Deep Dive Episode 246 – Creatures of Statute: Administrative Agencies in Practice

[Music and Narration]

 

Introduction:  Welcome to the Regulatory Transparency Project’s Fourth Branch podcast series. All expressions of opinion are those of the speaker. On September 12, 2022, The Federalist Society’s Regulatory Transparency Project and the Capitol Hill Lawyers Chapter hosted part one of a three-part luncheon panel series. The following is the audio from the event, “Creatures of Statute: Administrative Agencies in Practice.”

 

Steven D. Schaefer:  Welcome to “Creatures of Statute: Administrative Agencies in Practice,” the first of a three-luncheon series on the role that the administrative state plays in modern American government. This series is brought to you by The Federalist Society’s Regulatory Transparency Project and the Capitol Hill Lawyers Chapter. My name is Steven Schaefer, and I’m the Director of the Regulatory Transparency Project, which is dedicated to fostering discussion about how regulations either succeed or fail and think about how we might improve them. Savannah Griesinger, Federalist Society’s Director for External Relations, also co-planned this event. 

 

Today, we are pleased to have with us a panel of experts on the administrative state: Boris Bershteyn, Paul Ray, and Judge Stephen Alexander Vaden. Note, The Federalist Society takes no position on particular legal or public policy matters. All expressions of opinion are those of the speakers. You also see on your tables — because this is a series, we have two more events here: Capitol Hill Club on Mondays, October 3rd as well as October 17th. You can actually scan QR code and register for those events, and we’d love to see you there. 

 

Judge Stephen Alexander Vaden serves as judge on the United States Court of International Trade, following his confirmation by the United States Senate on November 18, 2020, and appointment by President Donald J. Trump on December 21, 2020. Before joining the Court, Judge Vaden served as General Counsel of the United States Department of Agriculture. Judge Vaden supervised more than 250 legal professionals in 13 offices across the United States who handled all legal matters on behalf of the Department with more than 100,000 employees and an annual budget approaching $150 billion. During his nearly four-year tenure as head of the Office of General Counsel, the Department won two cases before the United States Supreme Court, relocated and reorganized the agencies that comprise the Department to better serve rural America, engaged in substantial regulatory reform, developed new regulations to allow for the legal sale of hemp and the labeling of bioengineered products, and implemented the 2018 Farm Bill. The Department averaged more than 5,000 matters in litigation before federal legal and administrative tribunals at any one time. 

 

Judge Vaden also served as Member of the Board of Commodity Credit Corporation, a government corporation devoted to helping American agricultural producers. During his tenure from 2017-2020, the Board developed programs to assist American producers affected by foreign trade barriers. In the private sector, Judge Vaden worked for two law firms: Jones Day and Patton Boggs. At both, Judge Vaden served as an appellate litigator and as part of the firms’ political law practices. In this role, he counseled political candidates, donors, and others involved in political process or compliance issues involving federal and state laws that govern those who are seeking to hold elective office. A native of Union City, Tennessee, Judge Vaden grew up helping with his family farms and real estate ventures. Judge Vaden, I’ll let you take it from here.

 

Hon. Stephen Alexander Vaden:  Thank you so much. It’s wonderful to be with you all today. [Inaudible 00:04:17] the microphone there? 

 

Participant:  Here you go, Judge.

 

Hon. Stephen Alexander Vaden:  Oh, okay. Thanks. Okay. Hopefully, this is better. It’s wonderful to be with you all today. I’d like to thank The Federalist Society and the Capitol Hill Chapter for having us. As was mentioned, this is the first in a series of three events on the administrative state and how it affects both the policymakers and the law. 

 

In this event today, we’re going to look at how the administrative process works with a particular focus on the Office of Information and Regulatory Affairs or OIRA. It’s the most powerful agency most people have never heard of. And to help us understand how the regulatory process works, we have two experts with us here today who headed OIRA during their tenures in the federal government as its administrator. 

 

First, to my left, although not politically, [laughter] is Paul Ray. Paul was Administrator of the Office of Information and Regulatory Affairs from 2020 to 2021. Prior to that, he served as a counselor to the Secretary of Labor. Currently, he is the Director of the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation. Paul clerked for Judge Debra Livingston across the street from me on the Second Circuit and for Justice Alito on the Supreme Court of the United States. He’s an alumnus of Hillsdale College and the Harvard Law School, and he’s a fellow Tennessean like me, although he’s from the southeast in Chattanooga rather than from the northwest where I am. 

 

To my right, is Boris Bershteyn. As was mentioned, Boris also served as the acting Head of the OIRA from 2012 to 2013. Before that, he served as General Counsel — so he would have been my colleague — of the Office of Management and Budget from 2011 to 2012. And before that, he served as an Associate White House Counsel under President Obama. Boris is currently an attorney at Skadden, Arps, handling all types of antitrust and regulatory matters out of their New York office. He clerked for Judge José Cabranes on the Second Circuit, also across the street from me there in New York, and Justice David Souter on the Supreme Court. He holds degrees from Stanford and Yale Law School. 

 

So to kick things off, Paul, I’m going to turn it over to you first, and I’m going to ask the simplest question that we can begin with. What is an agency, and what is a regulation?

 

Paul J. Ray:  Can you guys hear me? Hmm. Interesting. 

 

Hon. Stephen Alexander Vaden:  You want to take this one?

 

Paul J. Ray:  Yeah. Maybe I should. Thank you. All right. Better? All right. Good. So thank you, Judge, for the question, a great place to begin. If you don’t establish what an agency and a regulation are, we can’t really go much further. So the word, “agency,” comes from the Latin word, ago, and it’s the same place we get the word, “act.” So an agency is simply an instrument of action. That’s the best way to think of what an agency is. 

