Administrative Rules (all)

RULEMAKING:
FORMAL (556 & 557); "on the record after a hearing"
INFORMAL (553)
1. Notice - "Logical outgrowth" and data
2. Comment
3. Concise General Statement - Responsiveness

ADJUDICATION:
FORMAL: 554, 556, 557; Trial, ALJ acts as lawyer
INFORMAL: [VOID], CONSTITUTIONAL PROCEDURAL DUE PROCESS

A. Administrative law is a shift from common law to statutory law.
B. Belief agencies are more accountable than judges and possess greater expertise.
C. Judges use canons of interpretation when considering statutory law, so they are still in effect making law.
D. Organic statutes create agencies and their powers.

1. Policy - not enough reason or research to enforce an arbitrary limit.
2. Legal - interpretation of statute and agency's power was incorrect.
3. Procedural - rulemaking and adjudicatory procedures were insufficient.
4. Factual - facts on which the rule or decision was based are incorrect. Difficult to prove since agencies are experts.
5. Constitutional - agency acted within its authority under the statute but the statute itself was unconstitutional.

Field v. Clark: Congresses delegated power to the President to impose tariffs on imports when he was "satisfied" of the need for tariffs.
- Rule: Where the power delegated involves fact-finding to effectuate congressional will, that power is not legislative in nature.

Hampton v. United States: Statute granted the President power to revise tariffs when "necessary" to equalize the cost of production in the United States and the principal competing country.
- Rule: Congress may grant the authority to modify a rule so long as the statute contains an intelligible principle to guide the discretion of the agency and the review of the courts.

Schechter v. United States: Congress granted FDR the power to approve codes of fair competition written by the regulated industries themselves.
- Rule: An intelligible principle must provide a judicially recognizable constraint ("fair" is not a constraint). Congress cannot delegate its power to private parties or grant limitless discretion to the president to carry out a statute.

Whitman v. American Trucking: Congress passed the Clean Air Act and granted the EPA the power to set levels for pollutants with the standard as "requisite to protect the public health within an adequate margin of safety." The EPA set new levels for ozone, and were challenged.
- Rule: Where Congress has made the big policy-making choices and merely authorized an agency to enforce those limits, the nondelegation doctrine is not violated.
o "Requisite" is an intelligible principle.
o There was no delegation to private parties.
o The scope was limited because only granted authority over air pollution - not enough power to be legislative.
- Stevens' Concurrence: Functionalist argument - Congress necessarily grants some of its policymaking authority to agencies. There is no concern for unaccountability because agency heads are removable by the president.

Benzene Case: OSHA couldn't find a safe level for benzene exposure, so the secretary set the standard at the lowest level "technologically achievable at a cost that will not impair the viability of the industries subject to the regulation."
- Rule: The "significant risk" standard was a sufficient intelligible principle, but the agency failed to demonstrate how its rule achieved that end.
o The Court read stricter requirements into the statute to avoid broad delegation to the agency in violation of Schechter.

Mistretta v. US: Congress set up the US Sentencing Commission, which created guidelines for sentencing that bound judges once put into effect.
- Rule: Blackmun found that the seven "offense" factors provided a sufficient intelligible principle because it narrowed the agency's scope of discretion.
- Scalia's Dissent: A certain degree of discretion, and thus of lawmaking inheres in most executive or judicial action, and it is up to Congress, by the relative specificity or generality of its statutory commands, to determine how small or how large that degree shall be.
o Standards here are standards for further legislation - the power to make law is not ancillary.

INS v. Chada: Congress granted the Attorney General discretion to suggest exemption of individuals from deportation. Either house of Congress was able to veto the recommendation without consideration from the other house.
- Rule: If an act is performed by the legislature, it must follow the requirements established in Art. I of bicameralism and presentment. If an act alters the legal rights, duties, or obligations of individuals, it is legislative.
o Reinforces separation of powers since the AG is acting as an extension of the President in execution of the laws.
- White's Dissent: Functionalist argument - legislative veto is the only means by which Congress secures the accountability of executive and independent agencies.
o Maintains Congress' position as ultimate lawmaker.

Robertson v. Seattle Audobon: Congress passed the Migratory Bird Act that prevented the killing or taking of the Spotted Owl's habitat. While logging interests' challenge to the rule was pending, Congress passed an appropriations bill effectively approving the compromise reached by the Forest Service and the loggers.
- Rule: Congress may amend substantive law in an appropriations statute, as long as it does so clearly. Means by which Congress can restrain agency action.
o Repeals by implication are disfavored.
o Last in time rule - later statutes trump earlier statutes.
o Specific statutes trump general statutes.

TVA v. Hill: TVA found an endangered species of fish while constructing a dam. The Endangered Species Act required TVA to stop construction. TVA argued that continued congressional appropriations after determination implied repeal of that portion of the ESA.
- Rule: The doctrine of disfavoring repeals by implication is even stronger when the repeal rests solely on an Appropriations Act.
o Concern that Riders will pass without real consideration by Congress since members are right to presume that funds will be used for lawful purposes.

Clinton v. New York: Congress passed the Line Item Veto Act, which permitted the President to cancel individual provisions of statutes.
- Rule: The President, acting alone, cannot make substantive changes to legislation because it allows the president to repeal an act of Congress. The delegation must be that required to account for changing real world circumstances.
o President was acting on same information as Congress when he chose to veto the provisions.
- Scalia's Dissent: The requirements of presentment were already satisfied. The power to cancel provisions of an act is the equivalent of declining to spend funds. The only problem is if the funds were mandatory and not discretionary.
- Breyer's Dissent: The delegation of authority was permissible because it provided an intelligible principle.

Buckley v. Valeo: The FEC was created to ensure the fairness of elections. The FEC was composed of six members. Two were appointed by the President with advice and consent of both houses, two by the President Pro Tem of the Senate, and two by the Speaker of the House. There were also two non-voting members. The FEC was executive in nature because it was permitted to file lawsuits when it found violations.
- Rule: The Appointments Clause applies to all parties that exercise at least some executive authority. Negative inference meant that leaders of Congress were not heads of departments and therefore were incapable of appointing inferior officers.

