Administrative Law

These opinions review decisions by the NLRB, FedEx Home Delivery v. N.L.R.B., 563 F.3d 492 (2009) (Garland, J., dissenting), SEC, Financial Planning Association v. Securities Exchange Commission, 482 F.3d 481 (2007) (Garland, J., dissenting), FDA, Alpharma, Inc. v. Leavitt, 460 F.3d 1 (2006), EPA, American Corn Growers Association v. EPA, 291 F.3d 1 (2002), FERC, PSEG Energy Resources & Trade LLC v. Federal Energy Regulatory Commission, 665 F.3d 203 (2011), HHS, Arizona v. Thompson, 281 F.3d 248 (2002), FCC, Bianca Telephone Company v. Federal Communications Commission, 743 F.3d 860 (2014), and DHS, Lacson v. DHS, 726 F.3d 170 (2013).


American Corn Growers Association v. EPA (2002)

In the late-1970s, Congress amended the Clean Air Act (CAA) to account for the protection of visibility as a public good tied to air quality. During the 1980s and ‘90s, Congress took further action, indicating to the EPA that it wanted more to be done about visibility impairment, especially in national parks. By 1997, there was also a lot more information available about the sources of regional haze—particulate matter that collected in the air and reflected light, impairing visibility significantly. In response to Congressional prompting and the expanded data, the EPA solicited comments for a prospective rule regulating regional haze, issuing its final rule in 1999. The final rule imposed a number of requirements on states and generated considerable controversy.

A number of petitioners and interveners joined in a consolidated three-part challenge to the Haze Rule. First, they argued that the EPA acted contrary to law because of its requirement that states identify all major stationary sources subject to Best Available Retrofit Technology (BART) requirements as a “group” or “area” rather than a “source-by-source” approach. Second, they argued that the EPA acted without statutory authority and in an arbitrary and capricious manner in promulgating the “natural visibility” goal and “no degradation” requirement in the rule. Finally, the Sierra Club challenged the rule on the grounds that the EPA failed to set reasonable criteria for measuring progress, and that the EPA acted unlawfully in extending the statutory deadline for submission of state plans.

Applying Step One of the familiar Chevron analysis to the first issue, the majority decided that the EPA’s rule was incompatible with the language and structure of the CAA, which they said clearly intended BART decisions to be approached individually, source-by-source. Additionally, referring to the legislative record, the court decided that the EPA exceeded their statutory authority by overly constraining the states in their implementation of BART, forcing the states “to require BART control at sources without any empirical evidence of the particular source’s contribution to visibility impairment.”

On the second issue, the court called the petitioners’ claims groundless. Citing Mead, the court emphasized that the natural visibility goal was neither “manifestly contrary to the statute” nor “arbitrary or capricious in substance.” Because the EPA also had an express delegation of authority, the court was bound to uphold the regulation. The EPA’s natural visibility goal and the no degradation requirement both reasonably elucidated the statute.

Addressing the third issue, the court dismissed the Sierra Club’s first attack on ripeness concerns based on their decision on the group-BART issue. The court was troubled by the EPA’s extension of the state plans deadline, stating that on its face this action seemed to extend beyond its statutory authority. Nevertheless, the court decided not to vacate the deadline extension because of its decision on the BART provisions, encouraging the agency to reconsider the deadline decision at the same time as it revised the Haze Rule requirements.

Judge Garland filed a separate opinion, concurring in part and dissenting in part. He voiced especially strong objections to the majority’s handling of the BART controls issue, arguing that the court’s action flew in the face of Congressional intent. Their decision also ignored the EPA’s scientific studies, which concluded that “reasonable progress was not possible without a collective approach . . . [among other reasons, because] it is not possible to trace emissions from an individual source directly to such a downwind area without great time and expense—and even then the results would be of uncertain reliability.”

