5.1.C Express Causes of Action, Administrative Procedure Act

Updated 2013 by Gill Deford, 2016 by Jeffrey S. Gutman

5.1.C. Administrative Procedure Act

Although some federal statutes that create rights include their own mechanisms for judicial review of agency action affecting those rights, most are silent with respect to judicial review. In the Administrative Procedure Act (APA), Congress expressly granted a private right of action to enforce federal rights against federal agencies.1 Because 5 U.S.C.§ 702 creates this right of action expressly, there is no need to look for an implied right of action against the federal government. The APA, then, waives the federal government's sovereign immunity over suits "seeking relief other than money damages and stating a claim that an agency or an officer or employee thereof acted or failed to act in an official capacity or under color of legal authority,"2 unless another statute "that grants consent to suit expressly or impliedly forbids the relief which is sought."3

5.1.C.1. Suit for Judicial Review

With many exceptions, the APA generally requires federal agencies to act through adjudication or rule making or both. Typical challenges to agency action contend that the agency misinterpreted its governing statute or made erroneous conclusions of law; that the agency’s rules or findings of fact were arbitrary or capricious; or that the agency used improper procedures in its decision making. As discussed below, due to the courts’ substantial deference to an agency’s interpretation of its governing statute and to its findings of fact, procedural challenges to an agency’s decision-making process may offer greater prospects for securing relief for your clients.4 State administrative procedure statutes similarly should not be overlooked as a potentially powerful tool against state actions that adversely affect your clients. However, at least two significant hurdles to judicial review must first be overcome: assertions that agency action is unreviewable and that the challenge was not filed at the appropriate time.

5.1.C.2. Unreviewable Agency Discretion

Although the APA may provide a right to sue, agency action may escape judicial review either under 5 U.S.C. § 701(a)(1), if it is exempted by statute from judicial review, or under § 701(a)(2), if it is committed to agency discretion. Section 701(a)(1) applies when a statute is sufficiently explicit and unequivocal to overcome the general presumption of reviewability first articulated in Abbott Laboratories v. Gardner.5 The First Circuit, for example, held that a hospital’s challenge to the U.S. Department of Health and Human Services’ refusal to reclassify it geographically was unreviewable in light of a provision of the Medicare Act that stated, “[T]he decision of the [Administrator] shall be final and shall not be subject to judicial review."6 When the extent of preclusion of review is less clear, the Supreme Court tends to interpret the asserted limitation narrowly.7 This approach is also commonly taken to avoid the very thorny constitutional question presented where a statute is interpreted to preclude review of a colorable constitutional claim.8

Section 701(a)(2), which precludes judicial review “to the extent that ... agency action is committed to agency discretion by law,” poses a more significant issue in APA litigation. Federal agencies routinely assert the Section 701(a)(2) exception, arguing that its seemingly limitless sweep precludes judicial review in all sorts of cases. As summarized below, early Supreme Court decisions limited the breadth of Section 701(a)(2), but more recently the trend has moved against the presumption of reviewability.

In Citizens to Preserve Overton Park Inc. v. Volpe, plaintiffs challenged a U.S. Department of Transportation decision to assist the construction of a highway through a public park as a violation of a federal statute requiring parks to be avoided when “feasible and prudent.”9 The Secretary argued that his decision was not subject to judicial review because the governing statute vested him with broad discretion relating to highway routes, did not expressly provide for judicial review and did not require the creation of a record for review. The Supreme Court, rejecting that assertion, held that Section 701(a)(2) was applicable only when there was “clear and convincing evidence” of legislative intent to bar review. Such is the case only in those rare instances where “statutes are drawn in such broad terms that in a given case there is no law to apply.”10 The “feasible and prudent” standard, in the Court’s view, supplied such a law.

