Petition for Writ of Certiorari — Department of Transportation v. Air Transport Ass'n of America

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UNITED STATES DEPARTMENT OF TRANSPORTATION,

ET AL., PETITIONERS

. AIR TRANSPORT ASSOCIATION OF AMERICA, ET AL.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

JOHN G. ROBERTS, JR.

Acting Soliciter General

STUART M: GERSON

Assistant Attorney General

STEPHEN L. NIGHTINGALE

Assistant to the Solicitor General

ANTHONY J. STEINMEYER

JOHN F. DALY

. Attorneys

Department of Justice

PHILLIP D. BRADY Washington, D.C. 20530

General Counsel (202) 514-2217

PAUL M. GEIER

Assistant General Counsel foi Litigation

Department of Transportation

Washington, D.C. 20590

GREGORY S. WALDEN

Chief Counsel pee

Federal Aviation Administration Sete

Washington, D.C. ee a

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BABE ERE HPT:

QUESTION PRESENTED

Whether regulations setting forth procedures for Fed-

eral Aviation Administration civil penalty proceedings

were “rules of agency organization, procedure, or prac-

tice’ exempt from the notice-and-comment requirement

of the Administrative Procedure Act.

(I)

PARTIES TO THE PROCEEDING

The petitioners, respondents below, are the United

States Department of Transportation; Samuel Skinner,

Secretary of Transportation; the Federal Aviation Ad-

ministration; and James B. Busey, Administrator of the

FAA.

The respondents are Air Transport Association of

America, the petitioner below, and National Air Carrier

Association, Inc., American Trans-_Air, Inc., Southern

Air Transport, Inc., World Airways, Ine, Air Line

Pilots Association, Aircraft Owners and Pilots Associa-

tion, America West Airlines, Inc., Albert O. McCauley,

Duncan Black Parker, and Herbert G. Vance, petition-

ers-intervenors below.

TABLE OF CONTENTS

Page

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Statutory provisions involved ......................-....-..:ss:-ss+0-+0+- 2

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Reasons for granting the petition ..................-.....-.......-.---+- 8

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TABLE OF AUTHORITIES

Cases: :

Akron, Canton & Youngstown R.R. v. United

States, 370 F. Supp. 1231 (D. Md. 1974) ........... 17

Alcaraz v. Block, 746 F.2d 593 (9th Cir. 1984) .... 17

American Hosp. Ass’n V. Bowen, 834 F.2d 1037

indies cceiniianadinnniionsveneananinnan 10, 19

American Transfer & Storage Co. v. ICC, 719 F.2d

cen sialihinllibansiesnicncmenmee 18

American Trucking Ass’n y. United States, 688

F.2d 1837 (11th Cir. 1982), rev’d, 467 U.S. 354

SE ET SE rr eee 18

Associated Diy Goods Corp. v. EEOC, 543 F.

Supp. 950 (E.D. Va. 1982), nev'd, 720 F.2d 804

ER Pe 19, 20

Batterton v. Francis, 482 U.S. 416 (1977) ............. 13

Batterton v. Marshall, 648 F.2d 694 (D.C. Cir.

a lh is caneemnancncmunsbniaanennndacence 18-19

British Caledonian Airways, Ltd. v. CAB, 584

TE | Ca 19

Brown Express, Inc. v. United States, 607 F.2d

I a ciinsenininncncnnnensimenssonsainee 18

Broyles, In re, FAA Order No. 90-23 (Sept. 14,

iE RR EE ee 22

Cases—Continued : Page

Buckeye Cablevision, Inc. v. United States, 438

ee ee Cee Ge SED attire. 20

Cabais v. Egger, 690 F.2d 234 (D.C. Cir. 1982)... 10,18

Carroll, In re, FAA Order No. 90-21 (Aug. 16,

RRO Es ie ee CRN Me PEN Ee Rr a ve 22

Chrysler Corp. Vv. Brown, 441 U.S. 281 (1979)... 9,12

Colautti v. Franklin, 489 U.S. 379 (1979) ............ 12

Continental Airlines, Inc., In re, FAA Order No.

ee Fie itcitciacteiniicininhiecinniccenectn eines 22

Degenhardt, In re, FAA Order No. 90-20 (Aug.

RRR ARES ere eet eater oR aAe eN 22

Energy Reserves Group, Inc. v. DOE, 589 F.2d

1082 (Temp. Emer. Ct. App. 1978) ................... 17

Friedrich v. Secretary of HHS, 894 F.2d 829 (6th

REGRESS Set ere ee goths a 17

Jean V. Nelson, 711 F.2d 1455 (11th Cir. 1983),

modified, 727 F.2d 957 (11th Cir. 1984), aff’d,

Gar ee ee a a 18

Lamoille Valley R.R. v. ICC, 711 F.2d 295 (D.C.

5g eRe RN oa ae obec ee. Weare Ab) OL OO ci 20

Levesque V. Block, 723 F.2d 175 (1st Cir. 1983) -... 17

Lewis-Mota v. Secretary of Labor, 469 F.2d 478

I SU sileicahnca iccihclieienintica tsk Undeienecalp aliases 17

National Motor Freight Traffic Ass’n v. United

States, 268 F. Supp. 90 (D.D.C. 1967), aff’d,

Re ee See eee 4,10

Neighborhood TV Co. v. FCC, 742 F.2d 629 (D.C.

A SURELIRBV Caco ks one eS NY OSE 20

Ohio Dep’t of Human Servs. v. United States

Dep’t of HHS, 862 F.2d 1228 (6th Cir. 1988) __.. 17

Pennsylvania v. United States, 361 F. Supp. 208

(M.D. Pa.), aff’d, 414 U.S. 1017 (1978) -............ 17

Pharmaceutical Mfrs. Ass’n Vv. Finch, 307 F.

I Fe EU SUNG OD cicneciebcksecccancesicesieeininceeeics 17

Philadelphia Citizens in Action Vv. Schweiker, 669

fp bk Rg BRS eR rOr EN 25

Pickus v. United States Bd. of Parole, 507 F.2d

ba Ta EE Re eee ae ae 17

Rivera Vv. Becerra, 714 F.2d 887 (9th Cir. 1983),

cert. denied, 465 U.S. 1099 (1984) .......... 17

Southern California Edison Co. v. FERC, 770 F.2d

RU Ce I I ite entasrciietnnecestieicsitataninrancinniinn 15, 16

Cases—Continued: Page

USAir, Inc., In re, FAA Order No. 90-22 (Aug.

| TRS as Rae ae asker, Se kee ee aN 22

United States Dep’t of Labor v. Kast Metals Corp.,

744 F.2d 1145 (Sth Cir. 1984) 200. 18

Vermont Yankee Nuclear Power Corp. v. Natural

Resources Defense Council, Inc., 485 U.S. 519

II es icpatheighcchaciethcthaceiictdta iad lial 18, 15, 17, 20

Constitution, statutes and regulation:

U.S. Const. Amend. V (Due Process Clause) .......... 5

Act of July 4, 1966, Pub. L. No. 89-487, §1, 80

a a 13

Act of June 5, 1967, Pub. L. No. 90-23, §1, 81

ee PARR 20 Vole UOT fey Nc bee 12-13

Act of Dec. 15, 1989, Pub. L. No. 101-236, § 1, 103

RRR I cS Ua eA eo 3

Act of May 4, 1990, Pub. L. No. 101-281, § 1(a),

EEE ERIN wa ae Mite oar eR GTC Re Neots DN a 3

Act of Aug. 15, 1990, Pub. L. No. 101-870, 104

EGR NGT OR Scene ek ieee ee as ee I 8, 96a

Administrative Procedure Act, ch. 324, §3, 60

EI SEES rane a en Tee De mn TEE See 12, 14

Administrative Procedure Act:

8 Ee a ee eS = 12

FEES noe 2, 13, 14, 92a

i cca aie 12, 13

EE COCO ST 12

3) SE EERE eanapeaeee 2,9, 10, 11, 18, 15, 16, 92a

3 |), SS eee Siicueuie 11

ik eG FRc: 2,11, 12, 14

SUB eee ce (A)-(B) .............................<.... 4

Or i iccctansintestintciesicenimanioteneaniin 4

ic I ia cisennnncseiereneenscnscnnconasinss 9

bio 5 STS area 24

Airport and Airway Safety and Capacity Expan-

sion Act of 1987, § 204(g), 49 U.S.C. App. 1475

‘i “S & + R=SvRaSe renee reeee 2-3, 94a

49 U.S.C. App. 1475 (d) (1) (Supp. V 1987) .... 3

49 U.S.C. App. 1475 (d) (4) (Supp. V 1987)... 3

49 U.S.C. App. 1874(d) (2) (Supp. V 1987) -............ 15

49 U.S.C. App. 1471(a) (1) (Supp. V 1987) -............ 15

Miscellaneous: Page

133 Cong. Rec. $15,294 (daily ed. Oct. 28, 1987).... 2

K. Davis, Administrative Law of the Eighties

RR AE OOD AEE fe ee a ea ea 17

1 K. Davis, Administrative Law Treatise (2d ed.

ES UE EST Orn yaa Se NSE Ae ee TOR 19

2 K. Davis, Administrative Law Treatise (2d ed.

1979) ...... SS EE ee ae ae a 17

Be Ey A COT csc ccnceccccscecececcccscccccceccceceee 25

53 Fed. Reg. 34,646 (1988) 20... cece cececeeeeceeeeeee 8

55 Fed. Reg. (1990) :

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EE eee oe 7

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By ee II Oy, ROD ini cecncencccnccccccssececcccessesces 7,21

pp. 27,549-27,550 (July 3, 1990) ...00000.. ee. 22

Bs Ee CP iy BOD avacnccciscccncceccnccsnsccecsccccccess 21

SP I I UD kins ncn cdcccccececsnnccacaccosees 22

pp. 27,584-27,585 (July 3, 1990) 0.0. 21

S. Doc. No. 248, 79th Cong., 2d Sess. (1946)... 9

Note, The Substantial Impact Test: Victim of the

Fallout from Vermont Yankee?, 53 Geo. Wash.

a es Se ci ERE ince A 17

United States Dep’t of Justice, Attorney General’s

Manual on the Administrative Procedure Act

Re RE OTe LW RL EOL CN 18

Iu the Supreme Court of the United States

OCTOBER TERM, 1990

No.

UNITED STATES DEPARTMENT OF TRANSPORTATION,

ET AL., PETITIONERS

Vv.

AIR TRANSPORT ASSOCIATION OF AMERICA, ET AL.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

- FOR THE DISTRICT OF COLUMBIA CIRCUIT

The Acting Solicitor General, on behalf of the United

States Department of Transportation; Samuel Skinner,

Seeretary of Transportation; the Federal Aviation Ad-

ministration; and James B. Busey, Administrator of the

FAA, petitions for a writ of certiorari to revie’ the

judgment of the United States Court of Appeals for the

District of Columbia Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals (App., infra, la-

3la) is reported at 900 F.2d 369.

JURISDICTION

The judgment of the court of appeals was entered on

April 13, 1990. A petition for rehearing was denied on

June 18, 1990. App., infra, 32a. On September 7, 1990,

the Chief Justice extended the time for filing a peti-

tion for a writ of certiorari to and including October 5,

(1)

1990. This Court has jurisdiction under 28 U.S.C.

1254(1).

STATUTORY PROVISIONS INVOLVED

Sections 551(4) and 553 of Title 5 of the United

States Code and Section 204(g) of the Airport and Air-

way Safety and Capacity Expansion Act of 1987, 49

U.S.C. App. 1475 (Supp. V 1987), are set out in an

appendix (App., infra, 92a-96a).

STATEMENT

In this case, a divided panel of the court of appeals

struck down regulations establishing procedures for civil

penalty proceedings conducted by the Federal Aviation

Administration. The majority held that the regulations

were invalid because the FAA failed to comply with the

notice-and-comment requirement of the Administrative

Procedure Act. In so doing, the majority rejected the

government’s contention that the challenged rules fell

within the exception to that requirement for “rules of

agency organization, procedure, or practice” (5 U.S.C.

