Alex Platt’s article “Is Administrative Summary Judgment Unlawful?” raised many fundamental issues about subjects such as APA originalism and textualism and the utility of administrative summary judgment (hereinafter SJ). I don’t agree with Alex’s paper, but I will suggest a way to reframe it in a way that I could agree with.
Alex presents interesting textual and legislative history arguments for the position that the APA does not allow SJ. However, as a non-originalist and non-textualist, I do not agree that these arguments should lead courts to prohibit administrative SJ if that would be a suboptimal and inefficient result. Instead we should interpret the APA to allow agencies to use optimal and efficient procedures. This is easily done, since the language about oral testimony in APA §556(d) can be read to refer to cases in which an ALJ conducts an administrative hearing, but not to cases in which no hearing is needed since there is no disputed issue of material fact.
The APA is a 75 years old quasi-constitutional trans-substantive statute. It has often been—and should be–read in a non-literal and non-originalist way when that seems like the better result. Here are a few examples (readers of this blog can probably think of others):
- Is FTC cease and desist order rulemaking? Absolutely. It is an “an agency statement of general or particular applicability and future effect…” [APA §551(4)] But nobody takes this absurd result seriously. C&D cases have always been treated as adjudication.
- Generalized ratemaking is treated as informal rather than formal rulemaking. [Florida East Coast Ry] This decision recognizes that formal rulemaking is a totally inappropriate way to make general policy. This decision violated Congressional intent but the Supreme court just ignored that. [Nathanson, 75 Colum.L.Rev. 721, 732-33]
- The APA calls for a “concise general statement of basis and purpose” of a rule. This is guaranteed to produce a horse laugh among admin lawyers.
- Judicial decisions require disclosure of an agency’s scientific backup for a proposed rule. Where is that in the APA?
- A statute calls for an APA adjudicatory hearing—but it is trumped by a general rule that settles the issue. [Campbell v. Heckler and many other cases]
But should the APA be read to permit SJ procedures? Absolutely. ALJ hearings are costly and slow. They are not free goods. It is suboptimal to require an oral hearing when there are no issues in dispute and so no need for a hearing. Agencies are radically underfunded with rising demands for enforcement. Prohibiting SJ means precious adjudicatory resources are being wasted, so that the agency can undertake less enforcement. That’s a bad result.
The utility of SJ in administered hearings is confirmed by the leading case of Weinberger v Hynson Wescott & Dunning, 412 US 609 (1973), which permitted the FDA to use SJ procedures in determining whether thousands of existing drugs were effective. A rule required proof by controlled studies rather than anecdotal studies. Although the statute required a hearing for withdrawal of approval of the drugs, these hearings were trumped by SJ when the manufacturer could support its application only by anecdotal studies. Without SJ, the FDA would have required many long years to finish the job of decertifying ineffective drugs. The Court said: “What the agency has said, then, is that it will not provide a formal hearing where it is apparent at the threshold that the applicant has not tendered any evidence which on its face meets the statutory standards as particularized by the regulations.” Alex brushes the case aside since it didn’t involve an APA hearing, but I think its demonstration that SJ has great utility in administrative adjudication is extremely important.
Alex concedes that his APA interpretation prohibiting SJ would sweep across many agencies of the government that use that procedure. Even if he’s right that the SEC should be barred from using SJ, we need to be very cautious in interpreting the APA to produce broad trans-substantive effects. The Supreme Court is reluctant to do that, as seen in cases like Richardson v. Perales and Vermont Yankee. In the related area of due process, Withrow v. Larkin recognized the danger of overbroad effects. The case involved the issue of whether agency heads who investigated a case could vote on the final decision. A decision prohibiting that practice would sweep across countless thousands of federal state, and local licensing agencies, with immeasurable effects on pending or completed cases as well as future enforcement. Instead, the court required a strong showing that the agency head would be biased under the facts of a particular case.
I sense from the article that Alex’s concern for the issue arose out of the SEC’s broken-windows enforcement policy which was facilitated by its use of SJ. But if that’s true, it’s the wrong way to solve the problem. He needs to attack broken-window, not the otherwise useful procedural device that made it possible.
Finally, I’d like to be more constructive and suggest how Alex might reframe his paper. SJ may be inappropriate when an ALJ has to resolve the discretionary issue of the enforcement sanction, particularly in SEC follow-on proceedings or broken-window type enforcement. This kind of discretionary decision occurs in enforcement proceedings across the government. What’s the penalty? It could range from suspension of registration statements, a civil money penalty, license revocation, a cease and desist order, restitution, or it could be limited to a warning in the file. In setting penalties, the SEC should consider such factors as the state of mind of the violator, degree of culpability, deterrent effects, previous violations, remorse, ability to pay etc. I think an oral hearing may be useful in these situations, so it can be argued that SJ is inappropriate. But when the only issue in a case is interpretation or application of a statute or regulation or adjudicatory precedent to agreed facts, SJ is the way to go.
Michael Asimow is Dean’s Executive Professor of Law at Santa Clara Law School