Myers v. United States: Congress required advice and consent of the Senate before the President could remove an officer. The Postmaster General subsequently fired Myers from his position without cause.
- Rule: The ability to remove officers "at-will" is central to executive's ability to execute the laws and Congress cannot modify this requirement by statute.
o Promotes theory of the unitary executive.
o Common law default of at-will employment is relevant to the issue.

**OVERRULED TO AN EXTENT BY MORRISON

Humphrey's Executor v. United States: Humphrey was the head of the FTC. FDR asked him for his resignation due to a disagreement over policy and Humphrey refused. FDR then fired him, but the statute required for cause removal.
- Rule: Where an agency's action is quasi-legislative or quasi-judicial in nature, for cause removal is constitutional.

***OVERRULED BY MORRISON

Bowsher v. Synar: Congress required that the Comptroller General was only hireable and fireable by Congress. The Comptroller General was given authority to make binding decisions to reduce spending in accordance with statutory deficit reduction goals.
- Rule: Where an officer exercises at least some executive power, Congress cannot retain sole power over appointment and removal of that officer.

Morrison v. Olson: Congress created the role of independent counsel in response to Watergate. The IC was appointed by an Art. III court and removable only by the Attorney General after completion of investigation or for cause. The question was whether IC was a superior or inferior officer.
- Rule: If the removal restrictions impede the President's power to faithfully execute the laws, then the restrictions are unconstitutional (overrules Humphrey and to an extent Myers).
- Inferior Officer Test:
1. Subordinate to a superior officer - subordinate to the AG.
2. Limited scope of duties - no policymaking discretion.
3. Limited scope of jurisdiction - only investigated executive branch officials.
4. Limited tenure - the office dissolves once the investigation is over.

Edmonds v. United States: If an officer has a definitive boss who can fire at will, then that officer is inferior. If it is unclear whether there is a boss, an officer may still be an inferior officer under the Morrison Test.

Free Enterprise Fund v. PCAOB: Congress created the Public Company Accounting Oversight Board as a self-regulating
board that oversaw accounting firms nationwide. Five members of the board were only removable for cause by the SEC, who in turn were only removable for cause by the President.
- Rule: If an agency has broad discretionary power, then two-level for cause removal restrictions are unconstitutional.
o Unclear whether it would apply where an agency has limited discretion.

NLRB v. Noel Canning: Pro forma sessions where there is a quarum to conduct business do not count as a recess appointment.

Murray's Lessee: Because the federal government retains sovereign immunity, Congress can determine whether a private cause of action can be adjudicated by non-Art. III adjudicator. Congress cannot withdraw the power to review common law claims. Public rights are those created by statute and Congress is free to determine how those claims are adjudicated.

Crowell v. Benson: An employee brought a claim against his employer under the Worker's Compensation Act for injuries sustained while at sea. The claim was essentially a tort claim, but there was no state law to govern it, and the right to sue was granted by statute.
- Rule: Statutory rights between private parties can be adjudicated by a non-Article III court as long as an appeal to an Article III court is permitted (constitutional avoidance doctrine).

Northern Pipeline: Common law claims can never be considered public rights, which can never be heard by non-Art. III courts.
- Overruled by Thomas v. Union Carbide

Thomas v. Union Carbide: As long as the common law had been codified by statute, it is sufficient to count as a public right.

Commodities Futures Trading Commission v. Schor: Seller sued a broker in the CFTC and the broker counterclaimed on a contract claim. The CFTC ruled in favor of the broker on both claims, so the seller attempted to claim that the CFTC didn't have jurisdiction over the contract claim.
- Rule: A non-Art. III court can hear compulsory common law counter claims where:
1. There is no final judgment entered because the ruling is reviewable and enforced by an Art. III court.
2. The parties have waived a trial in an Art. III court.
3. The agency has expertise because of limited jurisdiction.

Stern v. Marshall: Anna Nicole Smith claimed tortious interference against her late husband's son in probate court and then filed for bankruptcy. Pierce then counterclaimed in bankruptcy court for defamation.
- Rule: Bankruptcy courts are not permitted to enter final judgment on state common law claims because it would be an impermissible delegation of Art. III power by Congress.
o Distinguished from Schor because there can't be waiver in bankruptcy proceedings and bankruptcy doesn't require expertise.

Londoner v. Denver: City council instituted special assessment district to create new tax for street paving and didn't provide chance for hearing to property owners.
- Rule: Where an agency makes a rule affecting a small set of individuals, those individuals are entitled to a hearing.

Bi-Metallic v. State Board of Equalization: All property was reassessed at 40% higher rates for tax purposes by the board.
- Rule: "Where a rule of conduct applies to more than a few people it is impracticable that every one should have a direct voice in its adoption."
o Paper hearing is sufficient (can be accomplished through either rulemaking or adjudication).
o Rule is one of general applicability.

National Petroleum Refiners v. FTC: FTC required octane ratings on gas pumps. The statute granted the agency authority to prevent persons, partnerships, or corporations... from using unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce.
- Rule: Courts interpret statutes broadly to grant power for rulemaking to agencies because it is an easier and more efficient method by which the agency can create general policy.
o If the agency is given the power to make any regulations, it is interpreted as power to make substantive rules.
• Congress must explicitly limit power.

Chenery I: A court of review can only uphold administrative orders on grounds the agency uses to justify that order.
- No pos hoc rationalizations.

Chenery II: SEC sought to issue a new rule through the adjudication process, which would in effect create a new general rule from a specific case and apply it retroactively.
- Rule: The agency may use its discretion in determining its choice of policymaking instrument.
o "The choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion of the administrative agency."
o There is no rigid requirement to make a general rule when a specialized problem arises in an adjudication.
o Similarity to Art. III courts whose judgments always act retrocactively.