553(b)(A)). By a 5-5 vote, the court of appeals de-

clined to rehear that question in bane.

1. Until 1987, the FAA had only limited authority to

adjudicate claims for civil penalties based upon viola-

tions of the Federal Aviation Act and associated regula-

tions. With the exception of certain cases involving the

transportation of hazardous materials, the agency was

required to refer violations subject to civil penalties to

the Department of Justice, which would then determine

whether to pursue enforcement proceedings in federal

district court.

In 1987, recognizing that competing demands on the

U.S. Attorneys’ offices had led to sporadic enforcement,

Congress provided the FAA with additional authority to

assess civil penalties.’ Section 204(g) of the Airport

1See 1383 Cong. Rec. $15,294 (daily ed. Oct. 28, 1987) (remarks

of Sen. Wilson).

and Airway Safety and Capacity Expansion Act of 1987,

49 U.S.C. App. 1475 (Supp. V 1987), empowered the

FAA to conduct a “demonstration program” in which

the agency could assess civil penalties in amounts up to

$50,000.00. As originally enacted, the program was to re-

main in effect for two years, through December 30, 1989.

49 U.S.C. App. 1475(d) (4). The FAA’s authority to

assess civil penalties has since been extended on several

occasions, most recently through August 1, 1992.*

The statute provides that a penalty is to be assessed

“only after notice and an opportunity for a hearing on

the record in accordance with [5 U.S.C. 554].” 49

U.S.C. App. 1475(d) (1). On September 7, 1988, in or-

der to prescribe procedures through which its new en-

forcement authority could be exercised, the FAA promul-

gated its “Rules of Practice for FAA Civil Penalty Ac-

tions.” 53 Fed. Reg. 34,646 (1988) [hereinafter Rules

of Practice]. The Rules of Practice set out a compre-

hensive set of procedures for civil penalty proceedings—

covering such matters as pleadings, representation of

parties, scheduling, discovery, motions, hearings, and ad-

ministrative appeals. App., infra, 38a-9la. The FAA

made the rules effective immediately upon their publica-

tion in the Federal Register. App., infra, 35a; see id.

at 37a.

2. The Air Transport Association of America (ATA),

a trade association consisting of American air carriers,

petitioned the United States Court of Appeals for the

District of Columbia Circuit for review of the Rules of

2 Unless otherwise indicated, all citations to 49 U.S.C. App. are

tc Supplement V to the 1982 edition of the United States Code.

3 See Act of Dec. 15, 1989, Pub. L. No. 101-236, § 1, 103 Stat.

2060 (four-month extension) ; Act of May 4, 1990, Pub. L. No. 101-

281, §1(a), 104 Stat. 164 (additional three-month extension); Act

of Aug. 15, 1990, Pub. L. No. 101-370, 104 Stat. 451 (extension

through August 1, 1992).

* The Rules of Practice, together with excerpts from the explana-

tory statement accompanying them, are set forth in an appendix.

App., infra, 35a-91a.

Practice, and other parties intervened to challenge the

rules. See p. ii, supra. The ATA and the intervenors

argued, inter alia, that the Rules of Practice were in-

valid because the FAA had promulgated them without

complying with the notice-and-comment requirement of

the APA, 5 U.S.C. 553(b)-(c). The government re-

sponded that the Rules of Practice were exempt from

the notice-and-comment requirement, because they were

“rules of agency organization, procedure, or practice”

and because the agency had properly found, in view of

the time constraints placed by Congress on the civil

penalty program, that good cause existed for dispensing

with notice and comment. See 5 U.S.C. 553(b) (A)-(B) ;

App., infra, 35a-37a. A divided court of appeals held

that neither exception to the notice-and-comment require-

ment was applicable.

a. The majority (Edwards and Mikva, JJ.) ruled that

the exemption for “rules of agency organization, proce-

dure, or practice” does “not apply to agency action that

‘substantially alter[s] the rights or interests of regu-

lated’ parties.” App., infra, 2a. The Rules of Practice

failed that test, the majority held, “because they sub-

stantially affect civil penalty defendants’ ‘right to avail

[themselves] of an administrative adjudication.’” Ibid.

(quoting National Motor Freight Traffic Ass’n v. United

States, 268 *. Supp. 90, 96 (D.D.C. 1967) (three-judge

court), aff’d mem., 393 U.S. 18 (1968)). See App., in-

fra, 11a, 13a, 14a, 15a, 18a-19a.

The majority dismissed as “unpersuasive” the gov-

ernment’s contention that the Rules of Practice were

rules of agency “procedure” or “practice” because they

established procedures for civil penalty proceedings and

had no effect on substantive obligations imposed on the

aviation community. App., infra, 1la-12a; see id. at 18a.

“Rather than focus on whether a particular rule is ‘pro-

cedural’ or ‘substantive,’” the majority declared, the

circuit’s prior decisions mandated a “functional analy-

sis.” Id. at 12a. Under this analysis, “[w]here nomin-

ally ‘procedural’ rules ‘encode[] a substantive value

judgment’ or ‘substantially alter the rights or interests

of regulated’ parties,” the exemption for rules of agency

procedure is unavailable (id. at 13a); that exception is

a “mere ‘housekeeping’ measure” reserved for rules or-

ganizing an agency’s “internal operations” (id. at 17a;

see id, at 12a, 18a). An agency can be allowed “to forgo

notice and comment,” the majority said, “only when the

subject matter or the circumstances of the rulemaking

divest the public of any legitimate stake in influencing

the outcome.” Jd. at 1la; see id. at 15a-16a, 24a.

Applying this “functional analysis,” the majority

found that the Rules of Practice “substantially affect a

civil penalty defendant’s right to an administrative ad-

judication” under the Due Process Clause and the APA.

App., infra, 13a. Whether or not the Rules of Practice

violate any such right, the majority explained, the rules

embodied “discretionary—indeed, in many cases, highly

contentious—choices concerning what process civil pen-

alty defendants are due,” and those choices “ ‘encode[d]

a substantive value judgment’ * * * on the appropriate

balance between a defendant’s right to adjudicatory pro-

cedures and the agency’s interest in efficient prosecu-

tion.” Id. at 18a & n.8. Thus, the majority declared,

“'t]he FAA was no less obliged to engage in notice and

comment before taking action affecting these adjudica-

tory rights than it would have been had it taken action

affecting aviators’ ‘substantive’ obligations under the

Federal Aviation Act.” Id. at 13a.

In fashioning a remedy, the majority acknowledged

that not all of the Rules of Practice “touch on civil pen-

alty defendants’ rights to adjudication,” but it neverthe-

less refused to limit its decision to rules having such an

effect. App., infra, 16a n.12. “At a minimum,” the court

said, “the FAA was obliged to engage in notice and com-

ment before promulgating the Rules implementing the

APA’s procedures for formal adjudication, see 5 U.S.C.

§§ 554, 556-557.” Ibid. The decision prohibited the FAA

from initiating any new penalty proceedings—or going

forward in pending cases—under the Rules of Practice.

Id. at 23a. Acknowledging the disruption that would ac-

company wholesale dismissals of civil penalty proceed-

ings, however, the majority permitted the agency to

hold pending cases in abeyance until it had promulgated

new rules in accordance with the court’s decision. /bid.

But the majority noted that a defendant would “be free

to raise the defense that the FAA could not have success-

fully prosecuted him but for the agency’s reliance” on

any aspect of the rules that might be abandoned in a

subsequent rulemaking. Ibid. The majority also took

“no position on whether parties whose cases have reached

a final determination under the [Rules of Practice] may

now raise the procedural invalidity of the Rules as a

ground for seeking review.” Id. at 23a-24a.°

b. Judge Silberman dissented. While observing that

“{ljines between substance and procedure in various

areas of the law are difficult to draw,” he concluded that

Congress ‘“‘made that difference critical” in the APA and

thus obligated courts “to implement a viable distinction

between ‘procedural’ rules and those that are substan-

tive.” App., infra, 25a. In “a spectrum of rules running

from the most substantive to the most procedural,” he

continued, the-former would be “those that regulate ‘pri-

mary conduct’” and the latter would be rules, such as

those at issue here, “which deal with enforcement or ad-

judication of claims of violations of the substantive

norm.” Id. at 26a. He suggested that the majority’s

5 The majority also held that the notice-and-comment issue was

ripe for review (a conclusion with which the dissent agreed), App.,

infra, Ta-9a; id. at 25a (Silberman, J., dissenting) ; that there was

no “good cause,” as that APA term had been interpreted by the

courts, justifying the FAA’s decision not to engage in notice-

and-comment rulemaking, id. at 19a-20a; and that the agency’s

failure to follow that course was not cured by its willingness to

receive and respond to comments submitted after the Rules of

Practice became effective, id. at 20a-22a. We do not seek further

review of these determinations.

cea

analysis—which found the Rules of Practice not to be

“rules of agency * * * procedure” because they affected

a right to an adjudication—was “circular reasoning”

(id. at 26a-27a) and would “result[] in the obliteration

of the distinction that Congress demanded” (id. at 29a).

Judge Silberman also noted that the majority’s reasoning

would make it “impossible for any agency general coun-

sel, 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” (id. at 26a).

3. The government filed a petition for rehearing with

a suggestion of rehearing in banc. By a 5-5 vote, the

court of appeals denied rehearing in banc. App., infra,

33a-34a.

4. After the case had been argued, but before the

panel issued its decision, the FAA published a Federal

meet some of the specific objections advanced by the

ATA and the intervenors. 55 Fed. Reg. 7980 (1990).

When the panel issued its decision, the agency was on

the verge of promulgating those amendments in final

form. In an effort to minimize disruption of its enforce-

ment program, the FAA issued the amendments, sus-

pended their effective date, and simultaneously published

all of the Rules of Practice, as amended, as a proposed

rule. 55 Fed. Reg. 15,110, 15,134 (1990). Final,

amended rules of practice were issued, after the agency

had received comments from the public, on July 3, 1990.

55 Fed. Reg. 27,548 (1990). These rules became effec-

tive on August 2, 1990.

pape aaa eee ta aaa ae eee ens

REASONS FOR GRANTING THE PETITION

The majority’s holding—that the FAA’s Rules of

Practice did not qualify as “rules of agency organiza-

tion, procedure, or practice” because they substantially

affected civil penalty defendants’ right to an administra-

tive adjudication—represents a serious departure from

the basic structure of the APA. The court’s decision also

conflicts squarely with a decision from the Ninth Circuit

upholding procedural rules issued by FERC. In that

case, the Ninth Circuit specifically rejected a contention

that the applicability of the exemption depended on the

magnitude of a rule’s impact on private parties’ inter-

ests. This Court’s review is warranted to resolve both

the scope of the exception for rules of agency procedure

and the much-debated question of whether rules having

a “substantial impact” on private parties are ineligible

for the exceptions to the notice-and-comment require-

ment.

The court of appeals’ decision is important to the FAA

and other federal agencies. The decision casts doubt on

the substantial number of civil penalty proceedings that

were pending at the time of the decision. The majority’s

interpretation will certainly encourage challenges to

rules of procedure promulgated by other agencies with-

out notice and comment. Finally, as the dissent noted,

the practical effect of the decision is to make it impossi-

ble for agencies to rely in the future on the exemption

for “rules of agency organization, procedure, or prac-

tice.” With the possible exception of the most mundane

housekeeping provisions; any procedural regulation

promulgated without notice and comment will be vulner-

able to a post hoc determination that it encodes a value

judgment, extends beyond an agency’s internal opera-

tions, substantially alters the rights or interests of reg-

ulated parties, or calls in some measure for public par-

ticipation—all grounds relied upon by the majority be-

low, but not specified in the statute.

