Administrative Law Prof Blog

An uncivil regulatory proceeding

When we think of regulatory enforcement and administrative procedures, we usually think in term of civil actions. Well, sometime the government can get really pissed off. A criminal indictment is described on Mayer Brown's blog in "The 'Wolff' at Importers’ Doors: Criminal Statute Is New Tool in Trade Enforcement Cases", by Anthony M. Alexis, Sydney H. Mintzer and Margaret-Rose Sales (Washington, DC). It begins:

US importers have long been subject to civil penalties for violating US trade law. However, with the recent indictment of 11 individuals and 6 corporations for allegedly conspiring to illegally import goods into the United States, the US government may be signaling a sea-change in its enforcement strategy by subjecting trade law violators to severe criminal penalties as well.

The article compares the threats posed by this indictment with the usual penalties associated with similar administrative actions. Thanks to Lexology for the pointer. EMM

 

Evidentiary standards in administrative hearings

Evidentiary standards in administrative hearings are usually more permissive than in judicial proceedings. Further, they may vary from context to context depending on establishing statutes and Administrative Procedure Acts. An example from Harvey Randall's New York Public Personnel Law blog, "Court permits tape-recorded statements provided by informants to be admitted into evidence in an administrative disciplinary hearing":

Marino E. Sannuti, a New York City police officer, was dismissed from his position after he was found guilty of conspiring with a “chop shop owner” to have at least one car stolen on his behalf. The evidence presented against Sannuti consisted of the testimony of the investigating officers and a tape recording containing statements by three informants.

Sannuti challenged his termination, contending that the commissioner’s determination was not supported by substantial evidence. The Appellate Division disagreed, holding that the record made during the disciplinary proceeding contained substantial evidence of Sannuti’s guilt of the charges filed against him.

The court said that the tape-recorded statements, although hearsay, were properly received as part of the evidence against Sannuti. The decision noted that the reliability of the informants’ statements was corroborated by their internal consistency, by facts disclosed in the investigation and, in part, by Sannuti’s own testimony.

EMM

Fairness matters

From the Law of the Land blog of Patty Salkin (Albany), "4th Circuit Court of Appeals Finds Regulatory Takings Allegation Satisfies Ripeness Standard Where Further Administrative Review Would be Futile":

In a somewhat complicated fact pattern, Acorn Land, LLC (Acorn) purchased a tract of land in Baltimore County in a residential zone. ...

I agree it's complicated, so I'll just give you the paragraph on how this action was ripe.

... To present a ripe regulatory takings claim, the plaintiff must demonstrate that: (1) the government entity charged with implementing the regulations in question has issued a “final decision regarding the application of the regulations to the property at issue,” and (2) the plaintiff has sought and been denied just compensation through available and adequate state procedures for seeking just compensation. Williamson County Reg’l Planning Comm’ n v. Hamilton Bank of Johnson City, 473 U.S. 172, 186, 195 (1985). As a result, the court looks at the issue of whether Acorn satisfied Williamson’s first, “final decision” prong. The court found that Acorn was subject to unfair and unreasonable zoning procedures when the Council denied Acorn’s petition, without explanation, after the petition met the County’s objective criteria for amending property classification. Further, the Circuit Court for Baltimore County went so far as to deem such action arbitrary and capricious. Despite the circuit court’s order to the Council, they still denied Acorn’s petition by rezoning the property. Therefore, the court held that under these circumstances “it would be both futile and unfair to require Acorn to jump through any additional administrative hoops to obtain a ‘final decision.” As a result of this [] Williamson’s first prong is satisfied and the takings claim is ripe for review.

EMM

Jurisdiction and administrative remedies

Another great case description from Lawrence Friedman on his Customs Law blog, "Are Excises Taxes Protestable?". Some of what he discusses is specific to customs problems, but the lesson is useful.

When Customs collects a tax for another agency, is it making a protestable decision? That is an important question. If the answer is yes, then the U.S. Court of International Trade has subject matter jurisdiction over the denied protest. If the answer is no, the importer has to look elsewhere for relief.

...

