notice-and-comment requirement but

not from the pre-publication requirement.
5.
 Notice and Federal Register The right to petition
Hearing publication 30 days in the agency to
(“Comment”), advance of the rule’s promulgate, amend,
553 (b) & (c) effective date (553(d)) or repeal a rule
(553(e))
Military or Foreign EXEMPT EXEMPT EXEMPT
Affairs
“agency management or EXEMPT EXEMPT EXEMPT
personnel or to public
property, loans, grants,
benefits, or contracts”
Interpretive Rules EXEMPT EXEMPT
General Policy EXEMPT EXEMPT
Statements
“Good Cause” EXEMPT EXEMPT
Procedural Rules EXEMPT

6. How to define procedural rules, interpretive rules and policy statements?

a. Procedural rules – rules that do not encode a substantive value

judgment (Public Citizen)
b. Good Cause Exception
a. Impracticable
b. Unnecessary
c. Public Interest

c. Interpretive rules – rules that simply interpret a pre-existing

rule of conduct, rather than impose a new rule. By contrast, a
“legislative” rule:

i. is necessary for there to be any rule of conduct at all (e.g., a

legislative rule is necessary when the authorizing statute
only says something like “it is hereby made illegal for
anyone to do anything with regard to securities sales that
the SEC hereafter identifies in a regulation”);

ii. reflects the agency’s explicit invocation of its power to

promulgate legislative rules; or

iii. amends or repudiates a pre-existing legislative rule.

d. Policy statements – statements that reveal the agency’s general
approach or view about what the law requires, rather than
imposing a binding rule. If, for example, an agency acts like it is
 bound by what it claims to be a mere policy statement, then that
statement may well be considered a legislative rule (see the
Telephone Association case in Note 5, p. 233)
Procedural Rules

 Public Citizen v. Dept. of State (DC Cir. 2002)

 FACTS: Dept. of State came up with rules for how to process FOIA requests. For
example, if you submit a request on JUN 1, 2020, can only receive documents
dated before 06/01. However, it takes months for FOIA requests to be submitted,
so additional documents post-06/01 may be relevant, but won’t be submitted to
you.
 HOLDING: Court concluded that Dept. of State did this for efficiency reasons
and not due to a substantive preference for some FOIA requests over others.
 Exempt when rules are procedural, not a substantive value judgment.

Good Cause Exception

 Exempt if imposing 553 requirements would be impractical, unnecessary, or contrary to
public interest
o Impractical – when an agency finds that due and timely execution of its functions
would be impeded by the notice otherwise required.
o Unnecessary – confined to those situations in which the admin rule is a routine
determination, insignificant in nature & impact, and inconsequential to the industry
and to the public…the issuance of a minor rule in which the public is not particularly
interested”
o Contrary to the public interest – connotes a situation in which the interest of the
public would be defeated by any requirement of advance notice
 PG. 218 – these exceptions are to be “narrowly construed” and “should be limited to
emergency situations”
 PG. 220 – Note 3 – ways for agencies to make its case for the good cause exception
o Interim-Final Rules – the agency issue a rule with notice & comment, relying on
good cause exception, but also inviting public comment & promising to consider
public comment in finalizing the rule
o Direct Final Rules – an agency publishes a rule it intends to adopt & inviting
objections from the public. If there are no objections, the rule can simply become
final at the appointed date.
Policy Statements
 Telephone Association v. FCC (1994)
 The FCC rule reiterated 12 times that it retained the discretion to depart from
the standards in specific applications
 Despite this, the court held that it violated the APA
 The court believed that the statement was so detailed and specific that it
must have been intended “to cabin the agency’s discretion”
 Also, the agency used it 300 times and only deviated 8, and 7 of those 8
didn’t really count, and the last case was ambiguous
 
So, the agency behaved as though it were bound, even if it said it
wasn’t
 “Binding” Test:
 “The general consensus is that an agency statement, not issued as a formal
regulation, binds the agency only if the agency intended the statement to
be binding”
 “The primary consideration in determining the agency’s intent is whether
the test of the agency statement indicates that it was designed to be
binding on the agency.”
 One way to determine whether an informal agency statement qualifies as a
valid non legislative rule is to ask whether it is possible to challenge the
agency’s stated position within the agency:
 If the agency considers the position taken in the informal statement to
be binding on its own decisions, the statement is a legislative rule in
disguise
 If the agency is prepared to entertain challenges to the position and to
justify the position in any particular proceeding in which the position
determines the outcome, the statement is probably a valid non-
legislative rule, not required to go through notice and comment
Interpretive Rules
American Mining Congress v. Mine Safety & Health Administration
Facts:
Holding:

 The Integrity of the Rulemaking Process

 External Ex Parte Contacts
o Formal Rulemaking [§557(d)]& Formal Adjudication has limits on external
EPCs
o Informal Rulemaking has NO statutory limits on external EPCs
 If rulemaking looks quasi-adjudicative in nature, due process might
require restrictions on EPCs, even if the APA does not. (HBO v. FCC)
 Internal Ex Parte Contacts
o APA does NOT impose limits on internal EPCs in rulemaking because
widespread internal communication is necessary to sound decision making
(Steelworkers v. Marshall).

 External ex parte contacts:

7. Formal Rulemaking has limits on external ex parte contacts – the same

limits that apply to formal adjudication. See Overview 3 for a discussion
of those rules.
8. Informal Rulemaking has no statutory limits on external ex parte contacts.
However, in HBO the DC Circuit imposed such limits, finding them to be
necessary to a fair process as well as to judicial review (i.e., so the
reviewing court could know what was really motivating the agency).

a. HBO is quite arguably inconsistent with Vermont Yankee, which came

down the year after HBO. It has been read narrowly, to apply only
when the rulemaking involves “competing private claims to a valuable
privilege.” ACT for Children’s TV; see also Sierra Club v. Costle.

Theme: To the extent the rulemaking looks like an adjudication

(“competing private claims …”) more careful procedural
requirements will be imposed on agencies.
 HBO v. FCC (1977)
 FACTS: The Federal Communications Commission (FCC)
(defendant) proposed new and amended restrictions on what cable
programmers could provide on television. After the comment
period, the FCC met with members of a particular interest group
and attempted to negotiate an outcome that all would find
acceptable. After the final rule was adopted, Home Box Office and
a number of other parties (plaintiffs) challenged it, arguing that the
FCC impermissibly engaged in ex parte communications leading
up to the final rule, including communications that took place after
the rulemaking record should have been closed.
 HOLDING: Court struck down rulemaking.
o Procedural: The ex parte contacts were not included in the
rulemaking notice, so commenters didn’t know how the
rule came to be shaped. Therefore, HBO did not have a
robust opportunity to comment because information was
missing.
o Substantive: it makes it difficult for the court to know if
the agency’s action was arbitrary/capricious (§706) or not
because the court would not be able to perform its judicial
review role because it wouldn’t know what really
motivated the agency to do what it did.
o Solution?: HBO should be seen as an adjudication b/c
there are competing private claims where 2 parties jostling
over 1 goodie that only 1 person may get. Therefore, HBO
is a Due Process case under the Londoner/Bi-Metallic rule.
 For informal rulemaking, agencies do not have to disclose EPCs
because the APA says nothing about it. Under Vermont Yankee,
have to stick with the APA unless the organic statute says
something different.
 Internal Ex parte contacts

The APA does not impose limits on internal ex parte contacts in rulemaking.
(The only APA-based limits on internal ex parte contacts are located in 554(d),
which deals only with formal adjudication.) The very nature of rulemaking is
such that widespread internal communication is necessary to sound
decisionmaking. For an explanation of the rationale for this rule, see
Steelworkers v. Marshall, especially the last paragraph of the opinion.

Bias

Marshall also addresses the question of bias or prejudgment in rulemaking. As

with internal ex parte contacts, the very nature of rulemaking makes it difficult to
enforce a rule against a rulemaker prejudging an issue. There is a very difficult-
to-satisfy test for illegal bias or prejudgment in rulemaking: whether the decision-
maker had an “unalterably closed mind.” National Advertisers (page 254). We
will return to this topic when we compare this standard to the one for prejudgment
in adjudications. See Overview 3 for more on this.

 Sierra Club v. Costle (DC Cir. 1981)

 FACTS: The EPA adopted a rule to govern emissions from coal
burning power plants pursuant to the 1977 Amendments to the Clean
Air Act (CAA). After the comment period was closed, the EPA
accepted 300 late comment submissions and entered into the
administrative docket. In the post-comment period, the EPA also
engaged in ex parte communications with interested parties,
legislators, and the president’s staff. The EPA inadvertently failed to
docket one meeting with Senate staff. In addition, the EPA did not
docket a meeting with White House officials. The Environmental
Defense Fund (EDF) challenged part of the final regulation on the
ground that the EPA would have adopted a stricter standard for
emissions if it had not engaged in such communications after the close
of the comment period.
 HOLDING:
o Adjudication and quasi-adjudication and competing valuable
claims to a private privilege – action for Children’s Television
v. FCC (case cited within notes, but not a separate case in
reading)
 Due process may require some limits to ex parte
communication (Londoner)
o Formal Rulemaking may require limits to EPC
 Formal Rulemaking has to have a trial-type proceeding
where the hearing is on the record
 When there’s informal rulemaking of a policy sort (i.e.
based on social facts, not the facts of a particular party),
 there’s general rulemaking based on general policy then
there can be less limits on EPCs
o Vermont Yankee limits court from imposing EPC limits in
informal rulemaking
o Article II concerns – POTUS should be able to speak with EPA
which is an agency of the executive branch
o Clean Air Act does not preclude EPC
o Example of a Hybrid Procedure: DC Federation of Civil
Association v. Volpe (DC Cir. 1971): Congressmen sat on
committee that decided what sort of infrastructure to be built in
DC. DC building subway at this time. Congressman calls DOT
and threatens to halt subway construction unless
Congressman’s bridge goes through.
 RULE: Two conditions must be met before an
administrative rulemakings is overturned simply on
the grounds of congressional pressure
1) The content of the pressure upon the Secretary
is designed to force him to decide upon factors
not made relevant by Congress in the applicable
statute (i.e. did the Congressman intend for the
agency to make a decision based on their
pressure and not statutory factors).
2) The Secretary’s determination must be affected
by those extraneous considerations (i.e. did the
Congressman succeed in getting the agency to
rely on that factor).
3) If both factors are met, it is an EPC

Bias and Prejudgment

 United Steelworkers of America v. Marshall (DC Cor. 1981)

 FACTS: Plaintiff alleging that person in charge of doing the
rulemaking had already made her mind up to promulgate this
regulation, therefore she was biased when she promulgated this
regulation.
 HOLDING: Statute does not require complete unbiased
rulemaking in this case. Also, rulemaking is not susceptible to
a hard ban on bias decisions makers. Congressman already
have predisposed opinions about whether or not the rule is
good or bad idea, so a little bit of bias is inherent in the
rulemaking process.
 Executive Oversight of the Rulemaking Process
 o The basic idea: The President needs a means to control how administrative
agencies are implementing law, to ensure a consistent “execution of the laws”
consistent with his priorities.
o Theme: Political accountability as a legitimating force in administrative law.
Note the costs to both expertise and procedural fairness when the President exerts
influence over the administrative process. These costs can be justified by
considering the Presidential review process as a tool to ensure that the President
remains politically accountable for what agencies do.

1. Basic features of Executive Order 12866:

a. Agencies must communicate their regulatory agendas to OMB, and

discuss them should they present a conflict with the President’s priorities.
(Section 4)

b. Agencies must send important regulatory actions (not just final rules, but,
e.g., notices of proposed rulemaking) to the OMB for their comment and
review, in particular regarding how they balance regulatory costs and
benefits. (Section 6)

2. Issues raised by EO 12866

a. the tension between the agency’s duty to comply with Congress’s statutory
mandate while also adhering to the President’s regulatory priorities. See
Section 2 (b).

b. the role of independent agencies in the Presidential review process. See

Section 3 (b)

c. the exemption from the EO for formal rulemakings. See Section 3(d).

d. the EO’s definition of “regulation,” which differs from the APA’s

definition in that it excludes rules of particular applicability (e.g.,
rulemakings that set rates for particular shippers). See Section 3(d).

3. Note: The EO does not confer rights; thus, private parties cannot cite it as a basis
for overturning agency action

4. The Trump EO: The most notable feature of the Trump EO is the “2 for 1”
requirement we discussed in class. But recall that any repeals of regulations that
are triggered by the 2 for 1 requirement still have to go through the APA process
for repealing a regulation (that is, they have to go through notice-and-comment).
Query whether a proposed repeal of a regulation that is defended as necessary to
comply with the 2 for 1 requirement would be attacked as “arbitrary and
capricious,” on the theory that the organic statute (e.g., the Clean Water Act)
 required the agency to consider only particular factors when promulgating (or
repealing) regulations (e.g., factors related to water pollution and animal and
human health). On this theory, an agency pointing to the 2 for 1 requirement as a
justification for repealing the rule may well find courts questioning the
reasonableness of that repeal decision.

