Administrative Law Prof Blog

The effect of preambles in regulations

From Alberto Bernabe's (John Marshall - Chicago) new Torts blog, "New NHTSA rule provides immunity from state tort suits related to seatbelt use":

The National Law Journal reports that a group of consumer and trial lawyer organizations have filed a petition asking the National Highway Traffic Safety Administration (NHTSA) to reconsider a final rule on designated seating positions in vehicles because it includes language that would give vehicle manufacturers immunity from state tort suits related to seatbelt use. Previously, NHTSA placed the preemption language in the preamble, which generally is acknowledged to be advisory in nature only. But placement of the language in the text gives it force of law. The final rule takes effect on Dec. 8.

Emphasis mine.  EMM

Practice: A regulator's view on encouraging compliance

In a speech titled "Incentivizing Good Compliance", Lori A. Richards (Director, Office of Compliance Inspections and Examinations, Securities and Exchange Commission) reviewed a regulator's ideas about how organizations can enhance regulatory compliance.  Her specific recommendations:

Given that firm leaders and managers have this responsibility, why not incentivize it to happen, right along with incentivizing production? Here are some ways that I think securities firms might better incentivize compliance by their employees with the firm's risk and compliance controls:

• Be clear about expectations. Managers and employees should be aware that compliance with the firm's internal risk management and compliance policies is expected, and performance expectations should be explicit on this point.
• Reward managers who achieve compliance. Managers could be compensated in part based on their branch's or unit's compliance activities (results of surveillance reviews, internal reviews, customer satisfaction levels). Positive results get higher compensation.
• Reward managers who cultivate a culture of compliance. Many organizations are measuring their employees' attitudes towards ethics and compliance by the use of surveys. Some firms then tie a component of their senior managers' compensation to the attitudes expressed by their unit's employees. Positive results get higher compensation.
• Make strong compliance an advertised goal. In industrial plants, firms advertise the number of days with a "clean" safety record — to remind employees about the importance of safety on the job. Other organizations could take a lesson and publicize the number of days without a customer complaint, arbitration, or aggrieved customer.
• Reward employees for considering compliance issues. Employees could be incentivized to approach compliance staff early on with questions about compliance — well before the deal, or the product or the transaction is launched.
• Consider new incentives. While sales incentives may be a part of the fabric of the securities business, wouldn't a reward based on the satisfaction levels of the clients of the registered representative or advisory representative be more meaningful? (satisfaction could be measured by, for example, whether the investor believes that the financial adviser understands the investor's needs, objectives, and risk tolerance; is responsive; effectively invests their funds; adequately discloses risks and costs; and provides understandable explanations about investment options). Wouldn't that type of reward incentivize the kind of long-term relationships that firms so want to develop?
• Incentives impact risk. Because incentives drive behavior, an organization's risk-assessment process could take into account the incentives that exist that encourage and reward compliance, and could identify areas and employees who do not operate with these incentives. Firms could include the latter as areas that may present higher risk and may warrant closer review. In addition, when organizations conduct special reviews or inquiries of compliance breakdowns, they could include an evaluation of the role that incentives played.

I'm certain that there are other ways too that organizations could better incentivize strong compliance — I hope that organizations will take time to consider how they might better incentivize strong compliance, to help encourage firm employees operate in accordance with the law, the firm's code of ethics and its internal compliance and risk controls.

While Director Richards was speaking in the context of the financial industry, her ideas are probably consonant with those of thoughtful regulators in other fields.  Director Richards was speaking at the 2008 Willamette Securities Regulation Conference, Willamette University College of Law, Portland, Oregon, October 30, 2008.  EMM

Unitary executive theory

For those interested in executive branch theory, Steven D. Schwinn (John Marshall - Chicago) has two relevant posts on our sibling, the Constitutional Law Prof Blog:  "The Sunday Reader: Pierce (on Calabresi and Yoo) on the Unitary Executive" and "The Unbundled Executive". Good commentary.  EMM

The Story of the Schechter Poultry Case

On The Volokh Conspiracy, Ilya Somin (George Mason) recommends and comments on a post by Steven Horwitz (Economics, George Mason) on the Liberty & Power: Group Blog of George Mason's History News Network.

