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Administrative Law
University of Pennsylvania School of Law
Adler, Matthew D.

Administrative Law: Adler Spring 2011

SECTION ONE: Introduction

I. Background

A. Functions of Agencies

Regulating markets – SEC, NLRB Financial system/Taxes – Federal Reserve, FDIC, IRS

Health and safety – OHSA, NHTSA, FDA Environment – EPA

Social Welfare – SSA, NIH, VA Defense – military agencies, Army, Navy, Air Fore

APA Agency Definition:

“Each authority of the Government of the U.S., whether or not it is within or subject to review by another agency” (excepted are Congress and the courts of the U.S.)

Agencies are not in Constitution, but set up by Federal Statute.

B. Structure of Agencies

– Internal structure: Rulemaking, adjudication functions typically divided

o Headed by board of commissioners (i.e. the FTC, SEC)

o Headed by single administrator (i.e. EPA, IRS)

– External structure: Agency relation to rest of government

o Agencies are created, and are independent bodies over which each of the three Constitutional bodies have control mechanisms, to varying degrees.

o Some are described as “executive agencies” and others as “independent agencies”, but this distinction is not entirely right.

o Adjudication and rule making: two ways agencies make legally binding decisions

C. Agencies & their relationship to Congress/President/Courts: Control Mechanisms

– Created by statutes or executive order. Also sometimes by order/regulation of existing agencies.

– Each branch has various control mechanisms over agencies – it’s misleading to think of the agencies as part of or entirely within one of the branches

o Congressional control mechanisms: Passes a statute. Hold hearings. Have role in appointment of agency heads.

▪ Agencies are always bound by statute

▪ Organic Statute: The statute that sets up the agency. Sets up the agency’s standards and area of regulation and jurisdiction. Specifies function and goal. Addressed to particular agencies.

· Examples: Motor Vehicle Safety Act: NHTSA

▪ Cross-cutting statutes: Stattues that affect many agencies and provide guidleines to many agencies. Sets up standards (Freedom of Info Act) or procedures (Ethics in Gov’t Ac).

– The most important cross-cutting statute is the APA.

o Executive: Appoints agency heads. Can remove agency heads. Can issue EOs to agencies.

o Judiciary: Power of judicial review of agencies. Fed courts have broad right of judicial review in agency actions; reviewing agency decisions for legality.

II. New Deal, The APA And Procedural Due Process

A. Importance of New Deal

o Growth of agencies starts in 1890s, continues, and then explodes in New Deal.

o Sheer growth in size of federal administrative state.

o Three areas of Constitutional Doctrine that changed post-1937 after “Switch in Time”:

· Schechter the only case found to violate non-delegation clause, 1935.

· Post-1937à Court’s much more deferential

1. Non-delegation (Art. I, Sec. 1): After 1937 there is not a single successful non-delegation challenge

2. Commerce Clause (Art. I, Sec. 8): Chief Constitutional basis for Federal Regulation. Pre-1937, court had a restrictive understanding of scope of Commerce Clause. Post 1937, court no longer vigorously enforces the Commerce Clause.

3. Due Process: Substantive Due Process (dealing with ordinary economic regulation). Pre 1937, court frequently strikes down ordinary economic regulation on substantive economic grounds. Post 1937, we don’t see economic regulation struck down on substantive due process.

· So after 1937 all of these restraints go away.

B. Restraints on Administrative State that emerge:

o APA passed in 1946 after WWII à new way to limit agency decision-making

o Procedural Due Process also remains as restraint on agency decision-making

o APA and PDP will provide restraints on agency adjudication and rulemaking

III. Schechter, Mistretta And the Non-Delegation Doctrine

Note—Ways to Raise Judicial Challenges to Agency Action:

· Pre-enforcement challenge (Private party vs. gov’t) – i.e.: Mistretta

· Enforcement challenge (Gov’t vs. private party) – i.e.: Schechter

A.L.A. Schechter Poultry Corp v U.S. (SCOTUS 1935) (Non-Delegation Doctrine)

Facts: National Industrial Recovery Act of 1933 (NIRA). Under NIRA, the President can issue codes of fair competition, a rulemaking power.

– Schechter, a wholly intrastate poultry slaughterhouse, violated the Live Poultry Code that regulated NYC industry – set min hour/wage provisions/trade practices.

– Procedural aspect of NIRA: Trade or Industry group applies to make code

o Hearings can be had and consumers and workers may be allowed to be involved.

o President issues rule/code

o Statute provides opportunity for hearing prior to the Pres action if interested parties request it

– Limitations on the Pres’ power: can’t promote monopolies, can’t be business adverse, effectuates policy. [Very FEW limitations on the president’s power—virtually was able to act unchecked]

– Pursuant to the National Recovery Act, the Live Poultry Code is established.

