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

Monday Morning Regulatory Review I – 11/3/14: Notice and Logical Outgrowth; Standing Fall Down; Revised Contraceptive Rule Preliminary Injunction; SCOTUS Watch; and Shepherds’ Wages Rule

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

Catching up on the last two weeks presents a challenge:  many small actions vie for attention with a small lesson.  The United States Court of Appeals for the District of Columbia Circuit focused on the Administrative Procedure Act (APA)’s notice / logical outgrowth problem and organizational standing in two recent cases.  Two district courts issued decisions of note:  one preliminarily enjoining new contraceptive mandate rules under Obamacare (Patient Protection and Affordable Care Act or PPACA) and the other implementing a remand by requiring the agency to promulgate a new rule within a specific time – or else.  Finally, we await a possible order from the United States Supreme Court (SCOTUS) this morning in the erstwhile and possible future intercircuit conflict over the propriety of the Administration’s regulation extending Obamacare subsidies nationwide.  Tomorrow we will try to return with a second edition focusing on agency actions.

Notice and Logical Outgrowth:  In National Oilseed Processors Association v. OSHA, the D.C. Circuit held that the Occupational Safety and Health Administration (OSHA) provided adequate notice of its consideration of grain dust as a hazard based on its explosive properties.  OSHA’s Hazard Communication regulation responded to international efforts to harmonize the requirements for identification and labeling of hazardous chemicals.

The court found that OSHA provided adequate notice of and an opportunity to comment on the possible inclusion of combustible dust from grain in the Hazard Communication Standard relying on the proposed rule’s request for comment on whether treating combustible dust as an unclassified hazard would be adequate.  The court noted that OSHA issued interpretive letters in 1986 and 1987 confirming that the existing regulations covered agricultural products – including grain – presenting dust explosion hazards, and more particularly, in 1994, OSHA rejected the grain industry’s position that the regulation should not cover grain dust.

  Critical to these findings is the inclusion of those interpretive letters and petition rejection in the administrative record of the final rule – a reach back of nearly 30 years, but a relevant reach nonetheless.  The agency’s responsibility is to ensure that the scope of the proposed rule encompasses the subject matter and that the agency’s record includes all the documents considered – which may be voluminous and historically lengthy.

Likewise, the application to the explosive features of combustible grain dust was a logical outgrowth of OSHA’s prior proposal and record.  While petitioners argued that only respirable hazards were noticed, OSHA’s prior consideration included explosive hazards.

 Logical outgrowth looks back from the result to what was considered, as the mirror of affirmative notice.  Counsel for potential litigants must take a very broad view of proposals and anticipate their potential coverage of their clients, including the extended history of the underlying issues such as the “longstanding position of the Agency that the hazard determination covers dusts known to be subject to deflagration and subsequent explosion, i.e., combustible dusts.”

Standing Fall Down:   The D.C. Circuit rejected the Alliance of Automobile Manufacturers v EPA (D.C. Cir. No. 11-1334, Oct. 21, 2014), petition to bar the Environmental Protection Agency (EPA)’s E15 labeling regulations (fuel with 15-percent ethanol) or require specific labeling about the fuel, which many in the marine industry believe will harm marine or other small engines, on organizational lack-of-standing grounds.  The unpublished decision reiterates a specific point citing well-established precedent:

Petitioners fail to establish Article III standing because they cannot show that their members have suffered or are threatened with suffering an injury in fact that is traceable to the regulation and redressable by a favorable decision.  ….  An association … has standing when “(a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.”

In this instance, although the E15 rule specifically targets petroleum manufacturers’ and sellers’ “mix,” petitioners conceded that none of their members planned to or were selling E15 fuel.  Some parties previously challenged EPA’s renewable fuel standards approving the introduction of E15 for certain vehicles and engines, and that challenge failed also on organizational standing grounds.

  Counsel need to carefully evaluate the individual standing issue when claiming organizational standing – and having settled on an organization as plaintiff are well advised to ensure that they could (and probably should) name as a plaintiff at least one member of the organization that establishes individual standing.  Individual plaintiffs may fear agency retaliation if they are named, which is a core reason for using organization standing, but that does not relieve counsel of the need to establish that individual standing.