By contrast, in Webster v. Doe, an agent who admitted that he was gay sought review of his discharge and asserted that his discharge was contrary to agency regulations, that it was arbitrary and capricious, and that it was unconstitutional.11 Relying on the language of the National Security Act, which authorizes the director of the Central Intelligence Agency to fire an employee whenever he “shall deem such termination necessary or advisable in the interests of the United States,” the Court held that the agency action was non-reviewable under the APA. The Court reasoned that the statute, empowering the director to make personnel decisions, not only provided no judicially manageable standards, but also seemed to vest the matter entirely in his discretion.12

Heckler v. Chaney elaborated on the “no law to apply” standard in the context of a challenge to an agency’s refusal act.13 The suit challenged the Food and Drug Administration’s refusal to begin enforcement proceedings against the use of unapproved drugs in “lethal injection” executions as a violation of the Food, Drug, and Cosmetic Act. The Court stated:

[E]ven where Congress has not affirmatively precluded review, review is not to be had if the statute is drawn so that a court would have “no meaningful standard against which to judge the agency’s exercise of discretion.” In such a case, the statute (“law”) can be taken to have “committed” the decisionmaking to the agency’s judgment absolutely. This construction avoids conflict with the “abuse of discretion” standard of review in § 706—if no judicially manageable standards are available for judging how and when an agency should exercise its discretion, then it is impossible to evaluate agency action for “abuse of discretion.”14

In applying the “meaningful standards” test to a claim challenging agency inaction, Chaney reversed the Overton Park presumption of reviewability. Chaney established a strong presumption against judicial review of an agency decision not to take enforcement action and suggested that the presumption could be overcome by a showing that the statute to be enforced specifically directed agency enforcement action and provided guidelines for doing so.15

Subsequent cases continued to chip away at the presumption of reviewability.16 Yet, the cases are very fact-specific, turning on a careful reading of the statute and its purpose.17 Two cases are illustrative, the first employing the logic of Overton Park, and the second following Chaney.18 They generally suggest a greater likelihood of reviewability when the case is framed as a challenge to agency action or decision-making than as a challenge to inaction or failure to enforce certain requirements.

In Beno v. Shalala, a group of Aid to Families with Dependent Children recipients challenged as arbitrary and capricious an Department of Health and Human Services grant of a waiver of maintenance-of-effort requirements; the waiver permitted California to embark on an experiment that reduced Aid to Families with Dependent Children benefits.19 The applicable statute authorized the Department of Health and Human Services secretary to grant waivers “to the extent and for the period [the Secretary] find[s] necessary” and for projects that “in the judgment of Secretary [are] likely to assist in promoting the objectives” of the Act.20 The Ninth Circuit held that the secretary’s decision was reviewable and noted that the granting of waivers was not traditionally unreviewable. The statute “does not reveal a congressional commitment to the unfettered discretion of the Secretary;”21 and judicial review did not interfere with the statutory scheme.

Despite the language of the statute, the court further held that it contained a meaningful standard for review because the Aid to Families with Dependent Children program’s objectives were specified in the statute.22 Although not the case in Beno, where the Ninth Circuit vacated the waiver and remanded the matter to the Department of Health and Human Services for development of the administrative record, reviewability victories are frequently short-lived as the deferential arbitrary and capricious standard makes reversal on the merits difficult.

In American Disabled for Attendant Programs Today v. U.S. Department of Housing and Urban Development, organizations advocating on behalf of the disabled sued the Department of Housing and Urban Development (HUD) under the APA for failing to ensure that multifamily housing was accessible to the disabled in alleged violations of the Fair Housing Act Amendment and Section 504 regulations.23 Plaintiffs alleged that HUD received many complaints of noncompliance but failed to investigate or take enforcement action against violators. Although HUD regulations state that HUD “shall” conduct a prompt investigation upon receipt of a complaint, the Third Circuit held that HUD’s failure to do so was unreviewable and that Congress established no guidelines limiting HUD’s discretion to investigate alleged violations.24 Despite the mandatory direction in the regulation, the court found this case to be controlled by Chaney. Again, even if the court had found HUD’s failure to be reviewable, the general absence of controlling limitations on enforcement actions would have made it very difficult to show that the agency behaved arbitrarily or capriciously. Reviewability is but the first battle in an Administrative Procedure Act war.