Theme: The ongoing struggle between Congress (which authorizes the agency’s
action and thus sets the conditions for how it can use that authority) and the
President (who may wish, as in the EO, to impose his own stamp on how his
agencies regulate).
WHITE HOUSE REGULATORY REVIEW – OMB REVIEW
 By the 1970s it appeared as though the regulatory process was falling out of POTUS’ control.
Broadly worded statutes were giving agencies enormous authority to regulate. And the
economy was perceived to be suffering from over-regulation/ A succession of presidents thus
tried to institute more White House control.
o Reagan issued an executive order requiring that major regulations be reviewed by the
Office of Management and Budget
 Within OMB is a subdivision called OIRA (Office of Information & Regulatory
Affairs)
 Regan tasked OIRA with the job of reviewing proposed regulations from admin
agencies
 Typically, Congress passes a statute  sometimes power is delegated to
POTUS/WH office (rarely), and usually delegates power to an Admin
Agency. For example, Congress gives EPA power to regulate under the Clean
Air Act. Head of these agencies control the regulations.
o Establishes OMB to ensure rulemaking is consistent/not in conflict across
agencies, and in line with statutory / presidential intent. Suggests that the president
has some approval over agency actions.
o Clinton issued his own executive order that retained the basis of that order
 Executive Order 12, 866
o Section 4: Agencies must communicate their regulatory agendas to OMB, and
discuss them should they present a conflict with the President’s priorities.
(Section 4)
o Section 6: Agencies must send important regulatory actions (not just final rules,
but, e.g., notices of proposed rulemaking) to the OMB for their comment and
review, in particular regarding how they balance regulatory costs and benefits.
(Section 6)
o Section 2: “to the extent permitted by law”
o Section 3(b): definition of “agency” – excludes independent agencies
o Section 3(d): defines regulation – different from the APA definition (in two ways)
 1)APA uses “particular applicability”, but Clinton Order just says “general”. A
regulation of particular applicability is essentially a licensing or rate setting
regulation.
a. Particular applicability speaks to adjudications and its problematic for
the White House to have adjudicative power
b. Londoner/Bi-Metallic type analysis: Due Process applies when there
are adjudications or things that are quasi-adjudicative.
2)Exempts rules issue though Formal Rulemaking (PG. 257) – concerned about
the integrity of the process
 Clinton order does not permit WH to stop the agency from making a rule.
Agency just has to show its budget homework to OMB and WH can ask for
more analysis and more information.
 Congress provides Agency with authority to act, and Clinton Order emphasizes
that congressional authority trumps WH review.
o Section 9: Agency Authority
o Section 10: No private rights created. Judicial Review: Nothing in Exec order 12,866
shall affect judicial review of agency action. Only intended to improve internal
management of gov’t. No judicial review of violation of EO 12,866.

The Trump “2 for 1” Executive Order (December 2017)

 “2 for 1” – for every regulation that an agency wants to promulgate, 2 regulations have to be
taken off the table.
 any repeals of regulations that are triggered by the 2 for 1 requirement still have to go
through the APA process for repealing a regulation (that is, they have to go through notice-
and-comment).
 How can the agency avoid the impact of this order?
o Bundle regulations
o Convert regulations into guidance documents (i.e. non-binding/non-legislative rules
that don’t have to go through §553)
 Is it arbitrary and capricious?: A proposed repeal of a regulation that is defended as
necessary to comply with the 2 for 1 requirement would be attacked as “arbitrary and
capricious,” on the theory that the organic statute (e.g., the Clean Water Act) required the
agency to consider only particular factors when promulgating (or repealing) regulations (e.g.,
factors related to water pollution and animal and human health). On this theory, an agency
pointing to the 2 for 1 requirement as a justification for repealing the rule may well find
courts questioning the reasonableness of that repeal decision.
 Section 5: Again, the agency’s statutory authority is primary
 Theme: The ongoing struggle between Congress (which authorizes the agency’s action and
thus sets the conditions for how it can use that authority) and the President (who may wish,
as in the EO, to impose his own stamp on how his agencies regulate).

Summing Up on Rulemaking
 The tension between the different models:
o Procedural Fairness: Nova Scotia / HBO / USEPA. But see Steelworkers
 Robustness of procedural right to comment
 Steelworkers – bias & prejudgment in informal rulemaking – sometimes the
nature of rulemaking is not amenable to the kind of robust rulemaking
associated with legitimate agency rulemaking. Court says rulemaking by
nature is a collegial process; not realistic that agency will be totally impartial;
will be swayed in one way or another.
o Expertise: Nova scotia
o Political Accountability: Sierra Club
 As per Article II power, POTUS should be able to have private conversations
with agency heads re: promulgation of rules/political concerns b/c POTUS has
to be accountable for regulatory output.
o The APA as a Compromise: Vermont Yankee
 Statute can be amended, etc.
 Courts have no business interfering with that compromise

III. AGENCY ADJUDICATIVE PROCESSES

Formal Informal

APA 554, 556 – 557 [Due

Adjudication APA 555, 706; Due Process
Process]

Rulemaking APA 556 – 557 APA 553

 Formal versus Informal Adjudication

Until recently courts had been more willing to require agencies to engage in formal
adjudication, easing up on the strict “magic words” requirement of Florida East Coast.
Seacoast. However, more recently courts have considered the question whether Congress
intended formal or informal adjudication to be a question where, in the absence of a clear
statement from Congress, the agency has the discretion to choose, as long as that choice
is reasonable. E.g., Dominion Energy (applying the Chevron standard of deference to
this agency choice). But this is not a uniform few; other courts explicitly embrace the
Florida East Coast presumption of informality (transferred from rulemaking into
adjudication), while a third group of courts continue to apply the opposite presumption,
in favor of formality.
The split in the lower courts
 Some courts presume informality – just like Florida East Coast
 Dominion Energy: Post-Chevron, overturned the presumption (Seacoast) in favor of
formality where statute requires a hearing. RULE: Unless congress uses the magic words,
agency will have discretion to decide whether formal or informal.
o Applying Chevron: If congress spoke directly to formal/informal (i.e. used magic
words), nothing for the agency to interpret. When organic statute is unclear, the
agency’s reasonable interpretation wins. Therefore, unless the statute clearly notes
formality (or informality), then agency’s preference for informality (or formality)
will be given deference.
o Note: the result of using Chevron is to presume informality

 The requirements of Formal Adjudication Under the APA

Sections 556 and 557 impose a host of trial-type procedures when agencies engage in
either formal adjudication or formal rulemaking. In addition, Section 554 imposes an
additional set of procedures when agencies engage in formal adjudication. Most notably,
Section 554(d) imposes significant limits on internal ex parte communications.
APA FORMAL Adjudication Requirements
 §§ 556/557: Trial Type Procedures (i.e. hearings)
 § 554
o (a) Scope: Applies to adjudications “on the record after opportunity for an agency
hearing.”
o (b) Notice: Must include:
 Time/Place/Nature of hearing
 Legal Authority/ JX of hearing
 Matters of Fact and Law asserted
o (c) Parties’ Rights: All interested parties must have opportunity for:
 Submission/consideration of facts/arguments/settlements
 A hearing compliant with 556/557
o (d) Ex Parte Rules – See below;.

 The requirements of Informal Adjudication Under the APA

The APA requires very little in terms of procedure when an agency is not required to
engage in formal adjudication. However, the provision that courts reverse agency action
found to be “arbitrary and capricious” (APA § 706) and § 555(e)’s requirement that
agencies furnish “a brief statement” for denying a request, combine to impose a minor
procedural requirement of providing an explanation that makes judicial review possible.
Pension Benefit Guarantee Corp. v. LTV Corp.
APA INFORMAL Adjudication Requirements
 APA says very little about procedures for informal adjudications
 But the Court finds at least a requirement of a short explanation. – necessary to decide
if rule is arbitrary & capricious
o Section 706 – we’ve already seen a reference to this (Nova Scotia / HBO)
o But also Section 555(e) – always look at the miscellaneous rules
 o Vermont Yankee / Overton Park (reversed an agency decision b/c decision was
not adequately explained)
 Pension Benefit Guaranty Corp v. LTV (1990): Under §706’s arbitrary & capricious
standard, agencies must provide a sufficient explanation for their decisions, so as to
provide a foundation for the court’s arbitrary/capricious review.
o Federal government, under a program (PBGC), takes over the pension liabilities
of companies facing financial distress, in an attempt to rescue as much of the
employees’ pension assets. Under this program, if a company’s finances improve,
the federal agency can throw the pension liability back to the private company. In
this case, LTV protests this decision. The agency failed to undergo the necessary
process before giving pension liability back to the company.

 Procedural Due Process

A. The Basic Questions:

1. Is there a due process interest (life, liberty or property) at

stake?

2. Has it been infringed? (We discussed this only briefly in

class, except to say that, in general, negligent conduct or
conduct not fairly attributable to the state does not count as
a formal “deprivation.”)

3. If there is a due process interest that has been infringed, has

the agency given sufficient procedural protections?

B. Is there a due process interest?

1. How to find a property interest?

Not in the DPC itself. Instead, look at sub-constitutional law (federal

statutes or regulations, or state constitutions, statutes, regulations or
common law) to determine whether the state has given you an expectation
in the continuation of a benefit.

a. An expectation of having some rights, such as what we call real

property rights (e.g., the right to exclude), because state common
law says you have the right, and the state stands ready (in this case,
via a trespass action) to enforce your expectation.

b. An expectation of having government continue to provide you with

a benefit, as long as you continue to meet the statutory or
regulatory eligibility criteria (e.g., a veteran's check or a broadcast
license).
 c. Note that government can change your expectations by changing
the substantive law (e.g., by repealing trespass actions or the
veteran's benefit statute); in such a case you no longer have an
expectation and so procedural due process no longer comes into
play.

2. Liberty interests

a. A liberty interest can be found in the same way as a property

interest.

b. Liberty interests can also be found, however, in the DPC itself: the
interests that we have come to see as liberty interests protected by
substantive due process.

 e.g., the right to raise your children as you see fit, or the right
to contract.

c. Caveat: Liberty must consist of a material interest, e.g., being

restricted from the freedom to do something – rather than simply
an interest in your good name, even though that interest is
protected by common law. See Paul v. Davis.

3. The Basis for this Analysis: Understanding "property" and "liberty" in

terms of stability of expectations. This naturally leads to the finding of
property or liberty interests whenever government has given you an
expectation. When government is giving you the benefit (as with a
veteran's check), this analysis means that you have a liberty or property
interest whenever government cabins its discretion to deny you the
interest.

4. The Problem With this Analysis: It leads courts to make the due process
inquiry turn on minor semantic differences in a statute or regulation that
speak to whether government has in fact cabined its discretion, e.g., a
prison manual that distinguishes between "shall" and "may" when noting
the prison's obligation to provide the prisoner with an hour a day in the
exercise yard.

5. The "Bitter With the Sweet." (Arnett). Does this analysis mean that
government can condition your property right (e.g., a government job) on
your acceptance of lesser procedural rights if government decides to fire
you? After all, if you knew in advance about the lesser set of procedural
rights, you wouldn't have an expectation, and thus you wouldn't have
"property," right?

a. A majority of the Court rejects this view in Arnett, and formally

rejects it in Loudermill.
 b. "Process" is separate and distinct from "substance."

c. The theory: Government can hand out or refrain from handing out
the benefit wholesale, e.g., by enacting or repealing a veteran's
benefits statute. If it does that, then interest groups (here, veterans)
will get the "process" of being able to lobby the legislature to
change its mind. But if government denies the benefit on a retail
basis, then the political check is not viable, since it's just an
individual that's being burdened. What "process" does that
individual get? A hearing -- i.e., "due" process.
C. How Much Process is Due?

1. The original idea (Londoner): due process means an oral hearing.

2. But once the category of due process interests expands (after Goldberg, in
1970), the Court starts to wonder whether it can always guarantee an oral
hearing. The concern is that there are now too many interests protected by
due process to require government to give an oral hearing (and maybe a
formalized oral hearing) each time, especially one that has to occur before
the benefit is cut off (i.e., a “pre-termination hearing”). And maybe
formalized oral hearings aren't useful to the holders of these "new
property" rights (e.g., welfare claimants), given the variety of contexts in
which “new property” rights are held to exist.

Theme: Judge Friendly’s article (p. 135) explaining that what due process
requires is “some kind of hearing”—that is, a hearing that is appropriate
for that particular context.

3. Mathews attempts to resolve the issue with a three part balancing test:

1. The importance of the interest to the class of claimants (e.g., all

welfare claimants, not a particular one)

2. The risk of error inherent in the current procedures, and the

enhanced accuracy promised by the requested procedures.

3. The state's interests.

This test looks like a relatively objective test: indeed, you could argue that
it's almost mathematical: if (1) X (2) is greater than (3), then more
procedure is required. If it's not, then there's no constitutional violation.
But there are problems viewing the test this way.

