Substance, Procedure, Reasoned Decision-Making, and the President

Courts must distinguish substantive from procedural duties in agency review to preserve reasoned decision-making.

In his recent article on reasoned decision-making, my colleague Richard J. Pierce, Jr., insightfully points out the dangers of sequential policy reversals by successive presidential administrations, which have become particularly salient in this era of extreme political polarity. Pierce also explains that courts play an important role in mitigating the adverse effects of executive branch “flip-flopping” through application of the duty to engage in reasoned decision-making and the corollary duty to explain changes in policy direction. Finally, Pierce notes the challenges of enforcing those duties when a policy reversal takes the form of direct presidential action rather than action by an agency or subordinate official.

Although I agree with Professor Pierce that a stream of sharp policy reversals on important social and economic issues bodes ill for the nation and that the courts have the authority to constrain these disruptive policy reversals, I take issue with some aspects of his description of the content of the duty to engage in reasoned decision-making.

Pierce starts by referring to Motor Vehicle Manufacturers Association v. State Farm as the U.S. Supreme Court’s most important enunciation of a demanding version of the duty to engage in reasoned decision-making. So far, so good.

But Pierce goes astray when he traces the “modern version of the duty to engage in reasoned decision making” to judicial interpretation of the requirements for conducting informal—or notice-and-comment—rulemaking under section 553 of the Administrative Procedure Act (APA), including the obligation to develop a fulsome “paper hearing” record. This attribution conflates two different sets of APA provisions. The requirements for conducting informal rulemaking, which have been interpreted by the courts to include the duty to make underlying factual data available during the public comment period and to respond in the final rule to significant public comments, are procedural in nature. An agency’s duty to engage in reasoned decision-making, and to explain in the context of a judicial challenge to its action how it has done so, is substantive in nature.

Of course, the dividing line between substance and procedure can be murky. Section 553’s mandate to accompany a final rule with a “concise general statement of basis and purpose” and the duty to provide a non-arbitrary explanation for agency action to avoid judicial reversal on the merits have the potential to overlap, even though the first is a procedural requirement and the second implicates the substantive validity of the action taken.

The Supreme Court recently contributed to the conflation of substance and procedure by characterizing the U.S. Environmental Protection Agency’s supposed failure to respond to an obscure public comment in a Clean Air Act rulemaking, which is a procedural flaw that violates the paper hearing requirements of section 553, as an example of arbitrary and capricious decision-making, which is a substantive failure. In an earlier case, the Court made a similar mischaracterization in the opposite direction. In Encino Motorcars v. Navarro, the Court labeled the U.S. Department of Labor’s failure to explain its reversal of a previous statutory interpretation as a procedural violation.

Pierce’s melding of two different sets of APA provisions—its procedural rules of the road for rulemaking under section 553 and its provisions governing substantive judicial review under section 706 of the APA— may not matter much in this instance. He suggests that the judiciary’s recent emphasis on textualism may prompt courts to overturn cases that have interpreted the barebones language of section 553 to foist a host of unmentioned obligations on agencies conducting informal rulemaking. As Pierce points out, Justice Brett Kavanaugh is already on record favoring a more constrained interpretation of what section 553 demands.

Even if the courts eliminate the procedural paper hearing requirements, agency behavior in conducting informal rulemaking or explaining the resulting decisions may not change dramatically. Under section 706, judicial review is confined to matters contained in the administrative record. In addition, the Supreme Court’s 1943 decision in SEC v. Chenery Corporation—known as Chenery I—precludes courts from relying on any explanation other than the one the agency provided at the time of its decision.

Together, these principles encourage agencies to develop ample contemporaneous administrative records to bolster their chances of surviving challenges based on claims that they have acted in an arbitrary and capricious fashion. Agencies will not be able to fill in gaps in a scant administrative record with information or rationales developed after the fact.

Of course, if the Supreme Court reverts to a weak version of arbitrary and capricious review, such as by overruling State Farm—a possibility raised by Professor Pierce—then agencies may have less to fear if they rely on skimpy records and explanations. Some upcoming tests of the vibrancy of judicial application of the duty to explain policy reversal are likely to come if the Trump Administration finalizes its proposals to repeal the U.S. Department of Agriculture Forest Service’s roadless rule and the Bureau of Land Management’s public lands rule. In both cases, the justifications in the proposed regulatory preambles for reversing course were remarkably thin.

