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

Monday Morning Regulatory Review – 5/4/15: SCOTUS Statutory Standing; Emergency Generators; & H-2B Regulations Again

Posted in Agency Authority, Constitutional Issues in Regulations, Judicial Review & Remedies

dawn over the capitol aocThree unrelated highlights from last week in regulatory practice: The United States Supreme Court (SCOTUS) agreed last Monday to consider a case of private causes of action that has potentially stunning constitutional and regulatory implications. The United States Court of Appeals for the District of Columbia Circuit “reversed” an Environmental Protection Agency (EPA) regulation that permitted greater use of emergency generators. And the Department of Homeland Security (DHS) and Department of Labor (DOL) finally published an interim final rule and a final rule to respond to court orders vacating DOL regulations of low-skilled alien worker visa (H-2B) regulations.

SCOTUS Statutory Standing: SCOTUS granted certiorari and agreed to accept full briefing and hear oral argument in Spokeo v. Robins, presenting the question of:

Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm, and who therefore could not otherwise invoke the [Article III] jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.

To understand the question in narrow context, the Fair Credit Reporting Act (FCRA) grants consumers a private cause of action against any person who negligently or willfully violates any requirement imposed under FCRA with respect to that consumer. Spokeo’s subscription website allegedly displayed a consumer report that inaccurately reported, among other things, that Robins was employed when Robins claims that he was unemployed and seeking employment, causing “actual harm to [his] employment prospects,” monetary injury, and emotional injury from anxiety about his “diminished employment prospects.”

The United States Court of Appeals for the Ninth Circuit held that Robins had Article III standing to sue Spokeo under the FCRA for publishing inaccurate personal information about him, and that inaccuracy alone satisfied the Article III standing requirements: “the violation of a statutory right is usually a sufficient injury in fact to confer [Article III] standing.” A complicated intercircuit conflict squarely raises the issue of whether a statutory violation alone is sufficient to comply with the United States Constitution Article III standing doctrine that requires injury in fact, causation, and redressability to invoke the authority of a federal court. Not only does this circuit split impact FCRA litigation, but a wide range of statutes create private statutory causes of action that may not meet Article III standing standards.

The Solicitor General, at SCOTUS’s request, presented the views of the United States, and argued that SCOTUS need not hear Spokeo because Robins had, in fact, established Article III standing. Although SCOTUS granted certiorari against the Solicitor General’s advice, the Court might ultimately agree and not reach the substantive issue of statutory limitations. Oral argument is expected next Fall, with a decision next Winter.

► At first blush, Spokeo might appear to be limited to private litigation, but the administrative law implications are significant. While regulations cannot create a private right of action, Congress may delegate authority to an agency to effectuate the provisions of the statutorily created private right of action, which Congress has done in an alphabet soup of statutes, including creating private causes of action to enforce an agency’s regulations. Thus, if Congress’s authority to create a private cause of action is limited to Article III’s contours of injury in fact, for example, then the vast federal regulatory fractal geometry is likewise limited. Stand by for approaching storm.

Emergency Generators: Down the Hill, the D.C. Circuit on Friday held, in DE Department of Natural Res. v. EPA, that EPA acted arbitrarily and capriciously when it modified the National Emissions Standards and the Performance Standards (NESHAP) under the Clean Air Act (CAA) to allow commercial backup generators to operate without emissions controls for up to 100 hours per year as part of an emergency demand-response program, rather than only 15 hours in a prior regulation. Demand response programs are programs through which customers reduce their consumption of electric energy from the grid in response to high prices or other incentives. The D.C. Circuit panel ruled that EPA failed to justify the increase for generators that typically are less efficient and provide power during emergencies.

The CAA provides that a court “may reverse” a final EPA rule if it finds EPA’s “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” while the Administrative Procedure Act (APA) provides that the “reviewing court shall” “hold unlawful and set aside agency action” the court finds to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” These standards for judicial review are essentially the same.