1. The APA divides agency rules into several categor-

ies and prescribes the procedures required for promulga-

tion of each type. As this Court has observed, the “cen-

tral distinction” 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.” Chrysler Corp. v. Brown, 441

U.S. 281, 301 (1979). When issuing “substantive rules,”

an agency must employ notice-and-comment rulemaking

and, in general, must postpone the effective date of a

final rule until 30 days after it has been published in

the Federal Register. See 5 U.S.C. 553(b)-(d). The —

other categories referred to in Chrysler Corp.—interpre-

tative rules, general statements of policy, and rules of

agency organization, procedure, and practice—are ex-

empt from the notice-and-comment requirement and may

be made effective immediately upon publication. 5 U.S.C.

553 (b)-(d).

The drafters of the APA—confident that “[t]he mean-

ing of the phrase ‘substantive rule’ [was] well defined

in court decisions and upon principle” (S. Doc. No. 248,

79th Cong., 2d Sess. 19 (1946) )—chose not to include

statutory definitions of the categories of rules referred to

in Section 553. Nevertheless, as the dissent noted, a

court is obliged to adhere to ..1e basic framework set out

in the statute—.e., “to implement a viable distinction

between ‘procedural’ rules and those that are substan-

tive.” App., infra, 25a.

a. In this case, the majority dismissed that “central

distinction” (Chrysler Corp. v. Brown, 441 U.S. at 301)

altogether. Responding to the dissent’s criticism that its

analysis would “result[] in the obliteration of the dis-

tinction” between procedure and substance “that Con-

gress demanded” (App., infra, 29a), the majority de-

clared iconoclasticly that “there is no such ‘distinction’

to obliterate for purposes of section 553(b)(A)” (id. at

17a). Likewise, the majority dismissed the FAA’s con-

tention that the Rules of Practice did not affect the sub-

stantive obligations of the aviation community as “irreie-

vant.” Id. at 18a.

Instead of attempting to apply the distinction set

forth in the statute, the majority devised a “functional

approach” having absolutely no connection to the statu-

tory text. Nothing in the statute suggests that the ap-

plicability of the notice-and-comment requirement de-

pends on the magnitude of its effect on “ ‘the rights or

interests of regulated’ parties” (App., infra, 18a).° The

6 The majority relied heavily on National Motor Freight Ass’n Vv.

United States, supra, in fashioning its analytical approach. In that

case, a three-judge court sustained a challenge to a rule establishing

a mechanism through which a shipper and a carrier could voluntarily

agree to “reparations”—in effect, refunds of amounts paid by the

shipper—subject to a determination by the ICC that the original

rate charged was unlawful. The precise basis for the holding was

opaque, but the court appears to have relied upon its judgment that

the rule was sufficiently significant in its impact to trigger the notice-

and-comment requirement. See, e.g., 268 F. Supp. at 95 (informal,

voluntary reparations procedure was not “so insignificant in nature

and impact as to fall outside the rule-making requirements of Section

[553)”) ; 268 F. Supp. at 97 (ICC took a “significant step” that

was “within the purview of the Congressional prescription of rule-

making requirements contained in Section [553]”). Contrary to

the majority’s suggestion in this case, the National Motor Freight

court did not hold that any rule affecting a right to an adjudication

would trigger Section 553. Indeed, the language invoked by the

majority in this case was an excerpt from an observation having

no relevance to the issue presented here. Referring to the fact that

carriers and shippers who agifeed to reparations would obtain an

ICC ruling on the legality of amounts previously paid, the court

stated that “[a] right to avail oneself of an administrative adjudi-

cation of this kind does not become trivial simply because it is

optional.” 268 F. Supp. at 96. Nothing in the opinion remotely

suggests that this observation was integra! to the court’s holding.

As the dissent noted (App., infra, 30a), this Court’s summary

affirmance of National Motor Freight did not constitute approval

of the three-judge court’s reasoning. In Cabais v. Egger, 690 F.2d

234, 237 (1982), the D.C. Circuit suggested that National Motor

Freight had been undercut by Vermont Yankee. The rule at issue

in National Motor Freight—which created a new remedy in the

wian—J——h——————

APA does not distinguish between rules that “encode a

substantive value judgment” and those that do not, nor

does it suggest that courts should inquire whether an

agency has made “discretionary” or “contentious”

choices bearing on private parties’ rights or interests

(id. at 13a). ‘There is nothing presumptively non-

procedural about rules “implementing the APA’s proce-

dures for formal adjudication” (id. at 16a n.12; see id.

at 12a); on the contrary, such rules would seem to be

“procedural” almost by definition. Nor does the text of

the APA provide any support for the proposition that a

rule of agency procedure cannot extend beyond an

agency’s “internal operations” (id. at 17a, 18a).

b. The various judicial “tests” articulated in the ma-

jority’s opinion—in the main, excerpts lifted from vari-

ous prior D.C. Circuit opinions—were applied as sub-

stitutes for the statutory text. The majority justified

this approach with the observation that “[t]he char-

4 acterizations ‘substantive’ and ‘procedural’ * * * do not

guide inexorably to the right result, nor do they really

advance the inquiry very far.” App., infra, 18a. In so

doing, the majority overlooked provisions of the APA

that cast considerable light on the distinction between

“substantive rules” and “rules of agency organization,

procedure, or practice’ in favor of a smorgasbord of

extra-statutory standards that have developed a life of

their own—independent of the law enacted by Congress.

Various provisions of the APA make it clear that the

majority’s analysis is untenable.

First, Section 553 does not apply at all to “a matter

relating to agency management or personnel” (5 U.S.C.

558(a)(2)). Thus, if the additional exception set out

in Section 553(b) (A) is limited to “internal operations,”

context of a statute in which Congress had assigned specific roles

to the courts and the ICC in reparations cases—bears no resem-

blance to the rules at issue here.

as the majority stated, it is superfluous.’ It is, of course,

an “elementary canon of construction that a statute

should be interpreted so as not to render one part in-

operative.” Colautti v. Franklin, 489 U.S. 379, 392

(1979).

Second, the reference in Section 553(b) (A) to “rules

of agency organization, procedure, or practice” is a

shorthand reference to a category of rules described

more fully in the APA’s publication requirement. In

enumerating the categories of materials that agencies

would be required to publish, the predecessor of Section

552, 60 Stat. 238 (§ 3), distinguished between “substan-

tive rules adopted as authorized by law and statements

of general policy or interpretations formulated and

adopted by the agency for the guidance of the public,”

on the one hand, and, on the other (emphasis added) :

(1) descriptions of [an agency’s] central and field

organization including delegations by the agency of

final authority and the established places at which,

and methods whereby, the public may secure infor-

mation or make submittals or requests; [and] (2)

statements of the general course and method by which

its functions are channeled and determined, includ-

ing the nature and requirements of all formal or in-

formal procedures available as well as forms and

instructions as to the scope and contents of all papers,

reports, or examinations. '*!

7 Contrary to the majority’s suggestion (App., infra, 12a, 17a-

18a), this Court’s decision in Chrysler Corp. v. Brown, 441 U.S.

at 309-310, did not determine that the APA exception for “rules

of agency organization, procedure, or practice” is limited to “‘house-

keeping” matters. When it spoke of a “housekeeping” statute in

Chrysler Corp., the Court was referring to 5 U.S.C. 301. See App.,

infra, 26a-27a n.2 (Silberman, J., dissenting).

8 We have cited to this provision because it was enacted at the

same time as the exception for “rules of agency organization, proce-

dure, or practice” and is thus the best indicator of the intention

of the Congress that enacted that exception. The current version

of Section 552(a) reflects amendments enacted in 1967, Act of

This provision and Section 553 may properly be read in

pari materia.® Thus, it is clear that the “rules of agency

* * * procedure” encompassed by Section 553(b) (A)

include those establishing “all formal or informal pro-

cedures available” (plainly, to the public), not just the

internal housekeeping matters encompassed by the ma-

jority’s interpretation.

Finally, the APA definition of a “rule,” 5 U.S.C.

551(4), contrasts procedural rules with rules that are

designed to implement, interpret or prescribe law or

policy. According to that definition, a rule is “the whole

or a part of an agency statement of general or particu-

lar applicability and future effect”

June 5, 1967, Pub. L. No. 90-23, § 1, 81 Stat. 54. (These amendments

were originally enacted in 1966, see Act of July 4, 1966, Pub. L.

No. 89-487, § 1, 80 Stat. 250, but were reenacted to incorporate them

in the 1966 recodification of Title 5.) The amendments are not, in

our view, material to the issues presented here.

® The “substantive rules adopted as authorized by law and state-

ments of general policy or interpretations formulated and adopted

by the agency for the guidance of the public” are unmistakable

references to the “substantive rules,” “general policy statements,”

and “interpretative rules” referred to in Section 553. The other

paragraphs thus may be taken as a description of the “rules of

agency organization, procedure, or practice” referred to in Section

558.

The Attorney General’s Manual on the APA relied heavily on the

parallel between the predecessors of Sections 552 and 553 in ex-

plaining the intent of those provisions. It stated that “the rules

of organization and procedure which an agency must publish pur-

suant to section 3(a)(1) and (2) [quoted above in text] are not

ordinarily subject to the requirements of section 4(a) and (b)

[now 5 U.S.C. 553(b) and (c)].” United States Dep’t of Justice,

Attorney General’s Manual on the Administrative Procedure Act

30 & n.8 (1947). This Court has relied upon the Manual’s inter-

pretations of the tategories of rules established by the APA, “be-

cause of the role played by the Department of Justice in drafting

the legislation.” Vermont Yankee Nuclear Power Corp. V¥. Natural

Resources Defense Council, Inc., 435 U.S. 519, 546 (1978). See

Batterton v. Francis, 432 U.S. 416, 425 n.9 (1977).

—‘“designed to implement, interpret, or prescribe law

or policy or”

—‘describing the organization, procedure, or prac-

tice requirements of an agency * * *”

The second of these categories is the same as the cate-

gory of “rules of agency organization, procedure, or prac-

tice’”” exempted by Section 553(b) (A) from notice-and-

comment rulemaking. Here again, it is clear that the

drafters envisaged a distinction between rules that im-

plemented the agency’s substantive mission—those that

“implement, interpret, or prescribe law or policy’—and

those that set forth the agency’s procedures and practice

requirements.

In short, the drafters of the APA did not share the

majority’s view that there is no intelligible difference

between procedure and substance. Nor did they leave

courts with nothing to apply but an abstract distinction

between procedural and substantive rules. The various

provisions of the APA discussed above sketch a common-

sense distinction between substantive rules—rules that

are designed to implement or prescribe law (see 5 U.S.C.

551(4) )—and procedural rules—rules setting forth “all

formal and informal procedures available” (60 Stat.

238), including the agency’s “practice requirements” (5

U.S.C. 551(4) }.

There is no need to resort to the various tests applied

by the majority in this case, and doing so distorts the

pertinent inquiry. Whatever the result of the refined

analyses invoked by the majority below, when one looks

at the APA and the FAA Rules of Practice it seems

plain that the Rules of Practice are rules of agency

“procedure” or “practice.” They set forth formal and

informal procedures and practice requirements of the

FAA for civil penalty proceedings. They do not purport

to “implement, interpret, or prescribe law or policy’——

i.e., the standards governing the aviation community or

the penalties for violations of those standards.’® Those

10 The majority stated that the Rules of Practice “established a

schedule of civil penalties, including fines of up to $10,000 for

standards are prescribed in the Federal Aviation Act or

in substantive rules issued after notice and comment.

ce. Finally, the APA does not, as the majority sug-

gested, empower courts to exercise their judgment as to

whether or not “the need for public participation [is] ‘too

small to warrant it’” (App., infra, 24a; see id. at 11a,

15a-16a). Congress weighed the benefits of public par-

ticipation in rulemaking against the costs and struck the

balance by specifying categories of rules which could be

promulgated without resort to notice-and-comment rule-

making. As this Court observed in Vermont Yankee

Nuclear Power Corp. v. Natural Resources Defense

Council, Inc., 485 U.S. 519, 523 (1978), the APA “‘set-

tled ‘long-continued and hard-fought contentions, and

enacts a formula upon which opposing social and polit-

ical forces have come to rest.’” “[{G]enerally speaking,”

Section 553 of the APA “established the maximum pro-

cedural requirements which Congress was willing to have

the courts impose on agencies in conducting rulemaking

procedures.” 435 U.S. at 524. Just as these principles pro-

hibit the imposition of procedural requirements more

stringent than those specified by Section 553, they also re-

quire that Section 553’s exceptions be evenhandedly con-

strued. The decision in this case—which narrows the ex-

ception for “rules of agency organization, procedure, or

practice” to rules governing an agency’s “internal opera-

tions” and makes the availability of the exception de-

pendent upon criteria that have no foundation in the

statutory text-—represents a serious departure from the

basic structure of the APA and thus from the principles

set forth in Vermont Yankee.

