TRAC Factors Applied in the Present Tense

In the Pesticide Action Network North America (“PANNA”) case, below, the Ninth Circuit Court of Appeals applies the TRAC factors in a case where environmental safety advocates seek judicial review of the EPA’s delayed response to the advocates’ petition calling on the agency to regulate the use of chlorpyrifos on crops.

The PANNA court starts by proclaiming that the agency’s “delay is egregious and warrants mandamus relief.” A writ of mandamus is an order from a court ordering an inferior government official (like an agency head) to properly fulfill their official duties or to correct an abuse of discretion. Congress gave courts the authority to issue writs of mandamus in the All Writs Act,  28 U.S.C. § 1651, which allows courts to “issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.” Writs of mandamus are considered “extraordinary remedies” that courts justify granting only in “exceptional circumstances.” In the context of agency delay, mandamus is only warranted when an agency’s delay is egregious. 

Here is an overview video about the pesticide issue in the case below. It’s a short, and informative, clip that provides great context for the issue in the case: If You Can Hear My Voice: The Fight to Ban Chlorpyrifos -  https://youtu.be/CnD1I3T2vr8

Pesticide Action Network North America (PANNA) v. U.S. Environmental Protection Agency

798 F.3d 809 (9th Cir. 2015)

McKEOWN, Circuit Judge:

Although filibustering may be a venerable tradition in the United States Senate, it is frowned upon in administrative agencies tasked with protecting human health. Pesticide Action Network North America and the Natural Resources Defense Council have been waiting for years for the United States Environmental Protection Agency to respond to their administrative petition requesting a ban on the pesticide chlorpyrifos. Instead, they've received a litany of partial status reports, missed deadlines, and vague promises of future action. We recognize the scientific complexity inherent in evaluating the safety of pesticides and the competing interests that the agency must juggle. However, EPA's ambiguous plan to possibly issue a proposed rule nearly nine years after receiving the administrative petition is too little, too late. This delay is egregious and warrants mandamus relief. We order EPA to issue a full and final response to the petition no later than October 31, 2015.

BACKGROUND

EPA is tasked with registering all pesticides. A pesticide may be registered only if EPA finds that it is “safe,” meaning that "there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information." 21 U.S.C. § 346a(b)(2)(A)(ii). EPA may “revoke” a pesticide's registration whenever it determines that its use does not meet safety standards. Id. § 346a(b)(2)(A)(i).

The Food Quality Protection Act of 1996, Pub.L. No. 104-170, directed EPA to take a fresh look at the safety of existing pesticides. The statute required EPA to examine every pesticide then in use to ensure compliance with relevant safety standards. The Act gave EPA ten years to complete an initial review of registered pesticides, 21 U.S.C. 346a(q)(1), and ordered the agency to repeat the process using updated scientific data every fifteen years, 7 U.S.C. § 136a(g)(1)(A)(iii).

During this initial review, EPA determined that the pesticide at issue here, chlorpyrifos, was not being used in an altogether safe manner. In 2000, EPA announced an agreement with pesticide manufacturers to ban the application of chlorpyrifos in residential areas. Carol M. Browner, Dursban Announcement (June 8, 2000). Soon after, the agency issued both interim and final decisions permitting the continued use of chlorpyrifos in agricultural areas.

Pesticide Action Network North America and the Natural Resources Defense Council vehemently disagree with EPA's assessment that chlorpyrifos is safe. [...] Pesticide Action Network [...] filed an administrative petition with EPA in September 2007. EPA published a notice of that petition in the Federal Register, 72 Fed. Reg. 58,845 (Oct. 17, 2007), but otherwise did not issue any formal response to it. In July 2010 Pesticide Action Network filed suit in federal district court in New York demanding a final response to the administrative petition. Five months later, EPA and Pesticide Action Network filed a stipulation staying the suit based on EPA's promise that it would issue a human health risk assessment by June 2011 and a final response by November 2011. EPA was a month late in issuing the human health risk assessment and failed to publish a final response to the administrative petition.

In April 2012, Pesticide Action Network filed a petition for a writ of mandamus in the Ninth Circuit. EPA responded by publishing a partial denial of the administrative petition and stating that it would finalize its response to the remaining issues raised in the petition between [by February, 2014]. 

After mediation efforts failed to yield a resolution, we denied the 2012 mandamus petition. In concluding that mandamus relief was inappropriate at that time, we noted that EPA had a “concrete timeline” for issuing a final response by February 2014, and made clear that “our denial of the petition is without prejudice to seeking the same relief at a future date in the event EPA fails to act.” Id. at 651-52.

As an astute reader might have guessed, EPA's timeline proved not to be “concrete.” When EPA failed to issue a final response to the administrative petition in February 2014 as promised, Pesticide Action Network filed a renewed petition for a writ of mandamus in September 2014, which is the subject of this opinion. [...]

We heard oral argument on June 4, 2015. In response to questioning regarding when EPA intended to issue a final response to the administrative petition, counsel for EPA was unable to offer a firm date. However, counsel stated that EPA would know by June 30 whether the public comments received in response to its preliminary final denial of the administrative petition necessitated further proceedings. We thus ordered EPA to inform the court of the date by which it intended to either "finalize the preliminary denial of [the] administrative petition" or issue any other "final ruling" in this matter. In re Pesticide Action, Network N. Am., 790 F.3d 875 (9th Cir. 2015).

In response to that order, EPA asserted that its concerns about contamination of drinking water had convinced it to take more aggressive action to restrict chlorpyrifos. EPA stated that its current plan is to publish, before April 15, 2016, a proposed rule to "revoke all chlorpyrifos tolerances"—in essence, to impose an outright ban on the pesticide. In that update, however, EPA also noted that certain labeling changes could render such action “unnecessary.” Dissatisfied with the uncertainty of EPA's response, Pesticide Action Network reiterated its request that we issue a writ of mandamus compelling EPA to issue a “final” ruling on the administrative petition.

ANALYSIS

The only question before us is whether EPA’s delay in responding to the administrative petition warrants the extraordinary remedy of mandamus. We conclude that it does. EPA has spent nearly a decade reviewing Pesticide Action Network’s data and arguments. Even in response to our unambiguous order directing EPA to specify a date for issuing a “final ruling” on the administrative petition, the agency has still not stated with certainty when it intends to take formal action to grant or deny it. Issuing a writ of mandamus is necessary to end this cycle of incomplete responses, missed deadlines, and unreasonable delay.

The legal standard governing our analysis is neither complex nor contested by the parties. The Administrative Procedure Act instructs agencies to complete their work “within a reasonable time,” and grants courts of appeal the authority to “compel agency action unlawfully withheld or unreasonably delayed.” 5 U.S.C. §§ 555(b), 706(1). Our authority to issue a writ of mandamus is contained in the All Writs Act, 28 U.S.C. § 1651. Issuing a writ of mandamus directing a federal agency to act, however, is "an extraordinary remedy justified only in `exceptional circumstances.'" In re Cal. Power Exch. Corp., 245 F.3d 1110, 1120 (9th Cir.2001) (quoting Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 289, 108 S.Ct. 1133, 99 L.Ed.2d 296 (1988)). Mandamus is warranted in those rare instances when the agency's delay is “egregious.” Id. at 1124 (internal quotation marks omitted).

Our inquiry is governed by the six-factor test articulated in Telecommunications Research and Action Center v. F.C.C., 750 F.2d 70 (D.C.Cir.1984), known as the “TRAC factors.” These factors are:

(1) the time agencies take to make decisions must be governed by a rule of reason;

(2) where Congress has provided a timetable or other indication of the speed with which it expects the agency to proceed in the enabling statute, that statutory scheme may supply content for this rule of reason;

(3) delays that might be reasonable in the sphere of economic regulation are less tolerable when human health and welfare are at stake;

(4) the court should consider the effect of expediting delayed action on agency activities of a higher or competing priority;

(5) the court should also take into account the nature and extent of the interests prejudiced by delay; and

(6) the court need not find any impropriety lurking behind agency lassitude in order to hold that agency action is unreasonably delayed.

Two years ago, in July 2013, we applied the TRAC factors to Pesticide Action Network's 2012 mandamus petition and found that they did not yet weigh in favor of judicial action. We explained that the “complexity of the issue” justified EPA's delay in answering the petition, and noted that the agency had many competing priorities consuming its resources. In re Pesticide Action Network, 532 Fed.Appx. at 651. Although Pesticide Action Network alleged that chlorpyrifos harmed human health and safety, the urgency of action was mitigated somewhat because EPA “regulates almost entirely in the realm of human health” and had certified the safety of chlorpyrifos in 2006. Critically, we recognized that issuing a writ was unnecessary in light of EPA's "concrete timeline" for finally resolving the petition in “February 2014.” 

EPA would have us adhere to the reasoning and holding of our prior disposition. But time changes things, including our weighing of the TRAC factors.

First and foremost, the “rule of reason” has tipped sharply in favor of Pesticide Action Network. Two years ago, EPA had been considering the administrative petition for six years and had a “concrete timeline” for issuing a final ruling in a matter of months. Now, the delay has stretched to eight years, and when we asked EPA to specify the precise date by which it would issue a “final ruling” on Pesticide Action Network's petition, it demurred. Instead, EPA told us it intends to initiate a proposed rulemaking next year, in April 2016. Not only is a proposed rulemaking not a final ruling, EPA also indicated that it might not issue such a rule at all if settlement discussions with industry are fruitful. These prospective conversations introduce yet another uncertainty in the process. What's more, EPA's latest status report says that it has “concerns about the risks to farmworkers” who are exposed to chlorpyrifos and states that “complex regulatory proceedings” may be necessary. Yet EPA does not offer a timetable for concluding or even initiating those proceedings. EPA's response isn't a “concrete timeline” for resolving the petition—it's a roadmap for further delay. EPA has stretched the “rule of reason” beyond its limits.

Another factor that has moved the needle is the threat posed by chlorpyrifos to human health. Although EPA determined that chlorpyrifos was “safe” in 2006, it has backtracked significantly from that pronouncement over the last several years. EPA recently imposed new labeling requirements on the chemical, and in its latest status report, EPA reported that chlorpyrifos poses such a significant threat to water supplies that a nationwide ban on the pesticide may be justified. We do not take this representation lightly. Yet EPA offers no acceptable justification for the considerable human health interests prejudiced by the delay. In view of EPA's own assessment of the dangers to human health posed by this pesticide, we have little difficulty concluding it should be compelled to act quickly to resolve the administrative petition.

Finally, although there is no allegation of impropriety underlying EPA's delay, we note that the agency has a significant history of missing the deadlines it has set in these proceedings. The D.C. Circuit's comment in Public Citizen Health Research Group v. Brock seems particularly apt here: “In light of the fact that [the agency's] timetable representations have suffered over the years from a persistent excess of optimism, we share petitioners' concerns as to the probable completion date.” 823 F.2d 626, 629 (D.C.Cir.1987) (per curiam). EPA's unreasonable delay in responding to the administrative petition has already been the subject of three non-frivolous lawsuits. There should not be a fourth.

CONCLUSION AND ORDER

The petition for a writ of mandamus is granted. EPA is directed to issue either a proposed or final revocation rule or a full and final response to the administrative petition by October 31, 2015. If EPA chooses to issue a proposed revocation rule, it shall inform the court by October 31, 2015, of the timeline for finalizing the proposed rule. The court will consider modification of this deadline only if EPA documents that extraordinary circumstances not already presented to the court will prevent its compliance.

The petition for a writ of mandamus is GRANTED.

Environmental Integrity Project v. EPA

425 F.3d 992 (D.C. Cir. 2005)

DAVID B. SENTELLE, Circuit Judge.

The Environmental Integrity Project and other petitioners petition for review of the Environmental Protection Agency’s Part 70 regulations, as well as the Agency’s revised interpretation of its “periodic” and “umbrella” monitoring rules. Petitioners contend EPA’s Part 70 regulations are arbitrary, capricious, and otherwise unlawful. In addition, petitioners claim EPA’s actions in this case violate the notice-and-comment requirements of the Administrative Procedure Act (APA). Because we agree EPA's final rule was not a "logical outgrowth" of the Agency's proposed interim rule, we grant the petition for review, vacate the final rule, and remand the matter to the Secretary. [...]

I. Background

[...] The Clean Air Act (CAA) requires that [every major stationary source of air pollution has to get an operating permit (called a Title V permit) to ensure that it will comply with pollution limitations. (Stationary sources are not mobile like cars or trucks. Stationary sources are air pollution sources like factories and power plants that do not move.) All stationary sources that have Title V permits must monitor their air emissions (pollution discharges) to assure that they are complying with the CAA. The EPA has promulgated numerous monitoring regulations. Two monitoring regulations are relevant here: the “periodic monitoring” rule and the “umbrella monitoring” rule. These monitoring regulations overlap and conflict with each other, confusing permit-holders.]

The “periodic monitoring” rule, 40 C.F.R. § 70.6(a)(3)(i)(B), requires that

[w]here the applicable requirement does not require periodic testing or instrumental or noninstrumental monitoring (which may consist of recordkeeping designed to serve as monitoring), [each permit must contain] periodic monitoring sufficient to yield reliable data from the relevant time period that are representative of the source's compliance with the permit. Such monitoring requirements shall assure use of terms, test methods, units, averaging periods, and other statistical conventions consistent with the applicable requirement. Recordkeeping provisions may be sufficient to meet the requirements of [the periodic monitoring rule].

The “umbrella” rule, 40 C.F.R. § 70.6(c)(1), requires that each permit contain, “[c]onsistent with [the “periodic monitoring” rule], compliance certification, testing, monitoring, reporting, and recordkeeping requirements sufficient to assure compliance with the terms and conditions of the permit.” EPA must review and approve all Title V permits, and if a specific permit requires insufficient monitoring, EPA must reject it. 

In November and December 2000, EPA rejected two Title V permits. In both decisions, EPA held the “umbrella” rule empowers state permitting authorities to review, on a case-by-case basis, the sufficiency of each permittee's monitoring requirements, independent of any other monitoring that might be imposed under the “periodic monitoring” rule. Thus, EPA concluded that where a permit requires no “periodic” monitoring at all, the “umbrella” rule is satisfied by meeting the more substantive requirements of the “periodic monitoring” rule. On the other hand, where there is some periodic monitoring but it is not sufficient to assure compliance, the umbrella rule's “separate regulatory standard” governs instead and requires case-by-case enhancement of existing monitoring “as necessary to be sufficient to assure compliance.” 

[Note from Lamdan: YES, reader, this is very confusing! It helps to think of the “umbrella” and “periodic” monitoring requirements, simply, as two different monitoring requirements. If the EPA requires both umbrella and periodic monitoring requirements then state environmental agencies administering the permit program can tell the polluters to do more monitoring if they are not doing enough “periodic” monitoring. Conversely, if the EPA requires only one of the requirements (umbrella or periodic monitoring) then Title V permit holders can do less monitoring. Title V permitting agencies could not make a permit-holding polluter with periodic monitoring plans add additional, more stringent umbrella monitoring plans on top of the periodic monitoring.]

On September 17, 2002, EPA published a proposed rule to clarify the monitoring required in Title V permits by “codifying” the interpretation of Part 70 that the Agency embraced in the permit rejection cases. Specifically, EPA proposed to remove the italicized prefatory language to § 70.6(c)(1) providing that all Title V permits contain, “[c]onsistent with paragraph (a)(3) of this section,” monitoring “sufficient to assure compliance with the terms and conditions of the permit.” [This proposed rule would make the “umbrella” and “periodic” monitoring requirements independent of each other. The two monitoring regulations would, in some cases, require stationary source air polluters to adopt both periodic and umbrella monitoring plans.]

In its final rule, however, EPA decided not to amend Part 70. [...] Instead of codifying the two permit decisions, EPA's final rule switched course and adopted the opposite position, holding that [the periodic monitoring requirement and the umbrella monitoring requirement] are not “separate regulatory standard[s],” and permits that satisfy [periodic monitoring requirements] cannot be supplemented with additional monitoring requirements under the [umbrella monitoring rule]. The upshot of EPA's final interpretation of its Part 70 rules is that state permitting authorities are now prohibited from adding new monitoring requirements under the “umbrella” rule if the Title V permit already contains some (albeit insufficient) monitoring under the “periodic monitoring” rule.

EPA explains its abandonment of the proposed rule (and its adoption of the inverse interpretation of its Part 70 regulations) on the basis of public comments, which insisted that source-specific, case-by-case reviews by permitting authorities would have been unduly time-consuming and wasteful of valuable regulatory resources. [...]

II. Analysis

A.

This Court will uphold EPA's final agency action unless it was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. See 5 U.S.C. § 706(2)(A). However, an interpretation of a legislative rule “cannot be modified without the notice and comment procedure that would be required to change the underlying regulation—otherwise, an agency could easily evade notice and comment requirements by amending a rule under the guise of reinterpreting it.” Molycorp, Inc. v. EPA, 197 F.3d 543, 546 (D.C.Cir. 1999).

B.

The Environmental Integrity Project and other petitioners raise four principal arguments in their petition for review. First, petitioners argue EPA’s Part 70 regulations unlawfully, arbitrarily, and capriciously compel state permitting authorities to accept “inadequate but ‘periodic’ monitoring ... without enhancement.” [...] Finally, petitioners argue that EPA's final rule violates APA §§ 551(5), 553(c), because it was not a “logical outgrowth” of the Agency's proposed interim rule and therefore did not comport with the requirements of notice-and-comment rulemaking. Because we conclude the fourth and final argument is dispositive in this case, we need not and do not reach petitioners' other claims. 

C.

Last term, in International Union, United Mine Workers of America v. Mine Safety & Health Administration, 407 F.3d 1250 (D.C.Cir. 2005), we noted:

[The APA's n]otice requirements are designed (1) to ensure that agency regulations are tested via exposure to diverse public comment, (2) to ensure fairness to affected parties, and (3) to give affected parties an opportunity to develop evidence in the record to support their objections to the rule and thereby enhance the quality of judicial review.

Given the strictures of notice-and-comment rulemaking, an agency’s proposed rule and its final rule may differ only insofar as the latter is a “logical outgrowth” of the former. See Northeast Maryland Waste Disposal Auth., 358 F.3d at 952 (stating a final rule is a “logical outgrowth” of a proposed rule only if interested parties “‘should have anticipated’ that the change was possible, and thus reasonably should have filed their comments on the subject during the notice-and-comment period”) The “logical outgrowth” doctrine does not extend to a final rule that finds no roots in the agency’s proposal because “[s]omething is not a logical outgrowth of nothing,” Kooritzky, 17 F.3d at 1513, nor does it apply where interested parties would have had to “divine [the agency’s] unspoken thoughts,” Arizona Pub. Serv. Co. v. EPA, 211 F.3d 1280, 1299 (D.C.Cir.2000) , because the final rule was “surprisingly distant” from the Agency's proposal. International Union, 407 F.3d at 1260.

Thus, we have refused to allow agencies to use the rulemaking process to pull a surprise switcheroo on regulated entities. In International Union, for example, the Agency's proposed rule provided that “[a] minimum air velocity of 300 feet per minute must be maintained” to ventilate underground coal mines. The final rule, however, provided that “[t]he maximum air velocity in the belt entry must be no greater than 500 feet per minute, unless otherwise approved in the mine ventilation plan.” Although “[t]here were some comments during the hearings urging the Secretary to set a maximum velocity cap,” we vacated the final rule because the Agency “did not afford a ... public notice of its intent to adopt, much less an opportunity to comment on, such a cap.” International Union, 407 F.3d at 1261; see also Fertilizer Inst. v. EPA, 935 F.2d 1303, 1312 (D.C.Cir. 1991) (stating EPA “cannot bootstrap notice from a comment”) [...]

EPA argues that it met its notice-and-comment obligations because its final interpretation was also mentioned (albeit negatively) in the Agency's proposal. However, this argument proves too much. If the APA's notice requirements mean anything, they require that a reasonable commenter must be able to trust an agency's representations about which particular aspects of its proposal are open for consideration. A contrary rule would allow an agency to reject innumerable alternatives in its Notice of Proposed Rulemaking only to justify any final rule it might be able to devise by whimsically picking and choosing within the four corners of a lengthy “notice.” Such an exercise in “looking over a crowd and picking out your friends,” does not advise interested parties how to direct their comments and does not comprise adequate notice under APA § 553(c).

In this case, EPA proposed to codify its interpretation of the Part 70 rules through an amendment of the regulatory text. Whatever a “logical outgrowth” of this proposal may include, it certainly does not include the Agency's decision to repudiate its proposed interpretation and adopt its inverse. We therefore hold EPA's final rule violated the APA's notice-and-comment requirements.

III. Conclusion

For the reasons set forth above, we [...] vacate the final rule, and remand the matter to the Secretary [...]

Hawaii Helicopter Operators Association v. Federal Aviation Administration

51 F.3d 212 (9th Cir. 1995)

SCHROEDER, Circuit Judge:

The Hawaii Helicopter Operators Association (“HHOA”) petitions, pursuant to 49 U.S.C. § 46110(a), for review of the Federal Aviation Administration's issuance of Special Federal Aviation Regulation (“SFAR”) No. 71 establishing special operating rules, procedures and limitations for airplane and helicopter air tour operators in Hawaii. The regulation was promulgated on an emergency basis pursuant to the exception contained in 5 U.S.C. §553, which exempts an agency from complying with the notice and comment requirements of the Administrative Procedure Act (“APA”) where good cause exists. HHOA’s principal grievance is with SFAR No. 71’s prohibition against air tour aircraft flying below a minimum altitude of 1,500 feet. HHOA also objects to the requirements that helicopters be amphibious and equipped with emergency flotation gear, or that each person on board wear approved flotation gear.

The FAA promulgated SFAR No. 71 after a series of seven helicopter accidents involving four fatalities, which occurred in the first nine months of 1994. The regulation was promulgated September 26, 1994. It became effective on October 26, 1994.

HHOA initially contends that the FAA improperly invoked 5 U.S.C. § 553(b)(B), the good cause exception to the notice and comment requirements of the APA’s rule-making provision. The APA provides that notice and comment may be waived by an agency when it “for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.” 5 U.S.C. § 553(b)(B).