 

So the federal government has many, many agencies. Really, there’s an agency for every kind of action that needs to be taken. There are, I believe, 17 major regulatory agencies in the President’s Cabinet. There’s about a dozen independent regulatory commissions. We’re going to talk about what those are in a little bit. And there’s over a hundred other agencies that don’t fit into either of those categories. 

 

The other agencies can be very large and powerful, such as the CIA, or they can be very small with a limited jurisdiction, such as the Presidio Trust. Does anyone know what the Presidio Trust is? Nice. You guys Californians? Exactly. Okay. There we go. The Presidio Trust superintends a single park in the San Francisco area, so just to illustrate the wide scope with which agencies have to do. So basically, anything that the Executive Branch or the federal government does is done by an agency. That’s what you need to know. 

 

So agencies fight wars. They conduct espionage. They fund things, many things. They communicate. They prosecute. They adjudicate. And of course, they regulate. That’s what we’re here to talk about today is the regulatory process, in particular. 

 

So I want to begin by pointing out that we’re not here to talk about all that agencies do. We don’t have enough time for that. You don’t have enough time for that. We would spend hours and hours, and we need to get Scotch or something like that up here to sustain us through many hours of conversation. But we’re here to talk about really one activity, which is regulating. We’re going to talk a little bit about adjudication as well. 

 

So to regulate is to issue a rule. A rule — a good working man’s definition of a rule is a norm of conduct that applies to multiple parties on a going-forward basis, prospectively. Okay? That’s actually a little bit narrower than the definition in the Administrative Procedure Act. I think we’re going to talk about in a bit, but it’s a good kind of working man’s definition. When we talk about agencies regulating or issuing rules, engaging in rulemaking, what we’re talking about is the creation of norms that direct conduct directed at more than one party — at a class of parties on a going-forward basis. So now, you have a definition of “agency” and a definition of “rule.” So Judge, over to you. 

 

Hon. Stephen Alexander Vaden:  All right. And Boris, my first question for you is tell us about the Office of Management and Budget, of which the Office of Information and Regulatory Affairs is a part, and what role they play in the regulatory process?

 

Boris Bershteyn:  Thank you, Judge, and thank you to The Federalist Society for organizing this event and for the invitation. So Office of Management and Budget is an agency within the Executive Office of the President. If you can think of the White House as at the center of the executive branch, there are sort of inner and outer orbits, and the Executive Office of the President is the innermost orbit, and OMB is the largest agency in that orbit. But as the largest agency, it has 500 employees compared to 100,000 in Judge Vaden’s former agency. Of those 500 employees, about 95 percent are career federal employees, which is to say that those who work in the Biden administration today also, for the most part, worked at OMB during the Trump administration. 

 

The — what does OMB do? I think if I had to put it in the simplest terms, what OMB does is facilitate the management of the rest of the executive branch by the president, and in turn, it works with the agencies elsewhere in the executive branch to help those agencies channel their activities to the extent permissible in the direction of the president’s policy priorities. 

 

How does OMB do that? It has basically five tools. There is the president’s budget, which you know you hear about every late winter, and that’s a statement of the president’s priorities, and it requires reconciling conflicting views of agencies, which, as you can imagine, each wish to have a more prominent place in the budget than the president might desire. The OMB facilitates the president’s — the executive branch’s communication with Congress, the review of legislative testimony or legislative proposals. OMB reviews and coordinates executive orders and presidential memoranda. OMB has cross-cutting offices that were created in OMB by Congress to oversee certain kinds of activities across agencies, like procurement and financial management. 

 

And last but not least, OMB has a subagency called OIRA, which performs regulatory review and review of various information collections. So if you’ve ever filled out a government form, which I suspect all of us have, you see a little stamped number at the — somewhere at the bottom that has been approved by OMB. And that’s one of the functions that OIRA performs. 

 

But the function that we’re here really to talk about is the regulatory review function. And to give you just a very bird’s eye view of that, what happens to a rule is it generally appears in public in at least two versions as a proposed rule on which the public can comment and then as the final rule. And before it makes either of those appearances in the federal register and thus to the public, it has to receive approval from OIRA. That’s an authority that has sometimes proven controversial. 

 

What does OIRA do? It does really two big things. It coordinates the rule with other federal agencies to make sure that the proposal from the agency that’s promulgating the rule doesn’t conflict with either the legal scheme or the programmatic scheme being administered by a sister agency. OIRA also ensures integrity of the cost-benefit analysis that’s often embedded in the rule. A — maybe a just very, very short history of OIRA’s rulemaking function is that as far back as — in the post-World War II presidents — so the Nixon, Ford, Carter administrations — efforts have been made by presidents to try in some way to coordinate the regulatory activities of agencies. And the big development in that came early in the — in President Reagan’s administration when he directed OIRA to review all the rules and to ensure that cost-benefit analysis is conducted. 

 

That was controversial, and I’m sure we’ll talk about some of the controversies surrounding that. But somewhat to folks’ surprise, President Clinton retained much of President Reagan’s system, and while presidents after Clinton have made tweaks here and there, and presidents after those repealed those tweaks, the 1993 version of regulatory review more or less survives today and is — has become a, not entirely uncontroversial but much more accepted, part of the regulatory process.