5.1.C.3. Timing

Should an agency decision be reviewable under Section 701, a court may still decline to review it on the ground that agency action is not final, that the plaintiff failed to exhaust administrative remedies, or that the case is not ripe for review. There is considerable overlap among these doctrines.25 But each is discussed briefly, and separately, below.

5.1.C.3.a. Final Agency Action

In the absence of a substantive statute specifying the prerequisites for judicial review, or deeming certain agency action to be final, the Administrative Procedure Act governs the timing of judicial review.26 Section 704 limits judicial review to final agency action.

The Supreme Court's current test for final agency action was articulated in Bennett v. Spear.27 There, the Court held that finality required satisfaction of two elements: (1) “the action must mark the ‘consummation’ of the agency’s decision-making process—it must not be of a merely tentative or interlocutory nature,” and (2) “the action must be one by which ‘rights or obligations have been determined,’ or from which ‘legal consequences will flow.’”28 The first element is satisfied when the agency offers its “last word” on the subject, even if that word is expressed less formally than a rule making or adjudication, and is subject to continuing agency review.29 The second element is met when the agency action “imposes an obligation, denies a right or fixes some legal relationship.”30 It is not satisfied when the agency action is no more than a nonbinding recommendation.31

The Supreme Court recently applied this test in Sackett v. Environmental Protection Agency.32 In Sackett, the plaintiffs challenged an Environmental Protection Agency compliance order issued under Section 309 of the Clean Water Act. That order found that the plaintiffs had discharged pollutants into a wetland and ordered them to restore the land. The Court held that the order determined the plaintiffs' rights and obligations and had consummated agency decision-making. Although plaintiffs were invited to inform the Environmental Protection Agency of errors in the order and to engage in informal discussions, no administrative hearings were permitted, making the order final.33

Final agency action can include, as 5 U.S.C. § 551(13) provides, agency inaction which is the failure to make an agency rule, order, license, sanction or relief. 5 U.S.C. § 706(1) requires a reviewing court to compel agency action that is “unlawfully withheld or unreasonably delayed.” In Norton v. Southern Utah Wilderness Alliance,34 the Court held that an Administrative Procedure Act inaction claim must challenge an agency’s fa ilure to take a legally required and discrete action. Legally required acts are those that would have been remediable by mandamus prior to the enactment of the Administrative Procedure Act.35 The requirement that a court can only compel discrete acts forecloses broad challenges to general agency inaction of the sort rejected in Lujan v. National Wildlife Federation.36

5.1.C.3.b. Exhaustion of Administrative Remedies

Common law or statutes may require the exhaustion of administrative remedies.37 Perhaps the leading case discussing the rationale for the common-law exhaustion requirement and its exceptions is McKart v. United States.38 According to the Supreme Court in McKart, a Vietnam War draft case, exhaustion serves to permit the agency that is delegated authority by Congress to make findings and conclusions based on its expertise to develop a full record for future judicial review, to avoid disruption of administrative process, and to reduce judicial appeals.39 At the same time, the Court recognized that the rationale for exhaustion may be outweighed by other considerations.40 Exhaustion may not be required where it would cause irreparable injury, the agency appears to lack jurisdiction over the matter, agency expertise is not implicated, an administrative record would not assist the reviewing court, or exhaustion would be futile.41

The degree to which exhaustion is required by statute, of course, depends on the terms of the statute. If required by statute, however, exhaustion may not be excused by a court or agency.42 Nevertheless, the Court frequently—but not consistently—excuses the exhaustion requirement when the plaintiff challenges aspects of the agency’s decision making on constitutional grounds.43 Nor is exhaustion generally required in Section 1983 cases.44 A court may not impose exhaustion requirements beyond that set forth in the statute or agency rule.45