This court has said that our “inquiry into whether the Secretary properly invoked ‘good cause’ proceeds case-by-case, sensitive to the totality of the factors at play.” Alcaraz v. Block, 746 F.2d 593, 612 (9th Cir.1984). We have observed that notice and comment procedures should be waived only when “delay would do real harm.” Buschmann v. Schweiker, 676 F.2d 352, 357 (9th Cir.1982).

In this case the FAA based its invocation of the “good cause” exception on Hawaii's “recent escalation of fatal air tour accidents.” The FAA further explained that the problem was urgent:

Despite voluntary measures, the cooperation of the Hawaii air tour operators, and the FAA’s inspections, the accident data show that voluntary measures and existing regulations are insufficient to ensure safe air tour operations in Hawaii. The recent accidents ... indicate an urgent safety problem that cannot be adequately addressed solely by enforcement of existing regulations. Air Tour Operators in the State of Hawaii, 59 Fed.Reg. 49138, 49145 (Sept. 26, 1994) (to be codified at 14 C.F.R. §§91 and 135). 

The FAA listed specific facts supporting its reasons for issuing SFAR No. 71. These facts included: (1) there had been 20 air tour accidents between 1991 and 1994, including 24 fatalities; (2) among the 20 accidents, seven had occurred in 1994; (3) the most recent fatal accident had occurred on July 14, 1994; (4) the most recent non-fatal accident had occurred on September 4, 1994, only three weeks before SFAR No. 71 was promulgated.

We perceive no indication in this record that the FAA waived notice and comment for any reasons other than its concern about the threat to public safety reflected in an increasing number of helicopter accidents. The FAA adequately explained the basis for taking emergency action without waiting for public participation. Compare San Diego Air Sports Center, Inc. v. FAA, 887 F.2d 966, 970 (9th Cir.1989) (FAA did not comply with provisions of §553 when it issued letter disallowing parachuting without any explanation of why it felt emergency action was needed and where only known accident had occurred two years earlier.).

HHOA also contends that SFAR No. 71 is arbitrary and capricious. See 5 U.S.C. §706(2)(A). A decision is arbitrary and capricious within the meaning of the APA when the agency

has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Beno v. Shalala, 30 F.3d 1057, 1073 (9th Cir.1994) (quoting Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 44, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443 (1983)). The reviewing court “may not substitute its judgment for the agency’s; rather, it is limited to an inquiry whether the agency's decision was based on a consideration of relevant factors and whether there was a clear error of judgment.” Marshall, 625 F.2d at 302. An agency's factual findings must be upheld “if those findings are supported by substantial evidence on the record as a whole.” Arkansas v. Oklahoma, 503 U.S. 91, 113, 112 S.Ct. 1046, 1060, 117 L.Ed.2d 239 (1992).

HHOA's principal objection is to the 1,500 foot minimum flying altitude requirement. The FAA summarized its rationale as follows:

Hawaii’s unique topography often complicates access to suitable emergency landing areas. The air tour accidents in Hawaii have been characterized by insufficient time for pilots to locate suitable landing areas after engine power loss or other problems leading to accidents. The requirement to maintain an altitude of 1,500 feet above the surface is necessary for safety because it allows the pilot sufficient time to react in an emergency, to notify and instruct passengers, and to prepare for a forced landing. An aircraft operating at least 1,500 feet above the surface allows the pilot a greater opportunity to select a suitable landing site than would be the case at lower altitudes.

On the basis of the record before this court, the regulation bears a rational relationship to legitimate FAA safety concerns and is neither arbitrary nor capricious.

HHOA also objects to the SFAR 71’s flotation requirements, contending that no rational basis supports singling out helicopters flown in Hawaii for such regulation. The regulation itself adequately explains that flotation requirements were imposed after a study of recent helicopter accidents in Hawaii showed that crash victims of accidents where flotation equipment was available were much less likely to drown than victims of helicopter accidents where no such equipment was available. We conclude that a reasonable basis supported the flotation requirement.

HHOA also contends that due process requires the FAA to provide some notice and comment before promulgating the regulation. Where the requirements of §553 have been satisfied, however, the Constitution imposes no higher procedural requirements. Cf. Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 524, 98 S.Ct. 1197, 1202, 55 L.Ed.2d 460 (1978) (“[Section 553 establishes] the maximum procedural requirements which Congress was willing to have the courts impose upon agencies in conducting rulemaking procedures.”).

Moreover, the FAA has not barred all input from interested parties such as HHOA. Under SFAR No. 71,

interested persons are invited to submit such comments as they desire regarding this SFAR.... All communications received on or before the close of the comment period will be considered by the Administrator, and this SFAR may be changed in light of the comments received. All comments will be available, both before and after the closing dates for comments, in the Rules Docket for examination by interested parties.

In this manner, the FAA left the record open for a comment period that has recently expired. The FAA has indicated that it may modify SFAR No. 71 in response to comments. The record reflects that a number of comments, including comments from the National Transportation Safety Board, have directed criticism at SFAR No. 71. These comments may well merit response by the FAA.

When the FAA does respond to the comments, its action, including any modifications of the regulation, will constitute final agency action reviewable by this court. See, e.g., 14 C.F.R. §§ 11.61-11.69.

This panel will retain jurisdiction of any further petitions for review of SFAR No. 71 or any successor regulation emerging from the comment period. 

REVIEW DENIED.

State of New Jersey Dep’t of Environmental Protection v. U.S. Environmental Protection Agency 

626 F.2d 1038 (1980)

McGOWAN, Circuit Judge:

We review here a rule promulgated by the Administrator of the Environmental Protection Agency [“EPA”] under section 7407(d) of the Clean Air Act. Because the Administrator felt that a tight statutory schedule gave him “good cause” to do so, he promulgated that rule without the prior notice and without the prior solicitation of public comments which section 553 of the Administrative Procedure Act ordinarily requires. Because we find that the Clean Air Act’s schedule for promulgation of the rule did not place such time constraints on the Administrator that notice and comment rulemaking would have been impracticable, we hold he erred in invoking the good cause exception. We therefore reverse the Administrator and remand the record for further proceedings.

I

[Congress amended the Clean Air Act in 1970. Those amendments empowered the EPA to promulgate “National Ambient Air Quality Standards” for several pollutants, including a pollutant variously referred to as photochemical oxidants or ozone.] In 1970, Congress had expected that these standards would be met by the middle of the decade. However, by 1975 Congress apprehended that that expectation would go unrealized in many areas. Congress viewed this failure with the utmost seriousness, for it understood that the “non-attainment of air quality standards in a wide and densely populated region could result in a phenomenal health impact, measured in terms of millions of days of aggravated disease, asthma attacks and lower respiratory disease episodes.” H.Rep. No. 95-294, 95th Cong., 1st Sess. 209 (1977).

Fearing for the health of “tens of millions,” Congress imposed a new, and tight, schedule for achieving the air quality standards[...] The [schedule] required states to submit to the Administrator a list of (1) those air-quality-control regions (to be designated “attainment”) which, on August 7, 1977, met the national air quality standards, (2) those regions (to be designated “nonattainment”) which did not meet the standards[...] This list was to be submitted on December 5, 1977. Within sixty days thereafter—by February 3, 1978—the Administrator was directed to “promulgate each such list with such modifications as he deems necessary.”

Although the statute required the Administrator to promulgate a list of nonattainment areas on February 3, 1978, he in fact promulgated it on March 3, 1978. And although section 553 of the Administrative Procedure Act (APA) requires that, when an agency proposes to issue a rule, it must first publish a general notice in the Federal Register, 5 U.S.C. §553(b), and “give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments,” 5 U.S.C. § 553(c), the Administrator provided neither notice nor opportunity for comment. Instead, his “final rule” was effective “immediately.” 43 Fed.Reg. 8962 (March 3, 1978). In justification, he invoked the exception to the usual requirement of notice and comment rulemaking which section 553(b)(B) creates for those occasions “when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.” 5 U.S.C. § 553(b)(B). The Administrator explained that the tight schedule Congress had set prevented notice and comment rulemaking:

The States are now preparing revisions to their State implementation plans (SIPs) as required by sections 110(a)(2)(I) and 172 of the Act. This enterprise, which must be completed by January 1, 1979, requires that the States have immediate guidance as to the attainment status of the areas designated under section 107(d). Congress has acknowledged this by imposing a tight schedule on the designation process and requiring EPA to promulgate the list within 180 days of the enactment of the amendments. Under these circumstances it would be impracticable and contrary to the public interest to ignore the statutory schedule and postpone publishing these regulations until notice and comment can be effectuated. For this good cause, the Administrator has made these designations immediately effective.

However, the Administrator did offer to receive post hoc public comment:

The Agency recognizes . . . the importance of public involvement in the designation process. It is[,] therefore, soliciting public comment on this rule by May 2, 1978.

In his list (i. e., in the rule we now review), the Administrator designated “over 600” of the 3,044 counties in the country as “nonattainment” for photochemical oxidant pollution. Most counties in the industrial Northeast and in western California were designated nonattainment for oxidant pollution; little of the rest of the country was [...]

On April 28, 1978—and thus within the 60 days allotted by the Administrator for comments—the State of New Jersey wrote the Administrator to protest his analysis of the way oxidants are formed, the time they persist in the atmosphere, the distances they travel, the ways they should be measured, and the degree of their ubiquity:

Ozone air pollution is widespread; certain meteorological conditions carry it over wide areas of the country at levels above the Federal health standard. As these ozone-laden air masses move across the United States, every area, rural or urban, is likely to violate the ozone standard. Moreover, sources everywhere contribute ozone generating ingredients to the air mass exacerbating the problem.

New Jersey thus asked the Administrator to “change your designations and policies in such a way as to require all states to establish control regulations for the ingredients to ozone formulation.” 

On May 2, 1978, New Jersey petitioned this court for review of the Administrator’s rule. Since that time, the States of Maine, Connecticut, Massachusetts, New York, Rhode Island, and Vermont, the District of Columbia, and the City of New York have intervened in favor of petitioner New Jersey, and the States of Georgia, Arkansas, Missouri, and New Mexico have intervened in favor of the respondents (the EPA and its Administrator)[...]

II

In its brief, New Jersey argues that the Administrator’s oxidant designations of “nonattainment” and “unclassifiable” are invalid because (1) they were issued without notice-and-comment rule-making and (2) they are arbitrary, capricious, and without adequate basis in the record. At oral argument, however, counsel for New Jersey bowed to the deference which, as a legal and practical matter, this court must pay the EPA’s technical expertise and conceded that, in the present circumstances of this case, we could not properly invalidate the rule on the state's second ground. In any event, we find New Jersey’s first argument persuasive and consequently need not reach the second [...]

We hold that the Administrator erred in declining to adhere to the notice-and-comment requirements of section 553 of the APA [...]

First, we emphasize that judicial review of a rule promulgated under an exception to the APA’s notice-and-comment requirement must be guided by Congress's expectation that such exceptions will be narrowly construed. In American Bus Association v. U. S., 627 F.2d 525 (D.C.Cir. 1980), where we investigated at length another exception to the notice-and-comment requirement of section 553, we said that that section “was one of Congress’s most effective and enduring solutions to the central dilemma it encountered in writing the APA—reconciling the agencies’ need to perform effectively with the necessity that ‘the law must provide that the governors shall be governed and the regulators shall be regulated, if our present form of government is to endure.’” It is now a commonplace that notice-and-comment rule-making is a primary method of assuring that an agency’s decisions will be informed and responsive. And we have previously explained that, “if the Agency, in carrying out its ‘essentially legislative task,’ has infused the administrative process with the degree of openness, explanation, and participatory democracy required by the APA, it will thereby have ‘negate[d] the dangers of arbitrariness and irrationality in the formulation of rules . . . ,” Weyerhaeuser Co. v. Costle, 590 F.2d 1011, 1027-28 (D.C.Cir.1978).

From this, it should be clear beyond contradiction or cavil that Congress expected, and the courts have held, that the various exceptions to the notice-and-comment provisions of section 553 will be narrowly construed and only reluctantly countenanced. Nowhere did Congress make its intention in this respect plainer than in its deliberations over the very exception respondent cites. The Senate Committee responsible for the APA warned:

The exemption of situations of emergency or necessity is not an “escape clause” in the sense that any agency has discretion to disregard its terms or the facts. A true and supported or supportable finding of necessity or emergency must be made and published. “Impracticable” means a situation in which the due and required execution of the agency functions would be unavoidably prevented by its undertaking public rule-making proceedings.

The Committee concluded its report by reminding courts of their particular obligation to enforce the APA through a meticulous and demanding interpretation of its terms:

It will thus be the duty of reviewing courts to prevent avoidance of the requirements of the bill by any manner or form of indirection, and to determine the meaning of the words and phrases used. For example, in several provisions the expression “good cause” is used. The cause so specified must be interpreted by the context of the provision in which it is found and the purpose of the entire section and bill. Cause found must be real and demonstrable.

As the Fifth Circuit commented in U. S. Steel,

This exception should be read narrowly. It is an important safety valve to be used where delay would do real harm. It should not be used, however, to circumvent the notice and comment requirements whenever an agency finds it inconvenient to follow them. 595 F.2d 207, 214 (5th Cir. 1979) [...]

[W]hatever one's conclusions about the general compatibility of the APA and the Clean Air Act, the Third and Fifth Circuits have demonstrated that, under the facts of this case, the Administrator could have reconciled the commands of the two acts by publishing the designations submitted to him by the states as proposed rules [...] If the admonition to construe the good-cause exception of section 553(b)(B) narrowly means anything, it means that we cannot condone its invocation where, as here, such a reconciliation is possible[...] While we do not contend that a statutory schedule can never preclude notice-and-comment rule-making, we doubt these two cases will bear the precedential weight placed on them. 

Our fourth consideration is that we cannot accept in any absolute form the Sixth and Seventh Circuits' argument that the Administrator cannot be reversed here because to do so would delay implementation of the Clean Air Act. An agency’s functions will be impaired any time it is reversed on procedural grounds, and such occasional impairments are the price we pay to preserve the integrity of the APA. Of course, cases under the “tight schedule” version of good cause are sure to be particularly troublesome in this respect, since if an agency’s allegations as to the need for expedition are remotely true, the elapse of time necessary to secure judicial review will assure that a court cannot easily reverse the agency. But a court serves neither the law nor, ultimately, the parties before it by succumbing, without a cautious examination of a case's facts, to whatever fait accompli an agency may choose to present. Fortunately, such an examination of this case indicates that our reversal of the Administrator should not noticeably interfere with, and may actually promote, the ends of the Clean Air Act [...]

IV

It will be recalled that, after promulgating a “final rule” which was to be effective “immediately,” the Administrator stated the Agency would accept public comments received within sixty days of the promulgation of the rule. The Administrator now argues that his provision for post hoc comment “cures” his failure to follow section 553’s procedures. We cannot agree.

Once again, we accept the reasoning of the Fifth Circuit in its U.S. Steel:

Section 553 is designed to ensure that affected parties have an opportunity to participate in and influence agency decision making at an early stage, when the agency is more likely to give real consideration to alternative ideas. Other courts have recognized this difference and rejected arguments similar to that asserted here:

Permitting the submission of views after the effective date is no substitute for the right of interested persons to make their views known to the agency in time to influence the rule making process in a meaningful way. . . . “We doubt that persons would bother to submit their views or that the Secretary would seriously consider their suggestions after the regulations are a fait accompli.”

. . . Were we to allow the EPA to prevail on this point we would make the provisions of §553 virtually unenforceable. An agency that wished to dispense with pre-promulgation notice and comment could simply do so, invite post-promulgation comment, and republish the regulation before a reviewing court could act. 595 F.2d at 214-15.

We are convinced that the Fifth Circuit accurately assessed the psychological and bureaucratic realities of post hoc comments in rule-making. It was in recognition of those realities that Congress specified that notice and an opportunity for comment are to precede rule-making [...]

Hoctor v. U.S. Dep’t of Agriculture

82 F.3d 165 (7th Cir. 1996)

POSNER, Chief Judge:

A rule promulgated by an agency that is subject to the Administrative Procedure Act is invalid unless the agency first issues a public notice of proposed rulemaking, describing the substance of the proposed rule, and gives the public an opportunity to submit written comments; and if after receiving the comments it decides to promulgate the rule it must set forth the basis and purpose of the rule in a public statement. 5 U.S.C. §§ 553(b), (c). These procedural requirements do not apply, however, to “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.” 5 U.S.C. § 553(b)(A). Distinguishing between a “legislative” rule, to which the notice and comment provisions of the Act apply, and an interpretive rule, to which these provisions do not apply, is often very difficult—and often very important to regulated firms, the public, and the agency. Notice and comment rulemaking is time-consuming, facilitates the marshaling of opposition to a proposed rule, and may result in the creation of a very long record that may in turn provide a basis for a judicial challenge to the rule if the agency decides to promulgate it. There are no formalities attendant upon the promulgation of an interpretive rule, but this is tolerable because such a rule is “only” an interpretation. Every governmental agency that enforces a less than crystalline statute must interpret the statute, and it does the public a favor if it announces the interpretation in advance of enforcement, whether the announcement takes the form of a rule or of a policy statement, which the Administrative Procedure Act assimilates to an interpretive rule. It would be no favor to the public to discourage the announcement of agencies’ interpretations by burdening the interpretive process with cumbersome formalities.

The question presented by this appeal from an order of the Department of Agriculture is whether a rule for the secure containment of animals, a rule promulgated by the Department under the Animal Welfare Act, 7 U.S.C. §§ 2131 et seq., without compliance with the notice and comment requirements of the Administrative Procedure Act, is nevertheless valid because it is merely an interpretive rule. Enacted in 1966, the Animal Welfare Act, as its title implies, is primarily designed to assure the humane treatment of animals. The Act requires the licensing of dealers (with obvious exceptions, for example retail pet stores) and exhibitors, and authorizes the Department to impose sanctions on licensees who violate either the statute itself or the rules promulgated by the Department under the authority of 7 U.S.C. § 2151, which authorizes the Secretary of Agriculture “to promulgate such rules, regulations, and orders as he may deem necessary in order to effectuate the purposes of [the Act].” The Act provides guidance to the exercise of this rulemaking authority by requiring the Department to formulate standards “to govern the humane handling, care, treatment, and transportation of animals by dealers,” and these standards must include minimum requirements “for handling, housing, feeding, watering, sanitation,” etc. 7 U.S.C. § 2143(a).

The Department has employed the notice and comment procedure to promulgate a regulation, the validity of which is not questioned, that is entitled “structural strength” and that provides that “the facility [housing the animals] must be constructed of such material and of such strength as appropriate for the animals involved. The indoor and outdoor housing facilities shall be structurally sound and shall be maintained in good repair to protect the animals from injury and to contain the animals.” 9 C.F.R. § 3.125(a).

Enter the petitioner, Patrick Hoctor, who in 1982 began dealing in exotic animals on his farm outside of Terre Haute. In a 25–acre compound he raised a variety of animals including “Big Cats”—a typical inventory included three lions, two tigers, seven ligers (a liger is a cross between a male lion and a female tiger, and is thus to be distinguished from a tigon), six cougars, and two snow leopards. The animals were in pens (“primary enclosures” in the jargon of the administration of the Animal Welfare Act). The area in which the pens were located was surrounded by a fence (“containment fence”). In addition, Hoctor erected a fence around the entire compound (“perimeter fence”). At the suggestion of a veterinarian employed by the Agriculture Department who was assigned to inspect the facility when Hoctor started his animal dealership in 1982, Hoctor made the perimeter fence six feet high.

The following year the Department issued an internal memorandum addressed to its force of inspectors in which it said that all “dangerous animals,” defined as including, among members of the cat family, lions, tigers, and leopards, must be inside a perimeter fence at least eight feet high. This provision is the so-called interpretive rule, interpreting the housing regulation quoted above. An agency has, of course, the power, indeed the inescapable duty, to interpret its own legislative rules, such as the housing standard, just as it has the power and duty to interpret a statute that it enforces. Stinson v. United States, 508 U.S. 36, 42–46, 113 S.Ct. 1913, 1918–19, 123 L.Ed.2d 598 (1993).

On several occasions beginning in 1990, Hoctor was cited by a Department of Agriculture inspector for violating 9 C.F.R. § 3.125(a), the housing standard, by failing to have an eight-foot perimeter fence. Eventually the Department sanctioned Hoctor for this and other alleged violations, and he has sought judicial review limited, however, to the perimeter fence. He is a small dealer and it would cost him many thousands of dollars to replace his six-foot-high fence with an eight-foot-high fence. Indeed, we were told at argument that pending the resolution of his dispute over the fence he has discontinued dealing in Big Cats. The parties agree that unless the rule requiring a perimeter fence at least eight feet high is a valid interpretive rule, the sanction for violating it was improper.

We may assume, though we need not decide, that the Department of Agriculture has the statutory authority to require dealers in dangerous animals to enclose their compounds with eight-foot-high fences. The fence is a backup fail-safe device, since the animals are kept in pens, cages, or other enclosures within the compound, in an area that is itself fenced, rather than being free to roam throughout the compound. Since animals sometimes break out or are carelessly let out of their pens, a fail-safe device seems highly appropriate, to say the least. Two lions once got out of their pen on Hoctor’s property, and he had to shoot them. Yet, when he did so, they were still within the containment fence. The Department’s regulations do not require a containment fence, and it is unclear to us why, if that fence was adequate—and we are given no reason to suppose it was not—Hoctor should have had to put up an additional fence, let alone one eight-feet high. But we lay any doubts on this score to one side. And we may also assume that the containment of dangerous animals is a proper concern of the Department in the enforcement of the Animal Welfare Act, even though the purpose of the Act is to protect animals from people rather than people from animals. Even Big Cats are not safe outside their compounds, and with a lawyer’s ingenuity the Department’s able counsel reminded us at argument that if one of those Cats mauled or threatened a human being, the Cat might get into serious trouble and thus it is necessary to protect human beings from Big Cats in order to protect the Cats from human beings, which is the important thing under the Act. In fact Hoctor had shot the two lions because they were dangerously close to one of his employees. Since tort liability for injury caused by a wild animal is strict, Burns v. Gleason, 819 F.2d 555 (5th Cir.1987); Behrens v. Bertram Mills Circus Ltd., [1957] 2 Q.B. 1; W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 76, p. 542 (5th ed. 1984), the common law, at least, is solicitous for the protection of the citizens of Terre Haute against escapees from Hoctor’s menagerie even if the Animal Welfare Act is not. The internal memorandum also justifies the eight-foot requirement as a means of protecting the animals from animal predators, though one might have supposed the Big Cats able to protect themselves against the native Indiana fauna.