Because Judge Garland would conclude that nothing in the language or structure of the CAA barred the approach the EPA took, and that the Haze Rule was grounded on a reasonable interpretation of the statutory language, he wrote that he would follow Chevron, deferring to the EPA and upholding the rule. He wrote, “Because EPA has reasonably determined that group-BART principles are necessary to provide [assurance of reasonable progress toward meeting the national goal of restoring natural visibility], the provisions of the Haze Rule that incorporate those principles are a permissible exercise of the agency’s delegated power.” Judge Garland also disagreed with the court that the EPA’s construction of the statute unlawfully constrained state’s rights, citing the CAA’s express delegation to the EPA to make these kinds of judgments, and observing that the states still retained considerable discretion.

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Alpharma, Inc. v. Leavitt (2006)

This appeal arose from a series of appeals and remands relating to the FDA’s approval of Philips Roxane, Inc.’s 1981 “new animal drug application” for a generic of bacitracin zinc. The company Alpharma, which manufactures a similar drug, filed citizen petitions asking the FDA to revoke their approval of the drug. The FDA requires applications to demonstrate a drug’s safety and efficacy for their prescribed use. A 1970s safety study sufficiently supported the conclusion that the drug was safe under the Food, Drug, and Cosmetic Act. To establish the drug’s efficacy, Philips Roxane pursued the “regulatory shortcut” of establishing “bioequivalency”: as long as they could establish the generic drug’s efficacy by demonstrating it was the “bioequivalent” to a “benchmark” drug the FDA had already found effective, then Philips Roxane would have satisfied the FDA’s efficacy requirement. Philips Roxane used a 1978 study that concluded both a “benchmark” drug and the generic were equally effective.

Alpharma appealed the FDA’s approval of the Philips Roxane generic up to the DC Circuit Court of Appeals, disputing that the 1978 study established the generic’s bioequivalence and alleging that the FDA had acted arbitrarily. At this first appeal, the DC Circuit deferred to the FDA on the question of bioequivalence, but did not accept the FDA’s response to Alpharma’s criticism of the testing methodology. The court found the FDA’s response conclusory, making “no response to cogently explain why Alpharma was mistaken.” The DC Circuit remanded the case to the FDA for a more adequate explanation.

Judge Garland wrote the majority opinion upon the case’s return to the DC Circuit in 2006. He held that the FDA’s explanation on remand adequately addressed the questions of the first appeal to the DC Circuit on how the 1978 study satisfied the bioequivalency standard in the animal drug context. However, he added that the FDA’s response also raised new problems and apparent contradictions, requiring another remand to the agency before the court could determine whether the FDA had acted reasonably. There were indications that the single-dosage approach of the 1978 study contradicted a historic practice of using the maximum approved dosage in testing, which was higher than a single dosage in this case. Furthermore, the FDA’s explanation made it unclear whether the 1978 study demonstrated the “control” or the “prevention” of the poultry disease for which it was prescribed. This mattered because the highest approved dosages were different for control and prevention. Because the FDA’s explanation also failed to provide its rationale for determining the optimally effective control dose, Judge Garland said the court was unable to determine whether the FDA’s decision was reasonable. Nevertheless, anticipating minimal harm from allowing the approval to remain in effect, the court left the approval in place pending the FDA’s renewed explanation on remand.

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Financial Planning Association v. Securities Exchange Commission (2007)

In Financial Planning Ass’n v. S.E.C, a panel of the D.C. Circuit Court of Appeals considered whether a final rule promulgated by the SEC exceeded the rulemaking authority delegated to the agency by the Investment Advisors Act (IAA). The rule exempted a category of broker-dealers from the IAA “when [those broker-dealers] receive special compensation therefor.” The Financial Planning Association (FPA) sought review of the final rule on the ground that the SEC had exceeded its rulemaking authority. Two members of the three-judge panel agreed, and after resolving an initial question of the FPA’s standing, they addressed the statutory delegation question.

The IAA carves out six exemptions from its definition of “investment advisor,” including an exemption for “any broker or dealer [1] whose performance of such services is solely incidental to the conduct of his business . . . and [2] who receives no special compensation therefore” at 15. U.S.C. § 80b–2(a)(11)(C). Subsection (F) contains a non-specific exemption: “such other persons not within the intent of this paragraph, as the Commission may designate . . ..” Judge Rogers argued that because “any” from (C) is ordinarily understood to mean “all-inclusive,” all brokers and dealers were therefore categorically distinct from the “other persons,” in (F). Thus, the plain meaning of the statute did not permit the SEC’s broadening of the exemption under (C) to include certain broker-dealers receiving special compensation. Because the court determined that Congress’s meaning was clear from the statute’s language and other contextual indicators of intent, Judge Rogers held that this question was resolved under Step One of the familiar Chevron agency deference analysis and therefore the SEC rule must be vacated.