5.1.C.3.c. Ripeness

While ripeness often overlaps with the doctrine of final agency action and exhaustion of administrative remedies, ripeness does have independent significance. Ripeness issues frequently arise when a challenge is made to agency rules before they are enforced and to agency action announced informally.46 In Abbott Laboratories v. Gardner, a pre-enforcement review case, the Supreme Court held that ripeness for review was presumed unless Congress specifically provided otherwise.47 The Court established a two-part ripeness test: “the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.”48 Abbott Laboratories, therefore, suggests that, if declining pre-enforcement review would visit harm upon the plaintiff and if the issue presented is principally a legal one, or one that can be decided without factual development by the agency, the matter is regarded as ripe for review.49

This relatively forgiving standard was narrowed in a category of cases commonly encountered by legal aid attorneys—cases involving challenges to rules governing government benefits. In Reno v. Catholic Social Services, classes of undocumented aliens challenged Immigration and Naturalization Service regulations which made it more difficult for them to realize the benefits of an alien legalization statute on the ground that the regulations were inconsistent with the statute.50 The Court found the challenge distinguishable from Abbott Laboratories, in which the plaintiffs were placed in the “immediate dilemma to choose between complying with newly imposed, disadvantageous restrictions and risking serious penalties for violation.”51 The Court reasoned that, by contrast, the regulations challenged in Catholic Social Services limited access to a benefit rather than imposed penalties and required the applicant to satisfy requirements other than those challenged.52 As a result, challenges to the regulations would be ripe only if the application for the benefit were formally or informally rejected on grounds contained in the rules at issue. Ripeness was not satisfied even if the invalid regulation deterred applications for benefits.53

The Court also barred pre-enforcement challenges to rules in cases in which Congress is believed to have supplied sufficient and alternative administrative methods of review. In Thunder Basin Coal Company v. Reich, a coal company filed a pre-enforcement challenge to a mine safety rule that permitted non-employee union officials to serve as the employees’ representatives in statutorily required mine inspections.54 Although silent on pre-enforcement claims, the Court held that the detailed and comprehensive administrative review provisions of the Federal Mine Safety and Health Amendments Act suggested that Congress intended to preclude pre-enforcement challenges. Moreover, the fact that the nature of the claims presented was not “collateral to the administrative review provisions and within the agency’s expertise” supported that conclusion. Noting that the ultimate administrative entity was independent, had exclusive jurisdiction, had decided constitutional claims, and was subject to judicial review in the court of appeals, the Court rejected the company’s assertion that the constitutional nature of its claim required immediate judicial, rather than administrative, review.55

Courts generally find that challenges to informal agency action, such as the issuance of opinion letters, interpretive rules, policy statements and the like, are not ripe for review or are not reviewable agency action. As discussed below, such agency action is not subject to Chevron deference and ordinarily lacks the binding force or effect of law. Nevertheless, if such action is regarded as final and binding and the issue for review involves solely a question of law, or if failure to review would result in hardship to the plaintiff, then the case may suggest ripeness.

5.1.C.4. Rulemaking

The Administrative Procedure Act prescribes three principal means for the adoption of agency regulations:

  • formal rulemaking,56
  • informal rulemaking, and
  • the issuance of interpretative rules, procedural rules, general statements of policy, and other rules exempted from normal rulemaking requirements.

We focus on the second and third means here.57

Informal rulemaking is the three-step process governing the adoption of legislative rules. Legislative rules are as binding as statutes as they must be followed by the public and the agency issuing them. Agencies may issue legislative rules only if Congress has permitted them to do so.  Informal rulemaking begins with the publication of a notice of proposed rulemaking in the Federal Register. The notice must describe the proposed rule or the subject and issues to be considered and must be sufficient to alert interested parties of the subject matter of the regulations and their probable impact.58 To assure public participation in the process, the notice of proposed rulemaking must solicit comments. In the second step, the agency receives and considers public comments. The process concludes with publication of final regulations and a basis and purpose statement reviewing the reasons for rulemaking, the agency’s consideration of comments received, and the rationale for the rule adopted.59 The basis and purpose statement must reflect that comments were considered in light of all factors that Congress directed the agency to consider even if ultimately rejected. The result of informal rulemaking is a set of legislative rules having the force and effect of law.

