Category: Administrative Law

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Double deference

I know that I am supposed to be caught up along with everyone else in the same-sex marriage cases, but I am still distracted by Decker v. Northwest Environmental Defense Center, decided last week at the Supreme Court. In a separate opinion designed to push the buttons of what Scotusblog’s John Elwood called Supreme Court nerderati, Justice Scalia again called for the reconsideration of the principle of Auer deference. Auer says that just as courts should defer to agencies’ reasonable interpretations of ambiguous provisions in their organic statutes, so should they defer to agencies’ reasonable interpretations of ambiguous provisions in regulations that they themselves promulgate. Chief Justice Roberts and Justice Alito suggested that they would also be open, in a different case, to reconsidering Auer.

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Auditing’s Snafu: Foreign Secrecy and Impaired Audits

Many US companies maintain substantial global operations, with increasing volumes of business done in China; many foreign companies are listed on US securities exchanges.  This cross-border expansion makes the reliability of financial reports created in foreign locales increasingly important.  Yet, in tandem with this cross-border expansion, there have been increasing assertions abroad, including in China, that local secrecy laws restrict access to the work papers of auditors, frustrating the ability of US federal authorities to enforce US securities laws designed to promote financial reporting integrity.

The snafu was joined this week in a case where the SEC is seeking access to audit work papers of a Deloitte affiliate in Shagnhai but the firm refuses.  The firm’s lawyers cite Morrison v. National Australia Bank, the 2010 SCOTUS ruling that, absent explicit language, federal statutes are seen as intended to apply within the US, not be extraterritorial.  It said that the federal securities laws lacked such explication.   

Furthermore, for Deloitte to comply with the SEC’s requests, the lawyers said, would risk committing a serious crime under Chinese law, one punishable by imprisonment. Deloitte’s lawyers say that the combination of Morrison and Chinese secrecy laws puts the records beyond the SEC’s reach.

Lawyers for the SEC object that these points cannot possibly be seen to limit the SEC’s administrative subpoena power under which it has demanded the Deloitte documents. But, during oral argument, the SEC’s lawyers did not acquit themselves well, according to one report, as they could not readily cite the precise legal authority supporting their position. 

Deloitte says there isn’t one and that the appropriate procedure to handle such cross-border securities matters is by diplomacy not enforcement. In this view, the SEC is wrong to proceed against Deloitte in court but must dispatch appropriate US officials to broker a resolution with Chinese regulatory counterparts.

The stakes are high for both sides in the case, of course, and for investors and students of auditing. After all,  audits endow financial statements with credibility. Shareholders are willing to pay for audits in exchange for that credence value.  But if an auditor’s work papers are top secret, inaccessible even to a regulatory overseer, how much of an audit’s credence value is lost? Is it still rational for shareholders to condone paying the auditor’s fee?

When the credibility of financial statements are in doubt, investors should shun their issuer and sell the stock.  A critical mass of shareholders of companies affected by this snafu might do well to follow that old-fashioned Wall Street Rule. If they did, then, along with such companies, the need to resort to either a diplomatic or enforcement solution would disappear. Read More

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Nondelegation, now available in 32-ounce sizes

New York City is abuzz with the setting aside of Mayor Bloomberg’s ban on the sale of sugared drinks in containers larger than sixteen ounces. The ban applies to establishments directly under the authority of the City’s Health Department (restaurants, movie theaters) but not those that are not (retail stores, church suppers). I have been following the rule with interest because my colleague Olivier Sylvain (guest blogging at Concurring Opinions next month, so stay tuned) has placed it at the core of his 1L course on Legislation and Regulation. In my section of the same course, but with respect to a different rule, I ask my students to pretend to represent the American Beverage Association, today’s successful plaintiffs. The ABA titled its victory post this morning “Choice Lives!”:  “Individuals are the ones with the power to choose what foods and beverages are right for them.”

