Constitutionality of Regulatory Reform Legislation for Independent Agencies

Constitutionality of Regulatory Reform

Legislation for Independent Agencies

Although there is no constitutional impediment to the bill’s requirement that independent regulatory

agencies communicate their legislative and budgetary messages directly to the Congress without

first clearing them with OMB, a uniform rule in the opposite extreme—i.e., that no communication

from an independent agency may be sent to OMB unless it is simultaneously sent to the Congress—

would not adequately protect important interests of the Executive Branch. The congressional access

provisions of the bill would not affect the power of the President, or the agency acting on the

President’s behalf, to assert executive privilege, because in the absence of express language in the

bill, it must be assumed that the bill does not constitute an attempted infringement of the constitu-

tionally based privilege, which is available with respect to those functions of independent regulatory

agencies that are of an executive or quasi-executive nature.

September 1, 1976

MEMORANDUM OPINION FOR THE ASSISTANT ATTORNEY GENERAL

OFFICE OF LEGISLATIVE AFFAIRS

This is in response to the request by Tom Boyd for the views of the Office of

Legal Counsel on the Interim Regulatory Reform Act of 1976, S. 3308, 94th

Cong., as it passed the Senate on May 19, 1976. 122 Cong. Rec. 14,528–34

(1976).

Our June 9 memorandum to you discussed the bill as it was introduced, when it

merely would have required agencies to submit proposals for the recodification of

their existing regulations. This proposal is retained in section 4 of the bill,

modified and improved somewhat. However, the bill now also deals with such

additional matters as substantive law revision for the seven independent agencies

involved,1 timely consideration of rulemaking petitions, congressional access to

agency information, conduct of the agencies’ civil litigation, protection of agency

personnel, conflicts of interest, and a limited waiver of sovereign immunity. Each

of these provisions, except that dealing with substantive law revision, is patterned

after a virtually identical section of a law already in effect for one or another of the

agencies. The effect of S. 3308 is therefore to extend these provisions to the seven

agencies involved so that all will be on equal footing. We will discuss the

proposals in order.2

1

As introduced, S. 3308 applied to the Departments of Commerce and Transportation, Civil

Aeronautics Board (“CAB”), Interstate Commerce Commission (“ICC”), Federal Trade Commission

(“FTC”), Federal Communications Commission (“FCC”), Federal Maritime Commission (“FMC”),

and Consumer Product Safety Commission (“CPSC”). Id. § 3 (as introduced Apr. 13, 1976). The two

departments have now been dropped from the bill and the Federal Power Commission (“FPC”) has

been added. Id. (as amended May 19, 1976); 122 Cong. Rec. 14,528.

2

Rules recodification, law revision, and protection of agency personnel are dealt with in sections 4,

5, and 9, respectively. Each of the remaining provisions listed in the text is the subject of a separate

section of the bill. However these sections (6, 7, 8, 10, and 11) apply only to the FTC, FCC, FPC, and

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I. Rules Recodification

This section (§ 4) applies to all seven agencies. It would require the chairman

of each agency, within 360 days after the Act is passed, to prepare and submit to

the Congress and to the Administrative Conference of the United States an initial

proposal setting forth a recodification of all the rules which the agency has issued

and which are in effect or proposed as of the date of submission. S. 3308, § 4(a).

The recodification is to be only “technical”—i.e., a streamlining or simplification

of existing rules to make them more understandable and capable of effective and

fair enforcement. The bill expressly provides that the recodified rules “shall not be

at variance, in any substantive respect, with the text of the rules of the agency

involved which are in effect or proposed as of the date of such submission.” Id.

See also S. Rep. No. 94-838, at 2–3 (1976) (“Senate Report”). After studying the

comments and recommendations of the Administrative Conference and others, the

chairman of each agency must submit to the Congress a final proposal for

recodification of the agency’s rules, which will take effect 90 days after this final

submission. S. 3308, § 4(c). The provisions for judicial review in chapter 7 of

title 5, United States Code, are expressly made applicable to the repromulgated

rules. S. 3308, § 4(e).

Although section 4 as it passed the Senate does not contain several of the de-

fects we identified in the original version of S. 3308, we still have reservations

about it:

The term “rule” is defined in section 4(f) of the bill in language that to some

extent parallels the definition of the term in 5 U.S.C. § 551(4) (Supp. V 1975).

However, the term also includes “any general statement of policy, and any

determination, directive, authorization, requirement, designation, or similar such

action,” but not an “order” as defined in 5 U.S.C. § 551(6) (1970). The express

exclusion of “orders” from the definition is unnecessary, and it is not clear what is

covered by the additional phrase just quoted.

Moreover, the definition of the term “rule” encompasses many agency determi-

nations—such as “the approval or prescription for the future of rates, wages,

corporate or financial structures or reorganizations thereof, prices, facilities,

appliances, services or allowances therefor, or valuation, costs, or accounting”—

which affect a limited number of parties and are not ordinarily codified in the

Code of Federal Regulations. Yet sections 4(a) and 4(c) require the agency to

prepare initial and final proposals “setting forth a recodification of all of the rules

which such agency has issued and which are in effect or proposed” (emphasis

added). Perhaps this means that the agencies must review and repromulgate only

CPSC. Sections 12–14 each deal with one of the three other agencies, so that all remaining matters

affecting the CAB, ICC, or FMC are included in one section. The substance of the proposals as to each

of the three is largely the same as that set forth in the earlier sections. The CAB, ICC, and FMC were

separated out because they are not subject to the jurisdiction of the House Commerce Committee.

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those rules which have already been codified. It would be advisable to make this

qualification explicit, however, or at least to limit the definition of the term “rule”

in section 4(f) to matters of general applicability.3 In our view, the Department

should not endorse any proposal which would require the agencies to reexamine

and codify all previously promulgated rules of particular applicability.

