RULEMAKING 101 13th Annual Administrative Law and Regulatory Practice Institute May 18, 2017
Part 2: Judicial Review of Agency Rulemaking H. Thomas Byron, III Assistant Director Civil Division, Appellate Staff U.S. Department of Justice Washington, DC Megan Brown Partner Wiley Rein Washington, DC Steve Lehotsky Vice President and Chief Counsel for Regulatory Litigation U.S. Chamber of Commerce National Chamber Litigation Center 2
Overview What law governs? What court? When to file? Sue or intervene? Preliminary relief? Hurdles to overcome Standard of review Substantive arguments What if you win? 3
What Law Governs? Many regulatory statutes have judicial review provisions. These control where they exist. APA 10 applies otherwise (5 USC 701 706) APA 10 creates a right of action; federal question jurisdiction under 28 U.S.C. 1331 4
What Law Governs? APA 10(e), 5 U.S.C. 706 Court shall compel agency action unlawfully withheld or unreasonably delayed; and Hold unlawful and set aside agency action, findings, and conclusions found to be Arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; Contrary to constitutional right, power, privilege, or immunity; In excess of statutory jurisdiction, authority, or limitations, or short of statutory right; Without observance of procedure required by law 5
What Law Governs? APA creates presumption of judicial review for final agency action not otherwise reviewable. Exceptions: Review specifically precluded by statute, e.g., Medicare contains more than 25 provisions precluding judicial review of rules [C]ommitted to agency discretion by law (5 U.S.C. 701(a)(2); see Heckler v. Chaney, 470 U.S. 821 (1985)) (Classic examples: Very broadly worded statutory language ( Secretary may in her discretion do X if she determines Y )) 6
Exhaustion Consideration Some statutes specify exhaustion and other preconditions before lawsuits can be filed challenging a rule. See e.g., Shalala v. Illinois Council On Long Term Care, Inc., 529 U.S. 1 (2000). E.g.: CAA 307(d)(7)(B) requires challengers to first file a petition for reconsideration if the grounds for challenge arose after the comment period closed or it was impracticable to raise the issue earlier 47 U.S.C. 405(a) requires that arguments be presented to the FCC before they can be used to challenge rules. Reconsideration will defeat finality but is party specific. 7
What Court? APA says a court of competent jurisdiction, which usually means federal district court; which one depends on venue law (see 28 U.S.C. 1391) Good bit of APA litigation is in District Court Hobbs Act vests original jurisdiction in Courts of Appeals for certain challenges to certain agency actions (see 28 U.S.C. 2342) Many statutes specify venue for particular issues Environmental D.C. Circuit often specified for national rules (RCRA, CERCLA, CAA) Relevant circuit for CAA regional rules Communications 47 U.S.C. 402(b) dictates D.C. Circuit for certain license decisions 8
Multiple Challenges: Strategy and Logistics Sometimes challenges may be filed in different courts of appeal or different district courts. Parties can have venue in different places Litigants identify favorable circuits and try to secure better rules of decision Practice pointer: a federal statute aimed to end gamesmanship on first to file for courts of appeals challenges. 28 U.S.C.A. 2112 provides for a lottery where multiple challenges are filed in the courts of appeal. 9
When to File? APA sets no deadline. General SOL for claims against US is 6 years (28 USC 2401(a)). Statutory review provisions typically establish jurisdictional filing windows Triggering events Often a set # of days after promulgation Promulgation occurs with FR publication, not the agency action approving it Some statutes treat varied agency action differently, see, e.g., 47 U.S.C. 402(a) and 402(b) for different FCC actions providing 30 day and 60 day periods 10
Sue or Intervene? Can file own complaint (district court) or petition (circuit court) In District of Columbia, a declaration that a rule is invalid may have nationwide consequences unless appealed and reversed Parties can intervene in someone else s case Appellate courts look to criteria from Fed. R. Civ. P. 24 Must have an interest in the case that could be adversely affected by a decision, and None of the existing parties to the case will adequately represent your interest, and Must be timely 11