Whenever 1581(a) [the protest review process - the administrative remedy] is available as a means of getting into Court, the usual result is that no other means of establishing jurisdiction will work unless the protest process is "manifestly inadequate." The Court did not see any such inadequacy in this case. Finally, the plaintiff's valiant effort at latching on to the Administrative Procedure Act to establish jurisdiction to review a "final agency action," was also unavailing. The APA does not provide aggrieved parties a means of circumventing the established path to judicial review. In light of the non-futile availability of the administrative protest, the APA was no help to the plaintiff. The CIT dismissed for lack of jurisdiction.

EMM

Estoppel: Sometimes you can hold the government to its promises

From Foley Hoag's Law and the Environment blog, "Yes, Virginia, You Can Estop the Government" by Seth Jaffe (Foley Hoag, Boston):

One of the first lessons I learned as a summer associate, more years ago than I care to remember, is that the probability of a successful estoppel claim against the government is approximately the same as the probability that there is a Santa Claus. After the recent decision from the District of New Jersey in FMC Corporation v. American Cyanamid, the probability of a successful estoppel claim may still be low, but it isn’t zero.

During negotiations, New Jersey said it would not try to collect certain environmental penalties from FMC. Four years (and a change of administrations) later, surprise, surprise, they try to collect. FMC objects, based on the earlier statements.

In responding to FMC’s motion to dismiss, NJDEP made the argument most of us would expect:

the doctrine of waiver should not be applied under these circumstances [because] a government agency may change policies for the benefit for the public without creating rights in parties who claim to have relied on the old policy.

The Court wasn’t buying it. While acknowledging that “the application of waiver or estoppel principles to government actions is to be most strictly limited,” the Court concluded that New Jersey had expressly waived its right to recover NRD. It was significant to the Court that NJDEP did not qualify the waiver in any way. Given the absence of qualifying language, the Court concluded that to allow NJDEP to bring NRD claims after such an unqualified waiver “would serve to completely alter the calculus of the litigation and undermine settlement negotiations that parties engage in with the State.”

The biggest lesson of FMC will probably be for government attorneys – make sure you qualify your waivers. Nonetheless, it does suggest that, at least in the right case, the government will be held to its promises.

Might be a fun case for classroom discussion on the problem of policy changes. EMM

You've got to follow the rules for changing rules

Heidi Trimarco (Taft Stettinius & Hollister LLP, Cincinnati) reports on a recent federal case in Florida where the Corps of Engineers changed the rules controlling its jurisdiction over wetlands without following the APA in "Federal Court Reins In Corps’ Regulation of Wetlands":

A federal District Court judge in Florida has issued an order prohibiting the Army Corps of Engineers from expanding the Corps’ authority under the Clean Water Act without first going through the appropriate administrative procedures.

... [The district court judge] struck down the Corps’ recent rulemaking that purported to expand the Corps’ authority to regulate wetlands. Under the Clean Water Act (“CWA”), the Corps is charged with regulating the “navigable waters” of the United States, including wetlands. ...

At issue in New Hope Power is a recent change in policy adopted by the Corp expanding the Corps’ definition of wetlands, and thus expanding the Corps’ regulatory authority. ...

The court found that there had been a “definitive shift in the Corps’ substantive rules regarding what the Corps considers wetlands.” ... [T]he Corps had inappropriately “broadly extended the Corps’ jurisdiction and sharply narrowed the number of exempt prior converted croplands.” The expansion was improper because the Corps did not go through the appropriate procedural steps necessary to change administrative regulations, including publication of the proposed changes in the Federal Register and allowing for a notice and comment period. By failing to abide by the proper procedures, the Corps improperly overstepped its authority. ...

[Citations omitted.] Back in the day, they were called "swamps". EMM

Final 2010 Model State APA Available

Rulemaking has announced "2010 Model State Administrative Procedure Act Available":

The National Conference of Commissioner on Uniform State Laws (NCCUSL) has posted the final version of the 2010 Model State Administrative Procedure Act (MSAPA) on the web at http://www.law.upenn.edu/bll/archives/ulc/msapa/2010_final.htm.  NCCUSL adopted the revised MSAPA, subject to style changes, at its 2010 summer meeting.  The final version was posted on October 18, 2010.

EMM

New administrative law articles

From the University of Washington's Current Index to Legal Periodicals:

Loutinsky, Genevieve. Comment. The needs of war and the right to fair process in seeking a security clearance. 19 Temp. Pol. & Civ. Rts. L. Rev. 543-569 (2010). [H]|[L]|[W]

EMM

Sometimes small rights require protection

From the Customs Law blog of Lawrence Friedman (Barnes/Richardson, Chicago), "Filer Code Safe for Now".

