Administrative Law Prof Blog

Final agency decisions

"If you call a dog's tail a leg, how many legs does a dog have? Four—just because you call something a leg doesn't make it a leg." Attributed to Abraham Lincoln.

The following is from Ariz. Physicians IPA, Inc., v. W. Ariz. Reg. Med. Ctr., 1 CA-CV 10-0579 (Sep. 27, 2011). Defendant health care provider made claims against Plaintiff intermediate contractor that the defendant was underpaid for some Medicaid services. The parties agreed to an administrative hearing on the issue of whether the claims were timely filed, postponing the issue of whether the appropriate reimbursement rates were applied. The ALJ found that 1354 claims were timely filed, but 27 were not. Arizona's Medicaid agency sustained the ALJ's findings. The plaintiff asked for an agency review of its decision, which the agency "substantively affirmed in a "Final Decision" stating it was "subject to judicial review" in accordance with the [Arizona Administrative Procedure] Act." So the plaintiff filed a complaint for judicial review. The defendant moved to dismiss, contending the court lacked subject matter jurisdiction because the so-called "Final Decision" was not in fact a final administrative decision. The trial court granted defendant’s motion to dismiss. I've omitted the quotation marks and citations below; see the slip opinion.

¶10 The right to appeal from an administrative decision exists only by force of statute and is limited by the terms of the statute. [Ed. note: Arizona provides for other modes of judicial review on constitutional grounds.] The [Administrative Procedure] Act permits appeals to the superior court from “final” decisions of administrative agencies. The Act defines decisions subject to judicial review as follows:

“Administrative decision” or “decision” means any decision, order or determination of an administrative agency that is rendered in a case, that affects the legal rights, duties or privileges of persons and that terminates the proceeding before the administrative agency.

¶11 The decision at issue did not terminate the proceedings before the administrative agency. [defendant]’s grievances over reimbursement rates initiated the administrative process and those grievances have not yet been resolved. [The agency] has become substantively involved. Indeed, it has ordered the next step in the proceedings, directing [plaintiff] to consider [defendant]’s grievances on the merits and “issue a written Notice of Decision as to each of the 1354 claim dispute [sic] that were filed.” [Plaintiff] itself has characterized [the agency]’s decision as a “remand” of the claims dispute. A remand order is not a final agency decision. [I]t has been firmly established that agency action is not final merely because it has the effect of requiring a party to participate in an agency proceeding.

¶12 The situation before us is analogous to the denial of a motion to dismiss on statute of limitations grounds. Although a defendant might seek special action review of such a decision, there is no right of appeal from that interlocutory ruling. [A]n appealable administrative decision must “mark the ‘consummation’ of the agency’s decisionmaking process” and may not be interlocutory in nature. [A]n agency’s action is not necessarily final merely because it is binding. ...

¶15 [The agency]’s characterization of its interlocutory order as a “Final Decision” is immaterial to the question of jurisdiction. It is a well-settled rule of law that subject matter jurisdiction cannot be conferred by consent, waiver, or estoppel. It is incumbent upon the party [sic] and counsel, themselves, to determine from the provisions of the statutes and the rules when the [administrative] decision has become ‘final.’ An agency’s incorrect explanation of a litigant’s appeal rights cannot create jurisdiction in the superior court.

Ooops! The opinion includes citations from federal and other state courts. EMM

It's ultra vires time again

The FDA Law Blog has a good review of a recent federal decision finding an agency was acting beyond its authority in "Federal District Court in Florida Delivers a Decisive Blow to FDA’s Authority to Regulate Pharmaceutical Compounding from Bulk Substances" by Karla L. Palmer & Jeffrey N. Gibbs. The opinion also covers Chevron deference and the importance of rulemaking.

[A] Florida federal district court ruled that FDA did not have authority to enjoin the “long-standing, widespread, state-regulated practice of pharmacists filling a veterinarian’s prescription for a non-food producing animal by compounding from bulk substances.” United States v. Franck’s Lab, Inc., No. 5:10-cv-147-Oc-32TBS (M.D. Fla. filed Sept. 9, 2011) ... Significantly, the court chastised the FDA for trying to “eradicate the line” between what would be considered unlawful manufacturing and the traditional compounding of animal medications.  After engaging in a detailed historical, regulatory and legal analysis of pharmaceutical compounding, the court held that FDA’s attempted assertion of authority over “traditional pharmacy compounding in the context of a pharmacist-veterinarian-patient relationship is contrary to [the] congressional intent” of the Federal Food, Drug and Cosmetic Act (“FDCA”). ...   