In his dissent, Judge Garland disagreed that subsection (F) of the IAA exemptions was clear, arguing that the court was thus obligated to defer to the SEC’s interpretation of the statute under Step Two of Chevron. He disagreed that either “within the intent of this paragraph” or “such other persons” from subsection (F) gave rise to a single meaning. He argued that the court’s reliance on the expressio unius canon in their reading of “within the intent of this paragraph” was misplaced in an administrative context. Furthermore, Judge Garland found that defining “other” did not resolve the question of whether “any broker or dealer” should be read independently or as modified by “whose performance of such services is solely incidental . . . and who receives no special compensation….” Therefore, the court should have deferred to the SEC if their construction was reasonable. “There is nothing implausible about interpreting [‘other persons’] to encompass anyone not actually exempt under one of the five preceding exceptions,” Judge Garland wrote. “The SEC does not rewrite the statute . . . [r]ather, it gives effect to one of two plausible interpretations of statutory language.” Similarly, he found the SEC’s case for its interpretation was compatible with the contextual reasons Congress had for enacting the IAA, even though brokerage service packaging and fee structures had evolved since the IAA’s enactment. Concluding his dissent, Judge Garland dismissed the FPA’s concerns as policy matters better left to the agency than the courts.

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FedEx Home Delivery v. N.L.R.B. (2009)

In July 2006, the International Brotherhood of Teamsters, Local Union 25, sought to represent single-route FedEx delivery drivers in Wilmington, Massachusetts. Although FedEx recognized the drivers’ popular support for union representation, the small-parcel delivery company refused to bargain with the union, disputing the preliminary finding that its drivers were “employees” within the meaning of the National Labor Relations Act (NLRA). The National Labor Relations Board (NLRB) determined that FedEx’s refusal to bargain with the union constituted an unfair labor practice under the NLRA. FedEx appealed enforcement of the NLRB ruling to the D.C. Circuit Court of Appeals.

Writing for the majority, Judge Brown framed the issue as a question of the NLRB’s jurisdiction. Because the NLRB has no jurisdiction over independent contractors, the court would not defer to the NLRB’s employment status determinations unless the NLRB “can be said to have made a choice between two fairly conflicting views.” Therefore, Judge Brown applied the U.S. Supreme Court’s United Insurance common-law agency test to address the underlying question of whether the FedEx drivers were independent contractors or employees. This multi-factor totality test, he explained, had been refined through subsequent cases to focus on whether the putative independent contractor’s position “presents the opportunities and risks inherent in entrepreneurialism.” Applying this test to the facts of the case, the court found that the FedEx drivers were independent contractors, largely because the drivers had the ability to hire others without FedEx’s participation, but also because they signed agreements designating them as contractors, not employees. The court vacated the NLRB’s enforcement order.

Judge Garland dissented on this issue, arguing that the D.C. Circuit should have let the NLRB decision on the delivery drivers’ employment status stand. Judge Garland primarily disagreed with the majority’s almost singular reliance on entrepreneurialism as a factor, arguing that the Supreme Court had emphasized that the test does not favor any one factor. Instead, he argued that this was a case where the NLRB “made a choice between two fairly conflicting views,” and therefore, under the United Insuranceholding, the Court of Appeals had no right to displace the NLRB’s decision, even though it would come to an opposite decision on the facts. Judge Garland argued that his colleagues in the majority were relying too heavily on one of their own past decisions for the emphasis on entrepreneurialism, which did not abrogate the Supreme Court’s approach in United Insurance. “Although the NLRB may have authority to alter the test or at least alter its focus,” he wrote, citing Chevron, “this court does not.” Judge Garland would have remanded the case for the NLRB Regional Director’s evidentiary rulings; however, on the question of the common-law agency test and deference to the NLRB’s application of it, Judge Garland was adamant that his colleagues were out of line.