[…]

The only ground on which the Department defends sanctioning Hoctor for not having a high enough fence is that requiring an eight-foot-high perimeter fence for dangerous animals is an interpretation of the Department’s own structural-strength regulation, and “provided an agency’s interpretation of its own regulations does not violate the Constitution or a federal statute, it must be given ‘controlling weight unless it is plainly erroneous or inconsistent with the regulation.’ ” Stinson v. United States, supra, 508 U.S. at 44–46, 113 S.Ct. at 1919. The “provided” clause does not announce a demanding standard of judicial review, although the absence of any reference in the housing regulation to fences or height must give us pause. The regulation appears only to require that pens and other animal housing be sturdy enough in design and construction, and sufficiently well maintained, to prevent the animals from breaking through the enclosure—not that any enclosure, whether a pen or a perimeter fence, be high enough to prevent the animals from escaping by jumping over the enclosure. The Department’s counsel made the wonderful lawyer’s argument that the eight-foot rule is consistent with the regulation because a fence lower than eight feet has zero structural strength between its height (here six feet) and the eight-foot required minimum. The two feet by which Hoctor’s fence fell short could not have contained a groundhog, let alone a liger, since it was empty space.

Our doubts about the scope of the regulation that the eight-foot rule is said to be “interpreting” might seem irrelevant, since even if a rule requiring an eight-foot perimeter fence could not be based on the regulation, it could be based on the statute itself, which in requiring the Department to establish minimum standards for the housing of animals presumably authorizes it to promulgate standards for secure containment. But if the eight-foot rule were deemed one of those minimum standards that the Department is required by statute to create, it could not possibly be thought an interpretive rule. For what would it be interpreting? When Congress authorizes an agency to create standards, it is delegating legislative authority, rather than itself setting forth a standard which the agency might then particularize through interpretation. Put differently, when a statute does not impose a duty on the persons subject to it but instead authorizes (or requires—it makes no difference) an agency to impose a duty, the formulation of that duty becomes a legislative task entrusted to the agency. Provided that a rule promulgated pursuant to such a delegation is intended to bind, and not merely to be a tentative statement of the agency’s view, which would make it just a policy statement, and not a rule at all, the rule would be the clearest possible example of a legislative rule, as to which the notice and comment procedure not followed here is mandatory, as distinct from an interpretive rule; for there would be nothing to interpret. American Mining Congress v. Mine Safety & Health Administration, 995 F.2d 1106, 1109 (D.C.Cir.1993); Robert A. Anthony, “ ‘Interpretive’ Rules, ‘Legislative’ Rules and ‘Spurious’ Rules: Lifting the Smog,” 8 Admin. L.J. of Am. Univ. 1 (1994). That is why the Department must argue that its eight-foot rule is an interpretation of the structural-strength regulation-itself a standard, and therefore interpretable, in order to avoid reversal.

Even if, despite the doubts that we expressed earlier, the eight-foot rule is consistent with, even in some sense authorized by, the structural-strength regulation, it would not necessarily follow that it is an interpretive rule. It is that only if it can be derived from the regulation by a process reasonably described as interpretation. Metropolitan School District v. Davila, 969 F.2d 485, 490 (7th Cir.1992). Supposing that the regulation imposes a general duty of secure containment, the question is, then, Can a requirement that the duty be implemented by erecting an eight-foot-high perimeter fence be thought an interpretation of that general duty?

“Interpretation” in the narrow sense is the ascertainment of meaning. It is obvious that eight feet is not part of the meaning of secure containment. But “interpretation” is often used in a much broader sense. A process of “interpretation” has transformed the Constitution into a body of law undreamt of by the framers. To skeptics the Miranda rule is as remote from the text of the Fifth Amendment as the eight-foot rule is from the text of 9 C.F.R. § 3.125(a). But our task in this case is not to plumb the mysteries of legal theory; it is merely to give effect to a distinction that the Administrative Procedure Act makes, and we can do this by referring to the purpose of the distinction. The purpose is to separate the cases in which notice and comment rulemaking is required from the cases in which it is not required. As we noted at the outset, unless a statute or regulation is of crystalline transparency, the agency enforcing it cannot avoid interpreting it, and the agency would be stymied in its enforcement duties if every time it brought a case on a new theory it had to pause for a bout, possibly lasting several years, of notice and comment rulemaking. Besides being unavoidably continuous, statutory interpretation normally proceeds without the aid of elaborate factual inquiries. When it is an executive or administrative agency that is doing the interpreting it brings to the task a greater knowledge of the regulated activity than the judicial or legislative branches have, and this knowledge is to some extent a substitute for formal fact-gathering.

At the other extreme from what might be called normal or routine interpretation is the making of reasonable but arbitrary (not in the “arbitrary or capricious” sense) rules that are consistent with the statute or regulation under which the rules are promulgated but not derived from it, because they represent an arbitrary choice among methods of implementation. A rule that turns on a number is likely to be arbitrary in this sense. There is no way to reason to an eight-foot perimeter-fence rule as opposed to a seven-and-a-half foot fence or a nine-foot fence or a ten-foot fence. None of these candidates for a rule is uniquely appropriate to, and in that sense derivable from, the duty of secure containment. This point becomes even clearer if we note that the eight-foot rule actually has another component—the fence must be at least three feet from any animal’s pen. Why three feet? Why not four? Or two?

The reason courts refuse to create statutes of limitations is precisely the difficulty of reasoning to a number by the methods of reasoning used by courts. Hemmings v. Barian, 822 F.2d 688, 689 (7th Cir.1987). One cannot extract from the concept of a tort that a tort suit should be barred unless brought within one, or two, or three, or five years. The choice is arbitrary and courts are uncomfortable with making arbitrary choices. They see this as a legislative function. Legislators have the democratic legitimacy to make choices among value judgments, choices based on hunch or guesswork or even the toss of a coin, and other arbitrary choices. When agencies base rules on arbitrary choices they are legislating, and so these rules are legislative or substantive and require notice and comment rulemaking, a procedure that is analogous to the procedure employed by legislatures in making statutes. The notice of proposed rulemaking corresponds to the bill and the reception of written comments to the hearing on the bill.

The common sense of requiring notice and comment rulemaking for legislative rules is well illustrated by the facts of this case. There is no process of cloistered, appellate-court type reasoning by which the Department of Agriculture could have excogitated the eight-foot rule from the structural-strength regulation. The rule is arbitrary in the sense that it could well be different without significant impairment of any regulatory purpose. But this does not make the rule a matter of indifference to the people subject to it. There are thousands of animal dealers, and some unknown fraction of these face the prospect of having to tear down their existing fences and build new, higher ones at great cost. The concerns of these dealers are legitimate and since, as we are stressing, the rule could well be otherwise, the agency was obliged to listen to them before settling on a final rule and to provide some justification for that rule, though not so tight or logical a justification as a court would be expected to offer for a new judge-made rule. Notice and comment is the procedure by which the persons affected by legislative rules are enabled to communicate their concerns in a comprehensive and systematic fashion to the legislating agency. The Department’s lawyer speculated that if the notice and comment route had been followed in this case the Department would have received thousands of comments. The greater the public interest in a rule, the greater reason to allow the public to participate in its formation.

 We are not saying that an interpretive rule can never have a numerical component. See, e.g., American Mining Congress v. Mine Safety & Health Administration, supra, 995 F.2d at 1108, 1113; St. Mary’s Hospital v. Blue Cross & Blue Shield Ass’n., 788 F.2d 888, 889–91 (2d Cir.1986). There is merely an empirical relation between interpretation and generality on the one hand, and legislation and specificity on the other. Especially in scientific and other technical areas, where quantitative criteria are common, a rule that translates a general norm into a number may be justifiable as interpretation. The mine safety agency in the American Mining case could refer to established medical criteria, expressed in terms of numerical evaluations of x-rays, for diagnosing black-lung disease. 995 F.2d at 1112–13. Even in a nontechnical area the use of a number as a rule of thumb to guide the application of a general norm will often be legitimately interpretive. Had the Department of Agriculture said in the internal memorandum that it could not imagine a case in which a perimeter fence for dangerous animals that was lower than eight feet would provide secure containment, and would therefore presume, subject to rebuttal, that a lower fence was insecure, it would have been on stronger ground. For it would have been tying the rule to the animating standard, that of secure containment, rather than making it stand free of the standard, self-contained, unbending, arbitrary. To switch metaphors, the “flatter” a rule is, the harder it is to conceive of it as merely spelling out what is in some sense latent in a statute or regulation, and the eight-foot rule in its present form is as flat as they come. At argument the Department’s lawyer tried to loosen up the rule, implying that the Department might have bent it if Hoctor proposed to dig a moat or to electrify his six-foot fence. But an agency’s lawyer is not authorized to amend its rules in order to make them more palatable to the reviewing court.

The Department’s position might seem further undermined by the fact that it has used the notice and comment procedure to promulgate rules prescribing perimeter fences for dogs and monkeys. 9 C.F.R. §§ 3.6(c)(2)(ii), 3.77(f). Why it proceeded differently for dangerous animals is unexplained. But we attach no weight to the Department’s inconsistency, not only because it would be unwise to penalize the Department for having at least partially complied with the requirements of the Administrative Procedure Act, but also because there is nothing in the Act to forbid an agency to use the notice and comment procedure in cases in which it is not required to do so. We are mindful that the court in United States v. Picciotto, 875 F.2d 345, 348 (D.C.Cir.1989), thought that the fact that an agency had used notice and comment rulemaking in a setting similar to the case before the court was evidence that the agency “intended” to promulgate a legislative rule in that case, only without bothering with notice and comment. The inference is strained, and in any event we think the agency’s “intent,” though a frequently cited factor, is rather a makeweight. What the agency intends is to promulgate a rule. It is for the courts to say whether it is the kind of rule that is valid only if promulgated after notice and comment. It is that kind of rule if, as in the present case, it cannot be derived by interpretation. The order under review, based as it was on a rule that is invalid because not promulgated in accordance with the required procedure, is therefore

VACATED.

Texas v. United States

86 F.Supp.3d 591 (S.D.Texas 2015)

ANDREW S. HANEN, District Judge.

This is a case in which twenty-six states or their representatives are seeking injunctive relief against the United States and several officials of the Department of Homeland Security to prevent them from implementing a program entitled “Deferred Action for Parents of Americans and Lawful Permanent Residents”  [...]

On November 20, 2014, Jeh Johnson, in his position as Secretary of the [U.S. Department of Homeland Security] DHS, issued multiple memoranda to Leon Rodriguez, Director of the United States Citizenship and Immigration Services (“USCIS”), Thomas S. Winkowski, Acting Director of the United States Immigration and Customs Enforcement (“ICE”), and R. Gil Kerlikowske, Commissioner of the United States Customs and Border Protection (“CBP”). One of these memoranda contained an order establishing a new program utilizing deferred action to stay deportation proceedings and award certain benefits to approximately four to five million [immigrants...] in the United States. The present case, filed in an attempt to enjoin the rollout and implementation of this program, was initiated by the State of Texas and twenty-five other states or their representatives. Specifically, the States allege that the Secretary’s actions violate the Administrative Procedure Act (“APA”). The States filed this suit against DHS Secretary Johnson [...] 

III. BACKGROUND

On June 15, 2012, DHS Secretary Janet Napolitano issued a memorandum creating the DACA program, which stands for “Deferred Action for Childhood Arrivals.” Specifically, Secretary Napolitano’s memorandum instructed her Department heads to give deferred action status to all [...] immigrants who:

1. Came to the United States before age sixteen;

2. Continuously resided in the United States for at least five years prior to June 15, 2012 and were in the United States on June 15, 2012;

3. Were then attending school, or had graduated from high school, obtained a GED, or were honorably discharged from the military;

4. Had not been convicted of a felony, significant misdemeanor, multiple misdemeanors, or otherwise pose a threat to national security; and

5. Were not above the age of thirty. Doc. No. 38, Def. Ex. 19 (June 15, 2012 DACA Memorandum issued by Secretary Napolitano) [...] 

On November 20, 2014, following in his predecessor’s footsteps, Secretary Johnson issued a memorandum to DHS officials instructing them to implement the DAPA program and expand the DACA program in three areas. That memorandum [expands DACA by removing the age cap, extending and expanding renewal and work authorization, and extending deferred action to parents. Doc. No. 1, Pl. Ex. A (November 20, 2014 DAPA Memorandum issued by Secretary Johnson).] 

Deferred action is not a status created or authorized by law or by Congress, nor has its properties been described in any relevant legislative act. Secretary Johnson’s DAPA Memorandum states that deferred action has existed since at least the 1960s, a statement with which no one has taken issue. Throughout the years, deferred action has been both utilized and rescinded by the Executive Branch [...] 

D. Factual Contentions

Secretary Johnson supported the implementation of DAPA with two main justifications. First, he wrote that the DHS has limited resources and it cannot perform all of the duties assigned to it, including locating and removing [immigrants]. Secretary Johnson claimed that the adoption of DAPA will enable the DHS to prioritize its enforcement of the immigration laws and focus its limited resources in areas where they are needed most. Second, the Secretary reasoned that humanitarian concerns also justify the program’s implementation.

Plaintiffs maintain that the Secretary's justifications are conditions caused by the DHS, are pretexts, or are simply inaccurate. Regarding resources, Plaintiffs argue that the DHS has continued to be funded at record levels and is currently spending millions to create the enormous bureaucracy necessary to implement this program. The States additionally maintain that the DAPA program was: politically motivated and implemented illegally. The first proposition is not the concern of the Court; the second is. To support the latter proposition, the States quote President Obama at length. First, they quote the President’s statements made prior to the implementation of DAPA stating that he, as President, did not have the power under the Constitution or the laws of this country to change the immigration laws. On these occasions, he asserted that only Congress could implement these changes in this area of the law. From these statements, the States reason that if the President does not have the necessary power to make these changes, then the DHS Secretary certainly does not [...]

E. Legal Contentions

[The States maintain that Secretary Johnson's DAPA Directive violates the Administrative Procedure Act (“APA”)] The Government claims that the DAPA program is merely general guidance issued to DHS employees, and that the delineated elements of eligibility are not requirements that DHS officials are bound to honor. The Government argues that this flexibility, among other factors, exempts DAPA from the requirements of the APA [...]

The States complain that the implementation of DAPA violates the APA. 5 U.S.C. §§ 501 et seq. Specifically, the States assert that DAPA constitutes a “substantive” or “legislative” rule that was promulgated without the requisite notice and comment process required under Section 553 of the APA. Defendants concede that DAPA was not subjected to the APA’s formal notice-and-comment procedure. Instead, they argue that DAPA is not subject to judicial review and, even if reviewable, is exempt from the APA’s procedural requirements.

i. Judicial Review Under the Administrative Procedure Act

[...] The APA provides an avenue for judicial review of challenges to “agency action.” See 5 U.S.C. §§ 701-706. Under Section 702, “[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.” 5 U.S.C. § 702 [...] 

i. Rulemaking Under the APA [...]

Section 553 of Title 5, United States Code, dictates the formal rulemaking procedures by which an agency must abide when promulgating a rule. Under Section 553(b), “[g]eneral notice of proposed rule making shall be published in the Federal Register.” 5 U.S.C. § 553(b). The required notice must include “(1) a statement of the time, place, and nature of public rule making proceedings; (2) reference to the legal authority under which the rule is proposed; and (3) either the terms or substance of the proposed rule or a description of the subjects and issues involved.” Id. Upon providing the requisite notice, the agency must give interested parties the opportunity to participate and comment and the right to petition for or against the rule. See id. § 553(c)-(e).

There are two express exceptions to this notice-and-comment requirement, one of which Defendants argue applies in this case. Pursuant to Section 553(b)(3)(A), the APA’s formal rulemaking procedures do not apply to “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.” On the other hand, if a rule is “substantive,” this exception does not apply, and all notice-and-comment requirements “must be adhered to scrupulously.” Shalala, 56 F.3d at 595. The Fifth Circuit has stressed that the “‘APA’s notice and comment exemptions must be narrowly construed.’”

The APA does not define “general statements of policy” or “substantive rules”; however, the Case law in this area is fairly well-developed and provides helpful guidelines in characterizing a rule. With that said, the analysis substantially relies on the specific facts of a given case and, thus, the results are not always consistent. Here, Plaintiffs’ procedural APA claim turns on whether the DAPA Directive is a substantive rule or a general statement of policy. If it is substantive, it is “unlawful, for it was promulgated without the requisite notice-and-comment.” Id.

This Circuit, following guidelines laid out in various cases by the D.C. Circuit, utilizes two criteria to distinguish substantive rules from nonsubstantive rules:

First, courts have said that, unless a pronouncement acts prospectively, it is a binding norm. Thus ... a statement of policy may not have a present effect: “a ‘general statement of policy’ is one that does not impose any rights and obligations”.... The second criterion is whether a purported policy statement genuinely leaves the agency and its decisionmakers free to exercise discretion.

The court [in Community Nutrition Institute v. Young, 818 F.2d 943 (D.C.Cir. 1987)] further explained that “binding effect, not the timing, ... is the essence of criterion one” In analyzing these criteria, we are to give some deference, “albeit ‘not overwhelming,’” to the agency's characterization of its own rule.

The rule’s effect on agency discretion is the primary determinant in characterizing a rule as substantive or nonsubstantive. For instance, rules that award rights, impose obligations, or have other significant effects on private interests have been found to have a binding effect on agency discretion and are thus considered substantive. A rule, while not binding per se, is still considered substantive if it “severely restricts” agency discretion. Put another way, any rule that “narrowly constrict[s] the discretion of agency officials by largely determining the issue addressed” is substantive. Lastly, a substantive rule is generally characterized as one that “establishes a standard of conduct which has the force of law.”

In sharp contrast to a substantive rule, a general statement of policy does not establish a binding norm, nor is it “finally determinative of the issues or rights to which it is addressed.” Shalala, 56 F.3d at 596. A general statement of policy is best characterized as announcing the agency’s “tentative intentions for the future.” Thus, it cannot be applied or relied upon as law because a statement of policy merely proclaims what an agency seeks to establish as policy [...]

Defendants insist that the Directive is “a policy that ‘supplements and amends ... guidance’ for the use of deferred action.” In their briefings before the Court, Defendants label DAPA “Deferred Action Guidance.” The Court finds Defendants’ labeling disingenuous and, as discussed below, contrary to the substance of DAPA. Although Defendants refer to DAPA as a “guidance” in their briefings and in the DAPA Memorandum, elsewhere, it is given contradictory labels. For instance, on the official website of the DHS, DAPA is referred to as “a new Deferred Action for Parents of Americans and Lawful Permanent Residents program.”

The DHS website does use the term “guidelines” in describing DAPA’s criteria; however, this is only in the context of a “list” of guidelines that candidates must satisfy in order to qualify for DAPA (or the newly expanded DACA). Thus, not only does this usage of the term “guidelines” not refer to the DAPA program itself, but it is also a misnomer because these “guidelines” are in fact requirements to be accepted under these programs [...]

What is perhaps most perplexing about the Defendants’ claim that DAPA is merely “guidance” is the President’s own labeling of the program. In formally announcing DAPA to the nation for the first time, President Obama stated, “I just took an action to change the law.” He then made a “deal” with potential candidates of DAPA: “if you have children who are American citizens ... if you’ve taken responsibility, you’ve registered, undergone a background check, you’re paying taxes, you’ve been here for five years, you’ve got roots in the community—you’re not going to be deported.... If you meet the criteria, you can come out of the shadows....”

While the DHS’ characterization of DAPA is taken into consideration by this Court in its analysis, the “label that the ... agency puts upon its given exercise of administrative power is not ... conclusive; rather, it is what the agency does in fact.” Shalala, 56 F.3d at 596. Thus, the Court turns its attention to the primary focus of its analysis: the substance of DAPA. Nevertheless, the President's description of the DHS Directive is that it changes the law.

(2) Binding Effect

The Fifth Circuit in Shalala propounded as a “touchstone of a substantive rule” the rule’s binding effect. Quoting the Eleventh Circuit, the Shalala Court emphasized:

The key inquiry ... is the extent to which the challenged policy leaves the agency free to exercise its discretion to follow or not to follow that general policy in an individual case, or on the other hand, whether the policy so fills out the statutory scheme that upon application one need only determine whether a given case is within the rule’s criteria. As long as the agency remains free to consider the individual facts in the various cases that arise, then the agency action in question has not established a binding norm.

Despite the DAPA memorandum’s use of phrases such as “case-by-case basis” and “discretion,” it is clear from the record that the only discretion that has been or will be exercised is that already exercised by Secretary Johnson in enacting the DAPA program and establishing the criteria therein. That criteria is binding. At a minimum, the memorandum “severely restricts” any discretion that Defendants argue exists. It ensures that “officers will be provided with specific eligibility criteria for deferred action.” Indeed, the “Operating Procedures” for implementation of DACA contains nearly 150 pages  of specific instructions for granting or denying deferred action to applicants. Denials are recorded in a “check the box” standardized form, for which USCIS personnel are provided templates. Certain denials of DAPA must be sent to a supervisor for approval before issuing the denial. Further, there is no option for granting DAPA to an individual who does not meet each criterion. With that criteria set, from the President down to the individual USCIS employees actually processing the applications, discretion is virtually extinguished.