The court stated at the outset of its opinion on summary judgment that FDA “acknowledges that this is the first time it has sought to enjoin a state-licensed pharmacist from bulk compounding of animal medications.”  Indeed, FDA made it clear to the court that it was staking “the bright line position that any compounding of animal medications from bulk substances violates … the FDCA, even when conducted by a state-licensed pharmacist for an individual animal patient pursuant to a valid veterinary prescription.” ... FDA further contended that a “traditional compounding practice implicates the same concerns under the FDCA as the mass-production, mass-marketing, and mass distribution of unapproved animal drugs by an unlicensed manufacturer.”  

In response to FDA’s claims, Franck’s submitted industry, fact, expert and other declarations supporting its position that it was not engaging in unlawful manufacturing of unapproved animal drugs.  The FDA failed to present evidence refuting Franck’s position, despite having an “ample opportunity” to do so, “resting instead on its position that compounding animal drugs from bulk … constitutes a per se violation of the FDCA.”  The court noted that FDA also claimed that this was a “simple case” because “the literal, plain language of the 1938 FDCA gave the agency enforcement authority to prevent pharmacists from bulk compounding medications for non-food producing animals.”

The court disagreed with FDA’s “maximalist” portrayal of its own statutory authority. Also, as underscored by its 80-page opinion, the court disagreed that the case was a “simple” one. After undertaking a historical review of pharmaceutical compounding and compounding in bulk, the court reviewed FDA’s fifty-plus years of its “regulation” of compounding practices. It found untenable the agency’s position that, for over fifty years since enactment of the FDCA, it did not assert its authority to regulate pharmacy compounding; nevertheless, “once it has shown a violation of the statute (i.e., that a ‘new animal drug’ has been distributed without an approval or exemption in place), it enjoys unfettered enforcement discretion” to take action. ...

The Court pointed out that Chevron deference applies to ambiguous statutes, which the FDCA is not in this context. The article points out that "[a] recurring criticism of FDA’s use of guidance documents instead of rulemaking is that the agency does not attempt to test its views through the more rigorous rulemaking process."

What we have here is both sides claiming that the "plain language" of the statute supports their respective positions. Either (a) the FDA has been wrong for 50 years, or (b) the FDA is stupid or arrogant now, or (c) the FDCA is ambiguous on this point. The FDA says (a), but the plaintiff and the Court say (b). The 11th Circuit might say (c), because the District Court relied on legislative intent to interpret the statute, and legislative intent would only be invoked if the statute was ambiguous. This would throw it back to Chevron, and the FDA would probably win. EMM

Policy: Stare decisis for Chevron interpretations?

New on SSRN: "Why Agency Interpretations of Ambiguous Statutes Should be Subject to Stare Decisis" by Harold (Hank) Greenberg (Clerk, 11th Cir.), __ Tenn. L. Rev. ___ (2011). Abstract:

Agencies’ interpretations of ambiguous statutes under Chevron are not subject to a rule of stare decisis. Agencies may interpret and later reinterpret ambiguous statutes without settling the statute’s meaning. This article shows that this regime permits agencies to “interpret” law in legally unprincipled and inconsistent ways and prevents administrative statutes from meaningfully constraining agency policymaking. This article concludes that a rule of stare decisis should govern agencies’ interpretations of ambiguous statutes just as it governs judicial holdings. Taking seriously Chevron’s recognition of agencies’ power to interpret law, the conventional justifications for stare decisis—separation of powers, legislative supremacy, and the consistency of regulatory schemes—apply with equal force to agencies as to courts.

