The September 2018 volume of the UCLA Law Review is a must-read page-turner (or its equivalent for the digital age) for followers of JOTWELL’s Administrative Law section. That volume collects the written essays originally delivered as talks at the Law Review’s symposium on The Safeguards of our Constitutional Republic, organized by UCLA Professor Jon Michaels, along with his colleagues Professors Kristin Eichensehr and Blake Emerson. As Michaels writes in his introductory essay for the volume, “The first two years of the Trump presidency have been marked by scandals, standoffs, travesties, and tragedies. Customs have been flouted, compacts broken, laws transgressed, responsibilities ignored, and individuals and communities threatened and debased.” In their contributions for the symposium, participants—distinguished public law scholars and civic institutional leaders from different corners of the nation—collectively “explored whether we are in a time of simple flux or full-blown crisis; whether any such crisis rises to the level of a constitutional—as opposed to just a political or cultural—dislocation; and how we can steer the ship of State back on course.”
While readers would be rewarded for perusing all of the essays, the one I want to focus on here is Mariano-Florentino Cuéllar’s essay, From Doctrine to Safeguards in American Constitutional Democracy, which he presented as the keynote address at the symposium. Justice Cuéllar (on the Supreme Court of California since 2015, and before that a member of the Stanford Law School faculty) soberly cautions “against facile rule-of-law optimism” about “the prominent role of courts in setting constitutional constraints on official power.” (P. 1400.) While Justice Cuéllar rightly does not name President Trump in the essay (in fact, he alludes to the “[d]ilemma” of “a judge seeking to thread the needle at a UCLA symposium when alluding to transgressions of norms by elected officials” (P. 1422)), the animating concern of the essay resonates closely with contemporary challenges in the administrative state and our republic more generally. Whether the legal question centers on arbitrary-and-capricious review, statutory authority, or constitutional permissibility, judicial review of the Trump administration’s actions is a daily occurrence, in ways both familiar and breathtaking.
Justice Cuéllar asks us to consider whether judicial review is enough—not simply to cabin the chief executive and his officials but to sustain “the constitutional order.” It is not, he concludes. To believe that it is reflects “an unrealistic worldview in which courts are assumed capable of shouldering the primary responsibility for protecting the constitutional order despite fraying norms, weak institutions, economic uncertainty, and interference from geopolitical rivals.” His account is important. It provides yet another reason why those of us who teach and write in public law fields like administrative law must focus on institutions beyond courts.
The headers of each of the essay’s five sections provide a high-level set of takeaways for the piece—the elevator pitch for the tightly constructed argument that follows. Constitutional Safeguards are Undertheorized says Part I. We might think of the Steel Seizure case as a primary example of such a safeguard, where the Court held that “the president did not have the power—in the midst of what he considered a national security emergency, but without any apparent statutory authority—to seize private property.” (P. 1404.) But that view ignores other contemporaneous public activities (federal loyalty screenings, state Jim Crow laws) that are constitutionally concerning but were for a long time legally sanctioned. A “more robust understanding of American constitutional democracy” must include attention to geopolitical considerations, nonjudicial institutions, and “the evolving norms and values of people with meaningful influence over the use of public power.” (P. 1407.)
Of course, says Part II, Judicial Institutions Matter to Constitutional Safeguards. We would be foolish to think otherwise. But, Part III continues, Safeguards Depend Even More on Nonadjudicatory Factors. For example, “the existence of some measure of shared public sentiment supporting constitutional democracy—assigning value to its larger project despite the costs of accepting leaders one may disdain or even loathe—seems valuable in no small measure because constitutional democracy’s underlying logic is precarious without such sentiment.” (P. 1415.) That shared public sentiment depends in part on the extent of “economic distress,” among other varied conditions, however. “[G]overnment’s demonstrated capacity to mitigate risks and deliver reasonably effective social outcomes” is thus an important part of “[t]he public’s perception that safeguards matter.” (P. 1420.) Also important are “norms and institutions,” and the symbiotic relationship between them, that bolster the existence of shared public sentiment about key features of constitutional democracy.
Meaningful Constitutional Safeguards Raise Nuanced Institutional Design and Implementation Questions, Part IV elaborates. How, for example, should we think about the value of “[c]ourt decisions and other official pronouncements of law” once we understand that their “importance is contingent and limited by the relevance of other institutions with competing agendas, the crucial role of groups and the public who must accept certain broad norms, and the realities of life in a noisy, uncertain world”? (P. 1421.)
For one thing, we should stop assuming that “American institutions are fundamentally resilient merely because the country has seen much worse.” (Id.) It is easy to see how bit by bit, norms that support these institutions can be chipped away—a point more fully examined in an essay by Josh Chafetz and David Pozen in the same UCLA volume. It is therefore important to acknowledge that, while “actors and institutions” like “universities, courts, individuals with ties to law enforcement” must generally “stand apart from partisan politics,” norms bolstering constitutional democracy are nonetheless “largely in the hands of public officials willing to send costly signals of their concern by speaking out, resigning, or going against perceived interests.” (P. 1422.) Laws governing our “communications infrastructure,” including internet platforms like Facebook and YouTube, are additionally a critical but underappreciated part of our constitutional safeguards.
For another thing, we should acknowledge that “some processes requiring a measure of insulation from the rough-and-tumble of ordinary politics—whether they involve adjudication or rulemaking—may also benefit from engagement with the often-messy world of public discourse and political action.” (P. 1424.) This engagement may involve doctrine (“cautiously, as in modern procedural due process doctrine and perhaps in the incorporation of concerns for institutional stability in statutory interpretation” (Id.)). It may involve public statements by lawyers, policymakers, and judges about important “norms of civility, restraint, comity, and decency underlying the institutions within which they are operating, or to which they are contributing through their work” (where, of course, “ethically appropriate”). (Id.) At the very least, it should involve clarity in judicial opinions to make concrete what legal “justifications imply about society’s painful trade-offs and subtle vulnerabilities.” (Id.)
In the end, Part V concludes, Constitutional Democracy’s Strength Depends on Recognition of Its Fragility. Unlike authoritarian systems, ours is one with “fractured, contradictory ideas about social welfare,” which acknowledges a troubling “gap between aspirations and reality.” (P. 1426.) When the foundations that protect this system are shaken— “safeguards rooted in public democratic sentiment, the opposition’s legitimacy, state capacity, and resilience against economic and security shocks”—it is not simply “wrong policy choices or stark ruptures of doctrinal sensibility” that are at issue: “The silent but no less serious specter is the slow undoing of extraconstitutional factors on which constitutional doctrine—and ultimately, law itself—depends for relevance.” (P. 1427.)
We can be thankful, as Chief Justice Roberts exhorts, for an independent judiciary. But Justice Cuéllar offers serious caution about the potential for overreliance on formal law and doctrine while paying insufficient attention to broader societal and institutional safeguards of our democracy. Our teaching in law schools, and in other educational institutions, should take this caution to heart.
Caleb Nelson, “Standing” and Remedial Rights in Administrative Law
, 105 Va. L. Rev.
__ (forthcoming 2019), available at SSRN
After the slog of teaching constitutional standing—Lujan, Massachusetts, Freedom from Religion, Akins, Spokeo, and the rest of that crowd—it is always a relief to get to statutory standing. “Here’s the deal,” I say to the class, “statutory standing is just a matter of finding a statutory right of action to challenge agency action. You can find that ticket to judicial review in many enabling acts. But the most important one for our purposes is the APA’s right of action established by 5 U.S.C. §§ 701-706. Section 702 says you can use that right of action so long as you have ‘suffer[ed] legal wrong because of agency action, or [have been] adversely affected or aggrieved by agency action within the meaning of a relevant statute.’ The Supreme Court has told us that a plaintiff can qualify under the ‘adversely affected or aggrieved’ prong of § 702 by claiming that agency action has harmed interests that ‘arguably’ fall within the ‘zone of interests’ protected by a statute or constitutional provision that the plaintiff asserts the agency action has violated. And the Supreme Court has also told us, a whole bunch of times, that this arguably-within-the-zone test for invoking the APA’s right of action is super-easy to satisfy.”