4. Factor 1: Very imprecise, because (by necessity) it's done on a classwide

basis.

5. Factor 2: Depending on what you mean by "accuracy" this is also very

amorphous.
 a. Grey Panthers (the Medicare case in the reading packet):
"accuracy" is enhanced by requiring the decision maker to confront
the claimant directly, rather than via a purely paper process.

b. Loudermill: "accuracy" is enhanced when the claimant is allowed

to argue, not that the statute doesn't allow him to lose the benefit,
but instead that the statute would allow him to lose the benefit but
that it also confers discretion on the agency not to decide to rule
against the claimant. Such exercises of discretion may be
informed by allowing the claimant to tell his side of the story.

The point: Understanding accuracy in this way makes it much more

difficult to conceptualize factor 2 as a purely objective, mathematical
exercise.

6. Factor 3: A couple of problems here.

a. Hard to quantify the government's interest in avoiding extra

procedure, or in avoiding having to pay the benefit while the
claimant makes his argument. How much do procedure and
"payments pending decision" really cost?

b. To make it worse, in some cases, e.g., Loudermill, the Court

conceives of the government's interest to also include its interest in
not mistakenly denying the benefit (e.g., firing the employee). Of
course, that benefit is impossible to quantify. Moreover, wouldn't
you expect the government to already have thought of that interest
when it decided how much procedure it was going to give
claimants? Regardless, under this understanding of Factor 3, the
government’s interest ends up favoring more process.
PROCEDURAL DUE PROCESS

Substantive vs. Procedural Due Process

 Substantive DP: rights, liberty interests, that govt is substantively precluded from infringing
on regardless of the type of hearing govt provides
 Procedural DP: the right to a fair hearing before “life, liberty, or property” is impaired
o Either by the federal (5th Amendment) or state (14th Amendment) govts
o Three Procedural DP Questions: (ask in a sequence from 1 to 3)
1) Is there a due process interest (i.e. life, liberty or property) at stake?
2) Has there been a “deprivation” of that interest?
3) If so, has the government provided sufficient procedural protections?
Question #1: is there a due process interest (i.e. life, liberty or property) at stake?

PROPERTY INTERESTS
 Property Interests: Over time, Americans became highly dependent on interests that were
merely statutory in nature (i.e. Government benefits, Professional license, etc.).
 Board of Regents v. Roth (1972) and Perry v. Sinderman (1972)
 Similar facts – nontenured professors at state schools on 1 year contracts. In Roth, school
declines to re-hire him. In Perry, after 23 yrs school decides to not rehire him & say he’s not
eligible for anything. Roth & Perry desire a hearing to determine that they have a legal right
to a hearing re: getting their jobs back/a liberty & property interest.
 Property extends beyond common law protected property interest (i.e. money, chattel, real
estate, etc.). Property means more than an abstract desire for something.
 But it must be reasonable reliance
 RULE: One must have “more than a unilateral expectation” of the interest; one must instead
have “a legitimate claim on entitlement.”
 Applying that Requirement in Roth and Perry
o Roth: no legitimate claim of entitlement. It was just a 1-year contract that gave no
expectation of renewal.
o Perry: the faculty handbook suggests that he may have had a legitimate claim of
entitlement b/c it says there’s no tenure system, but they want every Professor to
feel that if they do a good job & are happy there they have a permanent home.
 After Roth & Perry, money/real estate/chattel as well as public benefits, licenses, etc. are
property interests protected by DP. Roth & Perry added the public benefits/licenses/etc.

LIBERTY INTERESTS
 Liberty Interests: Liberty must consist of a material interest, e.g., being restricted from the
freedom to do something – rather than simply an interest in your good name, even though
that interest is protected by common law. See Paul v. Davis
 Liberty is found in the same way as property…but can also be identified by 5th & 14th
Amendments themselves

Paul v. Davis (1976)

 FACTS: Davis is a photographer. Charged with shoplifting, charge was dismissed, but he
ends up on a list of active shoplifters that is open to the public. Davis brings federal
procedural due process claim alleging that he has a liberty interest in his good name that’s
been infringed on by the federal government.
 Davis’ claim: a procedural due process violation in the police department’s identification of
him as an “active shoplifter”
 HOLDING: the state’s deprivation of a person’s interest in his good name, without more,
did not trigger the procedural protections of due process. The court finds nothing special
about stigma – indeed, the case law suggests that stigma by itself is not a due process
violation. Due process interest has to be “material”.
 o Kentucky tort law allows him to recover under this claim and therefore provided
him a legitimate claim of expectation to the protection of the DP interest
o However, Court says no.
 Two premises might underlay the lower court’s conclusion that Paul does
in fact have a DP interest at stake (pg. 37)
 “the DPC makes actionable many wrongs inflicted by govt employees
which had heretofore though to give rise only to state law tort claims”

Question 2: Has there been a “deprivation” of that interest?

 Negligent deprivations are not “deprivations” for due process purposes
o For example, if the postal truck driver negligently hits your car is NOT a DP
deprivation
 But even unauthorized action by government actors is not a “deprivation”(Hudson v. Palmer)
o For example, if the postal truck driver deviates from his route and hits your car is
NOT a DP deprivation
o a frolic and a detour – if the agent/employee is on a private vendetta
unauthorized by official government channels, that action is not govt action, and
therefore is not a govt deprivation of the individual’s property or liberty.

 Question 3: How much Process is Due?

 The basic idea: under the old learning, some oral right to a hearing was required
(Londoner), but as more interests were deemed protected by due process under the
new learning, the level of required procedures had to be adjusted.

 Goldberg v. Kelly
 ISSUE: The timing of the oral hearing – before or after termination of
benefits
 Question 1: NY concedes that the welfare check is property
 Question 3: NY offers a lot of process, but only after the checks are
cut off
 The Court requires robust procedures pre-termination
 Shifted focus to importance of the right (importance of welfare
triggered DP right, regardless of lack of privilege). This too was
replaced. (No longer good law)

 Goss v. Lopez (1975):

 FACTS: Under a State of Ohio education statute, a public-school
principal may suspend a student for misconduct for up to ten days
without a hearing if he notifies the student’s parents within twenty-
four hours and gives reasons for his action.
  HOLDING: Fundamental fairness prohibits an administrator from
making an entirely one-sided determination that misconduct
occurred without giving a student a chance to rebut that
determination. Thus, the Due Process Clause requires a student
facing suspensions of ten days or less to be provided oral or written
notices of the charges against him, and, if he denies them, an
explanation of the evidence along with an opportunity to present an
opposing side. Where gov’t is adversary (i.e. disciplinary
proceedings), more likely that some sort of hearing will be
required. Goss sets “give and take” as minimum DP in the
academic context
 For an informal school suspension, maybe we don’t need a full
hearing. Student must be aware of charges and have a chance
to respond – that’s enough to protect the interest at stake.

 Matthews v. Eldridge (1976)

 FACTS: withdrawal of social security disability benefits.
Government offered a pre-termination written hearing, followed by
the chance for oral hearings after the cut-off.
 ISSUE: Timing of the oral hearing is the concern.
 The court adopts a 3-FACTOR TEST to decided how much
process is due
1. The importance of the interest of the class of
claimants
 Note: NOT the importance of the interest to the
particular claimant
 The Bloomberg problem – would also apply to
Mike Bloomberg, if he qualified for disability,
even though he’s rich
 Application: compare disability benefits with
the welfare benefits in Goldberg
2. The risk of error inherent in the current procedures,
and the enhanced accuracy promised by the
requested procedures.
 Application: compare the issues to be decided in
Goldberg & Matthews
 Since disability concerns medical claims, a
written hearing with document submission may
be more accurate
3. The government’s interest (presumably in saving
money – but this evolves)
Application of Matthews
 City of David (2003)
o How much process is due before an individual can claim that his wrong was
wrongfully towed & therefore he’s owed the towing fees?
o The post-termination written hearing is adequate b/c it concerns money
(technocratic)
 Schweiker v. McClue (1982)
o Medicare claimants insisting that, as a matter of due process, government
employees be the decider on Medicare eligibility claims instead of private
contractors
o No increase in accuracy by insisting on government EE decides
o Court says doesn’t have a right due to factor #2 of M v. E. There’s no difference
in accuracy between government or private contractors b/c private contractors are
trained by the government.
 Walters v. Radiation Survivors (1985)
o Government sets up a compensation program for people who were harmed by
govt atomic bomb tests/radiation exposure in the 1960s. Government relies on a
very old law that makes it impossible for individual claimant to bring a lawyer in
the room when the eligibility decisions are made.
o More procedure doesn’t always mean more accuracy. Court says the presence
of an attorney would make the process more adversarial than necessary.
 University of Missouri v. Horowitz (1978)
o The decision by the school that a medical student had to be academically
disqualified. The student wants a formalized procedural hearing to make her claim
to remain in the program.
o Court rejects student’s claim and says that when the government acts as
faculty/academic advisor, you don’t want to make the process adversarial.
Instead, keep the process informal & friendly so that the student/mentee
relationship can maintain. A formal procedure may damage the relationship
between claimant and the government.
o “government as your friend”
 Gray Panthers v. Schweiker (DC Cir. 1980)
o Paper process for Medicaid claims. Court says may have more accuracy with an
oral hearing than a purely paper process. Having to confront the claimant leads to
more accuracy. It also gives people a sense of being dealt fairly with.
 Cleveland Board of Education v. Loudermill (1985)
o Loudermill was an employee of the state of Ohio and lied on his application that
he was not convicted of a felony. Ohio law states that if you lie on your
application you are fired from your job.
o Court says even when it’s clear that the claimant is ineligible, maybe it’s still fair
that they should have a hearing/benefit of the doubt which will lead to more
accuracy (Eldridge Factor 2). Maybe the govt’s interest lies in not firing an
otherwise good employee (Eldridge Factor 3).
 o Expands the idea of the govt interest, to make it count in favor of more procedure.

HYPOS
 How important are the interests?
o A commercial driver’s license - $90,000/yr
o A bar license (temporarily suspended) - $150,000
o Medicaid benefits (temporarily suspended) - $10,000
o A doctor’s job at the VA - $125,000
o Can use earning to determine
 How accurate are paper procedures?
o Explaining “Reckless” driving as defined by state law
o Having an inappropriate sexual relationship
o Earning informal income by taking babysitting business
 The government’s interest
o How many hearings would there be?
o Are government benefits flowing to the claimant
o What about the government’s interest in not losing a qualified VA doctor?

IV. Integrity in Administrative Adjudications

The basic question here is the degree to which judicial concepts of ex parte contacts and
constitutional concerns about separating adjudicators from prosecutors/investigators
apply in the administrative context.

A. The basic rule: The varied nature of administrative processes across agencies and
jurisdictions (i.e., state and federal) mean that combination of functions cannot be a
per se due process violation. The due process concern for unbiased adjudicators leads
to a per se rule only in two instances: where the adjudicator has a pecuniary interest
in the outcome of the case and where the adjudicator has been the subject of personal
abuse by a party or litigator before him. Withrow v. Larkin.

The hard question then becomes identifying those situations where, based on the facts
of the situation, prejudgment by the administrative adjudicator does in fact violate
due process

B. Prejudgment: The results of the cases

Rulemaking
Adjudicative Facts Empty Set (because
rulemakings generally
don’t involve adjudicative
facts)
Legislative/Policy National Advertisers:
Facts standard is "unalterably
Adjudication
Cinderella: standard is "has
the decision maker in some
measure prejudged the facts
and the law”
Cement Institute: standard
is "irrevocably closed mind"
 closed mind" (see page 254)

The "some measure" standard is generally thought of as easier for a plaintiff to

win on, compared to the "irrevocably closed mind" standard (or “unalterably”
closed mind, which you should understand as the same as “irrevocably closed
mind”).

It appears, then, that the key distinction is not between adjudication and
rulemaking, but rather between the type of fact that is being prejudged. Basically,
adjudicative facts are those that pertain to an individual: "who, what, when, where
and how." Legislative facts pertain to an entire field of endeavor: "what is the
economic effect of a particular pricing policy in the steel industry;” “how
dangerous is copper to certain fish species."

Theme: Note the close connection between this idea, and the justifications for it
(immediately below) and our earlier analysis of Londoner and BiMetallic.

The basic reasons for this distinction might be noted below:

1. A sense of fairness: it may just seem more unfair to prejudge facts unique to a
particular individual, as compared with facts about a broader social or
scientific phenomenon.

2. It may be that the private party has more accurate information about
adjudicative facts (since, by definition, those facts pertain uniquely to it) than
legislative facts (since those facts can be discerned simply by examining an
industry, or a particular subject area). Thus, the goal of accurate decision
making requires that the agency be more open to changing its mind about
adjudicative facts. Cf. Factor 2 of Mathews: don’t forget, we’re talking about
due process here as well, so the concerns underlying Mathews (such as
ensuring decisional accuracy) should apply here also.

