Header graphic for print
Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

Monday Morning Regulatory Review – 2/6/17: Gorsuch to SCOTUS; Regulatory Budgeting; Fiduciary Rule Reconsideration; Congressional Disapproval Resurrection; and Petitions & Political Debates

Posted in Constitutional Issues in Regulations, Judicial Process, Regulatory Process

dawn over the capitol aocA complicated and busy week in regulatory practice requires extended comments and a little patience.  The President of the United States (POTUS) nominated Judge Neil Gorsuch to be an Associate Justice of the Supreme Court of the United States (SCOTUS) and that will likely soon require new thinking about judicial deference to agency interpretations.  POTUS added requirements for regulatory budgeting to the stable of regulatory management Executive Orders and directed the Department of Labor (DOL) to reconsider a major rule under the Administrative Procedure Act (APA), the only way to change it.  Congress, on the other hand, will soon present five resolutions of disapproval for Presidential signature.  Finally, a district court remanded a petition for rulemaking for a fully explication that may have a significant impact in the next Presidential campaign.

Gorsuch to SCOTUS:  President Trump’s nomination of Judge Gorsuch of the United States Court of Appeals for the Tenth Circuit to SCOTUS erupted accolades and brickbats before the decibels faded.  From a regulatory practice perspective, a single decision and concurrence announced by Judge Gorsuch is a must read:  Gutierrez-Brizuela v. Lynch reflects Judge Gorsuch’s doubts about judicial deference to agency interpretation of ambiguous statutes and the role of the judiciary under Chevron and Brand X.  Judge Gorsuch opens with a classic example of his entertaining writing style:

There’s an elephant in the room with us today.  We have studiously attempted to work our way around it and even left it unremarked.  But the fact is Chevron and Brand X permit executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design.  Maybe the time has come to face the behemoth.

Judge Gorsuch sets out not only his own view but expresses clearly and concisely the deep constitutional and statutory conflict inherent to Chevron deference.  The Senate Committee on the Judiciary will naturally have compiled every word Judge Gorsuch has written or spoken, including this administrative law treatisette.  The efficacy of Chevron makes a worthy subject of confirmation hearings if the Committee on the Judiciary musters the acuity to raise it well.

►  Gorsuch’s doubts about a mere three decades of Chevron precedent against the APA’s command that the courts interpret statutory provisions and overturn agency action inconsistent with those provisions deserve close attention and could bring SCOTUS back to question the roots of its own device.  The core conservative view of the roles of the courts in relation to the Executive and Legislative Branches does not concede that interpretation can be delegated by Congress to the Executive to override the role of the Judiciary to say what the law is.  This debate is worth having, as are other debates about the scope of judicial review to review agency actions.

Fairly assuming Gorsuch’s confirmation, SCOTUS’s composition likely changes little from is previous 9-Justice ideological composition, but the longstanding problems of Chevron may have a new voice and Chevron might become precedent at risk.  If, for the sake of argument, SCOTUS were to overrule Chevron and Brand X – or if Congress legislatively decried deference (reaffirming de novo review) as at least the House as done – then what?  If the courts must interpret for themselves ambiguous statues – de novo as Judge Gorsuch suggests – then a new wave of administrative law intercircuit conflicts from the dozen regional circuits may arise.  Resolution of intercircuit conflicts, duly percolated, has been a core value in SCOTUS’s guidance on granting certiorari, and SCOTUS often states clearly a conflict caused its review.  Yet, even with the reduced oral argument docket that SCOTUS has taken in recent years, it is not at all clear that SCOTUS has the capacity to resolve a substantial increase in already known intercircuit conflicts.  SCOTUS might grant, vacate, and remand (GVR) decisions that fail to acknowledge the creation or participation in an intercircuit conflict, but that might resolve few intercircuit conflicts.  Late Chief Justice Burger, prior to Chevron, supported an intercircuit tribunal to initially resolve intercircuit conflicts (broadly, not just administrative law), but that structural change found little support.  What doctrine or mechanism should replace Chevron?

Regulatory Budgeting:  Setting new Administration Policy, POTUS issued Executive Order 13771, Reducing Regulation and Controlling Regulatory Costs, on January 30, to require that regulations “be prudent and financially responsible in the expenditure of funds, from both public and private sources.”  In doing so, the Executive Order requires “at least two prior regulations be identified for elimination” for each new regulation as a means of at least balancing costs.  The Executive Order also prescribes zero net cost budgets for new regulations, unless consistent with advice from the Office of Management and Budget (OMB) and a system for future regulatory budgeting under OMB guidance.

The Executive Order makes exceptions for “regulations issued with respect to a military, national security, or foreign affairs function of the United States.”

►  As with its predecessors, this regulatory management Executive Order directs internal priorities and does not create what many would hope for – enforceable rights.  Moreover, while the “2-for-1” regulatory reduction presents a cute political position, the concepts are undefined.  More definition of what constitutes a “regulation” is needed to understand what is to be removed – a final rule, a CFR part, what?

Moreover, as noted previously by this blog, “costs” and “benefits” are malleable and economic analysis is rhetoric, not science.  Accordingly, many of the systemic criticisms of the prior Administration’s use of the “social cost of carbon” (SCC) could be applied as well to the economic calculativism in this Executive Order.

Take care not to read more into an Executive Order than is actually there.

Fiduciary Rule Reconsideration:  POTUS instructed DOL to reexamine the Definition of the Term Fiduciary; Conflict of Interest Rule – Retirement Investment Advice final rule, including its legal and economic underpinnings consistent with current Administration policy.  Presumably POTUS means for DOL to reexamine the entire suite of rules under the Fiduciary Rule rubric.  If the final rule(s) is (are) inconsistent with his policy, POTUS instructed DOL to “publish for notice and comment a proposed rule rescinding or revising the Rule, as appropriate and as consistent with law.”  The review will be informed, at least in part, by the litigation over the rules, but that may also soon change.

