Deep Dive Episode 226 – Due Process Protections in Agency Enforcement Actions
In February 2019, then General Counsel of the Department of Transportation (DOT), Steven Bradbury, issued a memo later dubbed the “Bradbury Memo” that addressed concerns about civil enforcement abuse at the agency. Parts of the memo were subsequently made into binding DOT rules. DOT asserted that these rules were designed to protect the due process rights of those who were the subject of DOT enforcement actions, including a requirement that the agency disclose all exculpatory evidence to those targeted by civil enforcement and the prohibition of “fishing expedition” investigations without sufficient evidence to support a violation.
On April 2, 2021, DOT rescinded these rules without the opportunity for public comment. Thereafter Polyweave Packaging Inc., a company that had been issued a civil penalty order by DOT over alleged regulatory violations, filed suit against DOT claiming the agency violated its due process rights by revoking the Bradbury Memo rules.
The U.S. District Court for the Western District of Kentucky ruled in favor of DOT, the case has been appealed to the Sixth Circuit Court of Appeals and oral arguments were on May 5, 2022.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
Ryan Lacey: Hello, and welcome to The Federalist Society’s virtual event. This afternoon, May 31, 2022, we discuss “Due Process Protections in Agency Enforcement Actions,” and give a litigation update on Polyweave Packaging v. Buttigieg. My name is Ryan Lacey, and I’m an Assistant Director of Practice Groups at the Federalist Society. As always, please note that all expressions of opinion are those of our experts on today’s call. Today we are fortunate to have an excellent panel moderated by Beth Williams, whom I will introduce very briefly.
Beth Williams is a Board Member of the United States Privacy and Civil Liberties Oversight Board. Prior to this, Miss Williams was the Assistant Attorney General for the Office of Legal Policy at the United States Department of Justice. Miss Williams also served as Special Counsel to the United States Senate Committee on the Judiciary, where she assisted with the confirmation of Chief Justice Roberts and Associate Justice Alito to the United States Supreme Court. Miss Williams graduated from Harvard College magna cum laude, and earned her law degree from Harvard Law School.
After our speakers give their remarks, we will turn to you, the audience, for questions. If you have a question, please enter it into the Q&A feature at the bottom of your screen and we will handle questions as we can, towards the end of today’s program. With that, thank you for being with us today. Beth, the floor is yours.
Hon. Beth Williams: Good afternoon. And thank you, Ryan, for that introduction. We’ve got a really interesting webinar today, and I’m happy to be here to moderate the panel. Let me start by giving a brief overview, and then I will introduce our speakers. In February of 2019, then General Counsel of the Department of Transportation, Steven Bradbury, issued a memo known as the eponymous “Bradbury Memo” that addressed concerns about civil enforcement abuse at the agency.
Parts of the memo were subsequently made into binding Department of Transportation rules. DOT asserted that these rules were designed to protect the due process rights of those who were the subject of DOT enforcement actions, including the requirement that the agency disclose all exculpatory evidence to those targeted by civil enforcement, and the prohibition of so-called “fishing expedition” investigations without sufficient evidence to support a violation.
On April 2, 2021, DOT rescinded these rules without the opportunity for public comment. Thereafter, Polyweave Packaging, Inc., a company that had been issued a civil penalty order by DOT over alleged regulatory violations, filed suit against DOT, claiming the agency violated its due process rights by revoking the Bradbury Memo rules. The U.S. District Court for the Western District of Kentucky ruled in favor of the Department of Transportation. The case has appealed to the Sixth Circuit Court of Appeals, and oral argument were heard on May 5, 2022.
With that, I’d like to introduce our distinguished panelists. First, Steve Bradbury served in the Trump Administration as the Senate-confirmed General Counsel of the U.S. Department of Transportation from November 2017 until January 2021. As the Department’s chief legal officer, he oversaw all of DOT’s rulemaking and enforcement actions. During his time at DOT, he also served as the acting Deputy Secretary of Transportation, and, briefly, as the acting Secretary of Transportation.
During the Bush 43 administration, Mr. Bradbury served as the Principal Deputy and Acting Assistant Attorney General for the Office of Legal Counsel at the U.S. Department of Justice. As the head of OLC from 2005 to 2009, he advised the president and the executive branch on a wide range of constitutional and statutory questions, and received the Edmund J. Randolph award and the Secretary of Defense Medal for Outstanding Public Service, among other awards.
Aside from government service, Mr. Bradbury has been a litigation partner at Kirkland & Ellis LLP, and at Dechert LLP in Washington D.C., where his practice focused on regulatory enforcement and investigations, rulemaking and judicial review of agency actions, appellate cases, and antitrust matters. Mr. Bradbury clerked for Justice Clarence Thomas on the Supreme Court, and for Judge James L. Buckley on the D.C. Circuit. He graduated magna cum laude from Michigan Law School and received his B.A. from Stanford University.
Also with us today is Sheng Li. Sheng is Litigation Counsel for the New Civil Liberties Alliance, and is representing the plaintiff Polyweave in the current litigation. Prior to joining NCLA, Sheng served as Counselor to the Administrator of Wage and Hour at the U.S. Department of Labor. In that role, he led numerous efforts to remove or simplify unduly burdensome regulations. He has also worked in the private sector as a litigation associate at Patterson Belknap Webb & Tyler, and at Kirkland & Ellis.
