The long-running saga of the Federal Communications Commission (FCC) attempts to provide diversity in the broadcast industry pushed forward by a court last week. Another court, however, faces the daunting task of sorting out whether a high-profile “Dear Colleague” “guidance” letter actually constitutes a rule that the agency must promulgate through Administrative Procedure Act (APA) procedures. Congress stepped into the debate over the definition of “fiduciary” for retirement plans, but that step appears futile. Two economically significant proposed rules present interesting issues: one a broad federalism engagement and the other a recurring reality check.
Agency Delays and Judicial Remands: The United States Court of Appeals for the Third Circuit last Wednesday displayed its displeasure with the FCC’s continued inability to complete a revision of its television and newspaper ownership rules, its statutory quadrennial review, and its revised joint sales rule in Prometheus Radio Project v. FCC III. The modern Prometheus trilogy is all about the FCC’s statutory duty to support diversity in managing broadcast ownership, not Greek mythology.
In Prometheus I, the Third Circuit remanded the FCC’s cross-media limits and the modification of numerical limits on television and radio ownership of local markets, and its failed station solicitation rule in 2004. In Prometheus II (one of the first cases discussed by this blog), the Third Circuit vacated and remanded the FCC’s newspaper/broadcast cross-ownership rule because the FCC failed to meet the notice and comment requirements of the APA. The court remanded provisions of the FCC’s diversity order that relied on a revenue-based “eligible entity” definition and the deferral of other proposed definitions to permit the FCC to adequately justify or modify its approach to advancing broadcast ownership by minorities and women.
Now, the court has not quite lost patience, remanding the FCC’s
Twelve years have passed since we first took up challenges to the broadcast ownership rules and diversity initiatives of the [FCC]. In some respects the [FCC] has made progress in the intervening years. In key areas, however, it has fallen short. These shortcomings are at the center of this dispute – the third (and likely not the last) round in a protracted battle over the future of the nation’s broadcast industry. Specifically, the parties present challenges to the [FCC]’s “eligible entity” definition, its Quadrennial Review process, and its rule on television joint sales agreements.
First, Congress required the FCC, long before Prometheus I, to promote minority and female broadcast ownership, but it claims inability to create a substantial administrative record on minority and female ownership so that it can justifiably regulate to fulfill that obligation. Second, the FCC is required to review its broadcast ownership rules every four years, but the last quadrennial review was 2006, everything since has languished. Third, the panel remanded the FCC’s rule that restricted joint sales agreements between television broadcasters by counting agreements exceeding 15% of weekly advertising time toward “ownership” totals to prevent what the FCC believed to be abusive avoidance (or evasion) of its ownership and diversity rules.
Thinking that some lean forward was necessary, the panel ordered the parties to mediation to work out a timetable with the threat that failure to work out a timetable would result in the court imposing its own time requirements. Judge Scirica, dissenting, would have gone the additional step and imposed a timetable for completion of the rules by mandamus.
► The court is too kind. After twelve years and three remands, the court still declines to vacate the rules, partly for technical reasons and partly because of the damage wrought from vacatur. Mandamus to compel a final action within a specific time period (six months) is appropriate. The court could have gone even further by ordering vacatur and staying that order for six months, making crystal clear the damage that further delay would bring and hold the FCC responsible.
Part of the problem in Prometheus III was that some parties sought vacatur and abandoned mandamus, leaving a technical remedial hole. Counsel must remember (and may have forgotten) the core distinction that vacatur and stays of effective date address the legal effect of a final rule or formal order adopting a final rule, while remand, mandamus, preliminary injunctions, and permanent injunctions command the parties to act or not to act with respect to a rule. Here, the distinction may have made a difference.
Sadly, both the court and parties must expect Prometheus IV.
Gender Guidelines Complaint: In yet another suit called Texas v. United States, N.D. TX. No. 16-cv-00054-O, ECF 1 (filed May 25, 2016), the State of Texas and nearly a dozen other jurisdictions sued to set aside the Department of Justice (DOJ) and Department of Education (ED) Dear Colleague Letter on accommodating transgender students. The Dear Colleague Letter interprets Title IX to require schools to treat a student’s “gender identity” as the student’s “sex,” with the exception of sports, and explains that “gender identity” refers to a person’s “internal sense of gender,” without regard for biological sex and without medical diagnosis.