The bill directs the chairman of each independent agency to “develop, prepare,

and submit” the initial and final proposal for the technical recodification of the

agency’s rules. S. 3308, § 4(a), (c). However, because the proposals will contain

revisions of the agency’s governing rules, which must ordinarily be approved by a

vote of all the members of the commission or board, we assume that the chairman

is to submit the agency’s proposals only after they have been approved by the

commission or board.

Section 4(e) provides that the text of the initial and final proposals must be

published in the Federal Register and that written comments are to be invited on

them. Solicitation of comments makes sense with respect to the initial plan, which

is in the nature of a notice of proposed rulemaking, but we see no reason to

provide another opportunity for public comment on the final proposal.

We also question the advisability of the provision for judicial review in section

4(e). Presumably there was an opportunity for judicial review of the substantive

content of the agency’s existing rules when they were first promulgated. Because

the recodification is to be only technical, judicial review of the substance of the

new rules is unnecessary. Furthermore, a court has no particular expertise to

determine whether an agency should have gone further in simplifying and

consolidating its rules. That is essentially a legislative-type determination to be

made by the agency and the Congress. And if there were any question as to

whether a given change was in fact merely technical, a court in a later case would

no doubt construe and apply the new rule in such a way that it would not be at

variance in any substantive respect with its predecessor. Judicial review of the

recodified rules will therefore serve no legitimate purpose, and it could lead to

delay and confusion as to the force of the recodified rules pending review.

Finally, we doubt whether the possible benefits of simplification of agency

rules—assuming they materialize—will outweigh the costs involved in the

recodification process. Agency personnel and those subject to the agency’s

jurisdiction are familiar with the regulations as they are presently written and

codified. The transition period will introduce considerable uncertainty. It is also

possible that the proposed “technical” recodification will divert attention from the

more profound assessment of the agency’s functions contemplated in section 5 of

3

In this connection, we note that section 1 of S. 796, 94th Cong. (as introduced Feb. 22, 1975),

which is based on recommendations of the American Bar Association (“ABA”) and the Administrative

Conference, would exclude matters of particular applicability from the definition of “rule” under the

Administrative Procedure Act, 5 U.S.C. §§ 551–559, and include them in the definition of a new term,

“rate-making and cognate proceedings.”

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S. 3308. In fact, major portions of the recodification could be rendered moot by

the substantive law revision, if it is adopted. However, the ultimate wisdom of

section 4 involves questions of policy on which this office defers to the seven

agencies involved.

II. Law Revision

Each of the seven agencies is directed by section 5(a) of S. 3308 to conduct a

full review of the statutory and case law relating to the agency and to make

recommendations to the Congress for revision and codification of the statutes and

other lawful authorities administered by or applicable to it, including repeals or

amendments “as such agency feels may better serve to enhance commerce and

protect consumers.” The purpose of the study and recommendations is to facilitate

congressional consideration of regulatory reform and to clarify, simplify, and

improve applicable law, both substantively and technically.

The chairman, upon the approval of a majority of the members, would appoint

a director to supervise the agency’s law revision activities and to serve as the

agency’s reporter, S. 3308, § 5(b), and he would also appoint an Advisory

Committee on Law Revision comprised of “individuals who by reason of

knowledge, experience, or training are especially qualified to assist in such law

revision,” id. § 5(c). Section 5(e) requires the chairman to submit a preliminary

report on law revision to the President and Congress within one year after the bill

is passed and an interim and final report within two and three years of passage,

respectively. The latter two reports would include an analysis of the economic and

other consequences of the revision and codification and a discussion of alterna-

tives considered.4

It is somewhat dubious that proposals for regulatory reform will be made in an

objective and thorough manner when they are developed under the control of the

very agencies sought to be reformed. For example, none of the agencies would be

likely to propose that it cede jurisdiction in certain matters to another body, or that

Congress provide for deregulation in a sector of the economy which would result

in a significant diminution of the agency’s role. Also, S. 3308 does not contem-

plate reports from or about other agencies or executive departments whose

functions are related to those of the seven dealt with in the bill and which would

therefore be affected by the substantive law revision. By way of contrast, S. 3428,

94th Cong. (as introduced May 13, 1976), an administration bill, would require the

President to submit regulatory reform proposals to the Congress which cut across

agency and departmental lines and cover entire sectors of the economy, such as

4

A similar but less elaborate law revision requirement is currently applicable to the ICC by virtue

of section 312 of the Railroad Revitalization and Regulatory Reform Act of 1976, Pub. L. No. 94-210,

90 Stat. 31, 60 (“RRRRA”). See Senate Report at 82–83. This provision would be repealed by section

13(a) of S. 3308.

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transportation, agriculture, mining, manufacturing, finance, and communications.

However, whether or not this broad ranging approach is preferable to the more

compartmentalized study called for in S. 3308 involves questions of policy on

which this office takes no position.

We do have one technical suggestion, however. It may be desirable to include

in section 5(c) an authorization for compensation for the members of the Advisory

Committees.

III. Timely Consideration of Petitions

Sections 6, 12(a) and 14(a) of S. 3308 would amend the organic acts of the

FTC, FCC, FPC, CAB, and FMC5 to require these agencies to grant or deny

petitions filed under 5 U.S.C. § 553(e) (1970) within 120 days and to publish the

reasons for each denial in the Federal Register. If the agency denies the petition or

fails to act on it within 120 days, the petitioner would be entitled to bring a civil

action for an order directing the agency to initiate a proceeding to take the action

requested in the petition. To obtain such an order, however, the petitioner would

be required to demonstrate (by a preponderance of the evidence in the record

before the agency, or, if the agency had failed to act, in a “new proceeding” before

the court) that the failure to grant the petition was arbitrary and capricious, that the

action requested in the petition is necessary, and that the failure to take the action

requested in the petition “will result in the continuation of practices which are not

consistent with or in accordance with” the agency’s organic act or any other act

administered by the agency or applicable to it. However, a court would have no

authority to compel the agency to take any action other than the initiation of a

proceeding for the issuance, amendment, or repeal of an order, rule, or regulation.