The decision, by New York State Supreme Court Judge Milton Tingling, makes a move one often sees in high-profile trial court cases, which is that it reaches its conclusion on as many bases as possible. In many ways, therefore, the decision is an alarming overreach. In particular, Judge Tingling says that the regulation is arbitrary and capricious because it is riddled with exceptions:  not just for the above-mentioned retail stores, but also, for example, for beverages that contain a lot of  milk or any alcohol. It cannot be right that an agency acts arbitrarily by failing to be comprehensive. The rules’ various exemptions, while fairly numerous, each bears a plausible justification. That plausibility is more than sufficient to get by the arbitrariness test.

The weakest part of the opinion is a long history of the New York City Charter, which the judge recites in support of his position that obesity is not a “health” issue within the Charter’s meaning. Not only does the opinion give a very dubious restrictive construction to the Charter language, but the Mayor’s soda rule survives that construction. Judge Tingling says that the Executive’s authority to “limit or ban” legal food items applies only when the city is in “eminent [sic] danger due to disease” [29] – but that is precisely the Health Department’s claim, and it is a reasonable one. And, as the City has emphasized, there is no ban here on soda in any quantity; all that is restricted is delivery systems, for which alternatives are available. You can buy 64 ounces of Coke if you want, as long as you are willing to carry four cups.

Nevertheless, Judge Tingling is right that New York State’s nondelegation doctrine – the doctrine that administrative law professors who teach only federal cases tell their students is a dead letter – prohibits the rule. The foundational case, Boreali v Axelrod, is nearly on all fours with this case. Health departments, pursuant only to sweeping language giving them authority over public health, cannot in New York State limit trade in legal markets over which the legislature has given them no explicit authority. If the City is to win its promised appeal, it is going to need to argue that Boreali should be overruled or limited.

The problem with that is that Boreali is right. Nondelegation is an important constitutional principle and should not be sidelined out of existence. I don’t disagree with the Mayor that obesity is a big problem, and am not per se opposed to the kind of state paternalism that shoves people in the direction of healthy behaviors; but I think it’s not just reasonable, but better politics, better civics, and better constitutional law to require those shoves to come from a legislative, rather than an executive and bureaucratic, process.

See also Rick Hills’ interesting comments here.

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The Cultural Construction of the Bicycle

Before automobiles first appeared in urban spaces, parents regularly sent children outside to play in the street. Today, noone would hesitate to label any parent who did that as reckless. The cultural distance between then and now is substantial. Readers interested in its course should check out Peter Norton’s excellent, and consistently surprising, Fighting Traffic.

I am regular bike commuter in New York City, along with an increasing number of other people. Bikes, under the law, are supposed to follow the same rules of the road as motor vehicles. But many cyclists, here in New York at any rate, don’t. They slow rather than stop at red lights and stop signs. They weave around pedestrians in crosswalks. They go the wrong way on one way streets. It’s a great case study of why people obey the law: we cyclists break these rules because they seem so manifestly unsuited to our circumstances. I yield rather than stop for some red lights and some pedestrians, when it seems clearly safe to do so (although I draw my personal line at salmoning upstream in a one-way zone). But I would never in a million years blow through a red light when driving a car. Even in the middle of the night, even if  nobody is coming and I know nobody is coming, I sit there patiently in the empty intersection until the light turns green.

Can the law take the lead in developing rules that make enough sense for biking for transport that cyclists would obey them? Or must we await, as we did in the case of automobiles, a new cultural construction of bicycling? (As Norton demonstrates, a lot of people died in “accidents” while the new construction of the car was emerging.) Is the wait worth it if that new construction would be optimized by what my colleagues Sonia Katyal and Eduardo Peñalver might call bicyclists’ productive disobedience? Notwithstanding my wish for a more top-down approach, it seems that  lawyers and regulators have given more thought how to optimize traffic rules for driverless cars than for bicycles.

I was in London two weeks ago giving a paper, where the bike share system has made urban cycling even more ubiquitous than it is in New York. A few days’ observation found, just as in New York, cyclists ignoring red lights and going the wrong way on one way streets.  But I didn’t see one instance in London of two cyclist behaviors I see regularly here:  failing to stop for pedestrians and riding on the sidewalk.  London cyclists’ disobedience seems more productive than New Yorkers’.