Excelsior Underwear: NLRB was granted the authority to determine whether elections were fair and could set aside results if found to be unfair. Union members brought an action alleging that an election was unfair. The NLRB ruled that the election was unfair but upheld the election results because the employer wasn't given notice.
- Rule: An agency may state that the effect of a rule will apply prospectively in an adjudication and individualized order.
o NLRB attempted to set new guidelines for all future elections.

NLRB v. Wyman-Gordon: Employer refused to comply with the order the NLRB established in Excelsior with regard to new elections and issuing the list of employees.
- (Plurality) Rule: Agencies cannot engage in "prospective only" policy announcements via adjudication and orders, as the APA requires agencies to engage in substantive rulemaking for policies with prospective effect alone.
o The agency cannot replace a statutory scheme with a rule-making procedure of its own design.
- Black's Concurrence: Exercise of one power does not exclude the use of another (precedent = rule).
- Douglas' Dissent: Excelsior rule was invalid, so this rule is also invalid.

NLRB v. Bell Aerospace: The NLRA did not initially cover managerial employees (as interpreted by the NLRB), but the NLRB changed its policy and chose to cover managerial employees. The NLRB chose to make the change through adjudication rather than rulemaking. Bell Aerospace argued the NLRB couldn't do so because it had relied on the NLRB's prior interpretation.
- Rule: Where reliance interests are so substantial that applying the new policy would harm the industry, an agency must use prospective rulemaking.
o Still unclear whether prospective adjudication is permissible to relieve the problem.

Overton Park v. Volpe: Amendment to the Federal-Highway Aid Act of 1966 forbid the building of highways on parkland or historic sites unless (1) there was no feasible and prudent alternative to the use of such land, and (2) the highway project included all possible planning to minimize any harm to such park or site resulting from such use. Secretary Volpe relied on the justifications provided by others to approve the I-40 extension through the park and did not establish agency record.
- Arbitrary & Capricious Review: "The court must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error in judgment."
o The reasons for choice have to be presented at the time the decision is made because there has to be an opportunity for the public to participate in policymaking.
• Affidavits are merely post hoc rationalizations.
o Although no record is technically required for informal adjudication, the Court remanded to the lower courts to consider the whole record to determine whether the Secretary's decision was arbitrary and capricious.

***STATE FARM IS MODERN A&C TEST

Chenery I: SEC ruled that the management of a public utility holding company undergoing restructuring could not convert old shares into voting shares in the new company. The SEC initially only offered one justification at the time of its decision and then later added another during litigation.
- Rule: Agencies are not permitted to make post hoc rationalizations, unlike Congress. Courts cannot substitute their own reasons for agencies in litigation.

United States v. Morgan: The Secretary of Agriculture issued order setting the maximum rates for buying and selling livestock at stockyards. Challenge arose because it was alleged the Secretary never personally heard the evidence.
- Rule: Unless the facts support an allegation of improper decision-making, the Court should not probe the mind of the administrator.

Motor Vehicles Manufacturers Assn. v. State Farm (Repeal): The NHTSA amended the standard for passive restraints in cars and then rescinded the requirement once economic circumstances changed. The justification given for the repeal was that automatic seatbelts wouldn't really provide more safety. The agency failed to consider whether airbags would provide a proper amount of safety and dismissed seatbelt safety tests. Insurers challenged the repeal of the rule as arbitrary and capricious.
- Rule: There must be a rational connection between the facts found and the choice made by the agency. While the agency is permitted for changing its policy, it must explain its reasons for doing so. A choice is arbitrary and capricious if:
1. The agency relied on factors Congress didn't intend for it to consider; or
2. The agency failed to consider an important aspect of the problem (failed to consider mandatory airbags); or
3. The agency's explanation is counter to the evidence (inertia argument worked against decision); or
4. The choice was so implausible that it couldn't be ascribed to a difference in view.

FCC v. Fox (Change): The FCC changed its policy regarding fleeting expletives. Under its new policy, it held Fox in violation but refused to impose sanctions.
- Rule: An agency may create a new policy via an order when: (1) it clearly acknowledges its change in policy and (2) that the new justification is not arbitrary and capricious (e.g. the reasons for the change are rational).

Massachusetts v. EPA (Inaction): The EPA declined to regulate greenhouse gases. It gave no reasoned explanation for its refusal to decide whether greenhouse gases caused or contributed to climate change. Instead, it only stated that it believed it was unwise to do so.
- Rule: An agency must bring its scientific expertise to bear on an issue within its jurisdiction. If it chooses not to take action, it must give valid reasons as to why it has chosen not to do so. Otherwise, its inaction is arbitrary and capricious.

***OVERRULED MQE WHICH WAS LATER REVIVED IN KING

CANONS OF INTERPRETATION

1. Purposivism (Argument) - Acknowledges that there is more going on to a statute than just the text. The Court asks what the legislature would want to occur in the case before the court. If it is clear how Congress wanted a particular case resolved, then the Court should honor that intent. If it is unclear, the Court looks to the broader purpose of the statute. If the language of the statute conflicts with the broader purpose, then the Court ignores the test.
2. Intentionalism (Bargain) - Relies on the legislative history of the statute and what the legislators intended when they signed it into law. If legislative history is lacking, judges either move to purposivism or textualism.
3. Textualism - Relies solely on the text of the statute and nothing more, despite consequences. Rationale is that courts should enforce the law as written because Congress can redraft the law to remedy any contrary interpretation. Rests on the idea that there is no singular legislative intent and, even if there were, it is not law.

