Key Legal Cases Discussed in Class: King v. Burwell and Gonzales v. Oregon

Chapter 7 Part II

King v. Burwell, 576 U.S. (2014) Slide added for review Class discussion of case, based on edited and highlighted excerpt posted on the class blog: https://biotech.law.lsu.edu/blog/14-114_qol1.pdf Formalizes elephant in the mousehole: Are there things that so important that they should not be left to the agency through ambiguous drafting? How is this complicated by the IRS not being a health care agency? Would the plain language of the statute advance congressional intent in this case? 2

Gonzales v. Oregon, 546 U.S. 243 (2006) The Controlled Substances Act creates the prescription drug requirement: DOJ Reg: [prescriptions] 'be issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice.'' What are the undefined terms? Traditionally the state defined these terms Some states allow non-physicians to write prescriptions Most states have additional limits on controlled substances. 3

Does the CSA give the AG Authority over Assisted Suicide? Oregon passes an assisted suicide law - physicians can write prescriptions for lethal amounts of drugs. Bush II administration opposed assisted suicide AG issues an interpretive rule that assisted suicide is not proper medical purpose Who gets to define legitimate medical purpose? Why doesn't this allow medical marijuana? What is the predicate for being a drug that can be prescribed under the CSA? 4

Example - Court/Agency Conflicts in Interpretation 5

FCC Regulations on Telecommunications Why is federal regulation and preemption necessary for radio and broadcast TV? Definition of Telecommunications "Telecommunications" is defined in the Act as "the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received. What sort of communications did this contemplate? Why can you show sexually explicit content on cable TV and the Internet, but not on broadcast TV? 6

What is an Information Service? Communications Act defines "information services" as "the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications. This was pre-Internet. How is this different from a telecommunications service? Originally, the FCC did not regulate information services, thus no preemption of state action. 7

What is the Internet under the FCC? The broadband provider - your connection to the Internet backbone. May also be your ISP, or your ISP may contract with the broadband provider. Are broadband internet providers telecommunications or information services under the original meaning of the Act? If they are telecommunications services, can the state regulate them? 8

AT&T CORP. v. City of Portland, 216 F. 3d 871 (CTA9 2000) Portland wants to regulate broadband providers Why might a locality want to regulate broadband? Industry says they are telecommunications providers, thus not subject to local regulation 9th Cir agrees that they are telecommunications providers Does it matter whether the FCC has regulated them? 9

National Cable & Telecommunications Association et al. v. Brand X Internet Services et al., 545 U.S. 967 (2005) FCC then promulgates a rule defining broadband providers as information services. Would this let Portland regulate them? Does the holding in AT&T CORP. v. City of Portland bar this rule? Why does timing matter? Was the court reviewing a rule in that case? What if the court had said that the Act defines broadband as telecommunications? 10

The Continuing Saga of Net Neutrality The information services classification came back to bite the FCC on net neutrality. Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014) held that the agency could not impose net neutrality provisions on information services. The FCC then promulgated a rule reclassifying internet service providers as telecommunications services, which could be regulated. This was upheld in US Telecom Association v. FCC, 825 F.3d 674 (D.C. Cir. 2016). The Trump FCC is now going back to the telecommunications definition, which hands the ball back to Portland and other municipalities. 11

Chevron was about notice and comment rules WHAT IF THE COURT IS NOT LOOKING AT A RULE? 12

Leading up to Mead: Christensen v. Harris County, 529 U.S. 576 (2000) What did the court rule? Here . . . we confront an interpretation contained in an opinion letter, not one arrived at after, for example, a formal adjudication or notice-and-comment rulemaking. Interpretations such as those in opinion letters--like interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law--do not warrant Chevron-style deference. Why is this consistent with our definition of a guidance document? 13

When does Chevron Apply? - United States v. Mead, 533 U.S. 218 (2001) Chevron was a notice and comment rule Why does the notice and comment process better assure that an agency legal interpretation is sound? Mead is a letter ruling on the classification of a product for tariff purposes (Daytimer calendars) No notice and comment, thus no vetting Can be changed at a later date without notice and comment - does not bind the agency Should this letter ruling get Chevron deference? 14

The Mead Test ...administrative implementation of a particular statutory provision qualifies for Chevron deference when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority. Remanded for Skidmore analysis. What would you look for to decide if Mead applied? 15

Barnhart v. Walton, 535 U.S. 212 (2002): Chevron/Skidmore Hybrid? This is a SSA interpretation of a statute that is in various guidance documents. The agency treats these as binding should they be rules? Despite this not being a rule, the Court (Breyer) applied Chevron, but only after using factors that look like persuasiveness to decide whether agency s interpretation of the statute should get Chevron. 16

The Barnhart Factors The importance of interpretation to agency policy; The period that the agency has held the view; The legal expertise of the agency; The complexity of the problem; How does this look like the analysis in Brown and Williamson? How can the agency strengthen its case for deference under Barnhart? 17

