Administrative Law Prof Blog

A state judicial review of an administrative action

Yesterday the Arizona Court of Appeals published a textbook opinion reviewing a Medicare decision:  Sharpe v. Arizona Health Care Cost Containment System, CV 07-0817 (February 3, 2009). 

It seems that Ms. Sharpe is going to have to have all her teeth pulled, and asked for a full set of dentures.  Her dentist and a bunch of doctors agreed.  The state Medicare agency, the Arizona Health Care Cost Containment System (AHCCCS), said "no," and she appealed.  The ALJ said "yes," and the State appealed.  The Superior Court said "no," and Ms. Sharpe appealed.

The Arizona Medicare implementing statute provides that "...contractors shall provide the following medically necessary health and medical services:..."  Although non-emergency dental care is a state option under Medicare, the Arizona Legislature had chosen to include "dentures ordered by a dentist" in the list of items under that statute.  However, the AHCCCS by regulation required that medical necessity be determined by the recipient's primary care physician (that is, not a dentist), and in a written "policy" stated that "Neither the inability to properly masticate nor cosmetic considerations, alone or in combination, constitute medical necessity for dentures." 

The Court of Appeals says "yes."  In this detailed opinion, the Court of Appeals discusses

• the weight to be given to the agency's interpretation of the statute
• the requirement that agency rules be consistent with their enabling statutes
• the meaning of the disjunctive in statutory construction
• the use of other parts of the same statute to aid in construction
• avoiding surplusage in statutory construction
• expressio unius est exclusio alterius
• plain meaning in statutory construction
• avoiding absurdity in statutory construction
• the import of Medicare services that are optional under federal law

The Court was dismissive of the agency's arguments about the meaning of the enabling statute.

AHCCCS contests this "plain meaning" reading of the statute on the grounds that the statute "does not say a word about chewing or eating."  As noted, however, any reasonable definition of "dentures" plainly implies chewing and eating.  It is difficult to conceive of why else the legislature would make dentures available.  The legislature did not require a medical condition other than, or in addition to, that for which dentures are typically (if not always) required:  chewing food.  This, however, is precisely how AHCCCS has construed this statutory provision, thwarting its primary purpose.  It is akin to saying a prosthetic foot will only be provided if one can show a medical need other than the ability to walk properly.

(Emphasis in the opinion.)  For your entertainment, gentle reader, I will monitor this to see if the State takes this case to the Arizona Supreme Court.   EMM

New administrative law articles

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

 
• Hodge, James G., Jr. and Evan D. Anderson.  Principles and practice of legal triage during public health emergencies.  64 N.Y.U. Ann. Surv. Am. L. 249-291 (2008). [L]|[W]
 
• Luria, Amy.  CERCLA contribution:  an inquiry into what constitutes an administrative settlement.  84 N.D. L. Rev. 333-364 (2008). [L]|[W]
 
• Macinko, Seth and Sarah Schumann.  The process of "property":  stasis and change in lobster management in Southern New England.  33 Vt. L. Rev. 73- 129 (2008). [L]|[W]
 
• Mineiro, Michael C.  Law and regulation governing U.S. commercial spaceports:  licensing, liability, and legal challenges.  73 J. Air L. & Com. 759-805 (2008). [L]|[W]
 
• Symposium:  James Bessen and Michael J. Meurer's Patent Failure:  How Judges, Bureaucrats, and Lawyers Put Innovators at Risk.  Articles by F. Russell Denton, Glynn S. Lunney, Jr., Cecil D. Quillen, Jr. and Samson Vermont.  16 J. Intell. Prop. L. 1-107 (2008). [L]|[W]
   
  • Denton, F. Russelll.  Plumb lines instead of a wrecking ball:  a model for recalibrating patent scope.  16 J. Intell. Prop. L. 1-33 (2008). [L]|[W]
   
  • Lunney, Glynn S., Jr.  On the continuing misuse of event studies:  the example of Bessen and Meurer.  16 J. Intell. Prop. L. 35-56 (2008). [L]|[W]
   
  • Quillen, Cecil D., Jr.  Commentary on Bessen and Meurer's Patent Failure:  an industry perspective.  16 J. Intell. Prop. L. 57-81 (2008). [L]|[W]
   
  • Vermont, Samson.  Taming the doctrine of equivalents in light of Patent Failure.  16 J. Intell. Prop. L. 83-107 (2008). [L]|[W]

EMM

New Jersey-Based NRG Energy Applies to Build Nuclear Reactors

Last Monday, NRG Energy applied for permission to build a new nuclear power plant.  It is the first application of this kind in thirty years, and signals a shift towards the increased willingness to explore nuclear power as a leading source of energy.