TOOLS OF CONSTRUCTION

1. Disfavor of implied repeals
2. Constitutional avoidance - Interpret the statute in a way that avoid raising a constitutional question.
3. Expressio unius - When one or more things of a class are expressly mentioned, others of the same class are excluded.
4. Legislative history
5. Last in time
6. Specific statutes trump general statutes
7. Rule of lenity
8. Incorporation of common law meaning
9. Horizontal coherence - Interpret a term in the statute to mean the same throughout.
10. Rule against superfluity - Interpret the statute in a way that gives effect to every word in a list (in conflict with Ejusdem generis).
11. Ejusdem generis/Noscitur a sociis - Words in a list should be interpreted to mean essentially the same thing.
12. Plain text reading

NLRB v. Hearst: The NLRB ordered (formal adjudication) Hearst to bargain collectively with its newsboys, based on a finding that the newsboys were "employees" of Hearst. Hearts challenged that interpretation, arguing that the common law distinction between "employee" and "independent contractor" should be incorporated.
- Rule: Questions of statutory interpretation are for the courts to resolve, but an agency's judgment is persuasive authority. Specific application of a broad statutory term is the unique province of the agency and the court plays a more limited role (e.g. determination is accepted if: (1) the record supports its finding and (2) there is a reasonable basis in law).
o Court engaged in purposivist interpretation and found that Congress' intent was to remedy a nationwide problem. If common law were incorporated, the statute would have a different meaning in different jurisdictions.

Skidmore v. Swift & Co.: Challenge arose when firemen sued for overtime pay for on call time at the firehouse. The Administrator of the Labor Department filed a brief interpreting the statute to exclude sleeping time but include on-duty time in working time definition (informal adjudication).
- Rule: The Court is the appropriate body to interpret laws but it will grant broad non-binding deference to the expertise and knowledge of administrative agencies to the extent it is persuasive.
o Difference between informality and formality may affect the binding nature of the agency's interpretation, but it doesn't affect the deference that should be given to agencies.

Chevron v. Natural Resources Defense Council: Challenge arose over the definition of stationary source in the Clean Air Act and whether the EPA's interpretation was valid. The EPA changed to a bubble policy, which viewed each industrial plant with various burners or blast furnaces and required reductions from the plant as a whole (the "bubble"). This would reduce pollution at plant as a whole and allow the plant to reduce on sources with the lowest marginal cost of improvement.
- Rule: When Congress gives no clear indication of its intent, agency choices should trump judicial interpretations because agencies are both experts and accountable (broad deference to agencies).
o Justices always use tools of construction to find that a statute is unambiguous, so there really is no deference to agencies (If justices disagree as to the meaning of a statute, it means its ambiguous, but courts want to retain power).
- Chevron Two Step:
1. Is the statute ambiguous? - If the statute is unambiguous, an agency can't deviate from Congress' intent.
• Different analysis than if it were determining reasonableness. It allows the Court to determine the meaning instead of the agency.
2. If the statute is ambiguous, was the agency's interpretation reasonable? - Must satisfy arbitrary and capricious review.

MCI v. AT&T: Communications Act of 1934 required long-distance telephone carriers to report rates to the FCC to prevent unfair practices by monopolies. The FCC was permitted to make any modification to the requirement it chose. Through order and rulemaking, it passed permissive detariffing. The policy was challenged as outside agency authority and turned on the definition of "modification."
- Rule: Where a statute is unambiguous, an agency may not deviate from Congress' intent.
o Scalia analyzed the dictionary definition and found modification to mean modest change, not a fundamental one.
o Disregarded the purpose of the statute, which was to discourage unfair practices. Continued regulation actually discouraged competition.
• Up to Congress to correct obsolete statute, not the Court.
o Scalia's analysis still leaves open the question of whether the action was big or small, which means it was ambiguous, and he should have deferred to the agency.

Babbit v. Sweet Home Chapter of Communities: Secretary of the Interior was given authority to grant endangered species status and take action to protect those endangered species. The Secretary then instituted a regulation that defined harm as a "significant habitat modification."
- Rule: Where a term in a statute is ambiguous, it should be left to the agency expertise to interpret.
o Stevens used horizontal coherence, purpose of statute, legislative intent, and plain text reading to reach result.
- Scalia's Dissent: Argued that "take" had a common law meaning, that "harm" was included in a list of similar terms (eiusdem generis), and that words in a statute should each be given effect (rule against superfluity).

Massachusetts v. EPA: The EPA argued that the statute was sufficiently ambiguous as to whether the EPA had authority to regulate greenhouse gases that its decision to exclude them should be given deference. It argued that Congress chose not to include green house gases when it amended the Clean Air Act, that it specifically addressed the issue in other legislation, and that green house gases were so big an issue that Congress would have been explicit had it intended for the EPA to regulate them.
- Rule: Where the term of a statute is unambiguous, the agency cannot deviate from Congress' intent. Political reasons for choosing not to act cannot trump scientific expertise.
o "Air pollutant" was a broad term that allowed for flexibility.
o Distinguished from Brown & Williamson because there was no direct conflict between EPA and Congress and the EPA had asserted prior authority and Congress had acquiesced.
o Major Question Exception as expressed in Brown & Williamson would have bolstered EPA's argument.

Utility Air v. EPA (Step 1 & 2 Analysis): In response to the Court's holding in Massachusetts v. EPA, the EPA attempted to regulate greenhouse gases. Doing so significantly increased the number of sources required to obtain permits, so the EPA passed a tailoring rule that increased the statutory limits for greenhouse gases only. The question arose whether the interpretation that it had to regulate greenhouse gases for all sources was reasonable, and whether the tailoring rule was permissible.
- Rule: Greenhouse gases were within the zone of ambiguity, but the EPA was not required to regulate them. It only had to decide whether it was sensible to do so. The EPA's interpretation would change what Congress envisioned, so it must be wrong (statute is unambiguous). The tailoring rule violated separation of powers because the statute's language was clearly unambiguous.
o Must account for the specific context in the provision and the broader context (e.g. horizontal coherence).
o Not reasonable to require permitting by imposing greenhouse gas standards on stationary sources.
o Unreasonable due to the broad impact of the decision (citing MQE cases)
o Incompatible with the regulatory scheme.

New Chevron Analysis:
1. Major Question Exception - Intent to Delegate?
2. Ambiguous?
3. Reasonable?