2. There is a square conflict between the court of ap-

peals’ decision in this case and the Ninth Circuit’s deci-

sion in Southern California Edison Co. v. FERC, 770

violations of the safety standards of the Federal Aviation Act and

related regulations.” App., infra, 5a. The majority was mistaken.

The regulations merely reiterate penalties set forth in the statute.

Compare App., infra, 4la-438a with 49 U.S.C. App. 1874(d) (2),

1471 (a) (1).

a |

F.2d 779 (1985). In Southern California Edison, two

utilities challenged a rule, promulgated without prior

notice and comment, establishing procedures for final ap-

proval of rates for power marketed by the Bonneville

Power Administration.’ The utilities argued that notice-

and-comment rulemaking was required because certain

of the rules “would have a substantive effect on parties

to BPA final rate approval proceedings.” Jd. at 783.

The court rejected that contention, explaining (ibid.) :

Section 553(b) (3) (A) of the APA exempts “rules

of agency organization, procedure, or practice” from

the notice and comment requirement. In light of that

express exemption, we have rejected the notion that

procedural rules with a substantive impact are sub-

ject to the notice and comment requirements. * * *

As noted above, the regulations pertain to the pro-

cedural aspects of FERC’s approval of BPA rates:

intervention, requests for refunds for interim rates

and for final confirmation and approval. Accord-

ingly, we conclude that the promulgation of 18 C.F.R.

$ 300.21 was not subject to the APA’s notice and

comment requirement.

Under Southern California Edison’s interpretation of

the exception for rules of agency procedure, it is irrele-

vant whether a rule has a “substantive impact” on private

parties. By contrast, in this case, the majority ruled that

the exception does not apply to agency action that sub-

stantially affects the rights or interests of regulated par-

ties. App., infra, 2a. There is a square conflict between

these approaches. This conflict did not arise with this

ease. There has long been disagreement among the courts

of appeals with respect to the question whether a so-

called “substantial impact” test has any legitimate role

11—n 1981, the FERC issued an interim rule establishing proce-

dures for interim approval of BPA rates. After receiving comments

on the interim rule, the FERC issued a final rule that added a new

provision establishing procedures for final rate approval. That new

provision was made immediately effective. The parties and the

court assumed that Section 553 applied separately to the new provi-

sion issued without prior notice. 770 F.2d at 781-783.

to play in determining the rules to which the notice-and-

comment requirement applies.

Before Vermont Yankee, courts relied heavily on the

“substantial impact” test in applying the exceptions to

the notice-and-comment requirement of the APA.” Fol-

lowing Vermont Yankee, however, the Ninth Circuit re-

jected the substantial impact test altogether, finding it

inconsistent with this Court’s admonition that courts

were not to “engraft|] their own notions of proper pro-

cedures upon agencies entrusted with substantive func-

tions by Congress” (435 U.S. at 525). See Rivera v.

Becerra, 714 F.2d 887, 889-891 (9th Cir. 1983), cert.

denied, 465 U.S. 1099 (1984); Alcaraz v. Block, 746

F.2d 5938, 613 (9th Cir. 1984) ."

12 See, e.g., Pickus v. United States Bd. of Parole, 507 F.2d 1107,

1114 (D.C. Cir. 1974) ; Lewis-Mota v. Secretary of Labor, 469 F.2d

478, 482 (2d Cir. 1972); Akron, Canton & Youngstown R.R. V.

United States, 370 F. Supp. 1231, 1236-1240 (D. Md. 1974) (three-

judge court) ; Pennsylvania v. United States, 361 F. Supp. 208, 220-

222 (M.D. Pa.) (three-judge court), aff'd mem., 414 U.S. 1017

(1973); Pharmaceutical Mfrs. Ass’n Vv. Finch, 307 F. Supp. 858,

863 (D. Del. 1970). See also 2 K. Davis, Administrative Law

Treatise §§ 7:18-7:20 (2d ed. 1979) ; K. Davis, Administrative Law

of the Eighties § 7:20 (1989); Note, The Substantial Impact Test:

Victim of the Fallout from Vermont Yankee?, 53 Geo. Wash. L. Rev.

118 (1985).

13 At least in cases involving the distinction between interpreta-

tive and legislative rules, the Sixth Circuit seems to have rejected

the test. Friedrich v. Secretary of HHS, 894 F.2d 829, 836 (1990)

(“extent of the impact is not an indicative factor in our search for

the proper characterization of” the rule at issue); Ohio Dep’t of

Human Servs. Vv. United States Dep’t of HHS, 862 F.2d 1228, 1233-

1234 (1988). Similarly, the First Circuit has restricted the role of

the “substantial impact” test in that context. Levesque v. Block,

723 F.2d 175, 182 (1983) (in distinguishing between interpretative

and legislative rules, “whether a rule has a substantial impact may

be relevant in construing the intent of the agency in issuing the

rule”). See also Energy Reserves Group, Inc. v. DOE, 589 F.2d

1082, 1093-1098 (Temp. Emer. Ct. App. 1978) (opinion of Becker,

J.) (criticizing the substantial impact test).

Other circuits have continued to employ the substan-

tial impact test in applying express exceptions to the

notice-and-comment requirement. For instance, the Fifth

Circuit has described the substantial impact test as “the

primary means by which courts look beyond the label

‘procedural’ to determine whether a rule is of the type

Congress thought appropriate for public participation.”

United States Dep’t of Labor v. Kast Metals Corp., 744

F.2d 1145, 1153 (1984); accord Brown Express, Inc. Vv.

United States, 607 F.2d 695, 701-702 (5th Cir. 1979)

(substantial impact test is “proper test * * * in consid-

ering a rule that may arguably fall under the exemp-

tions for ‘procedural rules’”). In Kast Metals, the Fifth

Cireuit specifically declined to follow the Ninth Circuit

in rejecting the substantial impact test. 744 F.2d at

1154 n.19."

Before this case, the D.C. Circuit had given conflicting

signals regarding its adherence to the “substantial im-

pact” test. In Cabais v. Egger, 690 F.2d 234, 237 (D.C.

Cir. 1982), the court declared that “[s|imply because

agency action has substantial impact does not mean it

is subject to notice and comment if it is otherwise ex-

pressly exempt under the APA.” The court also observed

that “the substantial impact test has no utility in dis-

tinguishing between” interpretative rules and substan-

tive rules, but suggested that the test “may be useful” in

applying other exceptions to the notice-and-comment re-

quirement. Jd. at 237-238. See also Batterton v. Mar-

14 The Eleventh Circuit, although viewing the former Fifth Cir-

cuit’s decision in Brown Express as part of the law of its circuit,

has gone to unusual lengths to criticize it, in dicta, as contrary to

Vermont Yankee. See American Trucking Ass’n Vv. United States,

688 F.2d 1337, 1351-1352 & n.20 (11th Cir. 1982), rev’d on other

grounds, 467 U.S. 354 (1984); Jean v. Nelson, 711 F.2d 1455, 1479-

1480 & nn.18, 20 (11th Cir. 1983), modified on other grounds on

rehearing, 727 F.2d 957 (11th Cir. 1984) (en banc), aff’d, 472 U.S.

846 (1985). See also American Transfer & Storage Co. v. ICC, 719

F.2d 1283, 1285 (5th Cir. 1983) (noting that Brown Express had

been “much criticized”’).

’

shail, 648 F.2d 694, 707-709 & n.83 (D.C. Cir. 1980).

In American Hosp. Ass’n V. Bowen, 834 F.2d 1037, 1047

(D.C. Cir. 1987), the court observed—with respect to

the exception for procedural rules—that its cases had

“gradually shifted focus from asking whether a given

procedure has a ‘substantial impact’ on parties * * * to

inquiring more broadly whether the agency action also

encodes a substantive value judgment or puts a stamp

of approval or disapproval on a given type of behavior.”

This shift in focus, the court observed, “‘reflect(ed] a can-

did recognition that even unambiguously procedural

measures affect parties to some degree.” Ibid.

The decision in the instant case represents an abrupt

departure from the trend described in American Hospi-

tal Ass’n. The stated basis for the decision was a de-

termination that the Ruies of Practice “substantially af-

fect” the rights of civi! penalty defendants to an admin-

istrative adjudication. App., infra, 2a, lla, 13a. Like

decisions of the Fifth Circuit, the majority’s analysis

makes the effect of a rule the decisive factor in the ap-

plication of the APA exception for rules of agency

procedure.”

This case presents the Court with an excellent oppor-

tunity to resolve a square conflict—between the D.C. and

the Fifth Circuits on the one hand and the Ninth on

the other—over whether the availability of the exemp-

15 The majority claimed not to rely on the “substantial impact”

test. App., infra, 17a. However, its explanation of how its approach

differed from that test is unpersuasive. There is no difference be-

tween a test that focuses on whether procedural rules “substantially

affect” the rights or interests of regulated parties and one that

focuses on whether the rules have a “substantial impact” on private

parties. The National Motor Freight case, the principal authority

on which the majority relied, has been credited with originating the

substantial impact test. See Associated Dry Goods Corp. v. EEOC,

543 F. Supp. 950, 964 (E.D. Va. 1982), rev’d, 720 F.2d 804 (4th

Cir. 1983); British Caledonian Airways, Ltd. v. CAB, 584 F.2d 982,

989 (D.C. Cir. 1978). See also 1 K. Davis, Administrative Law

Treatise § 6.29, at 589 (2d ed. 1978).

tion for “rules of agency organization, procedure, or

practice” depends on the magnitude of a rule’s effects on

private parties. The validity of the “substantial impact”

test has been widely discussed in the circuits during the

11 years since Vermont Yankee, in the context of sev-

eral exemptions to the notice-and-comment requirement.

The debate continues. The D.C. Circuit, the court in

which “the vast majority of challenges to administrative

agency action are brought,” Vermont Yankee, 435 U.S.

at 537 n.14, is sharply divided over the merits of the

majority’s approach. It denied the government’s sugges-

tion of rehearing in banc by a 5-5 vote. Even if the

full D.C. Cireuit were to resolve the confusion in its

decisions in the near future, the conflict between the

Fifta and Ninth Circuits would remain. Only this Court

is in a position to restore consistency to this area of the

law."®

3. The decision in this case is important to the FAA

and to all other federal agencies that are subject to the

APA.

16 The majority’s assertion that the APA exception for procedural

rules is limited to rules organizing agencies’ “internal operations”

(e.g., App., infra, 18a) is also in conflict with decisions that have

applied that exception to rules governing proceedings involving

regulated parties. See Associated Dry Goods Corp. v. EEOC, 720

F.2d 804, 812 (4th Cir. 1983); Buckeye Cablevision, Inc. v. United

States, 438 F.2d 948, 953 (6th Cir. 1971); Neighborhood TV Co. v.

