MEMORANDUM

TO: ADMINISTRATIVE LAW CLASS
FROM: BETH GARRETT
SUBJECT: WINTER 1999 EXAMINATION
DATE: 03/26/99

Question I: This question is based on an Act currently before Congress and part of Senator McCain's platform: The Corporate Subsidy Reform Commission Act. In addition, I used aspects of the Base Closure Commission process, which was challenged unsuccessfully in Dalton v. Specter, 511 U.S. 462 (1994).

Part A: It is not at all clear that NAM can obtain judicial review at this time. The first issue to discuss is that of standing. Most students discussed the test applied to groups like NAM to get standing to sue. Sierra Club. Virtually all observed that NAM would have no difficulty passing the zone-of-interests test articulated in Clarke, particularly because its members would be directly affected by a decision to eliminate any tax expenditure that benefited them. Also easy here are issues of redressability and causation. If the Act is unconstitutional, then the threat that the process will result in the elimination of a tax provision no longer exists.

The problem is finding an injury-in-fact. A general law enforcement interest - a concern that the government is acting unconstitutionally - is not sufficiently concrete to justify the constitutional standing test (see Akins, page 940), and it is generalized, giving rise to prudential concerns. NAM argues that it will incur increased lobbying expenses because of the new process. Although this is concrete and particularized, many of you argued it was a bit like the costs of litigation in the context of standing. See Steel Company. It seems strange to allow such expenses to be seen as an injury because involvement in the political process may just be part of life in a democracy. However, this interest (in avoiding a greater involvement, at a greater cost, than the group would otherwise pursue) does provide a more concrete and particularized injury than any general interest in law enforcement. Finally, the members of NAM may benefit disproportionately from subsidies likely to be labeled as corporate welfare. The new process presents some increased risk that such subsidies will be eliminated.

Ripeness is also a problem for NAM. Whether the process will result in the elimination of any tax provision that benefits its members is speculative at this stage. See Toilet Goods. Many more steps are required before any law is changed; if those steps are not taken, no court involvement will be necessary. On the other hand, NAM may have to expend time and energy to protect itself as the process begins; thus, there is some hardship to the organization and its members if judicial review is postponed. Moreover, the issues presented by this challenge - relating to the constitutionality of the Act - are purely legal and will not benefit from further factual developments.

Two other timing issues were raised in many answers. Some of you discussed the need to exhaust remedies; in this challenge to the constitutionality of the Act, exhaustion is not necessary. Finally, a constitutional challenge like this is virtually always reviewable by a court (Johnson v. Robison); moreover, there is nothing in the facts that indicates that review has been precluded.

The question also asked you to address the merits of NAM's constitutional challenge. Most students discussed several different kinds of separation of powers concerns. The first was a challenge based on the delegation doctrine. Students assessed the statutory language and the legislative history to discern whether Congress had provided the executive branch actors with sufficient intelligible guidelines. See J.W. Hampton. Many noted that this delegation is done for purely political reasons (Congress wants to shift the responsibility), rather than to take advantage of expertise in the executive branch. Justice Rehnquist has indicated that the former kind of delegations are more problematic.

The second challenge develops from the aggrandizement cases. Here, you may have a case of congressional aggrandizement because the Act requires that members of Congress sit on the advisory committee. Under Bowsher and Metropolitan Airports, this congressional involvement in the execution of policy may be constitutionally impermissible. However, the committee is only an advisory one, so it may not be executing any laws at all. Congress has also limited the power of the President to remove commissioners. It seems likely this limitation on the removal power is constitutional in light of Humphrey's Executor and the rise of independent agencies.

Moreover, this arrangement looks very much like the Chadha case, without the element of congressional aggrandizement, and almost exactly like New York v. Clinton. The process it sets up allows the President to repeal an existing tax provision (or corporate subsidy) without the active involvement of Congress at the time of the repeal. Although Byron White might argue that the Act allows for the functional equivalent of bicameralism and presentment (because the failure of Congress to disapprove signals that it supports repeal), this argument is unlikely to persuade the Court to uphold the arrangement in light of the relevant precedents. Moreover, given the structure of the process, 2/3 of Congress has to disapprove of the President's recommendation because he is almost certain to veto any disapproval bill that would render his recommendation ineffective.

These are not all the constitutional issues raised in the answers; they are only the most frequently discussed ones.

Part B: This was a difficult question because none of the actions taken before the lawsuit is really a final action. Only the President's decision is a final action, that is, an action with some sort of legal and binding effect. Rubin's action is merely a recommendation, and the Commission only forwards proposals to the President. Thus, the Court in Dalton v. Specter held that recommendations from a similar commission were not sufficiently final to allow judicial review under the APA. The provisions of the organic statute relating to review are not provided in the exam. If review is not ruled out, the strong presumption of reviewability might allow the court to gauge whether the actions had complied with the organic statute. (Interestingly, the APA would not allow review of the President's action because he is not within the scope of the APA. So a party could obtain review of his decision only if the organic statute provided for it.) A few of you caught this twist in the question; many of you did not. Everyone proceeded to think about the decisions of the executive branch entities within the framework of the APA, as well as the organic statute.

A few of you noted potential ripeness problems here because the Commission's recommendations are only advisory. It is still a matter of speculation whether the President will forward the recommendations to the Congress.

How should we characterize what Rubin has done, if we assume it is some sort of final action? It is definitely informal, and probably it is an adjudication because his recommendation does not meet the definition of a "rule." The APA does not set forth many procedures that must be followed with respect to informal adjudications; the organic statute also provides little by way of procedure. It is certainly true that Rubin did not seek or obtain any views from parties or outside sources; he relied solely on his staff and OMB. If Rubin's recommendation could have been reviewed, it would have been reviewed first to see if he had complied with the law and second to gauge if his decision was arbitrary and capricious, Overton Park. Many of you raised a number of questions in this regard: Did Rubin rely on "reliable performance criteria"? What kind of cost-benefit analysis did he and his staff use? Was there a full consideration of the public benefit?