FDA v. Brown & Williamson Tobacco: FDA issued an informal rule prohibiting the tobacco industry from advertising to young children. The tobacco industry challenged the rule on the grounds that the structure and history of the FDCA precluded the agency from regulating tobacco products.
- Rule: Where an issue is one of deep economic and political concern, it is not an issue Congress intended to delegate to an agency but instead is an issue Congress intended to reserve for itself.
o Tools of Construction Used:
• Horizontal coherence - FDA would be forced to ban all tobacco, which would directly conflict with Congress' intent.
• Specific trumps general statute - Tobacco legislation was more specific than initial grant.
• Last in time rule - Tobacco legislation was passed after the FDCA
• Legislative acquiescence - FDA never asserted authority and Congress never granted authority.
• Post-enactment legislative history - Considered and rejected bills granting authority.
• Major question exception - tobacco industry is too important to leave to an agency.

King v. Burwell: Obamacare used market reforms, individual mandates, and federal subsidies to enforce healthcare. The tax credit seemed to apply only to state and not federal exchanges. The IRS then issued a rule applying the credit to all exchanges.
- Rule: Where the question is one of such deep political and economic concern, it is not an issue for an agency to decide but the Court.
o Roberts didn't want it to be ambiguous because it would allow a future administration to reverse the IRS rule easily.

US v. Mead Corp.: The ITC set the Harmonized Tariff Schedule. Customs and Border Protection in the field made determinations on individual products imported into the United States. In 1993, Customs changed the classification of Mead's planners, imposing a 4% tariff in a ruling letter. Mead protested the ruling and Customs provided an unpublished letter with its reasoning laid out.
- Rule: Where the decision made by an agency in administering the law does not stem from express or implied authority delegated by Congress, the Court will only grant the agency expertise deference to the extent that it is persuasive.
o If the agency cannot speak with the force of law, it is not granted deference.
o Where an agency can speak with the force of law (formal and informal rulemaking and formal adjudication) and chooses not to, the Court will determine the degree of deference it is granted.
• If it's not binding on the public, it's not binding on the courts.
- Scalia's Dissent: The origin of policymaking authority should be irrelevant. The test should instead be authoritative power (e.g. If it's the head of the agency, he should get deference). Agencies will ultimately result to more informal rulemaking to ensure they get deference (Court doesn't really give deference anyway).

FINAL RULES:
RULEMAKING
FORMAL: Chevron Deference
INFORMAL: Chevron Deference

ADJUDICATION
FORMAL: Chevron Deference
INFORMAL:
Totality of the Circumstances (Force of Law):
Chevron or Skidmore

CONSTITUTIONAL AVOIDANCE

It is a substantive canon of construction that avoids shifting the ground under the Constitution's meaning because its interpretation is so flexible. It is also an attempt to limit judicial intrusion. Instead, the Court presumes that Congress intends to act well within its realm of authority, so it wouldn't permit agencies to push the bounds of power (somewhat nonsensical because of one's narrow or broad interpretation of the Constitution and inherent nature of the branches to seize as much power as possible). It ultimately pushes statutes closer to the center of the realm of authority so the Court can avoid keeping track of an amorphous boundary.

Types:
1. If a statute could mean A or B and A is clearly unconstitutional, the Court will pick B.
o Outdated because the Court must speak to the unconstitutionality of one option.
• Unclear whether that reasoning will count as precedent in future cases.
2. If a statute could mean A or B and A is plausibly unconstitutional or raises a difficult constitutional question, the Court will pick B.
3. If a statute means A, but it doesn't say explicitly that it means A, and A is plausibly unconstitutional, the Court will hold that it doesn't mean A.
o Very rarely used or defended because the Court is just rewriting the statute.
o Similar to an as applied challenge but without the constitutional holding.

DeBartolo v. Florida Gulf Coast: Wage dispute arose over the employment of union workers. The workers proceeded to handbill at the local mall to get customers to boycott. The NLRB held that the handbilling was coercive and restrained trade but it ran up against the workers' First Amendment right.
- Chevron Step 1: While the statute may be ambiguous, constitutional avoidance clarifies it and forbids NLRB's interpretation.
- Chevron Step 2: The statute was ambiguous, but the NLRB's interpretation was unreasonable because it would be unconstitutional.
- Chevron Step 0: Congress didn't delegate power to the NLRB to make unconstitutional decisions.

Rust v. Sullivan: The HHS Director instituted regulations that prohibited federal monies to be used to educate Medicaid recipients about abortion as a family planning option. Nurses and doctors challenged the restriction as a violation of their 1st and 5th Amendment rights.
- Rule: An agency's interpretation will not be disfavored where the statute under whose authority it acts will raise a constitutional question automatically (no matter what the Court does, it can't resolve away the constitutional issue).
o Held that the issue was just a funding issue and not a grave constitutional issue.
• Rehnquist interpreted the statute narrowly to define "family planning" as only preconception and avoided the constitutional question of infringement on right to abortion.

APA §706(2)(E) provides for Substantial Evidence Review of factual findings in formal proceedings governed by APA §556-557. In the appellate court setting, Substantial Evidence Review is equivalent to the Clearly Erroneous standard. For informal proceedings, the court uses Arbitrary & Capricious review UNLESS otherwise specified in the organic statute of the agency (see Benzene). Courts must consider the evidence on the record as a whole.

RULEMAKING:
FORMAL: Substantial Evidence
INFORMAL: Arbitrary and Capricious

ADJUDICATION:
FORMAL: Substantial Evidence
INFORMAL: Arbitrary and Capricious

NLRB v. Universal Camera Corp.: Chairman testified at trial before the board and was subsequently fired from his job. He claimed he was fired out of retaliation, but his boss claimed it was for cause. The trial examiner found that there was insufficient evidence to establish a retaliatory discharge. The NLRB then reversed the examiner. The case then moved to the 2nd Circuit for enforcement.
- Holding: Hand found that the NLRB was entitled to more deference than the examiner and affirmed the NLRB's finding.
Universal Camera Corp. v. NLRB: The case was appealed to the Supreme Court. Frankfurter held that the recently passed amendments required judges to consider the entire record, not just one side's findings.
- Rule: Court must review the record as a whole, including an agency's assessment of the facts and its conclusions. The deference is not absolute, and courts have greater authority to reverse agencies than lower courts.
o 2nd Circuit ultimately reversed, but didn't engage in any new analysis.

