in whole or in part.
CHAPTER 23
ADMINISTRATIVE AGENCIES
in whole or in part.
CHAPTER 23: ADMINISTRATIVE AGENCIES 3
in whole or in part.
THE LEGAL ENVIRONMENT DIMENSION
Would the United States Supreme Court have deferred to the Treasury Department’s full–
time employee regulation even if it had disagreed with the rule? Why or why not? The
United States Supreme Court found that the Treasury Department’s regulation qualified for
Chevron deference because the FICA statute did not define student and was ambiguous as to
whether medical residents are students. It would not have mattered if the Court had disagreed
with the department’s full-time employee rule, it would still have had to enforce it as long as it
was not “arbitrary or capricious in substance, or manifestly contrary to the statute.” Courts are
not supposed to substitute their reasoning for that of an agency having authority to regulate a
specific area. It is possible that if the highest court in the United States had strongly disagreed
with the rule, the justices might have found some way to conclude that it was arbitrary and
capricious or inconsistent with the FICA statute. That was clearly not the case here, though, as
the justices approved of the Treasury Department’s reasoning and regulation.
CASE 23.3—QUESTIONS (PAGE 462)
THE ECONOMIC DIMENSION
Why should a court wait to review an agency’s order until it has gone through the entire
procedural process and can be considered final? In the interest of judicial economy, a court
waits to review an agency order until it has gone through the entire procedural process and can
be considered final. Courts discourage the filing of petitions for review until after an agency
completes its procedures. This is because it is a pointless waste of judicial energy for a court to
process any petition for review before an agency has acted, for example, on a request for
reconsideration of a ruling if a party decides to seek the agency’s reconsideration.
THE LEGAL ENVIRONMENT DIMENSION
Under what standard does a court defer to an agency’s interpretation of a statute? Did
the court in this case appear to have applied that standard to the DEA’s interpretation of
the Controlled Substances Act? Discuss. Under the holding of the Chevron case discussed
earlier in this chapter, an agency’s interpretation of a statute must be reasonable and, therefore,
not arbitrary and capricious. A court does not need to conclude that the agency’s interpretation
was the only one it could have adopted or even that it was the same interpretation the court
would have applied.
Yes, here the court appeared to have applied that standard to the DEA’s interpretation of
the CSA. The DEA’s interpreted the CSA to require a registrant to prove both that effective
controls against diversion of the marijuana for unapproved purposes are in place and that its
supply and the competition to supply it are inadequate. Because the court considered whether
Craker met those requirements without discussing their validity, the court appeared to conclude
that the DEA‘s interpretation was reasonable.
4 UNIT SIX: GOVERNMENT REGULATION
in whole or in part.
ANSWERS TO QUESTIONS IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
1A. Type of agency
The SEC is an independent regulatory agency, because the president does not have the power
to appoint and remove federal officers at the SEC. Because federal officers at the SEC are not
appointed by the president, serve for a fixed term, and cannot be removed from their positions
without just cause, the SEC is an independent regulatory agency.
2A. Arbitrary and capricious
Yes. The new rule is likely arbitrary and capricious because little rationale was provided for a
major change in a rule that should have been subject to notice-and-comment proceedings.
3A. Chevron deference
No. The SEC will probably not get Chevron deference and the courts will give careful review to
the new regulation. The new rule is a major expansion of regulatory power and it is not clear it
was the intent of Congress to go this far.
4A. Interpretative rules
Interpretive rules are not subject to the same level of judicial review as are new substantive
rules.
ANSWER TO DEBATE THIS QUESTION IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
Because an administrative law judge (ALJ) acts as both judge and jury, there
should always be at least three ALJs in each administrative hearing. It is unfair to give an
ALJ so much power within any administrative agency. After all, each ALJ works for the
administrative agency that she or he is supposed to judge in any dispute. How can we assume
that an ALJ will be unbiased? There will always be a tenancy for ALJs to favor the actions of
administrative agencies. There is at least a chance of more unbiased decisions if at least three
ALJs hear each case
The system of ALJs has worked well for decades, so now is not the time to change it. In
any event, ALJs frequently rule against the agencies for which they work. Besides, when a
party to an ALJ’s decision doesn’t like the outcome, that party can always appeal the decision in
federal court, which happens quite often. Finally, the cost of tripling the number of ALJs would
be prohibitive, especially with the federal government running such huge budget deficits.
CHAPTER 23: ADMINISTRATIVE AGENCIES 5
in whole or in part.
ANSWERS TO ISSUE SPOTTERS IN THE EXAMPREP FEATURE
AT THE END OF THE CHAPTER
1A. The U.S. Department of Transportation (DOT) sometimes hears an appeal from a
party whose contract with the DOT has been canceled. An administrative law judge (ALJ),
who works for the DOT, hears this appeal. What safeguards promote the ALJ’s fairness?
Under the Administrative Procedure Act (APA), the administrative law judge (ALJ) must be
separate from the agency’s investigative and prosecutorial staff. Ex parte communications be–
tween the ALJ and a party to a proceeding are prohibited. Under the APA, an ALJ is exempt
from agency discipline except on a showing of good cause.
