Air Transport Ass'n of America v. Department of Transportation

SILBERMAN, Circuit Judge,

dissenting:

I quite agree with the majority that the question whether the FAA was obliged to issue the proposed rules for notice and comment is ripe, 1 but I disagree with the majority’s answer to the question because I think the rules fall, by ample measure, within the “procedural” exemption of section 553(b)(A), which exempts from notice and comment “rules of agency organization, procedure, or practice.” To be sure, the rules in this case could as well be described as rules of “practice” (covering the practice of the parties and attorneys before the FAA) and also in some respects rules of “agency organization” (dealing with the interrelationship between the administrative law judges and the Administrator). I use the term “procedure” here to cover all three concepts.

Lines between substance and procedure in various areas of the law are difficult to draw and therefore often perplex scholars and judges. But Congress, when it passed the Administrative Procedure Act, made that difference critical, and we are therefore obliged to implement a viable distinction between “procedural” rules and those that are substantive. See, e.g., Chrysler Corp. v. Brown, 441 U.S. 281, 301 , 99 S.Ct. 1705, 1717 , 60 L.Ed.2d 208 (1979) (“The central distinction among agency regulations found in the APA is between ‘substantive rules’ on the one hand and ‘interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice’ on the other.”); Reeder v. FCC, 865 F.2d 1298, 1305 (D.C.Cir.1989); American Hospital Ass’n v. Bowen, 834 F.2d 1037, 1047 (D.C.Cir.1987); Neighborhood TV Co., Inc. v. FCC, 742 F.2d 629, 636-37 (D.C.Cir.1984); Lamoille Valley R.R. Co. v. ICC, 711 F.2d 295, 328 (D.C.Cir.1983); Batterton v. Marshall, 648 F.2d 694, 707 (D.C.Cir.1980). The majority opinion, in effect, abandons the effort, finding in Reed-er, American Hospital Ass’n, and Batter-ton a disposition to challenge the Supreme Court’s Chrysler Corp. analysis that I do not discern in those cases — or in any other. Accordingly, it will be impossible for any agency general counsel, in the future, safely to advise agency heads that a given set of proposed rules are procedural and do not have to be published for comment. Therefore, I dissent.

*398 If we assume a spectrum of rules running from the most substantive to the most procedural, I would describe the former as those that regulate “primary conduct” in the way that term is used in Toilet Goods Ass’n, Inc. v. Gardner, 387 U.S. 158, 164 , 87 S.Ct. 1520, 1524 , 18 L.Ed.2d 697 (1967), and the latter are those furthest away from primary conduct. In other words, if a given regulation purports to direct, control, or condition the behavior of those institutions or individuals subject to regulation by the authorizing statute it is not procedural, it is substantive. At the other end of the spectrum are those rules, such as the ones before us in this case, which deal with enforcement or adjudication of claims of violations of the substantive norm but which do not purport to affect the substantive norm. These kinds of rules are, in my view, clearly procedural.

Rules are no less procedural because they are thought to be important or affect outcomes. Congress did not state, when it passed the APA, that all but insignificant rules must be put out for notice and comment. 2 And to say, as does the majority, that the rules are covered by section 553’s notice and comment requirement because they “substantially affect a civil defendant’s right to an administrative adjudication,” Maj. Op. at 378 (emphasis in original), is, I respectfully submit, circular reasoning. It assumes the conclusion by describing petitioner’s interest in the agency’s adjudicatory procedures as if it were a substantive right. It also implicitly suggests that petitioner is correct on the merits in claiming the agency’s adjudicatory procedures are illegal. In determining whether particular rules must be put out for comment, surely the APA does not contemplate that a reviewing court would be influenced by whether or not it thought procedural rules were illegal. If, as argued by petitioner, the rules violate its rather ill-defined notion of administrative due process (petitioner’s primary claim on the merits seems to be that the rules offend the views of the American Bar Association) or even constitutional due process, that is an entirely separate matter which can be raised in a concrete setting.

Admittedly, not all our cases fit precisely along the continuum I described above. When an agency, rather than publishing rules which define a substantive norm to which regulated groups must conform or which flesh out enforcement procedures to effectuate such compliance, instead adopts rules dealing with the award of benefits, a slightly different but similar analysis is used to distinguish substantive from procedural rules. Sometimes the Government’s prospective award of benefits is actually designed, in part, to affect primary conduct — such as the standards used to determine whether to renew a broadcast license or the criteria employed to determine eligibility for unemployment insurance. But typically, benefits are bestowed in accordance with preexisting qualifications or status. In those circumstances, it cannot be said that the rules seek to condition primary conduct. We still think of such rules as substantive because defining eligibility for a benefit program is the very essence of the program. It is in this context that in Batterton v. Marshall, 648 F.2d 694 (D.C. Cir.1980), we said that substantive rules are those that affect the “rights and interests of parties.” See id. at 707 . In Batterton , Maryland challenged the Department of Labor’s adoption of a new method of calculating local unemployment rates, which in turn determined the amount of CETA job training funds each state and locality would receive. We categorized those new rules as substantive because they altered the criteria by which Government benefits would be distributed rather than simply change the manner in which claimants for benefits communicated to the *399 agency the nature of their substantive claim. See id. at 707-08 . Similarly, in Reeder v. FCC, 865 F.2d 1298 (D.C.Cir. 1989), a radio station objected to the FCC’s adoption of rules governing counterproposals to the agency’s allotment of new FM channels throughout the United States. We decided that the procedural exemption was inapplicable because the FCC had altered its decisionmaking criteria for new station allotments. See id. at 1304-05 .

