It’s always of interest when the Supreme Court takes up an issue on which one has expended substantial scholarly ink. Such is the case for me with Trump v. Pennsylvania and its companion, Little Sisters of the Poor v. Pennsylvania. The Court in this case granted certiorari to address three separate and distinct questions. As a result, for some, this case is about the Affordable Care Act and its associated contraceptive coverage mandate, whether cast as a question of reproductive rights or religious freedom. For others, this case is about nationwide injunctions and represents an opportunity for the Court to provide some much-needed guidance regarding their use by the lower courts. Both are important questions, but I have little to contribute to the debate over those issues. For me, this is a case about interim-final rulemaking — specifically, whether an agency can issue an interim-final rule without notice and comment based on an inadequate claim of good cause, and then go on to “cure” that procedurally-invalid interim-final rule by accepting and taking into account comments on a post-promulgation basis in finalizing the rule.
In this case, a Third Circuit panel considered the validity of interim-final rules that broadened exemptions to the requirement that group health insurance plans cover contraceptive services, as well as whether post-promulgation notice and comment procedures used in finalizing those rules cured the interim-final rules’ procedural deficiencies. The agencies issuing the interim-final rules asserted the APA’s good cause exception on three grounds: “(1) the urgent need to alleviate harm to those with religious objections to the [preexisting] regulations; (2) the need to address ‘continued uncertainty, inconsistency, and cost’ arising from ‘litigation challenging the previous rules’; and (3) the fact that the [a]gencies had already collected comments on” the preexisting regulations. The Third Circuit panel found none of those justifications sufficient to constitute good cause for foregoing notice and comment prior to the issuance of the interim-final rules. Recognized that the issuing agencies had used post-promulgation notice and comment in subsequently finalizing the interim-final rules, the panel noted circuit precedent holding that “post-promulgation notice and comment procedures cannot cure the failure to provide such procedures prior to the promulgation of the rule at issue.” The panel additionally accused the government of lacking “the ‘flexible and open-minded attitude’ the notice-and-comment process requires,” and said that the near-identical content of the interim-final rules and the final regulations “suggest[s] that the opportunity for comment was not a ‘meaningful one’ in the way the APA requires.” Thus, according to the panel, the procedural defects of the interim-final rules rendered the final regulations procedurally invalid as well.
My interest in interim-final rulemaking and post-promulgation procedures stems partly from a longstanding and frequent Treasury Department practice of issuing what it labels as “temporary” tax regulations with only post-promulgation notice and comment and without a valid, contemporaneous assertion of the APA’s good cause exception. I have written at length criticizing this practice as contrary to the Administrative Procedure Act. I am pleased to say that Treasury announced last year that it would no longer issue temporary regulations without also claiming good cause, although the one instance of Treasury issuing temporary regulations and asserting good cause since then has its own issues. Regardless, whenever Treasury puts out a temporary regulation without notice and comment, it is required by statute also to issue a notice of proposed rulemaking and finalize the regulations within three years, taking into account the comments it receives in that post-promulgation procedure. Hence, the question has arisen: if temporary Treasury regulations historically have violated the APA’s procedural requirements, then do Treasury’s post-promulgation notice and comment procedures fix the problem? This was a background issue in the litigation culminating in the Supreme Court’s decision in United States v. Home Concrete & Supply, LLC, which was resolved in 2012 on other grounds, with the circuits below disagreeing over how to handle the procedural problem.
