CHAPTER 43
ADMINISTRATIVE AGENCIES
ANSWER TO CRITICAL THINKING QUESTION
IN THE FEATURE
DIGITAL UPDATE—CRITICAL THINKING
Some observers predict that numerous lawsuits will be filed against the FCC in the
immediate future. Why would this be likely? Undoubtedly, broadband providers such as
CASE 43.1—CRITICAL THINKING
LEGAL ENVIRONMENT
As a policy matter, some observers might argue that the IRS should be allowed to
regulate tax-return preparers more strictly. Under the reasoning of the court, who has the
authority to give effect to this policy and how would it be accomplished? Under the
reasoning of the court, Congress is the branch of the government that has the authority to give
effect to the policy stated in the question and set out how it would it be accomplished.
In the Loving case, the court construed that statute in its original and recodified versions.
The previous statute “plainly” did not cover tax-return preparers, who were not “agents” or
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CASE 43.2—CRITICAL THINKING
ECONOMIC
Why should a court wait to review an agency’s order until it has gone through the entire
procedural process and can be considered final? In the interest of judicial economy, a court
waits to review an agency order until it has gone through the entire procedural process and can
be considered final. Courts discourage the filing of petitions for review until after an agency
completes its procedures. This is because it is a pointless waste of judicial energy for a court to
process any petition for review before an agency has acted, for example, on a request for
reconsideration of a ruling if a party decides to seek the agency’s reconsideration.
LEGAL ENVIRONMENT
Under what standard does a court defer to an agency’s interpretation of a statute? Did
the court in this case appear to have applied that standard to the DEA’s interpretation of
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2. Is a court’s evaluation of an agency’s assessment of a risk to national security
3. Should the agency at the center of this case have revealed the reasons for its decision
before Olivares filed a suit challenging it? Explain. Yes, the agency at the center of this
case should have revealed the reasons for its decision before Olivares filed a suit challenging it.
But its failure to do so was not fatal to that decision, because the agency did reveal its reasons,
in internal agency materials that were contemporaneous with the decision and in the Vara
Declaration, which the court found to support the conclusion that the agency’s action was not
arbitrary, capricious, an abuse of discretion, or otherwise not in accord with the law. And the
materials and the declaration were made available to Olivares before he made his arguments to
the court.
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In the Olivares case, the court cautioned, however, that the Administrative Procedure Act
(APA) required a contemporaneous explanation for an agency’s action. Thus, agencies, like the
Transportation Safety Administration here,
will be well advised to obey the explicit command of [the APA] rather than counting on being able to
salvage their actions later, after the losing party has been forced to seek redress in court. Persistent
scofflaw behavior might cause the courts to insist that the contemporaneous explanation actually be
expressed to the complaining party, as the statute requires, on pain of * * * remand. Or the courts might
insist on progressively more compelling indications that the reasons offered were in fact the reasons
governing the decision when it was made. The offending agency action in this case was mitigated
somewhat because the internal materials and the Vara Declaration were included in the parties’ [pleadings]
and Petitioner had an opportunity to review these materials before briefing and oral argument. This may not
be sufficient in future cases.
ANSWERS TO QUESTIONS IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
1A. Type of agency
The SEC is an independent regulatory agency, because the president does not have the power
to appoint and remove federal officers at the SEC. Because federal officers at the SEC are not
appointed by the president, serve for a fixed term, and cannot be removed from their positions
without just cause, the SEC is an independent regulatory agency.
2A. Arbitrary and capricious
The new rule is likely arbitrary and capricious because little rationale was provided for a major
change in a rule that should have been subject to notice-and-comment proceedings.
3A. Chevron deference
The SEC will probably not get Chevron deference and the courts will give careful review to the
new regulation. The new rule is a major expansion of regulatory power and it is not clear it was
the intent of Congress to go this far.
4A. Interpretive rules
Interpretive rules are not subject to the same level of judicial review as are new substantive
rules.
ANSWER TO DEBATE THIS QUESTION IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
Because an administrative law judge (ALJ) acts as both judge and jury, there
should always be at least three ALJs in each administrative hearing. It is unfair to give an
ALJ so much power within any administrative agency. After all, each ALJ works for the
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administrative agency that she or he is supposed to judge in any dispute. How can we assume
that an ALJ will be unbiased? There will always be a tenancy for ALJs to favor the actions of
administrative agencies. There is at least a chance of more unbiased decisions if at least three
ALJs hear each case
They system of ALJs has worked well for decades, so now is not the time to change it. In
any event, ALJs frequently rule against the agencies for whom they work. Besides, when a
party to an ALJ’s decision doesn’t like the outcome, that party can always appeal the decision in
federal court, which happens quite often. Finally, the cost of tripling the number of ALJs would
be prohibitive, especially with the federal government running such huge budget deficits.
ANSWERS TO ISSUE SPOTTERS
AT THE END OF THE CHAPTER
1A. The U.S. Department of Transportation (DOT) sometimes hears an appeal from a
party whose contract with the DOT has been canceled. An administrative law judge (ALJ),
who works for the DOT, hears this appeal. What safeguards promote the ALJ’s fairness?
Under the Administrative Procedure Act (APA), the administrative law judge (ALJ) must be
separate from the agency’s investigative and prosecutorial staff. Ex parte communications be-
tween the ALJ and a party to a proceeding are prohibited. Under the APA, an ALJ is exempt
from agency discipline except on a showing of good cause.
