Did Little Sisters of the Poor just gut APA rulemaking procedures?

For many Supreme Court watchers, the decision in Little Sisters of the Poor v. Pennsylvania was about a contraceptive mandate. As I noted in a prior post, however, for some of us, the case was about interim-final rulemaking and the procedures for agency rulemaking imposed by the Administrative Procedure Act (APA). At least at first blush, Justice Thomas’s opinion for the Court turns APA notice-and-comment rulemaking procedures into a pro forma exercise of procedural box-checking that will allow agencies to curtail meaningful public participation in the agency rulemaking process. Agency rulemaking will be much easier to accomplish, but the resulting regulations will be poorer in quality and thus less effective.

APA § 553(b) and (c) generally contemplate that, when the government wants to adopt legally-binding regulations, it must (1) issue a notice of proposed rulemaking (NOPR) that contains certain information, most specifically the legal authority for and general content of the proposed rule; (2) “[a]fter notice,” offer the interested public “an opportunity to participate in the rule making through submission of written data, views, or arguments”; and (3) “[a]fter consideration of the relevant matter presented” issue the final rules accompanied by a “concise general statement of their basis and purpose,” known more colloquially as the preamble. APA § 553(b) contains a limited “good cause” exemption from these requirements. Although the text does not say so explicitly, the import is obvious: as a default proposition, legally-binding legislative rules should be adopted only after notice and opportunity for public participation, not before.

The Little Sisters case concerned legally-binding interim-final regulations (IFRs) that the federal government adopted without first giving the public an opportunity to submit comments. The government asked for comments in conjunction with the IFRs, and it arguably took those comments into account when it replaced the IFRs with final-final regulations, but the final-final regulations did not make many changes. At least prior to today’s decision, many scholars (and the Administrative Conference of the United States) perceived this sort of post-promulgation notice and comment process, absent a valid statutory exemption, to be contrary to the text of APA § 553 by putting the opportunity for public participation after rather than before the agency adopts legally-binding regulations. Although APA § 553 does not say explicitly that notice and legally-binding regulations cannot occur in the same document, the APA’s text does signal an assumption of “notice first, binding regulations later” through its ordering of the different procedural steps (complete with repeated use of the word “after”), and for good reasons.

As the D.C. Circuit has observed repeatedly, the goals of notice-and-comment rulemaking procedures are “to reintroduce public participation and fairness to affected parties after governmental authority has been delegated to unrepresentative agencies and to assure that the agency will have before it the facts and information relevant to a particular administrative problem, as well as suggestions for alternative solutions.” American Hosp. Ass’n v. Bowen, 834 F.2d 1037, 1044 (1987) (internal citations, quotation marks, and brackets omitted). As a practical matter, it is well understood that, the further that agencies go down the road of the rulemaking process, the more committed they are to the regulations they have drafted, and the less likely they are to make changes in response to comments received. Consequently, the assumption and concern is that parties who might otherwise be interested in commenting will see a request for post-promulgation comments as insincere, designed to placate potential reviewing courts, so those parties will be discouraged from participating. I am not aware of any empirical studies that say so, but anecdotally through observation and conversations with agency officials and regulated parties alike, this has been my experience.

In Little Sisters, the government justified its action in a couple of ways that were more particularized to the case at bar. First, the government claimed that the Affordable Care Act specifically authorized the use of interim-final rules — which it did, unlike most statutes. Second, the government claimed good cause for foregoing pre-promulgation notice and comment, which may or may not have been the case (the Third Circuit did not think so), but which APA § 553(b) recognizes as a potential statutory exemption. Justice Thomas’s opinion for the Court completely ignored the first of these arguments and, regarding the second, declared in a footnote that addressing the government’s good cause claim was unnecessary given the Court’s broader conclusions regarding the procedural validity of interim-final rulemaking.

Indeed, sweeping much more broadly, Justice Thomas’s opinion for the Court is pretty close to a full-throated endorsement of interim-final rulemaking (i.e., binding rules first and last) as procedurally equivalent to the more standard notice-and-comment rulemaking process (i.e., notice only first and binding rules later). He reduced the challengers’ complaint to being about the labels of the IFRs rather than their relative timing and binding effect.