Somewhat similar provisions are already in effect for the CPSC, see 15 U.S.C.

§ 2059 (Supp. V 1975), and for the ICC with respect to common carriers by

railroad, see 49 U.S.C. § 13(6) (as added by RRRRA, supra note 4, § 304(b), 90

Stat. at 52). S. 3308 therefore contains no new provision regarding rulemaking

petitions filed with the CPSC, and section 13(b) merely extends to all ICC matters

the provisions for the timely consideration of petitions that are now applicable

only to those involving common carriers by railroad.

The Administrative Procedure Act (“APA”), 5 U.S.C. § 553(e), now provides

that “[e]ach agency shall give an interested person the right to petition for the

issuance, amendment, or repeal of a rule.” By letter dated April 26, 1976, from

Assistant Attorney General Uhlmann to Senator Eastland, the Department opposed

the enactment of S. 3123, 94th Cong. (as introduced Mar. 10, 1976), which would

have amended 5 U.S.C. § 553(e) to provide that an agency must either deny such a

petition or initiate the requested rulemaking proceeding within 60 days of the

5

In the case of the FMC, “organic act” refers to Reorganization Plan 7 of 1961, 75 Stat. 840.

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receipt of the petition. It was pointed out in the letter that 5 U.S.C. § 555(b) and

(e) (1970) already impose an obligation on agencies to act on such petitions in a

reasonable time and that a person aggrieved by an agency’s delay in acting on a

petition would appear to have a right to seek judicial review under 5 U.S.C.

§ 706(1) (1970) to compel the agency to decide whether to deny the petition or

initiate rulemaking. The court cannot now, and could not under S. 3123, address

the merits of the petition or direct the agency to initiate the requested rulemaking

proceeding.

S. 3308 is in certain limited respects an improvement over S. 3123, because it

would allow the agencies 120 rather than 60 days to take action on petitions,

S. 3308 §§ 6, 12(a), 14(a), and because it would not amend 5 U.S.C. § 553(e) and

thereby impose a rigid deadline on all departments and agencies covered by the

APA. Moreover, only the person who files the petition could seek judicial review

of the agency’s denial or failure to act on his petition. The generally applicable

judicial review section of the APA (5 U.S.C. § 702 (1970)), on the other hand,

allows any person suffering legal wrong because of agency action or adversely

affected or aggrieved within the meaning of a relevant statute to seek judicial

review. Nevertheless, there may still be some question as to whether a fixed

deadline is appropriate. The FPC, FCC, CAB and FMC opposed the provision in

their letters to the Senate Commerce Committee regarding S. 3308. See Senate

Report at 65, 67, 71, 78.

Whatever may be the merits of the fixed deadline provided for in S. 3308,

however, we recommend that the Department oppose the bill’s judicial review

provisions. The bill would require a court to determine whether the action

requested in a petition is “necessary” and whether the agency’s failure to take the

action will result in the continuation of practices which are not consistent with the

agency’s responsibilities. Id. §§ 6(a)(1), 6(b), 6(c), 12(a), 14(a). These are

substantive determinations of a kind ordinarily reserved to the agency. Yet, having

made a decision which is tantamount to a decision on the merits of the petition, a

court could do no more than remand the matter to the agency for another explora-

tion of the same issues in rulemaking proceedings. Notwithstanding the statement

in the Senate Report that the bill does not make “administrative expertise subser-

vient to the orders of the judiciary,” id. at 5, it is our opinion that this judicial re-

view procedure would seriously undermine the independence of the agencies

involved. An agency would be most reluctant to refuse to take the action requested

in a petition after a reviewing court has already determined that such action is

“necessary” and that the failure to take the action is not consistent with the agen-

cy’s goals. As a result, judicial review, which would frequently be made on an

incomplete record and without the benefit of the agency’s expertise, would give

the appearance of pre-judging the merits of the petition for the agency and thereby

casting doubt on the integrity of subsequent agency proceedings.

Quite aside from public pressures and problems of appearances resulting from

the timing of judicial review, the bill has the added disadvantage of forcing a court

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to second-guess the agency on the allocation of its scarce resources among various

administrative proceedings and other agency functions. As a practical matter, the

reviewing court might also be forced to consider each petition in isolation, without

giving due regard to related proceedings or the agency’s long-term goals.

The provisions for the timely consideration of petitions in S. 3308 were pat-

terned after 15 U.S.C. § 2059, see Senate Report at 4, which permits a district

court to order the CPSC to initiate rulemaking proceedings if the petitioner can

demonstrate to the court that the consumer product involved “presents an unrea-

sonable risk of injury” and that the failure of the CPSC to initiate rulemaking

proceedings “unreasonably exposes the petitioner or other consumers to a risk of

injury presented by the consumer product,” 15 U.S.C. § 2059(e)(2). It may be

questioned whether a court should second-guess the CPSC on such a matter, but at

least a court’s intervention is limited to situations which pose a significant threat

of injury. In such cases, the interference with the independent judgment of the

CPSC may be thought to be out-weighed by an overriding public interest in safety.

An overriding public interest of this type is not present in most matters coming

before the other agencies covered by S. 3308. Thus, the CPSC provision is not

necessarily a precedent for the present bill.