Benzene Case: OSHA lowered the threshold for benzene from 10 to 1 ppm because it was a carcinogen, and it could find no safe level of exposure. The statute required substantial evidence review for OSHA regulations and also required that OSHA demonstrate that the current level was unsafe. This case involves a legal challenge, policy challenge, and factual challenge.
- Rule: While the courts will grant some deference to agencies, an agency must base its decisions on substantial evidence in the whole record to determine whether the agency decision is reasonable.
o Factual challenge revolved around the agency failing to provide substantial evidence that 10 ppm was an unsafe exposure level and that 1ppm was a safe level.
o Legal challenge revolved around the definition of unsafe.
o Policy challenge revolved around failure to provide enough reason that 1 ppm was better than 10 ppm.

Agencies are able to create policy in four different ways. To trigger the requirements of formal rulemaking, the agency's authorizing statute must say, "on the record after a hearing." Formal rulemaking is very rarely utilized because it is tedious and defeats the agency's purpose as an efficient body. § 553 requires either actual or constructive notice in the Federal Register. Publication is not required if the group affected is small and given actual notice (see Londoner). It also requires a comment period and a concise general statement from the agency that is responsive to public comments and provides substantive justifications.


RULEMAKING:
FORMAL: 556, 557; "on the record after a hearing"
INFORMAL:
§ 553:
1. Notice - "Logical outgrowth" (CMA) and data (Nova Scotia)
2. Comment
3. Concise General Statement - Responsiveness (Nova Scotia)


ADJUDICATION:
FORMAL: §§ 554, 556, & 557; Trial - ALJ acts as lawyer

INFORMAL:
[VOID]
Procedural Due Process:
0. Londoner/Bi-Metallic (size of group)
o If the group is small, in-person hearing.
o If the group is large, paper hearing is sufficient.
1. Protected interest?
o Property: Reasonable expectation of entitlement derived from positive law (including common law).
o Liberty: Derives from substantive due process.
2. Harm of erroneous deprivation v. government interest in efficiency
3. Procedure due?
o Minimum of notice and hearing with an impartial adjudicator.
• Notice can be written or oral, depending on interest.

United States v. Allegheny Ludlum Steel: Challenge to a rule promulgated by the ICC. The Act provided that, "the commission may, after hearing... establish reasonable rules, regulations and practices...."
- Rule: While the absence of the language "be made on the record" is not necessary to invoke formal rulemaking, the absence of the language in the ICC indicates that formal rulemaking is not required.

United States v. Florida East Coast Ry: Challenge to rule promulgated by the ICC. Objected to the rule and requested an oral hearing, which was denied. The Act provided in §1(14)(a) that, "the Commission may, after hearing... establish reasonable rules, regulations and practices...."
- Rule: The use of the term "after hearing" does not imply a right to present evidence orally, cross-examine witnesses, or present oral arguments.

CMA v. Block (4th Cir.): Congress revised statute to include the definition of supplemental foods for the WIC program and included concerns about healthy, affordable, and sustainable patterns of consumption. The proposed rule would allow both flavored and unflavored milk to remain on WIC, but the agency received 78 comments recommending removal of flavored milk. The Dept. of Agriculture excluded flavored milk in its final rule, and CMA challenged because it had inadequate notice.
- Rule: Modifications to the proposed rule must be a logical outgrowth of the notice and comments. If the final rule substantially departs from the terms or substance of the proposed rule, the notice is inadequate.
o Notice must be enough to give meaningful opportunity to comment.
• CMA thought it was safe because of the specificity for juice and cereal with more general guidelines for all other foods.

Long Island Care at Home v. Coke: FLSA exempts defined employees from wage and hour requirements. The Department of Labor proposed a rule exempting companionship workers only if they were employed by the infirm's family direction. It did not seek to exempt workers employed by third parties. The final rule adopted by the Department of Labor exempted all companionship workers.
- Rule: A final rule is a logical outgrowth of its proposed rule when parties are on notice that their interests are implicated and they have a meaningful chance to comment.
o Litmus Test: Was the result surprising? If not, then the final rule was a logical outgrowth.

United States v. Nova Scotia Food Products Corp.: FDA imposed uniform time-temperature-salinity standards for all smoked fish, with the justification that it was addressing botulism concerns. FDA did not include its research in its notice in the Register, so Nova Scotia had no opportunity to comment on it. Once it promulgated the final rule, it did not address Nova Scotia's comments that differential standards were better or that botulism wasn't a concern for whitefish.
- Rule: If the data used to justify the rule is from a 3rd party (outside the realm of agency's expertise), it must be disclosed in notice so that interested parties can challenge the empirical findings.
o Agencies are not required to disclose inferences drawn from their own expertise.
- Rule: An agency's concise general statement must respond to major comments submitted.
o Agencies must explain themselves when making policy because they are not entitled to legislative deference.

HBO v. FCC (D.C. Cir.): The FCC promulgated a rule that prohibited pay TV form airing movies between 2-10 years old and having series. The FCC was worried about limiting good programming from traditional broadcast networks that were accessible by the larger public. The FCC's former general counsel filed a brief alleging significant ex parte contact between the networks and the FCC while the agency was considering its rule.
- Rule: Once notice of a rulemaking is given, agency officials who may reasonably be expected to be involved in the process should not discuss the rulemaking with any interested party.
o Court was concerned with agency capture by moneyed interests and dual records for private and public parties.
• Frustrated the court's ability to review for arbitrariness.
o In tension with Overton Park because the agency is only required to establish a rational connection between its rule and its justification.
o Ultimately limited to cases involving competing claims to a valuable privilege, which made it more like adjudication than rulemaking (attempt to comply with Vermont Yankee).