Respondents point to the fact that the 2018 final rules were preceded by a document entitled “Interim Final Rules with Request for Comments,” not a document entitled “General Notice of Proposed Rulemaking.” They claim that since this was insufficient to satisfy § 553(b)’s requirement, the final rules were procedurally invalid. Respondents are incorrect. Formal labels aside, the rules contained all of the elements of a notice of proposed rulemaking as required by the APA.

The APA requires that the notice of proposed rulemaking contain “reference to the legal authority under which the rule is proposed” and “either the terms or substance of the proposed rule or a description of the subjects and issues involved.” § 553(b)(2)-(3). The request for comments in the 2017 IFRs readily satisfies these requirements. That request detailed the Departments’ view that they had legal authority under the ACA to promulgate both exemptions, as well as authority under RFRA to promulgate the religious exemption. And respondents do not — and cannot — argue that the IFRs failed to air the relevant issues with sufficient detail for respondents to understand the Departments’ position. Thus, the APA notice requirements were satisfied.

Slip. op. at 22-23.

Justice Thomas next turned to the harmless error rule contained in the APA’s judicial review provisions. But rather than merely finding the agency’s use of IFRs in this case to be harmless error, he declared the use of IFRs more or less categorically to be nonprejudicial so long as they are sufficiently thorough in their explanation of the agency’s thinking.

Even assuming that the APA required an agency to publish a document entitled “notice of proposed rulemaking” when the agency moves from an IFR to a final rule, there as no “prejudicial error” here. § 706. We have previously noted that the rule of prejudicial error is treated as an “administrative law … harmless error rule.” Here, the Departments issued an IFR that explained its position in fulsome detail and “provide[d] the public with an opportunity to comment on whether [the] regulations … should be made permanent or subject to modification.” … “The object [of notice and comment], in short, is one of fair notice,” and respondents certainly had such notice here.

Slip op. at 23 (internal citations omitted and emphasis added).

Together these paragraphs suggest that two things: (1) so long as the agency at some point in the rulemaking process provides the information required by APA § 553(b) and includes language inviting public comments, the order in which the steps outlined in APA § 553(b) and (c) occur is unimportant; and (2) the Court sees the principal function of APA rulemaking procedures as facilitating communication from the agency to the public regarding what the agency is thinking, with little or no regard for the importance of communication in the other direction. Justice Kagan’s concurring opinion also recognizes that the government must explain itself sufficiently to satisfy the reasoned decisionmaking requirements of the Supreme Court’s 1983 State Farm decision — but again, that communication is from the agency to the public about what the agency is thinking, rather than the other way around. In short, notice to the public is all that really matters; communications from the public to the agency (i.e., public participation), and the resulting benefits to agency expertise and the rulemaking process more generally are left out of the analysis.

A vision of agency rulemaking procedures that focuses principally on notice to the public rather than collaboration and engagement with the public would be more efficient. As the lower courts have construed the APA over the past fifty years, notice-and-comment rulemaking has become procedurally cumbersome and time-consuming. Agencies often have regarded the APA’s procedural requirements as obstacles to accomplishing what they regard as worthy regulatory goals. But efficient is not necessarily the same thing as effective, and it is worth thinking for just a few moments about why the courts interpreted the APA to make notice-and-comment rulemaking so complicated in the first place.

When the APA was adopted, agencies did not adopt many legally-binding regulations. When they did, the general understanding was that they were required to use formal rulemaking procedures contained in APA §§ 556 and 557, which are cross-referenced in APA § 553, and which contemplate live witness testimony in open hearings as well as written submissions, cross-examination of those witnesses, and a transcript of the proceedings to generate a record supporting the rule. Given that understanding, extensive interpretation of APA § 553(b) and (c) to flesh out the requirements of a written hearing process simply was not required. NOPRs and preambles under APA § 553 could be (and were) quite skimpy because APA §§ 556 and 557 did all the procedural heavy lifting.