The Commission is also engaged in some sort of informal proceeding, although the organic statute provides for particular procedures. It has to hold public hearings and promulgate its own rules and regulations for such hearings. Some of you analyzed whether the requirement for "public hearings" triggered the APA's requirements for formal procedures; most of you concluded it did not. Many of you questioned whether the Commission had heard from all interested parties, such as those selling food processing and refining businesses or from members of the general public/public. As for the recommendations themselves, if they were reviewed under the APA standard for arbitrary and capricious decisionmaking, the court might well remand the recommendation back to the Commission. The Commission did not supply much by way of explanation for its decision; it accepted the recommendation of Secretary Rubin in the face of more sophisticated tests provided by the coops; and it may not have relied on acceptable performance criteria.

Finally, the question asked you to consider whether due process required more formal proceedings. Most of you first considered whether this was a case of adjudicative facts (Londoner) or legislative facts (BiMetallic). Although the provision affects only a few taxpayers, its repeal is more in the nature of a legislative decision that does not turn on facts surrounding particular cases. It seems unlikely that more particularized facts would help the Commission reach a better decision. Some of you thought that the decision involved a property interest of the coops and thus triggered a right to a hearing under Goldberg. I was not persuaded by this analysis. The question here is not whether a particular taxpayer qualifies for a government benefit; the question is whether the government will continue to offer a benefit to qualifying taxpayers or whether it will repeal the benefit. At any rate, even if due process concerns are directly involved, the parties were allowed to testify before the Commission and submit written statements responding to the other testimony. It seems likely that additional procedures (perhaps cross-examination) would not significantly increase the accuracy of the decision or serve other objectives. Mathews v. Eldridge.

Question Two: First, Efton challenges the use of adjudication to establish the new criteria. The licensing decision itself must involve an adjudication. See APA, Section 551(6), (7), and (9). But, the agency certainly could have announced its new rule concerning the reasonable minimum physical criterion in a rulemaking, and then it could have applied the new rule in its subsequent licensing determinations. The NTSA certainly provides the FHWA both adjudicatory and rulemaking powers. The question is whether FHWA's decision to announce the new rule as part of an adjudication is impermissible.

Given the definitions in the Act and the somewhat murky precedent of Wyman-Gordon, the FHWA probably could not have announced the new rule in a prospective only fashion in an adjudication. It did not do so here, applying the new rule to the case before it. In subsequent adjudications, FHWA could use the balancing tests we discussed in relation to the NLRB cases to determine whether to apply the new standard to conduct occurring before Efton's case was decided. Moreover, because the new "rule" is part of an order, it does not have the same binding effect of a rule issued through notice-and-comment rulemaking. Parties can attack the rule in each adjudication, although it will be given precedential effect.

Comprehensive answers on this issue discussed the advantages and disadvantages of using adjudication to set forth policy and of using rulemaking procedures. Some also talked about whether courts should adopt judicial approaches that would discourage agencies from using adjudication to announce general policies. A few noted that the previous policy had been set forth in an adjudication concerning Mike Bresson, so the agency had a long-standing practice of using adjudication to promulgate policy.

The second challenge Efton presents concerns the agency's interpretation of the law. Chevron provides the framework for analysis; although the agency used an adjudication, it was using its delegated authority and would receive Chevron deference. Some students presented a very sophisticated analysis of congressional intent in the discussion of Step One; they provided a close reading of the provisions of the statute, a discussion of the purposes of the Act, and an analysis of legislative history. A few people talked about particular canons that might be appropriately used in Step One, such as the delegation canon. Many of you determined that the statute was ambiguous with respect to the meaning of "minimum physical criteria" and its relationship to licensing and thus moved to Step Two. At this stage, any permissible reading of the statute would probably be upheld, and most of you thought the agency's interpretation would prevail.

Efton then challenges the fact-finding of the adjudicator. The first question is the standard of review. Section 558 of the APA governs licensing procedures. While some applications for licenses must go through formal procedures, the requirements for revocation and suspension are not formal; accordingly, the standard for review is arbitrary and capricious. See Overton Park. Although the standard of review differs (at least in wording), the test for the review of fact-finding is given by Universal Camera, which most of you discussed and applied to these facts. Many of you noted that, notwithstanding the phrasing of the judicial test, the courts tend to be very deferential to the fact-finding of agency adjudicators, particularly concerning issues of credibility.

The final two challenges relate to the policy itself and whether it is arbitrary and capricious. Some of you talked about the change in this standard recently, a change demonstrated by Syracuse Peace and American Dental Association. Most of you noted that the court might remand and require the agency to provide a better explanation than the studies it used to justify its new policy. You discussed in detail how the studies were not compelling or did not support the means chosen to increase driver safety. You noted that reasonable alternatives were available that the agency had not considered. Many argued that the studies themselves, particularly the Safety Consultants' Report, did not entirely support the agency's policy. Some of you also applied a substantive hard look, much like the majority in State Farm when it analyzed NHTSA's use of the Chevette and VW tests of passive seatbelts. You argued that it was simply contrary to common sense not to take account of the effect of corrective lenses when determining whether a driver had sufficient visual acuity to drive safely. No further explanation by the agency would convince you that this policy made any sense.

Again, this memo merely sketches out some of the arguments made by the examinations. Other issues were mentioned by a few students, and more topics could have been covered in answers to these questions.