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Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

Monday Morning Regulatory Review – 12/16/13: Obamacare Deadlines; Labor Elections Rule; Swaps Litigation; Vacating Empty Rules; & the Volcker Rule

Posted in Agency Authority, Judicial Process, Judicial Review & Remedies, Regulatory Process

Regulatory highlights from the past week include the Administration pushing back the deadline for applying for Obamacare and then begging insurance companies for even more time and leniency.  Two independent agencies – the Commodities Futures Trading Commission (CFTC) and the National Labor Relations Board (NLRB) threw in the towel on litigation and proposed new rules to replace vacated regulations.  The United States Court of Appeals for the District of Columbia vacated an Environmental Protection Agency (EPA) final rule for violating the Administrative Procedure Act (APA) but that would soon impose penalties on no remaining non-conforming truck engines.  Of course, no one can seriously review regulations this week without mentioning the machinations of the Volcker Rule.

Obamacare Deadlines:  The Department of Health and Human Services (HHS) released the Patient Protection and Affordable Care Act; Maximizing January 1, 2014 Coverage Opportunities interim final rule to change the date by which individuals must apply for insurance coverage under Obamacare (the Patient Protection and Affordable Care Act or PPACA) from December 15 to 23, 2013.  The justification for the interim final rule – bypassing advance notice and pre-promulgation opportunity for public comment – illustrates a bureaucratic avoidance of saying the obvious:  the agency could not enforce the original deadline because the agency botched establishing the enrollment system.  The action was immediately eclipsed by the Administration’s announcement that it would further extend the application time right up to the end of the year when HHS effectively asked insurers to provide insurance on a promise that the individual will actually pay the premium for that insurance at some future date.  Even while the deadline for applying for health insurance coverage was pushed back, HHS asked insurers to provide insurance coverage effective January 1 and pay claims even if applicants miss that deadline and apply by December 31, and even if the premiums are not paid on time.

“Good cause” for bypassing Administrative Procedure Act (APA) notice and comment requirements cannot be manufactured on the agency’s own failures and HHS’ procedural default is exacerbated by their request that insurers be lenient.  Together with the ongoing problem of even providing insurers with accurate information, HHS is skating on very thin ice.

NRLB Dismisses Election Rule Appeal:  The NLRB voluntarily dismissed its appeal from the United States District Court for the District of Columbia judgment in Chamber of Commerce v. NLRB, holding that the NLRB lacked a quorum to promulgate its Representation – Case Procedures rule.  The D.C. Circuit has held this case in abeyance since it decided Noel Canning v. NLRB, holding that the NLRB could not act because it had no quorum under defective recess appointments.

The NLRB’s move should be seen less as an indication of its faith in the Solicitor General’s ability to argue Noel Canning before the United States Supreme Court (SCOTUS) and more as a reflection of the fact that it now has a quorum and could (and may soon) readopt the rule.

CFTC Swaps Rulemaking and Litigation:  In a similar vein, the CFTC ended its fight to save its international swaps rule in the D.C. Circuit, and last week released a new proposed rule.  In International Swaps and Derivatives Association v. CFTC the United States District Court for the District of Columbia concluded that authorizing Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) “unambiguously requires that, prior to imposing position limits, the Commission find that position limits are necessary to ‘diminish, eliminate, or prevent’ the burden described in [the Act].”  As the court observed, the D.C. Circuit has held that “‘deference to an agency’s interpretation of a statute is not appropriate when the agency wrongly believes that interpretation is compelled by Congress.’”  Making the statutory finding, the CFTC now proposes new rules with comments due February 10, 2014.

Vacating Empty Rules:  The D. C. Circuit vacated an EPA final rule permitting non-conforming truck engine manufacturers to pay a penalty rather than have their engines barred from commerce in Daimler Trucks North America, LLC v. EPA.  If this sounds vaguely familiar, the D. C. Circuit previously vacated EPA’s interim final rule (IFR) in Mack Trucks, Inc. v. EPA because EPA lacked good cause under the APA to bypass notice-and-comment requirements.  The IFR and a proposed rule were published together, and EPA adopted a final rule after the D.C. Circuit vacated the IFR.

New challengers argued that the EPA failed to provide adequate notice and opportunity for comment under the APA before amending a regulatory definition of “substantial work” toward compliance to encompass past work – a logical outgrowth problem based on a change in verb tense – and departed from past agency practice without providing a rational explanation.  EPA defended that the final rule was a logical outgrowth of the proposed rule because petitioners had actual notice of EPA’s interpretation and the final rule conformed to the interpretation that EPA had held for 27 years.  The court was not convinced because EPA’s prior interpretation was not a notice that it proposed to change the rule or that petitioners should have anticipated the changes that were made in the 2012 final rule.  Accordingly, the court vacated the 2012 final rule, as it has typically done when an agency entirely fails to provide notice and comment, but EPA admitted that all manufacturers will be in compliance by the first of next year and the rule will become obsolete, making vacatur a simple remedy.

Volcker Rule:  The Board of Governors of the Federal Reserve System (FRB), the Department of the Treasury (DOTr)’s Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Securities and Exchange Commission (SEC) finally approved and released variations of the “common” “Volcker rule.”  The rule, named for former FRB Chair Paul Volcker, is often confused with the Dodd-Frank Act authorization for the rule itself and the statutory provision is too often generalized and misnomered as the “Volcker Rule.”  A “common” rule is a rule adopted by multiple agencies under their individual authority; the preambles may differ but may not conflict, while the regulatory text is the same.  In short, the rule prohibits proprietary trading – a bank using its own capital to gamble on short-term price movements – but the rule is not supposed to interfere with a bank making markets for its customers.

A regulatory text may have been finalized in these two-ream, single-spaced, leviathans, but issues may remain.  The CFTC also has a role and has claimed primacy over some 110 banks that are registered as swaps dealers, including some of the biggest firms on Wall Street, but cancelled a schedule public meeting.  The rule has long effective and compliance dates, and litigation challenging the substance and process of the rulemaking, and how the coordination between agencies affects regulated parties, is all but assured.