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

Monday Morning Regulatory Review – 1/16/17: WOTUS Jurisdiction & Venue; Arbitration Bars; Deference without Deference; Mandatory Duties & Remedies; Regulatory Accountability Act Reprise; Expedited Removal and Cubans; Good Cause Overdose & Communicable Disease Incaution

Posted in Judicial Process, Judicial Review & Remedies, Legislation, Regulatory Process

dawn over the capitol aocThe United States Supreme Court (SCOTUS) added to its argument calendar Friday, including several that could implicate future regulatory practice – including jurisdiction to review regulations and the potential scope of arbitration-limiting regulations.  In lesser lights, a Court of Appeals determined that an agency’s interpretation was correct without the agency, while a district court imposed deadlines on an agency that failed to comply with mandatory duties.  In regulatory highlights, one agency took expedited action where appropriate, another overdosed on in its concise statements, and a third acted incautiously on a highly controversial rule that will in all likelihood come to a halt pending further review.  And these are just the highlights … this week ….

WOTUS Jurisdiction & Venue:  SCOTUS granted certiorari to review the deeply divided decision of the United States Court of Appeals for the Sixth Circuit that it possessed jurisdiction and venue over challenges to the Environmental Protection Agency (EPA) and Army Corps of Engineers’ Clean Water Act:  Definition of “Waters of the United States” final rule.  The question presented by National Association of Manufacturers v. Department of Defense (DOD) is most clearly stated by the Department of Justice (DOJ)’s Acting Solicitor General in opposition:  “Whether the court of appeals has original jurisdiction under 33 U.S.C. 1369(b)(1) over a petition for review challenging a regulation that defines the scope of the term “waters of the United States” in the Clean Water Act [(CWA)].”  The waters travail chronicled in past posts includes randomly consolidated petitions for review in the Sixth Circuit, refusal to consolidate complaints in district courts (which have languished), a Sixth Circuit nationwide stay, and the present jurisdictional decision pending SCOTUS review, but the Sixth Circuit has yet to schedule argument on the complicated substantive issues.

►  Both SCOTUS and the Sixth Circuit may find the issues to be moot if the incoming Administration takes action to stay, and then reopen and vacate, the twice-stayed rule.  The grant is not a surprise – the complicated issue warrants review – but review of this case may be short-lived.

Arbitration Bars:  SCOTUS granted also three cases raising a familiar conflict within Federal law issue in a non-regulatory context and consolidated them for one hour of oral argument, largely eliminating variances between them – NLRB v. Murphy Oil USA, Ernst & Young LLP v. Morris, and Epic Systems v. Lewis, in sum, present whether collective bargaining agreements requiring individual arbitration and barring class actions / collective proceedings to resolve employer-employee disputes must be enforced under the Federal Arbitration Act (FAA) or are not enforceable under the National Labor Relations Act (NLRA) as employee protected concerted activities.  The National Labor Relations Board (NLRB) and the Acting Solicitor General take the view that the NLRA is superior, but the incoming Administration may not.

►  The current Administration’s long-standing antipathy toward arbitration clauses has been expressed in several different regulations chronicled in prior posts, many of which have been stayed or preliminarily enjoined pending judicial review.  The incoming Administration could essential “switch sides” in the present troika of cases without affecting the efficacy of review.  SCOTUS would likely retain review no matter the position of the United States because the cases present an acknowledged and growing intercircuit conflict concerning the validity of arbitration agreements precluding class / collective actions before a court, and, indeed, the United States was not previously a party in the latter two cases.  The ultimate result of review will likely provide guidance on the scope of at least half of the potential statutory interpretation conflict that animates the variations of regulatory litigation.

Thanks, as always, to SCOTUSblog for all they do, and particularly making SCOTUS dockets transparent through their case pages.

Deference without Deference:  The United States Court of Appeals for the Ninth Circuit last week, on remand from SCOTUS, remanded Navarro v. Encino Motorcars, LLC to the district court after determining, as a matter of statutory construction and without deference to the Department of Labor (DOL), that service advisors at automobile dealerships are not exempt from the Fair Labor Standards Act (FLSA).  SCOTUS held that DOL’s regulations were not due deference because DOL had failed to explain its change in position, but remanded to the Ninth Circuit for an initial statutory interpretation.  The Ninth Circuit, now on its own, but with the appearance of DOL as an amicus for the first time, now parsed the statutory text and legislative history to conclude that DOL was right – service advisors are not exempt from the FLSA overtime requirements.