In stark contrast to a policy statement that "does not impose any rights and obligations" and that "genuinely leaves the agency and its decisionmakers free to exercise discretion," the DAPA Memorandum confers the right to be legally present in the United States and enables its beneficiaries to receive other benefits as laid out above. The Court finds that DAPA’s disclaimer that the “memorandum confers no substantive right, immigration status, or pathway to citizenship” may make these rights revocable, but not less valuable. While DAPA does not provide legal permanent residency, it certainly provides a legal benefit in the form of legal presence (plus all that it entails)—a benefit not otherwise available in immigration laws. The DAPA Memorandum additionally imposes specific, detailed and immediate obligations upon DHS personnel—both in its substantive instructions and in the manner in which those instructions are carried out. Nothing about DAPA “genuinely leaves the agency and its [employees] free to exercise discretion.” In this case, actions speak louder than words [...]

VI. CONCLUSION

This Court, for the reasons discussed above, hereby grants the Plaintiff States' request for a preliminary injunction. It hereby finds that [...] the Defendants have clearly legislated a substantive rule without complying with the procedural requirements under the Administration Procedure Act. The Injunction is contained in a separate order. Nonetheless, for the sake of clarity, this temporary injunction enjoins the implementation of the DAPA program that awards legal presence and additional benefits to the four million or more individuals potentially covered by the DAPA Memorandum and to the three expansions/additions to the DACA program also contained in the same DAPA Memorandum [...]

Epilogue for Texas v. United States

This case set off a chain of events: In November, 2015, the 5th Circuit upheld the District Court’s preliminary injunction blocking the implementation of DAPA. In 2016, the Supreme Court affirmed the Circuit Court decision. In 2017, Secretary of Homeland Security issued a memo formally rescinding DAPA. The decision that we just read (that started this chain of events) is considered erroneous by many administrative law scholars. 

Here is an article by a law professor named Eric Posner explaining why the Hanen Court erred. Posner writes, “If the DHS had said that everyone who satisfied the DAPA criteria must be given deferred-action status, then DAPA would be a rule, and so notice and comment would be required. But DHS told its employees that they should use their discretion when applying the DAPA criteria. The agents were given permission to refrain from granting deferred action to applicants who, for whatever reason, don’t seem to deserve it. DAPA was a policy statement, not a rule. For that reason, as Cass Sunstein explains, Judge Hanen erred… [Judge Hanen] cannot issue a preliminary injunction based on a prediction about how the government will act. He can only wait and allow the DHS to leap into action. If plaintiffs subsequently gather evidence that DHS agents actually do not use discretion but instead apply the DAPA criteria formulaically, only then can they seek an injunction. Hanen, in seeking to restrain the supposedly out-of-control executive branch, exceeded his own authority.”

Londoner v. Denver

210 U.S. 373 (1908)

MR. JUSTICE MOODY delivered the opinion of the court.

The plaintiffs in error began this proceeding in a state court of Colorado to relieve lands owned by them from an assessment of a tax for the cost of paving a street upon which the lands abutted. The relief sought was granted by the trial court, but its action was reversed by the Supreme Court of the State, which ordered judgment for the defendants. The case is here on writ of error. The Supreme Court held that the tax was assessed in conformity with the constitution and laws of the State, and its decision on that question is conclusive [...]

The tax complained of was assessed under the provisions of the charter of the city of Denver, which confers upon the city the power to make local improvements and to assess the cost upon property specially benefited [...] 

It appears from the charter that, in the execution of the power to make local improvements and assess the cost upon the property specially benefited, the main steps to be taken by the city authorities are plainly marked and separated: 1. The board of public works must transmit to the city council a resolution ordering the work to be done and the form of an ordinance authorizing it and creating an assessment district. This it can do only upon certain conditions, one of which is that there shall first be filed a petition asking the improvement, signed by the owners of the majority of the frontage to be assessed. 2. The passage of that ordinance by the city council, which is given authority to determine conclusively whether the action of the board was duly taken. 3. The assessment of the cost upon the landowners after due notice and opportunity for hearing.

[The landowner raises] the question whether the assessment was made without notice and opportunity for hearing to those affected by it, thereby denying to them due process of law. The trial court found as a fact that no opportunity for hearing was afforded, and the Supreme Court did not disturb this finding. The record discloses what was actually done, and there seems to be no dispute about it. After the improvement was completed the board of public works, in compliance with § 29 of the charter, certified to the city clerk a statement of the cost, and an apportionment of it to the lots of land to be assessed. Thereupon the city clerk, in compliance with § 30, published a notice stating, inter alia, that the written complaints or objections of the owners, if filed within thirty days, would be “heard and determined by the city council before the passage of any ordinance assessing the cost.” Those interested, therefore, were informed that if they reduced their complaints and objections to writing, and filed them within thirty days, those complaints and objections would be heard, and would be heard before any assessment was made. The notice given in this case, although following the words of the statute, did not fix the time for hearing, and apparently there were no stated sittings of the council acting as a board of equalization. But the notice purported only to fix the time for filing the complaints and objections, and to inform those who should file them that they would be heard before action. The statute expressly required no other notice, but it was sustained in the court below on the authority of Paulsen v. Portland, 149 U.S. 30, because there was an implied power in the city council to give notice of the time for hearing. We think that the court rightly conceived the meaning of that case and that the statute could be sustained only upon the theory drawn from it. Resting upon the assurance that they would be heard, the plaintiffs in error filed within the thirty days the following paper:

“Denver, Colorado, January 13, 1900.

“To the Honorable Board of Public Works and the Honorable Mayor and City Council of the City of Denver:

“The undersigned, by Joshua Grozier, their attorney, do hereby most earnestly and strenuously protest and object to the passage of the contemplated or any assessing ordinance against the property in Eighth Avenue Paving District No. 1, so called, for each of the following reasons, to wit: 

“That said assessment and all and each of the proceedings leading up to the same were and are illegal, voidable and void, and the attempted assessment if made will be void and uncollectible [...] Wherefore, because of the foregoing and numerous other good and sufficient reasons, the undersigned object and protest against the passage of the said proposed assessing ordinance.”

This certainly was a complaint against and objection to the proposed assessment. Instead of affording the plaintiffs in error an opportunity to be heard upon its allegations, the city council, without notice to them, met as a board of equalization, not in a stated but in a specially called session, and, without any hearing, adopted the following resolution:

“Whereas, complaints have been filed by the various persons and firms as the owners of real estate included within the Eighth Avenue Paving District No. 1, of the city of Denver against the proposed assessments on said property for the cost of said paving, the names and description of the real estate respectively owned by such persons being more particularly described in the various complaints filed with the city clerk; and

“Whereas, no complaint or objection has been filed or made against the apportionment of said assessment made by the board of public works of the city of Denver, but the complaints and objections filed deny wholly the right of the city to assess any district or portion of the assessable property of the city of Denver; therefore, be it.

“Resolved, by the city council of the city of Denver, sitting as a board of equalization, that the apportionments of said assessment made by said board of public works be, and the same are hereby, confirmed and approved.”

Subsequently, without further notice or hearing, the city council enacted the ordinance of assessment whose validity is to be determined in this case. The facts out of which the question on this assignment arises may be compressed into small compass. The first step in the assessment proceedings was by the certificate of the board of public works of the cost of the improvement and a preliminary apportionment of it. The last step was the enactment of the assessment ordinance. From beginning to end of the proceedings the landowners, although allowed to formulate and file complaints and objections, were not afforded an opportunity to be heard upon them. Upon these facts was there a denial by the State of the due process of law guaranteed by the Fourteenth Amendment to the Constitution of the United States?

In the assessment, apportionment and collection of taxes upon property within their jurisdiction the Constitution of the United States imposes few restrictions upon the States. In the enforcement of such restrictions as the Constitution does impose this court has regarded substance and not form. But where the legislature of a State, instead of fixing the tax itself, commits to some subordinate body the duty of determining whether, in what amount, and upon whom it shall be levied, and of making its assessment and apportionment, due process of law requires that at some stage of the proceedings before the tax becomes irrevocably fixed, the taxpayer shall have an opportunity to be heard, of which he must have notice, either personal, by publication, or by a law fixing the time and place of the hearing. It must be remembered that the law of Colorado denies the landowner the right to object in the courts to the assessment, upon the ground that the objections are cognizable only by the board of equalization.

If it is enough that, under such circumstances, an opportunity is given to submit in writing all objections to and complaints of the tax to the board, then there was a hearing afforded in the case at bar. But we think that something more than that, even in proceedings for taxation, is required by due process of law. Many requirements essential in strictly judicial proceedings may be dispensed with in proceedings of this nature. But even here a hearing in its very essence demands that he who is entitled to it shall have the right to support his allegations by argument however brief, and, if need be, by proof, however informal. It is apparent that such a hearing was denied to the plaintiffs in error. The denial was by the city council, which, while acting as a board of equalization, represents the State. The assessment was therefore void, and the plaintiffs in error were entitled to a decree discharging their lands from a lien on account of it [...] 

Bi-Metallic Investment Co. v. State Board of Equalization of Colorado

239 U.S. 441 (1915)

MR. JUSTICE HOLMES delivered the opinion of the court.

This is a suit to enjoin the State Board of Equalization and the Colorado Tax Commission from putting in force, and the defendant Pitcher as assessor of Denver from obeying, an order of the boards increasing the valuation of all taxable property in Denver forty per cent. The order was sustained and the suit directed to be dismissed by the Supreme Court of the State. The plaintiff is the owner of real estate in Denver and brings the case here on the ground that it was given no opportunity to be heard and that therefore its property will be taken without due process of law, contrary to the Fourteenth Amendment of the Constitution of the United States […] 

For the purposes of decision we assume that the constitutional question is presented in the baldest way — that neither the plaintiff nor the assessor of Denver, who presents a brief on the plaintiff's side, nor any representative of the city and county, was given an opportunity to be heard, other than such as they may have had by reason of the fact that the time of meeting of the boards is fixed by law. On this assumption it is obvious that injustice may be suffered if some property in the county already has been valued at its full worth. But if certain property has been valued at a rate different from that generally prevailing in the county the owner has had his opportunity to protest and appeal as usual in our system of taxation, so that it must be assumed that the property owners in the county all stand alike. The question then is whether 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. The Constitution does not require all public acts to be done in town meeting or an assembly of the whole. General statutes within the state power are passed that affect the person or property of individuals, sometimes to the point of ruin, without giving them a chance to be heard. Their rights are protected in the only way that they can be in a complex society, by their power, immediate or remote, over those who make the rule. If the result in this case had been reached as it might have been by the State's doubling the rate of taxation, no one would suggest that the Fourteenth Amendment was violated unless every person affected had been allowed an opportunity to raise his voice against it before the body entrusted by the state constitution with the power […] There must be a limit to individual argument in such matters if government is to go on. In Londoner v. Denver, 210 U.S. 373, a local board had to determine ‘whether, in what amount, and upon whom’ a tax for paving a street should be levied for special benefits. A relatively small number of persons was concerned, who were exceptionally affected, in each case upon individual grounds, and it was held that they had a right to a hearing. But that decision is far from reaching a general determination dealing only with the principle upon which all the assessments in a county had been laid.

Judgment affirmed.

Goldberg v. Kelly

397 U.S. 254 (1970)

MR. JUSTICE BRENNAN delivered the opinion of the Court.

The question for decision is whether a State that terminates public assistance payments to a particular recipient without affording him the opportunity for an evidentiary hearing prior to termination denies the recipient procedural due process in violation of the Due Process Clause of the Fourteenth Amendment.

This action was brought in the District Court for the Southern District of New York by residents of New York City receiving financial aid under the federally assisted program of Aid to Families with Dependent Children (AFDC) or under New York State’s general Home Relief program. Their complaint alleged that the New York State and New York City officials administering these programs terminated, or were about to terminate, such aid without prior notice and hearing, thereby denying them due process of law. At the time the suits were filed there was no requirement of prior notice or hearing of any kind before termination of financial aid [...] 

I

The constitutional issue to be decided, therefore, is the narrow one whether the Due Process Clause requires that the recipient be afforded an evidentiary hearing before the termination of benefits. The District Court held that only a pre-termination evidentiary hearing would satisfy the constitutional command, and rejected the argument of the state and city officials that the combination of the post-termination “fair hearing” with the informal pre-termination review disposed of all due process claims. The court said: “While post-termination review is relevant, there is one overpowering fact which controls here. By hypothesis, a welfare recipient is destitute, without funds or assets. . . . Suffice it to say that to cut off a welfare recipient in the face of . . . ‘brutal need’ without a prior hearing of some sort is unconscionable, unless overwhelming considerations justify it.” Kelly v. Wyman, 294 F. Supp. 893, 899, 900 (1968). The court rejected the argument that the need to protect the public’s tax revenues supplied the requisite “overwhelming consideration.” “Against the justified desire to protect public funds must be weighed the individual's over-powering need in this unique situation not to be wrongfully deprived of assistance . . . . While the problem of additional expense must be kept in mind, it does not justify denying a hearing meeting the ordinary standards of due process. Under all the circumstances, we hold that due process requires an adequate hearing before termination of welfare benefits, and the fact that there is a later constitutionally fair proceeding does not alter the result.” 

[...] The constitutional challenge cannot be answered by an argument that public assistance benefits are “a ‘privilege’ and not a ‘right.”” Relevant constitutional restraints apply as much to the withdrawal of public assistance benefits as to disqualification for unemployment compensation; or to denial of a tax exemption; or to discharge from public employment. The extent to which procedural due process must be afforded the recipient is influenced by the extent to which he may be “condemned to suffer grievous loss,” Joint Anti-Fascist Refugee Committee v. McGrath, 341 U. S. 123, 168 (1951) (Frankfurter, J., concurring), and depends upon whether the recipient’s interest in avoiding that loss outweighs the governmental interest in summary adjudication. Accordingly, as we said in Cafeteria & Restaurant Workers Union v. McElroy, 367 U. S. 886, 895 (1961), “consideration of what procedures due process may require under any given set of circumstances must begin with a determination of the precise nature of the government function involved as well as of the private interest that has been affected by governmental action.” 

It is true, of course, that some governmental benefits may be administratively terminated without affording the recipient a pre-termination evidentiary hearing. But we agree with the District Court that when welfare is discontinued, only a pre-termination evidentiary hearing provides the recipient with procedural due process. For qualified recipients, welfare provides the means to obtain essential food, clothing, housing, and medical care. Thus the crucial factor in this context—a factor not present in the case of the blacklisted government contractor, the discharged government employee, the taxpayer denied a tax exemption, or virtually anyone else whose governmental entitlements are ended—is that termination of aid pending resolution of a controversy over eligibility may deprive an eligible recipient of the very means by which to live while he waits. Since he lacks independent resources, his situation becomes immediately desperate. His need to concentrate upon finding the means for daily subsistence, in turn, adversely affects his ability to seek redress from the welfare bureaucracy,

Moreover, important governmental interests are promoted by affording recipients a pre-termination evidentiary hearing. From its founding the Nation's basic commitment has been to foster the dignity and well-being of all persons within its borders. We have come to recognize that forces not within the control of the poor contribute to their poverty. This perception, against the background of our traditions, has significantly influenced the development of the contemporary public assistance system. Welfare, by meeting the basic demands of subsistence, can help bring within the reach of the poor the same opportunities that are available to others to participate meaningfully in the life of the community. At the same time, welfare guards against the societal malaise that may flow from a widespread sense of unjustified frustration and insecurity. Public assistance, then, is not mere charity, but a means to “promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.” The same governmental interests that counsel the provision of welfare, counsel as well its uninterrupted provision to those eligible to receive it; pre-termination evidentiary hearings are indispensable to that end.

Appellant does not challenge the force of these considerations but argues that they are outweighed by countervailing governmental interests in conserving fiscal and administrative resources. These interests, the argument goes, justify the delay of any evidentiary hearing until after discontinuance of the grants. Summary adjudication protects the public fisc by stopping payments promptly upon discovery of reason to believe that a recipient is no longer eligible. Since most terminations are accepted without challenge, summary adjudication also conserves both the fisc and administrative time and energy by reducing the number of evidentiary hearings actually held.

We agree with the District Court, however, that these governmental interests are not overriding in the welfare context. The requirement of a prior hearing doubtless involves some greater expense, and the benefits paid to ineligible recipients pending decision at the hearing probably cannot be recouped, since these recipients are likely to be judgment-proof. But the State is not without weapons to minimize these increased costs. Much of the drain on fiscal and administrative resources can be reduced by developing procedures for prompt pre-termination hearings and by skillful use of personnel and facilities. Indeed, the very provision for a post-termination evidentiary hearing in New York's Home Relief program is itself cogent evidence that the State recognizes the primacy of the public interest in correct eligibility determinations and therefore in the provision of procedural safeguards. Thus, the interest of the eligible recipient in uninterrupted receipt of public assistance, coupled with the State's interest that his payments not be erroneously terminated, clearly outweighs the State's competing concern to prevent any increase in its fiscal and administrative burdens. As the District Court correctly concluded, "[t]he stakes are simply too high for the welfare recipient, and the possibility for honest error or irritable misjudgment too great, to allow termination of aid without giving the recipient a chance, if he so desires, to be fully informed of the case against him so that he may contest its basis and produce evidence in rebuttal." 

II

We also agree with the District Court, however, that the pre-termination hearing need not take the form of a judicial or quasi-judicial trial. We bear in mind that the statutory “fair hearing” will provide the recipient with a full administrative review. Accordingly, the pre-termination hearing has one function only: to produce an initial determination of the validity of the welfare department’s grounds for discontinuance of payments in order to protect a recipient against an erroneous termination of his benefits. Thus, a complete record and a comprehensive opinion, which would serve primarily to facilitate judicial review and to guide future decisions, need not be provided at the pre-termination stage. We recognize, too, that both welfare authorities and recipients have an interest in relatively speedy resolution of questions of eligibility, that they are used to dealing with one another informally, and that some welfare departments have very burdensome caseloads. These considerations justify the limitation of the pre-termination hearing to minimum procedural safeguards, adapted to the particular characteristics of welfare recipients, and to the limited nature of the controversies to be resolved. We wish to add that we, no less than the dissenters, recognize the importance of not imposing upon the States or the Federal Government in this developing field of law any procedural requirements beyond those demanded by rudimentary due process.

“The fundamental requisite of due process of law is the opportunity to be heard.” Grannis v. Ordean, 234 U. S. 385, 394 (1914). The hearing must be “at a meaningful time and in a meaningful manner.” Armstrong v. Manzo, 380 U. S. 545, 552 (1965). In the present context these principles require that a recipient have timely and adequate notice detailing the reasons for a proposed termination, and an effective opportunity to defend by confronting any adverse witnesses and by presenting his own arguments and evidence orally. These rights are important in cases such as those before us, where recipients have challenged proposed terminations as resting on incorrect or misleading factual premises or on misapplication of rules or policies to the facts of particular cases.

We are not prepared to say that the seven-day notice currently provided by New York City is constitutionally insufficient per se, although there may be cases where fairness would require that a longer time be given. Nor do we see any constitutional deficiency in the content or form of the notice. New York employs both a letter and a personal conference with a caseworker to inform a recipient of the precise questions raised about his continued eligibility. Evidently the recipient is told the legal and factual bases for the Department’s doubts. This combination is probably the most effective method of communicating with recipients.

The city’s procedures presently do not permit recipients to appear personally with or without counsel before the official who finally determines continued eligibility. Thus a recipient is not permitted to present evidence to that official orally, or to confront or cross-examine adverse witnesses. These omissions are fatal to the constitutional adequacy of the procedures.

The opportunity to be heard must be tailored to the capacities and circumstances of those who are to be heard. It is not enough that a welfare recipient may present his position to the decision maker in writing or secondhand through his caseworker. Written submissions are an unrealistic option for most recipients, who lack the educational attainment necessary to write effectively and who cannot obtain professional assistance. Moreover, written submissions do not afford the flexibility of oral presentations; they do not permit the recipient to mold his argument to the issues the decision maker appears to regard as important. Particularly where credibility and veracity are at issue, as they must be in many termination proceedings, written submissions are a wholly unsatisfactory basis for decision. The secondhand presentation to the decisionmaker by the caseworker has its own deficiencies; since the caseworker usually gathers the facts upon which the charge of ineligibility rests, the presentation of the recipient's side of the controversy cannot safely be left to him. Therefore a recipient must be allowed to state his position orally. Informal procedures will suffice; in this context due process does not require a particular order of proof or mode of offering evidence. 

In almost every setting where important decisions turn on questions of fact, due process requires an opportunity to confront and cross-examine adverse witnesses [...] Welfare recipients must therefore be given an opportunity to confront and cross-examine the witnesses relied on by the department [...]

Affirmed.

Board of Regents of State Colleges v. Roth

408 U.S. 564 (1972)

MR. JUSTICE STEWART delivered the opinion of the Court.

In 1968 the respondent, David Roth, was hired for his first teaching job as assistant professor of political science at Wisconsin State University-Oshkosh. He was hired for a fixed term of one academic year. The notice of his faculty appointment specified that his employment would begin on September 1, 1968, and would end on June 30, 1969. The respondent completed that term. [Though Roth was rated by the faculty as an excellent teacher, he had publicly criticized the administration for suspending an entire group of 94 Black students without determining individual guilt. He used his classroom to discuss what was being done about the suspensions and one day, instead of meeting his class, he went to a meeting of the Board of Regents to discuss the suspensions.] He was informed that he would not be rehired for the next academic year.

The respondent had no tenure rights to continued employment. Under Wisconsin statutory law a state university teacher can acquire tenure as a “permanent” employee only after four years of year-to-year employment. Having acquired tenure, a teacher is entitled to continued employment “during efficiency and good behavior.” A relatively new teacher without tenure, however, is under Wisconsin law entitled to nothing beyond his one-year appointment. There are no statutory or administrative standards defining eligibility for re-employment. State law thus clearly leaves the decision whether to rehire a nontenured teacher for another year to the unfettered discretion of university officials.

The procedural protection afforded a Wisconsin State University teacher before he is separated from the University corresponds to his job security. As a matter of statutory law, a tenured teacher cannot be “discharged except for cause upon written charges” and pursuant to certain procedures. A nontenured teacher, similarly, is protected to some extent during his one-year term. Rules promulgated by the Board of Regents provide that a nontenured teacher “dismissed” before the end of the year may have some opportunity for review of the “dismissal.” But the Rules provide no real protection for a nontenured teacher who simply is not re-employed for the next year. He must be informed by February 1 “concerning retention or non-retention for the ensuing year.” But “no reason for non-retention need be given. No review or appeal is provided in such case.”