Thanks to reading Caleb Nelson’s splendid article, “Standing” and Remedial Rights in Administrative Law, I see that things are not so simple as I thought. The major project of Professor Nelson’s article is to explain how the consensus understanding of the expansive reach of remedial rights under the APA evolved from a profound misreading of the source of the arguably-within-the-zone test, Justice Douglas’s opinion for the Supreme Court in Association of Data Processing Service Organizations v. Camp. The upshot of Professor Nelson’s analysis is that Data Processing, properly understood, does not stand for the proposition that satisfying the arguably-within-the-zone test is enough for a plaintiff with constitutional standing to invoke the APA’s right of action. To get to this conclusion, Professor Nelson takes a deep dive into the evolution of standing doctrine during the middle half of the twentieth century. The result is a terrifically lucid and engaging account, filled with telling details—notably including Professor Nelson’s recounting, based on both published opinions and internal correspondence, of the doctrinal duel between Justice Douglas and Justice Brennan over the framework for standing in Data Processing and its companion case Barlow v. Collins. (Pp. 37-52.)
Part I of the article sets the stage by offering a concise and informative account of the evolution of judicial review of agency action during the decades of the twentieth century that preceded Data Processing. Then as now, judicial review might take the form of nonstatutory review—e.g., a plaintiff might sue an officer in equity to enjoin illegal action. Professor Nelson emphasizes that, to make use of this device, a plaintiff needed to show that, in addition to violating the law, an officer’s action invaded the plaintiff’s “legal rights.” Complicating matters, however, he also observes that “[t]he Supreme Court never fully specified the criteria for determining whether a particular statutory or constitutional provision gave ‘legal rights’ to particular people.” (P. 13.)
Alternatively, a plaintiff might be able to pursue statutory review, i.e., make use of an express right of action created by Congress for review of particular agency actions. For instance, § 402(b) of the Communications Act of 1934 authorized “any…person aggrieved or whose interests are adversely affected by any decision of the [Federal Communications] Commission granting or refusing any such application” to seek judicial review from the D.C. Circuit. Unlike nonstatutory review, a person invoking statutory review did not need to establish that she had suffered a “legal wrong” or invasion of a “legal right.” Such a plaintiff just needed to satisfy the requirements that Congress had spelled out for using the statutory right of action.
Then along came § 702 of the APA, which provides that “[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.” At first, courts and commentators, for the most part, interpreted this provision as carrying forward the rights to judicial review available before the APA’s enactment. The first prong, covering persons who had suffered “legal wrong,” carried forward the availability of nonstatutory review; the second prong, covering persons “adversely affected or aggrieved,” recognized that plaintiffs might make use of express statutory review proceedings where available. (Pp. 23-27.)
Before Data Processing, two doctrinal impulses worked to broaden availability of the APA’s right of action. First, the Warren Court developed a practice of finding implied rights of action to challenge agency statutory violations that seemed premised on a very generous understanding of the scope of plaintiffs’ “legal rights.” (P. 29.) Second, Professor Kenneth Culp Davis pushed for a far more expansive understanding of the reach of the “adversely affected or aggrieved” prong of § 702. According to Professor Davis, rather than merely acknowledging that a plaintiff might invoke statutory review, this prong of § 702 instead authorized any person “who is in fact adversely affected” by illegal agency action to obtain relief through the APA. (P. 25.)
Whew. That’s a lot of ground to cover. The key thing to see for the present purpose, however, is that, before Data Processing, to satisfy § 702 and use the APA’s right of action, a plaintiff had to either demonstrate that she had suffered “legal wrong” or else satisfy the terms of a particular enabling act’s statutory right of action.
At last we come to Part II and Professor Nelson’s detailed dissection of Data Processing itself. Most readers of JOTWELL’s Administrative Law page will recall that Data Processing involved a challenge to a decision by the Comptroller of the Currency that allowed national banks to perform data processing services incidental to their banking services. The plaintiffs were, just as one might expect, in the data-processing business. They contended that the Comptroller’s decision conflicted with provisions of the National Bank Act and the Bank Service Corporation Act of 1962. Justice Douglas, writing for the Court, explained that standing has both constitutional and non-constitutional dimensions. The data processors satisfied the constitutional requirement for standing, rooted in Article III’s case-or-controversy limitation, as they had plainly suffered an “injury-in-fact” due to increased competition from banks. As for standing’s non-constitutional requirement, Justice Douglas explained that this turns on “whether the interest sought to be protected by the [plaintiff] is arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question.” The Court concluded that the plaintiffs’ interest in avoiding competition from banks “arguably” fell “within the zone of interests protected” by § 4 of the Bank Services Act. Therefore, the plaintiffs had what we have come to call statutory standing.
The key to Data Processing is to understand just what Justice Douglas meant by “standing.” As Professor Nelson explains, before Data Processing, courts had often used this term when assessing whether a source of law gave a plaintiff a right of action in the circumstances of a case. (P. 5.) By contrast, in Data Processing, Justice Douglas intended the non-constitutional dimension of “standing” merely to screen out plaintiffs who were “not even in the ballpark of having a right of action.” (P. 107.) He did not contemplate that the lax arguably-within-the-zone test would determine whether a plaintiff actually had the proper type of “legal interest” to support a remedial right to challenge a given violation of law.
Over time, however, courts began treating Data Processing’s arguably-within-the-zone test not as a preliminary “ballpark” screen but as a definitive test for determining availability of the APA’s right of action. Characterizing the consensus that evolved on this point after about 1980, Professor Nelson writes, “[f]or more than a generation,…courts have assumed that when an agency violates statutory or constitutional limitations on its authority, everyone who is suffering ‘injury-in-fact’ and whose interests are even ‘arguably’ within the relevant ‘zone’ can obtain relief under the APA (unless a more specific statute supplants this right of action.” (P. 4.) He adds that, in keeping with this expansive understanding of Data Processing, some of the very brightest lights of administrative law have characterized this opinion as a “watershed” (Mashaw), a “Revolution” (Justice Breyer), and an “Earth-Shattering Kaboom” (Lawson). (P. 4.)
But, according to Professor Nelson, Data Processing itself did no such kabooming. More particularly, properly read, Data Processing does not stand for the proposition that any plaintiff who satisfies the arguably-within-the-zone test can, without showing anything more, lay claim to statutory standing under the APA. Instead, in keeping with earlier law, Data Processing contemplates that a plaintiff, at least absent help from an express statutory right of action, must still demonstrate that she challenges an agency action that did harm to her cognizable “legal interests.” On this view, statutory standing to use the APA’s right of action does not extend nearly so far as most everyone has been saying it does for the last few decades.
After Part II’s dissection of Data Processing, Part III turns to exploration of how and why this opinion came to be so widely misunderstood as well as some “ironic consequences” of the modern reading. (Pp. 68-69.) As with the rest of the article, Professor Nelson tells an intricate and detailed story—interweaving judicial precedents and academic work of another era—in a remarkably engaging way.
Speaking of ironies, I would just like to share a half-baked thought about constitutional standing that crossed my mind after reading “Standing” and Remedial Rights in Administrative Law a couple of times. According to Professor Nelson’s account, at the time of Data Processing, Justice Douglas intended “standing” to function as a preliminary screen with modest constitutional and statutory requirements. Justice Brennan pushed for an even more modest framework that would have confined the “standing” inquiry to the question of whether a plaintiff had suffered an injury-in-fact sufficient to satisfy Article III. On either approach, constitutional standing would not do a lot of work. The great misreading of Data Processing, however, made remedial relief generally available under the APA without regard to whether agency action infringed on a plaintiff’s “legal rights.” Might eliminating the legal rights inquiry from statutory standing have left greater space for it to complicate constitutional standing? We speak of constitutional standing as requiring an “injury-in-fact,” but we all know that this requirement might better be styled as an “injury-in-law”—i.e., the type of injury that the law is willing to recognize as sustaining standing. If statutory standing had stayed a bit tougher, might constitutional standing have had less work to do and remained a little easier? That might have been nice.