Sue, Intervene, or File Amicus Brief? Can intervene in attack on agency rule Must show adverse impact of rule Standing issues; fear of bad precedent often not enough Can intervene in defense of agency rulemaking Can still have standing problems depending on Circuit Courts can limit participation to certain claims Parties often consent to intervention where participation at agency and stakes are clear Parties may satisfy their needs with an amicus brief, but intervention affords more procedural rights Intervenors can bring own theories (including challenging subject matter jurisdiction) and sometimes can continue litigation without federal agency 12
Interim Relief Agency or court can stay rule pending review under APA 705 unless authorizing statute precludes Temporary Restraining Order & Preliminary Injunction Challenger has to meet requirements for injunction: Likelihood of success on merits (Windsor) Harm to challenger if stay not granted Harm to others if stay is granted Public interest 13
Finality Final agency action? Usually no question with rules. Not everything an agency does is agency action. See Norton v. So. Utah Wilderness Alliance, 542 U.S. 55 (2004). Some question with interpretive rules or guidance/policy statements. Bennett v. Spear: Issue is whether document Marks consummation of decisionmaking process; and Determines rights & obligations; legal consequences flow from it 14
Ripeness/Enforcement APA allows collateral challenge to rule as defense to enforcement action. Pre enforcement review permissible if issue is ripe. Two questions (Abbott Laboratories v. Gardner, 387 U.S. 136, 148 156 (1967)): Is the issue fit for judicial decision? Purely legal? Sufficiently crystallized? What is hardship on challenger if review deferred? 15
Ripeness/Enforcement Sometimes pre enforcement review expressly authorized (e.g., judicial review provisions) Window provisions also cut it off May preclude collateral challenges as defenses to an enforcement action Typically substantive attacks OK, procedural attacks not When in doubt, file. 16
Standing Original theory: Constitution Art. III cases or controversies ; ensure litigants have personal stake, really care about outcome, fight hard and well Requires: Injury in fact Causation Redressability Also zone of interests test prudential (not Constitutionally based) difficult to get case dismissed on zone test alone 17
Standing Injury Lujan v. Defenders of Wildlife (general plans to view wildlife abroad not sufficiently concrete) Is increased risk of injury injury in fact? No Summers v. Earth Island Institute (only a chance, not a likelihood); Clapper Yes Monsanto Co. v. Geertson Seed Farms (incurred costs to avoid risks) No purely procedural injury (Summers) Zone of interests 18
Case Study: Grocery Mfrs v. EPA Challenge to the change in gasoline specifications to allow 15% ethanol DC Circuit held engine manufacturers and petroleum industry did not have Article III standing, no direct injury Court held that the food group did not have prudential standing, not within the zone of interest 19
Standing for Intervenors D.C. Circuit requires intervenors to show standing; some circuits do not. E.g., Crossroads Grassroots v. FEC, 788 F.3d 312 (D.C. Cir. 2015). Even when supporting the government; government sometimes opposes supporters No standing or no interest if only stake is fear of bad precedent E.g., Sea Land Serv. Inc. v. DOT, 137 F.3d 640 (D.C. Cir. 1998) 20
STANDARD AND SCOPE OF REVIEW APA, 5 U.S.C 706 Standard of Review HOW the court reviews Scope of Review WHAT the court reviews 21
Standard of Review Arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; Contrary to constitutional right or power; In excess of statutory jurisdiction or authority; Without observance of required procedures. 22
Procedural Challenges No NPRM and no or inadequate explanation why (e.g., good cause exception) Comment period too short? NPRM inadequate; not logical outgrowth No further notice and comment after remand: Failure to give adequate explanation for why agency made the particular choices it made Failure to consider aspects of problem or alternatives Inadequate time before rule takes effect Failure to comply with other statutes procedural & consultation requirements 23
Substantive Challenges Big picture questions for the court: What is the problem and How did the agency address it? > Court reviews only the reasons given by the agency: SEC v. Chenery, 318 U.S. 80 (1943); post hoc rationalizations of litigation counsel can t save the rule > Is the rule necessary? Does it make sense? 24
Did Congress Give the Agency Authority to Promulgate the Rules? Important for deference: United States v. Mead Corp., 533 U.S. 218 (2001) No deference for interpretation of statute agency does not administer Potential problem in D.C. Cir. If more than one agency has rulemaking authority 25