– Enforcement: Criminal, by misdemeanor or Civil, by injunctive action. By United States.

– U.S. here brings Schechter into court on misdemeanor challenges

Issues: Raise 3 Constitutional challenges:

1. Non-delegation challenge

2. Interstate Commerce

3. Due Process

– These Constitutional challenges are raised as a defense to enforcement of the rule.

▪ Non-Delegation Challenge: Unconstitutional delegation of legislative power.

· Art. I, Sect. I, Cl. I: “All legislative powers herein granted shall be vested in a Congress of the United States…”

o Holding and Reasoning: Court agrees the act is unconstitutional. Such a delegation of leg power is uncon.

§ There is an existing tort of unfair competition, but surely “fair competition” is broader than this.

§ Federal Trade Commission is empowered to police “unfair methods of competition.”

Ø Adjudicating / Rulemaking distinction – FTC an adjudicatory body that decides on ad hoc, case-by-case basis (like a jud model) whether a practice is an “unfair method of competition.”

Þ Intsead, here Pres is exercising RM power to make Codes of Fair Competition (no limit on his power)

Ø Procedural apparatus – FTC has procedural protections: hearing, opinion, judicial review. If we provide procedural protections under NIRA – notice, hearing, opinion justifying rule, judicial review – should Ct still find unconst’l?

Ø Statutory standard too indeterminate itself (unfair methods of competition v. fair competition)

Þ FTC might be economic efficiency statute; NIRA is statute about macroeconomic stabilization – raising GNP; getting country out of depression. More indeterminate? Not clear macroeconomic stabilization has greater boundary area of indeterminacy than economic efficiency.

o Legislative Power: Does it mean power to make rules?

§ Not what the court says. Not a per se test that says non-delegation is about giving away power to make rules.

§ Instead, court says a statute violates non-delegation if it is too indeterminate, too unclear, doesn’t give specific guidance to an agency.

§ Question is one of determinacy and indeterminacy. But see Hart. If it is true that Article I Section I is about degrees of inde

· Permits case-by-case decision-making – takes general standard and applies it to specific cases

· Notice – More determinate statute gives notice to affected party re: impermissible bhvr; +ex ante

· Cngrss’l “capture” – special interests capture

· Agency “capture” – agencies subject to capture

· Ag flexibility to respond to changed circ– costs to change legisl high; ag can change more easily

· Allows for more Pres control – to the extent that you think of President as democratic actor

· Cngss’l control – to the extent you think Congress a democratic body, majoritarian authority

Factors in favor of greater determinacy:

Congress’ democratic capacity, Congress’ filing in the blanks of the policy/statute

Ex ante notice to private parties

Agency capture by interest groups, don’t want this

Factors in favor of greater Indeterminacy:

Capacity to respond to changing circumstances

Adjudication: case by case decision making may be better way to flesh out standards

President may be more democratic: President’s democratic role

Agencies expertise

How does Supreme Court deal w/ nondelegation analysis?

· “Intelligible principle” – so long as Congress lays down by legislative act an intelligible principle to which the agency is directed to conform, such legislative action is not a forbidden delegation of legislative power.

o What does this mean?

· Unjustified degree of indeterminacy? But this is an opaque way of stating it.

· Statute always provides right answers? Seems no statute does that; all have interdeterminacy

· Statute sometimes provides right answers – impossibly lenient since all statutes can do this.

· Ct has effectively gotten rid of nondelegation doctrine – judicially un-enforced constitutional norm.

Mistretta v US (highly indeterminate) “Intelligible Principle”

A. Rule: “Intelligible Principle”: Court will look at the statute and see if it provides an intelligible principle to guide the agency.

B. Facts: Sentencing Reform Act of 1984 creates US Sentencing Commission as independent body w/in judicial branch.

C. Challenge: In violation of Separation of Powers; impermissible delegation of authority to the Comm’n. à Ct disagrees.

D. Holding: No excessive delegation of power nor SOP violation; safeguards = Cngrss’l review, experienced panel

Establishes intelligible principle = some logical reason and direction/std. in the delegation à Ct will say its okay.

The test is unjustified degree of indeterminacy, and the court’s posture is non-enforcement

As a practical matter, what this case confirms is that Congress has ability to delegate power under broad standards.

The 1935 cases are outliers or exceptions to the general view of the court.