In conformance with these Rules, the President of Wisconsin State University-Oshkosh informed the respondent before February 1, 1969, that he would not be rehired for the 1969-1970 academic year. He gave the respondent no reason for the decision and no opportunity to challenge it at any sort of hearing.

The respondent then brought this action in Federal District Court alleging that the decision not to rehire him for the next year infringed his Fourteenth Amendment rights. He attacked the decision both in substance and procedure. First, he alleged that the true reason for the decision was to punish him for certain statements critical of the University administration, and that it therefore violated his right to freedom of speech. Second, he alleged that the failure of University officials to give him notice of any reason for nonretention and an opportunity for a hearing violated his right to procedural due process of law [...] The only question presented to us at this stage in the case is whether the respondent had a constitutional right to a statement of reasons and a hearing on the University's decision not to rehire him for another year. We hold that he did not.

I

The requirements of procedural due process apply only to the deprivation of interests encompassed by the Fourteenth Amendment’s protection of liberty and property. When protected interests are implicated, the right to some kind of prior hearing is paramount. But the range of interests protected by procedural due process is not infinite.

The District Court decided that procedural due process guarantees apply in this case by assessing and balancing the weights of the particular interests involved. It concluded that the respondent’s interest in re-employment at Wisconsin State University-Oshkosh outweighed the University's interest in denying him re-employment summarily. Undeniably, the respondent’s re-employment prospects were of major concern to him—concern that we surely cannot say was insignificant. And a weighing process has long been a part of any determination of the form of hearing required in particular situations by procedural due process. But, to determine whether due process requirements apply in the first place, we must look not to the “weight” but to the nature of the interest at stake. We must look to see if the interest is within the Fourteenth Amendment’s protection of liberty and property.

“Liberty” and “property” are broad and majestic terms. They are among the “[g]reat [constitutional] concepts . . . purposely left to gather meaning from experience. . . . [T]hey relate to the whole domain of social and economic fact, and the statesmen who founded this Nation knew too well that only a stagnant society remains unchanged.” National Ins. Co. v. Tidewater Co., 337 U. S. 582, 646 (Frankfurter, J., dissenting). For that reason, the Court has fully and finally rejected the wooden distinction between "rights" and "privileges" that once seemed to govern the applicability of procedural due process rights. The Court has also made clear that the property interests protected by procedural due process extend well beyond actual ownership of real estate, chattels, or money. By the same token, the Court has required due process protection for deprivations of liberty beyond the sort of formal constraints imposed by the criminal process.

Yet, while the Court has eschewed rigid or formalistic limitations on the protection of procedural due process, it has at the same time observed certain boundaries. For the words “liberty” and “property” in the Due Process Clause of the Fourteenth Amendment must be given some meaning.

II

“While this Court has not attempted to define with exactness the liberty . . . guaranteed [by the Fourteenth Amendment], the term has received much consideration and some of the included things have been definitely stated. Without doubt, it denotes not merely freedom from bodily restraint but also the right of the individual to contract, to engage in any of the common occupations of life, to acquire useful knowledge, to marry, establish a home and bring up children, to worship God according to the dictates of his own conscience, and generally to enjoy those privileges long recognized . . . as essential to the orderly pursuit of happiness by free men.” Meyer v. Nebraska, 262 U. S. 390, 399. In a Constitution for a free people, there can be no doubt that the meaning of “liberty” must be broad indeed. 

There might be cases in which a State refused to re-employ a person under such circumstances that interests in liberty would be implicated. But this is not such a case.

The State, in declining to rehire the respondent, did not make any charge against him that might seriously damage his standing and associations in his community. It did not base the nonrenewal of his contract on a charge, for example, that he had been guilty of dishonesty, or immorality. Had it done so, this would be a different case. For “[w]here a person’s good name, reputation, honor, or integrity is at stake because of what the government is doing to him, notice and an opportunity to be heard are essential.” Wisconsin v. Constantineau, 400 U. S. 433, 437. In such a case, due process would accord an opportunity to refute the charge before University officials. In the present case, however, there is no suggestion whatever that the respondent’s “good name, reputation, honor, or integrity” is at stake.

Similarly, there is no suggestion that the State, in declining to re-employ the respondent, imposed on him a stigma or other disability that foreclosed his freedom to take advantage of other employment opportunities. The State, for example, did not invoke any regulations to bar the respondent from all other public employment in state universities. Had it done so, this, again, would be a different case. For “[t]o be deprived not only of present government employment but of future opportunity for it certainly is no small injury . . . .” Joint Anti-Fascist Refugee Committee v. McGrath, supra, at 185 (Jackson, J., concurring). The Court has held, for example, that a State, in regulating eligibility for a type of professional employment, cannot foreclose a range of opportunities “in a manner . . . that contravene[s] . . . Due Process,” Schware v. Board of Bar Examiners, 353 U. S. 232, 238, and, specifically, in a manner that denies the right to a full prior hearing. In the present case, however, this principle does not come into play.

To be sure, the respondent has alleged that the nonrenewal of his contract was based on his exercise of his right to freedom of speech. But this allegation is not now before us. The District Court stayed proceedings on this issue, and the respondent has yet to prove that the decision not to rehire him was, in fact, based on his free speech activities.

Hence, on the record before us, all that clearly appears is that the respondent was not rehired for one year at one university. It stretches the concept too far to suggest that a person is deprived of “liberty” when he simply is not rehired in one job but remains as free as before to seek another.

III

The Fourteenth Amendment's procedural protection of property is a safeguard of the security of interests that a person has already acquired in specific benefits. These interests—property interests—may take many forms.

Thus, the Court has held that a person receiving welfare benefits under statutory and administrative standards defining eligibility for them has an interest in continued receipt of those benefits that is safeguarded by procedural due process. Goldberg v. Kelly, 397 U. S. 254. Similarly, in the area of public employment, the Court has held that a public college professor dismissed from an office held under tenure provisions, and college professors and staff members dismissed during the terms of their contracts, have interests in continued employment that are safeguarded by due process. Only last year, the Court held that this principle “proscribing summary dismissal from public employment without hearing or inquiry required by due process” also applied to a teacher recently hired without tenure or a formal contract, but nonetheless with a clearly implied promise of continued employment.

Certain attributes of “property” interests protected by procedural due process emerge from these decisions. To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. It is a purpose of the ancient institution of property to protect those claims upon which people rely in their daily lives, reliance that must not be arbitrarily undermined. It is a purpose of the constitutional right to a hearing to provide an opportunity for a person to vindicate those claims.

Property interests, of course, are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law—rules or understandings that secure certain benefits and that support claims of entitlement to those benefits. Thus, the welfare recipients in Goldberg v. Kelly had a claim of entitlement to welfare payments that was grounded in the statute defining eligibility for them. The recipients had not yet shown that they were, in fact, within the statutory terms of eligibility. But we held that they had a right to a hearing at which they might attempt to do so.

Just as the welfare recipients’ “property” interest in welfare payments was created and defined by statutory terms, so the respondent’s “property” interest in employment at Wisconsin State University-Oshkosh was created and defined by the terms of his appointment. Those terms secured his interest in employment up to June 30, 1969. But the important fact in this case is that they specifically provided that the respondent's employment was to terminate on June 30. They did not provide for contract renewal absent “sufficient cause.” Indeed, they made no provision for renewal whatsoever.

Thus, the terms of the respondent's appointment secured absolutely no interest in re-employment for the next year. They supported absolutely no possible claim of entitlement to re-employment. Nor, significantly, was there any state statute or University rule or policy that secured his interest in re-employment or that created any legitimate claim to it. In these circumstances, the respondent surely had an abstract concern in being rehired, but he did not have a property interest sufficient to require the University authorities to give him a hearing when they declined to renew his contract of employment.

IV

Our analysis of the respondent's constitutional rights in this case in no way indicates a view that an opportunity for a hearing or a statement of reasons for nonretention would, or would not, be appropriate or wise in public colleges and universities. For it is a written Constitution that we apply. Our role is confined to interpretation of that Constitution.

We must conclude that the summary judgment for the respondent should not have been granted, since the respondent has not shown that he was deprived of liberty or property protected by the Fourteenth Amendment. The judgment of the Court of Appeals, accordingly, is reversed and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

Paul v. Davis

424 U.S. 693 (1976)

MR. JUSTICE REHNQUIST delivered the opinion of the Court.

We granted certiorari in this case to consider whether respondent’s charge that petitioners’ defamation of him, standing alone and apart from any other governmental action with respect to him, stated a claim for relief under [the] Fourteenth Amendment. For the reasons hereinafter stated, we conclude that it does not.

Petitioner Paul is the Chief of Police of the Louisville, Ky., Division of Police, while petitioner McDaniel occupies the same position in the Jefferson County, Ky., Division of Police. In late 1972 they agreed to combine their efforts for the purpose of alerting local area merchants to possible shoplifters who might be operating during the Christmas season. In early December petitioners distributed to approximately 800 merchants in the Louisville metropolitan area a “flyer,” which began as follows:

“TO: BUSINESS MEN IN THE METROPOLITAN AREA

“The Chiefs of The Jefferson County and City of Louisville Police Departments, in an effort to keep their officers advised on shoplifting activity, have approved the attached alphabetically arranged flyer of subjects known to be active in this criminal field.

“This flyer is being distributed to you, the business man, so that you may inform your security personnel to watch for these subjects. These persons have been arrested during 1971 and 1972 or have been active in various criminal fields in high density shopping areas.

“Only the photograph and name of the subject is shown on this flyer, if additional information is desired, please forward a request in writing . . . .”

The flyer consisted of five pages of “mug shot” photos, arranged alphabetically. Each page was headed:

“NOVEMBER 1972 CITY OF LOUISVILLE JEFFERSON COUNTY POLICE DEPARTMENTS ACTIVE SHOPLIFTERS”

In approximately the center of page 2 there appeared photos and the name of the respondent, Edward Charles Davis III.

Respondent appeared on the flyer because on June 14, 1971, he had been arrested in Louisville on a charge of shoplifting. He had been arraigned on this charge in September 1971, and, upon his plea of not guilty, the charge had been “filed away with leave [to reinstate],” a disposition which left the charge outstanding. Thus, at the time petitioners caused the flyer to be prepared and circulated respondent had been charged with shoplifting but his guilt or innocence of that offense had never been resolved. Shortly after circulation of the flyer the charge against respondent was finally dismissed by a judge of the Louisville Police Court [...]

I

Respondent’s due process claim is grounded upon his assertion that the flyer, and in particular the phrase “Active Shoplifters” appearing at the head of the page upon which his name and photograph appear, impermissibly deprived him of some “liberty” protected by the Fourteenth Amendment. His complaint asserted that the “active shoplifter” designation would inhibit him from entering business establishments for fear of being suspected of shoplifting and possibly apprehended, and would seriously impair his future employment opportunities. Accepting that such consequences may flow from the flyer in question, respondent's complaint would appear to state a classical claim for defamation actionable in the courts of virtually every State. Imputing criminal behavior to an individual is generally considered defamatory per se, and actionable without proof of special damages [...]

The words “liberty” and “property” as used in the Fourteenth Amendment do not in terms single out reputation as a candidate for special protection over and above other interests that may be protected by state law. While we have in a number of our prior cases pointed out the frequently drastic effect of the “stigma” which may result from defamation by the government in a variety of contexts, this line of cases does not establish the proposition that reputation alone, apart from some more tangible interests such as employment, is either “liberty” or “property” by itself sufficient to invoke the procedural protection of the Due Process Clause [...] While not uniform in their treatment of the subject, we think that the weight of our decisions establishes no constitutional doctrine converting every defamation by a public official into a deprivation of liberty within the meaning of the Due Process Clause of the Fifth or Fourteenth Amendment [...]

MR. JUSTICE BRENNAN, with whom MR. JUSTICE MARSHALL concurs and MR. JUSTICE WHITE concurs in part, dissenting.

I dissent. The Court today holds that police officials, acting in their official capacities as law enforcers, may on their own initiative and without trial constitutionally condemn innocent individuals as criminals and thereby brand them with one of the most stigmatizing and debilitating labels in our society. If there are no constitutional restraints on such oppressive behavior, the safeguards constitutionally accorded an accused in a criminal trial are rendered a sham, and no individual can feel secure that he will not be arbitrarily singled out for similar ex parte punishment by those primarily charged with fair enforcement of the law. The Court accomplishes this result by excluding a person's interest in his good name and reputation from all constitutional protection, regardless of the character of or necessity for the government's actions. The result, which is demonstrably inconsistent with out prior case law and unduly restrictive in its construction of our precious Bill of Rights, is one in which I cannot concur [...]

Codd v. Velger

429 U.S. 624 (1977)

PER CURIAM.

[Respondent Velger alleged that he had been wrongly dismissed without a hearing or a statement of reasons from his position as a patrolman with the New York City Police Department, and under 42 U.S.C. § 1983, sought reinstatement and damages for the resulting injury to his reputation and future employment prospects. He held only a probationary position with the Penn-Central Railroad Police Department, so he had no property interest. Thus, Velger alleged that he was entitled to a hearing due to the stigmatizing effect of certain material placed by the City Police Department in his personnel file. He alleged that the derogatory material had brought about his subsequent dismissal from his position and that it had also prevented him from finding other employment of a similar nature for which his scores on numerous examinations otherwise qualified him.]

The case came on for a bench trial before Judge Werker, who [...] determined that the only issue  [up for discussion] was whether petitioners, in discharging respondent had “imposed a stigma on Mr. Velger that foreclosed his freedom to take advantage of other employment opportunities.” 

Among the specific findings of fact made by the District Court was that an officer of the Penn-Central Railroad Police Department was shown the City Police Department file relating to respondent’s employment, upon presentation of a form signed by respondent authorizing the release of personnel information. From an examination of the file, this officer “gleaned that plaintiff had been dismissed because while still a trainee he had put a revolver to his head in an apparent suicide attempt.” The Penn-Central officer tried to verify this story, but the Police Department refused to co-operate with him, advising him to proceed by letter. In rendering judgment against the respondent, the court also found that he had failed to establish “that information about his Police Department service was publicized or circulated by defendants in any way that might reach his prospective employers.”

Respondent successfully appealed this decision to the Court of Appeals for the Second Circuit. That court held that the finding of no stigma was clearly erroneous. It reasoned that the information about the apparent suicide attempt was of a kind which would necessarily impair employment prospects for one seeking work as a police officer. It also decided that the mere act of making available personnel files with the employee's consent was enough to place responsibility for the stigma on the employer, since former employees had no practical alternative but to consent to the release of such information if they wished to be seriously considered for other employment. 

We granted certiorari, and the parties have urged us to consider whether the report in question was of a stigmatizing nature, and whether the circumstances of its apparent dissemination were such as to fall within the language of Board of Regents v. Roth, 408 U. S. 564, 573 (1972) [...] We find it unnecessary to reach these issues, however, because of respondent’s failure to allege or prove one essential element of his case.

Assuming all of the other elements necessary to make out a claim of stigmatization under Roth [...], the remedy mandated by the Due Process Clause of the Fourteenth Amendment is “an opportunity to refute the charge.” [...] But if the hearing mandated by the Due Process Clause is to serve any useful purpose, there must be some factual dispute between an employer and a discharged employee which has some significant bearing on the employee's reputation. Nowhere in his pleadings or elsewhere has respondent affirmatively asserted that the report of the apparent suicide attempt was substantially false. Neither the District Court nor the Court of Appeals made any such finding. When we consider the nature of the interest sought to be protected, we believe the absence of any such allegation or finding is fatal to respondent’s claim under the Due Process Clause that he should have been given a hearing.

Mathews v. Eldridge

424 U.S. 319 (1976)

MR. JUSTICE POWELL delivered the opinion of the Court.

The issue in this case is whether the Due Process Clause of the Fifth Amendment requires that prior to the termination of So cial Security disability benefit payments the recipient be afforded an opportunity for an evidentiary hearing.

Cash benefits are provided to workers during periods in which they are completely disabled under the disability insurance benefits program created by the 1956 amendments to Title II of the Social Security Act. Respondent Eldridge was first awarded benefits in June 1968. In March 1972, he received a questionnaire from the state agency charged with monitoring his medical condition. Eldridge completed the questionnaire, indicating that his condition had not improved and identifying the medical sources, including physicians, from whom he had received treatment recently. The state agency then obtained reports from his physician and a psychiatric consultant. After considering these reports and other information in his file the agency informed Eldridge by letter that it had made a tentative determination that his disability had ceased in May 1972. The letter included a statement of reasons for the proposed termination of benefits, and advised Eldridge that he might request reasonable time in which to obtain and submit additional information pertaining to his condition.

In his written response, Eldridge disputed one characterization of his medical condition and indicated that the agency already had enough evidence to establish his disability. The state agency then made its final determination that he had ceased to be disabled in May 1972. This determination was accepted by the Social Security Administration (SSA), which notified Eldridge in July that his benefits would terminate after that month. The notification also advised him of his right to seek reconsideration by the state agency of this initial determination within six months.

Instead of requesting reconsideration Eldridge commenced this action challenging the constitutional validity of the administrative procedures established by the Secretary of Health, Education, and Welfare for assessing whether there exists a continuing disability. He sought an immediate reinstatement of benefits pending a hearing on the issue of his disability [...] In support of his contention that due process requires a pretermination hearing, Eldridge relied exclusively upon this Court’s decision in Goldberg v. Kelly, 397 U. S. 254 (1970), which established a right to an “evidentiary hearing” prior to termination of welfare benefits. The Secretary contended that Goldberg was not controlling since eligibility for disability benefits, unlike eligibility for welfare benefits, is not based on financial need and since issues of credibility and veracity do not play a significant role in the disability entitlement decision, which turns primarily on medical evidence [...]

“[D]ue process is flexible and calls for such procedural protections as the particular situation demands.” Morrissey v. Brewer, 408 U. S. 471, 481 (1972). Accordingly, resolution of the issue whether the administrative procedures provided here are constitutionally sufficient requires analysis of the governmental and private interests that are affected. More precisely, our prior decisions indicate that identification of the specific dictates of due process generally requires consideration of three distinct factors: First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail [...] 

Since a recipient whose benefits are terminated is awarded full retroactive relief if he ultimately prevails, his sole interest is in the uninterrupted receipt of this source of income pending final administrative decision on his claim. His potential injury is thus similar in nature to that of the welfare recipient in Goldberg [...]

Only in Goldberg has the Court held that due process requires an evidentiary hearing prior to a temporary deprivation. It was emphasized there that welfare assistance is given to persons on the very margin of subsistence:

“The crucial factor in this context—a factor not present in the case of . . . virtually anyone else whose governmental entitlements are ended—is that termination of aid pending resolution of a controversy over eligibility may deprive an eligible recipient of the very means by which to live while he waits.” 

Eligibility for disability benefits, in contrast, is not based upon financial need. Indeed, it is wholly unrelated to the worker’s income or support from many other sources, such as earnings of other family members, workmen’s compensation awards, tort claims awards, savings, private insurance, public or private pensions, veterans’ benefits, food stamps, public assistance, or the “many other important programs, both public and private, which contain provisions for disability payments affecting a substantial portion of the work force . . . .” 

As Goldberg illustrates, the degree of potential deprivation that may be created by a particular decision is a factor to be considered in assessing the validity of any administrative decisionmaking process. The potential deprivation here is generally likely to be less than in Goldberg, although the degree of difference can be overstated [...] 

An additional factor to be considered here is the fairness and reliability of the existing pretermination procedures, and the probable value, if any, of additional procedural safeguards. Central to the evaluation of any administrative process is the nature of the relevant inquiry. In order to remain eligible for benefits the disabled worker must demonstrate by means of “medically acceptable clinical and laboratory diagnostic techniques,” that he is unable “to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment . . . .” In short, a medical assessment of the worker’s physical or mental condition is required. This is a more sharply focused and easily documented decision than the typical determination of welfare entitlement. In the latter case, a wide variety of information may be deemed relevant, and issues of witness credibility and veracity often are critical to the decisionmaking process. Goldberg noted that in such circumstances “written submissions are a wholly unsatisfactory basis for decision.” 

By contrast, the decision whether to discontinue disability benefits will turn, in most cases, upon “routine, standard, and unbiased medical reports by physician specialists,” concerning a subject whom they have personally examined. [P]rocedural due process rules are shaped by the risk of error inherent in the truthfinding process as applied to the generality of cases, not the rare exceptions. The potential value of an evidentiary hearing, or even oral presentation to the decisionmaker, is substantially less in this context than in Goldberg.

The decision in Goldberg also was based on the Court's conclusion that written submissions were an inadequate substitute for oral presentation because they did not provide an effective means for the recipient to communicate his case to the decisionmaker. Written submissions were viewed as an unrealistic option, for most recipients lacked the “educational attainment necessary to write effectively” and could not afford professional assistance. In addition, such submissions would not provide the “flexibility of oral presentations” or “permit the recipient to mold his argument to the issues the decision maker appears to regard as important.” In the context of the disability-benefits-entitlement assessment the administrative procedures under review here fully answer these objections.

The detailed questionnaire which the state agency periodically sends the recipient identifies with particularity the information relevant to the entitlement decision, and the recipient is invited to obtain assistance from the local SSA office in completing the questionnaire. More important, the information critical to the entitlement decision usually is derived from medical sources, such as the treating physician. Such sources are likely to be able to communicate more effectively through written documents than are welfare recipients or the lay witnesses supporting their cause. The conclusions of physicians often are supported by X-rays and the results of clinical or laboratory tests, information typically more amenable to written than to oral presentation. 

A further safeguard against mistake is the policy of allowing the disability recipient's representative full access to all information relied upon by the state agency. In addition, prior to the cutoff of benefits the agency informs the recipient of its tentative assessment, the reasons therefor, and provides a summary of the evidence that it considers most relevant. Opportunity is then afforded the recipient to submit additional evidence or arguments, enabling him to challenge directly the accuracy of information in his file as well as the correctness of the agency's tentative conclusions. These procedures, again as contrasted with those before the Court in Goldberg, enable the recipient to “mold” his argument to respond to the precise issues which the decisionmaker regards as crucial [...]