2A. Techplate Corporation learns that a federal administrative agency is considering a
rule that will have a negative impact on the firm’s ability to do business. Does the firm
have any opportunity to express its opinion about the pending rule? Explain. Yes.
Administrative rulemaking starts with the publication of a notice of the rulemaking in the Federal
Register. A public hearing is held at which proponents and opponents can offer evidence and
question witnesses. After the hearing, the agency considers what was presented at the hearing
and drafts the final rule.
ANSWERS TO BUSINESS SCENARIOS AND BUSINESS CASE PROBLEMS
AT THE END OF THE CHAPTER
23-1A. Rulemaking and adjudication powers
(Chapter 23—Pages 454–456)
on their choice of proceeding through rulemaking and adjudication. As long as the FTC fol–
lowed prescribed rulemaking procedures, with notice and comment, the rules and subsequent
23-2A. Informal rulemaking
(Chapter 23—Page 456)
those extra procedures, at least until the rule is formally rescinded. Ultimately, in this case, the
court will most likely rule for the food producers.
in whole or in part.
in whole or in part.
8 UNIT SIX: GOVERNMENT REGULATION
in whole or in part.
23-8A. A QUESTION OF ETHICS—Rulemaking
(a) The FMSCA analyzed the crash risks due to driver fatigue according to a new
model to justify an increase in the maximum number of daily and weekly hours that long-haul
truck drivers could drive and work. The agency did out reveal this new methodology, however,
parties an opportunity to comment on the methodology of the crash-risk model used. The court
stated that the agency’s argument “misse[d] the point.” Even if interested parties had known that
the previous model would have to be adjusted, there was “no way of knowing that the agency
would calculate the impact of time on [the risk] in the way it did.”
ethical duty to be as transparent as possible.
(b) Public Citizen claimed that the graph made it appear as if the risk of a crash after a
higher number of hours on the job was significantly lower than it actually was. The plaintiff
argued that the agency should have explained its reason for depicting the data in this way.
than what the agency asserts could be characterized as deceitful and thus unethical. An agency
would seem to have an ethical duty to reveal as much of the background for its rulemaking and
decisionmaking as possible.
23-9A. LEGAL REASONING GROUP ACTIVITY—Investigation
(a) The court should not order UAL to comply with the subpoena. The information
sought goes far beyond an inquiry into whether and for whom UAL makes French social security
payments. It is not limited to individuals who may be considered similarly situated to Droge
in whole or in part.
in whole or in part.
CHAPTER 23: ADMINISTRATIVE AGENCIES 3
in whole or in part.
THE LEGAL ENVIRONMENT DIMENSION
Would the United States Supreme Court have deferred to the Treasury Department’s full–
time employee regulation even if it had disagreed with the rule? Why or why not? The
United States Supreme Court found that the Treasury Department’s regulation qualified for
Chevron deference because the FICA statute did not define student and was ambiguous as to
whether medical residents are students. It would not have mattered if the Court had disagreed
with the department’s full-time employee rule, it would still have had to enforce it as long as it
was not “arbitrary or capricious in substance, or manifestly contrary to the statute.” Courts are
not supposed to substitute their reasoning for that of an agency having authority to regulate a
specific area. It is possible that if the highest court in the United States had strongly disagreed
with the rule, the justices might have found some way to conclude that it was arbitrary and
capricious or inconsistent with the FICA statute. That was clearly not the case here, though, as
the justices approved of the Treasury Department’s reasoning and regulation.
CASE 23.3—QUESTIONS (PAGE 462)
THE ECONOMIC DIMENSION
Why should a court wait to review an agency’s order until it has gone through the entire
procedural process and can be considered final? In the interest of judicial economy, a court
waits to review an agency order until it has gone through the entire procedural process and can
be considered final. Courts discourage the filing of petitions for review until after an agency
completes its procedures. This is because it is a pointless waste of judicial energy for a court to
process any petition for review before an agency has acted, for example, on a request for
reconsideration of a ruling if a party decides to seek the agency’s reconsideration.
THE LEGAL ENVIRONMENT DIMENSION
Under what standard does a court defer to an agency’s interpretation of a statute? Did
the court in this case appear to have applied that standard to the DEA’s interpretation of
the Controlled Substances Act? Discuss. Under the holding of the Chevron case discussed
earlier in this chapter, an agency’s interpretation of a statute must be reasonable and, therefore,
not arbitrary and capricious. A court does not need to conclude that the agency’s interpretation
was the only one it could have adopted or even that it was the same interpretation the court
would have applied.
Yes, here the court appeared to have applied that standard to the DEA’s interpretation of
the CSA. The DEA’s interpreted the CSA to require a registrant to prove both that effective
controls against diversion of the marijuana for unapproved purposes are in place and that its
supply and the competition to supply it are inadequate. Because the court considered whether
Craker met those requirements without discussing their validity, the court appeared to conclude
that the DEA‘s interpretation was reasonable.
