Notice & Comment

Revisiting APA Section 553, by Bernard W. Bell

bernie-bellOn February 8, 2016, the ABA adopted recommendations to revamp the APA’s informal rulemaking provision, 5 U.S.C. § 553.  In its Report to the President-Elect, the ABA Section on Administrative and Regulatory Law has urged the Trump administration to endorse those revisions (pages 10-11).  The provisions have been summarized previously in this blog here.

Section 553 has certainly been a success.  It has remained unamended since shortly after its adoption in 1946.  By way of contrast, the Freedom of Information Act, initially enacted 20 years later has been amended 6 times (in 1974, 1976, 1986, 1996, 2007, and 2016). Section 553’s longevity is all the more impressive given Vermont Yankee’s constraints upon courts’ ability to supplement its barebones procedures.  In part, section 553 owes its survival as enacted to its role as a default rule.  Congress has adopted procedural innovations over the last 70 years (including some originating in judicial opinions) in crafting special rulemaking provisions in specific statutes.  And agencies have developed various innovative rulemaking procedures over the years.

This post discusses some of the proposed revisions.  But first, let’s consider how much has changed since 1946.

The Report on the Attorney General’s Committee on Administrative Procedure (1941) and the Attorney General’s Manual on the Administrative Procedure Act (1947)(Attorney General’s Manual) provide some insight into the state of administrative law in 1946.  The use of “skeletal legislation,” legislating vague standards and tasking agencies with flesh out a policy via rule was considered to be in its infancy.  Indeed the non-delegation doctrine was arguably not dormant, two statutes had been invalidated on non-delegation grounds a mere 11 years previously.  Judicial review of agency rulemaking largely consisted of collateral review in the context of enforcement actions.  Granted the Attorney General’s Committee noted a developing trend of statutory provisions specifying broader, pre-enforcement judicial review of regulations.  Some public assistance programs existed, particularly as a result of the New Deal.  However, the “right/privilege” distinction was in full force, and suggested that “rule of law” constraints on agencies should focus on cabining agencies’ exercise of regulatory rather than proprietary functions.  And while some regulatory programs involved scientific matters, such as The Federal Food, Drug, and Cosmetic (FDC) Act of 1938, the bulk of the administrative state seems to have focused on economic interests rather than physical or environmental risk.  This was also an era in which the Supreme Court, and presumably many others, believed that administrative decisions could be made by insulated experts from a policy neutral standpoint, as typified by Humphrey’s Executor (noting that the Federal Trade Commission is “non-partisan,” must “act with entire impartiality,” and “is charged with the enforcement of no policy except the policy of the law”).  The era was characterized by active economic regulation of industries, with government agencies such as the Civil Aeronautics Board (“CAB”), the Federal Power Commission (“FPC”), and the Interstate Commerce Commission (“ICC”) regulating rates and services provided.

Since the 1940’s grants of broad regulatory authority that agencies must flesh out to via rulemaking have become common.  Due in part to Abbott Labs, pre-enforcement judicial review, outside of the context of a particular application of a regulation, has become the norm.  The “right/privilege” distinction has been jettisoned, even as additional benefit and grant-in-aid programs have been created.  The role of economic regulation has declined, due to de-regulation in the 1970’s and 1980’s, while regulatory programs (and whole agencies) have been created to control environmental and other health and safety risks.  We have also retreated from the view that decisions can be made by impartial experts shielded from elected officials.  Public interest groups representing the beneficiaries of regulatory schemes have become a permanent and powerful feature of the administrative landscape, and can serve as expert voices that partially counteract those of regulated entities.  And, of course, the digital revolution has had an impact on rulemaking.

This post will comment upon the ABA recommendations regarding the categorical exemptions from the rulemaking requirements, agency obligations to disclose critical data on which a proposed rule is based, agency obligations to develop a rulemaking record, and clarification of the statutory term “rule.”

Categorical Exemptions

Section 553 exempts from its requirements rules regarding (1) public property, loans, grants, benefits, or contracts or (2) any military or foreign affairs function, inter alia.  The scope of these and other statutory exemptions have not proven easy for courts to define with precision, and the existence of years of caselaw might provide a basis for refining the statutory text.

