Select Page

Administrative Law
Southern Illinois University School of Law
McCubbin, Patricia Ross

ADMINISTRATIVE LAW: PROFESSOR MCCUBBIN, SPRING 2010
 
DOES THE DELEGATION OF RULEMAKING AUTHORITY VIOLATE NON-DELEGATION DOCTRINE?
 
 
EXAMPLE FACTS:
The Wine Merchants Association, a national trade association for wine merchants, is very concerned about the rulemaking authority granted to the Wine Trade Commission (WTC or Commission) under section 5 of the Wine Trade Commission Act (WTCA).  Subsection (b) requires the Commission to adopt rules identifying and prohibiting common business practices in the wine trade industry that have been shown to act as a fraud or defeat on consumers. The provision, however, does not appear to give the Commission any further guidance on those rules.  Does this vague delegation of rulemaking authority to the WTC violate the nondelegation doctrine?  Be prepared to make both sides of the argument
 
ISSUE:
DOES THE DELEGATION OF RULEMAKING AUTHORITY TO THE AGENCY VIOLATE NON-DELEGATION DOCTRINE?
 
RULE:
In Mistretta v. U.S. the court held that Congressional delegation of rulemaking authority was valid so long as Congress lays down an intelligible principle to which the person or body authorized to exercise the delegated authority is directed to conform, such legislative action is not a forbidden delegation of legislative power.   In American Trucking, the court added that historically, there are only two cases in history where agency rule-making authority violated the Constitution.  To meet the intelligible principle requirement, Congress must:
 
1) Name the agency which the Act is to apply,
2) Clearly delineate the general policy and,
·   General policy entails describing the overall purpose/societal problem to be solved)
3) Provide sufficient boundaries on the agency’s discretion
·   This could be a list of factors that the agency should consider in making rules; or it could be specifying the tool or mechanism (such as a set of guidelines) that the agency is to use to accomplish the overall purpose. 
 
EXAM NOTE:
Ø State the Mistretta Rule and then go discuss whether each factor above is present within the statute. 
Ø All three elements must be met or the statute violates the non-delegation doctrine and is unconstitutional.
Ø  Most arguments will likely come from the 3rd factor, did congress provide boundaries?
______________   ___________    ___________    ____________    ___________    ____________
EXAMPLE APPLICATION:
Is the agency to apply the statute named? 
The Wine Trade Commission Act
Is there a general policy under section 5 of WTC?
To promulgate rules that address business practices that act as fraud or deceit on consumers
Are there boundaries to the delegated authority?
Yes Arguments:
·         Only 2 statutes in history have been found to violate non-delegation doctrine.  One had gave NO guidance for the exercise of discretion, the other (Schechter) conferred authority to regulate an entire economy and with the only boundary being to stimulate by assuring “fair competition” The Wine Trade Act is different  not regulating an entire national economy, it only affects a small segment. 
·         The tool or set of guidelines are the “rules” that the agency is to adopt as indicated in section 5. 
·         A factor to consider is that the “rules” are to be based upon “substantial evidence”
·         Perhaps the boundaries are found in the fact that the section provides that the rules to be adopted by the agency must only address acts that amount to consumer fraud or deceit. Hence, this acts to limit the agency as to the scope of the rules it may promulgate.
·         Congress is in a better position to delegate its authority than courts are to regulate after the fact. 
No Arguments:
·         The wine trade act is similar to Schechter in that the only boundary provided is that the rules should address business practices amounting to consumer fraud or deceit, while the statute in Schechter only said “to stimulate by assuring “fair competition.”  Both of these amount to more of a mere policy statement than any kind of limits or boundaries. 
·         The Act only states that “Such rules shall be based on substantial evidence from the rulemaking record, but what is substantial evidence?, where is this evidence supposed to be found, what should the commission consider?
·         The non-delegation doctrine is testing one thing: Whether Congress assigned rule-making authority. If you say the mechanism for promulgating rules is met simply because Congress delegated power to an agency to “make rules” the test is always met.  All this Act tells the agency to do is make rules, but it gives no guidance on what to consider in doing so. 
·         Professor “Im not entirely convinced that there are sufficient boundaries given, but, as we know, courts are reluctant to find a violation of non-delegation doctrine.”
 
 
 
 
DOES THE AGENCY’S ADJUDICATORY ACTION VIOLATE THE CONSTITUTION?
(JUSTICE BRENNAN TEST)
 
QUESTION:  Lesson 1C.1 asks us to determine whether it is permissible under Article III of the Constitution for the WTC to have authority to hold hearings – in other words, to adjudicate particular matters – under sections 7 and 11 of the Wine Trade Commission Act.
 