It might be argued, of course, that the independence of the agencies is pre-

served in S. 3308 by the added requirement that a court may not direct an agency

to commence rulemaking proceedings unless it concludes that the agency acted

arbitrarily and capriciously in denying the petition or failing to act on it. We doubt

that this will be the effect. If the court determines that the action requested in the

petition is necessary and that the failure to take the action would not be consistent

with the act administered by the agency, the court would be hard-pressed to

conclude that the agency’s denial or failure to act was nevertheless not arbitrary

and capricious.

Finally, we have some questions about the evidence on which the reviewing

court must base its decision. The relevant sections of the bill provide that the

decision is to be based on “a preponderance of the evidence in the record before

the [agency] or, in an action based on a petition on which the [agency] failed to

act, in a new proceeding before such court.” S. 3308, §§ 6, 12(a), 14(a). There is

now no requirement in the APA that a decision whether to grant or deny a petition

be made on the basis of a record developed before the agency and that an agency’s

denial be substantiated by such a record. This makes sense, because the agency’s

determination as to whether to initiate rulemaking proceedings depends not merely

on the “facts” pertinent to the petition, but also on broader policy, budgetary, and

related considerations which it would often be unnecessarily wasteful to reduce to

writing in each case. The effect of S. 3308, then, would be to force the agency to

go to the added expense of preparing an administrative record in a kind of mini-

rulemaking proceeding so that its denial of a petition will be supported by the

preponderance of the evidence in the record. Again, while this result might be

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acceptable for the CPSC because of public safety considerations, there is far less

justification for it with respect to the other agencies covered by the bill.

For these reasons, we believe that the provisions for judicial review raise far

more problems than they would solve. In our view, judicial review of the type now

available to compel an agency to make a decision whether to grant or deny a

petition is as far as the bill should go in this area.

IV. Congressional Access to Information

A.

Sections 7, 12(a) and 14(a) of S. 3308 would have the effect of establishing a

uniform requirement that the agencies transmit to the Congress copies of budget

information, legislative recommendations, testimony for congressional hearings,

and comments on legislation at the same time that such materials are submitted to

the President or to the Office of Management and Budget (“OMB”). The sections

further provide that no officer and no other agency of the United States shall have

authority to require the agency to submit its legislative recommendations,

testimony, or comments for approval, comments, or review prior to their submis-

sion to Congress. Provisions of this type are already applicable to the CPSC under

15 U.S.C. § 2076(k) (Supp. V 1975), enacted in 1972, and to the ICC by virtue of

section 201(j) of the Budget and Accounting Act of 1921, 31 U.S.C. § 11(j) (as

added by RRRRA, supra note 4, § 311, 90 Stat. at 60). A similar provision appli-

cable to the FTC was also included in section 4 of S. 2935, as it passed the Senate

on March 18, 1976. See 122 Cong. Rec. 7203 (1976); Senate Report at 5–6, 86.

Under existing law, the Secretary of the Treasury, the Director of OMB, and

the heads of “executive agencies” (which in this context presumably includes

independent regulatory agencies) must, upon request, furnish a committee of either

House of Congress, the Comptroller General, or the Director of the Congressional

Budget Office information as to the “location and nature of available fiscal,

budgetary, and program-related data and information.” 31 U.S.C. § 1153(a)(1)

(Supp. V 1975). This provision would appear to require the head of a department

or agency to furnish Congress with the budgetary proposal that the department or

agency has transmitted to OMB, although this Department’s administrative

counsel has construed the provision to compel the furnishing of the Department’s

budgetary data to Congress only after OMB has completed the overall budget

process. This is apparently OMB’s position as well. See OMB Circular No. A-10,

§§ 3–4. OMB Circular A-19 requires independent agencies to clear their legisla-

tive proposals through OMB, although section 7(g)(2) of the Circular permits such

reports to be submitted without approval where time limits require.

Thus, the effect of S. 3308 would be to alter the time at which Congress could

obtain copies of budget and legislative materials prepared by the seven independ-

ent agencies and to make them available to Congress without OMB clearance or a

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formal request from the Congress. The bill would not lift the present requirement

that agencies’ budgetary and other materials be submitted to OMB as well. Thus,

the Executive Branch will be informed of all agency transmissions to Congress

and will be able to counter them through its own recommendations, testimony, and

comments.

In general, we see no constitutional impediment to the requirement that inde-

pendent regulatory agencies communicate their legislative and budgetary messag-

es directly to the Congress without first clearing them with OMB. In Humphrey’s

Executor v. United States, 295 U.S. 602, 629–31 (1935), the Supreme Court held

that Congress could establish a regulatory agency, in that case the FTC, and insure

its independence from Executive Branch control by establishing a fixed term for

its members and providing that such members could be removed only for ineffi-

ciency, neglect of duty, or malfeasance in office. In our view, Congress may

legitimately conclude that a uniform practice of clearing all communications with

Congress through OMB might undermine the agencies’ intended independence

from the Executive Branch. See Senate Report at 5–6.

On the other hand, a uniform rule in the opposite extreme—i.e., that no com-

munication from an independent agency may be sent to OMB unless it is simulta-

neously sent to the Congress—would not adequately protect important interests of

the Executive Branch. For example, we do not believe that independent agencies

should be permitted to transmit to Congress copies of comments they have

prepared on legislation or reports drafted by executive departments before the

legislation or reports have themselves been transmitted to Congress. The depart-

ments’ draft legislation and reports are subject to review by OMB prior to

submission to Congress. This measure of Executive Branch control—which has

constitutional underpinnings in the duty of the President to “from time to time give

to the Congress Information of the State of the Union, and recommend to their

Consideration such Measures as he shall judge necessary and expedient,” U.S.

