Rulemaking Procedures and Restrictions

Limits on Rulemaking

  • Arizona Grocery Case:

    • The Interstate Commerce Commission had authority to set maximum and minimum rates for railroad transportation.

    • Railroads challenged the rates as too low.

    • The agency changed its rule about setting rates through an adjudication (letting railroads off the hook).

    • The Supreme Court held that a rule can only be changed with another rulemaking procedure.

    • You can change an order with an order (adjudication).

    • You can change an order with a rule.

    • You can only change a rule with a rule.

  • Bowen Case:

    • Deals with reimbursements for hospital employees under Medicare.

    • There is a strong presumption against any retroactive rulemaking unless explicitly authorized by Congress.

    • Rules are about future actions, not past actions; past actions are typically regulated through adjudication.

  • Chainery Case:

    • Absent a statutory mandate, an agency has the discretion to choose between adjudication and rulemaking.

    • The decision to use rulemaking or adjudication is subject to Chevron deference, as long as the agency's decision is reasonable.

Estoppel

  • Estoppel Concept:

    • The broad legal concept that prevents people from making claims due to prior decisions or actions.

  • Promissory Estoppel:

    • Example: Grandfather promises to pay for granddaughter's college tuition if she graduates.

    • The granddaughter relied on the promise and graduated but the grandfather refused to pay.

    • The granddaughter won the case under promissory estoppel because she reasonably relied on the promise and materially changed her position to her detriment.

  • Estoppel Issues with Agencies:

    • An agency makes a promise or gives advice that leads someone to act, and later the agency reverses its position, causing harm.

    • Example: An agency tells someone they don't need a permit, but later it turns out they did need one.

  • OPMV Richmond Case:

    • A bus driver on disability asked OPM if taking another job would affect his benefits; OPM said it would not.

    • Richmond took the job, but his disability benefits were revoked due to bad advice from OPM.

    • Courts generally do not apply estoppel against agencies unless there is affirmative misconduct (knowingly lying or trying to trick someone).

    • A mere mistake by the agency is usually not enough for estoppel to apply.

  • Collateral Estoppel:

    • If an agency determines someone's citizenship in one proceeding, it's stopped from claiming they aren't a citizen in another proceeding.

    • Example: If an agency determines someone is a citizen in a refugee status proceeding, it can't later claim they are not a citizen in a green card application.

    • Once a court has decided an issue of fact

      or law necessary to its judgment, that decision is conclusive in

      a subsequent suit based on a different cause of action

      involving a party to the prior litigation. (i.e., “collateral

      estoppel”). U.S. v. Mendoza.

  • Nonmutual Collateral Estoppel:

    • Involves different parties in different proceedings.

    • Courts often do not apply nonmutual collateral estoppel.

    • Example: If an agency determines that a person born to one American parent and one non-US citizen on a US military base overseas is a US citizen, it may not be stopped from making a different determination for another person under the same facts.

  • Equitable Estoppel: Courts will rarely apply the doctrine of

    equitable estoppel to government agencies, except (perhaps)

    in cases of “affirmative misconduct.” OPM v. Richmond.

Sources of Rulemaking Procedures

  • Administrative Procedures Act (APA).

  • Organic statute (the statute passed by Congress that creates the agency).

  • The Constitution (due process and equal protection).

  • Court decisions that interpret these requirements.

Determining How Much Procedure to Give

  • Londoner Case:

    • A new property tax was levied on a small number of houses on a cul-de-sac.

    • The court required a specific hearing for the affected property owners.

  • Bimetallic Case:

    • A wide-scale increase in property tax assessments across the entire city of Denver.

    • The only required process was the democratic process (voting).

  • Guidance:

    • Small-scale, targeted rulemakings or adjudications require a higher level of process.

    • Wide-scale rulemakings affecting a large group of people require less individualized process; the democratic process may be sufficient.

Distinguishing Rulemaking and Adjudication

  • Definition of a Rule (APA Section 551):

    • An agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy.

    • Rules are generally forward looking and widely applicable.

  • Rulemaking:

    • The process for making a rule.

  • Order:

    • Anything an agency does that isn't a rule.

  • Adjudication:

    • The process for making an order.

  • NLRB v Wyman-Gordon Company (1969):

    • The National Labor Relations Board (NLRB) ordered companies to provide names, addresses, and contact information of their employees to unions.

    • The Excelsior case was an adjudicatory proceeding deciding the future impact of when employers needed to provide employee information.

    • The Supreme Court determined that the Excelsior case was a rule because it had general applicability and was forward looking and thus had to go through the rulemaking process.

  • Morton v Ruiz:

    • Ruiz, a member of the Tohono O'odham tribe, lived just outside the reservation and was denied benefits based on a manual not published in the Federal Register.

    • The Supreme Court ruled that the manual was a rule, which should have gone through rulemaking procedures.

  • Exceptions to Notice and Comment Rulemaking:

    • General Statement of Policy: Not applicable as the manual had present effect.

    • Rule of Practice Organizational Procedure: Not applicable as the manual created a "stamp of approval."

    • Interpretive Rulemaking: Not applicable as the agency has broad discretion to grant benefits, and the manual was not published in the Code of Federal Regulations.

    • Good Cause: Narrow exceptions for price freezes, tight deadlines, or clerical errors do not apply.

  • Section 553 of the APA

    • Advanced notice of proposed rulemaking.

    • Notice of proposed rulemaking.

    • Final rulemaking including agency's response to comments.

  • Takeaways

    • Agencies must follow their own rules. Agencies can change orders through adjudication, so long as they are not arbitrary and capricious. But they cannot ignore or violate their own rules by issuing contrary adjudicative orders. A rule must be changed through rulemaking, and the change must be explained. Arizona Grocery.

    • Courts will rarely apply the doctrine of equitable estoppel to government agencies, except (perhaps) in cases of “affirmative misconduct.” OPM v. Richmond.

    • Once a court has decided an issue of fact or law necessary to its judgment, that decision is conclusive in a subsequent suit based on a different cause of action involving a party to the prior litigation. (i.e., “collateral estoppel”). Government agencies are not subject to non-mutual collateral estoppel (collateral estoppel raised by someone who was not a party to the earlier proceeding with the government). Mendoza.

    • Typically, absent a specific statutory authorization, agencies cannot enact rules which apply retroactively to unchangeable, past actions. Bowen.