Is the Rule Consistent with the Agency s Statutory Authority? Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984) Step One: Has Congress directly spoken to the precise issue, or is there ambiguity? Court decides, using traditional tools of statutory construction, e.g., text, structure, statutory purposes & findings, legislative history No deference to agency at this stage FDA v. Brown & Williamson, 529 U.S. 120 (2000) 26
Step Two: If statute is ambiguous, or if Congress left gaps for the agency to fill, is the agency s interpretation of the statute reasonable? Agency entitled to deference if its interpretation is reasonable Agency s interpretation need not be the best or the one preferred by the court Agency s interpretation can trump prior court interpretation under Step Two: NCTA v. Brand X Internet Servs., 545 U.S. 967 (2005) Note: Chevron applies to jurisdictional questions. City of Arlington, Tex. v. FCC, 133 S. Ct. 1863 (2013). 27
Practice Tip for Agencies In general, don t limit interpretation to Step One or Step Two; present alternative views E.g., Statute is clear, but if it is considered ambiguous, this is what it means and here s why Give court something to defer to; if agency limits interpretation to Step One, court cannot defer to agency expertise A Step Two interpretation gives agency leeway in the future 28
Skidmore Deference Agency interpretations set forth in less formal issuances e.g., policy statements adopted without public input are generally entitled to only respect, depending upon their thoroughness, consistency, and power to persuade: Skidmore v. Swift & Co., 323 U.S. 134 (1944) But see Barnhart v. Walton, 535 U.S. 212 (2002) 29
Is The Rule Arbitrary or Capricious? Agencies are entitled to deference for their expertise, predictive judgments, & cost benefit analyses Agencies are entitled to presumption of regularity (but can be rebutted) Agency must respond to all significant comments Agency must reasonably explain departure from past interpretations, policies, rules, etc. Generally no heightened scrutiny of rule rescinding earlier rule or effecting policy change: FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009) A & C standard varies; e.g., more deference to decision not to institute rulemaking, where resource based 30
Motor Vehicle Mfrs. Ass n v. State Farm Mut. Ins., 463 U.S. 29 (1983) Is there a rational connection between the facts found and the choice made? Is the decision based on a consideration of the relevant factors identified by Congress? Did the agency rely on factors that Congress did not intend for it to consider? Did the agency fail to consider an important aspect of the problem? Does the evidence in the rulemaking record support the rules? Did the agency ignore evidence? 31
Compare Business Roundtable v. SEC, 647 F.3d 1144 (D.C. Cir. 2011) (rule found to be arbitrary and capricious because, among other things, it failed to consider economic effects, as statute required) with American Petroleum Inst. v. EPA, 684 F.3d 1342 (D.C. Cir. 2012) (rule upheld because agency gave proper consideration to scientific study and explained reasons for disagreeing with it) 32
Practice Tip for Agencies NPRM & Final Rule should identify studies on which agency relies: see Chamber of Commerce v. SEC, 443 F.3d 890 (D.C. Cir. 2006) APA, 5 U.S.C. 553(c), requires a concise general statement of [the rule s] basis and purpose. >> Don t take that literally! Err on the side of providing more explanation in the preamble 33
Does the Rule Violate Other Statutes and Requirements? For example NEPA Regulatory Flexibility Act 34
Does the Rule Violate the Constitution? Courts avoid reaching constitutional issues whenever possible Constitutional challenges to rules themselves: Hearing procedures prescribed by a rule violate due process Rules (e.g., drug testing regs) violate Fourth Amendment Rules are void for vagueness (important if criminal penalties are possible) Rules can violate the First Amendment Preemptive rules can intrude upon state sovereignty and have Tenth Amendment implications 35
Scope of Review WHAT does the court review? [T]he whole [rulemaking] record or those parts of it cited by a party (5 U.S.C. 706) Generally, no external material (e.g., declarations submitted during the litigation): Camp v. Pitts, 411 U.S. 138 (1973); but see Fla. Power & Light v. Lorion, 470 U.S. 729 (1985) Only issues raised during the rulemaking; otherwise, it defeats the purpose of notice and comment (possible dismissal based on waives if no one raised issue in comments) 36
Case Study: U.S. Chamber of Commerce v. NLRB; NAM v. NLRB NLRB mandated posting of additional information in workplaces Trade groups said rule was in excess of authority, contrary to NLRA, and violated First Amendment Groups brought suit in different district courts (D.D.C. and D.S.C.), ended up with appellate decisions striking down the rule as inconsistent with statute and in excess of authority NLRB decided not to seek Supreme Court review 37