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The New York Fed and the Rule of Law

In Sunday’s New York Times, business columnist Gretchen Morgenson reported a piece of investigative journalism that is transcendently important, but whose complexity may have obscured that. It concerns secret dealings of the Federal Reserve Bank of New York. Morgenson explains the importance of her topic in terms of the threatened erosion of social trust that can occur when central banking officials engage in dubious behavior.

I would add that her topic, dubious dealings of central bankers, is of vital importance because those who run the FRBNY have enormous power in the field of banking regulation. They oversee the largest banks and provide direct input into the Financial Stability Oversight Council, the interagency government organization created by the Dodd Frank Act to oversee the financial system. It is empowered to intervene when the next financial crisis occurs, which could be later this year or five years or ten or what have you.

As with the financial crisis of 2008, these government actors, dominated by the FRBNY, will call all the shots about which institutions to save, sell or seize, on the one hand, and which creditors and shareholders to pay, wipe out or shortchange, on the other. How they exercise these powers is thus a matter of the utmost national interest. How they exercised them in the 2008 crisis remains both obscure and questionable. Read More

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The Disclosure Crisis

Thank you to Danielle for the lovely (re)introduction and to Concurring Opinions for inviting me to blog this month.

The Washington Law Review hosted a symposium Thursday entitled “The Disclosure Crisis,” which covered everything from privacy policies to restaurant hygiene grades. The gist of the conference, on my view, was that the only thing piling up faster than examples of mandated disclosure as a regulatory strategy is the evidence it does not work. Time and time again, officials choose to intervene in a given area by requiring companies and others to reveal information so that individuals can protect themselves and police the market. And time and time again, disclosure ends up helping few if any consumers or citizens actually make better decisions.

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RUC-rolled

A few years ago, I noted that the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) has a dominant role in suggesting payment levels to CMS.  It raises hard questions about price-setting in the health care sector, many of which cannot be answered because its processes are opaque.  Now we know that judicial relief will not improve things any time soon.  As Brian Klepper reports, “On January 7, a federal appeals court rejected six Georgia primary care physicians’ (PCPs) challenge to the Centers for Medicare and Medicaid Services’ (CMS) 20-year, sole-source relationship with the secretive, specialist-dominated federal advisory committee that determines the relative value of medical services.”  What was the complaint?

The core of the … physicians’ legal challenge was that the RUC is a “de facto Federal Advisory Committee,” and therefore subject to the stringent accountability requirements of the Federal Advisory Committee Act (FACA). This law ensures that federal bodies have panel compositions that are numerically representative of their constituencies, that their proceedings are open, and that methodologies are scientifically credible. In other words, FACA ensures that advisory practices are aligned with the public interest.

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For Transparency Sake?

Recall after President Obama’s first inauguration the fuss made about his administration’s commitment to transparent government.  The January 2009 Open Government memorandum seemed a fresh start for openness in the post-9/11 era.  Now, four years later, drastic change in government secrecy has not materialized.  Let’s take DOJ’s release to two Congressional intelligence committees the OLC memo authorizing the use of drone strikes to kill American civilians abroad considered terrorists.  According to the New York Times, the administration had until now refused to even officially acknowledge the existence of the documents, which had been reported about in the media.  This recent revelation is just one example of what we say–a commitment to transparency–is not what we do.  Consider that in a 2010 memo, the DOJ endorsed “the presumption that [OLC] should make significant opinions fully and promptly available to the public.”  Despite this stated goal and the stated goals of the Open Government memorandum, the Sunlight Foundation reports that DOJ is “withholding from online publication 39% (or 201) of its 509 Office of Legal Counsel opinions promulgated between 1998 and 2012.”  That is not to say that we have made no progress.  As the Sunlight Foundation explains, the Obama administration published a slightly higher percentage of its OLC opinions online when compared to its predecessor. From inauguration until March 28, 2012, the Obama administration published 63% (40 of 63) of its OLC opinions online whereas Bush administration’s published 55% (54 of 98) of its second term opinions online, and published 11% (20 of 187) of its first term OLC opinions online by January 20, 2005.