 
ISSUE:
DOES THE ADJUDICATORY ACTION OF THE AGENCY VIOLATE ART. III, SEC. 1 OF THE CONSTITUTION?
 
RULE:
The first of two tests was laid out by Justice Brennan in Granfinanciera v. Thomas.  Article III of the Constitution confers the “judicial power of the United States” in our traditional courts, but there is an exception that allows agencies to adjudicate disputes involving so-called “public rights,” not “private rights.”  A “public rights” case involves either:
 
1.      A dispute “between the government and others” (i.e., a governmental entity is the complainant/plaintiff or the respondent/defendant in the agency hearing);  
·   See page 52 for more detail on what it means for there to be a “public right”
·   One easy way we might be able to find a public rights case – If the government is going to be a party to the litigation before the hearing officer, it is a public right case.
·   In this example, we do not clearly have the government as a party to the hearing.  Sec. 7 says “any citizen” shall file a complaint….
·   However, the definitions section of the Act says that a citizen can be a “person” which is defined as “A person shall include any individual, corporation, business, partnership, state, municipality, or political subdivision of a state, or any other legally recognized entity.
·   Therefore, the United States Government could arguably/probably be considered a legally recognized entity which means the federal government could arguably be a plaintiff.  Hence, the agency could adjudicate disputes involving “public rights”.
·   Also, section 12 of the Act indicates that the United States government may also, technically be a defendant in a case.
·   Professor: “Section 12 does not really add much to the analysis that section 7 doesn’t already provide. 
   OR
 
2.      A dispute between two non-governmental entities that nevertheless involves a private matter that is “closely integrated into a public regulatory scheme.”  
·   Might first be helpful to ask what type of matters section 7 hearings would involve?  Hearing could be claim brought by consumer against a wine trader (two non-governmental entities) for violating the ban under section 5 against fraud or deceit.  Because section 5 provides ban on “fraud or deceit on consumers”, the private matter (fraud against the consumer) is closely related to public regulatory scheme. 
·   However, is it sufficient that

’s decision is final.
 
d. What is the standard of review for courts to use when reviewing orders issued by the ALJ?  If the standard is overly deferential, then again, that might cause her some concern.
·   Section 9(a) allows petitions for review of Administrative Orders by petitioning to U.S. Appellate Ct. While our statute does not provide a standard of review, section 9(a)(3) cross references 5 USC 551 which does provide a standard of review. 
 
2.      “The origins and importance of the right to be adjudicated” by the agency; and
(Justice O’Connor is essentially looking to see whether a case involves “public rights” or “private rights” under the definitions used by Justice Brennan.   See the last full paragraph on page 46 and the paragraph after that.)  If the case involves “public rights,” Justice O’Connor would likely have little concern, but she also signals a willingness to allow agencies to adjudicate even “private rights” cases)
·   O’Connor is not really concerned with this factor, doesn’t give it much weight but includes factor nevertheless.
·   So, say, to O’Connor, it’s a non-meaningful factor but even if it is a private rights case, it doesn’t really matter to her (O’Conner)
 
3.      “The concerns that drove Congress to depart from the requirements of Article III.” 
·   What was Congress trying to do when it authorized an agency to deal with this matter. 
Could be:
·   Provide an inexpensive or expeditious forum to settle disputes? 
·   Provide forum that is not susceptible to political pressure? – (O’Conner mentioned this in Schorr case but doesn’t hold much weight as a strong reason to support the agency’s adjudicatory authority after all, aren’t judicial court justices at least as, if not more, immune from political pressure than administrative law judges?)
·   There is not really any evidence of purpose in the WTA, but these may be likely reasons. 
SECTION 553 OF THE ADMINISTRATIVE PROCEDURE ACT
Notice and Comment/Informal Rulemaking
 
Rulemaking process for agencies is governed by:
–          553 (notice and comment rulemaking) & Organic Act
 
Section 553                            à  ***MULTIPLE CHOICE TOPIC FOR EXAM****
Notice and Comment (AKA-informal rulemaking)
– basic rule that when agency is proposing a rule it must provide notice to the public and allow for comment from the public on the rule
 
What must go in a notice of proposed rulemaking?
Sec. 553(b)(1)
·         Time = How long is the comment period. 
·         Place = the place where a public meeting/hearing will be held
·         Nature = this is a reference to whether the hearing will be formal or informal (99% of time informal)
Sec. 553(b)(2):  Agency should be able to cite a provision in the organic act that gives it authority to act
Sec. 553(b)(3):  Terms = the actual words that will be in CFR when codified; Substance = maybe more of a summary of what the proposed rule will provide; Description = an even more vague idea of the content of the rule.  Generally, the actual terms will be given.