Amicus Curiae Brief Regarding APA Rulemaking Process

Bob Zwirb Commentary by Bob Zwirb

A group of industry trade associations led by the U.S. Chamber of Commerce has filed an amicus curiae brief that asks the U.S. Supreme Court to decide whether an agency must engage in Administrative Procedure Act ("APA") advance notice and public comment rulemaking to significantly alter an "interpretive" rule that interprets an agency regulation.

The matter concerns an action by the U.S. Department of Labor, which revised the Bush Administration's guidance to suggest that the Fair Labor Standards Act overtime provisions did not apply to mortgage brokers. The Mortgage Bankers Association ("MBA") sued the Department of Labor ("DOL") in federal district court and argued that the agency could not change its interpretation without first going through the notice-and-comment period required by the APA. The district court denied MBA's motion for summary judgment. The U.S. Court of Appeals for the District of Columbia Circuit reversed and remanded the case with instructions to vacate the DOL's 2010 interpretation. The DOL then asked the Supreme Court to overturn the D.C. Circuit's requirement that an agency engage in formal rulemaking procedures before it significantly changes an interpretative rule.

At issue is whether a federal agency must engage in a notice-and-comment procedure before it can significantly alter the interpretation of a rule of agency regulation. The amicus brief argues that when an agency significantly revises a previous interpretation, the agency has in effect amended its rule, which it may not do under the APA without notice and comment. The brief urges the Court to restrain the agencies' tendency to avoid (or evade) the arduous procedural requirements of the APA by releasing "guidance" documents and intimidating regulated parties into compliance with the agencies' view.

Lofchie YouTube Selection: Watch from 4:10 for an Explication of the Word "Rule."

See: Amicus Curiae Brief.
See also: D.C. District Court Issues Opinion on SIFMA v. CFTC Cross-Border Guidance Case (with Lofchie and Zwirb Comments).

Commentary

Bob Zwirb
Bob Zwirb

Although the factual circumstances are somewhat different, the brief raises two issues that were central to two recent legal challenges to rules promulgated by the CFTC. The first involves whether an agency can abruptly revise previous policy by administrative action. The answer, according to the D.C. Circuit Court of Appeals, is yes even where the action reverses a relatively recent policy of excluding SEC-registered investment companies from commodity pool regulation. See Inv. Co. Institute v. CFTC, 720 F.3d 370 (D.C. Cir. 2013) (holding that an agency which changes course "need not demonstrate to a court's satisfaction that the reasons for the new policy are better than the reasons for the old one; it suffices that the new policy is permissible under the statute, that there are good reasons for it, and that the agency believes it to be better").

The second involves whether an agency can effectively thwart the notice-and-comment process of the APA by issuing interpretive guidance rather than binding rules, "knowing that courts must accept those interpretations as long as they are not patently incompatible with the statutory or regulatory text." Again, the answer appears to be yes according to the lower court in the D.C. Circuit. See SIFMA v. CFTC, Civil Action No. 13-1916 (PLF) (D.D.C. 2014).

More importantly, the amicus brief raises the fundamental question before the Supreme Court of how to distinguish between "legislative" and "interpretive" rules– an issue that was at the heart of the SIFMA matter. Noting that the distinction between the two is "inherently vague," the brief urges the court to "police the line between substantive and interpretive rules." Such policing is called for in light of the "duck test" employed by the court in SIFMA to distinguish between such rules, which held that if a rule looked, walked and quacked like a duck, then it must be a duck – a test that lacked seriousness. As the amicus brief points out, the current lack of clarity "emboldens agencies to manipulate and exploit the blurred boundary and avoid the costlier aspects of notice and comment by promulgating vague regulations and then making their most important regulatory decisions under the guise of interpretive rules issued without public feedback."

Finally, this case may have implications for the two matters recently decided in the D.C. Circuit in which the CFTC prevailed. If the Supreme Court agrees with the positions being advanced by the amici here, then it should call into question the rulings in those cases – particularly whether the Cross-Border Guidance is really guidance at all, and how much deference a court should afford an agency's characterization of such "guidance."

 

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