FCC, 742 F.2d 629, 636-639 (D.C. Cir. 1984); Lamoille Valley R.R.

v. ICC, 711 F.2d 295, 327-328 (D.C. Cir. 1983). The majority de-

scribed those decisions as “inapposite.” Although the rules at issue

in those cases “did affect ‘the manner in which the parties present

themselves or their viewpoints to the agency,’” the majority stated,

“they did not affect any component of a party’s statutory or con-

stitutional right to avail himself of an administrative adjudication”

and thus “ ‘the need for public participation’ in the rulemaking

process was ‘too small to warrant it.’” App., infra, 15a-16a. The

distinction suggested by the majority is unworkable; further, it

suggests, erroneously, that courts are to determine when the need

for public participation rises to the level justifying notice and com-

ment. Congress made that judgment in the APA in distinguishing

between substantive and procedural rules.

a. The decision casts doubt upon a substantial num-

ber of civil penalty proceedings that were conducted in

part under the Rules of Practice struck down by the

court. As of the date of the court of appeals’ opinion,

the FAA had issued 5860 notices of proposed civil pen-

alty, the first step toward assessing a penalty under the

demonstration program. Over 1100 of the notices were

issued to ATA’s members. By the date of the panel’s

decision, 2128 of those matters (including 76 to which

an ATA member was a party) had been resolved by

means of orders assessing penalties, the final agency ac-

tion in such a proceeding.’"’ We are advised that some

of the remaining cases have been dismissed. Nevertheless,

there are presently pending thousands of cases to which

the Rules of Practice were applied before they were

struck down.

Those cases were held in abeyance between the date

that the court of appeals issued its opinion and August

2, 1990, the effective date of the amended rules of prac-

tice promulgated by the FAA following notice and com-

ment. See 55 Fed. Reg. 27,548 (July 3, 1990). In its de-

cision, the court of appeals stated that a defendant in any

such case “will * * * be free to raise the defense that the

FAA could not have successfully prosecuted him but for

17 An FAA civil penalty proceeding commences with the issuance

of a notice of proposed civil penalty. A party receiving such a notice

has several options. It may submit the amount of the proposed

penalty, invoke an informal procedure for resolving disputes, and,

with or without employing the informal procedure, request a formal

hearing. 55 Fed. Reg. 27,574 (July 3, 1990). After an ALJ has

issued a decision following such a hearing, a party wishing to chal-

lenge an unfavorable decision has rights to administrative appeals.

Id. at 27,584-27,585. An order assessing civil penalty is the final

step in any proceeding in which a civil penalty defendant agrees

to pay or is found liable for a penalty. Depending on the extent to

which a party pursues available procedures, such an order may be

entered following a voluntary payment in response to a notice of

proposed penalty, at any stage of the administrative proceeding in

which the party declines to proceed further, or following exhaustion

of all administrative appeals.

the agency’s reliance on some aspect of the Penalty Rules

abandoned in the new scheme.” App., infra, 23a. Al-

ready, the Administrator of the FAA has issued five

decisions—two of them involving ATA members—in

which he has addressed sua sponte the question whether

amendments to the Rules of Practice struck down by the

court might have affected the outcome.’* As cases pend-

ing on April 13, 1990, are brought before the Adminis-

trator, he will undoubtedly be called upon to address that

issue with increasing frequency.”

18 Jn re Broyles, FAA Order No. 90-23 (Sept. 14, 1990); In re

Continental Airlines, Inc., FAA Order No. 90-18 (Aug. 22, 1990) ;

In re Degenhardt, FAA Order No. 90-20 (Aug. 16, 1990); In re

Carroll, FAA Order No. 90-21 (Aug. 16, 1990); In re USAir, Inc.,

FAA Order No. 90-22 (Aug. 16, 1990). In each of these cases, ex-

cept for Degenhardt, the civil penalty defendant asserted that the

Rules of Practice were invalid because they had been issued without

notice and comment and that, as a result, any penalty had to be

vacated. The Administrator rejected that contention, noting that

the decision in this case expressly permitted the FAA to hold pend-

ing proceedings in abeyance. However, in each case, he went on to

consider the claim reserved by the court of appeals. In four cases,

he found no basis for a conclusion that the application of the Rules

of Practice (as opposed to the subsequent, amended rules) could

have affected the outcome. In USAir, he found that a change re-

garding service of a notice of proposed penalty could have affected

the outcome, and he vacated the penalty at issue.

No significance should be attributed to the fact that the Ad-

ministrator has so far addressed the issue raised by the court of

appeals’ majority swa sponte. The amended rules did not become

effective until August 2, 1990, and upon their effective date, all

time periods prescribed by those rules began to run anew. 55 Fed.

Reg. 27,549-27,550 (July 3, 1990). A 50-day limit applies to briefs

challenging decisions issued by an ALJ. Id. at 27,584. Because of

this circumstance (and extensions granted by the agency), no brief

in chief was filed by a civil penalty defendant between August 2

and October 1, 1990.

19 One party against whom a civil penalty had been assessed before

the court of appeals decision has petitioned for review in the Sixth

Circuit and has argued that the Rules of Practice are invalid by

virtue of the agency’s failure to follow the notice-and-comment re-

quirement. Playter v. FAA, No. 90-3420 (6th Cir.). The case has

been fully briefed, but has not yet been scheduled for argument.

After the court of appeals’ decision, the agency an-

nounced it would voluntarily entertain requests to re-

mand cases in which a civil penalty defendant can dem-

onstrate that an amendment to the Rules of Practice

would likely have affected the outcome of a case. 55 Fed.

Reg. 15,125 (1990). However, there remains a live con-

troversy concerning whether the notice-and-comment re-

quirement was applicable to the Rules of Practice. If

(as we maintain) the requirement was inapplicable, the

failure to employ notice-and-comment rulemaking would

provide no basis for invalidating any penalty assessed in

a case pending at the time of the court of appeals’ de-

cision. Under the court of appeals’ decision, by contrast,

the agency’s determinations will remain vulnerable to

challenge on that ground—under standards left unclear

by that decision. Defendants denied remands by the

agency will be in a position to argue that the court of

appeals’ decision entitles them to relief.”°

b. The standards set forth in the majority’s opinion

will invite challenge to any existing procedural rule that

has been issued without notice and comment and will

make it impossible, in practice, to rely on the exception

for rules of procedure. Ironically, while the majority

dismissed the statutory distinction between procedural

and substantive rules as unhelpful (see App., infra,

18a), it employed a “functional analysis” (id. at 12a)

that is far less determinate. Under that approach, the

*° There is no doubt that at least some of the parties that chal-

lenged the rule retain an interest in the outcome of this case. For

instance, ATA’s members were parties to approximately 1100 cases

as of the date of the court of appeals’ opinion. ATA petitioned for

review as a representative of its members; thus, to the extent its

members have a continuing controversy with the FAA, ATA con-

tinues to have a live dispute with the FAA. The same may be said

of other parites representing members to which the Rules of Prac-

tice were applied and of air carriers that are parties to proceedings

in which the Rules of Practice were applied at some point. We are

advised that the civil penalty proceedings brought against the three

individual intervenors have been dismissed; the Rules of Practice

invalidated by the court of appeals will not be applied to them. The

case is moot as to those individuals.

exception for procedural rules wil! not apply to any rule

that substantially alters the rights or interests of af-

fected parties, including statutory rights to administra-

tive procedures. See id. at 2a, 13a. The effect on a pro-

cedural right can be substantial without rising to the

level of a violation (see id. at 18a n.8), but it is not

sufficient that the rule merely affects “the manner in

which the parties present themselves to the agency” (id.

at 15a). It is also relevant whether a rule “encode[s] a

substantive value judgment” on “the appropriate balance

between a defendant’s right to adjudicatory procedures

and the agency’s interest in efficient prosecution” or ex-

tends beyond “internal operations.” Id. at 13a, 17a, 18a.

The majority acknowledged that “not all of the proce-

dures established by [the Rules of Practice] touch on

civil penalty defendants’ rights to adjudication,” but de-

clined to specify which were invalid under that test. Jd.

at 16a n.12.

As the dissent noted, standards of this nature will

make it “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.” App., infra, 26a. Virtually

any rule of agency procedure will be vulnerable to a

claim that it substantially affects a procedural right or

runs afoul of another of the majority’s formulations.”

21 Under 5 U.S.C. 557(c), for example, a party to a hearing is

entitled to submit “proposed findings and conclusions” before a

decision is rendered. Under the majority’s analysis, a rule limit-

ing a written filing to a fixed number of pages might be said

to affect the right to file proposed findings and conclusions and

to encode a substantive value judgment on the appropriate bal-

ance between that right and the agency’s interest in efficient ad-

judication. In fact, in this case, the ATA specifically challenged a

rule that obligated parties to offer their proposed findings orally,

except in complex cases. App., infra, 83a-84a. It is impossible to

determine whether such a rule would pass muster under the ma-

jority’s analysis or, in terms of that analysis, to discern a line that

would distinguish it from a page limit.

The express statutory exceptions to the notice-and-

comment requirement serve the valuable purpose of

obviating “lengthy administrative procedures” in cir-

cumstances where Congress has determined they are not

essential. See Philadelphia Citizens in Action v. Schwei-

ker, 669 F.2d 877, 881 (3d Cir. 1982). While many

agencies voluntariiy engage in notice-and-comment rule-

making when issuing procedural rules (including the

DOT and FAA when time permits, see 44 Fed. Reg.

11,044 (1979) ), the flexibility afforded by the exception

to the notice-and-comment requirement for procedural

rules remains important to agencies in various circum-

stances. This case—in which the FAA was given the

task of creating and implementing a major enforcement

program and reporting to Congress within 18 months—

illustrates the importance of the exception. The excep-

tions to the notice-and-comment requirement embody a

legislative decision that agencies should have discretion

to promulgate certain categories of rules without notice

and comment; Congress’s “explicit judgment * * * as to

when administrative agencies may dispense with formal

rulemaking procedures must be respected.” 669 F.2d at

881.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted.

JOHN G. ROBERTS, JR.

Acting Solicitor General *

STUART M. GERSON

Assistant Attorney General

STEPHEN L. NIGHTINGALE

Assistant to the Solicitor General

ANTHONY J. STEINMEYER

PHILLIP D. BRADY JOHN F. DALY

General Counsel Attorneys

PAUL M. GEIER

Assistant General Counsel for Litigation

Department of Transportation

GREGORY S. WALDEN

Chief Counsel

Federal Aviation Administration

OCTOBER 1990

* The Solicitor General is disqualified in this case.

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 2, 1990 Decided April 13, 1990

As Amended April 27, 1990

No. 89-1195

AIR TRANSPORT ASSOCIATION OF AMERICA, PETITIONER

Vv.

DEPARTMENT OF TRANSPORTATION ; SAMUEL SKINNER,

SECRETARY OF TRANSPORTATION ;

FEDERAL AVIATION ADMINISTRATION ;

AND JAMES B. BUSEY, ADMINISTRATOR, RESPONDENTS

On Petition for Review of an Order

of the Federal Aviation Administration

Before: MIKVA, EDWARDS and SILBERMAN, Circuit

Judges.

Opinion for the Court filed by Circuit Judge Ep-

WARDS.

Dissenting opinion filed by Circuit Judge SILBER-

MAN.

EDWARDS, Circuit Judge: The issue in this case is

whether respondent governmental agencies (collec-

tively “Federal Aviation Administration” or “FAA”’)

(la)

were obliged to engage in notice and comment pro-

cedures before promulgating a body of regulations

governing the adjudication of administrative civil

penalty actions. See 53 Fed. Reg. 34,646 (1988)

(codified at 14 C.F.R. pt. 13) (“Penalty Rules” or

“Rules’). The FAA issued the Penalty Rules pur-

suant to a temporary enabling statute intended to

augment the agency’s authority to enforce compliance

with aviation safety standards. See 49 U.S.C. app.

§ 1475 (Supp. V 1987). Petitioner Air Transport As-

sociation of America (“Air Transport”) contends

that the FAA’s failure to comply with the notice and

comment requirements of the Administrative Pro-

cedure Act (“APA’’), see 5 U.S.C. §553 (1988),

renders the Penalty Rules invalid. The FAA main-

tains that it was justified in dispensing with notice

and comment under the “rules of agency organization,

procedure, or practice” and “good cause” exceptions

to section 553. See id. § 553(b) (A)-(B).