►  The rules became effective last June and only the compliance dates remain outstanding.  Therefore the only way to alter the final rules would be to undertake advance notice and an opportunity for public comment on a proposed rule and promulgate a new final rule – the long version of what POTUS has instructed.  In short, POTUS is simply ordering DOL to reconsider and comply with the APA if it changes the regulations.

(The White House-posted text of the memorandum remains uncorrected through posting time.  The better practice that this White House needs to learn is to post a copy of the document.)

Congressional Disapproval Resurrection:  Congress is poised to complete disapproval of five major rules under the Congressional Review Act (CRA) and OMB has indicated that POTUS’s advisors would recommend approval of all five joint resolutions of disapproval when presented for signature.  Each joint resolution of disapproval merely recites the regulation that Congress, by statute, now disapproves and provides “such rule shall have no force or effect.”  Each joint resolution of disapproval responds to a final rules with a long and contentious history:

  • H.J. Res. 36, Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the final rule of the Bureau of Land Management relating to “Waste Prevention, Production Subject to Royalties, and Resource Conservation” – engrossed as passed the House;
  • H.J. Res. 37, Disapproving the rule submitted by the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration relating to the Federal Acquisition Regulation – engrossed as passed the House;
  • H.J. Res. 38, Disapproving the rule submitted by the Department of the Interior known as the Stream Protection Rule – Enrolled Bill as passed by the House and Senate;
  • H.J. Res. 40, Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Social Security Administration relating to Implementation of the NICS Improvement Amendments Act of 2007 – engrossed as passed the House; and
  • H.J. Res. 41, Providing for congressional disapproval under chapter 8 of title 5, United States Code, of a rule submitted by the Securities and Exchange Commission relating to “Disclosure of Payments by Resource Extraction Issuers” –Enrolled Bill as passed by the House and Senate.

These five joint resolutions of disapproval mark only the second time that Congress has disapproved a rule with the President’s approval, eliminating the rule’s effect – the first being the disapproval of DOL ergonomics rule in 2001.  The key here is the extent of CRA review – and at least four of the five rules have been the subject of significant litigation, the last of which is in its second edition after a previous version was vacated by the courts.

►  The disapprovals are hardly surprising or even news.  The respective agencies, after POTUS signs the new laws, will remove the regulations from the Code of Federal Regulations as a non-discretionary act, just as DOL removed the ergonomics rule in 2001.  The evisceration of the rules will lead to dismissal of the litigation.

Petitions & Political Debates:  In a decision with interesting consequences, the United States District Court for the District of Columbia remanded for reconsideration a petition for rulemaking to the Federal Election Commission (FEC) because the FEC inadequately responded to the substance of the petition.  Level the Playing Field v. FEC presented complaints that the FEC (1) failed to adequately respond to enforcement complaints (the FEC has structured, not unlimited discretion) that the Commission on Presidential Debates (CPD) violated the FEC’s debate staging regulations that exempt contributions from a corporate bar and authorizing statutes in connection with the 2012 general election Presidential debates and (2) improperly denied a petition for rulemaking under the APA to adopt regulations that specifically bar debate staging organizations from using a polling threshold as the sole criterion for accessing general election presidential and vice-presidential debates.

(The CPD is an “independent nonprofit corporation” that operates the Presidential and Vice-Presidential debates every four years and can accept donations that the political parties and campaigns cannot.  The CPD requires that a candidate poll at least 15% support across certain polls to participate in those debates and the point of many complaints is that the “objective” 15% stifles participation by anyone other than the two major party candidates.)

The FEC published a Notice of Availability seeking comment on the petition, providing the electronic address of the petition on the FEC website and the FEC comment portal, and requesting public comments within 30 days.  As the court noted, “The FEC received 1,264 comments, and only one – from the CPD – opposed the Petition.”

The district court denied plaintiffs motion for summary judgment on the administrative complaints, but the FEC’s treatment of those complaints gave the court pause and exacerbated its level of concern for the petition for rulemaking.  The court found that even under a highly deferential standard, the FEC had failed to adequately respond to the substance of the petition:

By citing past practice – and the Buchanan decision [district court dismissing complaints of prior FEC dismissal of complaints about the CPD] – as its only response to LPF’s Petition, the FEC appears to have stuck its head in the sand and ignored the evidence that its lack of rulemaking and lack of enforcement may be undermining the stated purpose of its regulations and the Act.  This is not the reasoned decision-making that is required of all agencies.  Therefore, despite the deferential standard of review, this court concludes from reviewing the Petition and Notice of Disposition that the FEC acted arbitrarily and capriciously by refusing to engage in rulemaking without a thorough consideration of the presented evidence and without explaining its decision.

The FEC’s failure to provide a reasoned and coherent explanation for its decision required remand for reconsideration.  The district court declined the extreme remedy of compelling the FEC to move forward with a regulation but required reconsideration within 60 days.

►  The timing of the litigation poses a critical problem.  Plaintiffs filed the petition in September 2014 and initially sued in August 2015, but summary judgment was not heard until last month.  The entire 2016 campaign cycle had become irrelevant.  The district court gave the FEC 60 days to respond but seems to be reserving the ability to demand more if the FEC does not provide at least a better explanation on the merits of denying the petition.  The FEC’s publication and request for comments on the petition should be seen as more of a best practice than a contributor to delay.