Applying Barnhart HUD issues guidance on construction of the anti- kickback provisions in a real estate act Published in the register as policy statements with no notice and comment Legal effect? Should the court defer to these under Barnhart? Yes, according to the Second and Ninth Circuits; no, according to the Seventh Circuit. Should this just be Mead? 18

Public Citizen v. U.S. Dept. of Health and Human Services, 332 F.3d 654 (D.C. Cir. 2003) Is the Medicare Manual a notice and comment regulation? Did the agency have the authority to make law on this issue? Did the court find that the manual was a regulation with the force of law as to a third party? How would you argue under Mead and then Barnhart that Chevron should not apply? How can the Medicare Manual be binding on providers if it does not have the force of law? Is it binding on the agency? 19

Whitman v. American Trucking Assns., 531 U.S. 457 (2001) Chevron Step One The court found that the Clean Air Act was ambiguous on the point Chevron Step Two The court found that the agency had stepped outside of the ambiguity and overreached its authority. Think about this as arbitrary and capricious analysis when we finish the next section. Alternative reading the agency went beyond Congressional intent, i.e., Step One The big deal was the court did not invoke the non-delegation doctrine. 20

Interpretation of an Agency's Own Rules a court must necessarily look to the administrative construction of the regulation if the meaning of the words used is in doubt. The intention of Congress or the principles of the Constitution in some situations may be relevant in the first instance in choosing between various constructions. But the ultimate criterion is the administrative interpretation, which becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation. Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945), upheld by Auer v. Robbins, 519 U.S. 452 (1997) 21

Implications of Seminole Rock /Auer Should interpretation of rules and statutes be the same standard? Does Seminole Rock /Auer look like Chevron? What perverse incentives does this give the agency if it gets to resolve ambiguous rules? What if it just repeats the statute in the rule? Does this transform the statute into a regulation entitled to more deference? 22

What has Changed Since Seminole Rock Was Decided in 1945? How have the judicial requirements for posting the basis of a rule changed since 1945? Does a modern court have more information about the basis for the rule than in it would have in 1945? Are rules more complex and interrelated than 1945? How should this influence deference? 23

Do the Courts Really Follow Chevron/Mead? Scholars have studied the actual behavior of the appeals courts and the United States Supreme Court in applying these tests The courts are more likely to use Chevron when there is notice and comment or formal adjudications, and more likely to use Mead/Barnhart for less formal actions. However, there are a lot of cases where formal actions get Mead and some cases in which less formal actions get Chevron. 24

ABA Adlaw Conference 2008 - Justice Garland, 2nd Cir, on Chevron: If you have an ambiguous statute, and need Chevron deference, do not say that the interpretation is clear and there is no other way to construe the law. Say it is ambiguous and you are making a reasonable interpretation based on your knowledge of the statute and the regulatory circumstances. 25

The Implications of Ambiguous Standards Assume you are agency council. Assume you have an ambiguous statute and the agency wants to propose a new rule Also assume that you want to avoid reversal in the courts because of the delay and cost How does your advice differ if you are sure you will get Chevron, versus if there is a significant chance you will get Mead/Barnhart? 26

Chapter 7 Judicial Review of Facts Determined by the Agency

Scope of Judicial Review of Facts Congress sets scope of review, within constitutional boundaries. Since the Constitution is silent on agencies, Congress has wide latitude. Congress can allow anything from a trial de novo to no review, unless such an action otherwise runs afoul of the constitution. 28

Trial De Novo You start over at the trial court Agency findings can be used as evidence, but there is no deference to the agency FOIA Used more by the states than the feds 29

Independent Judgment on the Evidence Decide on the agency record, but do not defer to the agency's interpretation of the record. 30

Clearly Erroneous Definite and firm conviction that a mistake has been made on the facts or policy Same as reviewing a verdict by a trial judge without a jury 31

Substantial Evidence - Formal Adjudications 706(2)(E) - only applies to formal adjudications and formal rulemaking Could a reasonable person have reached the same conclusion? Standard for reviewing a jury verdict or for taking a case from the jury Should a jury get more or less deference than an agency? Hint - substantial means some, not a lot, when you are the agency 32

Substantial Evidence - Informal Adjudications and Rulemaking 706(2)(A) Arbitrary and capricious or abuse of discretion Same assessment of reasonableness as 706(2)(E), so the result is about the same as the substantial evidence test used for formal proceedings This is the most common standard 33

Substantial Evidence - Universal Camera v. NLRB, 340 US 474 (1951) it is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion ; it is evidence sufficient to withstand a motion for a directed verdict. It is a less rigorous standard than clearly erroneous, the standard by which appellate courts review factual findings made by a trial judge. It is more rigorous than no basis in fact. The agency s findings are entitled to respect, but they must nonetheless be set aside when the record before a [court] clearly precludes the [agency s] decision from being justified by a fair estimate of the worth of the testimony of witnesses or its informed judgment on matters within its special competence or both. . . . 34

Some Evidence Scintilla test The agency needs to show even less than in the substantial evidence standard Only limited use 35