 

Hon. Stephen Alexander Vaden:  And then, I’m going to talk a little bit about that regulatory process, and at the end of these opening remarks, you’ll see why administrative action, although sometimes it can move faster than Congress, still moves very slowly. And so, for any regulatory action that’s going to be taken and that’s going to go through the rulemaking process, it’s going to have three key parts. It’s going to have an intra-agency part. It’s going to have an interagency part. And then, it’s going to have a public part. And it’s going to have to go through each of those three parts a minimum of two times. So that means there’re going to be six steps along the way, which helps you to understand why, even in the best of circumstances, a normal rulemaking process takes at least a calendar year. 

 

So first, an agency decides that it needs to promulgate a rule. Well, that means the agency itself has to get its act together. It’s got to have internal meetings. It’s got to figure what proposal it wants to put before the public. It has to write that proposal. That proposal has to go through legal review in the agency’s General Counsel’s office. 

 

It’s going to be — need to be circulated among policymakers, undersecretaries, assistant secretaries in the agency. They’re going to need to comment on it. It’s going to need to go to the Secretary for at least his knowledge and maybe his input on what needs to be put out to the public for comment. There may be other policy-level reviews stipulated by the Secretary that are required before a promulgated rule can leave the Department and go over to the White House where Paul and Boris sit at the Office of Information and Regulatory Affairs, keeping in mind that the rule is private. People may know that it’s being worked on, but no one knows what’s in the rule at this point, outside of the government. 

 

And so, what Paul and Boris would do is they would take a look at the rule, and they would say, “Huh. This rule — if it was a USDA rule, for example — this rule may affect equities at the Department of Health and Human Services. The Department of Interior may have something to say about it. The Department of Justice will always have something to say about it and lots of other Cabinet departments.” So it’s going to send this rule around to the other Cabinet departments and ask for their input. 

 

Are you fine with this? Is there something that would conflict with your authorities? Does it need to be changed? If we’re talking about the Department of Justice — it’s not if — when we get sued, will this likely be struck down in court, and how can we seek to guard against that? And sometimes, there are disputes between Cabinet agencies, and it’s OIRA’s job to serve as the referee of these disputes. And these disputes have their own elevation process, beginning at the staff level, going up to the General Counsel or Assistant Secretary level. And then, if there continue to be disputes, it can go all the way up to where you have a meeting on rare occasion between Cabinet Secretaries in the Oval Office, where the President himself makes the decision about what the answer is going to be, all of that under OIRA’s auspices. 

 

At the end of all of that, OIRA puts its stamp of approval on the rule and says, “Okay, this looks like a valid proposal to us; you may issue it.” Then, and only then, does the rule go back to the Cabinet department for publication in the Federal Register, which is where all of you come in, in the public. That’s your first opportunity, and in some cases only opportunity, to provide comment on what the agency has prescribed. There can be 30 days, 60 days, 90 days, what have you, of comment. And then, once all those comments are received by the agency, we start this whole process all over again. 

 

The agency has to look at your comments. It has to decide whether there are good points, bad points, and it has to formulate responses to them. It may want to tinker with its initial proposal to respond to those comments. Once it’s done with that, it goes back to OIRA for the interagency review. We go through that whole process again. And then, only after that process has concluded, including the settlement of all policy disputes between affected Cabinet agencies, does it go back to the originating agency for publication in the Federal Register as a final rule that then goes and becomes a part of the code of federal regulations and can be enforced. 

 

So as you can see, it is a lengthy process, most of which the debates involving it are not subject to public view. So now that we’ve gone over how this lengthy process works, somebody’s got to be running it, Paul, and what makes the administrative process unique is that it touches all three branches of our federal government. Of course, it’s done by the executive branch. It’s supposed to occur where Congress has validly delegated authority to the executive branch to make a discretionary decision, and then, as I mentioned, someone’s going to sue and, of course, eventually going to have something to say about it. 

 

So why don’t we start out and either of you can respond to this, but — since you’ve both been in the position. Does that work now? Okay. He says that works. So Paul and Boris, I’ll pass this to you as soon as I ask the question. How does the president, the head of the executive branch, control the administrative state and the decision-making as we’re going through the processes we’ve outlined?

 

Paul J. Ray:  And it’s a great question. So I’d say the president has —

 

[CROSSTALK] 

 

Paul J. Ray:  Great. Okay. Good. The president has three primary controls over the regulatory process, so one is a control that he’s had for a long time, which is he appoints the Cabinet secretaries and the members of the independent regulatory commissions. He looks for people who agree with what he wants to do. Now, that’s a good control, but it’s not a perfect control because, as you might imagine, it’s — once someone is appointed, they may have their own plans for what they want to do. Their policies may not be the same as the president’s. And the president can fire a Cabinet secretary, but it’s a politically costly thing to do. And often, he can’t fire a member of an independent regulatory commission, so the ability to appoint, standing alone, only conveys so much presidential control. 

 

The second of the principle means of control is the OIRA process, which you’ve heard described just now very aptly. So the OIRA process gives the president a kind of last-minute veto on the regulatory process. If the agency prepares a regulation and sends it to OIRA for review, OIRA can say, “We believe this is not consistent with the president’s priorities,” and can refuse to allow the regulation — or can refuse to bless the regulation. And the agency then will not issue the regulation. Of course, as Judge Vaden just mentioned, the agency presumably would then protest and say, “No. The president does want a regulation of just this sort.” And there would be a series of meetings that would result in a presidential decision on the point. 

 

And the OIRA process facilitates presidential control of the regulatory process in a very serious way, but it, too, does not give the president anything approaching total control, principally, because it comes at the end of the regulatory process after the agency already had done a lot of work on the regulation. It’s responsive, so it doesn’t make the agency start a rulemaking. It only prevents the agency from concluding a rulemaking that the president may not like. And the OIRA review process does not apply to the independent regulatory commissions. 