In closing, “Standing” and Remedial Rights in Administrative Law is a terrifically informative and well-written article that makes the development of the doctrine of statutory standing and the availability of the APA’s right of action into a page-turner.
In 2011, Chief Justice John Roberts notoriously criticized the legal academy when he declared at a judicial conference, “Pick up a copy of any law review that you see and the first article is likely to be, you know, the influence of Immanuel Kant on evidentiary approaches in 18th-century Bulgaria, or something, which I’m sure was of great interest to the academic that wrote it, but isn’t of much help to the bar.” Legal scholars were unimpressed, to say the least, by Chief Justice Roberts’s flippant dismissal of their work. Perhaps the best response was Professor Orin Kerr’s tongue-in-cheek Green Bag essay in which he documented that, in fact, the Bulgarians really only became interested in Kant’s pronouncements in the late-19th Century and even then mostly ignored his ideas as “obscure and awkward.” Nevertheless, although Chief Justice Roberts’s criticism was a gross exaggeration, like most such overstatements it grew from at least a small kernel of truth—echoing similar, if more soberly presented concerns raised almost twenty years earlier by D.C. Circuit Chief Judge Harry T. Edwards about a “growing disjunction between legal education and the legal profession.”
Legal scholars know, of course, that quite a lot of the scholarship they collectively produce is of use to practitioners, courts, and legislators. Simultaneously, however, legal scholars must, and I think do, acknowledge that not all legal scholarship is useful or of interest to nonacademic readers. Legal scholars sit at the sometimes-awkward intersection of a larger academic community and the practicing bar, each with its own goals, values, norms, and needs. The fact that some legal scholarship appeals more to the former than the latter audience merely reflects that reality and does not diminish its value. Nevertheless, it is in our own interest as legal scholars to counter the narrative promoted by Chief Justice Roberts and others by calling attention to legal scholarship that may be of use to the more practical of our two audiences, even while it appeals to the more academic as well. Nick Parrillo’s groundbreaking work on federal agency guidance is an exemplar of this kind of legal scholarship.
As administrative law scholars know, federal agencies routinely issue informal pronouncements articulating their views regarding what the law requires of regulated parties. These informal pronouncements carry many distinct labels—to quote Parrillo, “advisories, circulars, bulletins, memos, interpretive letters, enforcement manuals, fact sheets, FAQs, highlights, you name it.” (P. 167.) Administrative Law experts commonly refer to such informal pronouncements collectively, irrespective of label or category, as “guidance.” In the parlance of the Administrative Procedure Act, guidance is categorized as either interpretative rules or general statements of policy (aka policy statements). As such, guidance is exempt from notice-and-comment procedures designed to facilitate public participation and transparency, and generally is understood to be nonbinding. Nevertheless, prudent regulated parties pay close attention to guidance as indicative of agency thinking. And regulated parties commonly complain that agencies apply guidance inflexibly, so that it is practically if not legally binding. Agency use—and arguable abuse—of guidance to direct regulated party behavior is a perennial topic of discussion and concern among administrative law scholars, courts, legislators, and practicing lawyers.
As Parrillo notes in his article, however, the scholarly literature on guidance has focused on doctrinal and theoretical approaches to distinguishing between legislative rules that must be adopted using notice-and-comment rulemaking procedures and guidance that is exempt from those procedures. Much has been assumed about how agencies and regulated parties think about and utilize guidance. Parrillo’s article fills this void.
Parrillo’s article grew from work that he performed initially on behalf of the Administrative Conference of the United States, or ACUS. Specifically, Parrillo interviewed 135 individuals working in government, industry, and nonprofit organizations across eight different regulatory fields, seeking to assess the role of guidance in the day-to-day decision-making and operations of agencies and regulated parties. The initial result of the study was a 200-page report for ACUS, rich and thorough in its detail, and a set of recommendations for agency use of policy statements that ACUS adopted and published in the Federal Register in 2017. ACUS recommendations are deliberately nondoctrinal, avoid making definitive legal conclusions, and are couched in terms designed to persuade agencies to adopt them. Although Parrillo’s ACUS report and his article overlap considerably, the article format offers more latitude for academic reflection.
Parrillo’s article finds that regulated parties have a legitimate basis for complaining that even nonbinding guidance really is more binding than not. Regulated parties often, though not always, face tremendous pressure to comply with guidance. Agencies often, though not always, exacerbate the difficulty by applying guidance inflexibly.
Regulated parties routinely find themselves in a position of needing to adhere to guidance—and not just to avoid becoming the target of an agency enforcement action, although enforcement is an obvious concern. For example, many regulated parties must pursue agency pre-approval processes to obtain permits, licenses, certifications, and the like. Complaining about or failing to adhere to agency guidance can result in delays, if not outright denials. Also, regulated parties are repeat players before agencies, meaning that they must maintain good working relationships with agency officials that might be undermined by complaining about or failing to adhere to agency guidance. For some regulated parties, the perceived need to maintain good working relationships with agency officials in turn prompts internal regulatory affairs employees to push for compliance with guidance, even where a good case may be made at law that a particular guidance document exceeds the agency’s authority.
In turn, agency officials are often inflexible rather than open-minded in their application of guidance. Parrillo rejects, however, the common conventional wisdom that agencies just want to bind regulated parties while avoiding the hard work and inconvenience of notice-and-comment procedures. Instead, he observes, agency inflexibility more often comes from demands by regulated parties, Congress, the courts, and nearly everyone else demands that agencies act consistently. Departures from guidance may be seen as ad hoc and unprincipled, contrary to statutory and political expectations that agencies not act arbitrarily or capriciously. In other words, the same parties that complain about agency inflexibility impose demands that make such inflexibility more likely.
For all of the above, Parrillo suggests that agencies pursue what he labels principled flexibility—meaning “that agency officials make departures from guidance, but for each departure, they give a written explanation that is accessible to other agency officials and to regulated parties, with the understanding that the exception thereby becomes generally applicable to like facts going forward.” (P. 241.) The result, he contends, would be “a body of rationally evolving precedent that informs future decisions about departure requests.” Parrillo acknowledges that this suggestion faces its own obstacles. Evaluating and documenting principled departures from guidance is more time consuming and expensive than simply applying guidance inflexibly. Regulated parties seeking pre-approval may prefer speed over flexibility, and thus may resent bearing the burdens of principled flexibility. Additionally, Parrillo recognizes that some inflexibility may simply be due to genuine faith by agency officials that the guidance in question is simply right. In such instances, Parrillo suggests that such cases represent “the archetypal scenario calling for legislative rulemaking.” (P. 262.) He encourages agencies to resist this sort of inflexibility and expend the resources necessary to pursue a policy of principled flexibility with respect to guidance.
Parrillo’s article, and the ACUS report from which it draws, are too full of interesting and useful observations to do justice in this short review. Together, they will provide a useful resource for anyone interested in the topic of agency guidance for years to come. His observations are not only insightful but balanced—reminding those of us working in this administrative law and regulatory space that there is more than enough “blame” to go around for the deficiencies of the status quo. Meanwhile, Parrillo’s proposal for a principled flexibility is eminently sensible as well as doctrinally sound. One can only hope that agencies take up his suggestion, and if they do, that regulated parties do not shortsightedly thwart such efforts.
Cite as: Kristin Hickman, In Praise of Practical Scholarship
(April 2, 2019) (reviewing Nicholas R. Parrillo, Federal Agency Guidance and the Power to Bind: An Empirical Study of Agencies and Industries
, 36 Yale J. on Reg.