2A. Techplate Corporation learns that a federal administrative agency is considering a
rule that will have a negative impact on the firm’s ability to do business. Does the firm
43-1A. Rulemaking and adjudication powers
The court will examine first whether the agency followed the procedures prescribed in the
Administrative Procedure Act (APA). If so, the Federal Trade Commission (FTC) rules will likely
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43-2A. Informal rulemaking
The court will consider first whether the agency followed the procedures prescribed in the
43-3A. Rulemaking
The U.S. Court of Appeals for the District of Columbia Circuit reviewed and vacated the new
conditions, holding that the SEC violated the Administrative Procedure Act (APA) when the
agency reaffirmed the conditions without reopening the opportunity for public comment. The
court held that “the extra-record materials did not merely supplement the rulemaking record
without prejudice to the Chamber, and the public availability of those materials, in this instance,
43-4A. BUSINESS CASE PROBLEM WITH SAMPLE ANSWERS—Agency powers
1990). Nothing in the statute suggests that Congress meant to curtail the agency’s power to
treat greenhouse gases as air pollutants. In other words, the agency has a pre-existing mandate
to regulate “any air pollutant” that may endanger the public welfare.
The EPA also argued that, even if it had the authority to regulate greenhouse gases, the
agency would not exercise that authority because any regulation would conflict with other
administration priorities. The Court acknowledged that the CAA conditions EPA action on the
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43–5A. Judicial deference
A court of appeals reviews the legal issues raised in an administrative appeal but accords
deference to relevant factual finding. An ALJ’s factual determinations must be upheld if they are
supported by substantial evidence in the administrative record, and the decision as a whole
must be affirmed if the ALJ’s decision was rational, supported by substantial evidence on the
43–6A. Arbitrary and capricious test
Yes, the agency’s decision to revoke Manin’s certification was arbitrary and capricious. When
reviewing an agency decision, a court considers whether the agency’s actions were arbitrary,
capricious, or an abuse of discretion. An action is arbitrary or capricious if, for example, the
agency changed its prior policy without justification or entirely failed to consider a relevant
factor. When an agency’s action is arbitrary or capricious, a court can hold it to be unlawful and
43–7A. Adjudication
GoJet can appeal the decision of the Federal Aviation Administration (FAA) to the appropriate
federal court of appeals. After a hearing before an administrative law judge (ALJ), the ALJ
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issues an initial order. Any party to the case can appeal this decision to the board or
commission that governs the agency. If any party is further dissatisfied with the governing
body’s ruling, the party can appeal the decision to a federal appellate court. If the party appeals
and a review is denied, the order of the ALJ or the governing body becomes the final order in
the case. If the party appeals and the case is accepted for review, the final order will come from
43–8A. Judicial deference to agency decisions
Yes, in this case, the court can defer to the Secretary’s interpretation of the language in the
Mine Act, but only if the court decides that the interpretation is reasonable. A court generally
defers to an agency’s analysis of facts that pertain to its area of expertise. A court also generally
defers to an agency’s interpretation of a statute if the interpretation is reasonable.
Reasonableness is particularly important when the statute’s language is ambiguous. An
interpretation that meets the standards for notice-and-comment rulemaking is assured of
deference.
The Federal Mine Safety and Health Act—the statute at the center of this problem—
designates a violation as “significant and substantial” (S&S) when it “could significantly and
substantially contribute to the cause and effect of a coal or other mine safety or health hazard.”
The U.S. Department of Labor charged Knox with violations of the Mine Act that were
determined to be S&S. In Knox’s challenge to this determination in a federal court, the Labor
Secretary contended that the statute’s language (“could”) meant “merely possible.” Knox argued
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43-9A. A QUESTION OF ETHICS—Rulemaking
(a) The FMSCA analyzed the crash risks due to driver fatigue according to a new
model to justify an increase in the maximum number of daily and weekly hours that long-haul
truck drivers could drive and work. The agency did out reveal this new methodology, however,
until it was too late for public comment. Public Citizen objected to the agency’s reliance on the
new model, arguing that it had been an integral part of the agency’s analysis of the limits on
drivers. The FMSCA responded that interested parties would have known from the overturning
of the 2003 revisions of the regulations that it “would have had to adjust the model.”
The court concluded that the FMSCA violated the Administrative Procedure Act (APA) by
not making the new model public sooner than it did. The agency should have given interested
parties an opportunity to comment on the methodology of the crash-risk model used. The court
stated that the agency’s argument “misse[d] the point.” Even if interested parties had known that
the previous model would have to be adjusted, there was “no way of knowing that the agency
would calculate the impact of time on [the risk] in the way it did.”
An agency’s withholding of its methods, when their disclosure is required under the APA,
could be portrayed as unethical. It could be described as deceitful or manipulative to reveal this
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43-10A. Investigation
(a) The court should not order UAL to comply with the subpoena. The information
sought goes far beyond an inquiry into whether and for whom UAL makes French social security
payments. It is not limited to individuals who may be considered similarly situated to Droge
either by position (flight attendant) or by location (France). The subpoena requires extensive
information with respect to all UAL employees residing abroad. Much of this information has little
or no relevance to resolving Droge’s charge against UAL. And even if it were relevant to the
charge in some tangential way, the request is overly burdensome. The financial and
administrative demand placed on UAL to comply would be significant and, in light of the
tangential need for the information, an undue burden.
(b) The Equal Employment Opportunity Commission (EEOC) does not have the