The Supreme Court did away with formal rulemaking for almost all agencies in 1973 in United States v. Florida East Coast Railway Co., right around the same time that the incidence of agency rulemaking dramatically expanded. Formal rulemaking was notoriously burdensome and inefficient; informal notice-and-comment rulemaking was perceived by many to be a more efficient alternative. But without the record that formal rulemaking produced, how could courts ensure that agencies were taking public participation seriously and not acting arbitrarily? They interpreted APA § 553(b) and (c) as requiring agencies to do things like disclosing the data on which the agency relied as part of the NOPR, not changing the final regulations so drastically as to make public participation meaningless, and responding to all significant comments received in the preamble to the final rule. In the aforementioned State Farm decision, the Supreme Court also interpreted APA § 706(2)(A) as requiring agencies contemporaneously to explain and justify their regulatory choices in their regulatory preambles.

None of these requirements (including the demands of State Farm) are spelled out explicitly in the APA’s text. But although the Court’s 1978 Vermont Yankee decision counsels against imposing procedural burdens not contemplated by the APA’s text, the APA’s textual silence also should not be taken too literally. Enacted in a much less textualist era (1946), the APA’s text occasionally offers specific details but also uses undefined, open-ended, and ambiguous terms that necessitate interpreting the words in their larger context as well as construing them to give them legal content and effect. (Larry Solum helpfully explains construction versus interpretation here and here.) For example, what does it mean to “give interested persons an opportunity to participate in the rule making through the submission of written data, views or arguments,” as APA § 553(c) requires? Arguably notice and an opportunity for participation means something more than merely saying “send in your comments” after the rules are in place, but how much more, and in what ways? The APA on its face is not explicit. Thus, unfortunately, the bare terms of APA § 553(b) and (c) are susceptible of the Court’s hyperliteralist interpretation in Little Sisters. But textualist methodology anticipates reading a statute’s words not in isolation but rather in context, and expects courts not to parse statutory text so closely as to render it a mere nullity.

And with its decision in Little Sisters, the Court has come pretty close to, if not writing APA § 553(b) and (c) out of the statute completely, then at least minimizing those provisions to the point of irrelevancy in most instances. Under the reasoning of Little Sisters, even without a claim of good cause, an agency can issue legally-binding IFRs that include the requisite citations to legal authority and invite public comments, then wait and see what happens. If someone challenges the IFRs as procedurally invalid, then the agency can hurry up and issue final-final regulations with a preamble that responds to comments received, if any, without making changes, and the Court likely will say “good enough” so long as the agency otherwise is thorough enough in communicating its own thoughts. But if no one bothers to challenge the IFRs, then the agency can just leave them on the books as-is without further action. Since most agency regulations go unchallenged in court (for many reasons unrelated to their compliance with the APA), most agency regulations can now be issued in legally-binding form without needing to engage with the public at all. And when regulations are challenged, State Farm is the only real protection left against agency arbitrariness.

Most agency regulation drafters are dedicated public servants who pursue rulemaking based on a genuine desire to accomplish what they perceive as good and desirable policy goals. Leaving aside good faith disagreements over what those policy goals ought to be, agency regulation drafters are not omniscient. Agency officials will concede that, often, they need the public’s input to fill gaps in their own knowledge. And on some occasions, agency regulation drafters simply don’t know what they don’t know. Public participation in the rulemaking process enhances agency expertise and improves the quality of agency regulations. The Court’s analysis in Little Sisters downgrades the statutory relevance of engagement and collaboration between agency officials and the public and, consequently, devalues and undermines public participation as a part of agency rulemaking. We likely will get more agency regulations faster, but in the end, we may not like the cost.

Cross-posted at Yale Journal on Regulation’s Notice & Comment Blog.

kristin hickman

Professor Kristin Hickman is a legal scholar working in the fields of tax administration, administrative law, and statutory interpretation. In addition to the Of Interest blog, Professor Hickman authors the Administrative Law Treatise (with co-author Richard J. Pierce, Jr.) and has published scholarly articles in Columbia Law Review, Virginia Law Review, Cornell Law Review, Duke Law Journal, Georgetown Law Journal, Vanderbilt Law Review, and many other prominent U.S. and international publications. She holds the titles of Distinguished McKnight University Professor and Harlan Albert Rogers Professor of Law at the University of Minnesota Law School.