In response to challenges by Delaware officials and several environmental advocacy groups and power suppliers, the D.C. Circuit ruled that EPA failed to respond to public comment concerns that the rule undermined the reliability of the power grid and increased pollution, particularly by attempting to foist the issue on the Federal Energy Regulatory Commission (FERC), failed to respond to comments that its proposed 100-hour limit was based on faulty evidence, and failed to respond to comments suggesting a regionalized approach to respond to generation capacity variations.

► The standards for responding to public comments are clear and longstanding: an agency must respond to relevant and significant comments, but need not discuss each and every item, fact, or opinion received so long as the agency responds sufficiently to enable a reviewing court to determine the major policy issues “ventilated” and the agency’s reasons for responding as it did. This is not a substantively difficult process, although it is time-consuming, requires diligence, and may illuminate politically uncomfortable truths. All too often, agencies skim the public comments (and perhaps cherry-pick them) and provide as little analytical response as they believe necessary. EPA missed the point this time and will have another opportunity to get it right.

H-2B Regulations Again: The DHS and DOL interim final rule (IFR) responds to court orders vacating the H-2B regulations establishing the labor certification process for want of authority and a final rule reestablishes the methodology for determine the wage rates that must be paid to those alien workers (virtually identical to a vacated 2012 rule). The litigation and agency authority dispute have been chronicled at length in this blog over the past three years. Two points are of interest here, whatever one may think of the substantive policy: (1) agency authority to promulgate legislative rules, and (2) “good cause” to promulgate a rule in advance of public comment.

Under the Immigration and Nationality Act (INA), DHS is required to “consult” with appropriate agencies to determine H-2B eligibility and DHS has “long recognized that the most effective administration of the H-2B program requires consultation with DOL to advise whether U.S. workers capable of performing the temporary services or labor are available.” From this, the agencies assert that DOL “is the appropriate agency … to make such a labor market finding.” DHS requires an application for an H-2B visa to include a DOL-approved temporary labor certification which “serves as DOL’s advice to DHS” on the market qualification. The agencies then argue that “since at least 1968” DOL has promulgated “regulatory procedures to certify” market qualification.

► The inflation of DHS’s responsibility to “consult” into DOL’s “certification” and somehow an authority for DOL to participate as a principal in promulgating substantive regulations is little more than an ipsi dixit – “because they said so.” Nowhere does the preamble address the core issues: whether DOL has statutory authority to promulgate legislative rules or the statutory authority of DHS to delegate any part of its authority to promulgate rules to DOL, particularly in light of court cases finding an absence of statutory support and contrary to external limitations on reorganization, appropriation, and inter-agency contracts. The litigants have thus far not challenged this arrogation of authority, but that my change.

DHS and DOL are adopting a lengthy “interim final rule” – promulgation concurrent with public notice and in advance of an opportunity for public comment – but concern here is limited to the agencies’ “brief statement of reasons” that good cause exists under the Administrative Procedure Act (APA) to adopt the rule in advance of notice and comment. The APA permits promulgation without advance notice and an opportunity to comment if that notice and comment is “impracticable, unnecessary, or contrary to the public interest.”   DHS and DOL resort to the sparse and antiquated legislative history of the APA and a half-dozen generation-old court decisions to claim that “‘[i]mpracticable’ means a situation in which the due and required execution of the agency functions would be unavoidably prevented by its undertaking public rule-making proceedings” and the “‘[p]ublic interest’ supplements…‘impracticable’ [and] requires that public rule-making procedures shall not prevent an agency from operating.”

► While DHS and DOL’s statements of fact may be accurate, their confluence of authorities and bolstering from legislative history does not support their interpretation of the law – and neither have the courts. The agencies have known about this problem for several years, and the court decisions both could have been avoided and should not have been surprising. A close reading of the cases relied upon by DHS and DOL shows that they are quite limited, not very on point, mostly dicta, and do not support the broader proposition advanced by the agencies. In short, the agencies’ selective reading and language-picking do not support adoption of an IFR before providing an opportunity for public comment on DOL’s authority to issue any rule. The litigants have thus far not challenged DHS and DOL’s prior attempt to use an IFR, but that could change also.