Const. art. II, § 3—would be lost if copies of independent agency comments made

available to Congress disclosed the substance of the Executive Branch proposals

while the proposals were still in their formative stage. In our view, the same

principle applies when draft legislation, reports, or comments prepared by an

independent agency relate to other important interests of the Executive Branch, as

might be the case, for example, with a proposal to take jurisdiction in a certain

area away from an executive department or to alter the application of civil service

laws to the agency’s personnel.

B.

The other feature of sections 7, 12, 13 and 14 of S. 3308 having to do with

congressional access to agency information directs each agency, whenever a duly

authorized committee having responsibility for authorizations or appropriations for

the agency makes a written request for documents in the possession or subject to

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the control of the agency, to submit such documents (or copies thereof) to the

committee within 10 days of the request. The bill prescribes no sanctions for an

agency’s failure to comply, nor does it contain any other means of enforcement,

although the bill does expressly provide that it “shall not be deemed to restrict any

other authority of either House of Congress, or any committee or subcommittee

thereof, to obtain documents,” id. §§ 7(a), 7(b), 7(c), 7(d), 12(a), 14(a)—

apparently referring to the subpoena power. A similar congressional access

provision was recently made applicable to the ICC in a new paragraph 15 of

section 17 of the Interstate Commerce Act, 49 U.S.C. § 17(15) (as added by

RRRRA, supra note 4, § 301, 90 Stat. at 47). In our opinion, the Department of

Justice should oppose the adoption of this aspect of S. 3308, because it does not

adequately preserve the confidentiality of trade secrets and similar information

obtained from persons subject to the agencies’ regulation and because it could lead

to inappropriate involvement by the Congress in the ongoing operation of the

agencies, especially in pending cases and investigations.

Confidential information in the hands of an independent regulatory commission

should be protected from casual disclosure in the course of compliance with a

sweeping, undifferentiated, and perhaps passing congressional request for

materials. Cf. Authority of Federal Communications Commission to Disclose

Confidential Information to Senate Committee on Interstate and Foreign Com-

merce, 41 Op. Att’y Gen. 221, 228 (1955) (Brownell, A.G.). The provision

applicable to the ICC recently enacted as section 17(15) of the Interstate Com-

merce Act contains a key limiting provision designed to enable agencies to afford

just such protection, while at the same time preserving the right of a congressional

committee to obtain the material by means of subpoena if it concludes that

circumstances warrant disclosure. The limiting provision reads:

This paragraph shall not apply to documents which have been ob-

tained by the Commission from persons subject to regulation by the

Commission, and which contain trade secrets or commercial or fi-

nancial information of a privileged or confidential nature.

90 Stat. at 47. Similar qualifying language was apparently contained in the

relevant paragraphs of S. 3308 when the bill was circulated to the seven agencies

in working paper form, see Senate Report at 68, but it has since been deleted.

Section 13(c)(5) of S. 3308 would delete the passage from the Interstate Com-

merce Act as well. At a minimum, this protection for confidential information

should be restored to the bill.

Even with this modification, however, we have serious doubts about the disclo-

sure provision. The Department of Justice has taken the position that executive

privilege is available with respect to those functions of independent regulatory

agencies that are of an executive or quasi-executive nature. The privilege must be

assertible by the President or in a manner suitable to him. In our view, S. 3308

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would not affect the power of the President, or the agency acting on the Presi-

dent’s behalf, to assert executive privilege, because in the absence of express

language in the bill, it must be assumed that the bill does not constitute an

attempted infringement of the constitutionally based privilege. Nevertheless, the

passage of these congressional access sections of S. 3308 could introduce added

confusion into an already unsettled area.

Aside from the question of executive privilege as such, it should also be noted

that within its own area of operations, an independent regulatory agency has a

strong interest in the free flow of communications to and from the heads of the

agency—i.e., the members of the commission or board—which is analogous to

that giving rise to the privilege of the President as head of the Executive Branch.

See United States v. Nixon, 418 U.S. 683, 705, 708 (1974). An independent

regulatory agency also has a strong interest in the integrity of ongoing cases and

investigations which could be seriously prejudiced if the facts and legal arguments

are freely reported to the Congress. Similar interests have been asserted to support

the withholding of investigation-related evidence compiled by the FBI, an agency

of the Executive Branch. Position of the Executive Department Regarding

Investigative Reports, 40 Op. Att’y Gen. 45 (1941) (Jackson, A.G.). In our view,

S. 3308 does not give adequate weight to these important interests.

It is true that the bill contains no sanctions for violations and that an agency

might therefore be thought to be free to decline to comply with a request for

information on either of the above-mentioned grounds or for any other reason. But

an agency should not be placed in the position of defying mandatory language in a

statute in order to protect the confidentiality of certain of its internal communica-

tions and operations. For these reasons, we recommend that the Department

oppose passage of those portions of sections 7, 12(a), 13(c), and 14(a) which

purport to require agencies to furnish information to Congress within 10 days of a

request.

V. Representation in Litigation

Section 8, 12(a), 13(d) and 14(a) of S. 3308 contain provisions which would in

essence permit the FCC, FPC, CAB, ICC, and FMC, through their own attorneys,

to commence, defend, or intervene in any action (including any appeal of such

action) having to do with matters under their jurisdiction if the Department of

Justice fails to assume the case on behalf of the agency within 45 days of the

receipt of written notification from the agency. The right of an agency to handle its

own appeals in cases in which the Department of Justice has declined to represent

the agency apparently would include appeals and petitions for certiorari to the

Supreme Court, thereby undercutting the Solicitor General’s control over such

matters. The agencies would also be authorized to seek temporary and preliminary

injunctive relief without first giving the Department of Justice an opportunity to

take responsibility for the case.