3. There may be an argument that some level of agency prejudgment of policy

facts is necessary to their duties—thus, for example, one would necessarily
expect the agency to have at least some pre-existing view about, say, whether
children’s advertising is deceptive when it promulgates a proposed regulation
limiting that practice, even if the effect of that prejudgment is to make it
harder for parties to convince the agency otherwise during the comment
process.
ADJUDICATIVE INTEGRITY
 What Guarantees are required to provide a fundamentally fair hearing?
o Limits on the Combination of Functions
o Limits on Bias & Prejudgment
Prejudgment

 Withrow v. Larkin (1975) – PG. 120 of “Short & Happy”

 FACTS: MD was the target of administrative investigation & adjudicative
proceedings. MD (π) alleged that due process was necessarily violated when the
same agency both performed the preliminary investigation that caused the
adjudication to be pursued & also presided over the ensuing adjudication. π’s
claim is that the Combination of Functions entrusted to the agency violates due
process by biasing subsequent proceedings.
 HOLDING: The court rejects the argument: it notes the many situations where
agency personnel play multiple roles. Court concluded that in most cases, due
process claims of bias/prejudgment would have to turn on the particular facts of
the case.
 TAKEAWAY: combination of functions cannot be a per se due process violation
 Winthrow acknowledges Two Per Se Due Process Violation (i.e. 2 situations in
which human nature makes us too suspicious of bias)
o 1. Where the adjudicator has a pecuniary (monetary) interest.
 Tumey v. Ohio (1925) – a police court in a small OH town that
was funded by the fines that were assessed by that court.
Therefore, the more fines, the more funding. Court finds this
was a due process violation.
 Think about Ferguson (BLM police shooting): investigations
found that the judicial system in Ferguson was making money
from the Black population
o 2. When the adjudication has been the subject of personal attacks
from one of the parties
 The “Yagman problem” – attorney Steven Yagman was an LA
litigator who litigated against the LAPD. Yagman would attack
the judge and call him “racist, etc.” and then file a motion to
have the judge removed from the case.

 Two Standards to Analyze Prejudgment DP Violation (beyond Per Se)

 Entrenchment/Disinterested Observer (facts related to specific parties)
o Where agency has entrenched in a position by public statement that it cannot
easily back away from.
o Rule: Whether a disinterested observer would conclude that the agency has
adjudged the facts and law of a particular case pre-hearing
o Agency head comments publicly on issue while hearing is pending.
 Cinderella Finishing Schools v. FTC (1970) Entrenchment FTC Commissioner fines
Cinderella that they’re engaged in deceptive practices. Cinderella loses at the ALJ level
and appeals to the head of the agency. Commissioner knows that it’s been accepted for
review at the highest level of the FTC. However, he gives a speech alluding to the facts
of the Cinderella case. Cinderella says that Commissioner pre-judged case and it would
violate due process for him to review its case. Cinderella prevails.
o
  Irrevocably Closed Mind (facts related to general policy) – Cement:
o Rule: Where agency has irrevocably closed mind on a policy issue being
contested in a given case. Court says the standard is that the agency’s mind has to
be “irrevocably closed” in order to prove bias/prejudgment.
o Stricter Standard than entrenchment: We want agencies to prejudge on policy and
let people know where they stand.
o Ex: Agency made statements re: point pricing, then charged cement on same
issue. Court found no DP violation (high standard)
o FTC v. Cement Institute (1948) Closed Mind: FTC writes a report about the steel
agency that says the industry tends to use a particular point pricing system and
that this system is a violation of the existing fair-trade laws. Agency also says that
other industries engage in this system, including the cement industry. FTC later
bring cement institute up on charges alleging that they’re using point pricing,
which, FTC says, violates fair trade laws. Cement loses.

Association of National Advertisers v. FTC (1980)

 FTC wanted to limit advertising on Saturday morning cartoons because it was by nature
coercive b/c children don’t have the cognitive capacity to discern between truth &
advertising. Advertisers claim the agency already made their mind up/prejudged the issue.
 Court rejects the advertisers claim using the Unalterably Closed Mind standard.

Type of Fact Being Pre-Judged Rulemaking Adjudication

N/A (because rulemakings
Adjudicative Facts generally don’t involve
adjudicative facts)
National Advertisers: standard is
Legislative/Policy Facts "unalterably closed mind" (see
page 254)
Cinderella: standard is
"entrenchment" or the “disinterested
observer” standard
Cement Institute: standard is
"irrevocably closed mind"

Why these Distinctions?

 Workability – nature of what agencies due is to make biased decisions
 Expertise/Accuracy – because agencies are experts should have some leeway to prejudge
broad policy facts
 Fairness

C. Internal Ex parte Contacts:

a. The APA has no rules governing internal ex parte contacts for informal
adjudication – all that applies in those cases is due process.
b. For formal adjudication, however, the APA does impose requirements:
Section 554(d)
The rules under 554(d):

A summary:

 No ex parte communications with a person or party on a fact in issue.

 Adjudicators cannot be supervised by prosecutors.

 No investigator or prosecutor in a case can participate in the decision in that

case, except in their roles as witness or prosecutor.

1. No ex parte communications with a person or party on a fact in issue.

a. The point: keep the ALJ from discovering facts or investigating,

outside the context of a hearing where all parties are present

b. Application: Fairly straightforward, this rule is designed to stop the

ALJ from asking the expert down the hall about a fact relevant to a
particular case. But recall the ambiguities we discussed in class.
 For example: the ambiguity in this provision is that
the ALJ should be able to consult a law clerk or
administrative assistant about “a fact in issue.” The
best reading of this provision is that the ALJ should
be understood as a unit. Additionally, the ALJ
might get a book out of his/her library written by an
employee on the fact.

Theme: Note the sacrifice of expertise (in terms of easy ALJ access to
more information), in order to promote fairness/due process.

2. Adjudicators cannot be supervised by prosecutors (even if the prosecutor

isn't prosecuting any case before that ALJ).

Fairly straightforward: the problem is obvious (adjudicators being tempted

or pressured to rule in favor of the prosecution because of their awareness
of the supervisory relationship).

3. No investigator or prosecutor in a case can participate in the decision in

that case, except in their roles as witness or prosecutor.

a. Note*** that this limitation applies both to ALJs and to agency

heads (i.e., it “applies” to agency heads because even though an
agency head is exempt from 554(d) and therefore can ask the
question, the witness or prosecutor is still subject to the statute, and
therefore can’t answer it).
 Theme: The due process/fairness model becomes quite important
here -- it's so important because of the importance we ascribe to
the roles of "witness" and "prosecutor" -- they're so important that
we don't want them to "step out of role," even at the behest of the
agency head.

b. The point: we want attorneys ("prosecutors") and witnesses only to

act as attorneys and witnesses. If Congress cared enough about
adjudication under a particular statute that it required a formal
hearing, then we want attorneys and witnesses to act only as part of
the formal judicial process.

Theme: Note that the due process/fairness model becomes

sufficiently important to impact even the freedom of action of the
agency head, who normally is otherwise allowed much more
discretion to seek out information beyond the hearing process, in
order either to improve his technical understanding of the issue
(the expertise justification) or to further the overall agenda of the
presidential administration (the political accountability
justification).

D. External Ex parte Contacts: Again the APA imposes no rules for informal
adjudication. For formal adjudication (and formal rulemaking), the rules are in
557(d). The basic principle of these rules is a prohibition on such contacts. On the
other hand, the inevitability that adjudicators will have social contacts with interested
parties requires a careful evaluation of the level of fault and the harm caused by the
contacts. Note also 557(d)(1)(E)’s provision for when the restriction begins.

Note also how parallel the rules of 557(d) are to the rules the D.C. Circuit laid out in
HBO. The problem is that HBO involved informal agency action (an informal
rulemaking); thus, HBO essentially amended 557(d) to apply to informal agency
action. This might explain why Act for Children’s TV was so careful to limit HBO to
adjudicative-like action (“competing private claims to a valuable privilege”), which
then allowed it to explain HBO as being more about due process than anything else.

E. Congressional Pressure: Recall the DC Federation v. Volpe case (which was also
excerpted earlier in the book). That case dealt with congressional pressure on the
agency in the context of an informal adjudication.

Pillsbury (p. 451) involved congressional pressure on formal agency adjudication.

This type of pressure (here, sharp congressional questioning of an agency head who
was preparing to hear an adjudicative appeal) was sufficient to convince the court that
the party to the adjudication could not receive a fair hearing, given the pressure the
agency head felt to state a view on the case before Congress.
  Compare Sierra Club (the case we read in the rulemaking integrity part of the
course), where the court cautions that, while Presidents have the Article II right to
speak candidly with their agency heads in the course of a rulemaking, they might
have less leeway to engage in ex parte communication relating to an adjudication.
Again, and as with Pillsbury, the status of something as an adjudication ratchets
up the procedural fairness that is required, even at the cost of political
accountability—indeed, even at the cost of the ability of a constitutional branch
(Congress or the President) being able to influence agency action.

APA Ex parte Contact Limits in Formal Action

Formal Rulemaking Formal Adjudication

Limits on Internal EPCs? NO 554(d)

Limits on External EPCs? 556(d) / 557(d) 556(d) / 557(d)

What about Informal Agency Action?

 Some DP limits on EPCs in Informal Adjudication
o DC Federation v. Volpe (pg. 454)
o We discussed this in Sierra Club
 No DP limits on EPCs in Informal Rulemaking

§ 554(d) – [Formal] Adjudications

 Primarily refers to internal ex parte contacts
1. No ex parte consultation “with a person or party on a fact in issue” unless notice
2. No supervisor relationship between adjudicator and investigator/supervisor
3. An investigator or witness shall not participate in the decision in that case, except as an
investigator or witness
4. None of this applies to the agency head when adjudicating [§554(d)(C)]

External Ex-Parte Contacts: 556(d)/557(d)

 RULE: No ex parte communications relevant to merits of the case btw interested person
& decision-maker

Pillsbury Co. v. FTC (5th Cir. 1966)

 FACTS: FTC is thinking of whether to allow a merger between Pillsbury & another food
company, which could raise anti-trust concerns. Congress calls the FTC to testify.
 involved congressional pressure on formal agency adjudication. This type of pressure (here,
sharp congressional questioning of an agency head who was preparing to hear an
 adjudicative appeal) was sufficient to convince the court that the party to the adjudication
could not receive a fair hearing, given the pressure the agency head felt to state a view on the
case before Congress.

Legitimating Models
1. Political accountability
2. Procedural fairness
3. Expertise

IV. THE AVAILABILITY OF JUDICIAL REVIEW-§701

 Section 701: Is judicial review available at all?
 Section 702: Who can be the parties to a lawsuit?
 Section 703: What does the lawsuit look like?
 Section 704: When can the lawsuit be brought?
 Section 705: Interlocutory Relief
 Section 706: Justifications for Strike-Downs

 Jurisdiction
APA does not provide federal courts with jurisdiction to hear claims against
agencies.
 Federal Question Jurisdiction (§ 1331 jurisdiction).
 Sometimes Organic Statute sets up a particular scheme of judicial review (e.g.,
making judicial review available only in the D.C. Circuit); in that case, the
provisions of that particular jurisdictional grant generally trump those of §
1331.
 Reviewability
 Rule: The presumption is that agency action will be reviewable by a court except:
1) Statute Precludes Judicial Review Or
2) The Action is Committed to agency Discretion by Law

 § 701-First Exception: The Statute Precludes Judicial Review

 Congress expresses its intent, either explicitly or implicitly.
o Implicit Example:
 Block v. Community Nutrition Institute
 Facts: This action was brought by milk
consumers, a group that was excluded
from the price setting process but which
also was not mentioned in the mandatory
internal appeals process. The statute
provided for only particular groups
identified in the statute to set the price
for raw milk in a particular growing area
in the country. If a member of the group
 listed disagree with the price set, they
will have to go throw extensive agency
appeals before they can seek Article III
court review.
 Holding: The statute implicitly
precludes law suits brought by
consumers. “the presumption favoring
judicial review may be overcome by
inferences of intent drawn from a
statutory scheme as a whole. When a
statute provides a detailed mechanism
for judicial consideration of particular
issues at the behest of particular
persons”) to preclude review, then courts
may not review the agency action.
Note*** courts will often bend over
backward to avoid reading a statute as
precluding all review, given the
constitutional issue that might arise if
Congress really did try to block all judicial
review of an agency action. This is
especially true if the issue for which judicial
review is allegedly precluded involves a
matter of Constitutional Law, which Article
III courts . (DeMore v. Kim)-The court read
this statute narrowly as not precluding the
plaintiff’s constitutional right claim but
precluding the individualized decisions the
Attorney General might make when
administering the statute.
Note*** A statute that could be read
as either precluding or not
precluding judicial review, will be
read as not precluding.