Each stage of the rulemaking process is subject to potential legal challenge.  The rulemaking notice must explain what the agency proposes to do and why.60 The notice of proposed rulemaking must be sufficiently detailed to offer the public a reasonable opportunity to comment. When the final rule is sufficiently divergent from the proposed rule, it may be challenged on the ground that the initial notice was inadequate to put the public on notice that the resulting rule was contemplated by the agency and thus one that could have been commented upon. In this regard, the notice of proposed rulemaking may be found insufficient if the final regulations were not a "logical outgrowth" or not "sufficiently foreshadowed" in the notice of proposed rulemaking.61 In addition, the agency must disclose the technical data, if any, relied upon in developing the proposed rule so that it may be subject to comment.62 As explained further below, the agency is required to consider the comments and explain why it rejected plausible alternative approaches to the final rule as part of the general statement of "basis and purpose" required by 5 U.S.C. § 553(c).

Whether an agency engages in the three-step process for informal rulemaking is significant in two respects. First, if the agency issues a legislative rule without engaging in notice and comment rulemaking, the resulting rule is procedurally invalid. Second, whether the agency adopts a legislative rule through informal rulemaking, or an interpretative or other rule without informal rulemaking, has implications for the extent of deference given to the agency interpretation of its governing statute. The dividing line between rules requiring public participation in notice and comment rulemaking and those not, therefore, is an important but elusive one.

5.1.C.4.a. Exemptions from Rulemaking

The Administrative Procedure Act exempts certain rules from notice and comment rulemaking requirements.63 The most significant of these exemptions are for interpretative rules and general statements of policy.64 For years, the courts have struggled with distinguishing between legislative rules, which are required to be promulgated pursuant to notice and comment rulemaking, and interpretative rules, which are not. In American Mining Congress v. Mine Safety and Health Administration, the D.C. Circuit crafted a new test.65 It was subsequently adopted by at least seven other circuits:66

Accordingly, insofar as our cases can be reconciled at all, we think it almost exclusively on the basis of whether the purported interpretive rule has “legal effect,” which in turn is best ascertained by asking (1) whether in the absence of the rule there would not be an adequate legislative basis for enforcement action or other agency action to confer benefits or ensure the performance of duties, (2) whether the agency published the rule in the Code of Federal Regulations, (3) whether the agency explicitly invoked its general legislative authority, or (4) whether the rule effectively amends a prior legislative rule. If the answer to any of these questions is affirmative, we have a legislative, not an interpretive, rule.67

Interpretive rules, in contrast, generally alert the public to the agency’s interpretation of the laws and rules that it administers.68 An agency could circumvent the public participation requirements of the Administrative Procedure Act by issuing general and non-controversial legislative rules and, then, issuing more substantive and potentially controversial interpretations of its vague legislative rules. Courts of appeal have not taken kindly to this approach.69 American Mining Congress would regard such efforts as, in effect, amendments to legislative rules and, therefore, legislative themselves. A subsequent D.C. Circuit case, Paralyzed Veterans of America v. D.C. Arena, took this point one step further.70 The D.C. Court suggested in dicta that, when an agency significantly changes its interpretation of an interpretive rule that interprets a legislative rule, the agency must do so after engaging in notice and comment rule making.71

In an important 2015 case, the Supreme Court rejected the D.C. Circuit's approach in Paralyzed Veterans.72 The case involved the administrative exemption to the Fair Labor Standards Act. A 2004 Department of Labor regulation, promulgated pursuant to notice and comment procedures, provided examples of such exempt employees. In 2006, the Department issued an interpretive opinion letter concluding that mortgage-loan officers were exempt. In 2010, the Department reversed that interpretation without using notice and comment rulemaking. The Court held that the APA did not require government agencies to use notice and comment rulemaking in amending or repealing interpretive rules which themselves are issued without it.

