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Chapter 5
ADMINISTRATIVE LAW
A. Operation of Administrative Agencies 1. Judicial Review
1. Rulemaking a. General Requirements
a. Legislative Rules b. Questions of Law
b. Interpretive Rules c. Questions of Fact
c. Procedural Rules 2. Legislative Control
2. Enforcement 3. Executive Branch Control
3. Adjudication 4. Disclosure of Information
B. Limits on Administrative Agencies a. Freedom of Information Act
b. Privacy Act
c. Government in the Sunshine Act
Cases in This Chapter
Mayo Foundation for Medical Education and
Research v. United States
American Airlines, Inc. v. Department of
Transportation
Sackett v. Environmental Protection Agency
FCC v. Fox Television Stations
Chapter Outcomes
After reading and studying this chapter, the student should be able to:
Explain the three basic functions of administrative agencies.
Distinguish among the three types of rules promulgated by administrative
agencies.
Explain the difference between formal and informal methods of
adjudication.
TEACHING NOTES
Administrative law is the branch of public law created by administrative agencies
as rules, regulations, orders, and decisions to carry out the regulatory powers
and duties of those agencies. Administrative agencies are governmental
entities (other than courts and legislatures) that have authority to affect the
rights of private parties. They are referred to as commission, board, department,
agency administration, bureau or o#ce. They regulate important matters of
national safety, welfare and convenience.
considering every aspect of a specific problem in order to address it. Instead,
legislators can pass an enabling statute and create an agency for the task.
*** Chapter Outcome ***
Explain the three basic functions of administrative agencies.
A. OPERATION OF ADMINISTRATIVE AGENCIES
Most administrative agencies perform all three of the basic functions of
government: (1) making rules; (2) enforcing law; and (3) adjudicating
controversies. Administrative process refers to activities in which agencies
*** Chapter Outcome ***
Distinguish among three types of rules promulgated by administrative agencies.
Explain the difference between formal and informal methods of adjudication.
Rulemaking
Under the APA a rule is "the whole or a part of an agency statement of general or
particular applicability and future effect designed to implement, interpret, or
process law or policy."
Legislative Rules — often called regulations, are substantive rules issued by an
administrative agency under the authority delegated to it by the legislature.
Legislative rules have the force of law in contrast to interpretive and procedural
rules. Most must be promulgated in accordance with the informal rulemaking
procedures of the APA, which require prior notice, an opportunity for
participation, and publication of a final draft. Formal rulemaking is more
complex and involves finding facts, applying legal rules to the facts, and
formulating orders. It requires opportunity for a hearing, with testimony and
CASE 5-1
MAYO FOUNDATION FOR MEDICAL EDUCATION AND
RESEARCH v. UNITED STATES
Supreme Court of the United States, 2011
562 U.S. ____, 131 S.CT. 704, 178 L.ED.2D 588
http://scholar.google.com/scholar_case?q=131+S.+Ct.
+704&hl=en&as_sdt=2,34&case=3055490070969307951&scilh=0
Roberts, C. J.
Most doctors who graduate from medical school in the United States pursue additional education
in a specialty to become board certified to practice in that field. Petitioners Mayo Foundation for
Medical Education and Research, Mayo Clinic, and the Regents of the University of Minnesota
(collectively Mayo) offer medical residency programs that provide such instruction. Mayo’s
residency programs, which usually last three to five years, train doctors primarily through
hands-on experience. Residents often spend between 50 and 80 hours a week caring for patients,
typically examining and diagnosing them, prescribing medication, recommending plans of care,
and performing certain procedures. Residents are generally supervised in this work by more
senior residents and by faculty members known as attending physicians. In 2005, Mayo paid its
residents annual “stipends” ranging between $41,000 and $56,000 and provided them with health
insurance, malpractice insurance, and paid vacation time.
Through the Social Security Act and related legislation, Congress has created a
comprehensive national insurance system that provides benefits for retired workers, disabled
workers, unemployed workers, and their families. [Citation.] Congress funds Social Security by
taxing both employers and employees under FICA on the wages employees earn. [Citations.]
Congress has defined “wages” broadly, to encompass “all remuneration for employment.” §
3121(a). The term “employment” has a similarly broad reach, extending to “any service, of
whatever nature, performed . . . by an employee for the person employing him.” § 3121(b).