The ABA recommends largely jettisoning the first exemption above.  The Attorney General’s Manual asserts that the exemption involved rules governing “proprietary functions,” i.e., government control over its own resources.  Perhaps excluding such rules from rulemaking requirements made sense in an era where regulation was viewed as infringing upon regulated entities’ rights while benefits programs were viewed as merely providing largesse.  But such a lack of concern regarding rules governing loans (including loan guarantees), grants, and benefits seems out of place in the modern era.  “Peacetime” federal spending is a more sizeable portion of GDP and we have recognized the importance of fairness to the recipients of such government expenditures.  Even those exercising the government’s proprietary functions could benefit from receiving comments on proposed actions and should be subject to meaningful judicial review in promulgating rules governing distribution of such benefits.  Moreover, recipients of government loans, grants, etc. as well as the general public should have a chance to participate in the rulemaking process through notice-and-comment procedures.

The ABA recommends narrowing the exception covering military and foreign policy functions, the second exemption identified above.  In its view, the exemption should be coextensive with the Freedom of Information Act’s exemption for classified information.  That exemption applies to matters that are “(A) specifically authorized under criteria established by an Executive order to be kept secret in the interest of national defense or foreign policy and (B) are in fact properly classified pursuant to such Executive order.” 5 U.S.C §552(b)(1)(A).

Certainly one aspect of military and foreign affairs is the need for secrecy and confidentiality, which seems inimical to the inherently public notice-and-comment rulemaking process.  (However, it may be possible to permit notice and comment even when some of the relevant information the government possesses must remain classified.)  Even if the need for confidentiality were the sole justification for the exemption, the ABA’s suggested approach is problematic.  Judicial review under FOIA requires courts to independently review classification decisions, so as to counteract the executive branch’s tendency toward excessive secrecy.  But such an independent review approach would be problematic if employed to determine the scope of a military/foreign affairs exemption.  Agencies must be able to reliably determine whether the exemption applies before judicial review.

But more fundamentally, other aspects of military and foreign affairs rulemaking may justify exempting such rules.  First, military and foreign affairs decisions may require dispatch, which is in tension with the informal rulemaking process.  Granted, military and diplomatic officials could perhaps avail themselves of section 553’s “good cause” exception to act more expeditiously when necessary.

Second, one critical aspect of informal rulemaking, namely development of a record for judicial review, may not be particularly appropriate in the military and foreign affairs contexts.  Many such decisions lay within the President’s constitutional prerogatives or are made pursuant to statutes that accord the President broad discretion.  The rule of law concerns regarding domestic agencies’ fidelity to statutory directives are not present to the same degree with regard to military and foreign affairs decision making.  Such concerns are further diminished when military of foreign affairs decision are made at the direction of the President, the primary nationally-elected official.

Third, foreign affairs (and perhaps even some military) decisions will often involve compromise and accommodation with foreign sovereigns, and thus may be less amenable to the sort of “means-ends” rationality that a rulemaking record combined with judicial review is designed to ensure.  Indeed, a similar point has been made in the domestic context.  Jerry Mashaw, Administrative Law: The American Public Law System at 982 (7th ed. 2014) (noting, in discussing Citizens to Preserve Overton Park v. Volpe, that “[j]udicial review thus tends to push administrative action into a conceptual mold that employs . . . sharp criteria for judgment and detailed explanations of decisions[;] . . . influences of history, intergovernmental politics and the nonscientific or nonrational side of planning tend to be ignored”).

Disclosure of Data Providing the Basis for a Proposed Rule

As the Recommendation accompanying the ABA’s February 8, 2016 Resolution explains: “Empirical studies and other factual material often have an important impact on how an agency weighs competing concerns in drafting a final rule.”  Section 553 does not require agencies to provide such studies with a notice of proposed rulemaking.  With essentially no textual support, courts have required agencies to provide such empirical data during the informal rulemaking process.  Two leading cases involve scientific studies underlying rules that regulate health risks.  Portland Cement Assn v. Ruckelshaus (D.C. Cir. 1973) (EPA); U.S. v. Nova Scotia Food Prods (2d. Cir. 1977) (FDA).  The failure to require provision of such studies as a part of informal rulemaking was a deficiency in 1946, but became more evident beginning in the 1970’s.  Without the critical data an agency is relying upon in proposing a rule, participants (regulated entities and public interest groups) cannot effectively comment on the rule.  This salutary and time-tested doctrine, which has never been formally recognized by the Supreme Court, could always be invalidated on the basis of Vermont Yankee.  For that reason, the doctrine warrants codification.