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Congress recently enacted somewhat similar legislation for the FTC, see 15

U.S.C. § 56(a) (Supp. V 1975), and the CPSC, see Consumer Product Safety

Commission Improvements Act of 1976, Pub. L. No. 94-284, § 11, 90 Stat. 503,

507–08.6 S. 3308 therefore contains no section dealing with the litigating authority

of these two agencies.

The Department of Justice vigorously opposed the expansion of the FTC’s

litigating authority on the traditional ground that the government’s litigation

should be centrally controlled and under the supervision of experienced trial

attorneys, see H.R. Rep. No. 93-1107, at 51–52, 67–68 (1974), and the Chief

Justice informed the Congress that the justices unanimously recommended against

dilution of the Solicitor General’s control over government litigation in the

Supreme Court, see S. Rep. No. 93-1408, at 39 (1974). Both objections were to no

avail. The Department also unsuccessfully opposed the expansion of the CPSC’s

litigating authority. See Consumer Product Safety Act Amendments: Hearings

Before the Subcomm. on Consumer Protection and Finance of the H. Comm. on

Interstate and Foreign Commerce, 94th Cong. 158–67 (1975) (statement of Joe

Sims, Special Assistant to the Assistant Attorney General, Antitrust Division).

We assume that the Department will also oppose S. 3308 to the extent that it

would result in a loss of litigating authority to the other five agencies,7 although

6

The FTC provision is actually considerably broader than the litigating authorizations in S. 3308

for the FCC, FPC, CAB, and FMC, because it grants the FTC exclusive litigating authority in such

areas as injunctive relief, consumer redress, judicial review of rules and cease and desist orders, and

enforcement of subpoenas. 15 U.S.C. § 56(a)(2). Section 13(d) of S. 3308 would grant the ICC

exclusive litigating authority in essentially the same areas as those in which the FTC has been granted

such authority. This ICC provision is virtually identical to one passed by the Senate as part of the

RRRRA but dropped from the bill (S. 2718) because of a jurisdictional objection by a House

Committee. See S. Rep. No. 94-595, at 158–59 (1976) (Conf. Rep.). The Department of Justice appa-

rently did not formally communicate with the Congress on this feature of the Senate version of S. 2718.

The CPSC provision enacted in May gives the CPSC exclusive litigating authority only in injunc-

tion and forfeiture actions, and it expressly denies the CPSC the authority to handle its own cases in the

Supreme Court. It does, however, permit the CPSC, with the concurrence of the Attorney General, to

prosecute and appeal any criminal action. S. 3308 does not propose to give the other six agencies any

authority with respect to criminal cases.

7

The existing litigating authority of the five agencies varies considerably. For example, the FPC

currently has authority to be represented by its own attorneys in actions to review FPC orders or to

enjoin violations of the Federal Power Act and Natural Gas Act. See 15 U.S.C. §§ 717r, 717s; 16

U.S.C. §§ 825l, 825m (1970). Section 8(b) of S. 3308 therefore appears to enhance the authority of the

Department of Justice by giving the Attorney General 45 days in which to assume responsibility for

such actions. See Senate Report at 65–66. Similarly, the FCC’s right under 47 U.S.C. § 401(e) (as

added by S. 3308, § 8(a)) to be represented by its own attorneys in appeals of FCC orders and decisions

under 47 U.S.C. § 402(b) (1970), see Senate Report at 68–69, may be undercut by the Attorney

General’s right of first refusal under 47 U.S.C. § 402(e)(1)(B) (as added by S. 3308, § 8(a)). See also

49 U.S.C. § 1486(a) (1970) (CAB); 46 U.S.C. § 828 (1970) (FMC); Senate Report at 72–73 (CAB), 79

(FMC). In other respects, however, the litigating authority of these agencies would be enhanced insofar

as actions the Attorney General has refused to bring are concerned. The somewhat different provisions

in section 13(d) would apparently have little substantive effect on the ICC’s present authority. Senate

Report at 54–55.

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that is a question of policy on which this office defers to the Solicitor General, the

Civil Division, and other interested litigating divisions.

VI. Protection of Officers

Section 9 of S. 3308 would amend 18 U.S.C. § 1114 (Supp. V 1975) to make it

unlawful to kill an officer or employee of the ICC, FTC, FPC, FCC, CAB or FMC

who is “assigned to perform investigative, inspection, or law enforcement

functions, while engaged in the performance of his official duties, or on account of

the performance of his official duties.” Section 1114 now prohibits the killing of

officers and employees of various executive departments and agencies and of the

CPSC, which was brought under the section’s coverage as a result of an amend-

ment contained in section 18 of the Consumer Product Safety Commission

Improvements Act, 90 Stat. at 514. Also, 18 U.S.C. § 111 (1970) makes it a

federal crime forcibly to assault, resist, oppose, impede, intimidate or interfere

with a person designated in 18 U.S.C. § 1114 while he is engaged in, or on

account of, the performance of his official duties.

We do not disagree with the statement in the Senate Report (at page 8) that

there should be no distinction, for purposes of federal criminal jurisdiction,

between officers and employees of the Executive Branch and those of independent

agencies, but we question whether piecemeal amendment to 18 U.S.C. §§ 111 and

1114 is the proper approach. This Department has previously sought more general

amendment to those provisions bringing within federal jurisdictions all assaults on

federal officers occasioned by their status or their performance of duties. This is

the approach taken in S. 1, 94th Cong. (as introduced Jan. 15, 1975).