Sheng is a graduate of Johns Hopkins University and Yale Law School, where he was managing editor of the Yale Journal of International Law. After graduating law school, Sheng served as a law clerk to one of my favorite judges, the Honorable Danny J. Boggs, on the U.S. Court of Appeals for the Sixth Circuit. Thank you both so much for being here, and for giving us some insight both into this case and into the rules themselves.
So now we’ll proceed with the standard order. Each speaker will provide brief statements, and then the speakers will have a chance to engage each other before a few questions from me. Then we’ll open it up to questions from those listening. So, please, as Ryan said, feel free to type your questions in the Q&A function, and we’ll try to get to as many as we can. So with that, let me turn it over to Steve.
Hon. Steven Bradbury: Beth, thank you so much for that introduction. It’s great to be here. I always love being on FedSoc webinars. As Beth mentioned, I was General Counsel of the Department of Transportation under Secretary Elaine Chao, during the Trump administration. It was a great privilege of mine to serve in that capacity. The Department of Transportation is one of the principle regulatory agencies of the federal government. It has responsibility, very broad responsibility over safety and consumer protection in a number of transportation sectors within the U.S. economy. It has a number of subcomponents which have regulatory authority, primarily over safety, of different transportation modes or systems. And they have very broad authority to conduct investigations, issue rules, bring enforcement actions.
They include the Federal Railroad Administration over railroads; the Federal Aviation Administration over the aviation system; Motor Carrier Safety Administration, which addresses the safety of trucking operations; National Highway Traffic Safety Administration, which focuses on the safety of motor vehicles and motor vehicle equipment manufactured for sale in the U.S. And then, an important component of DOT that isn’t always top of mind for a lot of folks is what’s called PHMSA, the Pipeline and Hazardous Materials Safety Administration. That’s the component that engaged in the enforcement action at issue here with the Polyweave case.
And let me just say, except in certain minimal respects, I’m not going to comment on the merits of the Polyweave litigation. I’m not going to comment, certainly, at all, on the merits of the underlying enforcement action involving Polyweave. But, because DOT is such a heavy regulatory department, the Department of Transportation was kind of front and center in the Trump administration’s priority policy emphasis on regulatory reform. And so we had a big role to play in putting in place the new procedures that President Trump had announced in some of his early executive orders on regulatory reform, focused on regulatory reform. And we were very active in that area, very proud to take a leading role as General Counsel in that effort.
And, as part of that, beginning, really, in 2017, coming into office, one of my big focuses was on a range of regulatory reform efforts. It really had three parts. I announced it internally to our staff across the department, all the lawyers in the department, in 2017. We worked throughout 2018 on this effort, culminating in three action documents that I signed for the department, one having to do with the rulemaking procedures at DOT to kind of put in place and codify all of the regulatory reform structures and review processes we had initiated to try to improve the regulatory, the rulemaking process, including enhanced accommodation for public input into costly rules, and instituting, for the first time, a guarantee that the Secretary of Transportation would have to review and approve every rule, both significant rules and non-significant rules, with certain number of exceptions that the department would initiate.
We then also took on the question of guidance documents: the review, the clearance and the use of guidance documents. Both of these efforts were consistent with policy focuses of the administration, certainly the president’s regulatory reform efforts. You’ve also probably heard of the Rachel Brand Memo, as Associate Attorney General, having to do with guidance documents. We wanted to ensure that guidance documents would be transparent to the public, that agencies would not use guidance documents to expand legal obligations of parties, and that the government, in enforcement actions, would not rely on guidance documents to expand the legal obligations of parties or try to prove a legal violation.
The third area I wanted to focus on would be reform of the enforcement process. Agencies can run with the ball in rulemaking, and they can try to expand rules through the improper use of guidance documents. But then they can also try to expand their authority through enforcement actions. And some agencies have been known to do this in the past, where enforcement actions are used to, in essence, span the perimeter of what the legal obligations are for parties out there in the private sector, and sometimes even settle an enforcement action against one party in a manner that purports to create legal obligations binding on other parties, third parties.
And so kind of getting a handle on enforcement actions and ensuring that they’re conducted in a way that guarantees due process or regulated entities was also a high priority in this, sort of, the third component. All three of these components resulted in action documents that I signed, or DOT. Two of them I signed in December of 2018. One was an order on behalf of the secretary, setting forth comprehensively our new regulatory procedures, or to notice-and-comment and analysis of rules and approval of rules.
A second was the use and clearance of guidance documents. And then the third, which I signed in February of 2019. It was intended to guarantee due process and fairness in enforcement actions. That’s the memo that is now referred to here as the Bradbury Memo. Actually, I have a copy of it. And it really goes through, soup to nuts, aspects of due process and fairness in enforcement actions brought by components of the Department of Transportation.
And, basically, due process is mainly making sure the parties understand what their legal obligations are, understand and have notice of an alleged violation or a suspected violation. They understand what the agency’s findings are, and conclusions, in an investigation. And then they have an opportunity to respond in a meaningful way to any alleged violation, and be heard on that violation before penalties are assessed.