Armed with the backing of the White House and congressional leaders—and subsidies, such as $500 million in risk insurance from the U.S. Department of Energy— the nuclear industry is experiencing a revival in the U.S. As many as 29 new reactors may be added to the current U.S. fleet of 104, according to Bill Borchardt, director of the Nuclear Regulatory Commission's (NRC) office of new reactors. "It is going to be significantly different than it was in the 1970s," he says.

Needless to say that along with the vast environmental and energy implications, Federal oversight is going to be critical to this process. 

Scientific American reports.

KP

FDA Oversight of State Inspections Sub Par

The recent peanut salmonella scare in Georgia is in part attributed to decreasing rigor in the FDA inspection process.  The Atlanta Journal Constitution reports:

From 2003 to 2006, the FDA cut its inspection force by 12 percent, according to a report by Waxman, the California congressman. During the same period, Waxman found, the number of inspections dropped by 32 percent.

The FDA has increased its reliance on state inspections, according to the Health and Human Services inspector general. But states vary in how stringently they inspect food facilities, have differing levels of enforcement authority and set their own examination schedules, the inspector general said in a report. Still, the report said, the FDA doesn’t adequately monitor state inspections, raising concerns “about the quality and uniformity” of food inspections. Halloran, of the Consumers Union, said federal authorities should have retooled the inspection system after earlier breakdowns caused widespread illnesses.

“We obviously have a problem here with inspection and enforcement,” she said. “It isn’t that states can’t do it. But the FDA doesn’t seem to have been supervising the state of Georgia or to have been in much touch with what the state was doing.”

The entire article can be found here.

KP

Sometimes it's the simple things that confuse

In administrative law, sometimes it's the simple things that confuse us.  Patty Salkin (Albany) describes a recent decision by the Delaware Supreme Court explaining that when acting in a decision-making capacity an agency

does not act in a legislative capacity, but rather "partly in a ministerial and partly in a judicial capacity." In reviewing the applicable enabling statutes, the Court said that the "The statutes do not, either expressly or by implication, give the Commission unfettered discretion to deny an otherwise legally conforming subdivision application based on impact-related concerns expressed by commenting state agencies."

Or whining by neighbors who don't like it.  The time for legislation has passed.  Unless we are dealing with a function involving allocation of limited resources, where there is not enough pie for everyone to have a piece (e.g., grants or electromagnetic spectrum), if an applicant or respondent conforms then the decision is made.  "Commission Exceeded its Authority in Denying Subdivision Application".  EMM

Look for interpretive guidance

A recent New York Appellate Division opinion discussion on the New York Public Personnel Law blog is a reminder to check for applicable interpretive guidance in regulations themselves or in their enabling statutes.  "NYC's Administrative Code requires court to apply "more stringent requirements" in adjudicating civil rights law allegations".  In this case, the regulation itself provided that:

The provisions of this title shall be construed liberally for the accomplishment of the uniquely broad and remedial purposes thereof, regardless of whether federal or New York State civil and human rights laws, including those laws with provisions comparably-worded to provisions of this title, have been so construed.