Customs and Border Protection assigns licensed customhouse brokers unique filer codes. These codes allow the broker to have electronic access to Customs.  The filer code, therefore, effectively permits the broker do business in a modern commercial environment. Absent an active filer code, the broker may as well have to operate using carrier pigeons and smoke signals. Consequently, when CBP threatened to deactivate its filer code, Lizarraga Customs Broker went on the offensive.

...

This case may seem technical and legal. The importance of it for brokers, though, is that it represents an on-the-record acknowledgement by Customs that it cannot simply yank a filer code. Rather, the broker is entitled to notice and an opportunity to be heard. Further, the Court was clear that it was not stating that the procedural protections afforded under the Administrative Procedure Act were necessarily sufficient in all cases. Thus, the decision appears to put everyone on notice that the threat of deactivating a filer code is important, subject to the APA, and will be given careful scrutiny by the Court. Brokers should take some solace in that conclusion.

EMM

Why it's important to trace how regulations are connected

An interesting description of how complicated consequences can be in the regulatory world from the FDA Law Blog, "TRICARE Reissues Retail Pharmacy Refund Rule Largely Unchanged" by Alan M. Kirschenbaum. The subject of the post is the promulgation of a revised Department of Defense (DoD) regulation implementing a statutory requirement that vendors selling prescription drugs to service members paid under the TRICARE insurance program must refund previous overcharges. Here is the last paragraph from the post:

DoD did make one significant change from the previous rule.  32 CFR § 199.21(q)(4) now provides that DoD may impose available remedies for the failure of a manufacturer to honor a requirement of the regulation or of a refund agreement, rather than for a failure to “make” an agreement as before.  This change is based on DoD’s view that the refund agreement is voluntary, because a manufacturer may opt out of the program on a drug-by-drug basis under section 199.21(q)(3)(iii)(C) of the rule.  However, if a drug is opted out, the drug will be excluded from TRICARE coverage through not only the retail pharmacy benefit, but also the mail order service and military treatment facility pharmacies.  More importantly, such an opt out may arguably cause the manufacturer to breach its Master Agreement with the Department of Veterans Affairs (VA), which obligates the manufacturer to offer its products to federal agencies (including DoD) on the Federal Supply Schedule.  DoD recognizes this possibility (though calling the issue “outside DoD’s authority”), but offers only cold comfort:  if a manufacturer thinks an opt-out will put it in breach of its Master Agreement, the manufacturer can always voluntarily decide to terminate its Master Agreement.  Of course, the result of these “voluntary” actions would be that the manufacturer would be prohibited from selling its drugs to the federal government, and could not have any of its outpatient drugs reimbursed by the federal government under Medicaid or Medicare Part B.

Basicly, a vendor may choose not to pay the refund if it wants to walk away from any federal money - DoD, VA, or Medicare/Medicaid. Advising your pharma client, you would need to sift through not only the new DoD TRICARE regulation, but also other DoD pharmacy regs, VA procurement regs, and Medicare/Medicaid reimbursement regs. It's another technique for enforcing agency decisions. EMM

Collateral estoppel

From Harvey Randall's New York Public Personnel Law blog, "Doctrine of collateral estoppel may bar making of new findings of fact in an administrative hearing":

The Carthage Central School District dismissed Sharon Foster after a ... hearing officer found her guilty of misconduct in the operation of her school bus. ...

Following her dismissal, Foster was denied unemployment insurance benefits on the grounds that she was terminated from her position for “disqualifying misconduct.”

After a number of procedural steps had been completed, an Unemployment Insurance Administrative Law Judge concluded that he was bound by the factual findings of the [diciplinary] proceeding and held that Foster’s action constituted disqualifying misconduct. The Appellate Division agreed, sustaining the Unemployment Insurance Board’s determination. ...

According to the ruling, Foster, who was represented by counsel in the ... disciplinary proceeding, had a full and fair opportunity to litigate all the factual issues concerning the charges of misconduct.

