This short post will do two things. First, it will heap praise on Professor Parrillo’s article, Federal Agency Guidance and the Power to Bind: An Empirical Study of Agencies and Industries. This terrific and engaging work sheds valuable light on what it means, practically, for policy statements to be “practically binding.” One can reasonably hope that its evidence and analysis will penetrate to the courts and help move the law, which is often described as “fuzzy,” “blurred,” or “enshrouded in considerable smog,” in a clearer direction. Second, the post will add a quick, quarter-baked thought of its own on a potential reform—i.e., how petitions for rulemaking under § 553(e) might help address the problem that courts are currently trying to solve by invalidating policy statements that are “practically binding.”
As any reader who has made it this far into this post is certain to know, the default procedure for promulgating a legislative rule that creates a new legally binding norm is notice and comment. This process enables interested persons to submit objections to an agency’s proposed rule, and the agency must respond to material objections lest a reviewing court invalidate the rule as arbitrary. Among other benefits, this process helps ensure that agencies act on the basis of good information and analysis, and it creates a record that enables reviewing courts to determine whether agency rules are reasonable. An agency policy statement, by contrast, is not supposed to have the same legally binding effect as a legislative rule. Rather, as the Attorney General’s Manual informs us, policy statements are supposed “to advise the public prospectively of the manner in which the agency proposes to exercise a discretionary power” in later proceedings. For instance, an agency might indicate in a policy statement that it will grant a permit to those regulated parties that do X. To a regulated party that wants to make sure it gets a permit, such information can of course be extremely valuable. By much the same token, however, this information may create intense practical pressure on a regulated party to do X to get the permit—even if the regulated party is convinced that doing Y instead should suffice. This pressure to comply will be that much higher if the regulated party anticipates that the agency will apply the policy statement rigidly to all permit applications. If the pressure rises high enough, then one might say that the policy statement is “practically binding” and functioning as an improper, de facto legislative rule.
Case law addressing this problem explains that an agency’s purported policy statement is really an improper legislative rule if it “impose[s] any rights and obligations” or does not “genuinely leave[ ] the agency and its decisionmakers free to exercise discretion.” General Electric v. EPA, 290 F.3d 377 (D.C. Cir 2002). These two prongs can boil down to one inquiry: Has the agency deprived itself of its own discretion by the purported policy statement? The answer to this question will be yes, and the policy statement invalid, where it “appears on its face to be binding … or is applied by the agency in a way that indicates it is binding.” Id. The upshot here is that, if a court concludes that an agency will apply a policy statement rigidly in later proceedings, it is “practically binding” and should be invalidated as an improper legislative rule.
Okay, now that the regrettably long set-up is done, let’s get back to Professor Parrillo’s article. To explore the potential for guidance documents to “practically bind,” he did a splendid thing: He interviewed 135 individuals—including agency officials, industry representatives, and NGO representatives—and asked them what they thought about the problem. Based on their responses, he identified circumstances in which regulated parties face especially strong pressures to comply with guidance. These circumstances include: (a) the regulated party needs to demonstrate compliance to obtain pre-approval for some advantage, such a permit; (b) regulatory regimes that involve continuous or frequent monitoring of regulated parties by agencies; (c) the existence of a “compliance officer” culture at a regulated party; and (d) a significant risk of ex post enforcement for regulatory violations. See Federal Agency Guidance at 177. Professor Parrillo also identified strong but perfectly legitimate pressures on agencies to apply their guidance consistently. Among them, consistency serves the rule-of-law values of promoting predictability and avoiding arbitrary favoritism. On a closely related point, interested agency outsiders, including regulated parties, NGOs, the media, and Congress, often demand agency consistency. In addition, Professor Parrillo identified perfectly understandable, if not always laudable, sources of bureaucratic inertia that contribute to agency rigidity—e.g., it can be costly to regulated parties to seek a variance from a policy statement and costly to agencies to grant them.
This careful analysis indicates that there are many regulatory domains where, for a mix of legitimate reasons, we should expect an agency policy statement to be applied with a great deal of consistency in later proceedings. If this expected consistency is enough to justify a conclusion that an agency policy statement is “practically binding” and therefore invalid, then it would seem to follow that there are many regulatory domains in which agencies cannot properly issue policy statements. But, given that the guidance imparted by agency policy statements can be so valuable, this can’t be right. This conclusion in turn suggests that courts should find something other than the “practically binding” test to police the line between policy statements and legislative rules.
Regarding a search for an alternative cure, here is a quick thought: Consider that the underlying problem that the “practically binding” test is trying to solve is that a party potentially affected by application of a policy statement should have a meaningful opportunity to persuade the agency to exercise its discretion not to follow the policy statement. So, we are looking for a device, other than invalidating a policy statement as “practically binding,” for making sure that an agency has the requisite “open” mind.
As it happened, in 1945, the Senate Judiciary Committee, in a portion of the APA’s legislative history known as the Comparative Print, suggested one. In a passage justifying the APA’s exceptions to notice and comment for procedural rules, interpretive rules, and policy statements, the Committee noted, “the provision for petitions contained in subsection (c) affords an opportunity for private parties to secure a reconsideration of such rules when issued.” Administrative Procedure Act: Legislative History, S. Doc. No. 248, 79th Cong., 18 (reprinting the 1945 Senate Judiciary Committee Comparative Print). Transposing this suggestion to the enacted APA, a person unhappy with a policy statement, which is, after all, a type of rule under the APA, might bring a petition for a rulemaking to repeal or alter that policy statement pursuant to § 553(e).
A number of scholars have reached differing conclusions regarding the potential availability and efficacy of this approach (e.g., Mark Seidenfeld, Nina Mendelson, Aram Gavoor, Daniel Miktus, and Sean Croston). Space constraints do not allow for an unpacking of their various views—and I haven’t fully thought out my own conclusions. Still, before closing, I would like to throw in one quick thought that suggests to me that petitions for rulemaking might provide a more promising path for reform than one might at first think.
One rap on the efficacy of petitions for rulemaking is that agencies can delay responding indefinitely. Courts, applying the TRAC factors and mindful of the need to avoid infringing on agency discretion, will often tolerate years of delay. But maybe they can be persuaded to treat petitions for rulemaking to contest agency policy statements differently. Such a petition does not ask an agency to embark on some entirely new regulatory path. Instead, it questions a stance for which the agency, under basic administrative law, should already have a sufficient contemporaneous rationale. If the agency has done its job right in fashioning its policy statement, it should not be that difficult for it to give a substantive response to the petition, justifying a quicker turnaround time for prying a response from the agency. Tracing this path to its end, were an agency to deny a petition, the unhappy petitioner, provided requirements such as standing are satisfied, could seek judicial review. Petitions for rulemaking could thus provide a means for forcing agencies to consider particular objections to their policy statements without requiring them to engage in full-blown notice and comment.
Richard Murphy is the AT&T Professor of Law at Texas Tech University School of Law.
This post is part of a symposium on federal agency guidance. The rest of the posts in this symposium can be viewed here.