So the memo goes through those basic principles, and ensures that the agency operates fairly, that there’s notice given, parties have an opportunity to respond, that there isn’t bias or conflicts of interest in the proceedings, that when the agency conducts inspections or investigations, it — to the maximum extent possible — promptly discloses to the affected parties what its finding in those investigations, what its conclusions are, preliminary conclusions. We also ensure in here there’s a clear legal foundation for the enforcement action before it begins.
And if the agency is seeking monetary penalties — for example, through administrative procedures, rather than going to court — we made it clear there has to be a clear authorization in statute for the kind of action. And I’ll tell you kind of what prompted that. This whole reform memo on enforcement actions was my idea for DOT. And what really initially prompted it was hearing about something that occurred during the Obama administration, where NHTSA, National Highway Traffic Safety Administration, published a notice of proposed rulemaking, where it proposed to authorize itself, in effect, to bring administrative enforcement actions for monetary penalty. And there’s no grant of authority in NHTSA’s statute for NHTSA to do that. And they had proposed that rule in the Obama Administration without review by the General Counsel’s office at DOT, without approval from the Secretary. They didn’t have those procedures in place at that time.
NHTSA then withdrew that notice of proposed rulemaking. But, later, the Inspector General was reviewing the safety procedures of the components of DOT, and had a draft recommendation in his report that NHTSA should reinstitute that rulemaking. And it was evidence of a bad safety culture at NHTSA that they had withdrawn that rule. And I had to go down and have a discussion with Hal. He was actually a very good Inspector General. But I had to explain to him, “Look, as General Counsel, I would have to say NHTSA doesn’t have this authority. It’s not in their statute. If you make that recommendation, I’m going to have to disagree with you.”
So they pulled that recommendation out of their report. But this incident prompted, in my mind, a need to make clear to all the components of DOT that you can’t bring enforcement actions, certainly for monetary penalties, to administrative proceedings, without some clear legal authority in statute. So we make that clear in the memo as well.
There are a number of other aspects to it, just two I want to highlight. One, we’ve made it clear that agencies and enforcement actions are not to use doctrines of judicial deference, like Chevron or Auer deference, as an excuse or device to expand the bounds of the agency’s authority. Also, we put in place a policy that the agencies would use, in effect, the Brady Rule that comes from criminal law authorities of the Supreme Court, that if there’s evidence that’s favorable to the regulated entity that’s discovered in the enforcement investigation, that the agency will voluntarily affirmatively disclose that favorable evidence to the regulated entity, as an analogy to the Brady Rule.
This was something new. This was not something agencies do, typically. And we thought it was just a good common-sense sort of principle that we would adopt, as a policy matter, to help ensure fairness in enforcement actions. And, also, of course, we’ve made it clear that you’re not going to use guidance documents as a basis for enforcement actions. Guidance documents are hortatory. They’re recommendations. They’re not independent legal obligations.
And then we made it clear that you’re not going to use settlements or consent orders to try to impose new regulatory obligations on third parties. Certain actions would require the personal approval of the General Counsel. So, to put these policies in place, we undertook a pretty rigorous review process within all the components of DOT to comment and have input on these documents. And we also had review from the Secretary’s office; from OIRA, over at OMB, the Office of Information and Regulatory Analysis, that approves major new rules for the executive branch, on behalf of the White House.
So there was a lot of input, internally. We put them in place as new procedures that we would follow internally. So these are not the kinds of policy statements that require notice-and-comment to put in place. But we did take the extra step, in the end of 2019, of codifying all of these in a rule, as Beth mentioned, which was published in the Code of Federal Regulations, to make it more formal, to institutionalize it, and, frankly, to make it a little more difficult for the next guys to pull it back, assuming they would want to do that.
Well, they went ahead and did that last year, under Secretary Buttigieg, for the Biden Administration. And let me just say I was very disappointed and disheartened that they did it in the way they did do it. They did it just very abruptly, without notice-and-comment, without a lot of deliberation. And what they did was they pulled back, very dramatically, on the rulemaking reform procedures, because they had undone President Trump’s rulemaking reform executive orders. They completely revoked the policy on guidance documents, use and clearance of guidance documents. And they completely revoked this memo and these rules from the CFR on enforcement actions.
And the excuse they gave was, basically, the COVID emergency, but, also, we don’t like Trump, so we’re going to undo all of Trump’s executive orders. So, because this references some Trump executive orders, we’re going to completely pull it back, and we’re going to say that the COVID emergency makes it necessary for us to streamline our procedures, or what have you. There really isn’t any satisfactory explanation there as to how undoing procedural protections and extra steps in enforcement actions is needed to address the COVID pandemic emergency. So, there doesn’t seem to be a connection between A and B.
So I was very disappointed. I, frankly, thought they would pull back some of these things, like the Trump two-for-one on regulatory reform and some of those, which we understood they would disagree with as a policy matter. But I thought they would do it in a more considered and careful way. And, frankly, I was pretty shocked that they would just completely eliminate procedures put in place to try to enhance the fairness and transparency of enforcement actions. I can’t quite understand what the positive policy purpose of doing that would be. So I’ve gone on much too long, but, with that, let me turn it back to you, Beth, or over to Sheng. Thank you.