In striking the appropriate due process balance the final factor to be assessed is the public interest. This includes the administrative burden and other societal costs that would be associated with requiring, as a matter of constitutional right, an evidentiary hearing upon demand in all cases prior to the termination of disability benefits. The most visible burden would be the incremental cost resulting from the increased number of hearings and the expense of providing benefits to ineligible recipients pending decision. No one can predict the extent of the increase, but the fact that full benefits would continue until after such hearings would assure the exhaustion in most cases of this attractive option. Nor would the theoretical right of the Secretary to recover undeserved benefits result, as a practical matter, in any substantial offset to the added outlay of public funds. The parties submit widely varying estimates of the probable additional financial cost. We only need say that experience with the constitutionalizing of government procedures suggests that the ultimate additional cost in terms of money and administrative burden would not be insubstantial.

Financial cost alone is not a controlling weight in determining whether due process requires a particular procedural safeguard prior to some administrative decision. But the Government’s interest, and hence that of the public, in conserving scarce fiscal and administrative resources is a factor that must be weighed. At some point the benefit of an additional safeguard to the individual affected by the administrative action and to society in terms of increased assurance that the action is just, may be outweighed by the cost. Significantly, the cost of protecting those whom the preliminary administrative process has identified as likely to be found undeserving may in the end come out of the pockets of the deserving since resources available for any particular program of social welfare are not unlimited. 

But more is implicated in cases of this type than ad hoc weighing of fiscal and administrative burdens against the interests of a particular category of claimants. The ultimate balance involves a determination as to when, under our constitutional system, judicial-type procedures must be imposed upon administrative action to assure fairness. We reiterate the wise admonishment of Mr. Justice Frankfurter that differences in the origin and function of administrative agencies “preclude wholesale transplantation of the rules of procedure, trial, and review which have evolved from the history and experience of courts.” The judicial model of an evidentiary hearing is neither a required, nor even the most effective, method of decisionmaking in all circumstances. The essence of due process is the requirement that “a person in jeopardy of serious loss [be given] notice of the case against him and opportunity to meet it.” All that is necessary is that the procedures be tailored, in light of the decision to be made, to “the capacities and circumstances of those who are to be heard,” to insure that they are given a meaningful opportunity to present their case [...] 

We conclude that an evidentiary hearing is not required prior to the termination of disability benefits and that the present administrative procedures fully comport with due process.

Cleveland Board of Education v. Loudermill

470 U.S. 532 (1985)

JUSTICE WHITE delivered the opinion of the Court.

In these cases we consider what pretermination process must be accorded a public employee who can be discharged only for cause.

In 1979 the Cleveland Board of Education, petitioner in No. 83-1362, hired respondent James Loudermill as a security guard. On his job application, Loudermill stated that he had never been convicted of a felony. Eleven months later, as part of a routine examination of his employment records, the Board discovered that in fact Loudermill had been convicted of grand larceny in 1968. By letter dated November 3, 1980, the Board's Business Manager informed Loudermill that he had been dismissed because of his dishonesty in filling out the employment application. Loudermill was not afforded an opportunity to respond to the charge of dishonesty or to challenge his dismissal [...] 

Loudermill filed an appeal with the Cleveland Civil Service Commission on November 12. The Commission appointed a referee, who held a hearing on January 29, 1981. Loudermill argued that he had thought that his 1968 larceny conviction was for a misdemeanor rather than a felony. The referee recommended reinstatement. On July 20, 1981, the full Commission heard argument and orally announced that it would uphold the dismissal [...] 

Although the Commission's decision was subject to judicial review in the state courts, Loudermill instead brought the present suit in the Federal District Court for the Northern District of Ohio. The complaint alleged that [Ohio’s civil servant law] was unconstitutional on its face because it did not provide the employee an opportunity to respond to the charges against him prior to removal. As a result, discharged employees were deprived of liberty and property without due process [...] 

An essential principle of due process is that a deprivation of life, liberty, or property “be preceded by notice and opportunity for hearing appropriate to the nature of the case.” Mullane v. Central Hanover Bank & Trust Co., 339 U. S. 306, 313 (1950). We have described “the root requirement” of the Due Process Clause as being “that an individual be given an opportunity for a hearing before he is deprived of any significant property interest.” This principle requires “some kind of a hearing” prior to the discharge of an employee who has a constitutionally protected property interest in his employment. Board of Regents v. Roth, 408 U. S., at 569-570 [...] 

Some opportunity for the employee to present his side of the case is recurringly of obvious value in reaching an accurate decision. Dismissals for cause will often involve factual disputes. Even where the facts are clear, the appropriateness or necessity of the discharge may not be; in such cases, the only meaningful opportunity to invoke the discretion of the decisionmaker is likely to be before the termination takes effect.

The case before us illustrate[s] these considerations. [Respondent] had plausible arguments to make that might have prevented their discharge. [The] termination involved arguable issues, and the right to a hearing does not depend on a demonstration of certain success. 

The governmental interest in immediate termination does not outweigh these interests. As we shall explain, affording the employee an opportunity to respond prior to termination would impose neither a significant administrative burden nor intolerable delays. Furthermore, the employer shares the employee’s interest in avoiding disruption and erroneous decisions; and until the matter is settled, the employer would continue to receive the benefit of the employee’s labors. It is preferable to keep a qualified employee on than to train a new one. A governmental employer also has an interest in keeping citizens usefully employed rather than taking the possibly erroneous and counterproductive step of forcing its employees onto the welfare rolls. Finally, in those situations where the employer perceives a significant hazard in keeping the employee on the job, it can avoid the problem by suspending with pay.

The foregoing considerations indicate that the pretermination “hearing,” though necessary, need not be elaborate. We have pointed out that “[t]he formality and procedural requisites for the hearing can vary, depending upon the importance of the interests involved and the nature of the subsequent proceedings.” Boddie v. Connecticut, 401 U. S., at 378. In general, “something less” than a full evidentiary hearing is sufficient prior to adverse administrative action. Mathews v. Eldridge, 424 U. S., at 343 [...] 

In only one case, Goldberg v. Kelly, 397 U. S. 254 (1970), has the Court required a full adversarial evidentiary hearing prior to adverse governmental action. However, as the Goldberg Court itself pointed out, that case presented significantly different considerations than are present in the context of public employment. Here, the pretermination hearing need not definitively resolve the propriety of the discharge. It should be an initial check against mistaken decisions — essentially, a determination of whether there are reasonable grounds to believe that the charges against the employee are true and support the proposed action. 

The essential requirements of due process, and all that respondents seek or the Court of Appeals required, are notice and an opportunity to respond. The opportunity to present reasons, either in person or in writing, why proposed action should not be taken is a fundamental due process requirement. To require more than this prior to termination would intrude to an unwarranted extent on the government’s interest in quickly removing an unsatisfactory employee [...]

We conclude that all the process that is due is provided by a pretermination opportunity to respond, coupled with posttermination administrative procedures as provided by the Ohio statute. Because respondents allege in their complaints that they had no chance to respond, the District Court erred in dismissing for failure to state a claim. 

So ordered.

Sierra Club v. Costle

657 F.2d 298 (D.C. Cir. 1981)

WALD, Circuit Judge:

This case concerns the extent to which new coal-fired steam generators that produce electricity must control their emissions of sulfur dioxide and particulate matter into the air. In June of 1979 EPA revised the regulations called “new source performance standards” (“NSPS” or “standards”) governing emission control by coal burning power plants. On this appeal we consider challenges to the revised NSPS brought by environmental groups which contend that the standards are too lax and by electric utilities which contend that the standards are too rigorous [...] 

D. Procedural History

In 1970 Congress for the first time authorized the federal government to set performance standards limiting emissions from newly built or modified sources of air pollution. These sources to be controlled were those that EPA determined emitted pollution contributing substantially to the endangerment of the public health or welfare. EPA decided that large coal-fired generators fell within that category. In 1976 the Sierra Club and the Oljato and Red Mesa Chapters of the Navajo Tribe petitioned EPA to revise the NSPS so as to require a 90 percent reduction in sulfur dioxide emissions. Eventually [...] final NSPS were promulgated in June 1979. Several parties petitioned EPA for reconsideration of the revised NSPS. In February of 1980 EPA denied all the petitions for reconsideration. The present appeal followed. 

V. THE 1.2 LBS./MBTU EMISSION CEILING

EPA proposed and ultimately adopted a 1.2 lbs./MBtu ceiling for total sulfur dioxide emissions [which limits the amount of sulfur dioxide that coal-fired generators can emit]. Environmental Defense Fund (“EDF”) challenges this part of the final NSPS on procedural grounds, contending that although there may be evidence supporting the 1.2 lbs./MBtu standard, EPA should have and would have adopted a stricter standard if it had not engaged in post-comment period irregularities and succumbed to political pressures[...]

EDF alleges that as a result of an “ex parte blitz” by coal industry advocates conducted after the close of the comment period, EPA backed away from adopting the .55 lbs./MBtu limit, and instead adopted the higher 1.2 lbs./MBtu restriction [...] Whether or not EDF’s scenario is credible, it is true that EPA did circulate a draft NSPS with an emissions ceiling below the 1.2 lbs./MBtu level for interagency comment during February, 1978. Following a “leak” of this proposal, EDF says, the so-called “ex parte blitz” began. “Scores” of pro-industry “ex parte” comments were received by EPA in the post-comment period, states EDF, and various meetings with coal industry advocates — including Senator Robert Byrd of West Virginia — took place during that period. These communications, EDF asserts, were unlawful and prejudicial to its position.

In order for this court to assess these claims, we must identify the particular actions and incidents which gave rise to EDF’s complaints. Aside from a passing reference to a telephone call from an EPA official to the Chief Executive Officer of National Coal Association, EDF’s procedural objections stem from either (1) comments filed after the close of the official comment period, or (2) meetings between EPA officials and various government and private parties interested in the outcome of the final rule, all of which took place after the close of the comment period.

1. Late Comments

The comment period for the NSPS began on September 19, 1978, and closed on January 15, 1979. After January 15, EPA received almost 300 written submissions on the proposed rule from a broad range of interests. EPA accepted these comments and entered them all on its administrative docket. EPA did not, however, officially reopen the comment period, nor did it notify the public through the Federal Register or by other means that it had received and was entering the “late” comments. According to EDF, most of the approximately 300 late comments were received after the “leak” of the new .55 lbs./MBtu proposal. EDF claims that of the 138 late comments from non-government sources, at least 30 were from “representatives of the coal or utility industries,” and of the 53 comments from members of Congress, 22 were either forwarded by the Congressmen from industry interests, or else were prepared and submitted by Congressmen as advocates of those interests.

2. Meetings

EDF objects to nine different meetings [...] EDF believes that the communications [...], when taken as a whole, were so extensive and had such a serious impact on the NSPS rulemaking, that they violated EDF’s rights to due process in the proceeding, and that these “ex parte” contacts were procedural errors of such magnitude that this court must reverse. EDF does not specify which particular features in each of the [...] communications violated due process or constituted errors under the statute; indeed, EDF nowhere lists the communications in a form designed to clarify why any particular communication was unlawful. Instead, EDF labels all post-comment communications with EPA — from whatever source and in whatever form — as “ex parte,” and claims that “this court has repeatedly stated that ex parte contacts of substance violate due process.”

At the outset, we decline to begin our task of reviewing EPA’s procedures by labeling all post-comment communications with the agency as “ex parte.” Such an approach essentially begs the question whether these particular communications in an informal rulemaking proceeding were unlawful. Instead of beginning with a conclusion that these communications were “ex parte,” we must evaluate the various communications in terms of their timing, source, mode, content, and the extent of their disclosure on the docket, in order to discover whether any of them violated the procedural requirements of the Clean Air Act, or of due process.

C. Standard for Judicial Review of EPA Procedures

This court’s scope of review is delimited by the special procedural provisions of the Clean Air Act, which declare that we may reverse the Administrator’s decision for procedural error only if (i) his failure to observe procedural requirements was arbitrary and capricious, (ii) an objection was raised during the comment period, or the grounds for such objection arose only after the comment period and the objection is “of central relevance to the outcome of the rule,” and (iii) “the errors were so serious and related to matters of such central relevance to the rule that there is a substantial likelihood that the rule would have been significantly changed if such errors had not been made.” The essential message of so rigorous a standard is that Congress was concerned that EPA’s rulemaking not be casually overturned for procedural reasons, and we of course must respect that judgment.

Our authority to reverse informal administrative rulemaking for procedural reasons is also informed by Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc. In its unanimous opinion, the Supreme Court unambiguously cautioned this court against imposing its own notions of proper procedures upon an administrative agency entrusted with substantive functions by Congress. The Court declared that so long as an agency abided by the minimum procedural requirements laid down by statute, this court was not free to impose additional procedural rights if the agency did not choose to grant them. Except in “extremely rare” circumstances, the Court stated, there is no justification for a reviewing court to overturn agency action because of the failure to employ procedures beyond those required by Congress [...]

D. Statutory Provisions Concerning Procedure

The procedural provisions of the Clean Air Act specifying the creation and content of the administrative rulemaking record are contained in section 307. [The] 1977 Amendments required the agency to establish a “rulemaking docket” for each proposed rule which would form the basis of the record for judicial review. The docket must contain, inter alia, (1) “notice of the proposed rulemaking ... accompanied by a statement of its basis and purpose,” and a specification of the public comment period; (2) “all written comments and documentary information on the proposed rule received from any person ... during the comment period[;] [t]he transcript of public hearings, if any[;] and [a]ll documents ... which become available after the proposed rule has been published and which the Administrator determines are of central relevance to the rulemaking....”; (3) drafts of proposed rules submitted for interagency review, and all documents accompanying them and responding to them; and (4) the promulgated rule and the various accompanying agency documents which explain and justify it.

In contrast to other recent statutes, there is no mention of any restrictions upon “ex parte” contacts. However, the statute apparently did envision that participants would normally submit comments, documentary material, and oral presentations during a prescribed comment period. Only two provisions in the statute touch upon the post-comment period, one of which states that “[a]ll documents which become available after the proposed rule has been published and which the Administrator determines are of central relevance to the rulemaking shall be placed in the docket as soon as possible after their availability.” But since all the post-comment period written submissions which EDF complains of were in fact entered upon the docket, EDF cannot complain that this provision has been violated [...]

[Since] this court can reverse an agency on procedural grounds only if it finds a failure to observe procedures “required by law,” we must first decide whether the procedures followed by EPA between January 15 and June 1, 1979 were unlawful. Only if we so find would we then face the second issue whether the unlawful errors were “of such central relevance to the rule that there is a substantial likelihood that the rule would have been significantly changed if such errors had not been made.” We now hold that EPA’s procedures during the post-comment period were lawful, and therefore do not face the issue whether any alleged errors were of “central relevance” to the outcome.

E. Validity of EPA's Procedures During the Post-Comment Period

The post-comment period communications about which EDF complains vary widely in their content and mode; some are written documents or letters, others are oral conversations and briefings, while still others are meetings where alleged political arm-twisting took place. For analytical purposes we have grouped the communications into categories and shall discuss each of them separately. As a general matter, however, we note at the outset that nothing in the statute prohibits EPA from admitting all post-comment communications into the record; nothing expressly requires it, either. Most likely the drafters envisioned promulgation of a rule soon after the close of the public comment period, and did not envision a months-long hiatus where continued outside communications with the agency would continue unabated. We must therefore attempt to glean the law for this case by inference from the procedural framework provided in the statute.

1. Written Comments Submitted During Post-Comment Period

Although no express authority to admit post-comment documents exists, the statute does provide that:

All documents which become available after the proposed rule has been published and which the Administrator determines are of central relevance to the rulemaking shall be placed in the docket as soon as possible after their availability.

This provision, in contrast to others in the same subparagraph, is not limited to the comment period. Apparently it allows EPA not only to put documents into the record after the comment period is over, but also to define which documents are “of central relevance” so as to require that they be placed in the docket. The principal purpose of the drafters was to define in advance, for the benefit of reviewing courts, the record upon which EPA would rely in defending the rule it finally adopted; it was not their purpose to guarantee that every piece of paper or phone call related to the rule which was received by EPA during the post-comment period be included in the docket. EPA thus has authority to place post-comment documents into the docket, but it need not do so in all instances.

Such a reading of the statute accords well with the realities of Washington administrative policymaking, where rumors, leaks, and overreactions by concerned groups abound, particularly as the time for promulgation draws near. In a proceeding such as this, one of vital concern to so many interests — industry, environmental groups, as well as Congress and the Administration — it would be unrealistic to think there would not naturally be attempts on all sides to stay in contact with EPA right up to the moment the final rule is promulgated. The drafters of the 1977 Amendments were practical people, well versed in such activity, and we decline now to infer from their silence that they intended to prohibit the lodging of documents with the agency at any time prior to promulgation. Common sense, after all, must play a part in our interpretation of these statutory procedures.

EPA of course could have extended, or reopened, the comment period after January 15 in order formally to accommodate the flood of new documents; it has done so in other cases. But under the circumstances of this case, we do not find that it was necessary for EPA to reopen the formal comment period. In the first place, the comment period lasted over four months, and although the length of the comment period was not specified in the 1977 Amendments, the statute did put a premium on speedy decisionmaking by setting a one year deadline from the Amendments’ enactment to the rules’ promulgation [...]

If, however, documents of central importance upon which EPA intended to rely had been entered on the docket too late for any meaningful public comment prior to promulgation, then both the structure and spirit of section 307 would have been violated. The Congressional drafters, after all, intended to provide “thorough and careful procedural safeguards ... [to] insure an effective opportunity for public participation in the rulemaking process.” Indeed the Administrator is obligated by the statute to convene a proceeding to reconsider the rule where an objection of central importance to it is proffered, and the basis of the objection arose after the comment period had closed. Thus we do not hold that there are no circumstances in which reopening the comment period would ever be required.

The case before us, however, does not present an instance where documents vital to EPA’s support for its rule were submitted so late as to preclude any effective public comment. The vast majority of the written comments were submitted in ample time to afford an opportunity for response. Regarding those documents submitted closer to the promulgation date, our review does not reveal that they played any significant role in the agency's support for the rule. The decisive point, however, is that EDF itself has failed to show us any particular document or documents to which it lacked an opportunity to respond, and which also were vital to EPA’s support for the rule [...]

2. Meetings Held With Individuals Outside EPA

The statute does not explicitly treat the issue of post-comment period meetings with individuals outside EPA. Oral face-to-face discussions are not prohibited anywhere, anytime, in the Act. The absence of such prohibition may have arisen from the nature of the informal rulemaking procedures Congress had in mind. Where agency action resembles judicial action, where it involves formal rulemaking, adjudication, or quasi-adjudication among “conflicting private claims to a valuable privilege,” the insulation of the decisionmaker from ex parte contacts is justified by basic notions of due process to the parties involved. But where agency action involves informal rulemaking of a policymaking sort, the concept of ex parte contacts is of more questionable utility.

Under our system of government, the very legitimacy of general policymaking performed by unelected administrators depends in no small part upon the openness, accessibility, and amenability of these officials to the needs and ideas of the public from whom their ultimate authority derives, and upon whom their commands must fall. As judges we are insulated from these pressures because of the nature of the judicial process in which we participate; but we must refrain from the easy temptation to look askance at all face-to-face lobbying efforts, regardless of the forum in which they occur, merely because we see them as inappropriate in the judicial context. Furthermore, the importance to effective regulation of continuing contact with a regulated industry, other affected groups, and the public cannot be underestimated. Informal contacts may enable the agency to win needed support for its program, reduce future enforcement requirements by helping those regulated to anticipate and shape their plans for the future, and spur the provision of information which the agency needs. The possibility of course exists that in permitting ex parte communications with rulemakers we create the danger of “one administrative record for the public and this court and another for the Commission.” Under the Clean Air Act procedures, however, “[t]he promulgated rule may not be based (in part or whole) on any information or data which has not been placed in the docket….” Thus EPA must justify its rulemaking solely on the basis of the record it compiles and makes public.

Regardless of this court’s views on the need to restrict all post-comment contacts in the informal rulemaking context, however, it is clear to us that Congress has decided not to do so in the statute which controls this case [...] 

It still can be argued, however, that if oral communications are to be freely permitted after the close of the comment period, then at least some adequate summary of them must be made in order to preserve the integrity of the rulemaking docket, which under the statute must be the sole repository of material upon which EPA intends to rely. The statute does not require the docketing of all post-comment period conversations and meetings, but we believe that a fair inference can be drawn that in some instances such docketing may be needed in order to give practical effect to section 307(d)(4)(B)(i), which provides that all documents “of central relevance to the rulemaking” shall be placed in the docket as soon as possible after their availability. This is so because unless oral communications of central relevance to the rulemaking are also docketed in some fashion or other, information central to the justification of the rule could be obtained without ever appearing on the docket, simply by communicating it by voice rather than by pen, thereby frustrating the command of section 307 that the final rule not be “based (in part or whole) on any information or data which has not been placed in the docket....”

EDF is understandably wary of a rule which permits the agency to decide for itself when oral communications are of such central relevance that a docket entry for them is required. Yet the statute itself vests EPA with discretion to decide whether “documents” are of central relevance and therefore must be placed in the docket; surely EPA can be given no less discretion in docketing oral communications, concerning which the statute has no explicit requirements whatsoever. Furthermore, this court has already recognized that the relative significance of various communications to the outcome of the rule is a factor in determining whether their disclosure is required. A judicially imposed blanket requirement that all post-comment period oral communications be docketed would, on the other hand, contravene our limited powers of review, would stifle desirable experimentation in the area by Congress and the agencies, and is unnecessary for achieving the goal of an established, procedure-defined docket to enable reviewing courts to fully evaluate the stated justification given by the agency for its final rule.

Turning to the particular oral communications in this case, we find that only two of the nine contested meetings were undocketed by EPA. The agency has maintained that, as to the May 1 meeting where Senate staff people were briefed on EPA's analysis concerning the impact of alternative emissions ceilings upon coal reserves, its failure to place a summary of the briefing in the docket was an oversight. We find no evidence that this oversight was anything but an honest inadvertence; furthermore, a briefing of this sort by EPA which simply provides background information about an upcoming rule is not the type of oral communication which would require a docket entry under the statute.