We grant the petition for review. It is well estab-

lished that the exemption under section 553(b) {37

(A), for “rules of agency organization, procedure, or

practice,” does not apply to agency action that “sub-

stantially alter[s] the rights or interests of regulated”’

parties. American Hosp. Ass’n v. Bowen, 834 F.2d

1037, 1041 (D.C. Cir. 1987). The Penalty Rules fall

outside the scope of the exception because they sub-

stantially affect civil penalty defendants’ “right to

avail [themselves] of an administrative adjudica-

tion.” National Motor Freight Traffic Ass’n v.

United States, 268 F. Supp. 90, 96 (D.D.C. 1967)

(three-judge panel), aff'd mem., 393 U.S. 18 (1968).

Moreover, because we find that the time constraints

of the enabling statute did not impose an insurmount-

able obstacle to complying with the applicable notice

and comment requirements of the APA, we also reject

the FAA’s reliance on the “good cause’ exception

under section 553(b)(B). Consequently, we hold

that the Penalty Rules are invalid and that the FAA

may not initiate new prosecutions until it has com-

plied with the procedural requirements of the APA.

I. BACKGROUND

In December of 1987, Congress enacted a series of

amendments to the Federal Aviation Act relating to

civil penalties. See Pub. L. No. 100-223, § 204, 101

Stat. 1519 (codified in scattered sections of 49 U.S.C.

app.). Among other things, these amendments raised

to $10,000 the maximum penalty for a single viola-

tion of aviation safety standards, see 49 U.S.C. app.

§ 1471(a)(1) (Supp. V 1987), and established a

“demonstration program” authorizing the FAA to

prosecute and adjudicate administrative penalty ac-

tions involving less than $50,000, 49 U.S.C. app.

$1475 (Supp. V 1987).’ Under the terms of the

demonstration program, the FAA was granted the

authority to assess administrative penalties for a two-

year period beginning on December 30, 1987, see id.

§ 1475(d) (4), and was to report to Congress on the

effectiveness of the program within eighteen months,

see Pub. L. No. 100-223, § 204(i) (2), 101 Stat. 1521.

Congress’ goal in enacting this legislation was to

strengthen the enforcement powers of the Federai

Aviation Administration. Before the 1987 amend-

ments, the FAA could propose a maximum civil pen-

i The Administrator, or his delegate, may assess a civil

penalty for a violation arising under this chapter or a

rule, regulation, or order issued thereunder, upon written

notice and finding of violation by the Adniinistrator.

Id. § 1475 (a).

alty of only $1,000 per violation and had no enforce-

ment authority of its own.? When an alleged violator

disputed a penalty, the FAA was obliged to refer the

case to the United States Attorney’s office for prosecu-

tion in federal district court; relatively few such cases

were prosecuted, however, because of competing work

obligations facing U.S. Attorneys. See 133 CONG.

REC. $15,294 (daily ed. Oct. 28, 1987) (statement of

Sen. Wilson); 53 Fed. Reg. 34,646 (1988). Under-

standably, Congress did not view this as a particu-

larly effective system for assuring compliance with

aviation safety standards. By raising the maximum

penalty and giving the FAA the power to prosecute

penalty actions administratively, Congress sought to

“close the holes in the FAA’s safety net” and thereby

“provide[] an incentive for airlines to ensure that

[their safety] systems are maintained at the highest

of standards.” 133 CoNnG. REC. $15,294 (statement of

Sen. Wilson).°

At the same time, however, Congress remained at-

tentive to the adjudicative rights of civil penalty de-

fendants. Congress provided that the FAA could as-

sess a civil penalty “only after notice and opportunity

for a hearing on the record in accordance with section

2 However, the FAA did have the authority to assess civil

penalties of up to $10,000 for violations of the Hazardous

Materials Transportation Act, 49 U.S.C. app. § 1809(a) (1)

(1982), and to prosecute such violations administratively, see

49 C.F.R. § 18.16 (1988). The Penalty Ruies govern admin-

istrative penalty actions under both the Federal Aviation Act

and the Hazardous Materials Transportation Act. See 49

C.F.R. §§ 18.201 (a) (2) (1989).

8 Nonetheless, civil penalty actions may still be brought in

federal district court, see 49 U.S.C. app. §§ 1471, 1487 (1982),

which retains exclusive jurisdiction in civil penalty actions

involving more than $50,000, see id. § 1475 (c).

a ee

554 of [the APA].” 49 U.S.C. app. § 1475(d) (1).

As the conference report accompanying section 1475

explained, the express incorporation of the APA’s

procedural protections was designed to achieve two

purposes :

First, the requirement is intended to advise the

FAA of the appropriate level of procedural for-

mality and attention to the rights of those as-

sessed civil penalties under this demonstration

program. Secondly, this requirement is intended

to provide reasonable assurance to the potential

subjects of such civil penalties that their due

process rights are not compromised.

H.R. CONF. REP. No. 484, 100th Cong., 1st Sess. 81

(1987).

Approximately nine months after enactment of

section 1475, the FAA promulgated the Penalty

Rules. See 53 Fed. Reg. 34,646 (1988) (codified at

14 C.F.R. pt. 13). Effective immediately upon their

issuance, the Penalty Rules established a schedule of

civil penalties, including fines of up to $10,000 for

violations of the safety standards of the Federal

Aviation Act and related regulations. See 14 C.F.R.

§ 13.16(a) (3) (1989). The Penalty Rules also es-

tablished a comprehensive adjudicatory scheme pro-

viding for formal notice, settlement procedures, dis-

covery, an adversary hearing before an ALJ and an

administrative appeal. See id. §§ 13.201-13.235. In

explaining why it dispensed with prepromulgation

notice and comment, the FAA emphasized the proce-

dural character of the Penalty Rules and the time

constraints of section 1475. See 53 Fed. Reg. 34,646,

34,652-53. The FAA did respond to postpromuiga-

tion comments but declined to make any amendments

to the Rules. See 54 Fed. Reg. 11,914 (1989).

Congressional oversight of the section 1475 demon-

stration program is ongoing. In its report to Con-

gress, the FAA vigorously defended the Penalty

Rules. See Respondent’s Supplemental Addendum at

1-54. Others, including commercial and noncommer-

cial aviators and the Administrative Law Section of

the American Bar Association were less enthusiastic,

criticizing what they perceived to be the Rules’ sys-

tematic procedural bias in favor of the FAA. See

Petitioner’s Supplemental Addendum 2-40. In re-

sponse to the controversy, Congress declined FAA’s

request to extend section 1475 by two years, and in-

stead extended the statute by only four months. See

Pub. L. No. 101-236, §1, 103 Stat. 2060 (1989).

Supporters of this legislation emphasized that exten-

sion “should not be viewed as approval of the FAA’s

procedures” but only “as a way to preserve the status

quo while” Congress “review[s] . . . how the major

concerns coming from every segment of the aviation

community are going to be resolved.” 135 Conca.

Rec. H8917 (daily ed. Nov. 17, 1989) (statement of

Rep. Hammerschmidt) ; id. (statement of Rep. Val-

entine). Indeed, on March 6, 1990—approximately

one month after this case was argued—the FAA is-

sued a notice of proposed rulemaking announcing the

agency’s intention to amend some of the individual

Rules that have provoked the most controversy. See

55 Fed. Reg. 7980 (1990).

In its petition for review, Air Transport raises two

challenges to the Penalty Rules.‘ First, it attacks

the procedural adequacy of the Rules, arguing that

* Air Transport petitioned directly to this court pursuant

to 49 U.S.C. app. § 1486 (1982). See generally Deutsche Luf-

thansa Aktiengesellschaft v. CAB, 479 F.2d 912, 915-16 (D.C. _

Cir. 1973).

| aneenenc een

the FAA was obliged by section 553 of the APA to

permit notice and comment before the Rules became

effective. Second, Air Transport attacks the sub-

stantive adequacy of the Rules on the ground that

they establish adjudicatory procedures inconsistent

with section 554 of the APA. In a previous order,

we deferred consideration of the FAA’s motion to

dismiss the petition on ripeness grounds and directed

the parties to address this issue in their briefs on

the merits. We now find that Air Transport’s pro-

cedural challenge to the Penalty Rules is ripe for re-

view and grant the petition on that ground.°

II. ANALYSIS

A. Ripeness

The FAA contends that, under the ripeness doc-

trine, Abbott Labs. v. Gardner, 387 U.S. 136, 149

(1967), this court should defer review of the Penalty

Rules until after the agency has had an opportunity

to apply the Rules in the concrete settings of admin-

istrative adjudications. Compare Webb v. Depart-

ment of Health and Human Servs., 696 F.2d 101,

107-08 (D.C. Cir. 1982) (fact-specific challenge to

regulation not ripe before regulation is applied) with

Better Gov’t Ass’n v. Department of State, 780 F.2d

86, 92-93 (D.C. Cir. 1986) (purely legal challenge

is ripe before application). In other words, the

agency claims that Air Transport’s preenforcement

challenge to the substance of the Penalty Rules

should be barred as unripe. We need not reach that

issue, however, because Air Transport’s petition for

review raises two issues: (1) the claim that the

5 Consequently, we do not reach petitioner’s challenge to

the substance of the Penalty Rules. We also express no opin-

ion on whether that challenge presents issues ripe for review.

agency was required to use notice and comment rule-

making in promulgating the Penalty Rules (the “pro-

cedural” challenge), and (2) the claim that, whether

or not notice and comment was required, certain of

the Penalty Rules are unlawful as promulgated (the

“substantive” challenge). Because we find merit in

the procedural challenge, we need not address

whether Air Transport’s substantive chalienge is

ripe.

As FAA counsel acknowledged at oral argument,

the first of the two claims, the procedural challenge,

is clearly ripe for review. In applying the ripeness

doctrine, we ask first whether the challenge in ques-

tion is “purely legal”; if so, it is presumptively re-

viewable. See, e.g., Better Gov’t Ass’n, 780 F.2d at

92. Next “we determine whether the court or the

agency would benefit from the postponement of re-

view until the agency action or policy in question has

assumed either a final or more concrete form.” /d.

Only if these inquiries raise significant “doubts about

the fitness of the issue for judicia! resolution” do we

look to the “hardship” prong of the ripeness test, con-

sidering whether the effect of the challenged action

on the petitioner’s primary conduct outweighs the in-

stitutional interests in deferring review. Consolidated

Rail Corp. v. United States, No. 89-1074, slip op.

at 5 (D.C. Cir. Feb. 16, 1990) ; see Askins v. District

of Columbia, 877 F.2d 94, 97-98 (D.C. Cir. 1989).

Applying these criteria, we have no trouble con-

cluding that Air Transport’s procedural challenge to

the Penalty Rules is ripe. The challenge is purely

legal; whether the Penalty Rules are subject to the

APA’s notice and comment procedures can be deter-

mined solely from the text, the legislative history and

the judicial interpretations of section 553. See Better

Gov’t Ass’n, 780 F.2d at 92. Furthermore, there are

no judicial or agency interests militating in favor of

deferring review. Neither the application of the

Penalty Rules nor even the possible amendment of

individual Rules will have any bearing on whether

the Rules as a whole were unlawfully promulgated.°

And until that question is settled, it will provide a

possible basis for review in every penalty action ad-

judicated by the FAA.

Thus, “in light of our conclusion that this matter

is clearly fit to be heard, we need not consider

whether petitioners would suffer any hardship from

our postponing its resolution.” Consolidated Rail

Corp., supra, slip op. at 6. Accordingly, we hold that

petitioner’s procedural challenge is ripe for review.

B. The Merits

Section 553 of the APA obliges an agency to pro-

vide notice and an opportunity to comment before

promulgating a final rule.’ No question exists that

6 The FAA does not contend that the possible expiration of

section 1475 affects the ripeness of the petition for review.

No reason exists to believe that Congress will permit the

FAA’s civil penalty program to lapse; and, in any event, we

cannot predicate our jurisdiction on speculations as to what

actions Congress may or may not take.

7 Section 553 provides in relevant part:

(b) General notice of proposed rule making shall be

published in the Federal Register, unless persons subject

thereto are named and either personally served or other-

wise have actual notice thereof in accordance with law.