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PSEG Energy Resources & Trade LLC v. Federal Energy Regulatory Commission (2011)

New England’s electricity market is structured as a “forward capacity market,” administered by ISO New England, Inc. and overseen by the Federal Energy Regulatory Commission (FERC). This means that rather than engaging in a traditional cost-based regulatory approach, New England sets utility rates by auction, in which electricity providers “purchase from generators options to buy quantities of energy three years in advance.” ISO New England manages the auction process, in which they set the initial prices that energy suppliers like PSEG Energy Resources & Trade LLC (PSEG) receive.

As Judge Garland described in his opinion for the majority, in the auction, suppliers would bid based on the capacity they would provide at the initial price. The amount of the bidding mutually descended until the ISO New England price and suppliers’ bids were equal at the minimum required level to maintain the reliability of the regional bulk electric system. However, the auction need not have reached this equilibrium: ISO New England imposed a price floor that closed the auction when that floor was met. To restore the price/capacity bid equilibrium, ISO New England used proration on both price and capacity.

In 2007, ISO New England submitted a new provision of their Proration Rule to FERC. Without a specific explanation, FERC approved the provision, which stated: “Any proration shall be subject to reliability review.” Because ISO New England interpreted the provision to mean that it could require a supplier to provide energy without capacity proration to meet minimum local electric needs—while also forcing the supplier to take the price proration—the supplier PSEG filed objections with FERC, challenging their approval of the auction results and their interpretation of the new proration provision. FERC rejected PSEG’s objection twice, but adopted the supplier’s position prospectively. PSEG appealed to the D.C. Circuit for review of FERC’s orders.

Judge Garland first addressed the provision interpretation issue. He applied a “Chevron-like” analysis, first considering de novo “whether the tariff unambiguously addresses the matter at issue.” As with Step One of Chevron, if the tariff’s language were clear, it would control. On the issue of clarity, FERC waffled. In handing down their own decisions to PSEG, they argued the text was clear, but on appeal, FERC conceded the tariff’s proration provision was ambiguous. Judge Garland agreed the provision was ambiguous, because, for example, it did not address how ISO New England reviewed “reliability” or what their next steps would be if there were a problem of meeting reliability. Judged Garland was especially concerned by FERC’s decision that the proration provision compelled the sanctity of the price floor.

Because FERC equivocated on the issue of the provision’s clarity, Judge Garland remanded to the agency, rather than proceeding to Step Two of the Chevron-like analysis. As FERC made their original decision on the assumption that the provision was clear, Judge Garland could not analyze whether FERC had reasonably interpreted an ambiguous provision. Judge Garland suggested FERC might reverse itself on remand, given their prior decision to reinterpret the proration provision prospectively. Judge Garland also remanded the matter on the grounds that FERC had not effectively responded to a number of PSEG’s legitimate objections.

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Arizona v. Thompson (2002)

In 1996, Congress passed the Welfare Reform Act, which replaced the Aid to Families with Dependent Children (AFDC) individual entitlement program to a federal block grant program called Temporary Assistance for Needy Families (TANF). Prior to the Welfare Reform Act’s enactment, the U.S. Department of Health and Human Services (HHS) permitted states to shift their federal assistance programs’ common administrative costs to AFDC. States opted for this “primary program allocation” approach instead of allocating the costs across the various programs “in accordance with relative benefits received,” as an Office of Management and Budget (OMB) standardized circular directed. Following the enactment, HHS issued a directive stating that this practice was no longer permitted: “While the former AFDC program allowed such an exception, the TANF legislation that replaced AFDC does not permit it being designated as the sole benefiting or primary program.”

Six states challenged the directive. They argued that it violated the Administrative Procedure Act (APA) because it was not in accordance with the Welfare Reform Act and because it was issued without notice and comment. Because states were unable to use their full TANF grants as a result of falling welfare caseloads, they wanted to use the program to cover the common administrative costs that benefited the other federal assistance programs. The district court deferred to HHS’s interpretation of the Welfare Reform Act, in accordance with Chevron, and held that notice and comment procedures were not required.