In contrast, in Neighborhood TV Co., Inc v. FCC, 742 F.2d 629 (D.C.Cir.1984), we concluded that FCC rules that froze contested applications for “translators” (devices which amplify and rebroadcast television signals) and then processed rural applications before urban ones were procedural because the rules did not alter the standards by which those applications would be judged. See id. at 637-38 . We also pointed out that our earlier decisions in Kessler v. FCC, 326 F.2d 673 (D.C.Cir. 1963), and Ranger v. FCC, 294 F.2d 240 (D.C.Cir.1961), found the challenged rules exempted from the notice and comment requirements precisely because the FCC rules did not regulate the radio stations’ right to broadcast its signals at a particular station. See Neighborhood TV, 742 F.2d at 638 .

Of course, procedure impacts on outcomes and thus can virtually always be described as affecting substance, but to pursue that line of analysis results in the obliteration of the distinction that Congress demanded. We avoided that snare only recently in American Hosp. Ass’n v. Bowen, 834 F.2d 1037, 1047 (D.C.Cir.1987), where we held, over a strong dissent in many respects redolent of the majority opinion here, that HHS rules that set forth the enforcement priorities for peer review organizations (acting as agents to ensure medically reasonable and necessary hospital health care), as well as some adjudicatory procedures similar to those contained in the rules before us, did not have to be published for comment. Although it was argued that the procedures would affect hospital behavior by discouraging activity in the zone of an enforcement priority, we nevertheless held that the rules did not “encode[ ] a substantive value judgment or put[] a stamp of approval or disapproval on a given type of behavior.” Id. at 1047 . We recognized that hospital costs would be affected by the enforcement scheme, but that was not enough to bring the rules out of the procedural safe harbor. See id. at 1051 . The case at bar involves rules that are, a fortiori, procedural because, unlike in American Hospital Ass’n , it is not even argued here that primary behavior — the safety efforts of the airlines — is even affected by the adjudicatory rules.

Deviating from our previous and recent emphasis on primary conduct, the majority asserts that a proposed rule that allegedly infringes on “the right to avail oneself of an administrative adjudication” is “substantive.” See Maj. Op. at 377. But the quoted language comes from an old and now discredited district court case, National Motor Freight Traffic Ass’n v. United States, 268 F.Supp. 90 (D.D.C.1967), aff'd mem., 393 U.S. 18 , 89 S.Ct. 49 , 21 L.Ed.2d 19 (1968). The Supreme Court summarily affirmed the judgment of the district court in National Motor Freight, and therefore we are not bound by the district court’s reasoning. See Anderson v. Celebrezze, 460 U.S. 780 , 785 n. 5, 103 S.Ct. 1564 , 1568 n. 5, 75 L.Ed.2d 547 (1983) (“A summary disposition affirms only the judgment of the court below, and no more may be read into our action than was essential to sustain that judgment.”); Illinois Election Bd. v. Socialist Workers Party, 440 U.S. 173, 182-83 , 99 S.Ct. 983, 989 , 59 L.Ed.2d 230 (1979). We have specifically disapproved of National Motor Freight’s “substantial impact” analysis, moreover, because of the Supreme Court’s command in Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519 , 98 S.Ct. 1197 , 55 L.Ed.2d 460 (1978), to avoid engrafting additional procedures on agency action beyond those required by the APA. See Cabais v. Egger, 690 F.2d 234, 237 (D.C.Cir. 1982) (“Simply because agency action has substantial impact does not mean it is subject to notice and comment if it is otherwise *400 expressly exempt under the APA.”). 3

It might be thought that there is something vaguely underhanded about an agency publishing important rules without an opportunity for those affected to comment. And lawyers and judges tend to prefer, on the margin, added procedure. But as Cabais makes clear, we have been admonished somewhat dramatically by Vermont Yankee to not add more procedure to the APA than Congress required. I am afraid the majority opinion by obliterating the distinction between substance and procedure in section 553 does just that.

. Although I do not believe petitioner’s challenge to the fairness of the rules is ripe, there is no point in discussing that issue in light of the majority’s disposition.

. The majority erroneously quotes Chrysler Corp. as referring to the procedural exemption as a "mere 'housekeeping' measure." See Maj.Op. at 378. In fact Chrysler Corp. characterized 5 U.S.C. § 301 — the provision authorizing executive department heads to prescribe regulations for the governing of their departments — and not the APA procedural exemption as a "housekeeping statute." See Chrysler Corp., 441 U.S. at 309-10 , 99 S.Ct. at 1721-22 . The Court then compared § 301 to the APA exemption, indicating that the procedural exemption at least includes day to day internal government business.

. Even if National Motor Freight were still good law and binding on us, our case is arguably distinguishable because the only issue before us is the specific content of FAA adjudicative procedures and not whether such a remedial avenue exists at all. In National Motor Freight, freight carriers challenged an ICC plan of administrative adjudication of alleged carrier overcharges. Congress had explicitly authorized only judicial remedies to recover excessive rates. In the absence of such authority, the district court concluded that the right to an administrative route to reparations itself was a significant determination by the Commission that granted shippers an easier path to recover excess payments. See National Motor Freight, 268 F.Supp. at 95-96 . Thus, the court decided that the provision of a new remedy was a new right or interest afforded to shippers. In contrast, Congress specifically empowered the FAA to adopt rules to adjudicate civil penalties. See 49 U.S.C. app. § 1475(d)(1). After National Motor Freight, the courts that adopted the "substantial impact” reasoning found the requisite impact when the agency created new rights and obligations. See British Caledonian Airways, Ltd. v. CAB, 584 F.2d 982 , 989 (D.C.Cir.1978).