The notice shall include—

(1) a statement of the time, place, and nature of

public rule making proceedings ;

(2) reference to the legal authority under which

the rule is proposed ; and

[Continued]

10a

the Penalty Rules fall within the scope of the APA’s

rulemaking provisions. See 5 U.S.C. § 551(4)-(5)

(1988). Nonetheless, the FAA maintains that the

Penalty Rules were exempt from the notice and com-

ment requirements for two, independent reasons:

first, because they are “rules of agency organization,

procedure, or practice,” id. §553(b)(A); and sec-

ond, because the time constraints of section 1475

gave the FAA “good cause” to find that prepromul-

gation notice and comment would be “impracticable,

unnecessary, or contrary to the public interest.” id.

§ 553(b)(B). The FAA also argues that its enter-

tainment of postpromulgation comments cured any

violation of section 553.

7 [Continued]

(83) either the terms or substance of the proposed

rule or a description of the subjects and issues in-

volved.

Except when notice or hearing is required by statute,

this subsection does not apply—

(A) to interpretative rules, general statements of

policy, or rules of agency organization, procedure, or

practice; or

(B) when the agency for good cause finds (and

incorporates the finding and a brief statement of

reasons therefor in the rules issued) that notice and

public procedure thereon are impracticable, unneces-

sary, or contrary to the public interest.

shall give interested persons an opportunity to partici-

pate in the rule making through submission of written

data, views, or arguments with or without opportunity

for oral presentation. After consideration of the relevant

matter presented, the agency shall incorporate in the

rules adopted a concise general statement of their basis

and purpose.

pen

lla

Section 553’s notice and comment requirements are

essential to the scheme of administrative governance

established by the APA. These procedures refiect

Congress’ “judgment that . . . informed administra-

tive decisionmaking require[s] that agency decisions

be made only after affording interested persons” an

opportunity to communicate their views to the

agency. Chrysler Corp v. Brown, 441 U.S. 281, 316

(1979). Equally important, by mandating ‘“open-

ness, explanation, and participatory democracy” in

the rulemaking process, these procedures assure the

legitimacy of administrative norms. Weyerhaeuser

Co. v. Costle, 590 F.2d i011, 1027 (D.C. Cir. 1978).

For these reasons, we have consistently afforded a

narrow cast to the exceptions to section 553, permit-

ting an agency to forgo notice and comment only

when the subject matter or the circumstances of the

rulemaking divest the public of any legitimate stake

in influencing the outcome. See, e.g., Batterton v.

Marshall, 648 F.2d 694, 704 (D.C. Cir. 1980);

American Bus Ass’n v. United States, 627 F.2d 525,

528 (D.C. Cir. 1980). In the instant case, because

the Penalty Rules substantially affected civil penalty

defendants’ right to avail themselves of an admin-

istrative adjudication, we cannot accept the FAA’s

contention that the Rules could be promulgated with-

out notice and comment.

1. “Rules of Agency Organization, Procedure, or

Practice”

The FAA argues that the Penalty Rules are ex-

empt as “rules of agency organization, procedure, or

practice” because they establish “procedures” for ad-

judicating civil penalty actions. According to the

FAA, it would have been obliged to permit public

12a

participation in the rulemaking process only if the

Penalty Rules affected aviators’ “substantive” obliga-

tions under the Federal Aviation Act. We find this

analysis unpersuasive.

Our cases construing section 553(b) (A) have long

emphasized that a rule does not fall within the scope

of the exception merely because it is capable of bear-

ing the label “procedural.” See, e.g., Reeder v. FCC,

865 F.2d 1298 (D.C. Cir. 1989) (per curiam). In

Reeder, we examined a body of rules governing the

submission of “counterproposals” to the allotment of

FM radio frequencies by the Federal Communications

Commission. Although the rules purported merely to

define the procedures for the submission of counter-

proposals, we recognized that these procedures in fact

foreclosed agency consideration of counterproposals

based on the upgrading of existing FM stations. See

id. at 1305. Because the agency previously did permit

applicants to submit counterproposals based on up-

grading plans, we held that the agency should have

engaged in notice and comment before depriving ap-

licants’ of this right. See id.; see also Batterton, 648

F.2d at 707-08 (procedures affecting entitlement to

federal grants not exempt); Pickus v. United States

Bd. of Parole, 507 F.2d 1107, 1113 (D.C. Cir. 1974)

(procedures affecting parole determinations).

Rather than focus on whether a particular rule is

“nrocedural” or “substantive,” these decisions employ

a functional analysis. Section 553(b)(A) has been

described as essentially a “housekeeping” measure,

Chrysler Corp. v. Brown, 441 U.S. 281, 310 (1979),

“Tt]}he distinctive purpose of . . . [which] is to en-

sure ‘that agencies retain latitude in organizing their

internal operations,’” American Hosp. Ass'n v.

Bowen, 834 F.2d 1037, 1047 (D.C. Cir. 1987) (quot-

ing Batterton, 648 F.2d at 707) (emphasis added).

I ttt cect > sn

13a

Where nominally “procedural” rules “encode[] a sub-

stantive value judgment” or “substantially alter the

rights or interests of regulated” parties, however, the

rules must be preceded by notice and comment. /d. at

1047, 1041.

The Penalty Rules fall outside the scope of section

553(b)(A) because they substantially affect a civil

penalty defendant’s right to an administrative ad-

judication. Under both the due process clause, see

Lipke v. Lederer, 259 U.S. 557, 562 (1922), and the

. APA, see 5 U.S.C. §§ 554, 556 (1988), a party has a

right to notice and a hearing before being forced to

pay a monetary penalty. Congress expressly directed

the FAA to incorporate these rights into its civil pen-

alty program. See 49 U.S.C. app. § 1475(d)(1);

H.R. CoNF. REP. No. 484, 100th Cong., 1st Sess. 81

(1987). In implementing this mandate, the FAA

made discretionary—indeed, in many cases, highly

contentious—choices concerning what process civil

penalty defendants are due. Each of these choices

“encode[d] a substantive value judgment,” American

Hosp. Ass’n, 834 F.2d at 1047, on the appropriate bal-

ance between a defendant’s right to adjudicatory pro-

cedures and the agency’s interest in efficient prosecu-

tion.” The FAA was no less obliged to envage in no-

tice and comment before taking action affecting these

adjudicatory rights than it would have been had it

taken action affecting aviators’ “substantive” obliga-

tions under the Federal Aviation Act. See, e.g., Na-

8 In noting that the FAA made discretionary choices deter-

mining the specific form of civil penalty defendants’ adjudi-

catory rights, we do not, of course, suggest tha’ the choices

made violated those rights. Section 553 stands for the propo-

sition that interested parties have a right to influence agency

decisionmaking even when the decisions made are substan-

tively lawful.

l4a

tional Ass’n v. Schweicker, 690 F.2d 932, 949 (D.C.

Cir. 1982) (notice and comment required for rules

“eliminating the qualified right” to present reim-

bursement claims to agency secretary rather than

intermediary), cert. denied, 459 U.S. 1205 (1983);

Brown Express, Inc. v. United States, 607 F.2d 695,

702-03 (5th Cir. 1979) (notice and comment required

for rules eliminating notice of award of temporary

carrier licenses).

Indeed, this is the teaching of the seminal decision

in National Motor Freight Traffic Ass’n v. United

States, 268 F. Supp. 90 (D.D.C. 1968) (three-judge

panel), aff'd mem., 393 U.S. 18 (1968). In National

Motor Freight, the court ® reviewed a body of Inter-

state Commerce Commission rules establishing a

scheme for the administrative adjudication of carrier

overcharge claims. Rejecting the claim that the rules

‘merely established precedures for implementing sub-

stantive statutory rights, the court held that the

agency’s decision to establish “[a] right to avail one-

self of an administrative adjudication” was itself one

that the APA required to be open to public participa-

tion. Id. at 95-96. National Motor Freight was sum-

marily affirmed by the Supreme Court, and remains

binding precedent. See 1 K. DAvis, ADMINISTRATIVE

LAW TREATISE § 6.29, at 589 (2d ed. 1978) (decrib-

ing National Motor Freight as “[t]he most authorita-

tive decision” on the scope of section 553(b)(A)).

In our view, it is controlling in the case before us.

The cases cited by the FAA do not suggest a con-

trary conclusion. The FAA puts its primary emphasis

on American Hospital Association. At issue in that

® On the three-judge panel were then Circuit Judge Burger,

Circuit Judge McGowan and District Judge Sirica. Judge

McGowan wrote the opinion for the court.

l5a

case were a series of agency directives and manuals

defining the “enforcement strategy” of review boards

assigned to investigate Medicare reimbursement

claims by hospitals. See 834 F.2d at 1049-52. We

held that these materials were covered by section 553

(b)(A) because we recognized that the public has

no legitimate interest in influencing an agency’s “dis-

cretionary deployment of enforcement resources,” id.

at 1057 n.4—a classic “internal” matter, essential to

how an agency constitutes itself, cf. Heckler v.

Chaney, 470 U.S. 821, 831-32 (1985). Nothing in

American Hospital Association detracts from the

principle that the public does have a legitimate inter-

est in participating in agency decisions affecting stat-

utory and constitutional rights “to avail oneself of an

administrative adjudication.” National Motor

Freight, 268 F. Supp. at 96.”°

Also inapposite are various decisions in which we

have applied section 553(b)(A) to rules that reg-

ulate such matters as the timing of applications for

benefits, see, e.g., Lamoille Valley R. Co. v. ICC, 711

F.2d 295, 328 (D.C. Cir. 1983); Ranger v. FCC, 294

F.2d 240, 243-44 (D.C. Cir. 1961), or the timing of

the agency’s processing of such applications, Neigh-

borhood TV Co., Inc. v. FCC, 742 F.2d 629, 637-38

(D.C. Cir. 1984). The rules at issue in these cases did

affect “the manner in which the parties present them-

selves or their viewpoints to the agency,” Batterton,

648 F.2d at 707, but they did not affect any compo-

nent of a party’s statutory or constitutional right to

avail himself of an administrative adjudication. They

10 Indeed, in American Hospital Association, the bulk “of

regulations ... regarding [agency review board] procedures”

had been subject to notice and comment rulemaking and were

therefore not being challenged. 834 F.2d at 1043 (emphasis

added).

MMi

16a

were all cases, in short, in which “the need for public

participation” in the rulemaking process was “too

small to warrant it.” Jd. at 704." The Penalty Rules,

in contrast, affect the entire range of adjudicatory

rights guaranteed by the due process clause, the APA

and section 1475(d)(1)—matters far too important

to be withdrawn from public deliberation. See Na-

tional Motor Freight, 268 F. Supp. at 96-97.”

In criticizing our reliance on National Motor

Freight, the dissent argues that agency action that is

11 In characterizing the principle underlying these decisions,

we have sometimes spoken broadly, describing section 553 (b)

(A) as exempting the “technical regulation of the form

of agency action and proceedings.” Pickus, 507 F.2d at 1113.

But we have never suggested, much less held, that section

553(b) (A) exempts measures that regulate the form of

agency proceedings when these measures also affect a statu-

tory or constitutional right to administrative adjudication.

Cf. id. (“category” of “technical regulation of the form of

agency action and proceedings” does not “include any action

which goes beyond formality and substantially affects the

rights of those over whom the agency exercises authority”).

12 Of course, not all of the procedures established by the

Penalty Rules touch on civil penalty defendants’ rights to

adjudication. We reject the FAA’s contention, however, that

we should identify which individual Rules fall within the

scope of section 553(b)(A) and invalidate only those. At

a minimum, the FAA was obliged to engage in notice and

comment before promulgating the Rules implementing the

APA’s procedures for formal adjudication, see 5 U.S.C.

§§ 554, 556-557 (1988), and deprived of these particular

Rules, the FAA’s penalty program clearly cannot function.