It's a sound argument, but I have one reservation. In a sprawling executive branch, the president needs some ability to redirect agencies. There are already gigaohms of resistance to change in agency behavior, especially to change that implicates reallocation of resources. On a change of administration, one would expect changes in interpretation as new political appointees take charge. Dissatisfaction with agency interpretations may be why there is a change of administration. Fixing agency interpretations might shift more practical power from the president to the civil service, and somewhat contrarily force interpretive decisions to higher levels of decision makers thereby slowing decisions down.

However, regulated entities need stability and consistency in agency interpretation. Mr. Greenberg's idea of imposing the principles of stare decisis on Chevron interpretations is attractive and worth further study. EMM

Policy: Intervention (F.R.C.P. 24(a)) in judicial review of informal rulemaking

New on SSRN: "A Sword or a Noose? Intervention of Right in Judicial Proceedings to Review Informal Federal Rulemakings" by Michael Ray Harris (Denver). Abstract:

Intervention - the procedural device enabling a third person to enter and become a party to an existing court proceeding - is a comparatively recent development in Anglo-American law. The codification of the Federal Rules of Civil Procedure in 1938 sought not only a more transactional approach to litigation, but also to expand, where appropriate, participation by non-parties in federal court litigation. One consequence of a more flexible party structure under the federal rules was the growth of “public law litigation” in the second half of the twentieth century.

In this Article, I do not quarrel over the role of intervention in public law cases generally. Instead, I seek to make a case for limiting intervention in a specific subset of public law proceedings - those brought to review the legality of informal federal rulemakings pursuant to the Administrative Procedure Act. There are important distinctions between the cases I am concerned with here and the public law cases championed by Professor Chayes and others that suggest courts should avoid making the same general assumptions about the necessity for broad, multi-party representation in informal rulemaking cases. First, intervention practice under Rule 24(a), as a practical matter, negatively impacts the efficiency of administrative rulemakings as envisioned by the Administrative Procedure Act. Second, intervention in these cases is not necessary to ensure that one whose rights could be affected by the outcome of a case, and, thus, might be in the position to collaterally attack the court’s judgment, have a means to participate in the first instance - whether by being invited into the action, or demanding to be heard - in order to promote both fairness and judicial efficiency.

EMM

Theory: Agency capture

New on SSRN: "Courts and Regulatory Capture" by M. Elizabeth Magill (Virginia). Abstract:

This draft chapter for an edited volume asks whether judicial review of agency action prevents or facilitates agency capture and, to the extent it fails to prevent capture, asks how judicial review could be redesigned to more effectively police agency capture. Judicial review’s effectiveness at controlling capture depends heavily on the definition and pattern of regulatory capture and the chapter starts by identifying different definitions of capture. The chapter then examines whether judicial controls are effective at detecting and policing capture. It argues that judicial controls are in some ways better at preventing capture than political controls, but in other ways judicial controls are poorly suited to police capture. The chapter then identifies several features of judicial controls on administration that could be altered to improve its capacity to police capture, but also argues that, if the goal is preventing agency capture, judicial review has some inherent limitations. This chapter will appear in a book produced by the Tobin Project, which is tentatively titled Preventing Capture: Special Interest Influence in Regulation, and How to Limit It (eds., Daniel Carpenter, Steve Croley, and David Moss).

EMM

How much process is due?

Much of what underlies administrative law, at a basic level, involves considerations of due process and just how much process is due in particular situations. We often think of the minimal level of due process as being "adequate notice and an opportunity to be heard", but there are situations where even less process is due—emergencies when the police power of the government must be employed to protect life and property. In the Law and the Multiverse blog, the authors review two legal aspects of the new movie Contagion. The first is of interest to admin law students. It opens with:

I. Police Power and Public Health

Perhaps the biggest question is the extent to which state and federal governments can impose drastic restrictions on civilian life to prevent the spread of the virus. It isn’t exactly clear from the film which government is imposing things like curfews, but suffice it to say that while the federal government would have some difficulty doing this, there is absolutely no question that state governments can.