 

The third of the mechanisms is a recently evolved mechanism. There’s a phenomenal article by now Justice Kagan about the Clinton administration’s, basically, creation of this mechanism. There are, in the White House, a series of groups of people called the policy councils, the Domestic Policy Council — you guys have heard of these? — National Economic Council, and they, unlike OIRA, can provide the president with ex-ante control of the regulatory process. So a policy council might work with a Cabinet department and suggest a regulation to that department. So rather than having a veto authority like OIRA does, a policy council can convey to an agency, “We believe that the president wants a regulation of this sort,” and work with the agency to produce such a regulation. So these three mechanisms mean that the president controls the heads of the agencies, and then, he has a lot of control over the beginning of a regulation and the end of the regulatory process as well. 

 

So the president has pretty serious control over the regulatory process. Now, that’s less true of the independent commissions, and we’re going to talk about those in a little bit. And one further point I want to make is, obviously, the folks actually working on a rulemaking are often agency career staff who are not accountable to the president in the same way that political appointees are, but the people who are making the final decisions about the content of the regulations — what is the regulatory text going to say? — right? — those are political appointees answerable to the president, accountable through this ex-ante and ex-post process that I’ve described. So the president — basically, in my experience in the Trump administration, I can think of only a single regulation by a Cabinet agency that the president did not support, and that’s a pretty remarkable fact, I think. 

 

Hon. Stephen Alexander Vaden:  Boris, would you like to add anything to that?

 

Boris Bershteyn:  I’ll just add something brief, and I completely agree with everything that Paul said. You — can you hear me? 

 

Audience member:  No.

 

Boris Bershteyn:  No. All right. Okay. Is this better or — okay. Cool. Maybe I’ll just say one thing that’s just a synthesis of maybe of the things Paul said, which is that it’s — I think it would be inaccurate to give you an idea that all these different actors are — have a very formal relationship with each other. They communicate only by memoranda or have kind of a very structured ways to let each other know what’s going on. A lot of the problems of coordination in regulation are generally solved just by informal communication and just by human interaction of — and try to be — courteously keep each other abreast of what others are doing. 

 

And so, to take my position as an acting OIRA Administrator, I was very interested, not just in my outbox — that is what rulemakings do I have for review and how quickly can I get them out — but what’s coming into my inbox. And so, I spent a lot of time just talking on the phone and meeting with deputy secretaries from different departments, trying to understand what their priorities are and what the timelines for meeting those priorities are because once something comes into OIRA, if it’s something that the administration doesn’t support or has significant substantive issues, that — the fact that something has come into OIRA is a public fact, and then, you can find it on reginfo.gov. And so, the public knows it. The regulated entities know it. The entities interested in regulating out there know it. You folks on the Hill know it, and there are people who are supporters and opponents of the regulation on the Hill. 

 

And if this regulation is just parked at OIRA, gathering dust while everyone’s trying to figure out what to do with it, the OIRA administrator gets a lot of calls. “Well, why haven’t you moved this?” And there’s just — it’s not a desirable set of circumstances. It can generally be avoided if everyone has a shared understanding of what the priorities are and what the timing is and how to allocate our shared resources.

 

Hon. Stephen Alexander Vaden:  Boris, I’m going to stick with you to be fair for the next question. Of course, we’re here at the Capitol Hill Chapter. Many people in the audience here today work on Capitol Hill for Congressmen and senators. And so, I’m going to ask you the question that their bosses frequently ask them when they learn of an administrative action, and that is why in the hell are they doing this, and who allowed them to do this? And as you know, the crass answer is because Congress allowed them to do it. But I’d like for you to let everyone know that — what role Congress plays, both beforehand, in terms of when they initially pass a rule with something delegated to the executive branch, and then, what oversight roles they can have once an executive agency begins to take an action if they have some questions or concerns about it. 

 

Boris Bershteyn:  Well, probably the right answer is the crass answer, is what you get from an agency is, “You made us do it,” because with some very few exceptions in constitutional areas that are left to the complete discretion of the president, like foreign policy or conduct of military affairs, the authority of the agencies to issue regulation comes from Congress. It is the implementation of statutes that agencies are directed to undertake. And that’s the — that’s really their only source of authority. Now, the challenge is that the statute, sometimes for very good reason, is not written in a prescriptive way. And it leaves some opportunity for interpretation. 

 

Sometimes, that’s necessary for the statute to be enacted. Sometimes, it’s just the right thing to do. Sometimes, it, I suspect, might be inadvertent. But it is what it is. And it is left up to the agency to interpret the statute in the course of the regulation. And at least historically, and this is a somewhat evolving area of law, courts have been tolerant of a range of interpretations of a statute that’s not completely prescriptive, provided that interpretation is reasonable. 

 

And that often means that an agency has a selection of ways to interpret the statute. Inevitably, that — some of those ways are not what, at least, some members of Congress intended when they voted for the statute or at least not what they had in mind today. And so, the heads of the agencies are subject to Congressional oversight role. And so, they’re called to the Hill to explain themselves. And then, there is an ex-post statute called Congressional Review Act, which, under certain circumstance, allows both houses of Congress to essentially enact an expedited resolution — I’m probably not using the term precisely — to overrule the regulation.

 

Hon. Stephen Alexander Vaden:  Joint resolution of disapproval.