165 (2019)), https://adlaw.jotwell.com/in-praise-of-practical-scholarship/
Amy Semet, An Empirical Examination of Agency Statutory Interpretation
, 103 Minn. L. Rev. __
(forthcoming 2019), available at SSRN
Inspired by Lisa Bressman and Abbe Gluck’s pioneering empirical study on how congressional staffers approach drafting statutes, I spent months in 2013 surveying federal agency rule drafters on how they interpret statutes and draft regulations. Among its many methodological limitations, my study focused exclusively on agency rulemaking. Agencies, of course, interpret statutes in a variety of other regulatory contexts, including adjudication, enforcement, guidance, permitting, and monitoring—just to name a few. Indeed, it’s fair to say that most agency statutory interpretation takes place outside of the rulemaking context.
Thanks to an exciting new voice in administrative law, we now have some more light shining into this black box of agency statutory interpretation. In An Empirical Examination of Agency Statutory Interpretation, Amy Semet turns her attention to agency adjudication and, in particular, how the multi-member National Labor Relations Board (NLRB) approaches statutory interpretation. To conduct this empirical assessment, Semet reviews more than 7,000 cases that the NLRB heard over two dozen years (1993-2016) and three presidential administrations (Clinton, Bush 43, and Obama). This study provides a treasure trove of insights into agency statutory interpretation. Here are a few of the highlights:
First, as a preliminary matter, whereas Semet read more than 7,000 NLRB decisions, very few actually dealt with statutory interpretation. In fact, the number is 121 majority decisions, or 2% of all decisions in the dataset. Semet explains (Pp. 26-28) why this figure might be underinclusive. Even if somewhat underinclusive, however, it may come as a surprise to many administrative law scholars—though probably not many regulatory lawyers—that only a small part of the agency’s adjudicative docket actually implicates novel questions of statutory interpretation. The bulk of the NLRB’s docket merely applies (or at least purports to apply) existing precedent to new facts and circumstances.
Second, the NLRB is a textualist interpreter, but perhaps in name only. Of the 121 majority decisions implicating statutory interpretation, the NLRB engages in some sort of textualist analysis roughly two thirds of the time. Yet, Semet codes (P.32) the statutory text as the “most determinative factor” in less than one in ten cases (8%). Indeed, the NLRB uses non-textualist methods about 95% of the time, including reference to legislative history in roughly two in five majority decisions. Similarly, the NLRB cites policy or practical considerations in 90% of the majority decisions. These findings are consistent with the growing scholarly call for federal agencies to engage in more purposivist statutory interpretation than their judicial peers. One may expect, moreover, that Republican and Democrat NLRB members rely more on textualism and purposivism, respectively, than their political counterparts. Semet finds (Pp. 33-34) some descriptive evidence of this, but none of it is statistically significant.
Third, precedent matters. When I teach 1L legislation and regulation, I often focus somewhat myopically on the distinction between textualism and purposivism and the various tools of statutory interpretation utilized by either/both interpretive schools. Within that interpretation toolbox, I seldom focus on precedent. Yet precedent drives so much of statutory interpretation. That is certainly true at the NLRB. Semet codes (Pp. 32-33) nine in ten NLRB majority decisions as viewing case law as “determinative or influential in the outcome.” Most of the time the NLRB cites its prior decisions, but three in four NLRB majority decisions also cite at least one Supreme Court decision that influences the agency’s interpretation. In one in ten cases, the NLRB “mirrors” a circuit court’s statutory interpretation.
Fourth, legislative history is a double-edged sword. A regular textualist criticism of the use of legislative history is that it encourages the interpreter to advance a broader interpretation of the statute than the plain text would allow. That observation is not without force. But, as Semet finds (Pp. 47-48), legislative history can also narrow the scope of the statutory text. Indeed, in most of the cases where the NLRB relied on legislative history, it did so to more narrowly interpret the statute.
Finally, Republicans and Democrats do not usually agree. Although statutory-interpretation cases make up less than 2% of Semet’s database, when a case does involve statutory interpretation, it usually sparks a dissent—oftentimes a very long dissent. In about three in four NLRB statutory-interpretation cases (77%), the majority decision is accompanied by a dissent. Indeed, Semet finds (P.56) the rate of dissenting has increased from 76% in the Clinton Administration to nearly 90% in the Bush 43 and Obama Administrations. Semet exhaustively details (Pp. 56-65) how the interpretive approaches differ in these various “dueling” opinions, and that section of the article (Part II.D) is definitely worth a close read.
What should we make of these findings?
In Part III of the article, Semet joins the scholarly call, discussed above, for agencies to engage in more-purposivist interpretation to leverage their comparative policy expertise. Having read two dozen years of NLRB decisions, she also seems pretty dissatisfied with statutory interpretation being advanced through adjudication, arguing that rulemaking may be the better vehicle. (As I explore elsewhere, similar arguments could be made for affording Chevron deference only to interpretations promulgated via rulemaking, and not to those advanced in adjudication.)
Semet is rightly cautious about drawing broader conclusions about agency statutory interpretation from her study. After all, while this dataset is impressive, it sheds light on only one agency adjudicative system, and a multi-member commission at that. Much more empirical work needs to be done to understand how agencies approach statutory interpretation in their regulatory activities.
That said, Semet’s study is an important contribution to this literature and has broad implications for administrative law and regulatory practice. Understanding how federal agencies interpret statutes is critical for, among other things, assessing the principal-agent relationship between Congress and agencies and informing how courts should subsequently review such agency statutory interpretations. I look forward to reading more from this promising new voice in our field.
Kent H. Barnett, Some Kind of Hearing Officer
, 94 Wash. L. Rev.
__ (forthcoming 2019), available at SSRN
When Congress enacted the Administrative Procedure Act (APA) in 1946, it expected that what we now call Administrative Law Judges (ALJs) would preside over most federal agency evidentiary hearings. Over time, however, the number of so-called “non-ALJ” adjudicators has ballooned. As a result, non-ALJ adjudicators vastly outnumber ALJs today by a ratio of about 5:1. Yet despite the prominent role currently played by non-ALJs, very little is known about them. In a forthcoming article titled Some Kind of Hearing Officer, Professor Kent Barnett seeks to change that.
Professor Barnett’s article does three important things. First, it begins by describing how existing due process jurisprudence has little to say about impartiality in the adjudicatory arena, leaving the task of designing optimal process largely in Congress’s hands. When Congress enacted the APA in 1946, it spelled out a fairly detailed scheme to promote impartiality in the context of formal adjudicatory hearings conducted by ALJs. For example, the APA makes clear that ALJs cannot engage in prosecutorial or investigative functions. In addition, the APA generally prohibits ALJs from engaging in ex parte communications. Yet when it comes to non-ALJs, Congress did not set forth similar constraints. The end result, as Professor Barnett points out, is that Congress effectively has delegated the task of determining optimal process in informal adjudications—and, more specifically, ensuring the impartiality of adjudicators—to individual agencies. And, as one might imagine, agencies have come up with all sorts of different ways of approaching the issue of impartiality in informal adjudications.
This leads to the second important contribution that Professor Barnett makes in his forthcoming article: Professor Barnett reports some key findings of a detailed survey that he and other researchers sent to 64 federal departments, agencies, and subcomponents within them while working as consultants for the Administrative Conference of the United States (ACUS). The findings shed significant light on how different agencies have approached the question of non-ALJ impartiality. Among other things, the findings demonstrate that agencies often do not consider subject-matter expertise when hiring non-ALJ adjudicators. In addition, more than 40 percent of non-ALJ adjudicators have no required separation of functions. Furthermore, a large proportion of non-ALJ types are subject to performance reviews, and of those non-ALJ types who are subject to performance reviews, more than 70 percent are eligible for bonuses. These and the many other findings that Barnett reports are important because, as a historical matter, little data has been collected on non-ALJ adjudicators. Barnett’s work, in other words, begins to pull the cover back from the administrative state’s previously hidden judiciary.
