Notice & Comment

D.C. Circuit Review – Reviewed: A Day Without Administrative Law

After yesterday’s decision at the Supreme Court, it seems everyone is talking about administrative law.

Well, everyone but the D.C. Circuit. Today the D.C. Circuit issued five decisions and not one of them has much to do with administrative law. The closest, I guess, is a case about foreign sovereign immunity — and that isn’t very close. There’s also a case about a “subcontractor on a U.S. Army Corps of Engineers flood protection project,” but the actual disagreement is largely just a contract dispute between private parties (although a regulation plays a role). Not much admin law. None of this is to say that the cases aren’t interesting. But on days like today, the D.C. Circuit is a regular court rather than a specialist.

Today’s most interesting case, in my view, is Bronner v. Duggan — which addresses the amount-in-controversy requirement for diversity jurisdiction. This case carves out an exception from the rule from St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (1938), that “the sum claimed by the plaintiff controls if the claim is apparently made in good faith,” even if “[e]vents occurring subsequent to the institution of suit … reduce the amount recoverable below the statutory limit.” Here, Judge Henderson (joined by Judges Griffith* and Wilkins) limits that principle: good faith does not matter if the court can say “to a legal certainty that the claim is really for less than the jurisdictional amount.” And that limit applies even if the district court itself initially believed that the claim could satisfy the amount-in-controversy requirement but later reverses itself. There is more going on in this case but if you are hankering for a discussion of diversity jurisdiction, this opinion is well worth your time.

The Court also issued two opinions about foreign arbitration. In Process and Industrial Developments Limited v. Federal Republic of Nigeria, Judge Katsas (joined by Judges Pillard and Wilkins) held that a district court “must” resolve any colorable immunity defenses before requiring a foreign sovereign to brief the merits. And in D&S Consulting, Inc. v. Kingdom of Saudi Arabia, Chief Judge Srinivasan (joined by Judges Tatel and Ginsburg) enforced a forum-selection clause in favor of “the Board of Grievances, a Saudi Arabian administrative court.”

The Court’s decision in United States v. Han — a criminal case — is colorful. Preview: it concerns fraud and “flashy cars” (a phrase Judge Garland, joined by Judges Henderson and Millett, used twice). United States of America, for the Use and Benefit of American Civil Construction, LLC v. Hirani Engineering & Land Surveying, PC (that’s a mouthful) involves a contract dispute. Here is how Judge Rogers (joined by Judges Henderson and Garland) opened the opinion:

There is some administrative law there — but a not a lot.

So if you come to the Yale Journal on Regulation for a weekly dose of administrative law, what can you do?

Take comfort: the D.C. Circuit also issued six — but really five — more decisions earlier this week, and all of them are about administrative law.

Judge Edwards (joined by Judge Sentelle) decided New York Stock Exchange LLC v. SEC. Here is the gist of this lengthy opinion. The SEC adopted a pilot rule to gather data by assigning different transaction fees to test groups. The Court didn’t buy it at Chevron Step Two — and had some very harsh words for the SEC. “The Pilot Program emanates from an aimless ‘one-off’ regulation, i.e., a rule that imposes significant, costly, and disparate regulatory requirements on affected parties merely to allow the Commission to collect data to determine whether there might be a problem worthy of regulation.” Indeed, “the purpose of Rule 610T was to induce ‘an exogenous shock’ to the market that might offer insights into ‘the effects of fees and rebates on the markets and market participant behavior.’ In other words, the Commission acted solely to ‘shock the market’ to collect data so that it might ponder the ‘fundamental disagreements’ between parties affected by Commission rules and then consider whether to regulate in the future. This was an unprecedented action that clearly exceeded the SEC’s authority under the Exchange Act.” (I added the emphasis.) Here is a snippet you may see again: “The Commission is of the view that the statutory reference to ‘regulations as may be necessary or appropriate’ gave it authority to act, as it saw fit, without any other statutory authority to adopt the Pilot Program. The Supreme Court’s decision in Michigan v. EPA debunks the Commission’s position. In Michigan v. EPA, the Court makes it plain that the mere reference to ‘necessary’ or ‘appropriate’ in a statutory provision authorizing an agency to engage in rulemaking does not afford the agency authority to adopt regulations as it sees fit with respect to all matters covered by the agency’s authorizing statute.” Judge Pillard wrote separately to say the case was a closer call in her view.