The court said that the factual findings made in during the [diciplinary] hearing were entitled to be given a collateral estoppel effect and thus Foster was “precluded from relitigating the factual issues” in the course of her unemployment insurance hearing.

In a parallel type of situation, if an employee is found guilty in a court of law of a crime such as stealing, and disciplinary charges are filed related to that same incident of theft, there is no lawful way for an administrative disciplinary hearing officer to find the employee not guilty of stealing. This was the holding in Kelly v. Levin, 440 NY2d 424, a case that challenged the acquittal an employee in an administrative disciplinary action earlier found guilty of a criminal act involving the same allegations.

EMM

When agencies ignore the experts

From the Abbott & Kindermann Land Use Law Blog, "Grazing Cattle and the BLM's Violation of NEPA and ESA" by  Emilio Camacho and Cori Badgley:

In Western Watershed Project v. Kraayenbrink, (9th Cir. Sep. 1, 2010, No. 08-35360__F3d.__.), the Ninth Circuit Court of Appeals ruled that the Bureau of Land Management (“BLM”) violated the National Environmental Policy Act (“NEPA”) and the Endangered Species Act (“ESA”) in adopting the 2006 amendments to the BLM’s grazing regulations.

... On July 16, 2006, the Secretary of the Interior proposed eighteen amendments to the BLM’s grazing regulations; these amendments would have decreased public involvement in public lands management, put new limitations on the BLM’s enforcement powers, and increased ranchers’ ownership rights to improvements and water on public lands.                 

... The petitioner won at trial court and BLM appealed. In addressing the first major issue, the court concluded that BLM failed to take a “hard look” at the environmental consequences and combined effects of the proposed regulatory amendments. The court explained that a final Environmental Impact Statement (“EIS”), a strict NEPA requirement, must offer a reasoned explanation and analysis for an agency’s change of policy. Given that there is a presumption against changes in current policy, the court noted that the agency proposing the change(s) must examine the relevant data and articulate a satisfactory explanation for its action, including a rational connection between facts found and the choice made. ...

In addressing the second major issue, the court concluded that BLM (or any major agency) violates the ESA when it concludes, without rational basis, that proposed amendments to its regulations would not affect listed species or their habitat. ESA requires agencies considering actions that “may affect” listed species and their habitat to consult with the United States Fish and Wildlife Service (“FWS”). For the same reasons that the court found BLM had violated NEPA, it held that BLM violated ESA. The court reasoned that because BLM failed to consider relevant expert analysis and concerns or articulate a rational connection between the facts found and the choice made, leading to its failure to consult with FWS, its actions were arbitrary and capricious in violation of the agency’s obligations under ESA. ...

This decision reminds agencies of the following two principles: 1) agencies must consider relevant expert analysis and concerns and provide adequate responses if the agency decides to reject the expert’s conclusion; 2) when the agency is changing an existing policy or rule, the agency must articulate a rational connection between the facts found and the choice to adopt the amendments.

EMM

Policy: Corruption of regulatory power

From The Volokh Conspiracy, "Racial Impacts and Business Regulations" by Timothy Sandefur (Pacific Legal Foundation). Opening paragraph:

Intrusive business regulations have a disproportionately negative impact on the poor and members of minority groups, who lack the political influence that whereby wealthy corporations and politically well-connected people are able to obtain special government favors. Nobody has done better scholarship on this point than Volokh Conspiracy blogger David Bernstein. The historical examples of the abuse of licensing laws and other regulations to oppress racial minorities are legion, and depressing. But they aren’t surprising. The lesson of public choice theory is that when government can redistribute wealth or opportunities, that power will fall into the hands of politically well-connected groups, who use it to their own advantage at the expense of less favored groups.

Regulation is power, and power can be corrupted. EMM

Why study administrative law?

From The BLT: The Blog of the Legal Times, "In-House Counsel Expect More Regulatory Litigation, Survey Finds" by Jenna Greene.

In-house counsel are bracing for a jump in litigation stemming from stricter government regulations, according to a survey of law departments released today.

Fulbright & Jaworski polled 275 in-house counsel in the United States, and found banking, health care and energy companies are especially concerned about the legal fall-out from heightened regulations. ...

As for which agencies are causing the most concern, the survey noted that the Justice Department has been active in investigating manufacturing and healthcare, and to a lesser extent, energy companies, while the Securities and Exchange Commission has focused on healthcare, financial services and energy, and the Internal Revenue Service has gone after engineering companies. Companies most often hired outside counsel to help with investigations by the Environmental Protection Agency.