 

Boris Bershteyn:  There we go. And though the challenge is if the president who oversaw the promulgation of the rule is still in office, the president has an ability to veto the joint resolution. And then — and it is uncommon for there to be a veto-approved majority to overrule it. But there have been circumstances historically where that’s happened, most especially during transitions between administrations of different parties. And then, maybe I’ll stop there and leave something for Paul to say.

 

Paul J. Ray:  Well, thanks, Boris. And I agree with everything you just said. Really, what I’d like to do is draw together answers to the last two questions. So the agencies have rulemaking authority because Congress gives it to them, and as we said before, the president has really serious authority over the regulatory process at the agencies. So really — and if you are to take away just one point from at least what I’m saying today, I wish it would be this point. When Congress give authority to the agencies, they’re giving authority to the president. And unless Congress repeals the statute that gives the authority to the agency, that authority will remain on the books in perpetuity. Right? 

 

So it’s very, very common to find authorities that were enacted in the ‘40s or ‘50s and were in response to some crisis du jour and are still very much used in regulatory responses by the agencies that are controlled by the president. So the point I wish to make is Congress very often will create an authority with a particular task in mind. It will look at the state of the country, the state of the world, and think it would be — “X agency really needs to accomplish y thing, and so, we’re going to create z authority.” But z authority stays on the books for decades and decades to come. And the agency is subject to the direction of the president, so that authority becomes one tool among many in the president’s very capacious toolbox. And the president, through the regulatory process we’ve described, is able to deploy those tools in ways that, I think, are often — would be surprising to the Congresses that enacted the statutes decades and decades ago. 

 

So to take one topical example, the eviction moratorium, I suspect that the Congress that enacted the CDC authority issued there would have been very surprised to see the way that the authority was used. Perhaps it would have supported the using that way. I think it wouldn’t have. But any event, it would have been surprised. It’s not what Congress thought it was doing. But it enacted an authority, gave it to an agency that reports to the president, and so, the — that authority then becomes a kind of instrument in service of the president’s political projects, whatever those may be going forward.

 

Hon. Stephen Alexander Vaden:  And I’ll — two points based on what both of you gentlemen said. First, a joint resolution for disapproval is uniquely powerful, if you can get it through, for two reasons. Number one, it’s not subject to the Senate filibuster. It doesn’t take 60 votes to pass. If you’ve got 51 votes in the Senate, it passes. 

 

Number two, if you manage to get a joint resolution of disapproval to become law, whether by the president signing it or by Congress overriding his veto, there is a unique provision in the Congressional Review Act that says that that agency may not put forward another proposal of that type unless it receives explicit approval for — from Congress. So if a joint resolution of disapproval passes, it’s not just that this proposal is dead now. It’s dead for all time, unless and until Congress passes a law that says, “You, agency, may do this.” 

 

A second point that wasn’t mentioned by either gentleman is that Congress’s other tool is its most frequently used one when agencies do something that Congress doesn’t like; that’s the power of the purse. An agency can go through the entire process. It can put a regulation on the books, and then, in the forthcoming budget, Congress can say, “Notwithstanding any other provision of the law, you, the agency, may not spend one dime of taxpayer money to implement regulation x.” And if Congress does that, it’s very clear under the case law that regulation is dead. It doesn’t matter that it’s on the book. It doesn’t matter whether it’s a good or bad idea. If you can’t spend money to implement it, it’s not there. 

 

And you can find cases — we had one at USDA, involving that while I was there in the Eighth Circuit, that holdback. And that kind of gets us to our next topic before we open it up to questions, and that is what role do Article III federal courts play with judicial review over administrative agency action. So I’m going to say a little about this as the Article III representative here, and then, I’m going to pass the microphone to Paul and Boris, who are the victims of Article III, in this case, to talk about how they feel when courts get involved. 

 

So as I mentioned, almost any federal regulation of any type of dispute is going to find its way into federal court. So that leads to the question of what do federal courts when it gets there, and what can federal courts if they find an error? And so, one of the problems with the Administrative Procedure Act, and that is the law that governs review of administrative agency actions when they get into federal courts, is that its instruments that it provides for court review are blunt. And so, there’re only a couple of things that courts can do, and so that when even disappointed people win in federal court, they may not entirely be happy with the result the law allows the court to give as a remedy. 

 

Well, what do I mean by that? So when a rule comes into court, the court plays a unique role. We don’t find facts. We don’t hear from witnesses. We can only look at the evidence that was before the agency at the time the rulemaking occurred, which means that if you think up the world’s best argument for why this is either illegal or unwise, but you think — you don’t think of it until the record has closed, you’re out of luck. It’s speak now or forever hold your peace, which means that participating in the agency comment process, even if you believe that the agency will close its ears as a policy matter to the concerns that you raise, is vital because if you don’t raise the concern before the agency, you can’t raise the concern before the court. And the courts police that very strenuously. 

 

And if there is any argument that you have failed to make an argument before the agency, you can rest assured that the Department of Justice will make that point number one in their brief, as someone who reads a lot of their briefs. But let’s assume you’ve done that. And let’s assume the court looks at it, and there’s a problem. Well, there are two key remedies that you can get from the court. If there is a legal problem in the sense that the agency has acted without authority, in other words, after a court reviews the regulation, it determines that, well, Congress didn’t actually delegate the power to take this particular action to the agency. 

 

Then, the court can issue an injunction. That injunction basically bars the agency from enforcing what it is it has just enacted as a regulation. That’s a very blunt mechanism. You can enforce parts of a regulation, not others. You can enjoin the whole thing, but it’s basically a stop sign that says, “You may not do this, agency.” And that’s the end of the matter, if that is upheld on appeal. 