Economist Steven Horwitz has a fascinating post on the history behind the Schechter Poultry case, the 1935 Supreme Court decision that struck down the National Industrial Recovery Act - the most extensive attempt at economic central planning in American history. ... Unlike most of the other controversial Depression-era Supreme Court decisions, which split the justices along ideological lines, Schechter was unanimous. Even liberal justices like Louis Brandeis recognized that Congress had exceeded its authority under Article I of the Constitution and voted to strike NIRA down.

There are some rules even Congress must follow.  Note that both Somin and Horwitz write from a strong libertarian perspective, but the Horwitz post tells the backstory of the case.  The opinion itself discusses the law pretty well.  EMM

Benjamin and Young on Administrative Federalism

Recently posted on SSRN:  Stuart Minor Benjamin (Duke) and Ernest Young (Duke), "Tennis with the Net Down: Administrative Federalism Without Congress".  Abstract:    

This essay replies to contributions by Brian Galle and Mark Seidenfeld and by Gillian Metzger to the Duke Law Journal's 2008 Administrative Law Symposium. Professors Galle and Seidenfeld are willing to entertain arguments that modern administrative agencies are, in fact, better vessels of democratic values than Congress, and to acknowledge the claims of federalism only if and to the extent that decentralizing authority furthers some sort of public policy value. Similarly, Professor Metzger accepts the value of federalism but argues that it should be protected through the operation of ordinary principles of administrative law. Both articles seek to shift the focus of federalism doctrine from the structures established by the Constitution to the structures established by the administrative state.

Our own view is that contemporary American lawyers must maintain continuity with-make some sense of-the constitutional vision of separation of powers and federalism notwithstanding the profound changes to that structure since 1789. By elevating administrative agencies to the primary role, our interlocutors shatter the fragile constitutional compromises that maintain that crucial continuity with the traditional Constitution. For us, the touchstone of any analysis must be what Congress intended, not what agencies can do to improve on Congress. This might not be as conducive to optimal policymaking as the alternative focus proposed by Galle, Seidenfeld, and Metzger. But a constitutional discourse that allows lawyers and judges simply to disregard the traditional constitutional constraints is too close, for our tastes, to Robert Frost's famous criticism of free verse-that is, such an approach amounts to "play[ing] tennis with the net down."

EMM

Exhaustion of administrative remedies

It's another one of those basic admin law precepts:  You must jump through all of the administrative appeal hoops before you bring your claim before the courts.  From the New York Public Personnel Law blog, "Appeal dismissed after employee fails to prove efforts to exhaust her administrative remedy would have been an exercise in futility":

While there are some exceptions to the rule requiring the exhaustion of administrative remedies, such as demonstrating that efforts to avail oneself of the available administrative procedures such as those that are set out in a statute or a collective bargaining agreement would be futile and thus excuse such failure to exhaust those remedies, the court said that in Amorosano-LePore case she failed to prove that her pursuing her administrative remedies provided by the controlling collective bargaining agreement would have been an exercise in futility.

The court also rejected Amorosano-LePore argument that the City’s officials acted beyond the scope of their authority, noting that this directly related to questions of interpretation, application, and enforcement provisions of the CBA and thus was reviewable under the CBA. Similarly, Amorosano-LePore claim that she was deprived of due process the hearing officer’s conduct also could have been addressed through administrative review as provided for in the collective bargaining agreement.

Patience.  EMM

More midnight regulations

From today's Eye Opener on the Federal Eye blog:

• More 'Midnight Regulations': "The Bush White House in the past month has approved 61 new regulations on environmental, security, social and commercial matters that by its own estimate will have an economic impact exceeding $1.9 billion annually," notes The Post's R. Jeffrey Smith and Juliet Eilperin. "The rules cover obscure as well as high-profile social and economic issues: spelling out what kinds of records must be kept by sexually explicit performers and publications, exempting hobbyists' rocket motors from federal explosives controls, expanding the collection of DNA samples from federal prisoners." Make sure to read through the new regulations from EPA, Interior, Energy, Veterans Affairs, Health and Human Services, Justice, HUD and Homeland Security.