VII. Avoidance of Conflict of Interest

The organic acts of each of the seven agencies would be amended by sections

10, 12(d), 13(f), and 14(b) of S. 3308 to provide that no commissioner or member

shall, for a period of two years following the termination of his service as a

commissioner or member, “represent any person before the [Commission or

Board] in a professional capacity.”8 The prohibition is intended to prevent a

conflict of interest or the appearance of a conflict of interest, Senate Report at 8,

presumably resulting from the possibility that a former commissioner or member

might have lingering influence with the agency by virtue of his former position.

8

Section 14(b) would add a new section 102(e) to Reorganization Plan 7 of 1961 to prohibit a

commissioner of the Federal Maritime Commission from engaging in any other business, vocation,

profession, or employment. A similar prohibition is already in effect for members of the other six

agencies, although only FCC commissioners are expressly precluded from engaging in any other

“profession.” 47 U.S.C. § 154(b) (1970). For the sake of uniformity, S. 3308 would add the word

“profession” to the provisions applicable to the CPSC (§ 10(d)), FTC (§ 10(a)), CAB (§ 12(d)), ICC

(§ 13(f)), and FPC (§ 10(c)). We have no objection to these changes.

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Under existing law, a specific prohibition similar to this is in effect only for

former FCC commissioners, although the FCC provision is applicable only for one

year and only if the former commissioner did not serve the full term for which he

was appointed. However, members and employees of all seven agencies covered

by S. 3308 are subject to the criminal conflict of interest laws, including 18 U.S.C.

§ 207 (1970). Subsection (a) of section 207 bars a former officer or employee of

an independent agency from knowingly acting as agent or attorney for anyone

other than the United States, either before the agency or in court, in connection

with any case or other particular matter in which he participated personally and

substantially as such an officer or employee. In addition, subsection (b) prohibits a

former officer or employee of an independent agency, for a period of one year

following the termination of his service, from knowingly acting as agent or

attorney for anyone other than the United States in connection with any particular

matter which was under his “official responsibility” within one year prior to the

termination of such responsibility. All matters pending within an independent

agency are under the “official responsibility” of the commissioners or members.

See 18 U.S.C. § 202(b) (1970). Thus, the effect of 18 U.S.C. § 207(b) is to

prohibit, for a period of one year, a former commissioner or member of any of the

agencies involved here from representing a private party in connection with any

particular matter that was pending within the agency during the year prior to the

time he left office, even if he had not participated in it or had no knowledge of it

while he was in office.

The conflict of interest section of S. 3308 would supplement the existing ban

on representational activity contained in 18 U.S.C. § 207. We recommend that the

Department support this proposal. Former commissioners or members are free

under 18 U.S.C. § 207 to represent private parties before the agency in which they

previously served in new matters that arise in the agency after they leave. Yet the

potential for a former commissioner or member to exert undue influence in an

agency proceeding because of his prior position is just as great in new matters as

in matters that were pending in the agency at the time he was there. S. 3308 would

prevent the use of such influence.

S. 3308 would impose a two-year ban on representational activities rather than

the one-year ban found in 18 U.S.C § 207. This longer period was chosen to make

the conflict of interest section in S. 3308 consistent with 18 U.S.C. § 283,* which

prohibits a retired officer of the Armed Forces of the United States, during the two

years following his retirement, from acting as agent or attorney or otherwise

*

Editor’s Note: By the time of this opinion, 18 U.S.C. § 283 was listed in the U.S. Code as having

been repealed. See 18 U.S.C. §§ 281–284, at 4185–86 (1970). As explained in the reporter’s note to the

1970 edition of the U.S. Code, however, section 283 was only partially repealed by section 2 of Public

Law 87-849, 76 Stat. 1119, 1126, and remained applicable to “retired officers of the armed forces of

the United States.” Id.

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Constitutionality of Regulatory Reform Legislation for Independent Agencies

assisting in the prosecution of a claim against the United States involving the

department in which he holds retired status.

Unlike 18 U.S.C. §§ 207 and 283, the conflict of interest provisions of S. 3308

would prevent representational activities only before the agency itself, not those

rendered in court in connection with matters under the agency’s jurisdiction, such

as in judicial review of an agency order. We have no objection to this more limited

scope of S. 3308. There is obviously a much greater potential for a former

commissioner or member to use undue influence in administrative proceedings in

which he is dealing directly with his former colleagues and subordinates than there

is once the matter reaches court, where the case is subject to independent supervi-

sion by the court.

Also, we note the S. 3308 does not provide for criminal sanctions for former

commissioners and members who violate its conflict of interest provisions.

Presumably each agency will enforce the ban on representational activities by

disqualifying the individual involved, either on its own motion or on the motion of

a party to the administrative proceeding in which the former commissioner or

member is appearing. This method of enforcement should be adequate. Because

the ban extends only to services rendered before the agency, agency officials will

be in a position to detect most if not all violations. For this reason, and because

attorneys—the group at which this aspect of S. 3308 apparently is aimed 9—would

be required as a matter of professional ethics to comply with the ban, see ABA,

Model Code of Professional Responsibility, DR Rule 2-110(B) (1976), the added

deterrent effect of criminal sanctions does not appear to be necessary in order to

accomplish the purposes of the statute.

VIII. Accountability

Sections 11, 12(a), 13(g), and 14(a) of S. 3308 would amend the organic act of

six of the agencies to provide that the Federal Tort Claims Act, 28 U.S.C.

§ 2680(a), (h) (1970 & Supp. V 1975), does not prohibit the bringing of a civil

action against the United States based upon misrepresentation or deceit on the part

of the agency or any of its employees or based upon any exercise or performance,

or failure to exercise or perform, a discretionary function on the part of the agency

or its employees which was grossly negligent.10 Judgments would be paid out of

general funds rather than out of funds appropriated for the operation of the

respective agencies. Senate Report at 9.

