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Administrative Law
University of Kentucky School of Law
Kightlinger, Mark F.

Administrative Law
Kightlinger—Fall 2008

Introduction
Overview of the Work and Place of Administrative Agencies in our System of Government

Administrative agencies are units of government created by statute to carry out specific tasks in implementing the statute. Usually, the agencies fall within the executive branch of government; however, some important agencies are independent of the executive branch.

o Agencies are the entities that ACTUALLY EXECUTE the laws that Congress passes (ex. IRS collects taxes, EPA administers the Clear Air Act; Social Security Administration responsible for paying SS beneficiaries, etc.)
o ACTIVITIES OF AGENCIES:
§ Regulating private conduct (ex. OSHA regulating workplaces)
§ Disbursing entitlements (ex. Medicare/ Medicaid)
§ Managing federal property (ex. National Park Service)
§ Many others (e. Issuing passports, admission and deportation of aliens, IRS collection of taxes)
o ORGANIC ACT—An agency’s organic act is the law that created the agency; an agency’s statutory mandate may be contained in the organic act or it may be in a separate law
§ Ex. Consumer Product Safety Act creates the CPSC and defines its power and responsibilities; EPA however, administers a number of different statutes (Clear Air Act, Clear Water Act, etc.) and each of these is a statutory mandate to the agency, both defining its powers under those laws and confining its powers within the constraints of those laws
§ When an agency wants to affect the legal rights of persons, they must be acting pursuant to legal authority granted to them, almost always by statute (don’t really have inherent powers)
o Generally, when agencies act in a way that affects persons outside of the government, they act in one of 2 ways: (1) they ISSUE RULES, or (2) they ISSUE ORDERS AFTER ADJUDICATION

The APA defines agency for purposes of its provisions as “each authority of the Government of the United States, whether or not it is within or subject to review by another agency,” and then it exempts various entities, most notably Congress, the courts, and the governments of the District of Columbia and territories.

o States and state agencies are NOT subject to the APA

ICC v. Cincinnati, New Orleans and Texas Pacific Railway Co. (1897)

o There was concern over abuses in railroad mgt. and transportation before the passage of the Interstate Commerce Act. The Court acknowledged that there were 3 possible courses of action: (1) Congress could prescribe rates itself, (2) It could commit this duty to a subordinate tribunal (the ICC), or (3) It could leave it to the market
§ Court assumes default position is the market and looks for evidence that Congress meant to override this default
o HOLDING—Court found that Congress did not confer upon the commission the legislative power of prescribing rates
§ Basic distinction between legislative and judicial power is:
RULEMAKING—Legislative acts are prospective
ADJUDICATING—Judicial power is retrospective
§ Court here was cautious about granting agencies prospective power rather than retrospective power

Pennsylvania v. West Virginia (1923)

o HOLDING—Court invalidated a WV statute that restricted the ability of pipeline companies to sell natural gas to consumers out of the state
o DISSENT—Brandeis essentially gives the rationale for creating administrative agencies in his dissent by arguing that the court is not institutionally competent to oversee the regulation of the natural gas industry because it would require complex calculations of supply and demand, continuous supervision and expert decisions
o In theory, the courts could do this but they would probably not do an adequate job because although they could set rules, they could not quickly respond to change nor would they have the necessary expertise

National Broadcasting v. US (1943)

o Court reviewed the legality of the Chain Broadcasting Regulations adopted by the FCC
o HOLDING—The regulations adopted by the FCC were a valid exercise of agency authority; Congress felt it was necessary to create the FCC because they were a licensing agency in charge of entry control (needed to have a license to broadcast)
o Very broad grant of authority: “The criterion government the exercise of the Commission’s licensing power is the “public interest, convenience, or necessity)
§ Court seems much more willing to grant expansive powers than in the Cincinnati Railway case (partly due to the election of FDR who selected several members of the Court

US v. Southwestern Cable Co. (1968)

o Involved a claim that the FCC lacked authority to regulation CATV systems; wanted a restrictive interpretation of the law
o HOLDING—Court said that absent compelling evidence that such as Congress’ intention, they could not prohibit administrative action imperative for the achievement of an agency’s ultimate purpose; there was no such evidence here and so the FCC’s authority over “all interstate communication by wire or radio” permitted regulation of the CATV systems
o In the NBC case, the court said that the FCC was operating under explicit statutory authority, while that was not present here; there was only an Act which referred to a general power over communications
o Again, a very broad grant of authority to the agency

FDA v. Brown & Williamson Tobacco Co. (2000)

o FDA asserted jurisdiction to regulate tobacco products and said that nicotine was a drug within the meaning of the FDCA
o Tobacco had its own unique political history, a distinct regulatory scheme and Congress had rejected giving the FDA jurisdiction over tobacco in the past
o HOLDING—Court said that they were obligated to defer not to the agency’s expansive construction of the statute, but to Congress’ consistent judgment to deny the FDA this power
§ To find the FDA’s authority, the court would have had to ignore the plain implication of Congress’ subsequent tobacco-specific regulation
o Court recognized the seriousness of the problem but said that “an administrative agency’s power to regulate in the public interest must always be grounded in valid authority from Congress” and here, it was clear that Congress did not give the FDA this authority
o Represents a return to a much less generous approach to agency authority; more RESTRICTIVE agency power

Adjudication & Rulemaking

Generally, when agencies act in a way that affects persons outside of government, they act in one of two generic ways: They issue rules, or they issue orders after an adjudication

o RULES adopted by agencies are a lot like statues passed by Congress: they establish rules for future conduct on a generic basis, not on a personal basis (even look like statues in how they are organized and phrased)
o ADJUDICATION by agencies looks a lot like what the courts do: they decide disputed issues with respect to specific parties, decide contested facts, apply the law to the facts, and conclude with the issuance of an order; even have a “judge”
§ Includes licensingà a person applies to the agency for a permit or license, and the agency grants the permit or license if it finds in the adjudication that the person meets the criteria for obtaining the permit or license.