4 UNIT SIX: GOVERNMENT REGULATION
in whole or in part.
ANSWERS TO QUESTIONS IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
1A. Type of agency
The SEC is an independent regulatory agency, because the president does not have the power
to appoint and remove federal officers at the SEC. Because federal officers at the SEC are not
appointed by the president, serve for a fixed term, and cannot be removed from their positions
without just cause, the SEC is an independent regulatory agency.
2A. Arbitrary and capricious
Yes. The new rule is likely arbitrary and capricious because little rationale was provided for a
major change in a rule that should have been subject to notice-and-comment proceedings.
3A. Chevron deference
No. The SEC will probably not get Chevron deference and the courts will give careful review to
the new regulation. The new rule is a major expansion of regulatory power and it is not clear it
was the intent of Congress to go this far.
4A. Interpretative rules
Interpretive rules are not subject to the same level of judicial review as are new substantive
rules.
ANSWER TO DEBATE THIS QUESTION IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
Because an administrative law judge (ALJ) acts as both judge and jury, there
should always be at least three ALJs in each administrative hearing. It is unfair to give an
ALJ so much power within any administrative agency. After all, each ALJ works for the
administrative agency that she or he is supposed to judge in any dispute. How can we assume
that an ALJ will be unbiased? There will always be a tenancy for ALJs to favor the actions of
administrative agencies. There is at least a chance of more unbiased decisions if at least three
ALJs hear each case
The system of ALJs has worked well for decades, so now is not the time to change it. In
any event, ALJs frequently rule against the agencies for which they work. Besides, when a
party to an ALJ’s decision doesn’t like the outcome, that party can always appeal the decision in
federal court, which happens quite often. Finally, the cost of tripling the number of ALJs would
be prohibitive, especially with the federal government running such huge budget deficits.
CHAPTER 23: ADMINISTRATIVE AGENCIES 5
in whole or in part.
ANSWERS TO ISSUE SPOTTERS IN THE EXAMPREP FEATURE
AT THE END OF THE CHAPTER
1A. The U.S. Department of Transportation (DOT) sometimes hears an appeal from a
party whose contract with the DOT has been canceled. An administrative law judge (ALJ),
who works for the DOT, hears this appeal. What safeguards promote the ALJ’s fairness?
Under the Administrative Procedure Act (APA), the administrative law judge (ALJ) must be
separate from the agency’s investigative and prosecutorial staff. Ex parte communications be–
tween the ALJ and a party to a proceeding are prohibited. Under the APA, an ALJ is exempt
from agency discipline except on a showing of good cause.
2A. Techplate Corporation learns that a federal administrative agency is considering a
rule that will have a negative impact on the firm’s ability to do business. Does the firm
have any opportunity to express its opinion about the pending rule? Explain. Yes.
Administrative rulemaking starts with the publication of a notice of the rulemaking in the Federal
Register. A public hearing is held at which proponents and opponents can offer evidence and
question witnesses. After the hearing, the agency considers what was presented at the hearing
and drafts the final rule.
ANSWERS TO BUSINESS SCENARIOS AND BUSINESS CASE PROBLEMS
AT THE END OF THE CHAPTER
23-1A. Rulemaking and adjudication powers
(Chapter 23—Pages 454–456)
on their choice of proceeding through rulemaking and adjudication. As long as the FTC fol–
lowed prescribed rulemaking procedures, with notice and comment, the rules and subsequent
23-2A. Informal rulemaking
(Chapter 23—Page 456)
those extra procedures, at least until the rule is formally rescinded. Ultimately, in this case, the
court will most likely rule for the food producers.
in whole or in part.
in whole or in part.
8 UNIT SIX: GOVERNMENT REGULATION
in whole or in part.
23-8A. A QUESTION OF ETHICS—Rulemaking
(a) The FMSCA analyzed the crash risks due to driver fatigue according to a new
model to justify an increase in the maximum number of daily and weekly hours that long-haul
truck drivers could drive and work. The agency did out reveal this new methodology, however,
parties an opportunity to comment on the methodology of the crash-risk model used. The court
stated that the agency’s argument “misse[d] the point.” Even if interested parties had known that
the previous model would have to be adjusted, there was “no way of knowing that the agency
would calculate the impact of time on [the risk] in the way it did.”
ethical duty to be as transparent as possible.
(b) Public Citizen claimed that the graph made it appear as if the risk of a crash after a
higher number of hours on the job was significantly lower than it actually was. The plaintiff
argued that the agency should have explained its reason for depicting the data in this way.
than what the agency asserts could be characterized as deceitful and thus unethical. An agency
would seem to have an ethical duty to reveal as much of the background for its rulemaking and
decisionmaking as possible.
23-9A. LEGAL REASONING GROUP ACTIVITY—Investigation
(a) The court should not order UAL to comply with the subpoena. The information
sought goes far beyond an inquiry into whether and for whom UAL makes French social security
payments. It is not limited to individuals who may be considered similarly situated to Droge
in whole or in part.