Louis J. Virelli III, Deconstructing Arbitrary and Capricious Review, 92 N.C.L. Rev. (forthcoming, 2014), available at SSRN.
The Administrative Procedure Act’s “arbitrary and capricious” standard has been a source of power for the courts, but also a source of bewilderment. It is a source of power because it provides courts with the authority to set aside agency action and, in particular, agency rulemaking, perhaps the most important and characteristic tool of regulatory governance. It is a source of bewilderment because its defining terms are enigmatic. Fairly early in its history, the D.C. Court of Appeals interpreted it as requiring courts to take a “hard look” at the agency’s action. Despite this formulation’s popularity, it has failed to dispel the mystery, first because it is excessively metaphorical, but even more seriously because it is deeply ambiguous. Does it mean that the court must take a hard look at the way the agency reached its decision (a procedural hard look), or rather that the court is insisting that the agency take a hard look at the evidence and arguments being presented to it (a substantive hard look)? The Supreme Court’s decision in Motor Vehicle Manufacturers Assoc. v. State Farm Ins. became the leading decision on the subject because it parsed the substantive hard look standard, providing at least some operationally defined criteria by which the agency’s application of the evidence can be assessed.
Given the importance and ambiguity of the arbitrary and capricious test, it is hardly surprising that the scholarly literature on the subject is voluminous. One approach that commonly appears is the effort to articulate a single test or standard that would enable courts to determine whether an agency decision is arbitrary or capricious. In this innovative and insightful article, Louis Virelli adopts the opposite approach. His idea is to multiply the number of considerations that the arbitrary and capricious test includes, combining both substantive and procedural standards. The point of this proliferation is not to make judicial review more demanding; he agrees with the prevailing view that the agency is the principal decision maker in our system and is entitled to considerable deference from the judiciary. But he argues that the administrative decision-making process necessarily consists of various discrete, qualitatively different steps, and that the standard for arbitrary and capricious action should vary in accordance. Thus, the hard look doctrine should be viewed as “a collection of more targeted inquiries into specific aspects of agency action.”
The article divides the various stages in the agency’s decision making process into two main categories; first, the agency’s “modes of self-education and information gathering,” and second, the conclusions that the agency reaches on the basis of the information that it has obtained. It proposes that judicial review of each stage, which is labeled simply as first and second order review, should be distinguished. In essence, this means that the court will engage in both a procedural hard look at the way the agency reached its decision and a substantive hard look at the quality of its decision making. But Virelli is not simply suggesting that courts engage in each type of review, rather than choosing between them. Rather, he disaggregates each of these large and familiar categories into separate components, and it is these components, not the general categories, to which his task-specific tests apply. The first and second order, or procedural and substantive categories, which he readily concedes are “inexact,” serve largely as a means of organizing the more individualized criteria.
Within the first category, the specific functions are for the agency to define the scope of its research, to gather information within that ambit, to build a record and to give reasons for the conclusions it reaches on the basis of that record. In each area, it has a great deal of discretion, being the institution the legislature has chosen to implement its statute and being a repository of substantive expertise. But the agency might fail in carrying out each of its functions. It might define the scope of research too narrowly, omitting relevant and important issues. It might rely on poor quality information, with obvious methodological errors or inadequate quantities of data. It might fail to document whatever information it has obtained, and it might fail to explain how it used that information to arrive at its conclusions. Within the second category, the functions that agency is expected to perform are to consider relevant factors and to establish a rational connection between the data gathered and the conclusions reached. Here too, the agency has wide discretion, and here too, it can abuse that discretion. It might overlook issues that it needs to consider, either by statutory command or good decision-making practice, or it might engage in slovenly or defective analysis of the information it has gathered. After specifying the way that the arbitrary and capricious standard can be given meaning in the context of each of these procedural and substantive functions, Virelli goes on to elaborate on the advantages of his approach and, to his credit, a few of the disadvantages as well.
A number of observers have criticized legal scholarship in general, and administrative law scholarship in particular, for being “juriscentric,” that is, for focusing excessively on judicial decision making and ignoring or under-emphasizing the legislative and administrative realms where most of modern governance occurs. Virelli’s article is hardly exempt from that criticism; it is a piece about judicial review, not about, say, the way agencies resolve scientific uncertainties. But one of the many virtues of the article is that it takes a non-juriscentric approach to judicial review. Instead of focusing on the reviewing court’s decision-making process—what are its competencies, which sorts of information it needs, how should it articulate the standard that it is applying—the article focuses on the decision-making process in the agency. The standard of review, it suggests, should be determined by the task the agency is carrying out, and should be specific to that task. In other words, instead of deriving the content of the arbitrary and capricious test from judicial precedent, from the conceptual framework and long established standards of judicial review, the article attempt to derive this content from the administrative process itself. What is good practice, it inquires, at each stage in this process. To what standard would a conscientious agency hold itself if it were conducting its own internal review of its own decision making.
Is this article the golden key that will permanently unlock the mysteries of the arbitrary and capricious doctrine? Of course not. There is no such key because the problem is too large to yield to a single resolution. The question that judicial review of agency action confronts is the effectiveness and fairness of the basic means by which we, as a collectivity, govern ourselves. Modern government is regulatory in its essence. In seeking standards for judicial review of agency action, we are asking—albeit in new ways and in a contemporary setting—the age-old question: what is good government and what is bad government. This article, needless to say, has not settled that question, but it advances and clarifies the inquiry in a creative and insightful way, which is why I like it lots.