Merck & Co., Inc. v. HHS also contains a sharp rebuke. Judge Millett (joined by Judges Henderson and Edwards) sternly rejected a rule from the Centers for Medicare and Medicaid Services that would have required drug manufacturers to disclose in their television advertisements the wholesale acquisition cost of many drugs. The Court set aside the rule, holding that the agency botched Chevron Step Two. Here is a sample of the analysis: “[N]o reasonable reading of the Department’s general administrative authority allows the Secretary to command the disclosure to the public at large of pricing information that bears at best a tenuous, confusing, and potentially harmful relationship to the Medicare and Medicaid programs. Although the Secretary’s regulatory authority is broad, it does not allow him to move the goalposts to wherever he kicks the ball.” (Note: Merck and New York Stock Exchange should be read in one sitting; there is a lot of overlap, including their treatment of Mourning v. Family Publications Service, Inc., 411 U.S. 356 (1973). Agencies should cite Mourning with trepidation.)

Judge Rao (joined by Chief Judge Srinivasan and Judge Rogers) authored the Court’s opinion in American Great Lakes Ports Association v. Schultz. Commercial shipping pilots sued the Coast Guard for setting an artificially inflated pilot licensing rate for the 2016 shipping season. The district court held that aspects of the Coast Guard’s methodology were unsupported by the record and remanded without vacatur. (Given the Coast Guard’s role here, I suppose this really is Vacation at Sea.) The D.C. Circuit affirmed. This sentence — or at least the first half of it — may be cited more than a few times going forward by challengers to agency action: “[A]lthough remand without vacatur remains an exceptional remedy, we have held that it is appropriate when vacatur would disrupt settled transactions.”

Friends of Animals v. Bernhardt (which is the same as Center for Biological Diversity v. Bernhardt) is a fascinating opinion, courtesy of Judge Silberman (joined by Judges Griffith and Pillard). Various parties challenged the U.S. Fish and Wildlife Service’s approach to imports of animal trophies from Africa. Here, the backstory matters. Challengers previously successfully argued that certain of the Service’s findings must be withdrawn because they were made without notice and comment. So what did the agency do? It withdrew the findings and said that going forward, it would proceed by informal adjudication (notably, informal adjudication that may cite those findings). Okay? Yes. The Court held the agency did not need to withdraw its findings through notice and comment because “we are faced only with the repeal of a ‘rule’ that illegally never went through notice and comment—in other words, a ‘non-rule rule.'” The Court also held that it is within the authority of the agency to announce its intention to use adjudication rather than rulemaking in the future.

(An aside: I’m still thinking through the implications of this case. Judge Silberman’s opinion, it seems to me, should be read alongside Chief Judge Robert’s opinion in Department of Homeland Security v. Regents of University of California. Imagine this fact pattern. An agency does something that should have gone through notice-and-comment but didn’t; a court says that was unlawful; the agency in response says that going forward it will act by case-by-case adjudication; challengers to that decision object, saying the agency must use rulemaking to undo what it did. According to the D.C. Circuit, that objection is wrong. Regents, of course, involved an inadequate explanation. But if a “non-rule rule” isn’t a rule at all and as a matter of law cannot be enforced (and so, per Silberman, can be rescinded without the notice-and-comment process that applies to rules), then is any additional explanation necessary to get rid of the non-rule rule?)

Finally, Judge Millett (joined by Judges Tatel and Garland) decided Solenex LLC v. Bernhardt. Solenex sued the Secretary of the Interior after the agency cancelled the company’s oil and gas lease. It argued that an unreasonable delay between the lease’s issuance and its cancellation violated the APA. The district court agreed but the D.C. Circuit did not: “First, delay by itself is not enough to render the Lease cancellation arbitrary or capricious. Second, the Secretary did consider, and in fact compensated, Solenex’s identified reliance interests.” There is a lot more going on in this case. Read it if you are interested in reliance. (Read the footnotes too.)

And that’s the week. Unfortunately, I fear this post might take more than five minutes to read.

* Judge Justin Walker was confirmed yesterday and will join the Court later this year when Judge Griffith retires.

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