Third, after reporting his findings about non-ALJs, Professor Barnett argues that much more data is needed. To this end, he proposes the use of a uniform, one-page agency disclosure form. His proposed disclosure form—which would be answered by federal agencies and then made publicly available—would provide Congress, the Executive Branch, and litigants with key information about non-ALJs’ impartiality protections. The disclosure form, for example, would ask agencies to disclose, among other things: whether hiring qualifications exist for the presiding officer; whether the presiding officer is prohibited from reporting to an individual with enforcement duties; and whether the presiding official can be paid performance bonuses by the agency. According to Professor Barnett, such a disclosure form might uncover various impartiality gaps and thereby prompt agencies—or Congress—to address gaps that emerge. In addition, Professor Barnett argues that his proposed disclosure regime could help litigants to better understand the process to which they are subject, thereby recognizing their dignitary interests and improving public trust in the administrative system.
I am much less convinced than Professor Barnett is that disclosing impartiality gaps will do much to help recognize litigants’ dignitary interests or improve public trust. Given that litigants may well have no choice about the process to which their claims are subjected, it seems unlikely that litigants’ trust in the system will increase if they are provided with disclosure forms that document impartiality gaps. Nonetheless, I agree with Professor Barnett that disclosure would be a very good thing to the extent that it might nudge—or even perhaps “shame,” as Barnett puts it—Congress and agencies to respond to significant impartiality gaps that are revealed.
It is, of course, quite possible that neither agencies nor Congress will take action to ensure more optimal process, even if Professor Barnett’s recommended disclosure system is implemented and even if it reveals significant impartiality gaps. But that’s a problem for a different day. For now, I agree with Professor Barnett that gathering more information—and continuing to try to shed more light on the hidden administrative judiciary—would be a good first step.
Miriam Seifter, Understanding State Agency Independence
, 117 Mich. L. Rev.
__ (forthcoming 2018), available at SSRN
In recent decades, our field of administrative law has taken an empirical turn, at least in part. We now know more about on-the-ground practices of federal agencies and their treatment in the federal courts, for example. Our focus, however, has been relentlessly on the federal level. To the extent that scholars look outside the federal government, to states or to private entities, for instance, they almost always examine the interaction with federal entities. Miriam Seifter’s work should divert your attention to the states—both to learn about state practices and to consider what those practices might tell us about federal institutions.
In her latest piece, Understanding State Agency Independence, Seifter examines agency independence at the state level and uses that examination to contribute a new perspective on agency independence at the federal level.
It would be easy to get lost in the details of state practices, but Seifter organizes the piece coherently to make important broader points (while not losing rich institutional details). Seifter first recaps debates about federal agency independence before looking at the constitutional origins of state agency independence, then moving onto state courts’ treatment of agency independence, turning next to the contestation of independence (and shifting agency designs) outside the courts, and concluding by thinking about lessons for federal administrative law from the state practices she has studied.
There is so much to praise in this article. To start, the descriptive work about state practices is stunning. Christopher Berry and Jacob Gersen, among others, asked us to contemplate whether a plural executive would be a better design for our federal system, drawing on the “unbundled executive” at the state level (where, for example, governors are often elected separately from attorneys general). Seifter starts with these state practices, some of which were “woven into the design of the earliest state constitutions.” There are 43 states that elect an attorney general, but only one state (Louisiana) elects an ethics official. Overall, “state constitutions establish 497 constitutional offices, 210 of which are separately elected.” You may have heard of the unbundled executive, but you may not know how many state constitutions “prescrib[e] legislative appointment of particular officials, or even an entire set of officials.”
Seifter then pivots to these constitutional agencies, where the state’s citizens do not elect their leaders and where the constitutional text does not provide for how the top officials are to interact with the governor. In addition, she considers multi-member boards and commissions that are not in states’ constitutions (except, in some instances, as a general class). Seifter, however, does not simply show the complexity of state institutions at a particular point. She also demonstrates that agency designs at the state level have often shifted over time. I am less certain of, but quite intrigued by, her claim that the independence of federal agencies “has been a sticky phenomenon,” by contrast. Federal agencies change structure too—for instance, the Post Office in 1971 and some financial agencies after the last financial crisis. These shifts at the federal level, however, do seem different from state legislatures changing agency designs to advance more nakedly partisan goals. Indeed, in lame duck sessions, several states have worked to change agency independence. (And should we compare the federal system against all the states, or just against an average state?) I look forward to more empirical work assessing Seifter’s provocative (and plausible) claim that state agency structures have been more malleable than federal ones.
Seifter makes a number of clever, original, and compelling observations and arguments from the descriptive details she has unearthed. Here are just three that struck me. First, the separate selection (by the legislature or election) of some agency leaders in the states—the unbundled executive—should not be conflated with independence. Separate elections, for example, play a role in, but do not determine, how such agency leaders will interact with the governor. Second, in contrast to the federal courts, state courts in New Mexico (and in other states) have taken a non-binary, non-categorical approach to agency independence. In other words, these courts do not see state entities as being in one of only two buckets (independent and non-independent), and they “do not use the term ‘independent agency’ (or any similar term) to invoke a trans-substantive category.” Third, unlike the federal system where removal is seen as an inherent executive power, governors’ removal power is a matter of positive law.
This article has made me rethink federal practices, particularly issues surrounding the removal of agency officials. Seifter shows, first, how some states allow policy disagreements between an official and the governor to constitute cause for firing (which federal case law does not allow) and, second, how many states explicitly make removal decisions unreviewable by the courts. On the first, as she briefly notes, Judge Griffith’s concurrence in the D.C. Circuit’s recent en banc decision on the constitutionality of the Consumer Financial Protection Bureau argues that the for cause standard should be, or is, lower at the federal level than federal case law might suggest. On the second, differences between the states and the federal government on agency independence produce such stark differences in outcome—specifically, in modern times, state officials often get removed for cause by the governor, but federal officials almost never get removed for cause by the president.
More broadly, Seifter’s impressive research on state administrative law should make all of us pause in our federal projects, to consider how state practices might shape our analysis. Inspired by her articles, I am currently learning about state practices for filling leadership vacancies on a temporary basis as I wrestle with “actings” and other interim leaders at the federal level. What might the states tell you about your work?
Lots of ink has been spilled over when Congress can give federal officials for-cause protection. One would think that a necessary antecedent to that discussion would be a determination of exactly what for-cause protection entails. What is “inefficiency, neglect of duty, or malfeasance in office”? Yet no one knows; the debate over the permissibility of that restriction proceeds in blissful uncertainty as to its scope.
The reason no one knows is that (almost) no President has ever tried to fire someone for specified shortcomings amounting to “cause.” Until reading Professor Bamzai’s article, I would not have included the parenthetical “almost.” In the best-known instances of a president removing an official with for-cause protections—Shurtleff, Myers, Humphrey’s Executor, Wiener—the president did not claim cause existed; he took the position that cause was not necessary. It is often asserted, with only the tiniest of hedges, that no president has ever fired anyone after a hearing and for cause. But it turns out that at the very end of his term President Taft did just that. This article is the engaging account of that overlooked event.
Part I sets the scene. Bamzai begins with an overview of very familiar terrain, describing the caselaw on the legal status of independent agencies. Readers engaged enough to be reading the Administrative Law section of Jotwell will find little new here. Bamzai then turns to a useful history of tariffs. Before the income tax, the tariff was entrenched because it was the government’s main source of revenue. But the details were a focus of constant political battles, and administration was difficult.
Tariff administration is plagued by two sorts of inescapable challenges. One is classification: the is-a-tomato-a-fruit-or-a-vegetable? or what’s-a-“bound diary”? problem. The other is valuation: to know the amount of tax due, one has to know the value of the item imported, and the importer has every incentive to understate that value. To help resolve such disputes, in 1890 Congress established the Board of General Appraisers. The Board heard appeals from determinations made by individual collectors. Members of the Board were appointed by the president by and with the advice and consent of the Senate, were subject to bi-partisanship requirements, and could “be removed from office at any time by the President for inefficiency, neglect of duty, or malfeasance in office.” The statute did not fix a term of years for the appointment.