* * *
On December 21, 2004, the Department adopted an amended rule prescribing that an
employee’s service is “incident” to his studies only when “[t]he educational aspect of the
relationship between the employer and the employee, as compared to the service aspect of the
relationship, [is] predominant.” [Citation.] The rule categorically provides that “[t]he services of
a full-time employee”—as defined by the employer’s policies, but in any event including any
employee normally scheduled to work 40 hours or more per week—“are not incident to and for
the purpose of pursuing a course of study.” [Citation,] (the full-time employee rule). The
amended provision clarifies that the Department’s analysis “is not affected by the fact that the
After the Department promulgated the full-time employee rule, Mayo filed suit seeking a
refund of the money it had withheld and paid on its residents’ stipends during the second quarter
of 2005. [Citation.] Mayo asserted that its residents were exempt under § 3121(b)(10) and that
the Treasury Department’s fulltime employee rule was invalid.
[The District Court granted Mayo’s motion for summary judgment. The Government
appealed, and the Court of Appeals reversed.]
We granted Mayo’s petition for certiorari. [Citation.]
We begin our analysis with the first step of the two-part framework announced in
* * *
In the typical case, such an ambiguity would lead us inexorably to Chevron step two,
under which we may not disturb an agency rule unless it is “‘arbitrary or capricious in substance,
or manifestly contrary to the statute.’” [Citation.] In this case, however, the parties disagree over
the proper framework for evaluating an ambiguous provision of the Internal Revenue Code.
* * *
The principles underlying our decision in Chevron apply with full force in the tax
context. Chevron recognized that “[t]he power of an administrative agency to administer a
congressionally created … program necessarily requires the formulation of policy and the
* * * We have held that Chevron deference is appropriate “when it appears that Congress
delegated authority to the agency generally to make rules carrying the force of law, and that the
agency interpretation claiming deference was promulgated in the exercise of that authority.” * *
*
* * * The Department issued the full-time employee rule pursuant to the explicit
authorization to “prescribe all needful rules and regulations for the enforcement” of the Internal
Revenue Code. [Citation.] * * *
* * *
The full-time employee rule easily satisfies the second step of Chevron, which asks
whether the Department’s rule is a “reasonable interpretation” of the enacted text. [Citation.] To
begin, Mayo accepts that “the ‘educational aspect of the relationship between the employer and
the employee, as compared to the service aspect of the relationship, [must] be predominant’” in
We disagree. Regulation, like legislation, often requires drawing lines. Mayo does not
dispute that the Treasury Department reasonably sought a way to distinguish between workers
who study and students who work, [citation]. * * * The Department reasonably concluded that its
full-time employee rule would “improve administrability,” [citation], and it thereby “has avoided
the wasteful litigation and continuing uncertainty that would inevitably accompany any purely
case-by-case approach” like the one Mayo advocates, [citation].
* * *
Enforcement
Agencies are also empowered to investigate certain conduct to determine
whether the statute or the agency's legislative rules have been violated.
Agencies have traditionally been accorded great discretion to compel disclosure
of information, subject to constitutional limitations.
Adjudication
After concluding an investigation, the agency may use formal or informal
methods to resolve the matter. Informal procedures, which include advising,
negotiating and settling, constitute the majority of administrative adjudication.
In 1990, Congress enacted the Administrative Dispute Resolution Act to
CASE 5-2
AMERICAN AIRLINES, INCORPORATED v. DEPARTMENT OF
TRANSPORTATION
United States Court of Appeals, Fifth Circuit, 2000
202 F.3d 788
http://scholar.google.com/scholar_case?
q=202+F.3d+788&hl=en&as_sdt=2,34&case=1007675062691397061&scilh=0
Garza, J.
This consolidated appeal involves respondent Department of Transportation’s (“DOT’s”)
interpretation of federal law governing airline service at Love Field airport. Petitioners Dallas
Fort Worth International Airport Board (“DFW Board”), City of Fort Worth (“Fort Worth”),
American Airlines, Inc. (“American”), City of Dallas (“Dallas”), Southwest Airlines Company
(“Southwest”), and Love Field Citizens Action Committee (the “Committee”) petition for review
of DOT’s declaratory, procedural, and reconsideration orders. Legend Airlines, Inc. (“Legend”),
Continental Airlines, Inc. (“Continental”), and Continental Express, Inc. (“Continental Express”)
have intervened. For the reasons set forth below, we affirm.
solely running intrastate flights from Love Field and thus was exempt from CAB certification
and pressure, refused to move to DFW and did not sign [the] agreement. Litigation ensued over
efforts to force Southwest from Love Field, terminating with our statement that “Southwest
Airlines Co. has a federally declared right to the continued use of and access to Love Field, so
long as Love Field remains open.” [Citation.]