 § 701-Second Exception: The Action is Committed to Agency Discretion by Law

 Rule for § 701: No Law to apply because the statute is written broadly
 Citizens to Preserve Overton Park v. Volpe(1971)
 Facts: The statute in this case sought to
prevent the use of parkland for highways
except when there is no “feasible and
prudent” alternative. The Department of
Transportation argued that their decision to
run the highway through the park is
unreviewable because that decision was
“committed to agency discretion by law.
  Holding: the statute’s preference for not
using parkland, and its insistence that such
use be essentially the last reasonable option,
meant that there was “law to apply,” such
that the agency’s routing decision was
subject to judicial review
 Webster v. Doe (1988)
 Facts: CIA analyst fired for being homosexual
 Holding: Here, even though Congress has not affirmatively
precluded judicial review, the language of the statute is
drawn so that a court would have no meaningful standard
against which to judge the agency’s exercise of discretion.
 Statute allows termination of an employee
whenever the Director “shall deem such
termination necessary or advisable in the
interest of the United States.” Short of cross-
examining the director, court doesn’t know
how it could review his action. Language of
the statue precludes discretion to the
Director.
 Justice Scalia's approach: In Webster v. Doe Justice Scalia argues
that this exception simply codifies the pre-APA common law about
when courts should not examine an agency action. These "common
law" factors would include practical considerations such as an agency's
need to control its own enforcement agenda (thus explaining Heckler),
the availability of legal standards making judicial review possible
(thus including the majority view that this exception includes the "no
law to apply" concept) and other such practical factors that find echoes
in the political question doctrine you may have studied in Con Law.
Note that this is not the majority view; the black letter law today is that
this exception is comprised of the "no law to apply" standard, even
though, as in Heckler, the Court often considers many of the factors
Scalia cites in its application of the “no law to apply” standard.


 Decisions by agencies not to prosecute:

a. Normally not reviewable (unless Congress explicitly
says they are, or provides standards against which a
court can review a decision not to prosecute).
 Heckler v. Chaney
 Facts: Inmate requested that the FDA
investigate the state that was planning on
executing him will be doing so by using
drugs in a manner that is unapproved by the
FDA and thus in violation of federal law.
  Holding: The court held that the agency
decision to decline to begin investigations or
enforcement actions were unreviewable, as
committed to the agency’s discretion. The
court provided 3 reasons why the agency
action is unreviewable, which includes: (1)
refusal based on the agency’s expertise and
enforcement priorities (2) the agency is not
usually using coercive power when opting
not to enforce; and (3) a non-enforcement
decision is like an exercise of discretion not
to prosecute, which traditionally is immune
from judicial review.
 Dunlop v. Bavhowski,
o Facts: Statute read: “The Secretary shall
investigate such complaint and, if he
finds probable cause to believe that a
violation has occurred he shall bring a
civil action.”
o Holding: The court held that congress
created a legal right to civil action if
there is probable cause to believe a
violation occurred
 Common law: if there is a legal
right, you have to get review.
 Decisions by agencies to not commence a rulemaking
 are reviewable, albeit under a very deferential
standard. American Horse Ass’n v. Lyng. Compare
APA § 553(e) (giving a right to request the agency
to start a rulemaking). The idea here is that if you
have a right to make the request, you have a right to
a response—and to challenge the response as
inadequate.
 American Horse Ass’n v. Lyng.
 Facts: Secretary of agriculture promulgated
implementing regulations that imposed civil
and criminal penalties for the use of specific
soring(use of performance-training devices
that injured show horses) devices. Later,
studies found that there were other specific
soring devices that were not included.
Plaintiff petitioned to the Secretary to amend
the regulation to include the additional
devices found by the study but he denied the
petition.
  Holding: An agency’s refusal to undertake
rulemaking is subject to review.
Additionally, the APA, 5 U.S.C. sec. 555(e),
requires an agency to explain the reasons for
denying a petition that asks the agency to
make, modify, or repeal a rule. Rulemaking
involves questions of law.
 Defining “Agency Action” for Review Purposes
RULE: Agency action (or failure to act) consists only of an agency taking (or failing to take) a
discrete action, rather than an agency’s overall management (or failure to manage) a regulatory
program.(Norton v. SUWA)
 §551(13) says you can sue under the APA only to review “agency actions;”
however, what does SCOTUS define as an “agency action”?
 §551(13) definition of “agency action”:
o § (a) “failure to act” – the majority understands this to mean “a failure to
take one of the agency actions” prescribed in §551(13). So it’s a failure to
take a discrete action.
o § (b) The only agency action to be compelled under the APA is that which
is legal required.
 Norton v. Southern Utah Wilderness
Alliance(SUWA)
Facts: Claims made by Environmentalists that the
federal bureau of Land Management was
mismanaging federal wilderness lands by allowing
excessive use of off road vehicles and other
activities that degraded their wilderness quality.
They claimed that the agency was failing to act, by
failing to manage the land properly.
Holding: The court held that all of the definition’s
example of action-rule, order, license, sanction, and
relief”-were discrete. Therefore, a “failure to act”
must be a failure to take a discrete action.

STANDING § 702
 RULE: Standing requires that a plaintiff must meet both Article III standing
requirements and have a cause of action- the cause of action can be obtain from
the organic statute(particular individuals are allowed to sue) and APA section
702, “ arguably within the Zone of Interest sought to be protected by the organic
statute.
 Article III Standing Requirements
1) Injury
a. Concrete and particularized to the Plaintiff, not generalized (Defenders of
Wildlife)
b. Actual (already happened) or imminent(pending)
2) Injury caused by the defendant
 3) Redressable by a court – if the court issues relief, will the relief make the π
whole/address the injury

 Application of the Standing requirements

 Lujan v. Defenders of Wildlife
 FACTS: Under the endangered species act, there are
special requirements when the government is doing
something to harm a species (i.e. if a military base is being
built near where endangered species live). In these cases,
requires the DOD to consult with the Dept. of Interior. The
action agency is acting abroad – USAID (federal
governments foreign aid agency). USAID assisting with
dam building in Egypt & Sri Lanka.
 Plaintiffs, Kelly & Skilbred, are wildlife researchers
that are concerned that the species they study will
be extinct and their career will be over b/c the thing
that they study will no longer exist.
 Citizen suit provision under the Endangered Species
Act gives any person the right to sue to challenge
violations of the law. Plaintiffs claim that this
provision gave them Article III standing and the
deprivation of this right is an injury.
 HOLDING:
 Injury: The π’s injury is not sufficiently imminent
because the π’s have no plans to travel abroad to
study these animals.
 Redressability: How do we know that π’s injury
will be redressed if the Court order DOI to consult
with USAID? USAID may chose not to show up
since they’re not a ∆, and USAID may not even
comply with a DOI request to stop building the
dam.
 Citizen Suit Standing: This is a right given to
everyone in the country; therefore it is not a
particularized injury, but a generalized
grievance and therefore don’t provide the
right, the deprivation of which creates Article
III Injury
 Note*** At times (as in Defenders) the Court will be strict, not so much about
whether the interest at stake (e.g., the researchers’ professional interest in
studying the species) is one the deprivation of which counts as Article III
injury, but instead, about whether that injury is in fact sufficiently imminent,
as opposed to indefinite or speculative (as it was held to be in Defenders,
given the researchers’ lack of definite travel plans to visit the habitats in
question)
  Note*** Citizen-suit provisions by themselves don't provide the right, the
deprivation of which creates Article III injury (Defenders)

 Causation (and thus redressability) problems may

prevent standing when the plaintiff sues an agency and
claims that the agency's action is illegally encouraging
another private party to act to the plaintiff's detriment
(Simon v. Eastern Kentucky-Strict Approach vs.
Friends of the Earth, Inc. Loose Approach )

 Simon v. Eastern Kentucky Welfare Rights Organization (1976)

 FACTS: Plaintiffs are indigent persons who would be
recipients of charity or low cost hospital care. Plaintiffs
argue that the IRS misread the tax code and has made it
too easy for hospitals to retain their charity status while
still denying free or low cost care to indigent patients.
 HOLDING: Court says how do we know that the IRS
caused the hospitals to deny charity care (injury)? If the
IRS reads the internal revenue code more stringently,
hospitals may no longer offer indigent care at all (no
redressability).
 Spokeo, Inc. v. Robins:
 Facts:
 Holding: the court held that the injury-inaccuracies on the
consumer report- was not concrete enough. The court held that for
an injury to be concrete it must be "de facto," it must "exists," and
it must be "real" rather than "abstract." It need not, however, be
"tangible." Courts have ruled that an intangible injury can be a
concrete injury.

 Probabilistic Standing:
 Does the plaintiff have injury if her argument is that the agency’s action merely
increases the odds that she will be harmed?
In Clapper v. Amnesty International: Holding: the Court insists
that injury be either
(1) actual or (2) “certainly impending,” but then adds in a footnote
that the plaintiff can also establish injury by showing (3) “a
substantial risk” that the injury will come to pass.
 The DC Circuit has amplified somewhat on this test,
requiring that a party seeking to establish this kind of
injury must show that (1) the agency action
substantially increases the risk of harm occurring and
that (2) the resulting risk is itself substantial.
  Statutory Standing- The Zone of Interest
The test: is the plaintiff arguably within the zone of interests sought to be protected
by the statute?
In addition to the Article III standing, a plaintiff seeking to challenge agency action must
demonstrate so-called “statutory” standing. In other words, the plaintiff must demonstrate
that congress provided he/she with a cause of action to sue.

 2 Sources of Law to determine statutory standing:

1. Organic Statute
 authorize certain types of parties
 Citizen Suit Provision in a Statute(Defender Wildlife)
2. APA § 702:
 Allows standing for a person “suffering legal wrong because of agency
action.
 Thus, a person whose legal rights have been impaired by an
agency action- for example, a person who has a legal right to
benefit but has been denied it-has a cause of action under
Section 702
 Allows standing for a person adversely affected or aggrieved by
agency action within the meaning of the relevant statute (Zone of
Interest)
 Association of Data Processing Service Organizations v.
Camp, the court interpreted “adversely affected or
aggrieved…” as requiring the plaintiff to be “arguably within
the zone of interest of the relevant statute.
Note***Application of the ZOI test: extremely easy to meet. All that’s required is that the
plaintiff be arguably within the zone of interests protected by the statute. Thus, competitors of
the regulated party (as in Data Processing) will almost always be within the zone
 Association of Data Processing Service Organizations v. Camp
o Facts: an agency regulation increased the
competition the data processing companies faced,
but the banking statue on which the agency
regulation was based did not explicitly reflect an
intention to benefit those data processors.
o Holding: The court held that a group representing
data processing companies had zone of interests
standing to challenge an agency regulation that
made it easier for banks to provide data processing
services for clients. The regulation increased their
competition.
Note*** Is there anyone who would be outside the ZOI, ever? Maybe the stenographer of
administrative hearings in the hypothetical in class. A purely incidental beneficiary of the
statute.
  Air Courier Conference of America v. American Postal Workers Union
Facts: Union for postal workers challenged a regulation allowing
private mail delivery companies to deposit mail with foreign postal
service.
Holding: The court held that the postal workers lacked
zone of interest because the original postal statute was enacted at
a time when there was no postal workers.