Provisions like this can be sneaky.  EMM

Explaining a new law to clients

A good summary of a new state regulatory change is available on Reed Smith LLP's Environmental Law Resource blog:  "Pennsylvania's New Right to Know Law" by Jayme Butcher.  First and last paragraphs:

Substantive revisions to Pennsylvania's Right to Know Law took effect on Jan. 1, 2009. The thoroughly revised law establishes for the first time an Office of Open Records with the Department of Community and Economic Development to administer the new law and fundamentally changes how citizens access public records.
...
Conclusion
The new Right to Know Law encompasses both substantial and procedural departures from previous versions. Substantively, the new law establishes much clearer boundaries between what is presumed to be public and what Pennsylvania agencies are permitted to withhold. Procedurally, the new law represents an even more radical departure from its predecessors by streamlining the process to permit requesters to more rapidly appeal agency decisions and seek judicial review.

This Is interesting from two perspectives:  The article itself is a well-written, plain-English summary of a complicated and novel regulatory scheme, and the new Pennsylvania law is an example of the "laboratory of democracy" aspect of state law.  Thanks to Lexology for the pointer.  EMM

It's all about Chevron

As Larry Friedman (Barnes/Richardson, Chicago) points out on his Customs Law blog, referring to Monday's SCOTUS decision in U.S. v. Eurodif S.A., No. 07-1059.  He spotted a news article, "NTI: Global Security Newswire - U.S. Uranium Enrichment Firm Wins Supreme Court Ruling".  From the article:

The key question centered around whether nuclear utility contracts to buy low-enriched uranium constituted a purchase of "goods" or "services." U.S. law allows for placing tariffs on "foreign merchandise" sold in the United States for "less than fair value," but does not permit such sanctions on the sale of services, ...

Complicating the situation is the nature of many uranium enrichment contracts, which can call for the utilities to provide natural uranium, purchased from a third party, to the enricher for processing. Ownership of the natural uranium is not clearly defined, however, as the enricher is free to use supplies on hand to produce the contracted low-enriched uranium.

Souter's opinion sought to emphasize the uncertainty of the situation.

"A customer who comes to a laundry with cash and dirty shirts is clearly purchasing cleaning services, not clean shirts. And a customer who provides cash and sand to a manufacturer of generic silicon processors is clearly buying chips rather than sand enhancement services," he wrote. "But the line blurs when the facts get more complicated."

"This is the very situation in which we look to an authoritative agency for a decision about the statute's scope ... and once the choice is made we ask only whether the department's application was reasonable," he continued.

Furthermore, allowing uranium enrichment to be considered a service would create a loophole that manufacturers in many industries would exploit, Souter wrote.

"The restructuring would not stop with uranium," he stated. "Contracts for imported pasta would be replaced by separate contracts for wheat and wheat processing services, sweater imports would give way to separate contracts for wool and knitting services, and antidumping duties would primarily chastise the uncreative."

To me at first glance it appears to be a straightforward reinforcing of Chevron deference, but I will enjoy seeing Mr. Friedman's promised analysis.  EMM

Costs of compliance

Clients constantly complain about the expense of regulatory compliance - including, of course, legal fees.  An article recently posted on SSRN describes a survey of the actual compliance costs in one particular area:  "Costs of Complying with the Sarbanes-Oxley Act", by Michael W. Maher (Cal-Davis, Graduate School of Management) and Dan Weiss (Tel Aviv, Faculty of Management).  Abstract:    

Managers, investors, and regulators have expressed concerns about the high costs of complying with the Sarbanes-Oxley Act of 2002 (SOX). This paper introduces a new measure of actual compliance costs to facilitate an objective large-scale study of accelerated filers. We find that (i) the annual SOX compliance costs range, on average, from 0.289% to 0.618% of sales in each of the four years after SOX was enacted, (ii) compliance costs exhibit substantial variation across firms and industries, (iii) firms that reported deficiencies in internal controls had significantly higher compliance costs, and, (iv) smaller firms incurred greater SOX compliance costs relative to sales than larger firms. For the majority of accelerated filers, we document significant SOX compliance costs that exceed the SEC's expectations of compliance costs. Nevertheless, we also find that almost one out of every four accelerated filers had costs as low as the SEC expectations in each of the compliance years. This empirical evidence is useful in considering future amendments to SOX and in expanding our knowledge about the economic implications of securities' regulations.