Action for Children's Television v. FCC (D.C. Cir): Limited the ban on ex parte contacts in informal rulemaking to proceedings that were more akin to adjudications, like Sangamon.

Vermont Yankee: The Court considered the proper standard for arbitrary and capricious review. There was a debate as to whether it should be a procedural or substantive review. Procedural review was supported by the theory that judges aren't experts in agency issues but are experts at procedure.
- Rule: The only procedural requirements for agency decision-making come from the APA, the agency's organic statute, or the Constitution. Courts cannot impose common law procedural requirements above and beyond these sources.
o Additional requirements of logical outgrowth, data, responsiveness, and on the record justifications can be framed as interpretations of the APA to survive Vermont Yankee.
• Formalism v. functionalism.
o Calls into question the decision in HBO, which attempted to extend the no ex parte contact rule to informal rulemaking.

Sierra Club v. Costle: Challenge to EPA's new coal regulation on procedural grounds. The proposed rule changed on multiple occasions. Cost-shifting of various pollution mitigation requirements and regionalism drew attention of politicians. The EPA changed the rule after an "ex parte blitz." Two political meetings that occurred after the comment period closed were not docketed. The Clean Air Act prohibited ex parte contact.
- Rule: Informal rulemaking may entail some ex parte contacts so long as information relevant to the decision of the agency is docketed.
o It is within the agency's discretion to determine what constitutes information that is centrally relevant to its decision.
- Rule: The president is free to meet with an agency and guide its actions without revealing himself because he is acting in his capacity as the executive.
o The President needs to have oversight in order to carry out his Art. II powers.

District of Columbia Federation of Civic Assns. v. Volpe: Department of Transportation needed to approve a bridge between Virginia and Georgetown. It was previously denied, but a congressman threatened to hold up funding for the Metro system unless plans were revived.
- Rule: The agency must reach its decision strictly on the merits and in the manner prescribed by statute, without reference to irrelevant or extraneous considerations.

Association of National Advertisers Inc. v. FTC: FTC moved to ban televised advertising aimed at children. Advertisers, manufacturers, and broadcasters challenged the FTC Chairman's participation in the rulemaking, as he made multiple public statements demonstrating prejudgment and bias on this issue.
- Rule: Agency decision makers must recuse themselves when, by a showing of clear and convincing evidence, the decision maker has unalterably closed his or her mind to matters critical to the proceeding.

Goldberg v. Kelly: Welfare recipients had benefits withdrawn and could only contest the deprivation at a post-termination hearing. Prior to termination, they were given notice of termination and an opportunity to file written statements with the agency to reconsider. Recipients challenged the processes, claiming it was a deprivation of property without due process.
- Rule: The government must provide basic procedural protections when seeking to deprive an individual of protectable interests. Entitlements granted by the government are no longer considered gratuities but legitimate property interests.
o Steps:
1. Identify protected interest
2. Determine harm from deprivation of interest (limited by degree of dependence and time deprived).
• Deprivation is presumed erroneous and challenger is presumed eligible
• Deprivation is weighed against government interest in avoiding erroneous payouts.
3. Determine procedure due
• A pre-termination hearing doesn't have to mirror formal adjudication
• The more significant the interest, the more procedure due - welfare recipients' lives depend on benefits, so more procedure.
• Minimum of notice and hearing with an impartial adjudicator.

Board of Regents v. Roth: Professor was given a one-year teaching contract at a university. He was given notice that he would not be rehired, but the university did not provide a reason. Roth made both a property claim in continued employment and liberty claim in reputation.
- Rule: An individual must have more than just a unilateral expectation of an entitlement before that interest counts as a property interest.
o Contract was for a fixed term and there was no expectation of retention beyond that contract.
- Court noted that there was no evidence of reputational harm, but it might implicate procedural due process if there were.

Perry v. Sindermann: Professor whose contract wasn't renewed alleged that ambiguous assurances in official publications created a system of "de facto tenure."
- Rule: Common law can serve as a source of positive law that creates a reasonable expectation of entitlement.
o Promissory estoppel and reasonable reliance interests from contract law created expectation.

Arnett v. Kennedy: Civil service employee could only be fired for cause, but cause was determined by a post-termination hearing.
- Rule: Bitter with the sweet doctrine - if positive law like a statute created the right, it could also discount the amount of procedure due (overruled by Loudermill).
- Concurrences: Procedural analysis must be separate from the interest because the Constitution determines the amount of procedure due.

***OVERRULED BY LOUDERMILL

Bishop v. Wood: Police officer in North Carolina was classified as a permanent employee. Before termination, he was entitled to a letter informing of poor conduct. The employee then had the opportunity to correct, but if he failed to do so, he was terminated with a letter giving cause but with no opportunity for a hearing. North Carolina Supreme Court interpreted "permanent employee" to mean at will. Permanent just connoted indefinite (i.e. until the employer decided to fire).
- Rule: If there is no reasonable expectation of entitlement to interest, constitutional due process is not triggered.
o Court just chose not to disturb the lower court's holding because it wasn't a clearly erroneous decision.

Cleveland Board of Education v. Loudermill: Civil servant was dismissed after falsely stating that he had never been convicted of a felony. The Statute required that he be fired for cause and was entitled to a post-termination administrative review but no pre-termination review.
- Rule: "The Due Process Clause provides that certain substantive rights - life, liberty, and property - cannot be deprived except pursuant to constitutionally adequate procedures."
o Once a protectable interest is implicated, the Constitution governs the amount of process due.
• Separate analyses for substance and procedure.