 

Secondly, and more frequently, the agency does have the power to do what it wants to do, but it’s gone about it in the wrong way. It’s done it procedurally incorrectly. It perhaps didn’t respond to all the comments that it should have or some other procedural error that the Administrative Procedure Act requires the agency to do. Frequently, an agency will come up with a great idea at the end of the process and say, “You know what? It would be great if we put this in our final rule.” And they put it in the final rule, and the problem with that is, oops, we didn’t put that particular idea out for notice and comment. It may be completely fine as a legal and policy matter, but because you, the public, didn’t have an opportunity to see it and comment on it, the agency can’t do it. That’s a common procedural option. 

 

Another possible issue is, well, maybe they didn’t have enough evidence in the record to support what it was they did. We will, as a court, review to see is there evidence in the record from which a reasonable person could have made the decision the agency made? As Boris mentions, it’s not would we as a court have made the same decision the agency made. The — because Congress has delegated power to the agency, the agency gets to make within the scope of that delegation a reasonable policy choice over which option to take as long as there’s evidence in the record that might suggest to a reasonable person that that is a good idea. As long as that’s there, the agency can do it, if it has legal authority. 

 

On the other hand, many times people put in evidence that suggests this isn’t a good idea, and the agency needs to rebut that evidence or explain why they discount that evidence. And if they fail to do it, then there’s not evidence in the record to support the decision. So in those two cases, if there’s a procedural file or if there’s an evidentiary issue, what does the court do? Well, the court’s only option is to remand the rule. We basically send it back to the agency, and we say, “Try again.” And the agency at that time has the ability to try to correct the errors that the court has identified, either by providing more procedures or by providing more substance, and then, the whole thing starts again, and you go back to federal court and answer the same question. 

 

So these are very blunt tools. But in the most common case, what frequently happens is is that the court says — doesn’t say, “No, you can never do this.” It just says, “You didn’t do this well.” And the question is whether the agency has the time or ability to go back through the entire process and try again. So now that I’ve provided a hopefully somewhat neutral explanation, I’m going to turn it over to the victims who have to deal with these court orders, and you can tell us your view of what happened when rules end up in court. Boris, you first.

 

Boris Bershteyn:  Sure. I think, Judge, you provided, not only a neutral but a — quite a complete explanation, and I think it’s a good — it gives us a good understanding of why so many rules are just in a perennial state of ping pong between the executive branch and the judicial branch without ever coming into effect. Maybe the one thing I want to say is draw a bridge between your comments and the earlier part of our panel. Just because the courts come at the end of the process doesn’t mean they don’t have an effect on the beginning of the process. You might be asking yourself, well, Paul and Boris, you have legal degrees, but their job doesn’t really seem to have anything to do with the law. It’s some kind of a policy, cost-benefit analysis job. What’s law got to do with? 

 

It turns out quite a bit because a lot of the debate during the regulatory enactment process happens in the shadow of the courts, in the shadow of Article III, of which we’re all victims, because a lot of the colloquy between OIRA and the agencies is about, “Well, you, Mr. Secretary, are proposing this, but we’re quite concerned that there’s a lot a litigation risk in this proposal because it is — doesn’t align in a most logical way with the text of a statute. Should we have another alternative that better aligns, at least for the public to comment on?” Or alternatively, OIRA, because of feedback from the agencies, might, for policy reasons, want to add another alternative for public to comment on. And we say, “Madame Secretary, shall we add this alternative?” The feedback we get is, “Well, there could be a lot of litigation risk with that alternative.” So a lot of — in a way, a lot of these legal debates are substantive. In some ways, they’re a proxy war for competing policy preferences. 

 

Hon. Stephen Alexander Vaden:  Paul.

 

Paul J. Ray:  Yeah, I agree with all that. I’d — what I’d add is that the legal discussion that Boris just mentioned itself happens within the broader context of presidential decision-making. Right? So the — a president very rarely wakes up in the middle of the night, and says, “What I want to do tomorrow is put out a Clean Air Act regulation under Section 112(e) to regulate x” — no, the president has broader political goals. Right? And so, typically and understandably, appropriately, the president or his immediate advisors will have a big policy idea, and they will say to the lawyers, “Can — we’d like to do x or something like x. Can you tell us what are the ways to do that? What are the authorities that we have, following the law that Congress has enacted to do this?” 

 

And so, the lawyers will come back with half a dozen or a dozen or more ideas that — not always. Sometimes, there’s only one way to do something. Sometimes, there’s no way to do something. But very often, there are multiple means to kind of get in the same area, get at or near the objective of the president, by drawing on the authorities from multiple agencies. So I think you see this with the vaccine Executive Order from President Biden, which invoked multiple authorities from multiple agencies all to promote vaccination, without assuming a position on the merits of that question. So the point is that while statutory law is a tremendously important constraint with respects to particular regulations, there are so many authorities the president can invoke that if one authority — if the law prohibits the use of one authority for an objective, there’s often another authority available, not always but very often there are multiple authorities in play. 

 

The only I’d add is it can be — how many of you had heard of the Administrative Procedure Act before this lunch? Well, I am blown away. That is a much higher ratio than one normally finds. That’s really encouraging. Is the APA trending on Twitter these days? [Laughter] So I’ll explain the way I think about APA with you briefly because I — there are some people who aren’t deeply familiar with it, I expect, in the room. 

 

So one way to think about what APA review is it’s review for whether an agency acted for reasons. It isn’t about whether the agency acted for this reason or that reason. The agency has wide discretion to choose among the reasons for action. But it does insist that the agency act for a reason. Right? The agency can’t enact a regulation without a good reason for it. It can’t enact any provision of the regulation without a good reason for it. 