More empirical studies like this will help practitioners advise their clients as to what their clients  realistically face in compliance expenses, and will help regulators factor more realistic costs of compliance into cost-benefit analysis.  EMM

Pay for Performance Proposal

Robbie Kunreuther, Director of Government Personnel Services, explores the possiblity of basing the salaries of federal agency employees on performance.

This is the last in a series of three articles. They concern the challenged faced by the new Democratic administration as they assess ongoing experiments with pay-for-performance (PFP) in the Federal sector.(See Sizing Up Pay-For-Performance In The Next Administration and The Future of Pay-For-Performance Under Pres. Obama.)

A decision needs to be made as to whether such models should be expanded throughout the Executive Branch or concluded with employees being rolled back into the General Schedule (GS) or some similar pay system. A continuing patchwork of pay systems within the Executive Branch (from DHS to FAA to DoD and so forth) is not a good long-term option, if flexibility and movement among agencies is considered a virtue.

The full article is on FedSmith.com.

KP

Retaliation Against FDA Whistleblowers?

According to the New York Times, the FDA may have opened a criminal investigation against 9 scientists who blew the whistle on the agency for failing to properly review highly important medical devices before they were approved for market.  These failures were documented in recent GAO report, discussed in this blog last Friday.  The scientists are seeking assistance from President Obama and have sent him a letter that says in part:

"It has been brought to our attention that F.D.A. management may have just recently ordered the F.D.A. Office of Criminal Investigations (O.C.I.) to investigate us rather than the managers who have engaged in wrongdoing!” . . . It is an outrage that our own agency would step up the retaliation to such a level because we have reported their wrongdoing to the United States Congress.”

LT

Cost-benefit analysis and the impact of Sunstein as regulatory "czar"

One of the tasks clients ask of administrative lawyers is preparing comments on proposed regulations.  To do this effectively, the lawyer needs to know how agencies come up with their proposals.  Eric Posner's defense of the nomination of Cass Sunstein as head of the Office of Information and Regulatory Affairs presents clearly the issues surrounding cost-benefit analysis as such a technique.  EMM

Jurisdiction for review of agency action

On his Customs Law blog, Larry Friedman (Barnes/Richardson, Chicago) discusses Schick v. U.S., a recent Federal Circuit decision.  Seems Mr. Schick failed to file his triennial customs broker report, and when Customs and Border Protection took away his license he appealed to the U.S. Court of International Trade.  However, the Court of Appeals for the Federal Circuit says that this is not within the jurisdiction of the CIT as specified in 28 U.S.C. sec. 1581.  Whoops.  EMM

New administrative law article

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

Deutsch, Rachel.  Note.  The federal role in reducing hospital-acquired conditions:  are Medicare reimbursement incentives enough?  42 Colum. J.L. & Soc. Probs. 1-41 (2008). [L]|[W]

EMM

Theory: "New public management"

A bit off-topic, but of interest to those of us who enjoy crystal-ball-gazing:  John Bumgarner (GAO) and Chad B. Newswander (Virginia Tech - Public Admin/Public Affairs), "The Irony of NPM: The Inevitable Extension of the Role of the American State" in 39 (2) American Review of Public Administration 189 (2009).  Abstract:

Government delivery mechanisms and services are increasingly being shifted to the private sector where executive values of efficiency and effectiveness reign supreme whereas legislative and judicial institutional values are confined to traditional government agencies. New Public Management (NPM) has ironically initiated a process of diffusing legislative and judicial institutional values into the contract state through reactive legislative enactments and judicial opinions that attempt to reinforce the constitutional character of public action. An integration of NPM and legislative and judicial constitutional values is sought to reach a balancing point in the American state. Last, prescriptions are provided for Congress, the judiciary, and public administrators to reach a balancing point that will ensure the protection of constitutional values while valuing effectiveness and efficiency. Thus, NPM may create a potential paradox—rather than the state becoming minimalist in nature, NPM will increase the influence of the state through the diffusion of constitutional values.

This appears to support my view of administrative law as a growth industry.  This article suggests that Congress and the federal judiciary will force administrative law values (e.g., due process) on private sector organizations performing what were government functions.  EMM