EMM

Debate over public comment systems

I recently commented on a proposal from the Center for Regulatory Effectiveness and a response from the Center for Progressive Reform on the subject of an "interactive public docket" for comments on proposed Federal regulations. It was pointed out to me by Charles Smith.

An interesting debate. CRE's proposal, CPR's response, and the comments appear to be based on inferences from experience and logic. They are not based on evidence, as far as I can see. I suggest testing CRE's proposal, perhaps under the auspices of the recently resurrected Administrative Conference of the United States. Let us see if the anticipated benefits (broader public input, transparency) and the anticipated problems (agency information overload, agency capture) actually happen. Maybe we can get a grant.

Throwing my (limited) wisdom into the fray, my (limited) experience suggests that well-heeled commenters will always have an advantage in any rulemaking system. In a public comment system, they will have or be able to hire good, trusted technical experts and communicators. It's a major source of income, I suspect, for lobbyists. To the extent that less flush people wish to make their voices heard, they will need to aggregate their resources and exploit nonmonetary motivations to encourage their own trusted experts and communicators to speak up.

As for the CRE proposal and CPR's objections, I suspect that quality will win out over quantity. Information from sources trusted by the decisionmakers will have the greatest impact. Regulation is not a democratic process, although it improves its authority and gains acceptance when it allows everyone to speak her or his mind and appears to be a fair process. The public trust in regulators is positively related to regulators demonstrated expertise, demonstrated judgment, and demonstrated responsiveness to the concerns of those affected by their decisions.

Information overload is simply a fact of life in the 21st Century. Regulators, like the rest of us, must learn to deal with it. See How To Drink From a Firehose Without Drowning, Or Online Current Awareness Made Less Difficult.

I suspect that as for agency capture, there is little difference between CRE's proposal and the current system. As long as aggregate interests offer better preparation for regulatory positions and better standards of living for people leaving regulatory positions, there will be some degree of capture, even if only on a less than conscious level. Regulators are human. Where you stand depends on where you sit, or sat, or will sit. That most regulators try to be honest and objective, that they think they are being honest and objective, is an amazing tribute to American culture.

EMM

Federal ALJs may not be required to maintain law licenses

From U.S. Law Week (BNA), "OPM Proposes to Ditch Licensure Mandate For Incumbent Administrative Law Judges", 79 U.S.L.W. 1446:

Individuals who currently serve as administrative law judges would not be required to maintain a license to practice law under an Office of Personnel Management proposed rule published Oct. 7 [75 Fed. Reg. 61,998]. ...

Explaining its proposal to eliminate the licensure requirement, OPM said it “believes that the standards of ethical conduct that apply to ALJs as Federal employees, and agencies' existing authority to supervise ALJs and take actions against them in appropriate circumstances, are sufficient to ensure that ALJs are held to a high standard of conduct.” ...

OPM stressed that it is not proposing to eliminate the licensure requirement for applicants to ALJ positions. “OPM remains convinced that active licensure at the time of application and appointment is vital as an indicator that the applicant presenting himself or herself for assessment and possible appointment has been subject to rigorous ethical requirements right up to the time of appointment,” it said.

Comments on the proposed rule are due Dec. 6.

EMM

 

Class-of-One equal protection claims

U.S. Law Week (BNA) describes a recent Second Circuit case in "Engquist Class-of-One Analysis Doesn't Bar Lab's Equal Protection Suit Against State", 79 U.S.L.W. 1434:

The class-of-one analysis recently adopted by the U.S. Supreme Court does not bar an equal protection claim against New York by a medical laboratory claiming that the state department of health intentionally and maliciously subjected it to an intense and unwarranted degree of regulatory scrutiny, the U.S. Court of Appeals for the Second Circuit held Oct. 4 (Analytical Diagnostic Labs Inc. v. Kusel, 2d Cir., No. 08-6297-cv, 10/4/10).

The class-of-one theory recognizes that an individual may not be arbitrarily treated differently from other similarly situated individuals. In Engquist v. Oregon Dep't of Agriculture, 553 U.S. 591, 76 U.S.L.W. 4367 (2008), the Supreme Court held that the theory does not apply to public employees. There is currently a circuit split over whether Engquist is limited to the public employment context. ...