Hon. Beth Williams: Thanks so much, Steve. Sheng, do you want to make a few remarks?
Sheng Li: Yes, please. Thank you, Beth. And thanks to The Federalist Society for hosting this event to discuss this important case. And, of course, thank you, Steve, for writing the regulations and the memo that made this all possible. To start, I just want to introduce how the Polyweave v. Buttigieg case got started. And, in fact, as Steve mentioned, it involves administrative enforcement action at its heart, from PHMSA, which is the Pipeline and Hazardous Materials Safety Administration. And the case has, in fact, spanned three presidential administrations. Polyweave is a small Kentucky-based company that makes packaging that’s used to transport hazardous material, so it’s regulated under PHMSA.
And it was in 2015 — that was under Obama’s administration — that PHMSA inspectors toured Polyweave’s facilities and alleged that maybe there’s some regulatory violations. So they waited until December of 2016 before sending to Polyweave some charging documents alleging — knowing that the statute requires proof of knowing violations of these regulations before civil penalties can assessed. So there was a charging document for that.
Polyweave went back and forth, through informal proceedings through 2017. And there was just no decision for a really long time. And it was in 2019 then, as Steve mentioned, his memo came out and was codified into regulation later in 2019. And, again, Polyweave just sat around waiting for a decision until February 2021. So, I don’t know, what’s that, four or five years later it got an adverse decision from PHMSA, and decided at that point the Bradbury regulations protecting due process in enforcement proceedings were in place. So Polyweave thought, “Let me appeal this to the PHMSA agency head.” And it did so in March, 2021.
Just a few weeks later, all those regulations protecting due process were rescinded. And, as Steve said, without so much of an explanation. And Polyweave was especially interested in the right to discover exculpatory evidence in the agency’s possession, and made that a center point of its challenge, which was filed in district court in Western Kentucky. The agency filed a motion to dismiss, not surprisingly. But, during the briefing period of that motion to dismiss, Polyweave kept on asking the agency, “Hey, we think you have exculpatory evidence in your possession that you have not disclosed.”
And the agency, in the middle of the briefing period, actually filed a notice to the district court saying, “Actually, we were mistaken. We did, actually discover some exculpatory evidence that was never disclosed to Polyweave in that five-year period when we were investigating and prosecuting Polyweave.” And that exculpatory evidence came in two tranches. The first is a 600-some-page draft inspection report that was never disclosed. And the second is a tranche — included a couple of inspection reports of customers who were using — customers of Polyweave who were using Polyweave products and shipping those products.
And the inspection reports showed that the customers’ use of Polyweave’s bags to ship hazardous material through commerce across state lines was not a violation of any law or regulation. And so Polyweave believes that shows these guys’ use of our bags didn’t violate any laws. How could our sale of bags violate any laws? So, based on that, Polyweave was alleging it was forced to undergo an administrative proceeding where the due process rights it believed it had when it filed its appeal were rescinded.
So this raised a couple of interesting issues. So one of them is actually closely related to something the Supreme Court granted cert on recently. And that is because there’s a statute that requires all final agency actions, enforcement actions, to be directly reviewed by the Court of Appeals. And there’s a question of whether Polyweave could have filed in the District Court before the final enforcement action was concluded, essentially, a collateral attack on the enforcement proceeding, based on Polyweave’s allegation that it was injured by being forced to undergo that. And the Supreme Court actually granted cert in a couple of cases, including one of NCLA’s cases just a few weeks ago on this kind of interesting question, which is sort of beside the point a little bit.
But, ultimately, the district court agreed with us on that point, and said the district court was the proper place to file this challenge against the rescission of Steve’s regulations. But the district court disagreed with us that we suffered an injury, and held that — a couple things — that it wasn’t clear that the documents that the agency was withholding, were belatedly turned over, were exculpatory, in any meaningful manner. We disagree with that, and appealed to the Sixth Circuit, arguing that, at least at the motion to dismiss stage, we’re entitled to a favorable factual inference.
The district court also said, “Well, maybe this thing, there’s no injury at all, because all the documents — these documents have been turned over.” We, again, appealed that issue, as well, to the Sixth Circuit. The district court also thought maybe it’s not redressable, because the agency did not give these documents to Polyweave, even when, between 2019 and 2021, when the exculpatory rights were in place, under Steve’s regulations.
And, finally — I’m not going through all the issues. But these are kind of the highlights of the district court’s decision. Finally, the district court said, “Even if Polyweave were injured, the agency was well within its rights to rescind these regulations, because these enforcement regulations are completely committed to agency discretion and not reviewable by any court. And, of course, we appealed that to the Sixth Circuit as well.
So that district court decision was in September 2021. We filed a notice of appeal in October. An interesting twist to this case is that within a few weeks of our notice of appeal to the Sixth Circuit, PHMSA, the agency, issued a final enforcement order against Polyweave in that case, in the underlying administrative case, fining Polyweave for the alleged regulatory violations. It was interesting because, at the time, there was no PHMSA administrator. And a final agency order is generally supposed to come from an agency administrator.