Judge Garland reviewed the states’ APA claims de novo. The states contended that, per the newly handed down Mead decision, Chevron deference was inappropriate because HHS’s directive was not a rule but a policy statement. Judge Garland sidestepped this argument to decide on other grounds that the HHS directive did not merit deference. Because HHS itself “stopped at step one” of Chevron, believing that the TANF provisions of the Welfare Reform Act compelled a single interpretation, Judge Garland reasoned that the agency did not interpret their statute in exercise of its own judgment. Therefore, their interpretation was not entitled to Chevron deference.

Reviewing the statute and its legislative context, Judge Garland argued that it was not possible to read the provisions as absolutely barring HHS from allowing a state to spend its TANF grants on administrative costs shared with other assistance programs. Even though that meant TANF funds were going towards other programs, much of the shared costs would be borne by TANF anyway, so charging them all to TANF would not defeat the states’ statutory allowance to use the grant “in any manner that is reasonably calculated to accomplish [TANF’s] purpose.” While HHS could, in their discretion, reach the conclusion that this cost allocation did not benefit TANF, Judge Garland argued that the statute did not require this reading. Judge Garland reached the same conclusion on both the second provision at issue, a “grandfather” clause, and the applicability of the OMB’s Circular A-87 requirements. HHS’s arguments on these matters might have been correct, but the statute did not require them to reach a singular resolution on common cost allocation, as HHS had believed. Because “an agency regulation must be declared invalid . . . if it was not based on the agency’s own judgment but rather on the unjustified assumption that it was Congress’ judgment that such [a regulation is] desirable or required,” Judge Garland remanded to the district court with instructions that HHS must reconsider the matter.

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Bianca Telephone Company v. Federal Communications Commission (2014)

In 1988, Congress passed the Hearing Aid Compatibility Act to “ensure reasonable access to telephone service by persons with impaired hearing.” Because some hearing aid users experienced discomfort while using the phone, Congress mandated standards for telephone compatibility with hearing aids. Congress initially exempted wireless telephones from the law, but gave the Federal Communications Commission (FCC) the authority to later revoke that exemption if doing so served the public interest. By 2003, as cell phone and wireless phone technology surged, the FCC was, as Chief Judge Garland quipped, “ready to make that call.”

Three years following the FCC’s new regulation that required wireless service providers to sell handsets compatible with hearing aids, few carriers had complied. Only by late 2006 had compliant devices begun to trickle down to smaller carriers. A number of carriers submitted requests to the FCC to waive the deadline for compliance. Although most carriers seeking waivers had come into compliance by the time the FCC addressed the waivers in 2008, the FCC decided to grant the waivers nunc pro tunc only to those carriers that had “exhibited ‘reasonable diligence’ in their efforts to comply.”

In determining what constituted “reasonable diligence,” the FCC considered the date of a carrier’s compliance, while also addressing each carrier’s process of compliance, case-by-case. Because most carriers were compliant by January 1, 2007, the FCC determined that compliance before that date tended to indicate reasonable diligence. In its case-by-case assessments, the FCC considered whether a carrier had expanded its search for compliant devices beyond its usual vendors if several months of noncompliance had passed. Finding their compliance efforts did not demonstrate “reasonable diligence,” the FCC denied the waivers of three small-tier carriers, Bianca Telephone, CTC Telecom, and Farmers Cellular Telephone Company, and referred their cases to its enforcement bureau.

The three carriers sought review of the FCC decision on a number of grounds, including that they were treated unfairly because “similarly situated” carriers had received waivers; that the FCC failed to provide an adequate explanation for its alleged differential treatment; and that the FCC’s factors for adjudicating waiver decisions should have been promulgated under the Administrative Procedure Act’s (APA) notice-and-comment requirements.

Addressing the carriers’ primary argument that the FCC “wrongly refused to waive liability for their tardy compliance,” Judge Garland recited the standard that for this to be the case, the FCC’s denial must have been “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” He emphasized that the court’s discretion to reverse the decision was extremely limited. Judge Garland determined that the FCC’s two-part process for determining whether a carrier had exercised reasonable diligence to comply was itself reasonable, because most carriers had complied by January 2007. Additionally, he found it neither arbitrary nor capricious for the FCC to determine that carriers must have looked beyond their usual suppliers after several months of noncompliance.