Facts Not Reviewable At All Congress can prevent certain types of judicial review Compensation decisions under the Smallpox Vaccine Compensation Act are not reviewable Enabling law is always reviewable unless Congress has taken away the court's subject matter jurisdiction. 36

Portal to Portal Act of 1947 (not in the book) During WWII, the DOL found that the time miner took to get to the mine face was not worktime, subject to the wage and hour laws. Post WWII, the United States Supreme Court found that travel time was covered, and the government, through cost+ contracts with the employers, would own billions. Congress changed the law retroactively and removed the court s jurisdiction: Such a defense, if established, shall be a bar to the action or proceeding, notwithstanding that after such act or omission, such administrative regulation, order, ruling, approval, interpretation, practice, or enforcement policy is modified or rescinded or is determined by judicial authority to be invalid or of no legal effect. 37

Federal Agency Review of ALJ Decisions Assume there is a hearing before an ALJ, the ALJ prepares a recommended opinion, and the agency wants to overrule the ALJ. May the agency substitute its decision for that of the ALJ? Why is the agency in a different position than the court when reconsidering an ALJ decision? What must the agency do when it wants to overrule an ALJ? Why is this different in Louisiana? 38

Agency Deference to the ALJ Why are witness credibility decisions by the ALJ difficult for an appeals panel to reevaluate? Why are ALJ legal findings entitled to the least deference by the agency? Deference to scientific or technical findings by the ALJ will depend on the expertise of the reviewing board members and their staff. 39

NLRB Smoking Hypo Employee says he was fired for union activity and the company says it was for violating the smoking policy. ALJ record shows employee was smoking but supervisor claimed this as excuse to fire him for his union activity. There is conflicting testimony from several witnesses, and the ALJ resolves these in favor of the company. 40

NLRB Board Review Board sees this as typical union harassment case. Board does not believe that supervisor was unaware of employee s union activity. If you are representing the employer before a court contesting the board s action, what are your arguments? What if there was evidence of a strictly enforced anti-smoking policy? 41

OLeary v. Brown-Pacific-Maxon, 340 U.S. 504 (1951) Was a worker within course and scope of employment when he drowned trying to save a foundering swimmer? Were there any disputed facts about the accident? What do you need to determine for a course and scope decision? Is it purely legal? Is this a legal question, entitled to less deference, or a factual one, entitled to more deference? 42

Frankfurters Hybrid Decision Analysis [This] only serves to illustrate once more the variety of ascertainments covered by the blanket term fact. Here of course it does not connote a simple, external, physical event as to which there is conflicting testimony. The conclusion concerns a combination of happenings and the inferences drawn from them. In part at least, the inferences presuppose applicable standards for assessing the simple, external facts. Yet the standards are not so severable from the experience of industry nor of such a nature as to be peculiarly appropriate for independent judicial ascertainment as questions of law. 43

NLRB v. Bell Aerospace Co., 416 U.S. 267 (1974) Company refuses to collectively bargain with buyers, saying they are managers. Agency finds that only managers whose interests align with the company are exempted from unionization. The court overruled the agency, holding that the law exempted all managers. Why no substantial evidence review and Hearst/ Chevron deference? How might the agency still get deference on the remand to determine whether buyers are managers? 44

Chapter 7 A & C Review

Cabining Arbitrary and Capricious Review Old definition Highly deferential to the agency Same as rational relationship test in constitutional law Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971) Added the notion of looking at the administrative record before the agency a substantial inquiry, a thorough, probing, in- depth review, and [a] searching and careful [inquiry into the facts]. 46

When Should the Court Allow the Record to be Supplemented by the Agency? This would result in de novo review of the new material Like a trial transcript on appeal, the record is usually closed. There can be an exception if the issue being appealed to the courts is the agency's failure to allow outside input and thus failing to consider all relevant factors. The court can allow the new material and give the agency a chance to supplement its record in response. There can also be an exception if the plaintiff makes a credible showing of significant bias by the agency and the court needs to evaluate it. The court can ask the agency to appoint an ALJ to take evidence and present it to the court - RARE 47

"Hard Look" - National Lime Assn. v. EPA, 627 F.2d 416, 453 (D.C. Cir. 1980) [judicial review should] evince a concern that variables be accounted for, that the representativeness of test conditions be ascertained, that the validity of tests be assured and the statistical significance of results determined. Collectively, these concerns have sometimes been expressed as a need for reasoned decision- making. . . . However expressed, these more substantive concerns have been coupled with a requirement that assumptions be stated, that process be revealed, that the rejection of alternate theories or abandonment of alternate course of action be explained and that the rationale for the ultimate decision be set forth in a manner which permits the . . . courts to exercise their statutory responsibility upon review. 48

Hard Look at What? The courts cannot use hard look to change the underlying requirement that they defer to agency decisionmaking on facts and policy. Chevron, etc. still applies. Hard look analysis requires agencies to make sure that the record for the case provides a clear basis for their factfinding and their policy decisions. The federal court cannot change the decision, but it can require the agency to provide better support for its decisions. Hard look drives rulemaking ossification. 49