Chapter 43 Administrative Law

Introduction Administrative Law is the rules, orders, and decisions of federal, state, and local government agencies established to perform a specific function.

§ 1: Agency Creation and Powers The study of Administrative Law requires an understanding of: Enabling Legislation. The Types of Agencies. Agency Powers and the Constitution.

Enabling Legislation Enabling legislation is a law passed by Congress to specify the name, purposes, functions, and powers of administrative agency. Federal administrative agencies may exercise only those powers that Congress has delegated to them in enabling legislation. Through similar enabling acts, state legislatures create state administrative agencies.

Types of Agencies There are two basic types of administrative agencies. Executive Agencies. Cabinet-level departments of the Executive Branch and their sub-departments. Independent Regulatory Agencies. Agencies outside the major executive departments such as the Federal Aviation Administration or the Federal Communications Commission.

Agency Powers and The Constitution Administrative agencies make legislative rules, or substantive rules, that are as legally binding as laws that Congress passed. Administrative agencies are sometimes referred to as the “fourth branch” of the U.S. government. Article I of the U.S. Constitution authorizes delegating such powers to administrative agencies.

§ 2: Administrative Process Administrative process include three functions: Rulemaking. Investigation. Adjudication.

Rulemaking Rulemaking is the formulation of new regulation. Notice and Comment Rulemaking involves three steps: Notice of the proposed rulemaking (NPRM). Comment Period. The Final Rule.

Investigation The purpose of investigations is to ensure that the rule issued is based on a consideration of relevant factors rather than being arbitrary and capricious, which include the powers to: Conduct Inspection. Issue Subpoenas. Subpoenas duces tecum requires production of documents. Subpoenas ad testificandum requires testimony.

Adjudication The law provides a mechanism for administrative adjudication of suspected rule violations: Negotiate settlements. Formal Complaints. Hearing before Administrative Law Judge. Agency Orders.

§ 3: Limitations on Agency Powers All three constitutionally created branches of government have some measure of control over administrative agencies. The Administrative Procedures Act provides for judicial review of most agency actions.

Judicial Controls A party seeking review must demonstrate standing to sue, there must be actual controversy at issue, and have exhausted all possible administrative remedies. Judicial review of agency action will frequently address whether the agency has acted beyond its authority or failed to discharge its responsibility.

Executive Controls Executive branch of government exercises control over agencies through: President power to appoint federal officers, and President’s veto power.

Legislative Controls The Congress exercises controls over agencies powers by: Enacting and changing enabling legislation. Determining funding for the agency. Investigating agency actions. Freezing agency enforcement efforts before they take effect. Amending the Administrative Procedures Act.

§ 4: Public Accountability A number of pieces of legislation make agencies more accountable through public scrutiny. Freedom of Information Act. Government in the Sunshine Act. Regulatory Flexibility Act. Small Business Regulatory Enforcement Fairness Act.

Freedom of Information Act This legislation requires the federal government to disclose certain “records” to “any person” on request, even if no reason is given for the request. All federal government agencies are required to make their records available electronically.

Government in the Sunshine Act The legislation requires that “every portion of every meeting of an agency” be open to “public observation.” Adequate notice of meetings must be given to the public. Closed meetings are authorized in a limited number of instances.

Regulatory Flexibility Act Concern over the effects of regulation on the efficiency of businesses, Congress passed the Regulatory Flexibility Act which requires an analysis of the cost a regulation will impose on small business and must consider less burdensome alternatives.

Small Business Regulatory Enforcement Fairness Act This Act allows Congress to review new federal regulations for at least sixty-day before they can take effect.

Case 43.1: AT&T v. Iowa Utilities Board (Rulemaking) FACTS: Federal law requires local exchange carriers (LECs), to share elements of their networks (loops, switches, and trunks) with competitors. Under FCC Rule 319 required access to seven specific network elements. The LECs, led by AT&T, filed suits in courts across the United States to challenge the rules and the cases were consolidated into a single case.

HELD: FOR ATT. THE COURT VACATED THE RULE. The United States Supreme Court held that the FCC failed to comply with the mandate of the Telecommunications Act because the agency did not use any limiting standard in fashioning Rule 319. Under the FCC’s interpretation, the LECs’ competitors, not the FCC, would determine whether access was necessary or whether impairment would occur in its absence. This allowed the FCC to “blind itself to the availability of elements outside the [LECs’] network[s]” and distorted the “ordinary and fair meaning of the terms “necessary” and “impair.” Case 43.1: AT&T v. Iowa Utilities Board (Rulemaking)

Case 43.2: FDIC V. Wentz (Investigation) FACTS: Wentz and Koether were directors of Howard Savings Bank when it was declared insolvency. The FDIC issued subpoenas duces tecum to Wentz, Koether, and others, seeking, among other things, their personal financial records. The directors refused to comply. The FDIC sued and the court ordered the directors to produce only those records showing addi­tions to or reductions in their assets. The directors appealed.

HELD: The court acknowledged that “there is a significant public interest in promptly resolving the affairs of insolvent banks on behalf of their creditors and depositors.” The FDIC showed a reasonable need for gaining access to the directors’ records in order to determine whether they reveal breaches of fiduciary duties through the improper channeling of bank funds for personal benefit. Case 43.2: FDIC V. Wentz (Investigation)

Case 43.3: Buck Creek Coal v. Federal Mine Safety & Health Admin. (Adjudication) FACTS: BCC operates a coal mine. Holland, an inspector for the MSHA charged BCC with violations of federal regulations that were intended to prevent fires. After an administrative hearing the judge fined BCC $2,000. BCC asked the Federal Mine Safety and Health Review Commission to review the ALJ’s conclusions. When the Commission declined, Buck Creek sought review in the courts.

HELD: REVIEW DENIED. “[The ALJ] made [his] findings, based primarily on the testimony of Inspector Holland. [N]o further evidence was necessary. Nor was anything more than Inspector Holland’s opinion neces­sary to support the common sense conclusion that a fire burning in an underground coal mine would present a serious risk of smoke and gas inhalation to miners.” Case 43.3: Buck Creek Coal v. Federal Mine Safety & Health Admin. (Adjudication)