Specifying Requirements for “The Record” 

The ABA recommends codifying the judicially-created requirement that the agency maintain a record of its rulemaking that “includes include any material that the agency considered during the rulemaking.”  The Attorney General’s Manual suggests that the section 553’s framers did not envision the need for a record outside of formal on-the-record hearings.  Section 553’s required “concise general statement of [final rules] basis and purpose” was viewed serving two purposes.  First, the statement would assist courts and the public in interpreting the regulation, much like legislative history assists in interpreting statutes.  Second, the statement would advise the public of the agency’s rationale for its action.  The “concise general statement” was not designed to serve as a justification for the action that would need to stand up to judicial scrutiny. However, with the changes in ripeness doctrine giving rise to pre-enforcement review as a norm, a record is essential to enable meaningful “hard look” judicial review.  Agency compilation of a rulemaking record is surely something that is here to stay, so long as “arbitrary and capricious” review remains somewhat searching.  Section 553 should reflect that reality.

What’s in a Definition: Re-Defining “Rule” 

The APA defines “rule” as “the whole or a part of an agency statement of general or particular applicability and future effect.” 5 U.S.C. §551(4) (emphasis added.)  The ABA proposes eliminating the italicized language.  According to the Attorney General’s Manual, the APA’s framers chose the contested language deliberately.  The specification of particular applicability was designed to ensure that rulemaking provisions could be used even when “the rule” would apply to a single person (including a single entity).  Rules that govern a single entity can specify that entity’s responsibilities and relationships with a large number of others.  One of the examples offered by the Attorney General, the Federal Power Commission’s prescription of rates charged by a single utility, is typical of a rule that may restrain one entity, but affects many more.  (See Attorney General’s Manual at 13.)  It is not clear why the definition need exclude such administrative actions from the definition of “rule.”  (Granted informal rulemaking should not result in rules limited to named entities.)

As the Attorney General’s Manual explains, section 553 is premised on the assumption that rules specify future conduct whereas adjudication assigns responsibility for past conduct.  (See Attorney General’s Manual at 14-15.)  In Bowen v. Georgetown University Hospital (1988), the U.S. Supreme Court has quite properly enshrined a clear statement rule requiring clear statutory language to authorize retroactive rulemaking.  Nevertheless Congress can authorize retroactive rulemaking, and apparently has done so at least on occasion.  See Jeffrey S. Lubbers, A Guide to Federal Agency Rulemaking 332-33 (5th ed. 2012). The APA’s definition of rule should at least acknowledge this possibility.

Indeed, perhaps an agency should be required to note specifically in a notice of proposed rulemaking that it is considering applying all or a portion of any rule adopted retroactively (and cite authority for its authority to do so).  Perhaps, the agency should be required to note on the public record its justification for doing so, much as it must justify foregoing notice-and-comment rulemaking when it is “impractical” or “contrary to the public interest.”

Others will discuss some more innovative aspects of the ABA proposal, notably midnight rules, and retrospective review of major rules.

In short, though section 553 has largely stood the test of time and enjoyed remarkable longevity; it is probably time to consider modest revisions on the basic framework.

Bernard W. Bell is a Professor of Law and Herbert Hannoch Scholar at Rutgers Law School.

This is post is part of the Symposium on the ABA AdLaw Section’s 2016 Report to the President-Elect. An introduction to the symposium is here, and all of the posts are collected here. The views in this post, which expand upon the recommendations set forth in the Report, are the author’s own and do not necessarily reflect the views of the ABA AdLaw Section. The full Report is available here.

Print Friendly, PDF & Email