EMM

New administrative law articles

From the University of Washington's Current Index to Legal Periodicals:

• Hackett, Lauren L.  Student note.  Taming cyberspace:  broadcasting as a model for regulating the Internet.  14 Widener L. Rev. 265-296 (2008). [L]|[W]
• Hill, Sean.  Note.  Sunshine in Indian Country:  a pro-FOIA view of ... (U.S. Department of the Interior v. Klamath Water Users Protective Ass'n, 532 U.S. 1, 2001.)  32 Am. Indian L. Rev. 463-485 (2007-2008). [L]|[W]
• Sunstein, Cass R.  Is OSHA unconstitutional?  94 Va. L. Rev. 1407-1449 (2008). [L]|[W]
• Wagner, Joanna M.  Comment.  Improving Native American access to federal funding for economic development through partnerships with rural communities.  32 Am. Indian L. Rev. 525-613 (2007-2008). [L]|[W]
• Symposium.  Race and Class in the 21st Century Through the Lens of Hurricane Katrina.  Introduction by Dorothy A. Brown; articles by Susan S. Kuo, William P. Quigley and Audrey McFarlane.  14 Wash. & Lee J. C.R. & Soc. Just. 1-96 (2007).
  
  • Brown, Dorothy A.  Introduction.  14 Wash. & Lee J. C.R. & Soc. Just. 1- 2 (2007). [L]|[W]
  • Kuo, Susan S.  Speaking in tongues:  mandating multilingual disaster warnings in the public interest.  14 Wash. & Lee J. C.R. & Soc. Just. 3- 47 (2007). [L]|[W]
  • Quigley, William P.  Katrina voting wrongs:  aftermath of hurricane and weak enforcement dilute African American voting rights in New Orleans. 14 Wash. & Lee J. C.R. & Soc. Just. 49-75 (2007). [L]|[W]
  • McFarlane, Audrey.  Fighting for the high ground:  race, class, markets and development done right in post Katrina recovery.  14 Wash. & Lee J. C.R. & Soc. Just. 77-96 (2007). [L]|[W]

EMM

Also arbitrary and capricious

Last week we told you about a case from New York demonstrating the rule that governing bodies and administrative agencies must generally follow their own precedents.  Harvey Randall of the New York Public Personnel Law blog has sent me a useful case from New York demonstrating a similar situation:

Re Ms. Salkin review of a New York case demonstrating "one of the unwritten rules of administrative law," regarding an administrative body's failure to adhere to  its own precedent, the following may be of interest:

Engel v Sobel, 161 AD2d 873. In this case the courts involved considered the effect of prior administrative precedents established by the Commissioner of Education in deciding a disciplinary appeal.

Engle was served with disciplinary charges by the school district. The disciplinary hearing panel found him guilty and recommended that Engel be given a letter of reprimand as the disciplinary penalty. The school board appealed, seeking a harsher penalty, and the Commissioner authorized the Board to suspend Engel without pay for one semester. The Commissioner said that his action authorizing the suspension without pay was justified because Engel "had been warned on four prior occasions" concerning his unacceptable behavior and he believed that "another written reprimand would be insufficient to deter [Engel] in the future." [Apparently the "four prior occasions" in which Engel had be "warned" referred to by the Commissioner did not result from disciplinary action taken against Engel by the school district.]

In response to Engel's appeal contending that the Commissioner had deviated from his prior administrative precedents in imposing a greater penalty, Supreme Court vacated the Commissioner's action; the Appellate Division affirmed the lower court's ruling.

The Appellate Division pointed out while the Commissioner could deviate from prior administrative precedent, such deviation must be adequately explained. It said: "In the absence of any such rationale, the administrative decision must be reversed on the law even though substantial evidence supports it. Here [the Commissioner's] explanation does not indicate whether he merely overlooked or ignored prior policy, or intentionally decided to change it; accordingly, the determination must be annulled."

From this decision it seems clear that administrative precedents, even precedents of long standing, may be modified or ignored in a particular administrative proceeding provided (1) the reason for doing so is clearly indicated; (2) the reason for deciding not to apply the precedent is neither arbitrary nor capricious; and (3) there is substantial evidence to support the ultimate determination.

Cordially,

Harvey Randall
Editor and General Counsel
Public Employment Law Press
publications@nycap.rr.com

You may wish to visit our site on the Internet at http://publicpersonnellaw..blogspot.com

Thanks to Mr. Randall.  EMM

Scholarship on the Regulatory Process

Professor Cary Coglianese of University of Pennsylvania Law School and Professor Robert Kagan of the University Of California-Berkeley's Center for the Study of Law and Society have written an empirical piece entitled "Regulation and Regulatory Processes". 