 

So just as an example, the most famous APA review case of all time, beloved by Americans everywhere, is the State Farm case from the ‘80s. And there, the agency decided not to include an airbag safety requirement. And it didn’t say why it decided not to include it. And the Supreme Court said, “Well, there may be very good reasons not to include this requirement, but you need to tell us what they are, if there such good reasons.” It’s a violation of the Administrative Procedure Act, of the APA, to issue a provision in a regulation without a reason for it. And so, as you work with members of Congress trying to understand what really is at issue in APA litigation, really, very often, the court is trying to figure out whether the agency had a decent reason for what it did. So — 

 

Hon. Stephen Alexander Vaden:  And before we go to questions, I’ll just close by tying both of what you two, together, said because what you — you aptly put it, Boris, that all of this takes place in the shadow of the law, what the agencies are doing. And what that frequently means is is that when there are disputes between agencies, these two gentlemen, Paul and Boris, were called upon to act as almost a judge when agencies, perhaps including the Department of Justice, would come before them and make an oral argument, for lack of a better term, as to why their proposal was both legal and politically — and by that, I mean, policy wise — sound. And Paul and Boris would frequently have the final say over who gave the best argument, and Cabinet General Counsels were frequently involved in this. And that’s why I tell my law clerks, a couple of whom are here today, I argued in front of the DC Circuit Court of Appeals when I was in private practice, but the most important oral arguments I ever gave were not in front of a judge, and they were not in a court. And Paul was judge over a couple of them. And I’m proud to say he ruled in favor [laughter] in those there, so I did a good job.

 

Paul J. Ray:  Quite correctly. [Laughter] 

 

Hon. Stephen Alexander Vaden:  Very correctly. But these guys play an important quasi-judicial role, unofficially, in what they do, carrying out their duties, and that’s important to keep in mind. We’ve talked enough. You’ve got questions. We want to hear them. 

 

Audience member:  I’ll start with an easy one. So one of the big — you mentioned the CRA earlier — one of the big, in my mind, steps of progress during the Trump administration is the application of CRA to separate regulatory guidance. We saw a number of resolutions disapproved along those lines and also extended it to — made clear that it applied in an agency, some banking regulators, for example. The CRA starts by saying, “Before the regulation can go into effect.” So just sort of tying — it must be submitted to Congress, which is very different than the timetable that Congress has to act on a resolution of disapproval. In theory, that’s open-ended. 

 

So my question is — and I’ll give you a hypothetical. During the Trump administration, the PTO issued the Director a series of guidance to examiners on, for example, about patent eligibility but on a number of other issues. None of that was submitted to Congress. So the first question is, under a literal interpretation of law, are those legitimate rules? Are they, in effect, the statute would soon be clear [inaudible 00:50:57]? The second question is, and this hits judicial review, what are the implications for that? For example, if you get an adverse result as a result of a regulatory action that is not legal because that is not compliant with CRA, do you have judicial recourse, and what does it look like? 

 

Hon. Stephen Alexander Vaden:  Paul, I know you dealt with this question on a couple of key issues that came up in your tenure, so I’ll turn to you first. 

 

Paul J. Ray:  Great. Well, yeah. So as I recall, and I haven’t looked at the issue in a couple of years, but I don’t believe that any courts, or at least not many courts, have found the failure to submit reviewable. So — 

 

Hon. Stephen Alexander Vaden:  Although, it won’t surprise you to know that there are some in the Ninth Circuit that disagree with that. [Laughter] 

 

Paul J. Ray:  I’m shocked to hear that. So really, I would say that that’s the principal question there. And as the case law continues to develop on that question, I think the — it will issue greater and greater significance. 

 

Hon. Stephen Alexander Vaden:  Boris.

 

Boris Bershteyn:  My first question is how was that an easy one? [Laughter] But I — my impression is the same as Paul’s, but I know that that has been a subject of oversight. And to the best of my recollection, Senator Grassley, in particular, has been interested in compliance with the submission of the major rule designations and their accuracy. And so, I know we’ve had to do some work to make sure that the executive agency family is fully compliant. 

 

Hon. Stephen Alexander Vaden:  The only thing that I would add is that we’ve talked about — of course, everyone knows the judiciary’s primary job is to interpret the law. Both Paul and Boris have talked about how they operated in terms of trying to interpret the law in their roles. But we can’t forget that Congress also has an independent responsibility, believe it or not, to interpret the laws, and the Congressional Review Act is one example of that because an agency that is part of Congress, the CBO, frequently is called on to determine whether or not something an agency has done is subject to the Congressional Review Act. And there have been disagreements between the executive branch and the legislative branch over whether subregulatory guidance — in particular, I can think of with USDA individual forest plans are subject to the Congressional Review Act. 

 

And ultimately, it’s up to Congress what laws are passed, so if — even if the executive branch says, “We don’t think this is subject to the CRA,” Congressional Review Act, if Congress does think it’s subject to that and they pass according to its procedures a resolution of disapproval, disapproving of something, the text of the CRA would seem to make it very difficult to challenge Congress’s determination that this is something that should be subject to the Congressional Review Act. So that’s kind of an example that we don’t often think about because everyone thinks a judiciary is the final rule — word on what the law is, but in this case, Congress itself may have the final rule as to what comes within the ambit of that particular piece of legislation. I know we had a question over here, so I want to go to you. And then, we’ll go around.