This setup led to the first big removal case when, in 1899, President McKinley fired Board Member Ferdinand Shurtleff without explanation. Shurtleff sued, losing in the Court of Claims and the Supreme Court. The decision was once the leading Supreme Court case on removal; Myers relies on it, and Humphrey’s Executor works hard to distinguish it. Invoking a background principle of presidential discretion in removals, the Court reasoned that the statutorily specified reasons for removal were not exclusive—no expressio unius for this Court!—and the president remained free to remove at will. Congress responded by amending the statute to specify that Board members could be fired for the three enumerated reasons “and no other.”
Part II turns to the actual firing. In August 1912, Taft created a three-member “committee of inquiry” to look into whether the Board members were doing an adequate job. One of its members was none other than Felix Frankfurter, then a twenty-nine-year-old neophyte attorney in the Department of War. Though not specified in its official instructions, the Committee had a particular target, one Thaddeus Sharretts. After months of investigation, a number of what we would today call off-line communications, and a public hearing, the Committee produced a report recommending the removal of Sharretts and Roy Chamberlain.
Regarding Sharretts, the concerns were ethical. The Committee found that he had used “his official power to compel personal favors,” requesting that a particular train make a special stop so he could get back to New York City from his weekend place in Maryland, perhaps for a quid pro quo. (This is another aspect of this story with contemporary resonance.) In addition, Sharretts seemed to have had made rulings that would be precedentially useful to his son, who practiced before the Board.
Chamberlain’s shortcomings were different: in an assessment one would not want one’s children to see, the Committee concluded that he was “totally useless to the Board,” had no “natural aptitude for [the] kind of work” the Board conducted, did not write his own opinions, and had through excessive drinking “brought scandal upon the Board.”
On March 3, Taft wrote to each, dismissing Sharretts for “malfeasance in office” and Chamberlain for “neglect of duty and inefficiency.” The next day, he left office and Woodrow Wilson became president. Neither ex-Board Member sued; President Wilson did not revisit the matter; and that was that.
Part III considers the aftermath of these little-known events and some lessons. One of the best parts of documentaries or films “based on true events” is the “where are they now?” screens at the conclusion. They certainly would be if this were filmed. William Howard Taft becomes Chief Justice and authors Myers, the single strongest judicial statement of presidential removal authority. Felix Frankfurter seems to head in the other direction—a civil service enthusiast, he goes on to write Wiener. The fate of Sharretts and Chamberlain is not revealed (though Wikipedia reports that the latter concluded his days as a grocer—a calling for which one hopes he did have a “natural aptitude”—in Bradford, PA). And the Board of General Appraisers? It goes on to greater glory as the Court of International Trade.
The normative payoff here is modest, as Bamzai acknowledges, but the incident provides useful and rare evidence indicating what qualifies as “cause.” Past practice matters, and, lo and behold, here it is! In this instance, the shortcomings and misconduct identified fall within the core and least controversial understandings of “cause.” Bamzai calls this a “crucial data point”; I am not sure I would go quite that far. First, it is only a data point, and one that involved no judicial determination. Second, one could read this story to support a narrow understanding of presidential authority, under which a President can fire an official with for-cause protection only for quite substantial shortcomings. However, precisely because those grounds existed here, the incident reveals nothing about whether the players thought more minor misconduct, or mere policy differences, were impermissible grounds for removal. (If the charges were trumped up, that would support a modest inference that Taft, Frankfurter, et al. thought that policy disagreement, for example, was not “cause,” but nothing Bamzai writes supports that conclusion.)
With regard to process, it is notable that Sharretts and Chamberlain were provided relatively full procedures, including a hearing. But, again, we do not know if this was perceived as legally required. Moreover, given the enormous doctrinal developments in the intervening century—to put it anachronistically, Sharretts and Chamberlain had a property interest in their employment because of the for-cause protection, but due process was provided, as per Mathews and Loudermill—what people thought about process a century ago is not that important.
In any event, Bamzai’s article is enjoyable and eye-opening. And, as with any good work of history, the whole story does make one think of William Faulkner.
Rory Van Loo, Regulatory Monitors
, __ Colum. L. Rev.
__ (forthcoming 2019), available at SSRN
One basic tension in administrative law is the combination in one entity of the various functions in government otherwise thought better divided: making laws, prosecuting suspected violations of those laws, and adjudicating whether the violations occurred. This mixed-function design leads to heightened concerns about accountability and oversight of agencies’ exercise of delegated authority. Various administrative law responses to these concerns are familiar. For example, for formal agency proceedings, Congress limited agency personnel communications and conflicts in the Administrative Procedure Act (APA) so as to ensure the “separation of functions” within an agency. More generally, public participation, transparency, and judicial review are mechanisms thought to constrain agencies from overreach.
But in his forthcoming article, Regulatory Monitors, Professor Rory Van Loo paints a striking picture of an underexamined group of agency actors who can de facto exercise all three kinds of agency power all while largely being exempted from APA constraints. His account of these regulatory monitors is made all the more fascinating by the methodology of his research, which captured the results of agency data, examination of public records, and interviews across nineteen large regulatory agencies. This sort of on-the-ground, trans-substantive look at the work agencies actually do is an exciting trend in administrative law scholarship (and one that I myself have found fruitful in examining how businesses and individuals seeking records about themselves invoke agency FOIA processes). This example is no exception: Van Loo’s account of regulatory monitors is powerful precisely because it complicates our understanding of agency power and suggests accountability gaps worth further exploration.
As for their tripartite power, monitors, who Van Loo defines as those “whose core power is to regularly obtain non-public information from businesses outside of the legal investigatory process,” are routinely empowered to engage in actions that go far beyond information gathering. On the prosecutorial and adjudication side, they can make decisions that result in a less formal agency sanction such as issuing a “noncompliance” notification or “warning letter.” In a majority of large regulatory agencies, they can block or suspend certain business activity. At some agencies they can investigate suspected violations of the law and even set fines or negotiate settlements. These are particularly significant exercises of power when you realize that the vast majority of suspected regulatory violations are resolved through these less formal processes. In this way, Van Loo’s piece resonates with valuable recent studies, such as Nick Parillo’s excellent research on behalf of ACUS, exploring how and why regulated parties comply even with informal or technically nonbinding agency action.
Maybe the most interesting finding to me was Van Loo’s portrait of regulatory monitors’ lawmaking function. Among other mechanisms, Van Loo describes monitors’ creation of agency common law through the precedent and patterns evidenced in inspection reports, warning letters, and other types of monitoring documentation. In the context of USDA inspections of entities regulated under the Animal Welfare Act, I am litigating a case pro bono in which I argue, among other things, that inspection reports are agency “orders” required to be proactively disclosed under FOIA’s reading room provision for exactly this reason: they form precedent on which the agency and private parties rely, and have real consequences for regulated entities. Van Loo’s government-wide look at the practice confirmed my own view that these records are of much greater importance than we often acknowledge.
One of the article’s other immensely fascinating aspects is the intersection of monitoring and government transparency. Van Loo compellingly argues that given the scope of power that regulatory monitors hold, we should be thinking distinctly about the kinds of accountability mechanisms that would best watch the watchdogs, to use a familiar phrase. Transparency is his very first and, I think, most powerful suggestion. While recognizing competing interests for which any increased transparency requirements should account, Van Loo argues that greater transparency over individual monitoring activities—such as routine disclosure of the results of inspections—would improve accountability and understanding of these important agency functions. Moreover, increased transparency over violations found through monitoring can itself be a soft form of inducing increased compliance with the law—Van Loo separately notes the “shaming” function that monitoring can provide.
While these are my favorite aspects of the article, there is a lot more to learn from Van Loo’s very rich inquiry. I suspect that regulatory monitors will become a larger part of the administrative law conversation as a result of his terrific piece.
