Category: Administrative Law

7

Teaching Administrative Law Using Current Events

One of the best parts of teaching a course you’ve already taught is updating course materials. I’m teaching Ad. Law again in the fall, and I’m considering adding a few relatively recent events as introductory discussion problems. The goal is to get students thinking about how process and agency structure shape substantive decisions. I tried to choose topics which do not require students to grasp complicated substantive issues:
1. The TSA seeks comments on across-the-board, whole body imaging for airline passengers. Here students can consider the interplay between notice-and-comment procedure and privacy objections to the imaging. I’ll also explore whether procedures (and concerns with use of imaging) should be different if TSA employees require this enhanced screening only on a case-by-case basis.
2. The IRS has been accused of unfairly targeting conservative groups who claim tax-exempt status. The issue highlights agency structure and raises questions of accountability in a system with multiple bureaucratic decision-makers. It also illuminates the tension between law and politics in agency decision-making, especially where agencies operate under vague rules such as the “social welfare” organization exemption.
I welcome any suggestions you may have.

4

Mooting Noel Canning?

No, I don’t mean running practice sessions for the oral argument.  There is a story today that Senate Democrats want to change the rules to bar filibusters of executive branch nominees.  (I’m all for cloture reform, as I’ve explained many times here.)  Part of that plan (or bluff) involves the confirmation of all of the President’s nominees for the vacancies on the NLRB.  These are the same vacancies that the President filled with recess appointments last year and were declared unconstitutional by the Third and D.C. Circuits.

Here’s my question.  Suppose the Senate does confirm these people.  Can they then confirm retroactively all of the decisions made by the recess appointees?  (Since I think the recess appointees and the nominees are the same, it would be confirming their own decisions.)  If so, then that would moot the appeal from the D.C. Circuit on which the Supreme Court granted certiorari.

Reviewing Cass Sunstein

The Boston Review recently published a review of the new Cass Sunstein book, Simpler. Sunstein has been a leading advocate of “libertarian paternalism:” a program of soft “nudges” designed to change “choice architecture” to promote better behavior. Law professor William H. Simon is unimpressed:

The biggest current liability for liberals is that many people have lost faith in the capacity of government to solve the problems they care about. Perhaps the most prominent of these problems are unemployment, economic inequality, the deterioration of the natural environment, and national security. The behaviorist toolkit [of Sunstein] is not much help here. Sunstein’s account of the future of government has nothing to say about unemployment, inequality, or national security, and its contribution to environmental protection is limited to consumer labeling of cars and appliances. . . .

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1

Agencies in the Cathedral?

AgenciesAreas of law dominated by government agencies haven’t taken advantage of the rich literature on property rules and liability rules, which are “workhorse concepts that permeate every corner of the economic analysis of law.” In their 1972 article Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, Calabresi and Melamed observed that there are fundamentally two types of remedies: (1) property rules, such as injunctions or disgorgement, which aim to deter, and (2) liability rules, like compensatory damages, which aim to compensate. This framework has paid rich dividends in areas like torts, property, IP, contracts, and conlaw — but seems to have bypassed areas of law dominated by agencies.

Government agencies’ remedies can be classified as either property rules or liability rules. For example, if a business has a permit from the EPA but violates the permit’s conditions, the remedy could be either taking away the permit (a property rule), or requiring proportional compensation (a liability rule). Similarly, if a broker has a license from the SEC and violates securities law, the remedy could be either yanking the license (a property rule), or requiring compensation for the harmed parties (a liability rule).

I apply the property rule and liability rule framework to my favorite agency — the IRS — in a forthcoming Virginia Law Review article. When a taxpayer violates a tax-law requirement, the remedy can be either yanking the taxpayer’s favorable tax status (a property rule), or requiring compensatory additional tax (a liability rule). Counterintuitively, anecdotal evidence shows that property-rule remedies may be less effective at deterring violations, because the threat of political and media blowback may make the IRS unwilling to impose a draconian property-rule remedy. As a result, when Congress protects a requirement with the property-rule remedy of yanking a favorable tax status, politically-powerful or sympathetic taxpayers are rarely deterred from violating the requirement. The IRS doesn’t dare impose it. Surely similar problems plague enforcement by other agencies.

Anyone working in any agency-dominated area of law could consider how the property-rule/liability-rule framework fits into their area.