The Ninth Circuit acknowledged that it’s decision conflicts with precedent in the Fourth Circuit and Fifth Circuit.  The panel remanded to the district court for resolution of factual issues.

►  Actual proceedings in the district court are unlikely.  More likely, the parties will return to SCOTUS seeking to resolve the intercircuit conflict.  Unfortunately, the Ninth Circuit shirked its responsibility to its sister circuits to explain the intercircuit conflict and analyze the Fourth Circuit and Fifth Circuit decisions with which it disagreed.  Rather the Ninth Circuit burdens SCOTUS with that effort and SCOTUS may have little choice but to again grant plenary review.  Again, the change in Administration may come into play as a new DOL might again revise its regulations.

Mandatory Duties & Remedies:  Following up on an October order granting summary judgment, the United States District Court for the Northern District of West Virginia, in Murray Energy Corp. v. EPA, ordered the EPA to take specific steps to establish compliance with the Clean Air Act (CAA).  The district court previously declared that the CAA imposes a nondiscretionary duty on EPA to “conduct continuing evaluations of potential loss or shifts of employment which may result from the administration or enforcement of the provision of [the CAA] and applicable implementation plans, including where appropriate, investigating threatened plant closures or reductions in employment allegedly resulting from such administration or enforcement.”  The court requested further briefing on the appropriate remedy, but EPA’s response argued that EPA could not effectively respond within the court’s timeframe (but did not ask for any extension) and that EPA would need approximately two years to develop a new evaluation methodology.  The district court was unimpressed:  “This response is wholly insufficient, unacceptable, and unnecessary.  It evidences the continued hostility on the part of the EPA to acceptance of the mission established by Congress.”  In its final remedial order, the district court extensively reviewed the history of the requirement and EPA’s evaluations prior to 1982, but notes that

At some point, …, EPA discontinued these continuing evaluations of losses and shifts in employment resulting from its actions.  EPA stated in this case that it is not aware of any records regarding the cessation of the [Economic Dislocation Early Warning System (EDEWS)].

The district court ordered EPA to submit to the court the appropriate evaluation of the coal industry and other entities affected by the rules and regulations affecting the coal mining and power generating industries by no later than July 1, 2017, submit evidence demonstrating that it has adopted measures to continuously evaluate the loss and shifts in employment which may result from its administration and enforcement of the CAA by no later than December 31, 2017, and submit a comprehensive filing detailing the actions it is taking to comply with the CAA requirements and the court’s orders within 60 days.

EPA has appealed the district court’s summary judgment order, and is likely to appeal this final order, allowing the Fourth Circuit to consolidate the appeals.

►  The implications for the CAA alone are broad – environmental groups have used similar requirements to successfully argue that EPA be compelled to act to promulgate regulations.  As the district court notes, Congress has amended also the CWA, Toxic Substances Control Act (TSCA), Solid Waste Disposal Act (SWDA), and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to require these evaluations.  Any perceived conflict between this decision and court decisions compelling EPA to promulgate regulations is only theoretical at the moment – this decision compels a predicate evaluation that becomes part of any regulatory actions that could be compelled by other courts.  The conflict should materialize in more concrete forms as EPA attempts to comply with all court decisions.  One may reasonable expect the incoming Administration to abandon or limit the appeal in this case and embrace the requirement, and argue that it limits other mandatory duties to regulate.

Regulatory Accountability Act Reprise:  Last Wednesday, the House of Representatives passed H.R. 5, the Regulatory Accountability Act of 2017, to impose ceilings on regulatory costs and new analytical duties on agencies.  The new version appears to be consistent with prior versions passed by the House during prior Congresses against the backdrop of an adverse Administration and agencies.

►  The same warning from last week deserves reiteration because the legislation imposes burdens that the incoming Administration may find difficult to implement in light of the past administrative records for promulgated rules:  Be careful what you ask for, you may get it.