What this allowed, this final agency order allowed us to actually file a second case against Polyweave, a second challenge that – under that direct review statute I talked about earlier, for direct review of final agency orders. And we raised a number of arguments in that second challenge, which goes directly to the Sixth Circuit, as a petition for review of agency’s action.
There we filed — our challenge was, we asserted different arguments from the rescission of these due process rights, including that fact that the final agency order was issued by a career civil servant, rather than someone accountable to the president, and just a general challenge against the internal adjudication process in the agency for not providing things like jury rights, which the Fifth Circuit recently recognized as constitutionally required a few weeks ago in Jarkesy v. SEC.
So, interestingly, we had these two kind of parallel cases, coming from the same two parties and based on substantially similar facts in the underlying adjudication. The first case, which involves the rescission of the due-process regulations — including the rescission of the regulation promising exculpatory evidence — had oral arguments, as Beth mentioned, in May. And, there, the panel was especially interested in this question of whether the case should have been filed in the district court or should have been filed directly in the court of appeals, under the direct review statute.
So that’s a kind of a jurisdictional question that we hope will be resolved in our favor. And, certainly, we hope, in the pending review in the Supreme Court, that will resolve that in our favor and say collateral attacks against agency adjudications can be filed directly in the district court. So that’s sort of the background of where the case is. Obviously, I don’t want to get into kind of strategy of how things will go, moving forward. But I’ll be happy to discuss what has happened in the past.
Hon. Beth Williams: Great. Thank you so much, to both of you. So I want to just give you a moment, if you want to ask questions to each other. I know, when you’re doing a litigation, it’s always exciting to be able to speak to the author of the regs and the memo. So, do you have any questions for each other?
Sheng Li: Yes. If you don’t mind, Steve. So one issue that arose in the Polyweave litigation is that in the memo and in the December 2019 regulation there was some boilerplate language at the very end, saying, “Hey, don’t rely on any of this. None of this is enforceable.” Do you have a sense of what the intent of that language was designed to do? Why was it included?
Hon. Steven Bradbury: Yeah, it is boilerplate language that you see in executive orders, for example. And when we put in place the internal procedures, as a policy matter, this was intended to — certainly I would intend to enforce it, as General Counsel, on all the attorneys in the Department of Transportation. But it was not intended to create new rights that could be enforced in court by parties. It was intended to be, basically, an instruction manual for our internal use, on how to proceed with enforcement actions in a way that would improve the process, in terms of fairness, for the parties involved.
And we included the same in the Code of Federal Regulations, because — again, we did this without notice-and-comment because these are internal procedures, binding on the department internally. But I recognize that there’s a question about whether that is truly the way a court in a particular dispute or case involving a private party with property rights or liberty interests would address that question. And so I readily acknowledge that once you publish it in the Code of Federal Regulations, it’s at least a stronger question, there, as to how a court might interpret that and apply it.
I noticed, in reading the district court’s opinion, that it was not, at least not a significant focus of the district court’s discussion. And I gather that’s because the court was — first of all, the court was addressing standing, and sort of threshold questions of entitlement to an injunction and standing. But when a party like Polyweave is claiming a loss of due process rights, there’s a question there about what is the actual impact? What has been done to take something away? And was a process followed that created an injury? And what’s going to address that? I think that’s a straight-up matter. There’s one thing — I don’t have a question for Sheng, but I do have one additional, just, brief point I wanted to make, Beth, if that’s okay.
Hon. Beth Williams: Sure, sure.
And this goes, again, to the reasons given by Secretary Buttigieg and the Biden administration for just completely taking away these policies, these enhanced protections that we had put in place for enforcement actions, and that’s this notion that, in some respect, they were prompted by executive orders from the president, and, as I tried to explain, with these enforcement action policies, really was not the case. This really originated internally at DOT, in our office.
Certainly, due process and enforcement actions was a priority for Don McGahn, the President’s White House Counsel, in the early part of the Trump administration. But there was no directive. There was no mandate directly from the president, as to putting in place these protections. Now, in October of 2019, before we published our final rule in the Code of Federal Regulations codifying this policy, the president did issue an executive order ensuring due process enforcement actions. Frankly, I think a lot of that was prompted, really, by what we had done at DOT. And some other agencies were moving in this direction as well.
And you’ll see from the memo I signed in February 2019 to Part 5 or Part D — I can’t remember what it is, Part 5, I think — of the codified regulations that we published in December, there are very few changes. There were only a couple of marginal additions, having to do with encouraging cooperative sharing of information with private industry and private parties in enforcement actions, and also ensuring compliance with the small business regulatory protection provisions of federal law.
Those really, as I recall, are the only two aspects of the final rule on enforcement actions that we added in response to that October 2019 executive order from the President. So it truly is disingenuous to say, “Well, we don’t like the President’s executive order. And President Biden has ordered us to remove all procedures, policies, and regulations that were done in response to those executive orders.” And that’s not the case with this enforcement action due process policy. So, just especially disappointed that they used the cover of getting rid of the evil Trump executive orders as an excuse for getting rid of this policy.
Sheng Li: I’m glad —
Hon. Beth Williams: Go ahead Sheng.