The Court has provided conflicting recent signals in this regard. On the one hand, it applied a rigorous version of arbitrary and capricious review in invalidating the Clean Air Act rulemaking referred to in Ohio v. EPA. On the other hand, in narrowly construing the scope of agency duties under the National Environmental Policy Act in Seven County Infrastructure Coalition v. Eagle County, Colorado, Justice Kavanaugh declared that “the central principle of judicial review in NEPA cases is deference.” He added that courts should “afford substantial deference and should not micromanage those agency choices so long as they fall within a broad zone of reasonableness.”

Still, I urge Pierce—and others, including the courts—to recognize the difference between the substantive and procedural aspects of administrative law. After all, the APA includes two separate provisions governing the procedures that agencies must use in conducting rulemaking or adjudication and that courts must use in reviewing challenges to those endeavors. In addition, section 706 of the APA sets different standards for substantive review—under the arbitrary and capricious or substantial evidence tests—and for review of agency actions alleged to have been taken “without observance of procedure required by law.”

One more aspect of Pierce’s article deserves mention. Pierce notes that because recent Presidents have more regularly taken direct action themselves rather than pursuing their policy objectives through agency officials, it is important for the Supreme Court to apply “a robust version of the duty to engage in reasoned decision-making on the president.” Easier said than done. To the extent that the duty derives from the APA’s arbitrary and capricious standard, the duty does not apply to the President, who, under the Supreme Court’s decision in Franklin v. Massachusetts, is not subject to the APA. Furthermore, the Court stated in Dalton v. Specter that judicial review of an alleged statutory violation “is not available when the statute in question commits the decision to the discretion of the President.”

Still, there may be avenues for reviewing presidential reasoning supporting actions taken under statutorily designated authority, including in cases in which statutes authorize emergency presidential action. In Chamber of Commerce v. Reich, the U.S. Court of Appeals for the D.C. Circuit held that Dalton’s preclusion of review does not apply when statutes deprive the President of discretionary authority or “places discernible limits on the President’s discretion.” The D.C. Circuit found it “untenable to conclude that there are no judicially enforceable limitations on presidential actions, besides actions that run afoul of the Constitution or which contravene direct statutory prohibitions, so long as the President claims that he is acting pursuant to” statutory authority. That result, the court reasoned, “would permit the President to bypass scores of statutory limitations on governmental authority, and we therefore reject it.”

The U.S. Court of Appeals for the Tenth Circuit likewise concluded in a suit involving a challenge to a presidential designation of a national monument under the Antiquities Act that “judicial review in such instances does not implicate separation of powers concerns to the same degree as where the statute did ‘not at all limit’ the discretion of the President.” Review is therefore available “to ensure that the Proclamations are consistent with constitutional principles and that the President has not exceeded his statutory authority.” Most recently, a federal court in Maryland concluded that it had “the authority to determine whether the [two] Executive Orders are incompatible with the will of Congress,” and found in that case that they were.

It is a basic principle of administrative law that courts may review whether an agency, or the president, has exceeded applicable statutory authority and thus acted ultra vires, as well as whether an agency, or the President, has exercised delegated discretion in a non-arbitrary fashion. Yet, the case law that developed under “step two” of the now-defunct doctrine established by the Supreme Court in Chevron v. Natural Resources Defense Council, which required courts to defer to reasonable agency interpretations of ambiguous statutes, shows that these two inquiries can overlap with one another, just as the dividing line between substance and procedure can be difficult to pinpoint.

As a result, courts may be able to apply the duty to engage in reasoned decision-making, which requires exercising discretion in a rational and adequately explained manner in reviewing the kinds of challenges that prior decisions have held fall within the authority of the federal judiciary, even if the defendant is the President of the United States. After all, the arbitrary and capricious standard for reviewing the validity of governmental action predated the APA, and, as section 559 of the APA provides, the APA did not repeal “requirements” that are “otherwise recognized by law.”