Note***: This is a statutory limit, growing out of Section 702 of the APA; but because it’s
statutory, Congress can eliminate this requirement by enacting another statute (e.g., by including
in the statute a citizen suit provision allowing any person to sue – in that case, all that's needed
is that the plaintiff satisfy the constitutional standing requirements (as long as the plaintiff is a
“person”—see Cetacean Community).
 Cetacean Community v. Bush
 Facts:
 Holding

 Associational Standing
 Important because most administrative law plaintiffs are associations-either industry
groups or public interest groups
1. For an association to sue on behalf of its members, it must satisfy the
following three requirements:
 At least one member of the association must have been able to
demonstrate standing on her own part;
 The association exists for reasons that are germane to the
lawsuit(Association must have some form of connection to the subject
of the lawsuit- (i.e. Sierra Club is an environmental protection group,
so must sue re: environmental protection); and
 The relief the association seeks must be effective in redressing the
individual member’s injury, despite that member’s absence as a named
plaintiff. (Defenders of Wildlife)-
 The association can sue an agency for an injunction because it
can operate to benefit the entire world, it would likely redress
the injury suffered by the individual member. In CONTRAST-
if the association seeks damages on behalf of its member/s and
not injunction, the court might have a second thought about it
because the damage check might not get to the injured party.
 Note*** The association can sue for damages its own behalf

TIMING § 703
 RULE: A lawsuit challenging agency action must be Ripe. Ripeness includes
both constitutional (Case or controversy) and prudential aspects(hardship to the
plaintiff). Additionally, either the organic statute must make the action
reviewable or the action must be final agency action within the meaning of the
APA sec.704. Finally, a plaintiff is generally required to exhaust her
administrative remedies before suing in federal court.
  Three Timing Doctrines:
 Ripeness – whether the lawsuit is ripe for judicial adjudication now
o Court focused
 Finality – when the agency action in question is final
o Agency focused
 Exhaustion – to what extent does the challenger has to exhaust her admin remedies
before she’s allowed to come to court
 Litigant focused
·
 Ripeness
 Ask Whether a case is “ripe” for judicial decision, or, conversely, whether it is too
early for the court to hear the case-whether a challenge has “ripened” to the point
where it constitutes a “case or controversy” of the type appropriate for judicial
resolution

Ripeness RULE (Abbott Labs)

1) Fitness of the Issue (Article III prong – “case” or “controversy”)
 Finality: is this the final agency action?
 Purely legal: Is it a question of law as opposed to a mixed question of
fact/law?
2) Hardship that the parties face (prudential concerns or common-sense)
How to apply?
Compare the contrasting results the Court reaches in Abbott Labs and Toilet Goods to get a sense
of what these factors mean in practice.
 Abbot Laboratories v. Gardner (1967)
 Facts: Regulation by the FDA says whenever the drug label uses the brand name
of the drug, it must also use the scientific name of the drug. Rather than slap the
old label on and wait to be adjudicated by the agency, the pharmaceutical
company sued when the rulemaking was over
 Holding:
 Fitness:
 this is a purely legal question
 no need for facts surrounding this question to reach an
appropriate answer, no real need to wait for enforcement, no
risk of hypothetical advisory opinion
 This is final agency action
 If the action wasn’t final, and the court wrote an opinion saying
the action wasn’t legal, the agency could moot the opinion the
next day by finalizing the action.
 Such a decision would be an opinion based on facts that
haven’t been established – classic advisory opinion
 Agency action does not have to be forever final to satisfy the
finality requirement
 2. Hardship to the parties:
 The mere fact that it is costlier to maintain uncertainty
for a few more months does not constitute hardship
  The hardship is substantial here because Abbot Labs
only has two bad options:
 Option 1: start complying now and lose the
opportunity for judicial review (because there
would be no enforcement action if they are
complying)
 Option 2: don’t comply and risk enforcement
action
 They would get judicial review, but the
PR would be really bad:
 If the enforcement occurs and the
reg is upheld, they will be
convicted of passing off
adulterated drugs
 Right before this a similar
result created a PR
nightmare for another
company
 Toilet Goods Association v. Gardner (1967): Companion Case to Abbot
 FACTS: Regulation authorized the agency to suspend “certification
services” for color additives used for cosmetics and related items if
that given manufacture failed to admit a government official who
wished to inspect the firm’s production facilities.
 HOLDING:
 Not RIPE because it’s not guaranteed when or if agency is
going to inspect the facilities. Regulation only gives agency the
authority to, not whether it will certainly occur.
 Why Different From Abbot: Is the inspection reg really
necessary for the enforcement of the act? Court says won’t
know until the agency actually implements the inspection reg.
Court needs more facts to answer the questions, which makes it
NOT RIPE.
 Primary conduct – Regulation does not make you do/prohibit
you to do anything NOW

 Finality
 The two-part test from Bennett v. Spear: does the action complained of reflect the
culmination of the agency’s decision-making process, and is it one from which legal
rights and obligations flow?
 Section 704: agency action made reviewable by statute and final agency action for
which there is no other adequate remedy in a court are subject to judicial review
 Bennett v. Spear (1997): to be final, an agency action: -
 Bennett Test:
1) Agency as to have signed off on the action; and
 2) The action has to have some form of Legal Effect on someone because
if it does not then it would be considered advisory opinion by the
court- “legal consequences will flow”
 Applications of this Test
 Sackett v. EPA (2012): an Administrative Order is final – it has legal obligations now
 Corps of Engineers v. Hawkes (2016): The 2nd part of the Bennett test could be met
when an agency action exposes a party to an increased risk of consequences that are
not yet legally mandated
 Laundry Council v. Schultz (DC Cir. 1971): a statement on the phone
o Facts: People who operate coin operated dry cleaning stores want to
know if they’re held to fair labor standards act, so they write a letter to the
agency head (Schultz). Schultz responds that it does apply based on the
facts they provided. LC sues. Holding: the Court finds they’re allowed to
sue because it’s final agency action. It’s final because Schultz is the
head of the agency and his answer represents the agency’s position.
The letter satisfies the first prong of the Bennett test even thought the
case was decided years prior to Bennette
 Appalachian Power v. EPA (DC Cir. 2000):
o Facts: The agency issued guidance document, however, the document had
strong mandatory language and was detailed in nature. Holding: the court
held that the detailed nature of the document & its use of mandatory language
strongly suggested to regulated parties that the document had legal
consequences
Note*** that even an informal agency action, such as a letter to an industry trade group, might
be considered sufficiently “final” as to constitute final agency action. Laundry Council.

 Exhaustion-704
 RULE: requires π to exhaust admin remedies before she can challenge the agency
action in a federal court. The nature of the doctrine is grounded in good judicial
common-sense. Must keep working her way up the agency process before going to
federal court.
The reasons for requiring exhaustion
 Promotes agency authority by letting it correct its mistakes
 Allows agencies to use its expertise to sharpen the issues the court
needs to decide and promotes respect for both the agency and
regulatory scheme that congress may have seen fit.
 But the countervailing idea: if a court has jurisdiction it has to exercise
it
 Three circumstances when the exhaustion requirement is waived:
 When there’s undue prejudice to the claim (i.e. significant delay or
tough filing deadlines)
 When the administrative remedy may be inadequate
 When the agency is shown to be biased
  No countervailing reasons to require exhaustion here – e.g. no special
agency expertise
 Non-APA Exhaustion:
 McCarthy v. Madigan (1992)
 Facts: Prison inmate seek monetary damages
and Article 1 court cannot remedy. Holding:
Court held no exhaustion required) – common
law rule of exhaustion (applies if there’s nothing
available in any legal source about exhaustion.
 APA Exhaustion – Section 704
 “except as otherwise expressly required by statute, agency action otherwise
final is final for the purposes of this section…unless the agency otherwise
requires by rule and provides that the..”
APA Exhaustion-704 RULE: This is a default rule that is used when the statute is silent
Exhaustion is not required unless the agency
1) requires exhaustion
2) by rule/regulation not case-by case and
3) provides that the preliminary result of that action is stayed
 (and if the organic statute by Congress requires it)
 How to resolve? Generally require exhaustion, but not when more agency consideration
would not help resolve the issue. McCarthy.

a. If requiring exhaustion would prejudice the plaintiff’s right eventually to come to

court.
b. If the agency could not offer adequate relief.
c. If the agency decision-maker is biased.

Note*** The APA speaks to exhaustion. In particular, Section 704 states the rule that a litigant
need not be forced to appeal an adverse decision to an appellate body within the agency (e.g.,
appealing an ALJ’s decision to the agency head) unless (1) Congress says otherwise (remember,
the APA is just the default, and Congress can always prescribe more specific rules for a
particular agency or program); or (2) the agency by regulation requires exhaustion and provides
that, while on appeal to the agency appellate body, the original decision is stayed.

THE SUBSTANCE OF JUDICIAL REVIEW §706

 The problem: When courts review agency action, they review several aspects of
agency conduct. These aspects, in turn, call forth different levels of judicial review.
o Fact Finding,
o Law Interpreting and
o Policy Making
  Judicial Review of Fact Finding
  Fact Finding Law-Interpreting Policy Making
Informal Agency Arbitrary & Chevron/Skidmore Arbitrary &
Action Capricious §706(2)(C) Capricious
Standard (§706(2)(A)) Standard (§706(2)
(A))
Formal Agency Action Substantial Evidence Chevron/Skidmore Substantial Evidence
Standard §706(2)(E) §706(2)(C) Standard §706(2)(E)

 What Standard of Review?:

 Judicial review of agency fact-finding turns on the formality of the
procedure used.
 Informal Action: When an agency engages in informal action,
courts review the agency's fact finding under the "arbitrary and
capricious" ("A/C") standard.
 Formal Action: When the fact findings are made in a formal
procedure, they are reviewed under the “substantial evidence
(SE)” standard
Note***: Ironically, some judges and commentators believe that, in terms of the actual level of
scrutiny, there is no significant difference between the A/C standard and the substantial evidence
standard. However, Some courts disagree, arguing that substantial evidence review is more
stringent than A/C review.

1. So, under the first approach (where there’s no difference in the stringency of
the review) why have two different standards? Because there are differences
in terms of the record that the agency can turn to in defending its fact finding

a. RULE for Substantial evidence: The agency must defend its fact
findings based on the whole public record created during its
decision making process, e.g., the record created in a formal
adjudicative hearing before an ALJ.

b. RULE for A/C: The agency must defend its fact findings based on
the information it had in front of it when it made its decision even
if such record was not made available to the actual public.
 However, that information isn't the same as the "record"
that is used to review decisions under the substantial
evidence standard. That latter “record” is limited to the
information and evidence put on the formal record of the
on-the-record proceeding—don’t forget that the S/E
standard applies only when there is such an on-the-record
proceeding. On this theory, A/C review allows an
 agency to defend a decision based on evidence it
considered, but did not place into the actual public
record (e.g., the notice of proposed rulemaking).
o In Nova Scotia-does not allow agencies to pull
anything out-in that case the court held that if the
evidence was so crucial to their rule making, then it
should have been in their record.
T-Mobile South, LLC v. City of Roswell

Pension Benefit Case

2. Assuming there is no difference in the intensity of judicial review of fact-

finding under these two standards, then what does this standard mean?

a. Generally understood to be more deferential than the “clear error”

standard by which appellate courts review fact-findings made by a
lower court.

b. The standard has been explained by the Supreme Court as enough

evidence to justify denying a directed verdict (also called a JNOV
verdict). In other words, enough evidence so that a reasonable
fact-finder could find the fact as the agency did.

 Factfinding Issue: What to do when Agency Head Disagrees with ALJ on Appeal

3. The problem of disagreement between the ALJ and the agency head: If, as in
Universal Camera and Penasquitos, the agency head, on appeal from the
ALJ’s decision, finds the facts differently than the ALJ did, should the ALJ’s
findings count for anything in the court’s substantial evidence review?

a. Because the ALJ’s findings constitute part of “the whole record” (§

706) that has to contain substantial evidence, the ALJ’s findings must
be part of the reviewing court’s analysis

b. Universal Camera says those findings should get the weight they
deserve (whatever that is in a given context)

c. In Penasquitos, this is understood to mean that if an ALJ’s findings are

based on credibility determinations, they should get relatively more
weight than if they are based on or derived from paper evidence
(“derivative inferences”), which both the ALJ and the agency head are
thought to be similarly capable of evaluating. Indeed, it might be that
agency heads are “better” at evaluating derivative inference—in part
because of their expertise, but also in part because such derivative
inferences may have a component of policy-making in them—and
 agency heads, as political appointees, may be better suited to make
those policy judgments.
 Universal Camera Corp. v. NLRB-Primary Inference
Facts: The ALJ found that an employee had been fired
for legitimate reasons unrelated to his union advocacy.
On appeal, however, the agency heads disagreed, and
found that the employee had been illegally discharged
for his union activities. Holding: The court held that
the ALJ finding should be given the weight it deserves,
which simply means that the ALJ finding was based
upon a witness that he heard and should be given more
weight.

 Penasquitos Village, Inc. v. National Labor Relations Board(NLRB)-Secondary or

Derivative Inference
 Background:
o Agency Head found Penasquitos in violation of NLRA for
unlawfully discharging employees for union activity
 Discharge was abrupt and it came two days after a
union election
o ALJ rejected those charges based on credibility of
testimony
 Issue: Why does the agency head get to second guess decisions of the
ALJ on secondary inferences?
o Why is more credence is given to
 Analysis:
o Justifications for Agency Head receiving greater deference on
secondary inferences:
 Expertise:
 “on the NLRB board there is a combined 165
years of labor experience, when a firing happens
abruptly right after a union election, they know
that 9/10 times it’s improper.”
 Political Accountability:
 Authority:
 Congress gave the Agency Head this
authority
 An agency head is hired for their
particular personal political
preferences which indeed may
color the facts
 Mixed Question of Facts and Policy:
 The facts the Agency Head finds based
on secondary inferences may be
inextricably intertwined with policy in a
 way that this is really a policymaking
decision
 An agency head’s personal
political preferences may color
the facts
 Rule – Universal Camera:
o Witness Credibility à ALJ’s findings will be given more
weight
 Penasquitos: Majority/Concurrence disagree over
whether it makes sense to give ALJ so much deference
on credibility determinations.
o Documentary Inference à Agency head will get more
deference
 Two Approaches:
1. Intuitive Difference
a. S/E is slightly more strict
scrutiny than A/C
b. A/C is even more deferential
2. Scalia’s Distinction – differing
evidentiary requirements
a. Under S/E the agency findings
can only be justified only under
the record that was part of that
formalized hearing
b. Under A/C the agency findings
can rely on anything, even if they
didn’t put it in the record
 **Issue: BUT, Nova Scotia: if the info was important
enough to win the case, then it should have been on the
record!

