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

Monday Morning Regulatory Review – 9/7/15: Inter-agency Sub-delegation; WOTUS Injunction Limited & Mineral Payments Disclosure Reset

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

dawn over the capitol aocRegulatory highlights from the last week could fill pages, but only three receive attention here. First, another court of appeals weighed in against one agency subdelegating authority to another agency. Second, a following up on last week’s Waters of the United States preliminary injunction clarified application to the plaintiff States. And third, a district court sought to compel an agency to complete a revision of regulations vacated by a different district court.

Inter-agency Sub-delegation: The United States Court of Appeals for the Tenth Circuit contributed the latest episode to the chronicle of whether the Department of Labor (DOL) possesses authority to regulate employment of foreign temporary non-agricultural workers under the H-2B visa program in G.H. Daniels III & Assoc. v. Perez. Previous episodes in this blog noted the conceptual intercircuit conflict between the Third Circuit and the Eleventh Circuit over DOL’s authority, albeit in procedural postures that prevent a direct conflict. Note as well that DOL and the Department of Homeland Security (DHS) have attempted to avert this platter of litigation with new regulations in 2013 and 2015, and multiple district court cases continue to percolate.

The Tenth Circuit’s curiously unpublished opinion in Daniels held that Congress (a) did not delegate DOL authority in the Immigration and Nationality Act (INA) to regulate the H-2B visa program and (b) did not delegate DHS authority to subdelegate final rejection authority to DOL through denial of a temporary labor certification. The Tenth Circuit extensively discussed the INA’s delegation of authority to DHS to “consult” with appropriate agencies, and even supported the appropriateness of DHS consultation with DOL, but the DHS and DOL 2008 regulations permit DOL to deny a temporary labor certification – ending the process with finality.

The issue we confront is whether an agency may, without Congressional authorization, delegate its decision-making responsibility to an entirely different agency. Courts are quite tolerant of the administrative practices of agencies, but passing the buck on a non-delegable duty exceeds elastic limits.

The court’s conclusion resolves the secondary question to the current mix of conflicting decisions over whether Congress granted DOL legislative rulemaking authority – the point previously raised in this blog:

DOL is not a subordinate agency of DHS. And there is no statute authorizing the subdelegation – indeed Congress gave DHS only the authority to consult with other government agencies. Absent Congressional authorization, DHS’s subdelegation in this case is improper.

[W]e recognize DHS, as administrator of the INA, has broad discretion in filling statutory gaps, like the ones present in this case. But that discretion is not unlimited. It is circumscribed by the language of the statute and the general prohibition against subdelegation to outside parties absent congressional authorization. The statutory language in this case – “consultation” – cannot reasonably bear the construction DHS has given it – congressional authority to subdelegate its authority and responsibilities under the H-2B visa program to an outside agency.

► The Tenth Circuit decision is not the last word, even in the specific case, because the court remanded to the district court for entry of judgment. At some point, this complex conflict must be elevated to the United States Supreme Court (SCOTUS) on certiorari or vitiated by a clarifying Congressional enactment. Resolution by the agencies seems highly unlikely, if not impossible, without DHS retracting to a pre-2008 position of making all final decisions and DOL retracting to its statutory “consultation” role. That complex process will require much more today, however, because a lack of DOL regulatory authority calls also into question the entire procedural scheme. The next issue may revolve on DOL’s authority for its Paperwork Reduction Act (PRA) filing requirements, which DHS may need to revise and adopt. No agency or Congressional action will happen soon and more judicial decisions are likely in the near future.

WOTUS Injunction Limited: As discussed at length last week, North Dakota v. EPA enjoined the Environmental Protection Agency (EPA) and Army Corps of Engineers’ Clean Water Act: Definition of Waters of the United States (WOTUS) final rule, but the district court ordered further briefing on whether that preliminary injunction applied nationwide or only to the plaintiff States. The States argued that the agencies repeatedly asserted uniform applicability until the court enjoined the rule, but then reversed course, even though the court found that the WOTUS rule violates both the Clean Water Act (CWA) and Administrative Procedure Act (APA). The Department of Justice (DOJ), on behalf of the agencies, argued that allowing any one plaintiff in any one court to bar application nationwide would be an “absurd” result.

The district court resolved the question late last week:

Courts have broad discretionary power in crafting a preliminary injunction, including the authority to provide for nationwide applicability of the injunction. It goes without saying, however, that the competence to act should not be conflated with the idea that it is propitious to act. In the instant case, there are significant prudential reasons to limit the scope of the preliminary injunction to the entities actually before the court. In particular, a court might decline to act further out of respect for the decision making authority of the other courts who have ruled on this issue; or out of respect for the states who desire the implementation of the [WOTUS] as currently proposed by the Agencies; or even because the record before this court is not sufficiently complete to justify a broader application. Based on these considerations the court is of the opinion that the Agencies should be enjoined from enforcing the rule only to the immediate plaintiffs.

► A nationwide bar is hardly absurd when a district court finds that the plaintiffs are likely to succeed on the merits that the agencies exceeded their statutory authority and, in the final analysis, the APA requires that the courts set aside (i.e. vacate) unlawfully promulgated regulations. The problem remains, however, that plaintiffs requested an equitable preliminary injunction, not an APA statutory stay, and the agencies have yet to lodge the administrative record with the court. At such a preliminary stage, narrow application is not that surprising, but it undercuts the notion of WOTUS as a nationwide rule.

Procedural posturing may continue over the rest of the month, but the next major event is likely to be the hearing before the Judicial Panel on Multidistrict Litigation (JPMDL) on consolidating the district court cases in October. The consolidated petitions for review in the Sixth Circuit will be subject to lengthy briefing and a post-effective-date stay or preliminary injunction of the rule is unlikely. For the time being, the litigation leaves the rule in imperfect application.

Mineral Payments Disclosure Reset: Two years ago, the United States District Court for the District of Columbia vacated the Securities and Exchange Commission (SEC) Disclosure of Payments by Resource Extraction Issuers final rule. The district court concluding that the SEC misread the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to require full public disclosure of payment reports and that the SEC was arbitrary and capricious in denying exemptions where foreign law or governments prohibited payment disclosure. The SEC declined to appeal the decision and announced that it would promulgate new rules.

Two years later, the SEC had not done so, and the United States District Court for the District of Massachusetts last week in Oxfam America, Inc. v. SEC, concluded that the SEC’s delay in promulgating the final extraction payments disclosure rule amounted to final agency action “unlawfully withheld” under the APA. The court reset of the Dodd-Frank clock that required the SEC to promulgate a final rule within 270 days of Dodd-Frank’s enactment. On finding that the SEC failed to meet the reset deadline, the court addressed the scope of its order:

While the Court concludes that the SEC “unlawfully withheld” agency action and, therefore, the Court is required by [the APA] to compel the agency to comply with its statutory duty to promulgate a final disclosure rule, an order must nevertheless consider the work that is necessary to publish the final rule and how quickly that work can be accomplished.

Thus, the court ordered the SEC to file with the court in 30 days an expedited schedule for promulgating the final rule. The court reserved further orders to ensure SEC compliance.

► Aside from the obvious multi-court judicial review fact given the different types of litigation, the court has taken pains to express the limitations of its own authority given the practical realities of regulatory development. Retaining jurisdiction and monitoring progress is more realistic than commanding (like Congress) a specific but unworkable deadline. Additionally, the court avoided any suggestion that it could compel the terms of any final rule – and the terms are likely to be challenged anew, probably in the District of Columbia, not Massachusetts.