Expedited Removal and Cubans:  In an example of regulation’s complicating decisions, the Department of Homeland Security (DHS) publishes in Tuesday’s Federal Register an Eliminating Exception to Expedited Removal Authority for Cuban Nationals Arriving by Air final rule, which does what the name emplies, and the DOJ’s Executive Office for Immigration Review (EOIR), publishes a final rule by the same name.  Meanwhile, DHS also publishes a notice announcing a policy change regarding expedited removal of Cubans arriving by sea.  The sum of the changes is the elimination of the Clinton Administration “wet foot / dry foot” policy distinction in light of changed relationship with Cuba.

These changes make Cuban nationals who arrive in the United States subject to expedited removal proceedings commensurate with nationals of other countries.  These rules and notice result from the confluence of different substantive limitations on types of international travel and the transfer of certain functions away from a centralized authority (DOJ) and consolidations into DHS under the Homeland Security Act of 2002.  Accordingly, three different documents in two different processes.

The rules become effective January 13 and public comments are due March 20.  The agencies invoke the classic good cause exception under the Administrative Procedure Act (APA) that advance notice and an opportunity for public comment would be impractical and contrary to the public interest because advance notice would create an opportunity for evasion that defeats the rule.  In the alternative, DHS and DOJ argue that the rules affect the foreign affairs functions of the United States and are not subject to the public process at all.

►  Whatever one may think of the substantive decision, the good cause exception and the foreign affairs exemption would might exemplify their respective genres, albeit perhaps in reverse order.  The rulemaking process implicates the international relationship with Cuba because of the historic tension between nations and the historical (and potential for) mass uncontrolled migration.  Much more lies behind the concise statements provided in the published documents.

Good Cause Overdose:  On the other hand, the Department of Health and Human Services (HHS), Centers for Medicare and Medicaid Services (CMS), may have taken the APA’s technical requirements a bit too far in the Medicare and Medicaid Program: Conditions of Participation for Home Health Agencies final rule.  The final rule revises the conditions that home health agencies (HHAs) must meet to participate in the Medicare and Medicaid programs, focusing on care delivered to patients.  The final rule was both economically significant under Executive Order 12866 and a major rule under the Congressional Review Act (CRA) because the overall economic impact for all of the new conditions of participation is estimated to be $293.3 million in the first year and $290.1 million in subsequent years.

Of interest here, CMS argues that it had good cause to promulgate three specific changes without advance notice and an opportunity for public comment:  in technical requirements of the electronic filing regulations to meet operational filing realities, withdrawing provisions that it found beyond the practical scope of its proposals, and withdrawing a linguistic distinction without substance.  The final rule, however, does not become effective until July.

►  CMS’ abundance of caution should be supported, but here it may not be necessary, although not contraindicated.  Perhaps overcautious.

Communicable Disease Incaution:  On the other hand, HHS’s Centers for Disease Control and Prevention (CDCP) will publish a Control of Communicable Diseases final rule January 19, 2017, that last publication day of the Administration.  The final rule amends regulations governing domestic (interstate) and foreign quarantines to best protect the public health of the United States in response to outbreaks of new or re-emerging communicable diseases (Ebola, MERS, Zika, etc.).  The final rule makes substantial changes from the proposed rule, particularly in the areas of HHS’s responsibilities to quarantined individuals and their due process rights.  The final rule is scheduled to become effective on February 21, 2017.

►  The rule has been highly controversial because it involves direct restriction on individual’s freedom (i.e. quarantine) and the collection of personal information.  The final rule, in this form, was not considered economically significant, perhaps a nod to the speculative nature of when or where it will ever be implemented.  A separate concern, however, should be raised about the internal budgetary ramifications of the rule on other federal law enforcement and detention operations.  The final rule admits to relationships with, for example, DHS’s United States Customs and Border Protection (CBP), Transportation Security Administration (TSA) and United States Coast Guard, but implementation could, in some circumstances, created substantial budgetary impacts.

In any event, the 30-day delayed effective date is much too short at the cusp of a change in Administration – the incoming Administration is likely to further delay the effective date of this final rule, and many others, to reevaluate the substance and the potential impacts.  Jamming “midnight” regulations with such a short delayed effective dates (and there were several this week) merely increase pressure for the incoming Administration to issue blanket orders to the agency staff to halt all pending actions and effective dates and to produce the individualized paperwork to effectuate stays.