1. Rulemaking Part I

2. 2 Uniformity Rules set up a general framework that treats all parties uniformly Rules are the fairest way to make big regulatory changes If the agency does not have rules, it can change enforcement policy from case to case, and is also at the mercy of judges to accept or reject agency standards

3. 3 Adoption of National Standards National standards can be adopted through agency rules, harmonizing practice across jurisdictions National building codes CDC guidelines on food sanitation Recommendations of the Advisory Committee on Immunization Practices LA and building codes

4. 4 Agency Efficiency While a rulemaking can be expensive and time consuming, it can settle issues which might otherwise have to be litigated in every enforcement case Rulemaking can also eliminate many hearings by resolving factual questions In disability cases, rules can be used to establish what constitutes a disability, rather than making it as case by case determination.

5. 5 Downside of Rulemaking Trials can be more flexible in the individual cases Adjudications are useful when you are not sure what the rule should be and need more info and a chance to experiment Rules can be so abstract or overbroad that they are expensive or difficult to follow Like statutes Agencies can pass rules that Congress would never pass - GHGs.

6. 6 Agency Oversight You can control the outcome of rulemaking much easier than that of adjudications Not Dependant on ALJs Why is this especially important in LA? More input from across the agency Input from the public as well Directly controlled by agency policy makers

7. 7 Rulemaking Ossification The courts and legislatures have increased the burden on rulemaking, especially in states Rulemaking has gotten so complex and time consuming it has lost some of its value Complicated by regulatory conflict and incompetent agency practice Rulemaking can go on for years What is the legal value of a proposed rule that has not been finalized? The Medicare anti-kickback regulations were delayed for years between the proposed rule and the final rule

8. What is a Rule?

9. 9 Definition of a Rule APA 551(4) APA 551(4 (4) 'rule' means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing; Not a clear definition Things that are not adjudications or licensing

10. 10 LA Definition 6) "Rule" means each agency statement, guide, or requirement for conduct or action, exclusive of those regulating only the internal management of the agency and those purporting to adopt, increase, or decrease any fees imposed on the affairs, actions, or persons regulated by the agency, which has general applicability and the effect of implementing or interpreting substantive law or policy, or which prescribes the procedure or practice requirements of the agency. "Rule" includes, but is not limited to, any provision for fines, prices or penalties, the attainment or loss of preferential status, and the criteria or qualifications for licensure or certification by an agency. A rule may be of general applicability even though it may not apply to the entire state, provided its form is general and it is capable of being applied to every member of an identifiable class. The term includes the amendment or repeal of an existing rule but does not include declaratory rulings or orders or any fees.

11. 11 Functional Definitions General applicability, as opposed to specific parties Remember the standards for a hearing? If you do not get a hearing, and there is no special exception such as an emergency or national security, it is probably a rule Binding on the agency as well as on the public

12. 12 How do you make a Rule? Publish the proposed rule and what it is based on for public comment The Federal Register and LA Register are where rules are published first Review and address public comments and publish these along with any modifications in the rule Codify the rule after it is effective Rules are Codified in Code of Federal Regulation and the LA Administrative Code

13. 13 Why Have Public Participation? Public participation has great political benefit in broadening the acceptability of the rules. Public comments can identify technical and legal problems with the rules Publication of proposed rules allows politicians to become involved to protect the interests of their constituents Public participation limits executive power and makes it more palatable to the courts to have agencies making laws While the agency may take comments at hearings, it is usually done in writing.

14. Exemptions to Notice and Comment Requirements Is notice and comment a constitutional requirement?

15. 15 Military and foreign affairs Why exempt these? Limiting the term of residence for Iranian nationals after the hostage incident National security issues? Extending asylum to persons subject to reproductive restrictions in China Was this just an individual benefit or part of a foreign policy?

16. 16 Agency Procedures Like the code of civil procedure Does not change the substantive rights of the parties Does not change the regulated behavior, only the process in agency procedures

17. 17 Actions where Secrecy is Important Wage and price controls Bidding on contracts Negotiations on land purchases and sales

18. 18 Emergency Proceedings Emergency Rules http://www.state.la.us/osr/osr.htm Misused in LA Interim Final Rules Published and in effect, but will be modified after comments are in. Calculations and other non-discretionary rules Technical corrections Can require notice and comment if the correction causes a different result

19. 19 Non-APA Requirements APA is the default if there is no other statutory guidance National Environmental Policy Act imposes requirements if the rule affects the environment Regulatory Flexibility Act - small business Executive Order 12866 - more $100M impact The book calls these hybrid rulemaking, do no confuse this with court imposed hybrid rulemaking as in Vermont Yankee

20. 20 Beginning Rule Making Why was the court willing to order the agency to make a rule in the Regulators? Why do agencies often fail to follow congressional direction to make rules? What is a request for a rulemaking and what does it force the agency to do?

21. 21 553(b) - Exceptions to Notice Requirements 1) Interpretative rules, general statements of policy, and rules of agency organization, procedure, and practice; and 2) Rules when the agency finds for good cause that notice and public procedure are impracticable, unnecessary, or contrary to the public interest. No notice means no comment under 553(c)

22. 22 Exception 1 - Interpretative Rules It is only explaining the law or providing guidance for action Prosecution guidelines IRS audit guidelines Since they do not change the law, they have no legal effect Like precedent cases in the civil law? Does that mean you can ignore them?

23. 23 How do you know if it an Interpretive Rule or a Legislative Rule? Why would an agency want to use an interpretive rule rather than a legislative rule? What is the risk to the agency if they do and the court disagrees? What is the benefit to the regulated parties of interpretive rules? What if the agency is prevented from providing guidance documents?