Policy statements are exempted from notice and comment rule making by 5 U.S.C.§ 553(b). The D.C. Circuit has recently offered two tests for determining whether agency action is an unreviewable statement of policy or a reviewable agency action.73 The first deals with the effects of agency action: (1) whether it imposes rights or obligations and (2) whether the agency remains free to exercise discretion. The second focuses on the agency’s intentions: (1) its characterization, (2) whether it was published in the Federal Register or Code of Federal Regulations (CFR) or (3) whether the action is binding on the agencies or outsiders. At bottom, the central issue is whether the agency statement has a legally or “practically” binding effect on members of the public.74 If it has such an effect, particularly when the statement announces a departure from prior practice, it is likely a rule subject to notice and comment rule making, more likely to be regarded as ripe for judicial review and given a more deferential standard of substantive review.75 When, however, the agency issues a statement that either restates existing interpretations or retains discretion to act beyond it, the statement is likely not a rule.76

5.1.C.4.b. Deference to Agency Interpretation of Statutes

Even if the agency’s rule or statement is promulgated lawfully, it may be challenged on the ground that it exceeds the limits of the agency’s statutory authority or proceeds from a misinterpretation of the statute. In Chevron U.S.A. Inc. v. Natural Resources Defense Council, Incorporated, the Supreme Court articulated a two-step standard by which such claims should be reviewed:

When a court reviews an agency’s construction of the statute it administers, it is confronted with two questions. First, always, is the question of whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.77

In step 1, “the court’s job is to determine whether the scope of ambiguity of the relevant language is sufficiently broad to invalidate the agency’s construction.”78 If the language of the statute cannot bear the construction selected by the agency, the interpretation must be overturned.79 The Court typically consults dictionaries and prior judicial opinions for guidance on the meaning of statutory language. If the agency interpretation of the statute is supported by the statutory language in step 2, the court must uphold the interpretation if a reasonable one.80 If it is unreasonable, the policy decision implicit in the agency interpretation is arbitrary and capricious and should be struck down.81 Thus, as Professor Richard Pierce explains:

[A] court’s task in applying Chevron step two is to determine (1) whether the agency adequately discussed plausible alternatives, (2) whether the agency adequately discussed the relationship between the interpretation and pursuit of the goals of the statute, (3) whether the agency adequately discussed the relationship between the interpretation and the structure of the statute, including the context in which the language appears in the statute, and (4) whether the agency adequately discussed the relationship between the interpretation and any data available with respect to the factual predicates for the interpretation.82

Recent Court decisions concern the forms of agency interpretation to which the deferential Chevron doctrine applies. Chevron plainly applies to legislative rules and formal adjudications.83 The Court has also recently ruled that Chevron deference is due to agency interpretations of its jurisdictional statute.84 Informal announcements (such as opinion letters, policy statements, and interpretive rules) that lack the force and effect of law, however, are not subject to Chevron deference.85 Instead, such interpretations are treated with “respect” only to the extent that they have the “power to persuade.”86

The scope of Chevron was potentially broadened in United States v. Mead.87 In Mead, the Court considered an issue left unanswered in Christensen v. Harris County—whether to give Chevron deference to informal adjudications. The Court noted that Chevron deference was owed to formal adjudications and notice and comment rule making, but further noted that such deference might also be afforded to less formal modes of interpretation. The Court held that tariff classification ruling letters (at issue in Mead), which were not subject to notice and comment rule making, were not entitled to Chevron deference. The Court held that “the terms of the Congressional delegation give no indication that Congress meant to delegate authority to Customs to issue classification rulings with the force of law.”88 However, Chevron deference is owed 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.”89 The difficulty in the aftermath of Mead is in determining when informal adjudications meet this standard.90

Nonetheless, Chevron and Mead suggest an avenue for challenging agency policies or interpretations that are not published through notice and comment rulemaking procedures or informal adjudications. If the plaintiff contends that the policy or interpretation is contrary to the statute or arbitrary and capricious, the government may argue that the interpretation should be subject to Mead or Chevron deference. If the court disagrees, plaintiff may reap the benefit of a less deferential standard of review.91 If the court agrees, then the agency interpretation must necessarily be a substantive or legislative rule that should have been promulgated through notice and comment rulemaking and can be challenged on the ground that it was not.92