Congress deregulated the airline industry in 1978. Shortly thereafter, Southwest applied for
permission to provide interstate service between Love Field and New Orleans. CAB granted the
application, concluding that it lacked power to deny it. This prompted Congress to intervene by
enacting the Wright Amendment. [Citation.] The Wright Amendment generally bans interstate
The Shelby Amendment [enacted in 1997] * * * expanded the contiguous states exemption to
allow direct flights between Love Field and airports within Kansas, Alabama, and Mississippi.
[Citation.]
The parties in this case responded in various ways to the Shelby Amendment. Southwest
began offering flights between Love Field and Mississippi and Alabama. Legend has announced
plans to offer long-haul service to states outside the Love Field service area using large aircraft
reconfigured to have less than 57 seats. Continental Express plans to use regional jets with less
At the urging of several of the parties, and while both the federal and state actions were
pending, DOT initiated the interpretative proceeding that is the subject of this petition for review.
DOT issued an order informing the parties in this action that it intended to rule on four “federal
law issues” and allowing the parties an opportunity to submit comments on these issues.
Subsequently, in response to the parties’ initial comments, * * * DOT ultimately issued a
“Declaratory Order” resolving the * * * questions it had set forth. Specifically, DOT ruled that:
(i) the City of Fort Worth may not enforce any commitment by the City of Dallas * * * to
limit operations at Love Field authorized by federal law, and the proprietary powers of the
from or to Love Field, notwithstanding any claim that such service violates any agreement
between the Cities of Dallas and Fort Worth; (iv) the Dallas-Fort Worth International Airport
Board may not enforce any contract provision that allegedly bars an airline from operating
interstate airline service at another airport in the Dallas-Fort Worth metropolitan area; and (v)
any air-line may offer through service between Love Field and any other point to passengers
* * *
Several of the parties challenge DOT’s declaratory order on procedural grounds * * * that:
DOT violated the Administrative Procedure Act (“APA”). * * *
Fort Worth and the DFW Board argue that DOT’s ruling violated the APA in various ways.
See § 706 (directing a reviewing court to “hold unlawful and set aside agency action, findings,
and conclusions found to be * * * without observance of procedure required by law”). Although
DOT has already rejected some of these challenges in its earlier rulings, we review de novo
DOT’s interpretation and application of the APA. [Citation.]
Several parties contend that DOT failed to provide them with sufficient notice as required
under § 554(b) or, alternatively, § 553, of the APA. We exercise plenary review over whether
DOT complied with applicable procedures. [Citation.]
Fort Worth contends that DOT failed to comply with § 554(b) by neglecting to notify parties
that DOT would also be considering a factual issue: the effect of increased service at Love Field
on DFW Airport. This argument fails for two reasons. First, as noted, the formal notice
requirement of § 554(b) does not apply to an informal adjudication. Second, the parties were
effectively on notice of this issue since it was one that they could reasonably expect to arise
given the issues of which DOT gave notice. [Citation.] The fact that Dallas, Continental Express,
and Legend all submitted factual evidence to DOT should also have put Fort Worth on notice that
it could submit its own factual evidence.
We also note the absence of anything in the record to indicate that Fort Worth possesses any
information bearing on the impact of increased service at Love Field. Fort Worth has had three
We also reject the DFW Board’s argument that DOT’s order amounts to a substantive rule
subject to the notice and comment provision of § 553. Agencies have discretion to choose
between adjudication and rulemaking as a means of setting policy. [Citation.] In determining
whether an agency action constituted adjudication or rulemaking, we look to the product of the
agency action. We also accord significant deference to an agency’s characterization of its own
B. LIMITS ON ADMINISTRATIVE AGENCIES
An important and fundamental part of administrative law is the limits imposed
by judicial review by the courts upon the activities of administrative agencies.
Courts are not supposed to substitute their judgment on matters of policy for the
agency's judgment, but the legislature and the executive branch may address
the wisdom of an agency's action. Legally required public disclosure of agency
actions provides further protection for the public.
NOTE: See Figure 5-1: Limits on Administrative Agencies.
Judicial Review
Judicial review, the process by which courts examine governmental action, is
available unless precluded by statute; it acts as a control on a particular rule of
an agency. A court may either compel agency action unlawfully withheld or set