9

S. 3308 prohibits a former commissioner or member from representing a person before the agency

“in a professional capacity.” See also Senate Report at 8. The phrase “acts as agent or attorney,” which

appears in 18 U.S.C. §§ 207 and 283, is somewhat broader, covering informal contacts on behalf of

others by the former employee in addition to those made in a professional capacity.

10

The waiver of sovereign immunity in S. 3308 would apply only with respect to acts committed by

the agencies or their employees prior to January 1, 1979, so that Congress may assess the impact of the

waiver for discretionary acts before making it permanent. Senate Report at 9.

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The sovereign immunity sections of S. 3308 are drawn almost verbatim from a

provision that is already applicable to the CPSC. 15 U.S.C. § 2053(i) (as added by

section 5 of the Consumer Product Safety Commission Improvements Act, 90

Stat. at 504). The Department of Justice apparently did not formally relay its views

to Congress on that aspect of the CPSC legislation, but Assistant Attorney General

Uhlmann did advise OMB by letter dated May 5 that the Department would

support a veto of the bill (S. 644) because of the waiver of sovereign immunity

and the expansion of the CPSC’s litigating authority. The President approved the

CPSC legislation without mentioning the Department’s reservations. We assume

that the Department will oppose an identical waiver of sovereign immunity for the

other six agencies covered by S. 3308.

However, it should be noted that both the CPSC statute and the pertinent sec-

tions of S. 3308 contain two features which might serve to limit the scope of the

waiver of sovereign immunity to some extent. First, there can be no recovery on a

claim against the United States which is based on “agency action” as defined in

5 U.S.C. § 551(13) (1970)—i.e., “the whole or a part of an agency rule, order,

license, sanction, relief, or the equivalent or denial thereof, or failure to act.” The

purpose of the exception in the CPSC legislation was to eliminate the possibility

that an action to recover damages under the Federal Tort Claims Act based on the

performance of or failure to perform a discretionary act would be used as an

alternative to seeking judicial review of the agency action under the Administra-

tive Procedure Act. 121 Cong. Rec. 23,577–78 (July 18, 1975). We assume that

the corresponding exceptions in S. 3308 have the same purpose. The effect of the

qualification, however, will be to preclude liability for most major policy determi-

nations which the discretionary act exception in the Federal Tort Claims Act, 28

U.S.C. § 2680(a), was designed to insulate from liability for damages. Presuma-

bly, this exception for agency action in S. 3308 will also apply to discretionary

decisions and acts in the course of the administrative process which precede a final

agency determination, not merely the formal agency action itself.

Second, the CPSC provision (15 U.S.C. § 2053(i) (as added by section 5 of the

Consumer Product Safety Commission Improvements Act, 90 Stat. at 504)) and

S. 3308 (§§ 11(a)(1), 11(b), 11(c)) both provide that a judgment may not be

entered against the United States on a claim based upon the performance of or

failure to perform a discretionary function “unless the court in which such action

was brought determines (based upon consideration of all the relevant circumstanc-

es, including the statutory responsibility of the [agency] and the public interest in

encouraging rather than inhibiting the exercise of discretion) that such exercise,

performance, or failure to exercise or perform was unreasonable.” As Assistant

Attorney General Uhlmann pointed out in his May 5 letter to OMB on S. 644, this

“reasonableness” test appears on its face to impose a standard of conduct on the

agency and its personnel that is more lenient than and therefore inconsistent with

the requirement, also contained in the CPSC legislation and S. 3308, that a

claimant may not recover damages unless the discretionary conduct at issue was

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Constitutionality of Regulatory Reform Legislation for Independent Agencies

“grossly negligent.” However, the conference report on the CPSC legislation states

that the court must find that the discretionary conduct was unreasonable “as a

matter of law.” H.R. Rep. No. 94-1022, at 18 (1976) (Conf. Rep.). This is the

standard under tort law generally for taking an issue away from the jury, and it is

ordinarily thought to be satisfied only when no reasonable person could reach a

contrary conclusion. William L. Prosser, Handbook of the Law of Torts § 37, at

207 (4th ed. 1971). If Congress actually intends to impose such a stringent

limitation on recoveries in addition to the separate requirement that the conduct be

“grossly negligent,” the waivers of sovereign immunity in S. 3308 may not result

in many recoveries. But passage of this feature of the bill could nevertheless result

in the filing of numerous and often frivolous damage claims by disgruntled

persons or companies who have been only incidentally injured by a low level

administrative decision or oversight. It is by no means clear that the cost and effort

entailed in processing and defending all such claims is warranted in order to

permit recovery in a few meritorious cases.

The CPSC provision which serves as a prototype for the sovereign immunity

sections of S. 3308 was passed largely in response to a single incident involving

the Marlin Toy Company that arose when the CPSC mistakenly included one of

the company’s products on a list of banned products. When Marlin requested that

the list be corrected, the CPSC admitted its error but did not issue a retraction until

it published a new list some eight months later. The company sustained a substan-

tial financial loss as a result, but it could not recover until the Congress enacted

special legislation enabling it to do so. See 121 Cong. Rec. 23,578 (July 18, 1975);

121 Cong. Rec. 33,686 (Oct. 22, 1975). We agree with the observation of

Assistant Attorney General Uhlmann in his letter to OMB on S. 644 that the

genuine hardship cases that have given rise to the sentiment in support of the

CPSC provision, and presumably those in S. 3308 as well, are best dealt with by

private relief legislation, as was in fact done in the Marlin Toy Company case.

For the foregoing reasons, we recommend that the Department oppose the

adoption of the sovereign immunity sections of S. 3308. This could be justified on

the ground that it is necessary to assess the impact of the special CPSC provision

before extending the concept to other agencies.

MARY C. LAWTON

Deputy Assistant Attorney General

Office of Legal Counsel

413