When Chevron deference applies remains an important and controversial issue before the Supreme Court. In National Cable & Telecommunications Association v. Brand X Internet Services, the Court reviewed a Ninth Circuit decision striking down the Federal Communications Commission’s interpretation of the Communications Act of 1934, which was that cable companies that sell broadband internet services do not provide telecommunications services and are not, therefore, subject to common carrier regulation.93 This interpretation was asserted to be inconsistent with prior Federal Communications Commission rulings and foreclosed by a prior Ninth Circuit decision, in which the Federal Communications Commission was not a party, holding that cable companies were subject to the Act.

The majority held that unexplained inconsistency with prior agency interpretations may be a ground for finding a new interpretation arbitrary and capricious, but inconsistency alone is not a reason to withhold Chevron deference.94 More interesting, the majority held that the Federal Communications Commission was not bound to follow Ninth Circuit precedent so long as the court did not hold that the statute was unambiguous. Over Justice Scalia’s dissent, the Court put it this way:

… allowing a judicial precedent to foreclose an agency from interpreting an ambiguous statute ... would allow a court’s interpretation to override an agency’s. Chevron’s premise is that it is for agencies, not courts, to fill statutory gaps. The better rule is to hold judicial interpretations contained in precedents to the same demanding Chevron step one standard that applies if the court is reviewing the agency’s construction on a blank slate: Only a judicial precedent holding that the statute unambiguously forecloses the agency’s interpretation, and therefore contains no gap for the agency to fill, displaces a conflicting agency construction.95

Applying Chevron deference, the Court went on to uphold the Federal Communications Commission’s interpretation.96

5.1.C.5. Adjudication

The Administrative Procedure Act requires federal agencies to employ trial-like formal adjudication procedures set forth in 5 U.S.C.§§ 554–557 only when the “adjudication [is] required by statute to be determined on the record after opportunity for agency hearing.”97 In the relatively rare circumstances in which formal adjudications, or formal rule making, are required, agency finding of fact may be overturned only if unsupported by substantial evidence.98 The traditional and very deferential formulation of substantial evidence is “such evidence as a reasonable mind might accept as adequate to support a conclusion.”99 In Allentown Mack Sales and Service v. National Labor Relations Board, however, the Supreme Court appeared to impose a significantly more rigorous and less deferential sort of review on findings from a National Labor Relations Board formal adjudication.100 Such logic might be applied to other formal adjudications, such as social security appeals, although language in Allentown suggests that the Court’s approach in Allentown is confined to National Labor Relations Board hearings.

For informal adjudications and rule making, agency findings of fact are subject to an arbitrary and capricious standard of review.101 The Supreme Court recently described that standard of review as “extremely narrow.”102 But the extent to which it is different, if at all, from the substantial evidence test is unclear.103 The standard formulation is that the court upholds an agency’s findings, unless they are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.”104 Under this standard, “the [agency] must be able to demonstrate that it has made a reasoned decision based upon substantial evidence in the record,”105 or “reasonable [and] based upon factors within the [agency’s] expertise.”106 Yet, even if this demonstration is offered with “less than ideal clarity,” the Court will uphold it “if the agency’s path may reasonably be discerned.”107 Rescissions of regulations and decisions not to initiate rulemakings108 are also subject to the arbitrary and capricious standard of review.

In addition, the Supreme Court recently held, in Federal Communications Commission v. Fox Television, that a more searching review is not required in case in which an agency reverses policy. According to the Court, the agency must supply the usual "reasoned explanation" for agency action and that explanation must "display awareness that it is changing position."109 However, the court explained: "it 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."110 The Court further held that arbitrary and capricious review is not applied more rigorously to agency actions that may implicate the Constitution."111 As a result of Fox Television, arguments premised on the need for more rigorous review of agency policy reversals or policies that have constitutional overtones will not be successful.


Updated 2013 by Gill Deford, 2016 by Jeffrey S. Gutman