Sheng Li: Sorry. I’m glad you said that, Steve, because one of the issues in litigation is whether the rescission was arbitrary and capricious. And one of the defenses the government raised was, “Hey, we have executive orders backing it, these are the reason for why we’re doing this.” So, glad to hear straight from the horse’s mouth that, in fact, the executive orders were not the primary motivation for this regulation, which is an argument we made. But we didn’t talk to you at that point.
In any event, I think the case law is pretty clear that executive orders, by themselves, don’t justify issuing, removing, revoking, revising regulations, otherwise. Otherwise, an agency can just bypass arbitrary and capricious requirements by getting the White House to file, to write an executive order saying, “Regulate in this way.” But, speaking to the reasons given to rescind the regulations — the due process regulations — the final rule, issued in April 2021, in addition to saying, “Oh, we need this for COVID,” which, I get you, Steve, I don’t understand what that really means; I don’t think that’s a very good argument.
But they also said something like, “Hey, we think we can provide adequate protection through internal processes, without these rules being codified. And, in any event, much of the due process protections guaranteed by the rules are already protected by the Administrative Procedure Act and the Constitution. We certainly quibbled with that more than a bit, by saying, “Well, what part of the Constitution, and what part of the Administration Procedure Act do you have in mind? Because maybe we don’t have a problem, if you agree that Brady Rights are guaranteed under the Constitution.
But do you have a sense of whether the position that internal preexisting procedures provide adequate due process protection, as claimed in the April 2021 recission document?
Hon. Beth Williams: Yeah. That’s a great question, Sheng. And maybe I can actually ask the question a little more broadly, because I think it’s really important here to separate the policy from the litigation. And I understand that DOT has asserted that they have every right legally to withdraw the protections that the Bradbury Memo granted. But what is there, putting on your best “if I’m the lawyer for current DOT” hat, what’s their best policy justification for removing those regulations and the protections in the Bradbury Memo?
I know that they’re talking about Biden’s first day executive order. President Biden’s first day order suggested that the regulatory reform rules that were put in place under the Trump administration were unduly restrictive to the government, and tied the government’s hands when it was trying to redress societal ills. So, since we don’t have someone from the administration here, what do you think would be the best policy reason for defending the rescission?
Hon. Steven Bradbury: Well, enforcement agencies, administrative agencies, always like to have flexibility in crafting rules, as well as in procedures they follow to bring enforcement actions. And if you are pursuing a — if you have a mandate to protect safety, and there’s an argument that the more flexible the procedures, the more streamline the process the agency can follow, the quicker it can act, the more protective it can be of safety. And, in putting this policy in place, we were not making any kind of statement or reaching any kind of conclusion that the components of DOT had been acting in a manner that was unfair to regulated entities, or that there had been consistent violations of due process. This was an effort to enhance the transparency of the procedures, to ensure notice, opportunity to be heard, that due process would be provided, and to, then, enhance, for example, with the Brady disclosure of exculpatory evidence, to enhance the procedures followed.
When you pull it back, as they’ve done, eliminating these policies, taking them away from the Code of Federal Regulations, then, basically, what you’re saying is, “We don’t want public regulated entities to see or know exactly what procedures we believe we’re binding ourselves to, we’re following. Just trust us. We’ll guarantee due process. And if we don’t, or if you don’t think we have, well, you have recourse at the courts, and the courts are the ultimate judge of what due process requires in enforcement actions. So you’ll get what you’re entitled to under the Constitution, through the courts, if you feel like you’ve been denied that.” And so it’s six of one, half-dozen of the other.
The difference is the transparency, the public statement of “Here are the standards, the particular components of due process and fairness that we think are important for our agency, and that we’re going to live up to, we’re going to hold ourselves up to. And we’re disclosing that in a way that ensures everybody understands the field that they face in an enforcement action.” And then the disclosures and affirmative duties that we put in place in these policies would enhance that and just improve the — actually improve the accuracy of the enforcement actions that come out the door at the end of the day, and, therefore, truly improve safety results for the American people, we thought.
And I guess the current administration thinks, well, maybe because of the pandemic, or just because of the acute needs we have for safety, or whether it be environmental justice or equity, or whatever their policy emphasis might be, we think we need to move quicker, in a more streamlined way. We can’t be bothered going through all these extra steps of disclosure and process. It just inhibits our ability to do what we want to do. And we’re good people acting in the best interests of the American public. So you shouldn’t be concerned. And you still have your day in court. So that’s what they —
Sheng Li: After over — sorry, go ahead.
Hon. Beth Williams: No, I was just asking if you had something to add, Sheng.
Sheng Li: Yeah. So, after a year of litigation, I still don’t know, and the government hasn’t clearly represented one way or the other, whether or not — even though the regulations have been rescinded — whether or not the eponymous Bradbury Memo is still in force. It was on the website, I think, I used the way-back machine, so I was on the website as of 2020, December 2020. As of May or June, 2020, ’21, it’s no longer on the website. But there has also been no public announcement that it’s been rescinded and new internal instructions have been given. So, Steve, do you have a sense of what is the status of that memo?
Hon. Steven Bradbury: No, I don’t know.