According to the appellate court, under Village of Willowbrook v. Olech, 528 U.S. 562 (2000), a class-of-one claim exists "where the plaintiff alleges that she has been intentionally treated differently from others similarly situated and that there is no rational basis for the difference in treatment." The Engquist court examined Olech, which dealt with a property owner's request to be connected to the municipal water supply, and said that in Olech a clear standard existed against which departures could be readily assessed. The Engquist court recognized that some state actions inherently "involve discretionary decisionmaking based on a vast array of subjective, individualized assessment." Such state action does not violate the Equal Protection Clause "when one person is treated differently from others, because treating like individuals differently is an accepted consequence of the discretion granted," the Engquist court said.

The Court determined that the case before them did not involve discretionary decisionmaking. However, this may be obiter dictum, because the Court affirmed the lower court dismissal of the Plaintiff's claim due to Plaintiff's failure to prove disparate treatment. EMM

New administrative law articles

From the University of Washington's Current Index to Legal Periodicals:

• Anand, Saurabh. Note. Using numerical statutory interpretation to improve conflict of interest waiver procedures at the FDA. 83 S. Cal. L. Rev. 649-692 (2010). [H]|[L]|[W]
  
  
• Flatt, Gregory C. Note. All in your head: a comprehensive approach to somatoform disorders in adult disability claims. 87 Wash. U. L. Rev. 1397-1427 (2010). [H]|[L]|[W]
  
  
• Fraser, Thomas J. Note. Interpretive rules: can the amount of deference accorded them offer insight into the procedural inquiry? 90 B.U. L. Rev. 1303-1329 (2010). [H]|[L]|[W]
  
  
• Rascoff, Samuel J. Domesticating intelligence. 83 S. Cal. L. Rev. 575-648 (2010). [H]|[L]|[W]

EMM

Cohen case - a better interpretation

Kristin Hickman (Minnesota) has an improved analysis of the Cohen case I posted about last week.

Hi Ted.

 I saw your post on the Cohen oral argument from last week.  I tried to post a comment but received a couple of error messages so thought I would just email you instead.  Cohen is a great case, but actually, the panel in Cohen found the agency action in question (an IRS Revenue Procedure) to be final, and the finality question was at best nominally an issue in the rehearing of the case en banc.  Better ways to frame the case, I think, are whether the Internal Revenue Code's anti-injunction act provision or the Declaratory Judgment Act's tax exception supersedes the Administrative Procedure Act's presumption in favor of judicial review of final agency rules or, alternatively, whether the Administrative Procedure Act offers an avenue for judicial review of final agency rules outside the Internal Revenue Code's refund and deficiency procedures for individual cases.  Hope you find the comment useful.

 All the best,
 Kristin
 *********************************************
Kristin E. Hickman
Associate Professor of Law
2010 Julius E. Davis Professor of Law
University of Minnesota Law School
314 Walter F. Mondale Hall
229 19th Avenue South
Minneapolis, MN 55455
(612) 624-2915
khickman@umn.edu
http://ssrn.com/author=459596

Very useful. Thanks, Kristin. I ask all of you, gentle readers, to let me know if you have better information on anything posted here. EMM

Policy: Regulatory burden

I usually don't post about policy matters, but this is a very general policy issue. The executive summary of a report prepared recently for the Small Business Administration begins:

The annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008. Had every U.S. household paid an equal share of the federal regulatory burden, each would have owed $15,586 in 2008. By comparison, the federal regulatory burden exceeds by 50 percent private spending on health care, which equaled $10,500 per household in 2008. While all citizens and businesses pay some portion of these costs, the distribution of the burden of regulations is quite uneven. The portion of regulatory costs that falls initially on businesses was $8,086 per employee in 2008. Small businesses, defined as firms employing fewer than 20 employees, bear the largest burden of federal regulations. As of 2008, small businesses face an annual regulatory cost of $10,585 per employee, which is 36 percent higher than the regulatory cost facing large firms (defined as firms with 500 or more employees).

Nicole V. Crain and W. Mark Crain (Lafayette College, PA), The Impact of Regulatory Costs on Small Firms (Sept. 2010). EMM