Because the three carriers in this case complied several months into 2007 and sought compliant phones from only their existing suppliers, Judge Garland held the FCC’s denial of waiver was also reasonable. Furthermore, he explained that the three carriers were not in fact similarly situated with other carriers that had been granted waivers because the other carriers either complied with the date, sought out new suppliers when their usual suppliers did not carry compliant devices, or did both. Finally, because the FCC’s exercise of its discretion in denying the waiver requests was adjudicatory in nature, its decisions were not subject to the APA’s notice-and-comment procedures.

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Lacson v. DHS (2013)

Three years after the Transportation Security Administration (TSA) hired him as a Federal Air Marshal, Jose Lacson became a habitual poster on the online forum Officer.com, using the alias “INTHEAIRCOP.” Lacson openly identified himself as a Federal Air Marshal and in 2010 caught the attention of the TSA when he posted on the forum about their hiring practices, detailing the number of newly hired air marshals and their assignment locations, as well as the rates of attrition at several field offices. When the TSA confronted him about disclosing Sensitive Security Information (SSI), Lacson admitted to publishing the posts, but argued that he had not disclosed SSI because the data he had posted were untrue. Further investigation revealed that in fact, most of the information in Lacson’s posts was true and his supervisor recommended his termination on the grounds that he had released SSI, used government computers to write the posts, and made inappropriate statements to other participants on Officer.com.

Lacson appealed the decision that he had released SSI to an office of the TSA, which issued an order affirming the finding that four of Lacson’s posts contained SSI in violation of TSA regulations. Lacson filed a petition for review of the order at the D.C. Circuit. In spite of the parties’ agreement that the D.C. Circuit had jurisdiction to review the order, Chief Judge Garland stated that the court was “obligated to conduct an independent inquiry” to be certain. The Civil Service Reform Act (CSRA) ordinarily gives primacy to the Merit Systems Protection Board (MSPB) in resolving federal government personnel actions and the Court of Appeals for the Federal Circuit has primacy in judicial review of those actions. Judge Garland used several past cases to illustrate the general rule that employees cannot invoke the Administrative Procedure Act (APA) or other broad statutory authority to gain jurisdiction to a regional circuit court of appeals in a manner that circumvents agency action on employment matters.

Distinguishing the statute in this case, Judge Garland provided three reasons for finding that the parties had adequate statutory support for the claim that the D.C. Circuit had jurisdiction. First, the statute in this case, 49 U.S.C. § 46110, was narrow, addressing the specific type of order at issue in the case, thereby limiting the possibility that Congress would have worried about employees using § 46110 to circumvent the detailed scheme of the CSRA. Second, the statute expressly granted jurisdiction, so Judge Garland found it clear that Congress intended this statute to provide an independent source of federal court jurisdiction. Finally, § 46110 was passed after the CSRA, so it could properly be viewed as supplementing the existing laws. Thus, Judge Garland found that the case was properly before the D.C. Circuit and turned to the merits of Lacson’s case.

At oral argument, the TSA framed the issue of Lacson’s illegal SSI disclosures not in terms of whether his statements were accurate, but rather in terms of the information’s effect: that the posts would constitute SSI “if [they] would harm transportation security.” However, because the agency originally decided that Lacson’s posts contained SSI only if they were “both security sensitive and true,” Judge Garland stated that the D.C. Circuit could sustain the TSA decision only if, under their deferential standard, the documents that the TSA relied upon in their decision-making process contained substantial evidence that Lacson’s four posts were accurate.

Judge Garland held that the hearsay evidence of two special agents involved in personnel matters was sufficient to constitute substantial evidence that three of Lacson’s posts contained accurate information—and therefore contained SSI. However, Judge Garland issued a warning that the hearsay evidence was “barely enough.” He wrote, “Although our standard of review is relatively forgiving, in the future TSA would be well-advised to provide more direct evidence…[if it] wants to be confident that its orders will survive judicial scrutiny….” Because the TSA failed to support its contention about the fourth post with any evidence, however, Judge Garland set this last determination aside.

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