Sheng Li: Okay. But, generally, would a memorandum like that still be in force or in affect or guide decisions, even after a regulation that purports to implement it gets rescinded?
Hon. Steven Bradbury: Well, I’m not sure. It depends. They could send an email out from the general Counsel saying, “Don’t rely on that memo anymore.” I don’t know if that’s been done, in some form. There are a lot of internal memos and policy statements that kind of gather dust on the shelf. We did a big effort, in our time at DOT, to go through all of the internal orders at the Department and cull out the ones that were moribund or obsolete. But there’s a lot that sort of stays on the books.
And, yet, if there isn’t a process of supervision and attention to it, these subagencies of the Department can kind of continue on their traditional pathway, and kind of feel like they don’t have to worry about it anymore. They don’t have to deal with it. And that’s a tendency that agencies sometimes fall into, often fall into. So, I don’t know, to answer your question.
Hon. Beth Williams: That was actually a factual question I had too. And somebody in the audience might have it also. Was this a rescind and replace by the Department of Transportation? The Department of Justice, for example, in this same — similar to the Department of Transportation, issued memos, the Sessions Memo and the Brand Memo, that pre-dated the executive order. And I think with the DOJ regulations it was purely rescinding. There’s no replacement yet. Is that the same from you?
Hon. Steven Bradbury: I think that that’s what you see. I know I saw we had a question from someone in the audience about, well, “Didn’t we, in the Trump administration, just do to the Obama administration’s policies what the Biden administration’s done to ours?” And that’s not really the case. Because we didn’t withdraw policies that the Obama administration had put in place to ensure due process enforcement actions and replace them with what we thought were different or better policies. There wasn’t such a clear, centralized policy in place like this for the Department, so we thought this was an improvement, putting this in place and enhancing the procedures that everyone would follow, regularizing them and ensuring disclosure notice, due process.
And the current administration, as I understand it, has, for these reasons we’ve discussed, announced they’ve just revoked and taken it away. And so what you have is a situation before, now again, where there really just isn’t this kind of regularized consistent guidance and sets of procedures that people follow. And I think that’s a detriment. I think it’s a detriment to the public. I think it’s a detriment to the effectiveness of the Department’s safety enforcement at the end of the day, because it takes away from the robust fair nature of the procedures that are followed. And, for the life of me, I can’t understand why you wouldn’t want to have a positive statement about the fairness and due process of your enforcement agencies.
And if you’re going to change that statement, why wouldn’t you do it in a more careful way, where you analyze the particular — provision by provision, like the Brady exculpatory thing, and explain, is this something we want to continue to do and follow and say we’re going to follow and hold ourselves to, or not? And, if not, specifically, why not? What’s the harm to the public in the process of doing it? But there really wasn’t an effort at explanation like that. And that’s what’s particularly disappointing to me and, frankly, it was a bit shocking.
Sheng Li: Well, some of the — there are other agencies with similar — not as comprehensive, perhaps, as this, but there are agencies with some similar rules. For instance, I think the SEC has its own kind of Brady Rule. The CFTC has, through its adjudication process, has held Brady to be a due process requirement in its internal administrative adjudications. Do you feel like that or any other of the — maybe the reliance on Chevron and Auer are kind of non-optional requirements, that constitutional due process requires certain of those requirements to be followed in the agency’s administrative proceedings?
Hon. Steven Bradbury: Well, as to the Brady rule, I guess, Sheng, I’m not really going to comment on the ultimate question. I saw that in your case, there’s an argument that because penalties and enforcement actions for regulatory violations are akin to criminal enforcement because they can be punitive in nature, in part, that the due process principles that underly Brady should apply in this context as well. And I have seen that there are some cases suggesting that, in certain contexts.
As I mentioned, when we put this in place, it was carefully written, as you see in the memo. And, as was expressed in the CFR, not to take a position, or not to suggest that the agency is bound by the Constitution to do this. Because, as I mentioned, the agencies had not been doing it. It had not been viewed as a due process requirement. So we put it place as a policy. On the Chevron and Auer deference point, I don’t see that as a practical matter, being enforced by courts. Because Chevron and Auer are doctrines that speak to courts and the role of courts. They express the deference that courts should provide agencies to ensure that the court is not usurping the discretion of the agency as the regulator.
What we were trying to express here, and what I strongly feel, is that agencies, when they regulate and enforce regulations, should not just rush to the boundary of Chevron deference or Auer deference as the outer perimeter of what they can get away with, but rather should make a judgement. What’s the right thing to do with the facts we have? What’s the best answer here?
But frankly, unfortunately, that is not the reality in lots of agencies. Regulatory agencies tend to rely on the deference that courts have granted as the outer perimeter of the envelope of what they can do. And they will push that envelope. They’ll actually use Chevron in analyzing and formulating regulations. And they’ll use Auer and other deference in deciding what they can do in an enforcement action. I think that’s very unfortunate. And it might require legislation from Congress or a revision to these deference standards by the Supreme Court to help address that issue. We tried to do it here. And I think it’s the right thing to do.