1

Interview with Marvin Kalb: The Road to War, Presidential Commitments Honored and Betrayed

I could not have timed my chat with Marvin Kalb220px-Marvin_Kalb better. On Sunday, before talking about cyber hate for the U.S. Holocaust Museum’s 20th Anniversary Tour in Chicago, Kalb and I discussed his most recent book, The Road to War: Presidential Commitments Honored and Betrayed (Brookings Institution Press 2013). The timing was auspicious not just because the book had come out days before but because at least 40% of the nation was reeling from learning about the most recent abuse of Executive power:  the NSA’s PRISM program and leaked FISA court Verizon order.

Before I recount some of the highlights of our conversation, I wanted to begin with a wonderful and incredibly apt description of Kalb written by a UPI reporter:

[Kalb] is the senior statesman of U.S. media. Tall, handsome, brilliant, unfailingly courteous, Marvin Kalb looks and acts more like a senior statesman than the chief diplomatic correspondent he was for CBS News and NBC over 30 years when these networks cared about world news. Now these media organizations still bill themselves as world news networks but, most nights, forget about the rest of the world.

Following his prize-studded reportorial career, Kalb became the first director of journalism’s school of higher learning at Harvard — the Joan Shorenstein Center on the Press, Politics and Public Policy. Now, still the profession’s senior statesman, he runs the center’s Washington office and hosts “The Kalb Report.” The author of two best-selling novels and a book titled, “One Scandalous Story: Clinton, Lewinsky and 13 days That Transformed American Journalism,” Kalb’s 13th book — his best — excoriates Congress for relinquishing its constitutional obligation to declare war.

The U.S. News and World Report’s Jamie Stiehm describes Kalb’s new book as “an elegantseg3_ssa_3 synthesis of how easy, too easy, it has become for an American president, any American president, to go to war” with Congress “ceding its rightful role in declaring war and tends to go along with the man in the White House.” Kalb’s book argues that so much power should not be concentrated in the President.

Here are some highlights from our conversation:

DC: Why has it been so easy for the Executive Branch to ignore the core constitutional guarantee that Congress declare war?

MK: We have a system of law undergirding Presidential authority to go to war — Congressional declaration of War and the power of the purse — yet it has been consistently ceded to the President. When I covered Vietnam in 1968, we had 500,000 troops on the ground. Who gave the President the authority to do so? I am a great believer of law, but if it is ignored with impunity, to whom do we turn?

DC: How did we get to that state of affairs–the President doing what he wants without check? Are things much different in light of recent revelations of our unsanctioned domestic intelligence apparatus?

MK: What we are witnessing this week stands as a confirmation of what we have ben seeing–unchecked Presidential power in the name of war time. In the Korea and Vietnam wars, one President after another made unchecked decisions and no one blew the whistle, most significantly Congress. Congress was successfully pressured to cede its power to the Executive Branch. For instance, only two Senators voted “no” for the Gulf of Tonkin resolution. When one of those senators, Senator Morse, saw President Johnson, the President put his arm around the Senator and said “Wayne, you are a good American. We do not want to hurt the troops.” Johnson wielded his power through persuasion and it worked–Congressional resistance was vanishingly small.

DC: What do you think of this week’s revelations about PRISM and the Verizon order?

MK: In important ways, I thought that we beat Big Brother when we prevailed in the Cold War. With the indiscriminate collection and analysis of all Verizon users’ telephony metadata (including who we called, where we were, and the inevitable revelation of sensitive information given the answer to the “who” question), we have become what we most fear–executive branch conducting surveillance over ordinary citizens in increasingly intrusive ways. Read More

8

The child, not the school

The Indiana vouchers program I posted about earlier, significant on its own, also partakes of a trend. The New York Times gets it:

A growing number of lawmakers across the country are taking steps to redefine public education, shifting the debate from the classroom to the pocketbook. Instead of simply financing a traditional system of neighborhood schools, legislators and some governors are headed toward funneling public money directly to families, who would be free to choose the kind of schooling they believe is best for their children, be it public, charter, private, religious, online or at home.

In particular, the Times is right that what is sought here is redefinition. Once states established and supported institutions – public schools – that parents could take or leave, so long as they educated their children somehow. The new paradigm has states instead provide a quantum of funding earmarked for each child, that parents can deploy at any educational institution of their choosing. The fact that the aid attaches to the child and follows her to her family’s chosen school is much more important than the various labels ascribed to the funding and/or the institutional provider – public, private, charter, voucher.

As people learn to function within, and get used to, this new paradigm, they will stop thinking of educational politics as the way to create good public schools, and start thinking of it in terms of how big the aid pie is and how it gets divided up. Whether a school is public or private, online or bricks-and-mortar, religious or not – these stop being political questions and start being questions that markets will resolve through supply and demand. Read More

0

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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0

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

2

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.

5

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’.