24. 24 How Does the Nature of the Enabling Act Affect Rulemaking? Very general laws Little effective guidance in the statute Makes any interpretative rule more likely to been seen as a legislative rule Very specific laws - like the ADA No room for legislative rules Everything is guidance

25. 25 EPA Example - Wetlands EPA makes a rule that states that the term “waters of the United States” (which defines the jurisdiction of EPA under the Clean Water Act) includes wetlands that potentially provide habitat to migratory birds. Is this an interpretative rule or a legislative rule? Can we tell just looking at the rule?

26. 26 What Do We Need to Know? Will the agency say that the rule is binding? The substantial impact test How might this rule affect the buyers of wetlands? Is this a substantial impact? What is the agency's defense? Is the substantial impact test circular?

27. 27 The “Legally Binding” or “Force of Law” Test What is the enforcement test? What do we need to know to tell whether the agency can enforce the law without this rule? Is the agency required to define wetlands? Was the agency doing enforcement before this rule? Under this test, is this an interpretative rule? What if statute allows the agency to define toxic substances that cannot be dumped into lakes? Would a list of these substances be legislative?

28. 28 General Policy or Specific Requirements? Remember, 553(b) does not require notice and comment for general policy statements Assume the statute says that in licensing actions, a physician must reply to agency request for information in a reasonable time. Would a requirement that this be in 7 days be a policy statement or a rule? Why does the inclusion of specific factual information undermine the claim that it is a general policy statement?

29. 29 How High do I Build the Fence? Hoctor v. USDA, 82 F.3d 165 (7th Cir. 1996) Statute requires the agency to adopt rules for the safe housing of dangerous animals Agency uses notice and comment to promulgate a rule requiring that reasonable precautions be taken to prevent the escape of the animals Agency then issues guidance saying that a reasonable precaution would be an 8 foot fence Interpretation or legislation? How could the agency enforce the provision without the height rule?

30. 30 Junk in the Park: United States v. Picciotto, 875 F.2d 345 (D.C. Cir. 1989) Can the agency use notice and comment to promulgate a legislative rule that says that the agency can add other requirements in specific situations without notice and comment? Why or why not? What if the rule just says that nothing can be brought to the park that would be disruptive or impede public access?

31. 31 Consistency, the Hobgoblin of Interpretative Rules What is the result if an interpretative rule is inconsistent with a legislative rule? Using an interpretative rule to change a calculation established by a rule Some courts also find that an interpretative rule cannot be changed with a subsequent interpretative rule, but can only be modified by a legislative rule Why is logically inconsistent? This is not widespread in the courts

32. 32 Other Factors Publication in the FR Must interpretative rules be published in the FR? What does failure to publish indicate? Does this make sense? Is it important that the agency clearly label the rule as interpretative?

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34. 34 Federal Mine Safety and Health Act Example Secretary has the statutory right to sue both the mine owner and the mine operator for violations of the Act. Secretary publishes a policy statement explaining that the agency can and will sue both of them for infractions, depending on the nature of the infraction. Does this require notice and comment? Why?

35. 35 Corps of Engineers Example Corps issues a guidance document saying that one way to qualify for a wet lands development certificate is to promise to restore 2X as much wet land as you fill Does this need notice and comment? Why? What if the Corps will only issue permits to people who agree to this? How would you prove this?

36. 36 Coercion: Chamber of Commerce v. U.S. Dept. of Labor, 174 F.3d 206 (D.C. Cir. 1999) DOL made a policy statement that it would reduce inspections of workplaces that adopted an OSHA suggested safety plan that exceeded federal minimums Is this really voluntary? Does coercion make this a binding rule? What about DOJ guidance that a corporate compliance plan will count as mitigation under the Sentencing Guidelines?

37. 37 How does the Agency Treat the Rules? Assume the agency says the statement is only an enforcement guideline What if the employees doing the enforcement always follow the guideline? Does this change its legal status? What position do these decisions on guidance put the agency in when the regulated parties or the public asks what the guidelines mean?

38. 38 Can Interpretative Guidance be Retroactive? Why would be a problem if rules were retroactive? Why does the ban on retroactive rules not apply to interpretive rules? How do judges change the law retroactively? If interpretive rules cannot change legal rights, does retroactive really mean anything? Could congress create an exception to the APA and allow a retrospective rule?

39. 39 Procedural Rules Procedural rules are exempt from notice and comment The form of an application for benefits is procedural The facts that the claimant has to establish to get the benefits are substantive A procedural rule can become substantive if the change in procedure has a substantial impact on the regulated parties. Procedural change for submitting bills by home health providers imposed a huge logistic and financial cost.

40. 40 What is Formal Rulemaking? A rulemaking conducted as a trial type hearing The agency support for the rule must be presented at the hearing Interested parties may present and cross-examine evidence History - grew out of rate making Rate making affects a small number of parties The courts thought they should get due process

41. 41 Why avoid formal rulemaking? The peanut hearings (FDA must do formal rulemaking in some situations) Should peanut butter have 87 or 90% peanuts? 10 years and 7,736 pages of transcript What was the concern in Shell Oil v. FPC? Formal rulemaking was impossibly time consuming to use for regulating something changeable such as natural gas rates. Why does just getting the right to be heard at a formal hearing benefit parties that oppose a rule?

42. 42 When is Formal Rulemaking Required? Disfavored by the modern courts Must have magic statutory language or be required by the agency's on rules Only when rules are required by statute to be "made on the record after opportunity for an agency hearing" Lawyering tip When would you want to argue that formal rulemaking is required? What do you have to do to support you request?