Worth a look. EMM

Policy: Bringing rulemaking to ordinary citizens - and ordinary lawyers

On RegBlog, Cary Coglianese (Penn) has posted an extract from his recent report to the Administrative Conference on the United States on Federal Agency Use of Electronic Media in the Rulemaking Process, "Making the Rulemaking Process Accessible to Ordinary Citizens". Opening paragraph:

Agencies use the Internet for many different purposes, communicating through their websites valuable information to the public not only about rulemaking, but also about a variety of other issues and activities. The proliferation of competing demands for communication makes rulemaking only one—perhaps even to some, a relatively minor one—of the many priorities under consideration when agency officials make decisions about the design and functionality of their websites. As a result, the risk exists that agencies will make website design decisions without giving due consideration to the values of public participation reflected in the various laws and executive orders that have called upon agencies to use electronic media to enhance the public's understanding of and role in rulemaking. Indeed, an emerging approach to government website design focuses on giving prominence to "top tasks" sought by members of the public. Such an approach certainly has much to be said for it. But an exclusive focus on current website use or demand will probably push information about rulemaking, and online opportunities for public commenting on rulemaking, far into the background—simply because the volume of website traffic generated by online government services performed by many agencies dwarfs the traffic related to rulemaking. Rulemaking may perhaps never be a "top task" in terms of the numbers of web users, but in a democracy few tasks compare in significance with the ability of government agencies to create binding law backed up with the threat of civil, and even criminal, penalties.

He goes on to discuss how hard it can be to find rulemaking information on even the newest federal government web sites. It's not just ordinary citizens who can't find information on rulemaking, but ordinary lawyers as well. Librarians have an expression, "What can't be found may as well not exist." EMM

Why things change

Sometimes the reasons for change in administrative law are a bit obscure. An example is the change in OSHA regs described by Michael D. Billock (Bond, Schoeneck & King, Syracuse) on the New York Labor and Employment Law Report in "OSHA Issues Far-Reaching Directive On Workplace Violence":

On September 8, 2011, the Occupational Safety and Health Administration (OSHA) issued its first ever Compliance Directive to address workplace violence. In the past, OSHA had issued citations to employers for exposing their employees to workplace violence -- until Administrative Law Judge Nancy Spies issued her decision in the Megawest Financial case in 1995. In that case, OSHA attempted to use the General Duty Clause of the Occupational Safety and Health Act—which imposes a duty upon employers to keep their workplaces free of “recognized hazards”—to argue that because there had been earlier attacks on employees by tenants of an apartment complex, the employer was liable when employees were again attacked by tenants. Judge Spies rejected that argument, finding the Act was not intended to “police social behavior” and that employers may reasonably believe “that the institution to which society has traditionally relegated control of violent criminal conduct, i.e., the police, can appropriately handle the [violent criminal] conduct.” Since then, OSHA has issued few workplace violence citations.

Judge Spies is now retired, and OSHA is taking another bite at the apple. ...

Sometimes there are simple and pragmatic reasons for change. EMM

 

New administrative law articles

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

• Bailly, Rose Mary. Administrative law. 61 Syracuse L. Rev. 557-588 (2011). [H]|[L]|[W]
• Juergens, Eric. Note. Feres and the Privacy Act: are military personnel records protected? 85 St. John's L. Rev. 313-354 (2011). [H]|[L]|[W]
• Merrill, Thomas W. Article III, agency adjudication, and the origins of the appellate review model of administrative law. 111 Colum. L. Rev. 939-1003 (2011). [H]|[L]|[W]
• Mitchell, Morgan Douglas. Note. Wolf or sheep?: is an agency pronouncement a legislative rule, interpretive rule, or policy statement? 62 Ala. L. Rev. 839-855 (2011). [H]|[L]|[W]