Implementing Health Reform

The Commonwealth Fund has recently reported on how states are lagging in implementing consumer protection aspects of the ACA.  In case you are looking for a comprehensive overview of the options open to a state as it implements the MLR provisisons of the ACA, check out my colleague Tara Adams Ragone’s policy brief The Affordable Care Act and Medical Loss Ratios: Federal and State Methodologies.  Though the piece focuses on New Jersey, its structure suggests the issues that will come up for many other states:

As part of sweeping health care reform in 2010, Congress established MLR requirements for health insurance issuers offering coverage in the group and individual health insurance markets, including grandfathered but not self-insured plans, hoping to increase the value consumers receive for their premiums and to improve transparency. Medical loss ratio refers to a measure of the percentage of premium dollars that a health insurance company spends on health care as distinguished from administrative expenses and profit, including advertising, marketing, overhead, salaries, and bonuses. Prior to the ACA, some states but not the Federal government regulated loss ratios. The new Federal MLR law, which went into effect on January 1, 2011, for the first time established a national MLR standard, which varies from existing state MLR requirements in important ways.

This Policy Brief analyzes the new Federal MLR requirements and how they intersect with and affect New Jersey law and its insurance markets. After providing background on medical loss ratios and highlighting the major similarities and differences between the existing Federal and New Jersey MLR regulatory schemes, this Brief examines several requirements and policy options that New Jersey must consider as it implements the Federal requirements. This Brief also includes appendices that provide more extensive details regarding the components of the Federal MLR requirements, New Jersey’s MLR legal structure, and research regarding experiences with loss ratios nationally and in New Jersey, pre- and post-the ACA.

My former student Ina Ilin-Schneider has also posted on the MLR, after authoring a very interesting paper on the state waivers granted (and denied) by HHS.

Finally, a quick note to recommend Ann Marie Marciarille’s several recent posts at PrawfsBlawg on ACA implementation and health policy generally.  It’s hard to write about these topics gracefully and for a general audience, while conveying the expertise of a scholar.  I think of her posts as real models on both counts.

X-Posted: Health Law Profs.

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Moral Values and the Curriculum

What great fun to read all these posts!

There are three separate threads on the posts that I want to respond to: the impact of Robin’s analysis and exhortations on what our law school curriculum might look like; the three Rs: Robin, Robert (Cover) and Religion; and the intersection between moral values, relationships and marriage.

So, to the first –curriculum.

Among the changes I hope will follow from Robin’s work are significant changes to the law school curriculum. As Rebecca Lee notes:

As I see it, Robin’s challenge to law schools is particularly timely in light of the curricular revisions many schools are making in response to the changing legal economy. To best equip students to be lawyers and problem-solvers in the 21st century, it is becoming increasingly clear that law schools need to prepare their students to do more than just adjudicative analysis. Students will need a wider understanding of law and its uses and tools in various realms, and this training, I believe, can and should begin in the classroom. As law schools’ raison d’être evolves, so too should our legal commitments and methods, and this rethinking should likewise extend to our scholarship

I completely agree.  Moreover, I think it is essential for law schools to give students a rich grounding in theories of justice concomitantly with teaching them such legal skills.  Robin has noted in this book the importance of liberal progressives being able to deploy normative arguments that rely on a thick understanding of justice and moral goods and she will make an even more extensive argument on the importance of teaching students about justice in her forthcoming book about law schools.  To me, giving students a rich grounding in theories of justice is imperative both to changing our legal approach and our scholarship in the manner that Robin is suggesting.

But I also can’t imagine having students learn about, and critique, theories of justice without also having a deep understanding of how our political system – which ultimately creates the body of laws that reflect our vision of justice — really, actually, and honestly works.