Hon. Beth Williams: So we’ve got one question for Sheng, and then two questions from the audience. So, for Sheng, what do you say to the argument that if DOT were granting rights to third parties, initially, it had to go through notice-and-comment, initially. And then not going through notice-and-comment is really about the Secretary’s ability to promulgate regulations to run the agency the way he or she sees fit.
Sheng Li: So, if I understand that correctly, the questioner may suggest that, because these regulations weren’t passed with notice-and-comment, that rescission without notice-and-comment would be somehow permitted. Is that —
Hon. Beth Williams: Correct.
Sheng Li: I think, one, the Supreme Court has said reliance interests are really important, that even if a regulation that provides binding rights was passed without notice-and-comment, because of the reliance interests that parties have in the protections provided by those regulations, then the way you rescind them, you have to use different, and perhaps more robust procedures, particularly here.
My client Polyweave didn’t have these regulations in 2017 when it was going through the agency’s initial adjudication. And, in 2021, when it had the opportunity to appeal, it looked and said, “Hey, we have these regulations that protect us. We could really appeal the bad decision that came out, and have a fair shot at prevailing in that appeal,” and relied on the existence of those regulations in making that decision and hiring attorneys, and crafting arguments. And to have the regulations pulled out from underneath them in the middle of their appeal, it’s — we think — itself, improper, and required, certainly, a better explanation and, likely, notice-and-comment as well.
Hon. Beth Williams: Thanks. So, question from the audience. And this is to Steve. Steve, did the sub-part D regulations create substantive rights? If not, can’t all regulations be protected from review simply by including the boilerplate?
Hon. Steven Bradbury: Well, I guess I’m not going to comment on the ultimate question, which really is, in effect, the issue, in the Polyweave litigation. And this kind of also goes — I see we have two questions, sort of combo question here, a comment and a question from Reggie Govan, who is the former Chief Counsel at the Federal Aviation Administration. And his first comment sort of goes to this question, too, that, basically, because these are internal procedures, that the agency can revoke them or rescind them at any time, even without giving a reason.
I guess what I would say is, without commenting on the ultimate question, that is the question that this litigation is raising, and that is to say, if you put procedural enhancements in place for the purpose of trying to improve the fairness of the process, including the treatment of regulated entities, and if a regulated entity believes it’s been harmed by the rescission of those enhanced procedures, then there’s a question raised as to whether the agency must act reasonably and give reasons in taking them away, versus putting them in place in the first place.
I’m not going to express a judgement on that ultimate question. That’s, I guess, at the merits of the case that Polyweave has brought. The district court did not reach the merits, except to say it thought it didn’t have a good chance of winning on that question. But Reggie also raises a second question about internal deliberations among inspectors and whether internal deliberations might constitute exculpatory evidence. And, I, again, I don’t want to get into too much specifics, but we do make it clear in the memo that draft documents and deliberative process materials are not part of the administrative record.
And if it’s truly deliberative, in terms of expressing recommendations, as to how to approach something, it wouldn’t be evidence. It wouldn’t be part of the record. However, if, in the process of different inspectors reviewing machinery or reviewing the practices of a regulated entity, there are factual statements made about the condition of something, or actions that were taken, it’s quite possible that that factual information might constitute something that would fall within this policy of favorable to the entity that’s subject to the enforcement action, and therefore, subject to disclosure. So, I guess that’s what I’ll say.
Hon. Beth Williams: That’s great, thank you. Sheng, did you have any comments on that question?
Sheng Li: No, I’m — yeah.
Hon. Beth Williams: So one final question with our last two minutes left. Have you considered this case in light of the Supreme Court’s 2019 DACA case, DHS v. Regents, where there the Obama administration didn’t go through notice-and-comment rulemaking to create DACA, but the Supreme Court held that DHS should have gone through APA procedures to rescind DACA?
Sheng Li: Yeah, we cite the DACA case quite a bit in our pleadings and our briefs. And I think the issue is very similar in that, again, was non-notice-and-comment — DACA was essentially a non-enforcement policy. And, here, it was what we do, procedural protections in enforcement. And it created certain expectations for the regulated community. And I think the regulated community, including Polyweave, relied on those expectations in deciding, not only their behavior, but what — in Polyweave’s case, it was in the middle of an enforcement action, in deciding its strategy in how to pursue its rights in the enforcement action. And when those rights are taken away without any explanation, certainly without any consideration of the reliance interests that Polyweave and other similarly situated companies have, then we think that’s, like in the DACA case, that would constitute arbitrary and capricious agency action.
Hon. Beth Williams: Great. Well, I think we’ve reached the end of our time. So I want to really thank Steve Bradbury and Sheng Li very much for participating today. And thank all of you, and turn it back over to Ryan.
Ryan Lacey: Thank you so much, Beth. On behalf of The Federalist Society, I want to thank our experts for the benefit of their valuable time and expertise today. And I want to thank you, the audience, for joining us and participating. We welcome listener feedback by email, at [email protected] And, as always, keep an eye on our website and your emails for announcements about upcoming webinars. Thank you for joining us today. We are adjourned.
Former General Counsel
U.S. Department of Transportation
New Civil Liberties Alliance
U.S. Privacy and Civil Liberties Oversight Board
Federalist Society’s Administrative Law & Regulation Practice Group