• Contesting Agency Conduct Part III: When can I contest a Rulemaking?

    Contesting a rulemaking is possible in several circumstances. As detailed in Contesting Agency Conduct Parts I & II, a claimant must first clear the hurdles of establishing that there was a reviewable and final agency action that caused an injury redressable by the courts, and that the claimant was a person whose interests were protected by the statute administered by the agency. After clearing those hurdles, a claimant can contest a rulemaking by showing that there was a deficiency in one or more of the aspects of the rulemaking process, or in the rule as promulgated.

    Rulemakings generally follow one of two procedures, either formal rulemaking or informal rulemaking. Formal rulemaking is a trial-like process involving public hearings, where there is opportunity for evidence or expert testimony to be presented by any interested parties and opposing parties have the opportunity to cross-examine the witnesses and present their own cases. Formal rulemaking is only required where congress expressly mandates in the statute that rules are to be promulgated on the record after opportunity for a hearing. Because formal rulemaking is such a long and difficult process, an agency is unlikely to proceed in that fashion unless mandated to do so. The rules an processes of formal rulemakings are outlined in APA §§556, 557. Because of their rarity, this article will focus on the predominant method—notice and comment rulemaking.

    The process for notice and comment rulemaking is fairly straight forward. The agency must first provide a notice of proposed rulemaking, followed by a period of accepting and considering comments, and then an issuance of a concise general statement explaining the basis and purpose of their final decision, and the promulgation of the rule by publication in the federal register. Each of these steps has its own requirements and is open to be contested by any eligible party.

    The notice of a proposed rulemaking must be sufficiently detailed. The notice must disclose the information relied upon by the agency to propagate the rule. This requirement ensures that the public has enough information to comment upon the proposed rule. If an agency disseminates insufficient information, it is unable to collect sufficient information from commentators. Because it would have had less than all relevant information, the decision would be arbitrary for not having considered all relevant factors. Contesting this part of the process is asking a court to review agency fact-finding.

    After a consideration of all the commentary, the agency must then issue its concise general statement. The statement must include a reasoned explanation of how and why it reached its decision. The explanation must account for all material commentary submitted to it, and reasons why it chose to adopt or ignore the content of those comments. The agency does not need to consider or respond to every fact or submission, only when the comment is of a material nature does the agency need to respond. A comment is considered to be material where, if true, the fact or submission would require a change in the proposed rule. The review in this context is not whether the policy decision is a wise policy or not, but that the process for reaching that decision was a reasoned decisionmaking process.

    A rule may also be challenged when the rule promulgated has substantially deviated from the rule outlined in the notice of proposed rulemaking. A promulgated rule is only valid if it is a logical outgrowth of the proposed rule. A rule may change in response to commentary, but the final rule must be such that interested or affected parties could have reasonably anticipated the final rule as a logical outgrowth of the draft rule. The salient question is whether potential commentators would have known that an issue in which they were interested in was on the table (i.e. whether a new round of notice and comment would provide the first opportunity for interested parties to offer comments that could persuade the agency to alter its rule).

    When a court reviews a concise general statement, or a final rule that substantially deviates from the draft rule, it is a review of agency policy-making. It should also be noted that when an agency withdraws regulation, courts consider that to be a de facto form of rulemaking as it represents a change in agency policy-making. Such a change is subject to all the rules for reasoned decisionmaking.

    After promulgation, a rule may also be challenged for its overall validity. This process involves challenging whether the promulgated rule was within the authority of the agency, or whether the rule was a result of the agency misinterpreting its organic statute. This is a challenge to an agency interpretation of law.

    There are exceptions to the notice and comment procedures for certain types of agency conduct. Procedural rules, such as the required format for commentary, or rules regarding the process for permit applications, are not subject to notice and comment rulemaking. A rule is generally considered procedural if it does not encode substantive value judgments (e.g. a permit application procedure that does not make a distinction based on the subject matter of the application).

    Another important exception to notice and comment rulemaking is the so called ‘good-cause’ exception. Notice and comment is not required where it is:

    1) Impracticable: where regulation is needed immediately, such as an emergency safety regulation. Such rules are generally subject to notice and comment after their promulgation.
    2) Unnecessary: where the rule is so minor that the public would not be interested in the rule.
    3) Contrary to the public interest: where the public interest would be defeated by advance notice. For instance, the promulgation of a regulation banning a highly profitable but malicious financial practice, but advance notice of its impending illegality would cause a spike in its occurrence. Again, after promulgation such rules are likely to go through after-the-fact notice and comment procedures.

    Other exceptions include: inter-agency agreements, so long as the practical implications of the agreement do not have substantive impact on third parties, i.e. it does not create rights or duties; military and foreign affairs; internal management rules and systems, like personnel decisions, contracting, or employee benefits, etc….

    The exceptions that generate the highest likelihood of being contested are interpretive rules and policy statements. Interpretive rules interpret preexisting rules of conduct, as opposed to rules that interpret the organic statute. To determine whether an interpretive rule is actually a mere interpretation or whether the agency intended to exercise its legislative powers a court analyzes four factors for evidence of agency intent:

    1) whether in the absence of the rule there would be an adequate legislative basis for an enforcement or other agency action to confer benefits or ensure performance of duties (i.e. without the underlying regulation there was no clear requirement or standard present in the organic statute); or
    2) whether the interpretive rule was published in the federal register (there is no need to publish interpretive rules); or
    3) whether agency has explicitly invoked its legislative authority; or
    4) whether the interpretive rule amends or repudiates existing rule.

    An agency has a good deal of ability to skirt the notice and comment process, but interpretive rules are continually subject to judicial review.

    Policy letters are statements that reveal how an agency will approach an issue. Policy letters are binding when an agency acts like it is bound by the statement. If a letter reads like a rule or ukase, and the agency acts like it is a rule, then the agency is attempting to act with the force of law without proper procedure. Therefore, when an agency acts like it is bound by a policy statement, these quasi-rules are subject to invalidation for not having gone through the notice and comment process. Like interpretive rules, even if an agency successfully defends a policy statement in one action, the interpretation or policy is subject to judicial review in every attempt by the agency enforce the policy or interpretation.
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