Jennifer Nou & Edward H. Stiglitz, Regulatory Bundling
, 128 Yale L.J.
__ (forthcoming 2019), available at SSRN
Schemes for regulatory reform have taken many different tacks: improving cost-benefit analysis, preventing interest-group capture of the regulatory process, enhancing public participation in rulemaking, and myriad other ideas. To some, the most alluring idea for reform is apparently that, whatever else happens, there should at a minimum be less regulation—where “less” is measured simply by counting up the number of regulations and trying to reduce that total.
That notion has now become a “cornerstone” of federal deregulatory policy. Under President Trump’s Executive Order 13771, agencies “shall identify at least two existing regulations to be repealed” for each new regulation that they propose or promulgate. The “two-for-one” Order is the business end of a broader critique that there is “too much law”; though that idea has modern currency, it goes back at least as far as Sir Thomas More, who half a millennium ago imagined Utopia as an island of “but few laws”—and no meddlesome lawyers. Will this Order bring us closer to that Utopia?
In a forthcoming article, Jennifer Nou and Edward Stiglitz shed light on that question by assessing the phenomenon that they dub “regulatory bundling.” Under the new Order, agencies face an obvious incentive—to “pack more regulatory provisions into one rule” (P. 5) because splitting the provisions into separate rules would require the agency to find more offsetting rules to repeal. But the impetus to bundle together regulatory requirements might change what regulators choose to put into the bundle. When legislators enact omnibus laws, the authors note, they often use those more capacious vehicles for logrolling, for pushing partisan agendas through must-pass measures, and for smuggling unpopular initiatives through the vetogates of the legislative process; splitting up laws, not bundling them, is thus the option advocated by many scholars and preferred by many states. (Id.)
Professors Nou and Stiglitz begin their account by offering an empirical case that, for some time now, agencies have been increasingly bundling rules that address different subjects. To measure regulatory bundling, they refer to the list of subjects that accompanies each proposed or final rule. Agencies are required to include such a list when they publish a rule in the Federal Register, and they draw the listed subjects from a standardized set of terms in a government thesaurus. So, for example, the Obama Administration’s Clean Power Plan rule listed the subjects “environmental protection,” “air pollution control,” “administrative practice and procedure,” “intergovernmental relations,” and “reporting and recordkeeping requirements.” (Pp. 9-10.) The authors therefore treat that rule as addressing five subjects.
This may seem an odd way to measure bundling. For instance, as an example of regulatory bundling, the authors cite an OSHA rule that regulated 428 air contaminants in one go. (P. 2.) That rule listed five subjects, not 428—“air contaminants, occupational safety and health, permissible exposure limits, health, risk assessment” (see 54 Fed. Reg. 2332-01, 2920 (Jan. 19, 1989)). Would that list of subjects have been any different in an OSHA rule that regulated ten air contaminants, or indeed only two? If not, then counting up the number of listed subjects would not distinguish between a highly-bundled rule that addressed 428 contaminants and a less-bundled rule that addressed just ten.
Rather than glide over such issues, Professors Nou and Stiglitz are commendably cautious about the worth of their metric for bundling, and they are careful to address the various reasons why their “initial snapshot” (P. 18) of bundling might either under-represent or over-represent the trends they observe in this phenomenon. (Pp. 10-12.)
With those caveats in mind, their study yields some interesting observations. Between 2000 and 2017, and across a population of 19,000 proposed rules and 41,000 final rules, they find that the average number of subjects grew—by about 19% for proposed rules and by about 10% for final rules (Pp. 13-14) when the initial two-year span is compared to the final two-year span. Though upticks and downticks in bundling occur, these fluctuations do not seem to occur in close vicinity to transitions in presidential administrations, but rather within the span of a given president’s tenure in office. (P.14, Fig. 1.) Some agencies—e.g., the CFPB, EPA, and VA—are much more apt to bundle than others—e.g., the DoD and FCC. (P. 16, Fig. 2.) And, though it is difficult to isolate out the relative impact, quite a lot of the increase in bundling over the 17-year span may be a result of these “bundler” agencies issuing more rules rather than because of an increase in bundling across the board. (P. 15, n.71.)
With this empirical backdrop in hand, Professors Nou and Stiglitz then move on to explore why agencies bundle. Within an agency, bundling can help to facilitate internal agency compromise, by allowing the addition of “regulatory riders” to win sign-off from internal agency officials, and it can smooth the process of logrolling between multiple agency heads who may each have a say in whether a rule goes forward. (Pp. 19-21.) From the perspective of an agency, they note, bundling can also be efficient, at least to a degree—once an agency has embarked on a rule-making, it may make sense to use that rule to address more subjects, until the point at which adding more subjects produces a “bottleneck” (P. 22) that interferes with other tasks the rulewriters would prefer to address.
The article then turns to examine how, externally to the agency, monitors such as OIRA, Congress, and the courts may also affect agency incentives to bundle. OIRA, for its part, has tried to discourage agencies from bundling regulatory and deregulatory initiatives into a single rule, unless they are “logically connected.” (P. 26.)
Congress, because of its new enthusiasm for using the Congressional Review Act, is a hard-to-gauge factor: if Congress dislikes some portions of a bundled rule, it might overturn the whole thing, which would encourage agencies to split up their rules; on the other hand, bundling less-popular provisions with more popular ones could enable the whole package to escape safely, which would have the opposite effect of encouraging agencies to bundle more. (Pp. 27-28.)
Last—and, here, decidedly least—are courts and judicial review. Professors Nou and Stiglitz find that “judicial scrutiny” in the D.C. Circuit—in their account, the “extent to which there is preference divergence based on the partisan identity of the judge’s nominating party” (P. 30)—does not affect agency bundling activity. In other words, changes in regulatory bundling do not show any correlation with changes in the political composition of the D.C. Circuit’s set of active judges, which leads the authors to suggest that “other institutional monitors like the President and Congress are stronger motivators of bundling behavior than the courts.” (P. 31.)
The final and most interesting question addressed by the article is what reforms should be adopted to address regulatory bundling. Should the Congressional Review Act be amended to enable Congress to veto only parts of regulatory bundles, rather than—as is currently the case—requiring an “all or nothing” up-or-down disapproval? (Pp. 37-38.) Should there be a single-subject requirement for rulemaking in the administrative state, and what precise shape should such a requirement take? (Pp. 39-40.) Should courts use their powers of judicial review to deter agencies from bundling because it muddies up the administrative record and precludes meaningful judicial review of unwieldy rules touching on myriad subjects? (P. 42.) Or, conversely, should courts encourage bundling, to force agencies to address together aspects of a regulatory problem that are substantively interrelated? (Pp. 43-44.)
Professors Nou and Stiglitz advocate no hard prescriptions for reform, but their nuanced assessment of the dynamics of regulatory bundling has set the table for future scholarship. The two-for-one Order calls for less regulation as measured by nothing more than raw numbers of regulations. Despite the deep flaws of that approach, that directive is (at least for now) part of the law of the administrative state, and regulatory bundling will surely be one strategy that agencies will use to obey its command. Professors Nou and Stiglitz’s article closes by highlighting the need for more empirical work to assess the strategic abuses and costs of regulatory bundling, as well as the possibility that bundling may have more “salutary motivations and consequences.” (P. 44.) Perhaps we will then discover whether the two-for-one Order will pave the way to a Utopia of “less” federal regulation, or whether the Order will ultimately prove to be—like the regulatory bundles it incentivizes—more of a mixed bag.
Cite as: Mila Sohoni, A Mixed Bag
(November 19, 2018) (reviewing Jennifer Nou & Edward H. Stiglitz, Regulatory Bundling
, 128 Yale L.J.
__ (forthcoming 2019), available at SSRN), https://adlaw.jotwell.com/a-mixed-bag/
Nearly everyone sings innovation’s praises. Innovation brings progress and prosperity. It leads to a better tomorrow. Yet, is innovation really an unalloyed good? In a new book, legal scholar Cristie Ford argues that innovation actually “presents a clear and persistent risk—perhaps the single most significant and under-analyzed risk—to regulation itself.” (P. 215.)