 Judicial Review of Agency Policy Making

Once an agency finds facts and interprets the law, it then sets about applying facts to law
and coming out with a particular regulatory result. In informal actions such as notice and
comment rulemaking, that result will be reviewed under the A/C standard.

A. The History of the A/C standard

1. Originally, probably extremely deferential, akin to rational basis review.

 2. But no more: today, that review is stricter, as courts demand evidence of
careful and logical thought by the agency (or, in other words, courts
demand that agencies take a "hard look" at all their options). Indeed, in
later incarnations, “hard look” review has come to be understood as
requiring the courts themselves to take a “hard look” at the agency’s
decision-making.

3. But note also: the vagueness of the standard allows judges, at least in high-
stakes cases, to let their political predilections influence their decision.

B. RULE for reviewing Policy Decisions: The Basic Standard: Overton Park and
State Farm
1. Overton Park described the A/C standard as narrow, yet searching,
seeking to ensure that:
a. the agency considered all the factors Congress told it to
consider; and
b. that it did not make a clear error of judgment when applying
those factors.
2. State Farm amplified on that standard:
a. did the agency rely on factors Congress did not intend it to
consider; or
b. entirely fail to consider an important aspect of the problem; or
c. offer an explanation that runs counter to the evidence; or
d. offer an explanation so implausible that it could not be rescued by
appeals to an agency's expertise.
Note** also that agencies must explain their actions, and may not rely on post-hoc
rationalizations or have the courts fill in the explanation for them (unlike equal protection or due
process rational basis review of legislation).
 Citizens to Preserve Overton Park v. Volpe(1971)
 Facts: The statute in this case sought to
prevent the use of parkland for highways
except when there is no “feasible and
prudent” alternative. The Department of
Transportation argued that their decision to
run the highway through the park is
unreviewable because that decision was
“committed to agency discretion by law.
 Holding: the statute’s preference for not using
parkland, and its insistence that such use be essentially
the last reasonable option, meant that there was “law to
apply,” such that the agency’s routing decision was
subject to judicial review. The court intern developed a
2 part test for reviewing agency decisions
 Two Part Test (Overton Park):
 1. Did the Agency Consider Relevant
Factors (i.e. what does the law
require the agency to consider?)
a. Might be that agency looked
at factors other congress
intended.
2. If so, did the agency make a clear
error of judgment in applying
those factors?
a. Agency must have some
basis in expertise for its
findings
b. How agency chooses to
interpret a study may be
attackable.
c. Thus, Practical Effect:
Agencies produce a lot of
supporting information to
support agency action.
Criticism that this led
agencies to be overly
cautious when promulgating
regs.


 Motor Vehicle Manufacturers Association v. State

Farm (1983)
 Revocation of a rule gets the same arbitrary
and capricious review as promulgation of a
rule
 Unlike a decision not to begin a rulemaking
at all – which gets much more deference
 Facts: Promulgated regulation requiring
automobile makers to 1) install airbags or 2)
automatic seatbelts
 Holding: Rescission of a rule is different
than an agency
o Judicial review of an agency
decision not to start a rulemaking –
extremely deferential (American
Horse)
o A/C review under APA ≠ rational
basis review under Due Process
 o Rational basis review = political
accountability
o A/C review = expertise
o No post hoc rationalizations allowed
 A/C Review of Policy-Making:
 The agency must examine the relevant data and
articulate a satisfactory explanation for its action
including “a rational connection between the facts
found and the choice made.”
 Consider:
1. whether the decision was based on a consideration of
the relevant factors
2. whether there has been a clear error of judgment.
 Agency has to read the statute correctly, apply the
relevant statutory factors, and must be reasonable/
rationale when applying such statutory factors.
 An Agency Policy May Be A/C If:
 The agency has relied on factors which Congress has
not intended it to consider
 Entirely failed to consider an important aspect of the
problem
 Offered an explanation for its decision that runs counter
to the evidence before the agency, or is so implausible
that it could not be ascribed to a difference in view or
the produce of agency expertise
 “we may not supply a reasoned basis for the agency’s
action that the agency itself has not given.” Chenery
 The contemporaneous rationale rule, agency has
to stand or fall by the reasons it gives
 We will, however, “uphold a decision of less than
ideal clarity if the agency’s path may reasonably be
discerned.”
 Application:
 Agency looked at facts and rescinded rule
 Failed to consider an important aspect of the
problem
 I.E Agency could have imposed a mandate
requiring airbags
 An agency must consider other regulatory solutions
before rescinding a rulemaking
 Does not place an unfair burden upon the agency
 Important factor to think about safety when
promulgating regulations
 The agency did not even consider requiring
compliance through airbags – it did not consider
a relevant factor
  There is no specific procedure required, and a
rulemaking is not illegitimate because the agency
failed to consider every alternative possible
 But, the agency has to consider something as
critical and obvious as airbags were in this
situation

Arbitrary and Capricious Standard:

 For an Agency to Avoid Failing A/C Review:
o Read the Statute Correctly + identify the correct
relevant factors (Overton Park)
o Consider the Relevant Factors (State Farm)
o Don’t Make a Clear Error in Judgment (State
Farm) - be reasonable when applying such
factors

 The theoretical basis for hard look review

1. Agency action must be reasonable, in order to vindicate the expertise

justification for agency action.

2. Agency action must be reasonable, and must be explained by the agency,

in order to vindicate the process that the APA provides.

The theory: That process -- e.g., participation rights in the notice and
comment process -- does not mean anything if the agency doesn't have to
explain how its result is responsive to the information provided during that
process.

3. Agency action must be reasonable, because judicial review of

reasonableness is the only way to ensure that the agency thought about the
issue in adequate depth.

4. Agency action must be explained by the agency also because the agency is
presumed to be the expert: it would be odd for the generalist court to
uphold the policymaking of a supposedly-expert agency on the court’s
own reasoning when the agency’s own explanation was rejected by the
court as unreasonable or arbitrary.

5. The problem: such expertise and due process/fairness justifications clash

with the political accountability justification. See, e.g., State Farm, esp.
the Rehnquist dissent.

6. Finally, agency action must be explained by the agency (and not by the
courts themselves) in order to make this type of review a reality and not a
sham (as it sometimes seems to be in equal protection/due process rational
 basis review, given how lax rational basis review can be in equal
protection and due process).

7. Still, the result of cases such as State Farm is that agencies can never be
sure how harsh judicial review will be of an agency’s policy decision. This
incentivizes agencies to take extra steps to shore up its reasoning—even if
those extra steps slow the process down and make it harder for agencies to
pursue other initiatives.
 FCC v. Fox Television Stations, Inc.
o Facts:
o Holding: The Fact that an agency changed their
mind from one view to another requires that the
change be justifiable. Agency has to explain
why the change of position. No need for extra
explanation once new approach is reasonable
 Pacific States Box & Basket Co. v. White

 Judicial Review of Agency Interpretations of Law

Agency Interpretation of it Organic Statute

The Basic Rule: Chevron's Two-Step Inquiry

Step#1: Did the statute clearly answer the question? If so, then the court simply
reads the statute without consideration of the agency's position.

Step#2: But if not, then the court defers to any reasonable agency interpretation
of the statute.
 Chevron v. NRDC (1984)
 Facts: CAA establishing permitting processes
applicable to “stationary sources” of air pollution. But
there was confusion as to whether “stationary sources”
permit application of the “bubble concept.” The EPA
announced a rule, changed course a year later, and the
NRDC challenged. The district court applied Skidmore
deference.
 Question: Whether EPA legal interpretation was
reasonable and what standard to apply to this question?
 Holding: Chevron two-step adopted:
(1) Whether Congress has directly spoken to the
precise question at issue?
  “If the intent of Congress is clear, that is the end
of the matter”
(2) If yes: read the statute and ignore agency’s
position / If no: defer to any reasonable agency
interpretation (hard look review)

The Basis of the Chevron Rule

 Political Accountability
Assuming we're dealing with Step 2, then deferring to a
reasonable agency interpretation allows the
administration in power to read statutes as to
correspond to the prevailing regulatory/political mood
in the nation (e.g., deregulatory, pro-business during the
Trump Administration). If the court instead imposes its
own interpretation of what is by hypothesis an unclear
statute, then an unelected judiciary ends up making
what are fundamentally policy judgments about how a
particular statutory scheme should be implemented.
(Note the characterization of Step 2 decisions as “policy
judgments” – this suggests similarity between what the
agency is doing here and what it is doing when it is
explicitly “making policy.”)
 Note*** also that Chevron greatly increases executive
power, at the expense of both the courts and Congress.
 To some degree, Chevron also reflects notions of
agency expertise. One sees hints of this in Chevron
itself and also in Barnhart v. Walton’s discussion of the
factors governing when Chevron applies.

 Barnhart v. Walton
Facts:
Holding:

2. Chevron and the Judicial Power

Is there a Marbury problem with Chevron's deference to administrative

interpretations of statutes? Possibly, but this can be resolved if you
conceptualize Chevron Step 2 as a situation where there is "no law to
interpret," because Congress had no clear intent. Recall also the class
discussion of how various factors in the political question doctrine also
pop up in a Step 2 situation.

 The Applicability of Chevron

1. Generally it applies to legal interpretations made in the course of
promulgating regulations and adjudicating cases, at least formal
adjudications.

2. Generally does not apply to agency actions that fall short of rulemaking,
e.g., the drafting of non-legally binding policy statements, interpretative
statement and litigation positions. Mead.
 US v. Mead Corp (2001) – PG. 207
 The issue: the proper interpretation of a section of the. US tariff
schedule (which is statutory)
 The agency makes it, via a process that Justice Souter
 When does Chevron Apply?
o Adjudication & rulemaking involves robust
participation rights (procedural fairness)
o Agencies gets the power to act with binding force only
when they act pursuant to a process that involves robust
participation rights
o Chevron gets deference when the agency acts in a way
that allows public participation in the process by
which the law is made.
 There’s a CATCH
o the NationsBank exception: sometimes agency
interpretations merit Chevron deference even when the
interpretation doesn't arise out of a rulemaking or
adjudication process.
 HOLDING: In this case Chevron doesn’t apply
o The agency lacks rulemaking authority on these particular
questions
o The agency made it clear that any classification decision is
binding only between the agency and the
requesting/importing party
o Even as to those parties it’s only binding until the agency
gives notice of a change
o No centralized mechanism for making these decisions
 Justice Scalia DISSENT: Calls for all-Chevron, all the time.
Questions the connection between administrative formality and
agencies’ power to interpret law with binding effect. He also
wonders why agencies should enjoy Chevron when they do, say
rulemaking, but not when they issue a policy statement
 The theory in general is that these latter actions do not reflect an implied
congressional delegation to the agency to act with the force of law (i.e.,
with Chevron deference).

a. These latter agency actions aren't the result of processes (again, the
notice-and-comment process and adversarial legal presentation)
that give an assurance that interested parties have had a chance to
influence the agency's final decision.

Theme: Due process/Fairness as a justification for agency action.

3. But note also Mead's catch-all exception -- that is, its statement that
sometimes agency interpretations merit Chevron deference even when the
interpretation doesn't arise out of a rulemaking or adjudication process. In
Mead itself, the Court concludes that the agency’s decision did not merit
the status of binding law given the characteristics of the agency’s action
that we described in class (e.g., the lack of any requirement that those
decisions be explained, and their revocability at will and without any
notice).

 In Barnhart, decided the year after Mead, the Court greatly expanded
the criteria for deciding whether an agency’s interpretation gets
Chevron deference, well beyond Mead’s focus on the procedure the
agency used.

4. Thus, here is how you perform “Chevron Step 0”:

a. If the agency has the authority to act in a procedurally robust way

(i.e., via rulemaking (formal or informal) or formal adjudication),
then the agency interpretation will likely get Chevron deference.
Mead.

b. Even if (a) isn’t satisfied, an interpretation might still get Chevron

deference if it has the indicia of careful consideration and
bindingness that the Customs interpretation lacked in Mead.
Mead.

c. Even if (a) and (b) aren’t satisfied, a court might still decide to
accord an interpretation Chevron deference, if the grab bag of
factors identified in Barnhart are held to be satisfied. Barnhart.
CHEVRON STEP ZERO:
 Was the Decision Made with Procedural Formality (i.e. Congress gave agency authority
to decide what the statute means)?
o Yes  Strong Presumption in favor of Chevron.
 If it’s Formal ADJ / (formal/informal) N&C RM  that’s enough.
  If informal ADJ depends on how much process was due. How much
participation was allowed?
o No  Still might be entitled to Chevron. NationsBank exception: sometimes agency
interpretations merit Chevron deference even when the interpretation doesn't arise out
of a rulemaking or adjudication process.
 Number of Decisions Put Forth: If agency is making thousands of such
rulings per year, likely that congress didn’t intend to vest all that power
(without being explicit)
 Specificity of Ruling: Where agency makes clear that decision only applies to
one party, and where the agency leaves open possibility that the law can
change at any time, less likely to get Chevron. If not Chevron  Skidmore
 Another Exception: Barnhart v. Walton Multi-Factor TEST
 Chevron applies if Congress have the agency the power to act through
a relatively formalized process (informal or formal rulemaking or
formal adjudication) OR
 If it satisfies the Barnhart multi-factor balancing test:
o Agency expertise
o Importance of the question to administer the statute
o Complexity of the statute’s administration
o How careful the agency considered the question

Note: This final possibility obviously makes the “Step 0” question highly
indeterminate. If you end up having to apply this final possibility, it’s fine
to admit that the inquiry is indeterminate, and could come out either way.

