Agency Authority,  Judicial Process,  Judicial Review & Remedies

Monday Morning Regulatory Review – 12/30/13: Obamacare Fractal Geography; Volcker Rule Stay & Reconsideration; OSHA Interpretations & Ripeness; and Rearview Mirrors & Cameras

The final week of 2013 does not go gently into that good night, with four unrelated but significant issues.  Obamacare further disintegrated as a nationwide legal program with further administrative exceptions and delays and piecemeal judicial bars to enforcement that have worn out their welcome.  The Volcker Rule still awaits publication in the Federal Register, but a petition for review and emergency stay request may have resulted in reconsideration.  An Occupational Safety and Health Administration (OSHA) interpretive rule can remain in effect even though the rule is contrary to the underlying statute.  And finally, a long awaited costly Department of Transportation (DOT) vehicle safety rule emerges on a new docket.

Obamacare Fractal Geography:  In rapid succession last week, the Obama Administration first added a day to the Obamacare (Patient Protection and Affordable Care Act or PPACA) deadline for individuals to enroll in a health plan (sliding the December 23 deadline to December 24), and then said that individuals could have more time to complete the process.  At last check, the deadline had passed, but that could again change.  The Administration appears to be seeking desperately to enroll as many people as possible to avoid obvious failure of the enrollment policy and system, but success or failure will soon be clear in the net number of individuals who have health insurance and the degree of difference – positive or negative – from the number who had health insurance prior to Obamacare.

Many aspects of the Obamacare process defy judicial review – such as extending the deadline for enrolling when the insurers may not have Constitutional standing to challenge the administrative action.  Federal involvement in health insurance, however, became even more crenelated as more district court decisions fragmented the application of Obamacare’s preventive contraceptive mandate to religious and religious-related organizations and individuals, including:

  • Grace Schools v. Sebelius, N.D. Ind. No. 3:12-CV-459 JD (Dec. 27, 2013) and Diocese of Fort Wayne – South Bend, Inc. v. Sebelius, N.D. Ind. No.  1:12-CV-159 JD (Dec. 27, 2013) (granting preliminary injunction); East Texas Baptist University v. Sebelius, S. D. Tex. No. H-12-3009 (Dec. 27, 2013) (granting permanent injunction); Geneva College v. Sebelius, W.D. Pa. No. 12-0207 (Dec. 23, 2013) (granting preliminary injunction); Southern Nazarene University v. Sebelius, W.D. Okla. No. 13-1015-F (Dec. 23, 2013) (granting preliminary injunction), as contrasted with
  • Michigan Catholic Conference v. Sebelius, W.D. Mich. No. 1:13-CV-1247 (Dec. 27, 2013) (denying preliminary injunction), and Catholic Diocese of Nashville v. Sebelius, M.D. Tenn. No. No. 3:13-01303 (Dec. 26, 2013) (denying preliminary injunction).

► Each preliminary or permanent injunction presents a slightly different factual premise and a slightly different legal bar.  The fractionalization of Obamacare, far beyond the discrete questions to be considered by the United States Supreme Court (SCOTUS) in Hobby Lobby and Conestoga, demands that the Administration reconsider its rules and consider the various legal opinions in this labyrinthine set of issues.  Enough, however, of this 94-piece fractal geography puzzle of district court litigation until greater refinement by the United States Courts of Appeals and potential intercircuit conflicts, which will surely happen.

Volcker Rule Stay & Reconsideration:  With the Federal Register’s printers not even wet with ink, let alone dry, the American Bankers Association filed an emergency motion with the United States Court of Appeals for the District of Columbia Circuit to stay the effect of the Volcker Rule.  American Bankers Association v. Board of Governors of the Federal Reserve System, D.C. Cir. No. 13-1310 (filed Dec. 23, 2013).  The emergency motion argues that an estimated 275 banks could be required to sell or divest collateralized debt obligations (CDO) backed by trust-preferred securities (TruPS) and take $600 million in immediate write-downs in their end of year financials in anticipation of the expected losses.  The complaint alleges that the five regulatory agencies impermissibly treated the debt instrument as an ownership interest contrary to law; the expansion of the term “ownership interest” to encompass these instruments was not a logical outgrowth of the proposed rule under the Administrative Procedure Act (APA); and the agencies failed to consider the costs imposed on community banks and was, therefore, arbitrary and capricious under the APA.

Facing this legal challenge, the Federal Reserve and other regulators announced on Friday they were reviewing whether it would be appropriate to exempt a small subset of securities from the rule. They said that a final decision would be announced by Jan. 15.  That action was enough to cause the parties to reach an agreement extending the time for response to the emergency motion into next year, a join motion that the court granted.  At this stage, nothing appears to be so settled that the agencies could not avoid the litigation – and Federal Register publication may be further delayed.

OSHA Interpretations & Ripeness:  The District of Columbia Circuit decided in American Tort Reform Association v. Occupational Safety and Health Administration that an introductory paragraph describing the preemptive scope of the hazard communication standard – labeling requirements for chemicals used in the workplace exceeded OSHA’s statutory authority, but, at the same time, was only interpretive (if wrongly so) and left the regulation in place.  The challenged regulation set out OSHA’s view that its regulations preempt state legislative and regulatory requirements, but not state tort claims.  The parties agreed that OSHA lacked legal authority to determine the preemptive effect of the Occupational Safety and Health Act.  Bear in mind that the Act allows states to establish their own workplace regulation in place of OSHA regulations if OSHA approves a state plan demonstrating that the state will establish safety standards at least as effective as OSHA standards and designating an enforcement agency to administer these state standards.

Given that OSHA had no authority to issue authoritative statements on the preemptive effect of its statute, the court found that the relevant provision was, at most, an interpretative rule advising the public of the OSHA’s interpretation of the statute.  And, reading backwards, because the provision is no more than an interpretative statement, it is not subject to notice and comment rulemaking under the APA.  Therefore, the issue was not ripe for review unless and until OSHA relies on the provision or purports to apply it in support of an agency decision in a particular case.  The bottom line:  an agency interpretation contrary to law can stand and confuse, and ripeness has another twist.

Rearview Mirrors & Cameras:  The Office of Management and Budget (OMB) Office of Information and Regulatory Affairs (OIRA) received for review perhaps the Rear Window of regulations, the National Highway Traffic Safety Administration (NHTSA)’s Federal Motor Vehicle Safety Standard No. 111, Rearview Mirrors as a Christmas present.  In a quirk of computer processing, ROCIS records the economically significant final rule as having been received on “12/25/2013.”  Rearview Mirrors, however, contains the suspense of a very costly rule to avoid an economically small but personally tragic benefit:  not backing over children.  A rule is long overdue and OMB will need to consider whether the cost of rearview cameras or other technology in the defined categories of vehicles has declined to the point that it is not prohibitive.

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