 

Audience member:  So picking up on the last point you guys were making during the panel discussion on the adjudicatory function that OIRA serves with the disputes among the agencies. Chevron deference is premised on the idea of agency expertise. And in the OIRA review process, sometimes, the agency’s [inaudible 00:54:56] rule can get bloodied and bludgeoned, and what goes in is not what comes out. So in your view, to what extent does the OIRA process either support or undermine that notion that the agency in its final rule when it’s subject to judicial review should get deference because of its expertise?

 

Hon. Stephen Alexander Vaden:  Boris.

 

Boris Bershteyn:  That’s a great and somewhat — and a much-debated question. I think the adjudicatory description of what OIRA does is probably — more heuristic more than anything else. I think it is, in fact, closer to something like a mediation function because it is — it behooves everyone in the executive branch family, ultimately, to get along. Otherwise, the president’s going to spend a whole lot of time trying to make tough decisions that the agencies can’t make by themselves. And I think the OIRA administrator is more of a facilitator of those decisions. There’s no doubt, though — not to evade your question — that there’s substantive input that happens during the OIRA process. But I think the ultimate authority to agree to the results of that process and the ultimate authority to issue rule, the rule, resides with the agency head, and I think everyone will ultimately say that that’s whose final call it is, and that’s when the deference adheres.

 

Hon. Stephen Alexander Vaden:  Paul.

 

Paul J. Ray:  Yeah. And it’s a great question. So the agency has a kind of — I mean, every agency has a kind of expertise that can really benefit from the dialog with OIRA. Right? So — well, I imagine all of you could testify to this from personal experience. I think everyone in this room has some sort of expertise in something or other. And imagine that an interlocutor who knows something about your area, maybe less than you do, were to engage in a dialogue with you. Well, probably your thinking would be sharpened, even within the domain of your expertise, from that conversation, from having to explain to the person you’re talking to why the conclusion follows that you assert follows. Right? 

 

So I think really OIRA review tends to kind of bring fully into play agency expertise. Right? There’s at least two kinds of expertise we can think about. There’s the expertise that’s sort of like a muscle memory expertise — right? — the expertise of a four year old riding a tricycle. Right? Maybe the four year old isn’t able to articulate what it means to ride a tricycle, how she knows how to do it, but she does know how to do it. Then, there’s the expertise that lawyers have, which is a kind of expertise that is susceptible of being explained. 

 

And that’s a kind of expertise that agencies have. So there really isn’t a good reason that an agency wouldn’t be able to fully explain the bases for its expert conclusions to OIRA. And so, I think, for that reason, OIRA review is both fully consistent with and indeed in aid of agency expertise. 

 

Hon. Stephen Alexander Vaden:  Well, if I could beg — I know there were a lot of questions. We can just do one question. I think there’s a good number. There were several at this table. I’ll let you pick. It’s your event. 

 

Dennis Kirk (sp):  Hi. Dennis Kirk. I know that having served in multiple agencies and multiple administrations, when you deal with the administrative state, they have tremendous abilities, and they don’t always enforce them. How does OIRA deal with an agency that has chosen, for whatever reasons politically or otherwise, not to enforce their own regulations that are [inaudible 00:59:03] and [inaudible 00:59:05]?

 

Hon. Stephen Alexander Vaden:  Boris, you want to take that first?

 

Boris Bershteyn:  Sure. I’ll do two really quick points. OIRA doesn’t really so much deal with enforcement as it does with what the regulations are, so if the regulations are on the books, an agency doesn’t choose to enforce them, that is sort of outside the OIRA jurisdiction. The second is but even — but if we’re talking about whether an agency chooses to regulate in a certain area, OIRA does have a tool. It’s called a prompt letter, so OIRA doesn’t — it doesn’t just have to be the inbox. It can be the prompter, the gooser, whatever, however you call it. But what I have to tell you OIRA’s not really good at that. OIRA’s much better at being a responsive agency is my experience. And so, the prompt letter is not much used.

 

Hon. Stephen Alexander Vaden:  Paul.

 

Paul J. Ray:  Yeah, I agree with that. OIRA is really at its forte in ensuring that the regulations comport with norms of the administrative process and gathering views and data from across the government. So if it’s — if what’s at issue is that an agency is sort of going off the rails and departing from the broader administration of the president and the entire — his entire cadre of subordinates, then OIRA’s pretty good at correcting that. It’s pretty good at correcting rulemakings that are intentional of what other agencies are doing or that are based on a mistake that data in the possession of another agency could have or that is not in compliance with the Administrative Procedure Act. It’s good to bring agencies into line on those fronts, less so at ensuring that they’re enforcing regulations that it has in the books. Good question.

 

Hon. Stephen Alexander Vaden:  Well, I’d like to thank all of you for a wonderful discussion. Both of you, knowing what you’ve dealt with in your roles, were incredibly diplomatic. I thought his question was, basically, can you tell us who the stupid agencies were [laughter], and none of you bit the bullet, so I’ll give you the answer later [laughter]. 

 

Steven D. Schaefer:  Well, I want to thank all of you for joining us today, and I hope you join us for the next two in our series on Monday, October 3rd and Monday, October 17th, same place. And you can, once again, you can check out the QR code, if you’d like to register for that now. And if you can join me in just thanking the [applause] —

 

 

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Conclusion:  On behalf of The Federalist Society’s Regulatory Transparency Project, thanks for tuning in to the Fourth Branch podcast. To catch every new episode when it’s released, you can subscribe on Apple Podcasts, Google Play, and Spreaker. For the latest from RTP, please visit our website at www.regproject.org.

 

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