O'Bannon v. Town Court Nursing Home: Nursing home's Medicaid certification was revoked and those patients dependent on Medicaid were forced to move to new facilities. Facility was given proper procedural due process protections. Patients argued that they had been deprived of their property interest in remaining in the facility.
- Rule: Indirect interests (third-party claims) cannot assert a constitutional claim. Expectations can be discounted by substantive contingency specified in positive law (e.g. "qualified" home).
o Residents only had a right to remain in a qualified home, not any home of their choosing.
- Blackmun's Concurrence: Indirect interests may be distinguishable if it is demonstrated that the third party's interest is not sufficiently aligned with the primary party.

Mathews v. Eldridge: SSA sent a questionnaire to Eldridge and then obtained reports from his doctors to determine if he was still eligible for disability benefits. It then sent him a letter with reasons as to why he was no longer eligible. Before termination, Eldridge was permitted to submit additional information to the agency as to why he shouldn't be terminated and could seek reconsideration after final determination. Eldridge argued that the procedures provided were inadequate to protect his interests.
- Rule: Provides framework by which to analyze Goldberg's step 2.
o pL > B (additional costs) → More procedure due (balances individual loss against social cost).
• Eldridge didn't rely on his benefits as much as the welfare recipients.
• Doctors are able to communicate effectively in writing (scheme initially turned on doctor's opinion).
• Oral hearing wouldn't add any protection.
• Cost burden would be high and reduce the amounts to eligible recipients.
o Court assumed Eldridge was ineligible.

Tumey v. Ohio: Mayor sat as adjudicator for traffic violations and got portion of the fines assessed.
- Rule: An adjudicator can't have a direct financial interest in a case.

Ward v. Village of Monroeville: Mayor sat as judge in cases involving traffic offenses. The fines assessed went into the village treasury.
- Rule: Temptation doesn't have to be direct to violate due process.
o Temptation runs the risk of partisanship, which violates due process.

Gibson v. Berryhill: Change in Alabama law required optometrists to work in private practice. Corporate optometrists were called before the state optometry board, which was completely made up of private practitioners, to determine whether their licenses should be revoked.
- Rule: Both prejudgment of a party and a pecuniary interest in the outcome of the adjudication are sufficient to establish partiality.
o Evidence that the optometry board had prejudged the corporate optometrists.
o Private optometrists had a financial interest in revoking the licenses because it would remove competition.

Cinderella Career & Finishing Schools v. FTC: Finishing school was ordered to cease and desist unfair and deceptive trade practices. The examiner dismissed the charges but the FTC appealed the decision to its full board. Chairman of the Board made public comments alluding to the appeal while it was pending before the board.
- Rule: While agencies may discuss the facts of an investigation in public (e.g. press release), administrative hearings must maintain both every element of fairness and the very appearance of fairness. The adjudicator cannot give the appearance of having prejudged the case.
o Rule is more flexible than the financial interest rule.
o Distinguishable from rulemaking because in that instance, the decisionmaker is prejudging an issue and not an individual entity (e.g. making policy to benefit society).
• See also Londoner and Bi-Metallic.

Withrow v. Larkin: The state medical board investigated a doctor for performing illegal abortions. The board then judged whether there was an actual violation. The doctor challenged the combination of duties as a violation of impartiality required by due process.
- Rule: Absent a showing which displaces a presumption of honesty or integrity or that there is a significant risk of actual bias or prejudgment from the combined role, the board is not impermissibly partial under the due process clause.
o Finding of probable cause is not a finding of guilt, just a determination that more process is needed.

APA §701 - Application (Judicial Review)

(a) This chapter applied according to the provisions thereof, except to the extent that —
1. Statutes preclude judicial review; or
2. Agency action is committed to agency discretion by law.

Two Methods
1. Explicit Preclusion
o Congress with explicit language removed certain items from the reviewing discretion of the courts.
2. Discretion by Law
o "No law to apply" (Overton Park)
o "Review is not to be had if the statue is drawn so that a court would have no meaningful standard against which to judge the agency's exercise of discretion" (Webster v. Doe).
o Anything that is inherent in executive powers

Abbot Labs: Strong presumption of reviewability that requires explicit statement by Congress as to its intent to remove possibility of review (avoids constitutional issue because it is highly likely that precluding judicial review is unconstitutional).

Johnson v. Robison: Constitutional claims are reviewable even when Congress precludes statutory reviewability.

Webster v. Doe: CIA employee voluntarily admitted to homosexuality. The agency dismissed him out of concern he might be more easily blackmailed to disclose secrets. Director was permitted to dismiss employees when he deemed such termination necessary or advisable in the interests of the US. Doe brought claim of both arbitrary and capricious dismissal and deprivation of liberty and property.
- Rule: "Review is not to be had if the statute is drawn so that a court would have no meaningful standard against which to judge the agency's exercise of discretion." Constitutional claims are still reviewable absent explicit statement by Congress to exclude them from review.
o Because at will employment is the default rule, the boss is automatically granted discretion.
o District Court can fairly balance national security interests against need for discovery.
- Scalia's Dissent: A claim can't be both unreviewable and reviewable.

Dunlop v. Bachowski: Under the Labor-Management Reporting and Disclosure Act of 1959, the Secretary of Labor is required to investigate complains and on a finding of probable cause, file a complaint within 60 days if the violation has not been remedied.
- Rule: While agency prosecutorial decisions are unreviewable, the use of the word "shall" in the statute requires that the agency either bring an action or provide a statement showing that the decision not to prosecute is not arbitrary or capricious.

Heckler v. Chaney: Death row inmates filed complaint with the FDA alleging that drugs used for lethal injections were being used for off-brand purposes, in violation of the FDCA. The FDA declined to bring an enforcement action and the inmates sued.
- Rule: The court may not review an agency's decision not to investigate or bring an enforcement action when the agency retains the statutory discretion to decide when to act or the requirements of the statute do not provide a standard for measuring the discretion of the agency.
o Agencies are better situated to know how to best allocate their resources.
o Agencies are acting in their executive function - functions traditionally and historically grounded in common law.
• The need for an intelligible principle is gone because they are performing functions they would be permitted to perform even without a statute (e.g. hiring and firing, allocating funds, enforcing law, etc.).