The other undocketed meeting occurred at the White House and involved the President and his White House staff. Because this meeting involves considerations unique to intra-executive meetings, it is discussed in the section immediately infra.

(a) Intra-Executive Branch Meetings

We have already held that a blanket prohibition against meetings during the post-comment period with individuals outside EPA is unwarranted, and this perforce applies to meetings with White House officials. We have not yet addressed, however, the issue whether such oral communications with White House staff, or the President himself, must be docketed on the rulemaking record, and we now turn to that issue. The facts, as noted earlier, present us with a single undocketed meeting held on April 30, 1979, at 10:00 a.m., attended by the President, White House staff, other high ranking members of the Executive Branch, as well as EPA officials, and which concerned the issues and options presented by the rulemaking.

We note initially that section 307 makes specific provision for including in the rulemaking docket the “written comments” of other executive agencies along with accompanying documents on any proposed draft rules circulated in advance of the rulemaking proceeding. Drafts of the final rule submitted to an executive review process prior to promulgation, as well as all “written comments,” “documents,” and “written responses” resulting from such interagency review process, are also to be put in the docket prior to promulgation. This specific requirement does not mention informal meetings or conversations concerning the rule which are not part of the initial or final review processes, nor does it refer to oral comments of any sort. Yet it is hard to believe Congress was unaware that intra-executive meetings and oral comments would occur throughout the rulemaking process. We assume, therefore, that unless expressly forbidden by Congress, such intra-executive contacts may take place, both during and after the public comment period; the only real issue is whether they must be noted and summarized in the docket.

The court recognizes the basic need of the President and his White House staff to monitor the consistency of executive agency regulations with Administration policy. He and his White House advisers surely must be briefed fully and frequently about rules in the making, and their contributions to policymaking considered. The executive power under our Constitution, after all, is not shared — it rests exclusively with the President. The idea of a “plural executive,” or a President with a council of state, was considered and rejected by the Constitutional Convention. Instead the Founders chose to risk the potential for tyranny inherent in placing power in one person, in order to gain the advantages of accountability fixed on a single source. To ensure the President's control and supervision over the Executive Branch, the Constitution — and its judicial gloss — vests him with the powers of appointment and removal, the power to demand written opinions from executive officers, and the right to invoke executive privilege to protect consultative privacy. In the particular case of EPA, Presidential authority is clear since it has never been considered an “independent agency,” but always part of the Executive Branch [...]

We recognize, however, that there may be instances where the docketing of conversations between the President or his staff and other Executive Branch officers or rulemakers may be necessary to ensure due process. This may be true, for example, where such conversations directly concern the outcome of adjudications or quasi-adjudicatory proceedings; there is no inherent executive power to control the rights of individuals in such settings. Docketing may also be necessary in some circumstances where a statute like this one specifically requires that essential “information or data” upon which a rule is based be docketed. But in the absence of any further Congressional requirements, we hold that it was not unlawful in this case for EPA not to docket a face-to-face policy session involving the President and EPA officials during the post-comment period, since EPA makes no effort to base the rule on any “information or data” arising from that meeting. Where the President himself is directly involved in oral communications with Executive Branch officials, Article II considerations — combined with the strictures of Vermont Yankee — require that courts tread with extraordinary caution in mandating disclosure beyond that already required by statute.

The purposes of full-record review which underlie the need for disclosing ex parte conversations in some settings do not require that courts know the details of every White House contact, including a Presidential one, in this informal rulemaking setting. After all, any rule issued here with or without White House assistance must have the requisite factual support in the rulemaking record, and under this particular statute the Administrator may not base the rule in whole or in part on any “information or data” which is not in the record, no matter what the source. The courts will monitor all this, but they need not be omniscient to perform their role effectively. Of course, it is always possible that undisclosed Presidential prodding may direct an outcome that is factually based on the record, but different from the outcome that would have obtained in the absence of Presidential involvement. In such a case, it would be true that the political process did affect the outcome in a way the courts could not police. But we do not believe that Congress intended that the courts convert informal rulemaking into a rarified technocratic process, unaffected by political considerations or the presence of Presidential power. In sum, we find that the existence of intra-Executive Branch meetings during the post-comment period, and the failure to docket one such meeting involving the President, violated neither the procedures mandated by the Clean Air Act nor due process [...]

Lucia v. Securities and Exchange Commission

138 S.Ct. 2044 (2018)

Justice KAGAN delivered the opinion of the Court.

[The Securities and Exchange Commission (“SEC” or “Commission”) has statutory authority to enforce the nation’s securities laws. One way it can do so is by instituting an administrative proceeding against an alleged wrongdoer. Typically, the Commission delegates the task of presiding over such a proceeding to an administrative law judge (ALJ). The SEC currently has five ALJs. Other staff members, rather than the Commission proper, selected them all. An ALJ assigned to hear an SEC enforcement action has the “authority to do all things necessary and appropriate” to ensure a “fair and orderly” adversarial proceeding. After a hearing ends, the ALJ issues an initial decision. The Commission can review that decision, but if it opts against review, it issues an order that the initial decision has become final. 

The SEC charged Raymond Lucia with violating certain securities laws and assigned ALJ Cameron Elliot to adjudicate the case. Following a hearing, Judge Elliot issued an initial decision concluding that Lucia had violated the law and imposing sanctions. On appeal to the SEC, Lucia argued that the administrative proceeding was invalid because Judge Elliot had not been constitutionally appointed. According to Lucia, SEC ALJs are “Officers of the United States” and thus subject to the Appointments Clause. Under that Clause, only the President, Courts of Law, or Heads of Departments can appoint such “Officers.” But none of those actors had made Judge Elliot an ALJ. The SEC and the Court of Appeals for the D.C. Circuit rejected Lucia's argument, holding that SEC ALJs are not “Officers of the United States,” but are instead mere employees—officials who are not subject to the Appointments Clause.]

The Appointments Clause of the Constitution lays out the permissible methods of appointing “Officers of the United States,” a class of government officials distinct from mere employees. Art. II, § 2, cl. 2. This case requires us to decide whether administrative law judges (ALJs) of the Securities and Exchange Commission (SEC or Commission) qualify as such “Officers.” In keeping with Freytag v. Commissioner, 501 U.S. 868 (1991), we hold that they do.

The SEC has statutory authority to enforce the nation’s securities laws. One way it can do so is by instituting an administrative proceeding against an alleged wrongdoer. By law, the Commission may itself preside over such a proceeding. But the Commission also may, and typically does, delegate that task to an ALJ. The SEC currently has five ALJs. Other staff members, rather than the Commission proper, selected them all. 

An ALJ assigned to hear an SEC enforcement action has extensive powers— the “authority to do all things necessary and appropriate to discharge his or her duties” and ensure a “fair and orderly” adversarial proceeding. Those powers “include, but are not limited to,” supervising discovery; issuing, revoking, or modifying subpoenas; deciding motions; ruling on the admissibility of evidence; administering oaths; hearing and examining witnesses; generally “[r]egulating the course of" the proceeding and the “conduct of the parties and their counsel”; and imposing sanctions for “[c]ontemptuous conduct” or violations of procedural requirements. As that list suggests, an SEC ALJ exercises authority “comparable to” that of a federal district judge conducting a bench trial. 

After a hearing ends, the ALJ issues an “initial decision.” That decision must set out “findings and conclusions” about all “material issues of fact [and] law”; it also must include the “appropriate order, sanction, relief, or denial thereof.” The Commission can then review the ALJ’s decision, either upon request or sua sponte. But if it opts against review, the Commission “issue[s] an order that the [ALJ's] decision has become final.” At that point, the initial decision is “deemed the action of the Commission.”

This case began when the SEC instituted an administrative proceeding against petitioner Raymond Lucia and his investment company. Lucia marketed a retirement savings strategy called “Buckets of Money.” In the SEC’s view, Lucia used misleading slideshow presentations to deceive prospective clients. The SEC charged Lucia under the Investment Advisers Act and assigned ALJ Cameron Elliot to adjudicate the case. After nine days of testimony and argument, Judge Elliot issued an initial decision concluding that Lucia had violated the Act and imposing sanctions, including civil penalties of $300,000 and a lifetime bar from the investment industry. In his decision, Judge Elliot made factual findings about only one of the four ways the SEC thought Lucia's slideshow misled investors. The Commission thus remanded for factfinding on the other three claims, explaining that an ALJ’s “personal experience with the witnesses” places him “in the best position to make findings of fact” and “resolve any conflicts in the evidence.” Judge Elliot then made additional findings of deception and issued a revised initial decision, with the same sanctions. 

On appeal to the SEC, Lucia argued that the administrative proceeding was invalid because Judge Elliot had not been constitutionally appointed. According to Lucia, the Commission's ALJs are “Officers of the United States” and thus subject to the Appointments Clause. Under that Clause, Lucia noted, only the President, “Courts of Law,” or “Heads of Departments” can appoint “Officers.” And none of those actors had made Judge Elliot an ALJ. To be sure, the Commission itself counts as a “Head[ ] of Department[ ].” But the Commission had left the task of appointing ALJs, including Judge Elliot, to SEC staff members. As a result, Lucia contended, Judge Elliot lacked constitutional authority to do his job.

The Commission rejected Lucia’s argument. It held that the SEC’s ALJs are not “Officers of the United States.” Instead, they are “mere employees”—officials with lesser responsibilities who fall outside the Appointments Clause’s ambit. The Commission reasoned that its ALJs do not “exercise significant authority independent of [its own] supervision.” Because that is so (said the SEC), they need no special, high-level appointment. 

Lucia’s claim fared no better in the Court of Appeals for the D.C. Circuit. A panel of that court seconded the Commission’s view that SEC ALJs are employees rather than officers, and so are not subject to the Appointments Clause [...] That decision conflicted with one from the Court of Appeals for the Tenth Circuit. 

Lucia asked us to resolve the split by deciding whether the Commission’s ALJs are “Officers of the United States within the meaning of the Appointments Clause.” Up to that point, the Federal Government (as represented by the Department of Justice) had defended the Commission’s position that SEC ALJs are employees, not officers […] We now reverse.

II

The sole question here is whether the Commission’s ALJs are “Officers of the United States” or simply employees of the Federal Government. The Appointments Clause prescribes the exclusive means of appointing “Officers.” Only the President, a court of law, or a head of department can do so [...] 

Two decisions set out this Court’s basic framework for distinguishing between officers and employees. Germaine held that “civil surgeons” (doctors hired to perform various physical exams) were mere employees because their duties were “occasional or temporary” rather than “continuing and permanent.” Stressing “ideas of tenure [and] duration,” the Court there made clear that an individual must occupy a “continuing” position established by law to qualify as an officer. Buckley then set out another requirement, central to this case. It determined that members of a federal commission were officers only after finding that they “exercis[ed] significant authority pursuant to the laws of the United States.” The inquiry thus focused on the extent of power an individual wields in carrying out his assigned functions.

[…] In Freytag v. Commissioner, 501 U.S. 868 (1991), we applied the unadorned “significant authority” test to adjudicative officials who are near-carbon copies of the Commission’s ALJs. As we now explain, our analysis there (sans any more detailed legal criteria) necessarily decides this case.

The officials at issue in Freytag were the “special trial judges” (STJs) of the United States Tax Court. The authority of those judges depended on the significance of the tax dispute before them. In “comparatively narrow and minor matters,” they could both hear and definitively resolve a case for the Tax Court. In more major matters, they could preside over the hearing, but could not issue the final decision; instead, they were to “prepare proposed findings and an opinion” for a regular Tax Court judge to consider. The proceeding challenged in Freytag was a major one, involving $1.5 billion in alleged tax deficiencies. After conducting a 14-week trial, the STJ drafted a proposed decision in favor of the Government. A regular judge then adopted the STJ's work as the opinion of the Tax Court. The losing parties argued on appeal that the STJ was not constitutionally appointed.

This Court held that the Tax Court’s STJs are officers, not mere employees. Citing Germaine, the Court first found that STJs hold a continuing office established by law. They serve on an ongoing, rather than a “temporary [or] episodic[,] basis”; and their “duties, salary, and means of appointment” are all specified in the Tax Code. The Court then considered, as Buckley demands, the “significance” of the “authority” STJs wield. In addressing that issue, the Government had argued that STJs are employees, rather than officers, in all cases (like the one at issue) in which they could not “enter a final decision.” But the Court thought the Government’s focus on finality “ignore[d] the significance of the duties and discretion that [STJs] possess.” Describing the responsibilities involved in presiding over adversarial hearings, the Court said: STJs “take testimony, conduct trials, rule on the admissibility of evidence, and have the power to enforce compliance with discovery orders.” And the Court observed that “[i]n the course of carrying out these important functions, the [STJs] exercise significant discretion.” That fact meant they were officers, even when their decisions were not final.

Freytag says everything necessary to decide this case. To begin, the Commission’s ALJs, like the Tax Court’s STJs, hold a continuing office established by law. Indeed, everyone here—Lucia, the Government, and the amicus—agrees on that point. Far from serving temporarily or episodically, SEC ALJs “receive[ ] a career appointment.” And that appointment is to a position created by statute, down to its “duties, salary, and means of appointment.” 

Still more, the Commission’s ALJs exercise the same “significant discretion” when carrying out the same “important functions” as STJs do. Both sets of officials have all the authority needed to ensure fair and orderly adversarial hearings—indeed, nearly all the tools of federal trial judges. Consider in order the four specific (if overlapping) powers Freytag mentioned. First, the Commission's ALJs (like the Tax Court's STJs) “take testimony.” More precisely, they “[r]eceiv[e] evidence” and “[e]xamine witnesses” at hearings, and may also take pre-hearing depositions. Second, the ALJs (like STJs) “conduct trials.” As detailed earlier, they administer oaths, rule on motions, and generally “regulat[e] the course of” a hearing, as well as the conduct of parties and counsel. Third, the ALJs (like STJs) “rule on the admissibility of evidence.” They thus critically shape the administrative record (as they also do when issuing document subpoenas). And fourth, the ALJs (like STJs) “have the power to enforce compliance with discovery orders.” In particular, they may punish all “[c]ontemptuous conduct,” including violations of those orders, by means as severe as excluding the offender from the hearing. So point for point— straight from Freytag’s list—the Commission’s ALJs have equivalent duties and powers as STJs in conducting adversarial inquiries.

And at the close of those proceedings, ALJs issue decisions much like that in Freytag—except with potentially more independent effect. As the Freytag Court recounted, STJs “prepare proposed findings and an opinion” adjudicating charges and assessing tax liabilities. Similarly, the Commission’s ALJs issue decisions containing factual findings, legal conclusions, and appropriate remedies. And what happens next reveals that the ALJ can play the more autonomous role. In a major case like Freytag, a regular Tax Court judge must always review an STJ’s opinion. And that opinion counts for nothing unless the regular judge adopts it as his own. By contrast, the SEC can decide against reviewing an ALJ decision at all. And when the SEC declines review (and issues an order saying so), the ALJ’s decision itself “becomes final” and is “deemed the action of the Commission.” That last-word capacity makes this an a fortiori case: If the Tax Court’s STJs are officers, as Freytag held, then the Commission’s ALJs must be too. […]

The only issue left is remedial. For all the reasons we have given, and all those Freytag gave before, the Commission’s ALJs are “Officers of the United States,” subject to the Appointments Clause. And as noted earlier, Judge Elliot heard and decided Lucia’s case without the kind of appointment the Clause requires. This Court has held that “one who makes a timely challenge to the constitutional validity of the appointment of an officer who adjudicates his case” is entitled to relief. Lucia made just such a timely challenge: He contested the validity of Judge Elliot’s appointment before the Commission, and continued pressing that claim in the Court of Appeals and this Court. So what relief follows? This Court has also held that the “appropriate” remedy for an adjudication tainted with an appointments violation is a new “hearing before a properly appointed” official. And we add today one thing more. That official cannot be Judge Elliot, even if he has by now received (or receives sometime in the future) a constitutional appointment. Judge Elliot has already both heard Lucia’s case and issued an initial decision on the merits. He cannot be expected to consider the matter as though he had not adjudicated it before. To cure the constitutional error, another ALJ (or the Commission itself) must hold the new hearing to which Lucia is entitled. 

We accordingly reverse the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion.

Morrison v. Olson

487 U.S. 654 (1988)

CHIEF JUSTICE REHNQUIST delivered the opinion of the Court.

[The Ethics in Government Act allows for the appointment of an “independent counsel” to investigate and, if appropriate, prosecute certain high-ranking Government officials for violations of federal criminal laws. The Act requires the Attorney General to investigate any person covered by the Act, when there is sufficient reason to do so. The Attorney General must conduct a preliminary investigation. When the Attorney General has completed this investigation, or 90 days has elapsed, they must report their findings to a special court (the Special Division) created by the Act “for the purpose of appointing independent counsels.” 

If the Attorney General finds that there are “reasonable grounds to believe that further investigation or prosecution is warranted,” then they “shall apply to the division of the court for the appointment of an independent counsel.” Upon receiving this application, the Special Division “shall appoint an appropriate independent counsel and shall define that independent counsel’s prosecutorial jurisdiction.” The independent counsel has “full power and independent authority to exercise all investigative and prosecutorial functions and powers of the Department of Justice, the Attorney General, and any other officer or employee of the Department of Justice.”]  

In 1982, two Subcommittees of the House of Representatives issued subpoenas directing the Environmental Protection Agency (EPA) to produce certain documents relating to the efforts of the EPA and the Land and Natural Resources Division of the Justice Department to enforce the “Superfund Law.” At that time, Olson was the Assistant Attorney General for the Office of Legal Counsel (OLC) [...] Acting on the advice of the Justice Department, the President ordered the Administrator of EPA to invoke executive privilege to withhold certain documents on the ground that they contained “enforcement sensitive information.” The Administrator obeyed this order and withheld the documents. In response, the House voted to hold the Administrator in contempt, after which the Administrator and the United States together filed a lawsuit against the House. The conflict abated in March 1983, when the administration agreed to give the House Subcommittees limited access to the documents.

The following year, the House Judiciary Committee began an investigation into the Justice Department’s role in the controversy over the EPA documents. During this investigation, appellee Olson testified before a House Subcommittee on March 10, 1983 [...] In 1985, the majority members of the Judiciary Committee published a lengthy report on the Committee’s investigation. The report [...] suggested that appellee Olson had given false and misleading testimony to the Subcommittee on March 10, 1983 [...] thus obstructing the Committee’s investigation. The Chairman of the Judiciary Committee forwarded a copy of the report to the Attorney General with a request that he seek the appointment of an independent counsel to investigate the allegations against Olson [...]

On April 23, 1986, the Special Division appointed James C. McKay as independent counsel [...] McKay later resigned as independent counsel, and on May 29, 1986, the Division appointed appellant Morrison as his replacement, with the same jurisdiction.

[Morrison] caused a grand jury to issue and serve subpoenas ad testificandum and duces tecum on [Olson]. [Olson] moved to quash the subpoenas, claiming, among other things, that the independent counsel provisions of the Act were unconstitutional and that appellant accordingly had no authority to proceed [...] 

V.

We now turn to consider whether [...] provision of the Act restricting the Attorney General’s power to remove the independent counsel to only those instances in which he can show “good cause,” taken by itself, impermissibly interferes with the President’s exercise of his constitutionally appointed functions [...]

Two Terms ago we had occasion to consider whether it was consistent with the separation of powers for Congress to pass a statute that authorized a Government official who is removable only by Congress to participate in what we found to be “executive powers.” Bowsher v. Synar, 478 U. S. 714, 730 (1986). We held in Bowsher that “Congress cannot reserve for itself the power of removal of an officer charged with the execution of the laws except by impeachment.” A primary antecedent for this ruling was our 1926 decision in Myers v. United States, 272 U. S. 52. Myers had considered the propriety of a federal statute by which certain postmasters of the United States could be removed by the President only “by and with the advice and consent of the Senate.” There too, Congress’ attempt to involve itself in the removal of an executive official was found to be sufficient grounds to render the statute invalid. As we observed in Bowsher, the essence of the decision in Myers was the judgment that the Constitution prevents Congress from “draw[ing] to itself . . . the power to remove or the right to participate in the exercise of that power. To do this would be to go beyond the words and implications of the [Appointments Clause] and to infringe the constitutional principle of the separation of governmental powers.”

Unlike both Bowsher and Myers, this case does not involve an attempt by Congress itself to gain a role in the removal of executive officials other than its established powers of impeachment and conviction. The Act instead puts the removal power squarely in the hands of the Executive Branch; an independent counsel may be removed from office, “only by the personal action of the Attorney General, and only for good cause.” There is no requirement of congressional approval of the Attorney General’s removal decision, though the decision is subject to judicial review. In our view, the removal provisions of the Act make this case more analogous to Humphrey’s Executor v. United States, 295 U. S. 602 (1935) [...] than to Myers or Bowsher.

In Humphrey’s Executor, the issue was whether a statute restricting the President’s power to remove the Commissioners of the Federal Trade Commission (FTC) only for “inefficiency, neglect of duty, or malfeasance in office” was consistent with the Constitution. We stated that whether Congress can “condition the [President’s power of removal] by fixing a definite term and precluding a removal except for cause, will depend upon the character of the office.” Contrary to the implication of some dicta in Myers, the President’s power to remove Government officials simply was not “all-inclusive in respect of civil officers with the exception of the judiciary provided for by the Constitution.” At least in regard to “quasi-legislative” and “quasi-judicial” agencies such as the FTC, “[t]he authority of Congress, in creating [such] agencies, to require them to act in discharge of their duties independently of executive control . . . includes, as an appropriate incident, power to fix the period during which they shall continue in office, and to forbid their removal except for cause in the meantime.” In Humphrey’s Executor, we found it “plain” that the Constitution did not give the President “illimitable power of removal” over the officers of independent agencies [...]

[Olson contends] that Humphrey’s Executor are distinguishable from this case because it did not involve officials who performed a “core executive function.” [Olson argues] that our decision in Humphrey’s Executor rests on a distinction between “purely executive” officials and officials who exercise “quasi-legislative” and “quasi-judicial” powers. In their view, when a “purely executive” official is involved, the governing precedent is Myers, not Humphrey’s Executor. And, under Myers, the President must have absolute discretion to discharge “purely” executive officials at will. 