Case Study: Montgomery County Md. v. FCC FCC adopted rules restricting local review of tower siting applications Counties sued in Fourth Circuit Claims: lack of authority, arbitrary and capricious, as well as 10 th Amendment claims Industry groups intervened to defend FCC Rules Fourth Circuit upheld rules, deferring to FCC s interpretation of the statute 38
Many Challenges Never Fully Litigated Where statutes have sue now or forever hold your peace provisions, many parties out of caution sue now. Some parties use as leverage to negotiate revisions, with or without administrative petitions for reconsiderations. D.C. Circuit cases routinely held in abeyance for (1) settlement discussions, and/or (2) new followup rulemaking. 39
Many Challenges Never Fully Litigated Common for followup rulemaking to resolve issues to be litigated and judicial challenge then dropped after years of abeyance. Also common (especially EPA cases) for parties on opposite sides of issues to challenge rules. So when followup rule resolved issues in one side s favor, other side may litigate followup rule. 40
Case Study: Viacom v. FCC FCC revamped children s television rules Several challengers in different circuits, from both sides (industry saying went too far, public interest saying not far enough) Different suits triggered lottery provision Substantive arguments: APA, notice arguments as well as First Amendment challenge Sought preliminary relief, agency extended effective date Ultimately settled 41
What if You Win? APA 706: The reviewing court SHALL... hold unlawful and set aside agency action found to be arbitrary/capricious, in excess of statutory authority, etc. Vacatur vs. Remand If court vacates rule (or portion of rule), rule is GONE. If court remands rule (or portion), rule stays in effect while agency does repair work. 42
What if you win? D.C. Circuit very inconsistent in approach to vacatur vs. remand. See Daugirdis article 80 N.Y.U.L. Rev 278 (April, 2005). Recent D.C. Circuit case found serious reasoned decisionmaking flaws in EPA rule, but remanded instead of vacating. PCA v. EPA, 665 F.3d 177, D.C. Cir. 2011. 43
Interesting Remand v. Vacatur Example EPA s Clean Air Interstate Rule (CAIR) issued 2005, affecting power plants in eastern half of U.S. D.C. Circuit held CAIR violated Clean Air Act with several fundamental flaws and VACATED the rule. North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008). But parties who won didn t want vacatur, only remand, and convinced court to rescind vacatur and issue remand instead. Purpose: so CAIR could stay in place until EPA issued followup rule fixing fundamental flaws. 44
Interesting Remand v. Vacatur Example With CAIR still in place EPA issues Cross State rule to replace CAIR in 2011. Cross State rule much more stringent than CAIR, and many electric utilities challenged in D.C. Circuit. D.C. Circuit stayed Cross State rule (in response to utilities motions) at end of 2011. Stay order specified CAIR to remain in place. 45
Interesting Remand v. Vacatur Example D.C. Circuit issued opinion on merits VACATING Cross State rule August 2012, finding rule violative of Clean Air Act on its face. Made clear CAIR would stay in place until EPA could fix flaws in rule. EME Homer City v. EPA, 696 F.3d 7 (D.C. Cir. 2012) In 2014, the Supreme Court reversed, holding the Cross State rule reasonable under Chevron. EPA v. EME Homer City, 134 S.Ct. 1584 (2014). 46
Interesting Remand v. Vacatur Example On remand, the D.C. Circuit considered and rejected several additional facial challenges to the Cross State rule, thus finally settling the legality if the rule. (The court also granted the as applied challenges of 13 states.) EME Homer City Generation, L.P. v. EPA, 795 F.3d 118 (D.C. Cir. 2015). Thus CAIR, which D.C. Circuit ruled in 2008 violative of Clean Air Act for several fundamental flaws, remained in place until its replacement was finally upheld in 2015. 47
What if you win? Remember you haven t won until the mandate issues. See FRAP 41. Mandate held up until 7 days past deadline for rehearing petitions (45 days + 7), and also held up during pendency of rehearing petitions. Also may be held up pending cert petitions. Thus vacated rules (or portions) may remain fully in effect for months after reviewing court holds invalid. 48
What if you win? A win often simply re starts full or partial rulemaking followed by more judicial review followed by another win or loss followed by more judicial review over decades. You can often win by settling. D.C. Circuit is more than happy to hold cases in abeyance pending settlement process. 49
Questions? 50