Revised Contraceptive Rule Preliminary Injunction:  The United States District Court for the Middle District of Florida preliminarily enjoined the Department of Health and Human Services (HHS) August 2014 interim final contraceptive mandate rule, promulgated in light of the SCOTUS’s rulings in Hobby Lobby and Wheaton College, and the follow-up decision by the United States Court of Appeals for the Eleventh Circuit.  Ave Maria Univ. v. Burwell, M.D. Fla. No. 2:13-cv-00630-JSM-CM, Dk. No. 62 (Oct. 28, 2014).  This may be the first preliminary injunction against the second generation rule.

To recap, SCOTUS, in Hobby Lobby, held that HHS failed to comply with the Religious Freedom Restoration Act (RFRA) in promulgating regulations mandating that all employers provide contraceptive coverage to employees at no cost or certify on they were an exempt religious organization – in this case, a private for-profit company operated in accord with the owner’s religious beliefs.  SCOTUS, in Wheaton College, enjoined application of the waiver form to a religiously affiliated organization – here a religiously affiliated non-profit university like Ave Maria.  The Eleventh Circuit applied the logic of Wheaton to the Eternal Word religious broadcaster.  The Administration then adopted revised rules.  The district court in Ave Maria found the revised rules inadequate under the RFRA and issued a preliminary injunction barring their application to Ave Maria.

  Hobby Lobby was not the beginning of the end, but the end of the beginning and Ave Maria is merely a step in the middle.  The Administration is being incautious in merely eliminating the formulistic notice to HHS that a religious employer claims exemption – the point is more profound:  the employer may not be required to participate in the practice that they deem to violate their religious teachings, including helping find an insurer to provide that which it will not.  While the political bloom may be largely off the rose after Hobby Lobby, the issue of HHS’s compliance with the RFRA will continue to grow and is likely to reach SCOTUS again.

SCOTUS Watch:  SCOTUS considered, for the first time last Friday, the petition for certiorari to review the Fourth Circuit’s decision in King v. Burwell, and the Administration’s at least temporary opposition to review in light of the pending rehearing en banc of Halbig v. Burwell in the D.C. Circuit.  These cases present the question of whether the Internal Revenue Service (IRS) may permissibly promulgate regulations to extend tax-credit subsidies to coverage purchased through exchanges established by the federal government under Obamacare when the statute states explicitly that the subsidies are available only to coverage purchased through exchanges established by the States.

  If past is prologue, SCOTUS may relist King for a second review before deciding whether to grant review, as John Elwood has repeatedly noted has become a pattern and practice of the Court in his entertaining and sometimes informative Relist Watch column at SCOTUSblog.  Whether SCOTUS takes the case today will become clear in the order list released at 9:30 this morning; if SCOTUS does not grant or deny, whether SCOTUS relists the case for another review will become clear when the Court updates its docket (hopefully later today).

Shepherds’ Wages Rule:  In a case of judicial management of the regulatory process, the D.C. district court set deadlines for the Department of Labor (DOL) to publish revised regulations for non-immigrant shepherd’s wages (H-2A visas) – granting quality a premium over speed.  The D.C. Circuit previously held, in Mendoza v. Solis, that DOL violated the APA by promulgating administrative interpretations that had substantive and binding effect without providing advance notice and an opportunity for public comment, and remanded the case to the district court to craft a remedy to the APA violation.

On remand, the district court order in Mendoza v. Perez (1) requires DOL to publish a Notice of Proposed Rulemaking by March 1, 2015 (although the memorandum says 2014), and a final rule by November 1, 2015; (2) requires that the effective date of the final rule be no later than 30 days after publication (a default APA standard) or December 1, 2015, whichever is earlier; and (3) vacates, upon the effective date of the new rule, the interpretations subject to this litigation.

  The APA normally reserves the timing of regulations (with minimums) to the agency, but when the agency violates the APA, a court should “hold unlawful and set aside” the regulation.  The courts have often skirted this requirement in light of the ease of correction and adverse impact of vacatur, but here the district court has given the agency the opportunity to correct its prior failures for future effect, but held a sword over the agency’s head.  The “split” remedy of remand with a specified time of vacatur appropriately ensures that the agency will act promptly.