We undoubtedly did rely on the terms “quasi-legislative” and “quasi-judicial” to distinguish the officials involved in Humphrey’s Executor and Wiener from those in Myers, but our present considered view is that the determination of whether the Constitution allows Congress to impose a “good cause”-type restriction on the President’s power to remove an official cannot be made to turn on whether or not that official is classified as “purely executive.” The analysis contained in our removal cases is designed not to define rigid categories of those officials who may or may not be removed at will by the President, but to ensure that Congress does not interfere with the President’s exercise of the “executive power” and his constitutionally appointed duty to “take care that the laws be faithfully executed” under Article II. Myers was undoubtedly correct in its holding, and in its broader suggestion that there are some “purely executive” officials who must be removable by the President at will if he is to be able to accomplish his constitutional role [...]

Considering for the moment the “good cause” removal provision in isolation from the other parts of the Act at issue in this case, we cannot say that the imposition of a “good cause” standard for removal by itself unduly trammels on executive authority. There is no real dispute that the functions performed by the independent counsel are “executive” in the sense that they are law enforcement functions that typically have been undertaken by officials within the Executive Branch. As we noted above, however, the independent counsel is an inferior officer under the Appointments Clause, with limited jurisdiction and tenure and lacking policymaking or significant administrative authority. Although the counsel exercises no small amount of discretion and judgment in deciding how to carry out his or her duties under the Act, we simply do not see how the President’s need to control the exercise of that discretion is so central to the functioning of the Executive Branch as to require as a matter of constitutional law that the counsel be terminable at will by the President.

Nor do we think that the “good cause” removal provision at issue here impermissibly burdens the President's power to control or supervise the independent counsel, as an executive official, in the execution of his or her duties under the Act. This is not a case in which the power to remove an executive official has been completely stripped from the President, thus providing no means for the President to ensure the “faithful execution” of the laws. Rather, because the independent counsel may be terminated for “good cause,” the Executive, through the Attorney General, retains ample authority to assure that the counsel is competently performing his or her statutory responsibilities in a manner that comports with the provisions of the Act [...] 

In sum, we conclude today that it does not violate the Appointments Clause for Congress to vest the appointment of independent counsel in the Special Division [...] The decision of the Court of Appeals is therefore Reversed.

JUSTICE SCALIA, dissenting.

[...] The Court concedes that “[t]here is no real dispute that the functions performed by the independent counsel are ‘executive’,” though it qualifies that concession by adding “in the sense that they are law enforcement functions that typically have been undertaken by officials within the Executive Branch.” The qualifier adds nothing but atmosphere [...] 

The utter incompatibility of the Court's approach with our constitutional traditions can be made more clear, perhaps, by applying it to the powers of the other two branches. Is it conceivable that if Congress passed a statute depriving itself of less than full and entire control over some insignificant area of legislation, we would inquire whether the matter was “so central to the functioning of the Legislative Branch” as really to require complete control, or whether the statute gives Congress “sufficient control over the surrogate legislator to ensure that Congress is able to perform its constitutionally assigned duties”? Of course we would have none of that. Once we determined that a purely legislative power was at issue we would require it to be exercised, wholly and entirely, by Congress [...] 

Is it unthinkable that the President should have such exclusive power, even when alleged crimes by him or his close associates are at issue? No more so than that Congress should have the exclusive power of legislation, even when what is at issue is its own exemption from the burdens of certain laws. No more so than that this Court should have the exclusive power to pronounce the final decision on justiciable cases and controversies, even those pertaining to the constitutionality of a statute reducing the salaries of the Justices. A system of separate and coordinate powers necessarily involves an acceptance of exclusive power that can theoretically be abused. As we reiterate this very day, “[i]t is a truism that constitutional protections have costs.” While the separation of powers may prevent us from righting every wrong, it does so in order to ensure that we do not lose liberty. The checks against any branch’s abuse of its exclusive powers are twofold: First, retaliation by one of the other branch’s use of its exclusive powers: Congress, for example, can impeach the executive who willfully fails to enforce the laws; the executive can decline to prosecute under unconstitutional statutes and the courts can dismiss malicious prosecutions. Second, and ultimately, there is the political check that the people will replace those in the political branches who are guilty of abuse. Political pressures produced special prosecutors — for Teapot Dome and for Watergate, for example — long before this statute created the independent counsel. 

The Court has, nonetheless, replaced the clear constitutional prescription that the executive power belongs to the President with a “balancing test.” What are the standards to determine how the balance is to be struck, that is, how much removal of Presidential power is too much? Many countries of the world get along with an executive that is much weaker than ours — in fact, entirely dependent upon the continued support of the legislature. Once we depart from the text of the Constitution, just where short of that do we stop? The most amazing feature of the Court’s opinion is that it does not even purport to give an answer. It simply announces, with no analysis, that the ability to control the decision whether to investigate and prosecute the President’s closest advisers, and indeed the President himself, is not “so central to the functioning of the Executive Branch” as to be constitutionally required to be within the President’s control. Apparently that is so because we say it is so. Having abandoned as the basis for our decisionmaking the text of Article II that “the executive Power” must be vested in the President, the Court does not even attempt to craft a substitute criterion — a “justiciable standard,” however remote from the Constitution — that today governs, and in the future will govern, the decision of such questions. Evidently, the governing standard is to be what might be called the unfettered wisdom of a majority of this Court, revealed to an obedient people on a case-by-case basis. This is not only not the government of laws that the Constitution established; it is not a government of laws at all [...]

Seila Law v. Consumer Financial Protection Bureau

140 S. Ct. 991 (2020)

Chief Justice ROBERTS delivered the opinion of the Court with respect to Parts I, II, and III.

Under our Constitution, the “executive Power”—all of it—is “vested in a President,” who must “take Care that the Laws be faithfully executed.” Because no single person could fulfill that responsibility alone, the Framers expected that the President would rely on subordinate officers for assistance. Ten years ago, in Free Enterprise Fund v. Public Company Accounting Oversight Bd., 561 U. S. 477 (2010), we reiterated that, “as a general matter,” the Constitution gives the President “the authority to remove those who assist him in carrying out his duties.” “Without such power, the President could not be held fully accountable for discharging his own responsibilities; the buck would stop somewhere else.”

[...] Our precedents have recognized only two exceptions to the President’s unrestricted removal power. In Humphrey’s Executor v. United States, we held that Congress could create expert agencies led by a group of principal officers removable by the President only for good cause. And in Morrison v. Olson, 487 U. S. 654 (1988), we held that Congress could provide tenure protections to certain inferior officers with narrowly defined duties.

We are now asked to extend these precedents to a new configuration: an independent agency that wields significant executive power and is run by a single individual who cannot be removed by the President unless certain statutory criteria are met. We decline to take that step [...] 

I

In the summer of 2007, then-Professor Elizabeth Warren called for the creation of a new, independent federal agency focused on regulating consumer financial products. Warren, Unsafe at Any Rate, Democracy (Summer 2007). Professor Warren believed the financial products marketed to ordinary American households—credit cards, student loans, mortgages, and the like—had grown increasingly unsafe due to a “regulatory jumble” that paid too much attention to banks and too little to consumers. To remedy the lack of “coherent, consumer-oriented” financial regulation, she proposed “concentrat[ing] the review of financial products in a single location”—an independent agency modeled after the multimember Consumer Product Safety Commission [...]

In 2010, Congress acted on these proposals and created the CFPB as an independent financial regulator within the Federal Reserve System. Congress tasked the CFPB with “implement[ing]” and “enforc[ing]” a large body of financial consumer protection laws to “ensur[e] that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive.” [...] The CFPB’s rulemaking and enforcement powers are coupled with extensive adjudicatory authority [...] 

Congress’s design for the CFPB differed from the proposals of Professor Warren and the Obama administration in one critical respect. Rather than create a traditional independent agency headed by a multimember board or commission, Congress elected to place the CFPB under the leadership of a single Director. The CFPB Director is appointed by the President with the advice and consent of the Senate. The Director serves for a term of five years, during which the President may remove the Director from office only for “inefficiency, neglect of duty, or malfeasance in office.”

Seila Law LLC is a California-based law firm that provides debt-related legal services to clients. In 2017, the CFPB issued a civil investigative demand to Seila Law to determine whether the firm had “engag[ed] in unlawful acts or practices in the advertising, marketing, or sale of debt relief services.” The demand (essentially a subpoena) directed Seila Law to produce information and documents related to its business practices.

Seila Law asked the CFPB to set aside the demand, objecting that the agency’s leadership by a single Director removable only for cause violated the separation of powers. The CFPB declined to address that claim and directed Seila Law to comply with the demand.

When Seila Law refused, the CFPB filed a petition to enforce the demand in the District Court. In response, Seila Law renewed its defense that the demand was invalid and must be set aside because the CFPB's structure violated the Constitution [...]

We granted certiorari to address the constitutionality of the CFPB’s structure [...] 

III

We hold that the CFPB’s leadership by a single individual removable only for inefficiency, neglect, or malfeasance violates the separation of powers.

Article II provides that “[t]he executive Power shall be vested in a President,” who must “take Care that the Laws be faithfully executed.” The entire “executive Power” belongs to the President alone. But because it would be “impossib[le]” for “one man” to “perform all the great business of the State,” the Constitution assumes that lesser executive officers will “assist the supreme Magistrate in discharging the duties of his trust.” 

These lesser officers must remain accountable to the President, whose authority they wield. As Madison explained, “[I]f any power whatsoever is in its nature Executive, it is the power of appointing, overseeing, and controlling those who execute the laws.” That power, in turn, generally includes the ability to remove executive officials, for it is “only the authority that can remove” such officials that they “must fear and, in the performance of [their] functions, obey.” Bowsher, 478 U. S., at 726. 

[...] We recently reiterated the President’s general removal power in Free Enterprise Fund. “Since 1789,” we recapped, “the Constitution has been understood to empower the President to keep these officers accountable—by removing them from office, if necessary.” Although we had previously sustained congressional limits on that power in certain circumstances, we declined to extend those limits to “a new situation not yet encountered by the Court”—an official insulated by two layers of for-cause removal protection. In the face of that novel impediment to the President’s oversight of the Executive Branch, we adhered to the general rule that the President possesses “the authority to remove those who assist him in carrying out his duties.” 

Free Enterprise Fund left in place two exceptions to the President’s unrestricted removal power. First, in Humphrey’s Executor, decided less than a decade after Myers, the Court upheld a statute that protected the Commissioners of the FTC from removal except for “inefficiency, neglect of duty, or malfeasance in office.” In reaching that conclusion, the Court stressed that Congress’s ability to impose such removal restrictions “will depend upon the character of the office.” [...] 

In short, Humphrey’s Executor permitted Congress to give for-cause removal protections to a multimember body of experts, balanced along partisan lines, that performed legislative and judicial functions and was said not to exercise any executive power. Consistent with that understanding, the Court later applied “[t]he philosophy of Humphrey’s Executor” to uphold for-cause removal protections for the members of the War Claims Commission—a three-member “adjudicatory body” tasked with resolving claims for compensation arising from World War II. Wiener v. United States, 357 U. S. 349, 356 (1958).

While recognizing an exception for multimember bodies with “quasi-judicial” or “quasi-legislative” functions, Humphrey’s Executor reaffirmed the core holding of Myers that the President has “unrestrictable power . . . to remove purely executive officers.” The Court acknowledged that between purely executive officers on the one hand, and officers that closely resembled the FTC Commissioners on the other, there existed “a field of doubt” that the Court left “for future consideration.”

We have recognized a second exception for inferior officers in Morrison v. Olson. [In] Morrison, we upheld a provision granting good-cause tenure protection to an independent counsel appointed to investigate and prosecute particular alleged crimes by high-ranking Government officials. Backing away from the reliance in Humphrey’s Executor on the concepts of “quasi-legislative” and “quasi-judicial” power, we viewed the ultimate question as whether a removal restriction is of “such a nature that [it] impede[s] the President’s ability to perform his constitutional duty.” Although the independent counsel was a single person and performed “law enforcement functions that typically have been undertaken by officials within the Executive Branch,” we concluded that the removal protections did not unduly interfere with the functioning of the Executive Branch because “the independent counsel [was] an inferior officer under the Appointments Clause, with limited jurisdiction and tenure and lacking policymaking or significant administrative authority.”

These two exceptions—one for multimember expert agencies that do not wield substantial executive power, and one for inferior officers with limited duties and no policymaking or administrative authority—”represent what up to now have been the outermost constitutional limits of permissible congressional restrictions on the President’s removal power.” 

Neither Humphrey’s Executor nor Morrison resolves whether the CFPB Director’s insulation from removal is constitutional. Start with Humphrey’s Executor. Unlike the New Deal-era FTC upheld there, the CFPB is led by a single Director who cannot be described as a “body of experts” and cannot be considered “non-partisan” in the same sense as a group of officials drawn from both sides of the aisle. Moreover, while the staggered terms of the FTC Commissioners prevented complete turnovers in agency leadership and guaranteed that there would always be some Commissioners who had accrued significant expertise, the CFPB’s single-Director structure and five-year term guarantee abrupt shifts in agency leadership and with it the loss of accumulated expertise.

In addition, the CFPB Director is hardly a mere legislative or judicial aid. Instead of making reports and recommendations to Congress, as the 1935 FTC did, the Director possesses the authority to promulgate binding rules fleshing out 19 federal statutes, including a broad prohibition on unfair and deceptive practices in a major segment of the U. S. economy. And instead of submitting recommended dispositions to an Article III court, the Director may unilaterally issue final decisions awarding legal and equitable relief in administrative adjudications. Finally, the Director's enforcement authority includes the power to seek daunting monetary penalties against private parties on behalf of the United States in federal court—a quintessentially executive power not considered in Humphrey’s Executor.

The logic of Morrison also does not apply. Everyone agrees the CFPB Director is not an inferior officer, and her duties are far from limited. Unlike the independent counsel, who lacked policymaking or administrative authority, the Director has the sole responsibility to administer 19 separate consumer-protection statutes that cover everything from credit cards and car payments to mortgages and student loans. It is true that the independent counsel in Morrison was empowered to initiate criminal investigations and prosecutions, and in that respect wielded core executive power. But that power, while significant, was trained inward to high-ranking Governmental actors identified by others, and was confined to a specified matter in which the Department of Justice had a potential conflict of interest. By contrast, the CFPB Director has the authority to bring the coercive power of the state to bear on millions of private citizens and businesses, imposing even billion-dollar penalties through administrative adjudications and civil actions.

In light of these differences, the constitutionality of the CFPB Director’s insulation from removal cannot be settled by Humphrey’s Executor or Morrison alone.

The question instead is whether to extend those precedents to the “new situation” before us, namely an independent agency led by a single Director and vested with significant executive power. We decline to do so [...]

“The Framers recognized that, in the long term, structural protections against abuse of power were critical to preserving liberty.” Bowsher, 478 U. S., at 730. Their solution to governmental power and its perils was simple: divide it. To prevent the “gradual concentration” of power in the same hands, they enabled “[a]mbition . . . to counteract ambition” at every turn. At the highest level, they “split the atom of sovereignty” itself into one Federal Government and the States. They then divided the “powers of the new Federal Government into three defined categories, Legislative, Executive, and Judicial.” Chadha, 462 U. S., at 951.

They did not stop there. Most prominently, the Framers bifurcated the federal legislative power into two Chambers: the House of Representatives and the Senate, each composed of multiple Members and Senators. Art. I, §§2, 3.

The Executive Branch is a stark departure from all this division. The Framers viewed the legislative power as a special threat to individual liberty, so they divided that power to ensure that “differences of opinion” and the “jarrings of parties” would “promote deliberation and circumspection” and “check excesses in the majority.” By contrast, the Framers thought it necessary to secure the authority of the Executive so that he could carry out his unique responsibilities. As Madison put it, while “the weight of the legislative authority requires that it should be . . . divided, the weakness of the executive may require, on the other hand, that it should be fortified.” [...]

The Framers [...] gave the Executive the “[d]ecision, activity, secrecy, and dispatch” that “characterise the proceedings of one man.”

To justify and check that authority—unique in our constitutional structure—the Framers made the President the most democratic and politically accountable official in Government. Only the President (along with the Vice President) is elected by the entire Nation [...]

The CFPB’s single-Director structure contravenes this carefully calibrated system by vesting significant governmental power in the hands of a single individual accountable to no one. The Director is neither elected by the people nor meaningfully controlled (through the threat of removal) by someone who is. The Director does not even depend on Congress for annual appropriations. Yet the Director may unilaterally, without meaningful supervision, issue final regulations, oversee adjudications, set enforcement priorities, initiate prosecutions, and determine what penalties to impose on private parties. With no colleagues to persuade, and no boss or electorate looking over her shoulder, the Director may dictate and enforce policy for a vital segment of the economy affecting millions of Americans [...]

Because the CFPB is headed by a single Director with a five-year term, some Presidents may not have any opportunity to shape its leadership and thereb y influence its activities. A President elected in 2020 would likely not appoint a CFPB Director until 2023, and a President elected in 2028 may never appoint one. That means an unlucky President might get elected on a consumer-protection platform and enter office only to find herself saddled with a holdover Director from a competing political party who is dead set against that agenda. To make matters worse, the agency’s single-Director structure means the President will not have the opportunity to appoint any other leaders—such as a chair or fellow members of a Commission or Board—who can serve as a check on the Director’s authority and help bring the agency in line with the President’s preferred policies [...]

Because we find the Director’s removal protection severable from the other provisions of Dodd-Frank that establish the CFPB, we remand for the Court of Appeals to consider whether the civil investigative demand was validly ratified [...]

Justice KAGAN, with whom JUSTICE GINSBURG, JUSTICE BREYER, and JUSTICE SOTOMAYOR join, concurring in the judgment with respect to severability and dissenting in part.

[...] The text of the Constitution, the history of the country, the precedents of this Court, and the need for sound and adaptable governance—all stand against the majority’s opinion. They point not to the majority’s “general rule” of “unrestricted removal power” with two grudgingly applied “exceptions.” Rather, they bestow discretion on the legislature to structure administrative institutions as the times demand, so long as the President retains the ability to carry out his constitutional duties. And most relevant here, they give Congress wide leeway to limit the President’s removal power in the interest of enhancing independence from politics in regulatory bodies like the CFPB.

What does the Constitution say about the separation of powers—and particularly about the President’s removal authority? (Spoiler alert: about the latter, nothing at all.)

The majority offers the civics class version of separation of powers—call it the Schoolhouse Rock definition of the phrase. See Schoolhouse Rock! Three Ring Government (Mar. 13, 1979), http://www.youtube.com/watch?v=pKSGyiT-o3o (“Ring one, Executive. Two is Legislative, that's Congress. Ring three, Judiciary”). The Constitution’s first three articles, the majority recounts, “split the atom of sovereignty” among Congress, the President, and the courts. 

[The majority fails to] recognize that the separation of powers is, by design, neither rigid nor complete. Blackstone, whose work influenced the Framers on this subject as on others, observed that “every branch” of government “supports and is supported, regulates and is regulated, by the rest.” So as James Madison stated, the creation of distinct branches “did not mean that these departments ought to have no partial agency in, or no controul over the acts of each other.” To the contrary, Madison explained, the drafters of the Constitution—like those of then-existing state constitutions—opted against keeping the branches of government “absolutely separate and distinct.” [...]

The majority relies for its contrary vision on Article II’s Vesting Clause, but the provision can’t carry all that weight. Or as Chief Justice Rehnquist wrote of a similar claim in Morrison v. Olson, 487 U. S. 654 (1988), “extrapolat[ing]” an unrestricted removal power from such “general constitutional language”—which says only that “[t]he executive Power shall be vested in a President”—is “more than the text will bear.” [...] Historical understandings thus belie the majority’s “general rule.” [...]

As the majority explains, the CFPB emerged out of disaster. The collapse of the subprime mortgage market “precipitat[ed] a financial crisis that wiped out over $10 trillion in American household wealth and cost millions of Americans their jobs, their retirements, and their homes.” In that moment of economic ruin, the President proposed and Congress enacted legislation to address the causes of the collapse and prevent a recurrence. An important part of that statute created an agency to protect consumers from exploitative financial practices. The agency would take over enforcement of almost 20 existing federal laws. And it would administer a new prohibition on “unfair, deceptive, or abusive act[s] or practice[s]” in the consumer-finance sector. 

No one had a doubt that the new agency should be independent. As explained already, Congress has historically given—with this Court's permission—a measure of independence to financial regulators like the Federal Reserve Board and the FTC. And agencies of that kind had administered most of the legislation whose enforcement the new statute transferred to the CFPB. The law thus included an ordinary for-cause provision—once again, that the President could fire the CFPB’s Director only for “inefficiency, neglect of duty, or malfeasance in office.” That standard would allow the President to discharge the Director for a failure to “faithfully execute[ ]” the law, as well as for basic incompetence. But it would not permit removal for policy differences.

[...] In the midst of the Great Recession, Congress and the President came together to create an agency with an important mission. It would protect consumers from the reckless financial practices that had caused the then-ongoing economic collapse. Not only Congress but also the President thought that the new agency, to fulfill its mandate, needed a measure of independence. So the two political branches, acting together, gave the CFPB Director the same job protection that innumerable other agency heads possess. All in all, those branches must have thought, they had done a good day’s work. Relying on their experience and knowledge of administration, they had built an agency in the way best suited to carry out its functions. They had protected the public from financial chicanery and crisis. They had governed.

And now consider how the dispute ends—with five unelected judges rejecting the result of that democratic process. The outcome today will not shut down the CFPB: A different majority of this Court, including all those who join this opinion, believes that if the agency’s removal provision is unconstitutional, it should be severed. But the majority on constitutionality jettisons a measure Congress and the President viewed as integral to the way the agency should operate. The majority does so even though the Constitution grants to Congress, acting with the President’s approval, the authority to create and shape administrative bodies. And even though those branches, as compared to courts, have far greater understanding of political control mechanisms and agency design [...]