These cases define when the Due Process Clause applies to agency action
14th Amendment—“No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the US; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the law”
The rule-making-adjudication distinction was first drawn in two early cases involving taxation

ADJUDICATION

Londoner v. City and County of Denver (1908)

o A city ordinance levied assessments on property owners for street improvements. The decision to pave the streets and the determination of total paving cost did not require a trial-type hearing. However, the division of costs between particular owners did require a hearing because there was a question about how much each piece of property had benefitted.
o HOLDING—Due process rights under the constitution attach to administrative agency hearings which involve adjudication, but not those which involve rulemaking or are legislative in nature.
o Outcome would have been different if the same decisions had been made by the Colorado legislature rather than by the Board of Equalization because the DP Clause would not grant a hearing for legislative actions.

RULEMAKING

Bi-Metallic Investment Co. v. State Board of Equalization (1915)

o A state board increased the valuation of all property in Denver by 40%. A Denver taxpayer had no right to a hearing on the reevaluation.
o HOLDING—DP protections only attach to administrative activities in which a small number of people are concerned, who are exceptionally affected by the act, in each case upon individual grounds. By contrast, rulemaking or quasi-legislative activities which affect a large number of people without regard to the facts of individual cases do not implicate DP protections.
o Not all individuals have a constitutional right to be heard before a matter can be decided in which all are equally concerned; “Where a rule of conduct applies to more than a few people, it is impracticable that every one should have a direct voice in its adoption.”
o The Constitution does not require all public acts to be done in town meeting or an assembly of the whole, statutes are passed that affect individuals without giving them a right to be heard; their power is in electing those who make the rules

Bi-Metallic (Rulemaking)

Londoner (Adjudication)

Large number affected

Small number

(1970)
o Goldberg is the leading modern case holding that due process protects “entitlements.” Welfare cannot be terminated on the theory that its receipt was a mere privilege, instead, it is a form of “new property.”
o NY had terminated welfare assistance to Mrs. Kelly because her landlady had reported that she had a live-in male friend (at the time only single parents could qualify for welfare);
o PROCEDURE GIVEN—Informal hearing procedure in which welfare recipient could tell their side of story; If the state determined that the person no longer qualified as a result of the evidence at the hearing, the state would IMMEDIATELY terminate welfare; The recipient could still seek a DE NOVO, formal administrative hearing, with retroactive payments if the benefits were found to have been erroneously terminated
o HOLDING—A person receiving welfare benefits under statutory and administrative standards defining eligibility HAS A PROPERTY INTEREST in continued receipt of the benefits. If the state wants to terminate the benefits, it must provide notice and a hearing BEFORE doing so.
§ Due process requires an adequate hearing before terminating welfare benefits; doesn’t matter if there is a later constitutionally fair proceeding
§ These pre-termination hearings DO NOT need to take the form of a judicial or quasi-judicial trial

o NEW PROPERTY—The majority determines that welfare benefits are actually “new property” under the DP Clause and therefore DP applies
o KEY DETERMINATION in deciding that there had to be a pre-deprivation hearing:
§ Balancing test—The extent to which procedural due process must be afforded the recipient is influenced by the extent of which (1) he may be “condemned to suffer grievous loss” and (2) depends on whether the recipient’s interest in avoiding the loss outweighs the governmental interest in summary adjudication
§ INDIVIDUAL INTEREST vs. GOVERNMENT INTEREST; as long as what is at stake is the survival of the individual, it is hard for the government to go against that
§ In this case, welfare is the safety net; it is distinctive; where less is at stake for the individual, the government interest gets more weight on its side

o “RUDIMENTARY” DUE PROCESS RIGHTS (requirements for pre-determination hearing)
1. Pre-deprivation hearing
2. Notice, including basis for termination
3. Present evidence orally before an official
4. Confront and cross-examine adverse witnesses
5. Retain/ use counsel (does not equal right to counsel)
6. Decision based on hearing record (restricted to ONLY what came in during the hearing)
7. Receive written statement of facts and reasons for decision
8. Impartial decision maker
§ Looks a lot like the 6th Amendment requirements;
§ Not really very “rudimentary”; actually a high water mark of due process

o APPLICANTS–Court also draws a bright line between current beneficiaries and applicants—it is risky to say that applicants should be extended the same rights and that they should receive benefits until it is determined that they should not get them

WHEN DOES AN INTEREST BECOME A PROTECTABLE RIGHT?
PROPERTY INTERESTS
· Board of Regents v. Roth (1972)
o Roth was a professor at the university and hired for the fixed term of 1 academic year; he was not rehired after his contract expired. No rules protect non-turned faculty after their contract is over
o PROCEDURE GIVEN—Not afforded a hearing at which to challenge the actual cause and basis for the failure to rehire
o HOLDING—A person dismissed at the end of their contract with no tenure does not have the right to procedural due process; NO PROTECTABLE PROPERTY INTEREST under the DPC
o Requirements of due process apply only to deprivation of (1) liberty or (2) property; not present here

o TO HAVE A PROPERTY INTEREST IN A BENEFIT, YOU MUST HAVE:
§ (a) Clearly more than an abstract need or desire for it
§ (b) More than a unilateral expectation of it
§ (c) A legitimate claim of entitlement to it