 Skidmore Difference:
o If an interpretation doesn’t get Chevron deference, then it gets deference under
Skidmore. Skidmore “deference” defers to an agency’s interpretation to the extent
it warrants respect: e.g., if it’s the product of agency expertise, consistent, and
well-explained.
 Skidmore v. Swift & Co (1944) – PG. 192
 FACTS: the workers were privately-employed workers who
would respond to emergency calls at the employer’s plant. Because
they were on call for long periods, but periods in which few if any
calls would come in, a question arose whether all of that waiting
time, or only part of it, or none of it, counted as work.
 Congress did not give the agency the power to promulgate
legally binding regulations on this topic, so fails Chevron.
 ISSUE: What counts as working time for fire fighters in an
industrial plant?
 What does the agency do in the course of answering questions like
this?
 o Issues Bulletins: Agency drafted interpretive bulletins that
tell the regulated community about what the agency thinks
about particular applications of the statute.
o Bring Charges: Agency acts as prosecutor, so can explain
“this is what the law is and why and we’re bringing suit”,
but word is not final say like a typical prosecutor
o In this case, write an amicus brief
 What characteristic unites all these functions?
o U.S. vs. Mead Corp (will review later): non-binding nature
of agency actions…
 How much deference does the agency’s interpretation warrant?
o Agency’s expertise gave it “The power to persuade, if
lacking the power to control”
 Its thoroughness
 The validity of its reasoning
 Its consistency
 And all the other factors that make it persuasive

6. The complication of having both Skidmore and Chevron as deference

approaches:

What if at Time 1 a court applies Skidmore (e.g., because the agency

interpretation is produced as part of an interpretive rule) and decides that
a statute means Y. Then a year later the agency comes back to that same
court (say, the Second Circuit) with a Chevron-eligible interpretation of
the statute (e.g., an interpretation produced as part of a legislative rule) as
meaning X. Does the Court reverse its own previous decision and defer to
the agency’s second interpretation?

In Brand X Internet the Court requires the lower court facing this situation
to, in essence, retroactively apply Chevron to the first interpretation. If the
later court, on reading the first court’s opinion, concludes that that first
court concluded that the statute was clear, then the first interpretation
stands, as it normally would under Chevron Step 1. But if that latter court
decides that that first court concluded that the statute was ambiguous,
then, as long as the agency’s current interpretation was reasonable, a court
would have to defer to it, even if it meant a de-facto overruling of the
court’s own precedent by a subsequent agency interpretation.
 NCT Ass’n v. Brand X Internet (2005)
 Time 1 (say 2000): the agency argues to the 2nd circuit that the statute means X.
It says this in the context of, say, a policy statement. The court applies
Skidmore and concludes, “no, it means Y”
  Time 2 (say, 2003): the agency now promulgates a regulation.
o It again says the statute means X. Again a challenge in the 2nd circuit.
o Is the first opinion controlling? NO
 The 2nd court must read the 2000 opinion and figure out if it
thought the statute was ambiguous
 If yes, it must then defer to the agency – even if it essentially
means overruling itself – because don’t forget, under Skidmore
the Court is supposed to say what the statute means – for all
time!

Chevron Step 1

This is a crucial step in the process: if the agency convinces the court that the
statute does not clearly answer the question, then there is a high likelihood
(though not 100%) that the court will uphold the agency action.

What does Step 1 mean? Courts have the power to find that a statute clearly
answers the question before it by reference to "traditional tools of statutory
construction."
Chevron STEP 1
 If congress specifically addressed the question at issue, the agency’s interpretation is not
entitled to deference. Reason here is that if congress addressed it, it didn’t authorize the
agency to do so.
 RULE - Brown and Williamson: Facts: Agency tried to regulate tobacco under its organic
statute. If court wants to find that congress spoke clearly on an issue, it will do so at Chevron
Step 1. Court here says that we must use a number of tools to determine whether congress
spoke directly:
o Subsequent Legislation: Particularly where it speaks more specifically to the
question at issue. Thus, view the enabling statute in the larger legislative context in
which it was enacted.
o Fit of the Interpretation with the Overall Statute: In B&W, interpretation didn’t
make sense – if FDA covered tobacco, it would have to pull it from shelves.
o Common Sense (SUPER BROAD): Tobacco is so major that if congress wanted
FDA to regulate, it would have just said so outright.
o Legislative History
o Other tools – Whatever needed.
 Effect: Step 1 Chevron becomes the judicial stopgap for retaining control over agency action.
o Holding: Important issue and congress did not intend to give agency authority.

What are those statutory interpretation tools? Many, including:

1) text—but not just the precisely-relevant text, but the text of the general statutory scheme
and even related statutory provisions
 2) legislative history;
3) canons of statutory construction -- traditional maxims about how to read statutes. The
problem is that these canons are extremely general, and sometimes different canons
directly contradict each other; and
4) the context of the entire statute -- does the entire statutory scheme, taken together,
indicate that a certain provision has a to have a particular meaning in order for it to make
sense. Indeed, in Brown and Williamson the Court looks beyond the statute, at the multi-
statute regulatory scheme enacted by Congress. It thus concludes that subsequent
legislation can alter the “meaning” of an earlier-enacted statute;
5) “common sense” – that is, the court’s intuition of whether Congress would have
delegated a decision on this issue to an agency – e.g., if it’s a really fundamental issue,
it’s not as likely Congress would have delegated that decision to the agency, and thus the
court would try to hard find statutory meaning at Step 1. This idea has morphed into what
is now called the “major questions” doctrine, which is discussed in a note in the last set of
notes we discussed in class.

Of course, these sources may point in different directions on the question whether the statute is
clear -- e.g., the text of the particular provision may point in one direction but the policy thrust
visible in the rest of the statute may point in another. Indeed, a court’s decision to stop at Step 1
may involve a complex statutory interpretation analysis. See, e.g., Brown & Williamson (the
case about FDA authority to regulate cigarettes). The point is that Chevron does not provide
mechanically predictable results about whether a court will find the statute to have clearly
answered the question. All it does is provide litigators with (1) a template for their statutory
interpretation arguments, and (2) tools with which they can make those arguments.

In a case involving an important regulatory issue (or “major question”), a court

might well decide that Congress did not intend to commit the decision to an
agency, and thus do whatever it needed to reach a decision on its own, rather than
getting to Chevron Step 2. E.g., King v. Burwell; & Brown & Williamson.

E. Chevron Step 2

Assuming the statute doesn't clearly answer the question, how does a court go
about deciding whether the agency's interpretation is reasonable?

1. Possible answers:

a. The agency's interpretation is unreasonable because it flatly

conflicts with something in the statute. (This seems incorrect, as it
seems to be a restatement of Step 1.)

b. The agency's interpretation is unreasonable because it is simply

irrational. This is one way to understand Step 2, as simply
requiring that the agency explain its interpretive decision. But note
how this sounds like review of agency policymaking. And indeed,
in Judulang v. Holder, the Court suggested that the two inquiries
 are the same. Indeed, recall NLRB v. Hearst: one way to
understand the second Hearst interpretive question is as a policy
decision—given the meaning of “employee,” and the facts of
newsboys’s relationship with the newspaper companies, are
newsboys “employees”? In other words, a combination of law and
fact—in other words, policymaking.
Note***
 Pure Question of Law- no deference;
 Mixed Question of Law and Fact: Lots of difference(Hearst)
 Courts do not answer Political questions and do not provide
advisory opinions.

Theme: The blurring of the lines between fact-finding, law-

interpreting, and policy making
Chevron STEP 2
 Similar to State Farm A/C Review: Did the agency look at the relevant factors and apply
them reasonably.
o Judulang: Says that it is the same analysis. Just need to be clear which one it is. If
the agency is interpreting the text of the statute (Law interpreting)  Chevron Step 2.
If Agency is going beyond the statute and laying policy  Arb/Capricious State
Farm.

NLRB v. Hearst (1944)

 ISSUE: Are “newsboys” employees for the purpose of the National Labor Relations Act?
 Questions
o (1) did Congress intend “employee” to have its common law meaning or something
more expansive?
 The court gives no deference to the agency
 Pure question of law
o (2) Based on the…
 the court gives the agency a lot of deference
 mixed question of law & fact
o Why different levels of deference?
 Purely legal questions vs. mixed questions of law & fact. Therefore, expertise
 (rulemaking standard of deference is arbitrary & capricious???)
 Quimbee Holding: When reviewing an agency decision involving a mixed question of law
and fact, courts review (1) the facts found by the agency to determine whether the agency’s
conclusion has “warrant in the record” and (2) the agency’s explanation of its decision to
determine whether the decision has a reasonable basis in law. Although questions of statutory
interpretation are for courts to resolve, such resolution must take into account the judgment
of the agency that administers the statute at issue. Where the question involves the specific
application of a broad statutory term in an agency proceeding, a reviewing court’s function is
more limited. Here, a review of the record and the NLRB’s findings demonstrates that the
 board’s determination that specified persons were “employees” under the Act has warrant in
the record and a reasonable basis in law.
SKIDMORE DEFERENCE:
 Applies if the agency decisions FAILS Step Zero (& doesn’t get Chevron Deference)
 Rule: Agency’s view is not binding, but is still entitled to deference because of its expertise
in that area, but only as much deference as it merits. Depends on:
o How thorough agency was
o How valid its reasoning
o How consistent it’s been
o How persuasive it is.
 Court makes final interpretative decision; Agency can only persuade the court that its
interpretation is the current one.

Deference when Agencies interpret their own regulations

F. Seminole Rock/Auer Deference, and Kisor

When an agency interprets its own regulations, it gets a high degree of deference,
for the very logical reason that it’s in the best position to know what its own
regulations mean. Note the potential for game-playing, if the agency “interprets”
a statute by simply repeating its words in a regulation, and then in turn
“interprets” that regulation and seeks Seminole Rock/Auer deference. The Court
put a stop to that abuse in Gonzalez v. Oregon, where it refused to accord
Seminole Rock/Auer deference to an interpretation of a regulation that simply
parroted the words of the authorizing statute. Nevertheless, a second type of
game-playing is still possible: the agency can try to promulgate a very vague
regulation interpreting the statute, and hope that the vagueness of that regulation
means it satisfies Chevron review. Then, it can interpret that vague regulation
however it wants, and claim Seminole Rock/Auer deference.

In Kisor v. Wilkie (2019), the Court came close to overruling, but did not overrule,
Seminole Rock/Auer deference. But it nevertheless made clear that such
deference would only be granted when, among other things, the agency’s
interpretation constitutes the final word of the agency on what the regulation
means, when the regulation is truly ambiguous, after courts try to find its meaning
using the traditional tools of statutory interpretation, and when the interpretation
was the result of careful consideration rather than, say, a post-hoc litigating
position.

 Seminole Rock/Auer Deference: When an agency interprets its own regulations, it gets a
high degree of deference, for the very logical reason that it’s in the best position to know
what its own regulations mean
 o Gonzalez v. Oregon Exception: “Parroting Regulations” will not get deference, such
as when if the agency “interprets” a statute by simply repeating its words in a
regulation, and then in turn “interprets” that regulation (game-playing)
Auer applies when there’s genuine ambiguity, as determined by application of the traditional
tools of statutory construction
 Only when there’s genuine ambiguity, as determined by application of the
traditional tools of statutory construction.
 Only when the agency’s interpretation is reasonable (!)
 Only when the interpretation is entitled to controlling weight
 Only when its authoritative: interpretation of the reg has to come from
a higher-up
 Only when the regulation implicates the agency’s expertise: have to
believe that the agency got it right
 Only when the interpretation reflects “fair and considered” judgment:
only when the agency has done a good job of thinking about the issue
 Only when no reliance interests are unfairly harmed: the court doesn’t
want the agency ping-ponging about what it thinks regulations mean,
so that people who have reliance interest on one interpretation are
disadvantaged when there’s a new interpretation
Kisor cuts back deference: deference would only be granted when, among other
things, the agency’s interpretation constitutes the final word of the agency on
what the regulation means, when the regulation is truly ambiguous, after courts
try to find its meaning using the traditional tools of statutory interpretation, and
when the interpretation was the result of careful consideration rather than, say, a
post-hoc litigating position