The complaint includes ten claims for relief under the United States Constitution, APA, Declaratory Judgment Act, and Regulatory Flexibility Act (RFA). DOJ and ED clearly indicate, and will likely take as their litigation position, that the Dear Colleague Letter imposes no new requirements and is merely non-binding public guidance as to how the agencies interpret the law.
► Once again a district court will face the distinction between legislative rules and interpretative rules or policy statements – an issue often and accurately described “tenuous,” “fuzzy,” “blurred,” or “enshrouded in considerable smog.” The new case presents a far more tenuous … picture than the immigration United States v. Texas pending before the United States Supreme Court (SCOTUS) where federal policy implementation directly imposed costs on Texas. While Texas may be due some special consideration, the first issue to arise is likely whether Texas has alleged a sufficiently concrete injury in fact.
Fiduciary Rule Joint Disapproval Disapproval: The Senate joined the House of Representatives in agreeing to H.J. Res. 88, a joint resolution of disapproval of the Department of Labor (DOL) Definition of the Term Fiduciary; Conflict of Interest Rule – Retirement Investment Advice under the Congressional Review Act (CRA). The Senate vote was 56 – 41, also joining the House April 28 vote of 234 – 183 in not adopting the resolution by a majority insufficient to withstand President Obama’s (POTUS) point-blank statement that he would veto the resolution, which awaits only presentment.
► Expect this resolution of disapproval to suffer the same fate as previous resolutions of disapproval of Environmental Protection Agency (EPA) rules – a veto and ignominious demise. Congress has successfully used the CRA once to disapprove a rule – the Clinton Administration DOL Ergonomics rule disapproved by a new Congress and signed by President Bush. Otherwise, the CRA has proven quite ineffective because the House and the Senate are unable to construct veto-proof majorities. The somewhat easier course for Congressional oversight is the more often used limitation on appropriations, which is ongoing and requires compromise.
Education Accountability Accountability: Setting in motion the next major battlefront, ED published its Elementary and Secondary Education Act of 1965, As Amended by the Every Student Succeeds Act – Accountability and State Plans proposed rule in tomorrow’s Federal Register. In the rule, ED seeks to implement the Every Student Succeeds Act (ESSA) update of the No Child Left Behind Act (NCLB), and other enactments. The new accountability measures include disclosure of expended Federal, State, and local funds. Public comments are due on August 1, 2016.
ED does not quantify the benefits of the proposed rule and that is not particularly surprising because most flexibility and transparency of actionable date benefits are simply not quantifiable or monetizable. Costs, on the other hand, total just under $75 million for the four-year authorization period for State and local education agencies, which would be financed with federal grant funds in any event. The key lies in the nearly $97 Billion in transfers of federal funds to State and local education agencies over the four-year authorization period and those transfers render the proposed rule to be economically significant under Executive Order 12,866, and thus subject to Office of Management and Budget (OMB)’s executive and interagency review. The transfers assume, of course, appropriations of those funds.
► The substance of the proposed rule, if not the transfers, raises more legal and policy issues relating to federal imposition on local educational agencies by “death knell” funding because the day when a local school system could meet federal requirements independent of funding without federal funds has long past. Expect all of the issues of federalization of local education to be chalked onto the docket.
Fueling Renewable Fuels: Also in tomorrow’s Federal Register, the EPA opens the comment period for the Renewable Fuel Standard Program: Standards for 2017 and Biomass-Based Diesel Volume for 2018 proposed rule. The annual requisition under the Clean Air Act (CAA) proposes the annual percentage standards for cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel that would apply to all motor vehicle gasoline and diesel produced or imported in the year 2017. As in the past, EPA may be resigned to the reality that cellulosic biofuel production is below the CAA plan and proposes a volume that is below the CAA-specified volume. EPA also proposes to reduce the applicable volumes of advanced biofuel and total renewable fuel.
► EPA continues to hope, expect, pray, that the regulation will change the market and create a renewable fuel distribution infrastructure to use the allocations required by law. These arguments are well trod, and EPA only allows 40 days – until July 11, 2016 – for public comment, which is short, but also probably realistic.