The issue of interim-final rules with post-promulgation procedures is not limited to the tax context. According to a 2012 GAO study and report, a significant plurality of agency regulations from 2003 to 2010 (35% of major rules and 44% of nonmajor rules) were issued without notice and comment, and most of those regulations (77% of major rules and and 61% of nonmajor rules) relied on the good cause exception when doing so. There is no reason to believe that agencies have changed that practice since then. Consistent with a 1995 ACUS recommendation regarding agency use of interim-final rulemaking, the GAO observed that agencies more often than not used post-promulgation notice and comment when finalizing regulations issued initially as interim-final or temporary rules. When an agency validly asserts good cause for foregoing notice and comment when issuing interim-final or temporary rules, post-promulgation notice and comment procedures are not required by the APA. But an agency that voluntarily pursues those procedures demonstrates good faith and good governance. The circuit courts have struggled, however, with what to do with final regulations promulgated in this way when the issuing agency’s good cause claim is later found to be inadequate.
A few years ago, Mark Thomson and I published an article in Cornell Law Review identifying four main approaches adopted by circuit courts regarding the implications of post-promulgation notice and comment procedures for the validity of final rules originating as procedurally-invalid interim-final or temporary rules:
- Rejecting post-promulgation notice and comment procedures categorically as an adequate substitute for pre-promulgation notice and comment, meaning that final rules based on procedurally-invalid interim-final or temporary rules are themselves categorically tainted;
- Treating post-promulgation notice and comment categorically as curing or mooting procedural defects in interim-final rules;
- Evaluating final rules adopted in this way case by case and upholding such rules when the court is convinced that the agency kept an “open mind” with respect to comments it received during the post-promulgation comment period; and
- Acknowledging that post-promulgation notice and comment is an inadequate substitute for pre-promulgation procedures, but applying harmless error analysis, including requiring the challenging party to demonstrate prejudice, in deciding whether to give the agency a pass and uphold the final rule anyway.
All of these approaches have their pros and cons. Categorically invalidating all such rules fails to take into account the murkiness of the good cause exception and risks wasting government resources and discouraging good faith efforts of agency officials. Categorically allowing post-promulgation notice and comment to cure agency procedural failures gives agencies free rein to ignore the APA and upend pre-promulgation notice and comment procedures altogether. The open mind standard and particularly harmless error analysis, as applied to date, ask little of the agency at fault and overly burden challengers seeking to effectuate their procedural rights. In our article, Mark and I advocated a different, middle-of-the-road approach that would not categorically reject all rules of this ilk but that nevertheless would embrace a stronger presumption of invalidity and force the agency to bear the burden of demonstrating the harmlessness of its error based on a set of factors, including its responsiveness to post-promulgation comments received and its motives in foregoing pre-promulgation procedures and asserting the good cause exception in the first instance.
Unfortunately, the Supreme Court may never get around to resolving this issue in Trump v. Pennsylvania. It could decide instead that the Affordable Care Act did not give the issuing agencies the authority to expand the conscience exemption to the contraceptive coverage mandate. Alternatively, and substantially more likely, the Court could decide that the statute specifically authorized the use of interim-final rulemaking with only post-promulgation notice and comment and without a simultaneous assertion of the good cause exception. Indeed, the Affordable Care Act expressly authorized “interim final rules as the Secretary determines are appropriate.” The Third Circuit panel found that statutory language insufficiently explicit to excuse compliance with APA notice and comment requirements. But although agencies occasionally will use an alternative term like temporary regulations, “interim-final rule” is practically an administrative law term of art, used across the regulatory state to describe rules issued with only post-promulgation procedures. Since agencies already have the authority under the APA to adopt interim-final rules with good cause, the language in the Affordable Care Act would be redundant unless it meant something else–e.g., the authority to adopt such rules without asserting good cause. Reading the Affordable Care Act as authorizing interim-final rules without a good cause claim would allow the Supreme Court to find the contraceptive coverage regulations at issue here to be procedurally valid without resolving the current jurisprudential mess regarding interim-final rules and post-promulgation notice and comment. Still, one can hope that the Court will take the opportunity to offer at least a little guidance regarding this extremely consequential — if perhaps a little dry when compared to reproductive rights, religious freedom, and nationwide injunctions — procedural question.
Cross-posted at Yale Journal on Regulation’s Notice & Comment Blog.