Innovation poses such an “existential challenge” to regulation, Ford argues in Innovation and the State: Finance, Regulation, and Justice, because the world subject to regulatory control is constantly changing. (P. 144.) Technological change, for example, has made hydraulic fracturing economical and led to a shale gas revolution in energy extraction. New, complex mortgage-backed derivatives in securities markets proliferated in the years leading up to the financial crisis. Changes such as these are continually occurring in every economy. Yet in a certain sense, regulation inherently stands still. Regulation operates by fixing words onto the pages of a rulebook. The world is dynamic, while regulation is static.
Ford is hardly the first to call attention to regulation’s relatively static nature. Many policymakers, and even more business managers, believe that regulation impedes socially valuable progress. For example, a common argument is that the U.S. Food and Drug Administration’s strict and slow pre-marketing review protocols keep life-saving drugs from helping patients sooner. More generally, the “clunkiness” and rigidity of regulation—such as its well-known problem of one-size-fits-all commands—creates a range of perversities, including increased costs and the locking in of suboptimal business practices.
This conventional view of the tension between regulation and innovation is most compatible with a critical posture toward regulation. Yet in her thoughtful book, Ford offers a valuable scholarly perspective that both skeptics and supporters of regulation should find instructive. She shows that regulation hardly impedes all innovation. Just as water in a river finds its way around or over boulders and other obstructions, innovation manages to occur even in a regulated economy. More importantly, the existence of ever-present innovation holds major implications for regulation, as changes in economic and social circumstances bring the constant potential to make rules antiquated and ineffectual. As Ford puts it, innovation has a “persistently corrosive effect on regulatory fit and effectiveness over time.” (P. 164.)
This corrosiveness exists in part because of what legal scholar Gary Marchant has called law’s “pacing problem.” Economic and technological development simply moves much more quickly than legal institutions typically are able to act. We see constantly emerging new lines of businesses—Facebook, Uber, and more—as well as new technologies—genetic engineering, autonomous vehicles, and more. Each of these developments bring the possibility of risks to consumers and the public. But the legal system is slow to respond.
Another source of innovation’s corrosiveness arises from firms’ strategic behavior. When regulated firms maintain the same incentives and goals that created the initial need for regulation, those firms can be expected to search for—and eventually find—ways of satisfying their objectives within the parameters of the law. But sometimes these new ways still create problems for society. The starkest examples take the form of evasiveness or outright fraud—just think about Volkswagen’s “innovative” approach to designing diesel engines so they could meet regulators’ required laboratory emissions tests, even though the cars still polluted excessively when driven on the road. Adaptive behavior induced by regulation can also be more benign in intent but still allow problems to persist or even create new problems. Whatever the motivation, such strategic innovation undoubtedly underlies Ford’s view that “the capacity to be innovative…is a form of power” and that this form power, like others, is not distributed equally in society. (P. 220.)
Ford’s book helpfully reminds us that a major predicament facing society—and a major intellectual challenge confronting regulatory scholars—derives from the realization that regulation must “operate within a dynamic and uncertain environment.” (P. 140.) What might be the solution to this predicament?
For much of the 1990s and early 2000s, regulatory scholars argued that the innovation predicament could be overcome through a form of regulation that Ford refers to as “flexible regulation.” (Ford uses this common, if not oxymoronic, moniker from that earlier time period, but also explains that flexible regulation sometimes has also traveled under the banner of “responsive regulation, reflexive law, smart regulation, and new governance and experimentalism.” (P. 21.)) Throughout much of Innovation and the State, Ford tells the intellectual history of flexible regulation. She shows how flexible regulation eschews top-down governmental control through bright-line rules, typically disparaged as “command-and-control” regulation. By contrast, flexible regulation prefers to work more from the bottom up, taking advantage of industry’s superior knowledge of its operations and providing greater sensitivity to variation in business contexts. By relying on either broad principles or regulatory performance targets, as well as on softer tools or nudges (such as information disclosure), flexible regulation seeks to shape and guide private behavior rather than to control businesses’ every action through the enforcement of strict, detailed legal commands.
In theory, flexible regulation overcomes both the rigidity and corrosiveness associated with traditional regulation. Instead of locking in specific, prescribed behaviors and technologies, a principles- or performance-based regulatory regime gives responsible firms leeway to adapt and find the most cost-effective means of achieving regulatory goals. In this way, flexible regulation is more receptive to “good” innovation. And by its reliance on broad principles or outcomes instead of bright-line rules, flexible regulation can allow government regulators to respond more nimbly to evasiveness and to adapt in the face of new business practices that might not be addressed by highly detailed, prescriptive rules. Flexible regulation in this way is thought to be more protective against “bad” innovation.
But the regulatory theory that developed in the 1990s looks different from this side of the financial crisis of 2007-2008. Ford cautions regulators and regulatory scholars against putting too much faith in the precise form of regulation, flexible or otherwise. A specialist in securities regulation herself, Ford devotes much attention in Innovation and the State to financial regulatory issues. Comparing how different countries fared in response to various innovations in finance in the years prior to the crisis, she concludes that “it would be difficult to establish that more ‘flexible’ systems like the United Kingdom’s more principles-based system were any more (or less!) susceptible to gaming or weaker in regulatory terms than more rigid, bright-line systems like the United States’.” (P. 133.)
Ford’s design-agnostic conclusion merits wide consideration. Both bright-line rules and principles-based regulatory designs have their strengths and weaknesses. And neither are immune to challenges posed by innovation. It oversimplifies, but perhaps only somewhat, to say that just as bright-line rules can block both bad and good innovation, flexible regulation can be accommodating to both good and bad innovation. Both the financial crisis and the Volkswagen scandal, each of which extended across national borders, remind us that bad innovation, flouting legitimate regulatory goals, can arise in vastly different regulatory systems.
Ford is correct to identify innovation as a daunting challenge confronting any regulatory system. She makes a persuasive claim that, at least as a technical or legal matter, “we simply cannot seem to ‘solve’ the problem of innovation, no matter what flexible, bright-line, or innovation-framing strategy we take.” (P. 47.) But then, if she is right, is there ever any hope for sensible, effective regulation?
Ford offers no simple, easy answers—and surely we should be most skeptical if she did. Still, I read her to be both realistic and hopeful. In her telling, “the way forward is…through a new kind of state action.” (P. 128.) That new action, she says, should entail thoughtful, fair, public deliberation and efforts by regulators to seek to identify changes in social and economic circumstances and learn how to respond to them.
She offers near the end of the book a helpful “[f]ramework for innovation-ready regulation” (P. 226) which includes a list of questions intended to help focus regulators’ attention on possible innovation threats on the horizon. That framework encourages the leaders of any regulatory organization to assess three key features of their operating environment: (1) “the basis of the regulator’s knowledge and the nature of its assumptions;” (2) how the regulatory regime is structured, and what implications flow from that structure;” and (3) “what mechanisms exist to allow the regulatory regime to learn and adapt, and whether they are adequate.” (P. 224.)
The operative word in Ford’s ultimate solution comes down to “action.” In looking at the regulatory failings in the lead up to the financial crisis, Ford points not to any particular failure in regulatory instrument design but to the lack of appropriate and adequate action by regulatory officials: “Across jurisdictions, underfunding, under-resourcing, lack and misdirection of information, lack of focus, and lack of regulatory independent-mindedness were the common thread.” (P. 133.) The solution, then, is not so much smart regulation, but smarter regulators.
In the end, whatever form regulation itself may take, regulators must also acquire the vision to notice change as it is evolving, possess the early-warning data to anticipate seismic shifts in the larger landscape, and inculcate the independent-mindedness to take appropriate action when needed. If innovation creates regulation’s existential problem, the solution lies in constant regulatory vigilance.