The lack of understanding on the part of the general public regarding the role and authority of the executive branch and the legislative branch sometimes takes my breath away.  By virtue of their profession, lawyers should be leaders in educating people about how our lawmaking system actually works and in helping people engage in citizen democracy.  But we don’t give our law students a comprehensive and rich understanding of lawmaking – the role of legislatures and agencies (as well as courts, which we cover quite well) in the making of law.

The good news is that this is beginning to change. Many schools are expanding their vision of what “teaching law” includes – which often extends to teaching students about advocacy in the political arena that makes law in the first place.

For this reason, I believe a forthcoming article on how law school clinics can lobby, co-authored by Professors Kevin Barry and Marcy Karin who head clinics that engage in both individual client work and policy work, is going to become a popular reading item. As Barry and Karin note in the beginning of their article:

In short, policy advocacy adds value for students, the law school, and the community. With respect to students, this type of clinical experience expands students’ toolkit of transferable legal skills and exposes them to the range of ways in which the law may offer solutions to a particular client or client base. It also responds to the growing student demand for policy advocacy opportunities and enables students to aspire to the highest ethical standards as set forth in the Preamble to the ABA Model Rules of Professional Conduct. These rules state that all lawyers “should cultivate knowledge of the law beyond its use for clients [and] employ that knowledge in reform of the law.” MODEL RULES OF PROF’L CONDUCT Preamble (2012) (emphasis added).

And finally, Jill Hasday’s post brought home to me how important students’ policy advocacy work can be – and what has been missing so far in those efforts, in terms of curriculum.  Jill tells us:

Family caps, which at least nineteen states currently impose in some form, deny or limit TANF benefits to children conceived while their parents are already receiving TANF. For example, New Jersey’s TANF program provides that a family of two will ordinarily receive up to $322 a month, a family of three will ordinarily receive up to $424 a month, and a family of four will ordinarily receive up to $488 a month. These scant benefits are unlikely to cover a family’s basic needs, and New Jersey’s family cap limits them even further. New Jersey’s family cap means that a family that enters TANF with two people is still limited to just $322 a month if another child is born, $102 less than New Jersey itself otherwise thinks necessary for three people’s subsistence.

Well, the only reason there is not a mandatory family cap in ALL 50 states in this country is that, back in 1996, students in the Georgetown Federal Legislation Clinic who were working on behalf of their client, Catholic Charities USA, helped draft legal analyses and talking points against the family cap. The original welfare reform bill had required every state to have a mandatory family cap in its TANF program.  Catholic Charities (the client) took the lead in organizing a coalition against that provision.  Politics was such that the best Catholic Charities could get was a provision that permitted states to impose a family cap if they affirmatively chose to do so.  The students who worked with Catholic Charities over the course of that year learned critical legal skills by doing that work and (from my perspective) helped advance social justice by eliminating the nationwide mandatory family cap.

But here’s my final point – the work of Georgetown’s Federal Legislation clinic on welfare reform (and on many other legislative and administrative issues over the past two decades) has enabled students to learn about the political system and the making of law, and to develop important legal skills.  But there is SO much more about justice and values and normative goods (and arguments about normative goods) that could have been taught to the students if they had had available to them – as Robin calls for — a richer progressive natural law jurisprudence.  Think about what more the students could have learned if part of the law school curriculum would have been to engage them in a substantive goods conversation about the family cap – at the same time that they were working on the issue in a practical way.  (I can tell you — I did not engage the students in that conversation.  But I would do so now, as a complement to their advocacy work.)

So to end with Robin’s words:

As I argue in my book, one other cost of contemporary liberalism’s commitment to this dubious premise [state neutrality toward conceptions of the good] is that partly as a consequence, we don’t have a progressive natural law: liberals disdain the entire tradition, in part, because of their antipathy toward conceptions of the good, and antipathy toward the notion that the state should entertain them. So the part of the natural law that I believe is of most interest — the part inspired by Aquinas and most developed by Finnis and his students, that explores the content of the common good and the role of the state, and of law, in realizing it — suffers from a lack of participation by those who ought to be most engaged.

Amen. (Designed as a segue to my next post: “The Three Rs: Robin, Robert (Cover) and Religion.”)