Abstract:      
Regulation of business activity is nearly as old as law itself. In the last century, though, the use of regulation by modern governments has grown markedly in both volume and significance, to the point where nearly every facet of today's economy is subject to some form of regulation. When successful, regulation can deliver important benefits to society; however, regulation can also impose undue costs on the economy and, when designed or implemented poorly, fail to meet public needs at all. Given the importance of sound regulation to society, its study by scholars of law and social science is also of paramount importance. In this chapter, we review the state of the field by focusing on four major areas of empirical research: (1) regulatory policy making, (2) regulatory enforcement, (3) business responses to regulation, and (4) innovative models of regulation. We begin by reviewing the political economy literature on the factors that influence government regulators as well as the ways that overseers may use administrative procedures to affect decisions of regulatory agencies. We next highlight the varied empirical findings on adversarial versus cooperative enforcement styles. We then review explanations for business responses to regulatory pressures, including the range of factors influencing compliance and beyond-compliance behavior. Finally, we survey the ever-growing research literature on innovative approaches to regulation, including self-regulation, performance standards, and market-based incentives. This chapter serves both as a stand-alone account of the existing state of empirical regulatory research by political scientists and researchers from other disciplines, as well as an introduction to the authors' edited volume that reprints a diverse collection of classic studies of regulation and regulatory processes.

KP

Quasi-Legislative or Quasi-Judicial?

In his Within the Scope blog, E.L. Lipman reviews an opinion from the Minnesota Court of Appeals on judicial review of local government actions in "Quasi-Legislative or Quasi-Judicial: Is it a duty or just a good idea?" 

Notwithstanding the fact that the Metropolitan Council had earlier promulgated standards under which it would assess such proposed swaps, for the appellate panel, a key part of the analysis was the discretion retained by the Council in such circumstances. Because the Metropolitan Council could reject proposed land exchanges, even in cases where their standards had been satisfied, the decision to undertake the transaction was more "legislative" than it was "judicial."

EMM

Arbitrary and capricious

In her Law of the Land blog, Patty Salkin (Albany) reviews a New York case that demonstrates one of the unwritten rules of administrative law.  Opening paragraph:

Although local zoning boards of appeal have broad discretion when considering applications for area variances, where the board fails to adhere to its own prior precedent and fails to indicate its reason for reaching a different result on essentially the same facts, the decision will not be upheld as it is considered arbitrary and capricious.

"Variance Denial Arbitrary Where Board Fails to Adhere to Its Own Prior Precedent".  The government doesn't have to be perfectly consistent, but it must explain its decisions when making a significant change from precedent.  EMM

Sunstein on irreversibility

New on SSRN:  "Irreversibility" by Cass R. Sunstein (Harvard).  Abstract:

The concept of "irreversibility" plays a large role in many domains, including public health, medical practice, and environmental protection. Indeed, the concept is explicit in some statements of the Precautionary Principle. But the idea of irreversibility remains poorly defined. Because of the flow of time, any loss is, in a sense, irreversible. On one approach, irreversibility might be understood as a reference to the value associated with taking precautionary steps that maintain flexibility for an uncertain future ("option value"). On another approach, irreversibility might be understood to refer to the qualitatively distinctive and even unique nature of certain losses - a point that raises a claim about incommensurability. The two conceptions fit different problems. These ideas can be applied to a wide assortment of environmental and public health questions, including overuse of antibiotics, genetic modification of food, avian flu, and climate change.

When looking at why we regulate something, this is an important concept.  EMM

Off Topic - Chris Mathews for Senate?

On this Friday after Thanksgiving it seems like a good idea to take a break from leftovers and indulge in a little 2010 Senate race speculation.  According to the Washington Monthly, Chris Mathews, the somewhat bellicose host of MSNBC's Hardball show, is strongly considering a run against Arlen Specter in 2010.  Mr. Mathews, former staffer to Tip O'Neil, is [in]famous for little ditties like "Can Obama now win over the regular folks, white folks, against John McCain" and for his, shall we say, exciteable interview style.  Should make for a very interesting 2010 election. 

Happy Post-Thanksgiving,

LT

New Regulations Offer Opportunities in Legal Market

Looks like the expectation of sweeping new federal regulations under the incoming Obama administration has D.C. attorneys licking their chops in anticipation.  The Legal Times interviewed members of D.C. firms to lend insight into how the D.C. regulatory practice might expand.

KP