EMM

New administrative law articles

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

• Caplen, Robert A. Turning Esch to dust? The state of supplementation of the administrative record in bid protests before the Court of Federal Claims. 12 Whittier L. Rev. 197-271 (2011). [H]|[L]|[W]
• Chen, Ronald K. Gallenthin v. Kaur: a comparative analysis of how the New Jersey and New York courts approach judicial review of eminent domain for redevelopment. 38 Fordham Urb. L.J. 987-1021 (2011). [H]|[L]|[W]
• Croston, Sean. Recent development. The petition is mightier than the sword: rediscovering an old weapon in the battles over "regulation through guidance." 63 Admin. L. Rev. 381-399 (2011). [H]|[L]|[W]
• Fein, Ian. Comment. Reassessing the role of the National Research Council: peer review, political tool, or science court? 99 Cal. L. Rev. 465-555 (2011). [H]|[L]|[W]
• Franzese, Paula. Reclaiming the promise of the judicial branch: toward a more meaningful standard of judicial review as applied to New York eminent domain law. 38 Fordham Urb. L.J. 1091-1117 (2011). [H]|[L]|[W]
• Haw, Rebecca. Amicus briefs and the Sherman Act: why antitrust needs a new deal. 89 Tex. L. Rev. 1247-1291 (2011). [H]|[L]|[W]
• Hemel, Daniel. Comment. Issuer choice after ... (Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869, 2010.) 28 Yale J. on Reg. 471-489 (2011). [H]|[L]|[W]
• Kahan, Marcel and Edward B. Rock. When the government is the controlling shareholder. 89 Tex. L. Rev. 1293-1364 (2011). [H]|[L]|[W]
• Marisam, Jason. Duplicative delegations. 63 Admin. L. Rev. 181-244 (2011). [H]|[L]|[W]
• Myers, Richard E. II. Complex times don't call for complex crimes. 89 N.C. L. Rev. 1849-1878 (2011). [H]|[L]|[W]
• Nelson, Jerome. Recent development. Administrative law judges' removal "only for cause": is that Administrative Procedure Act protection now unconstitutional? 63 Admin. L. Rev. 401-418 (2011). [H]|[L]|[W]
• Niles, Mark C. Punctuated equilibrium: a model for administrative evolution. 44 J. Marshall L. Rev. 353-422 (2011). [H]|[L]|[W]
• O'Reilly, James T. and Melissa D. Berry. The tsunami of health care rulemaking: strategies for survival and success. 63 Admin. L. Rev. 245-281 (2011). [H]|[L]|[W]
• Rath, Tom. Comment. Deregulation by any other name: New Jersey's Site Remediation Reform Act in federal context. 63 Admin. L. Rev. 323-350 (2011). [H]|[L]|[W]
• Rempell, Scott. The Board of Immigration Appeals' standard of review: an argument for regulatory reform. 63 Admin. L. Rev. 283-321 (2011). [H]|[L]|[W]
• Schenk, Deborah H. Exploiting the salience bias in designing taxes. 28 Yale J. on Reg. 253-311 (2011). [H]|[L]|[W]
• Schwartz, Andrew A. Consumer contract exchanges and the problem of adhesion. 28 Yale J. on Reg. 313-366 (2011). [H]|[L]|[W]
• Sousa, Michael D. A delicate balancing act: satisfying the Fourth Amendment while protecting the bankruptcy system from debtor fraud. 28 Yale J. on Reg. 367-417 (2011). [H]|[L]|[W]
• Ting, Michael M. Organizational capacity. 27 J.L. Econ. & Org. 245-271 (2011). [H]|[L]|[W]
• Trachtenberg, Ben. Health inflation, wealth inflation, and the discounting of human life. 89 Or. L. Rev. 1313-1355 (2011). [H]|[L]|[W]
• Uliassi, Ted. Comment. Addressing the unintended consequences of an enhanced SEC whistleblower bounty program. 63 Admin. L. Rev. 351-379 (2011). [H]|[L]|[W]
• Wittlin, Maggie. Note. Buckling under pressure: an empirical test of the expressive effects of law. 28 Yale J. on Reg. 419-469 (2011). [H]|[L]|[W]

EMM

Practical skills: Surprising regulatory compliance requirements

There is an interesting practical discussion on the Health Care Compliance Watch blog, "Appearance Enhancement and Weight Loss Franchises: Is Your Franchise System Practicing Medicine?". Opening paragraph:

Appearance enhancement and weight loss businesses that involve licensed professionals or that require a specialized business license will face complicated regulatory considerations when franchising their business. These regulatory considerations are heightened in states with strong corporate practice of medicine statutes in that the products, procedures and/or services offered by these franchise concepts may implicate what, in certain instances, may be considered the practice of “medicine.”

This can happen in many fields of business. The business lawyer needs to recognize or research the regulatory issues at all levels of government that may reach out and touch a business client, especially a client just getting organized. It can be quite a shock. EMM