Moreover, the FAA promulgated the Penalty Rules as an in-

tegrated whole. Because identifying the combination of pro-

cedures that best reconciles the needs of the agency and the

rights of civil penalty defendants involves discretionary law-

making powers delegated by Congress to the FAA, it would

be inappropriate for us selectively to invalidate individual

Rules while leaving the FAA’s adjudicatory scheme intact.

Cf. SEC v. Chenery Corp., 332 U.S. 194, 196 (1947).

17a

expressly exempt under the APA is not subject to no-

tice and comment rulemaking simply because it has a

“substantial impact” on regulated parties. We agree

with this assertion, but it is irrelevant because it begs

the question whether the Penalty Rules are included

within the exemption of section 553(b)(A). We rely

on National Motor Freight not to show that the

Penalty Rules have a “substantial impact” on avia-

tors, but to show that rules affecting the right to avail

oneself of an administrative adjudication are not

within the express terms of section 553(b)(A). No

case in this circuit has ever suggested otherwise.

The dissent also contends that we have “obliterated”

the distinction between substance and procedure. But,

as the case law clearly illustrates, there is no such

“distinction” to obliterate for purposes of section 553

(b)(A). The dissent refuses to come to terms with

the precedent characterizing this exception to notice

and comment rulemaking as a mere “housekeeping”’

measure, Brown, 441 U.S. at 310, applicable to rules

“ ‘organizing | agencies’ | internal operations.’ ”’ Amer-

ican Hosp. Ass’n, 834 F.2d at 1047 (quoting Bat-

terton, 648 F.2d at 707) (emphasis added). The

dissent’s infusion of a rigid “procedure’’-“‘substance”

distinction is not only inconsistent with our prece-

dent, see, e.g., Reeder, 865 F.2d at 13805; Batterton,

648 F.2d at 707-08, but is also inconsistent with the

statutory text. Section 553(b)(A) does not exempt

“rules of procedure” per se, but rather “rules of

agency organization, procedure, or practice.”” The dis-

sent’s exclusive fecus on the word “procedure” thus

violates the well established principle of construction

“that ‘words grouped in a list should be given related

meaning.’” Dole v. United Steelworkers, 110 S. Ct.

184

929, 935 (1990) (quoting Massachusetts v. Morash,

109 S. Ct. 1668, 1673 (1989) ).**

In sum, the FAA’s contention that it did not affect

the “substantive” obligations of aviators under the

Federal Aviation Act is irrelevant. “The characteri-

zations ‘substantive’ and ‘procedural’—no more here

than elsewhere in the law—do not guide inexorably

to the right result, nor do they really advance the in-

quiry very far.” National Motor Freight, 268 F.

Supp. at 96. In using the terms “rules of agency or-

ganization, procedure, or practice,’”’ Congress intended

to distinguish not between rules affecting different

classes of rights—“substantive” and “procedural”—

but rather to distinguish between rules affecting dif-

ferent subject matters—“the rights or interests of reg-

ulated” parties, American Hosp. Ass’n, 834 F.2d at

1041, and agencies’ “ ‘internal operations,’” id. at

1047 (quoting Batterton, 648 F.2d at 707). Because

the Penalty Rules substantially affect civil penalty

defendants’ “right to avail [themselves] of an admin-

istrative adjudication,” members of the aviation com-

munity had a legitimate interest in participating in

18 The dissent’s suggestion that we have disregarded Ver-

mont Yankee Nuclear Power Corp. v. NRDC, 485 U.S. 519

(1978), raises a false issue, for it assurmes the answer to the

question posed. In Vermont Yankee, the Supreme Court held

that reviewing courts cannot impose on an agency procedural

requirements not found in the APA. See id. at 549. Section

553 of the APA expressly directs agencies to engage in notice

and comment rulemaking; the issue in this case is whether

the FAA had any ground to disregard this procedural obliga-

tion. Because the dissent’s use of Vermont Yankee presup-

poses, incorrectly, in our view, that the Penalty Rules fall

within the exception in section 553(b)(A), the dissent’s

reliance on the case adds nothing to the position sought to be

advanced.

TN |

19a

the rulemaking process. National Motor Freight, 268

F, Supp. at 96.

2. “Good Cause”

We also disagree that the two-year duration of sec-

tion 1475’s demonstration program furnished the

FAA with “good cause” to dispense with notice and

comment procedures. Like the other exceptions, the

good cause exception is to “be narrowly construed and

only reluctantly countenanced.” New Jersey v. EPA,

626 F.2d 1038, 1045 (D.C. Cir. 1980). In particular,

we have explained that statutory time limits do not

ordinarily excuse compliance with the APA’s pro-

cedural requirements. In New Jersey v. EPA, we

reviewed a set of regulations issued pursuant to a six-

month time limit. Adopting the reasoning of two of

our sister circuits, we held that the statutory deadline

did not constitute good cause to forgo notice and com-

ment absent “ ‘any express indication’ ” by Congress

to this effect. /d. at 1043 (quoting Sharon Steel Corp.

v. EPA, 597 F.2d 377, 380 (3d Cir. 1979) ). See also

Council of Southern Mountains, Inc. v. Donovan, 653

F.2d 573, 581 (D.C. Cir. 1981) (“ ‘[T]he mere exist-

ence of deadlines for agency action... [can] not in

itself constitute good cause for a § 553(b)(B) ex-

ception.’” (quoting United States Steel Corp. v.

United States EPA, 595 F.2d 207, 213 (5th Cir.),

reh’g granted in part on other grounds, 598 F.2d 915

(5th Cir. 1975) ).

New Jersey v. EPA is controlling here. Congress

did not express an intention to relieve the FAA of the

legal obligation to engage in notice and comment pro-

cedures before promulation of the Penalty Rules. In-

deed, section 1475 did not even set a formal deadline

for implementation of the agency’s authority to assess

20a

civil penalties. It is true that the two-year duration of

the “demonstration program,” along with the asso-

ciated eighteen-month reporting deadline, see Pub. L.

No. 100-223, § 204(i) (2), 101 Stat. 1521, encouraged

the FAA to act with reasonable dispatcn. But we be-

lieve that the FAA, using expedited notice and com-

ment procedures if necessary, could have realized this

objective short of disregarding its obligations under

the APA. Cf. Phillips Petroleum Co. v. United States

EPA, 803 F.2d 545, 559 (10th Cir. 1986) (noting

broad discretion of agency to determine length of

comment period) .”*

Finally, the FAA is foreclosed from relying on the

good cause exception by its own delay in promulgating

the Penalty Rules. The agency waited almost nine

months before taking action to implement its author-

ity under section 1475. At oral argument, counsel for

the FAA conceded that the delay was largely a prod-

uct of the agency’s decision to attend to other obliga-

tions. We are hardly in a position to second guess the

FAA’s choices in determining institutional priorities.

But insofar as the FAA’s own failure to act materi-

ally contributed to its perceived deadline pressure, the

agency cannot now invoke the need for expeditious

action as “good cause” to avoid the obligations of sec-

tion 553(b). See National Ass’n of Farmworkers v.

Marshall, 628 F.2d 604, 622 (D.C. Cir. 1980).

3. Postpromulgation Comment

Finally, we reject the FAA’s contention that its

response to comments after promulgation of the Pen-

alty Rules cured any noncompliance with section 553.

14 We note in this regard that the FAA has adopted an

accelerated twenty-four-day comment period in its pending

notice of provosed rulemaking. See 55 Fed. Reg. 7980.

—EE———EEE

2la

Section 553 provides “that notice and an opportunity

for comment are to precede rule-making.” New Jer-

sey v. EPA, 626 F.2d at 1050. We strictly enforce

this requirement because we recognize that an agency

is not likely to be receptive to suggested changes once

the agency “‘put[s] its credibility on the line in the

form of ‘final’ rules. People naturally tend to be more

close-minded and defensive once they have made a

‘final’ determination.” National Tour Brokers Ass’n

v. United States, 591 F.2d 896, 902 (D.C. Cir. 1978).

Although we have suggested that there might be cir-

cumstances in which “defects in an original notice

[could] be cured by an adequate later notice” and op-

portunity to comment, we have emphasized that we

could reach such a conclusion only upon a compelling

showing that “the agency’s mind remain[ed] open

enough at the later stage.” McLouth Steel Prods.

Corp. v. Thomas, 838 F.2d 1317, 1323 (D.C. Cir.

1988); see Reeder, 865 F.2d at 1034; see also New

Jersey v. EPA, 626 F.2d at 1050 (noting “the pre-

sumption that post hoc comment was not contemplated

by the APA and is generally not consonant with it’).

The FAA has not come close to overcoming the pre-

sumption of closed-mindedness in this case. It made

no changes in the Penalty Rules in response to public

comments. Nor did the language of FAA’s published

replies suggest that the agency had afforded the com-

ments particularly searching consideration. See Mc-

Louth Steel Prods. Corp., 838 F.2d at 1323.

Under the circumstances, then, we cannot discount

the possibility that, had the FAA entertained com-

ments before the Penalty Rules became final, it

“might have decided [on] a different accommodation”

of the agency’s enforcement needs and civil penalty

defendants’ procedural rights. Brown, 441 U.S. at

316. Indeed, if the FAA had entertained prepromul-

22a

gation comments and taken those comments seriously,

it might very well have averted the public outery un-

derlying the agency’s pending notice of proposed rule-

making.

C. Remedy

Having determined that the FAA promulgated the

Penalty Rules in violation of the APA’s notice and

comment requirements, we must next consider the ap-

propriate remedy. Ordinarily, when agency rules

have been invalidated, the agency may not rely on

those rules until they have been repromulgated in ac-

cordance with the APA. See, e.g., Reeder, 865 F.2d

at 1306. We find such a disposition appropriate in

this case; therefore, we hold that the FAA may not

initiate new prosecutions under the Penalty Rules

unless and until they are repromulgated. Insofar as

the FAA’s pending notice of proposed rulemaking

seeks public comment on the individual Rules that the

agency intends to amend, the agency may rely on the

outcome of that rulemaking as a partial fulfillment

of this mandate.

This disposition, however, does not address the

status of pending civil penalty actions. Counsel in-

formed us that as of the date on which this case was

argued, the FAA had initiated some 4,800 prosecu-

tions, only a handful of which had progressed to the

stage of an administrative hearing. The FAA re-

mains free, of course, to refer these cases to the

United States Attorney for prosecution in district

court. See 49 U.S.C. app. §§ 1471(a) (1), 1487(a),

(b). Nonetheless, we remain sympathetic to the

FAA’s concern that leaving the agency with solely

this option would oblige it to forfeit the considerable

investment it has made in prosecuting these cases and

23a

would frustrate Congress’ intent to tighten enforce-

ment by providing an administrative forum for their

adjudication.

So long as it “act[s] within the bounds of the stat-

ute and without intruding upon the administrative

province,” the court sitting in review of an adminis-

trative agency “may adjust its relief to the exigencies

of the case in accordance with the equitable principles

governing judicial action.” Ford Motor Co. v. NLRB,

305 U.S. 364, 373 (1939); accord Indiana & Michi-

gan Elec. Co. v. FPC, 502 F.2d 336, 346 (D.C. Cir.

1974), cert. denied, 420 U.S. 946 (1975). In the past,

we have employed our broad remedial powers to mini-

mize disruption of congressional and administrative

objectives when invalidating a rule promulgated in

violation of the APA’s notice and comment proce-

dures. See, e.g., Rodway v. United States Dep’t of

Agriculture, 514 F.2d 809, 817 (D.C. Cir. 1975) (per-

mitting agency to continue reliance on procedurally

defective regulations implementing food stamp pro-

gram pending new rulemaking).

We believe that the exercise of our equitable re-

medial powers is appropriate in this case as well. Con-

sequently, although the FAA may not initiate new

prosecutions under the Penalty Rules, we hold that

the FAA is free to hold pending actions in abeyance

while it engages in further rulemaking. If and when

the FAA promulgates a final rule for adjudication of

administrative penalty actions, it may then resume

prosecution of these cases. A defendant in such a case

will also be free to raise the defense that the FAA

could not have successfully prosecuted him but for

the agency’s reliance on some aspect of the Penalty

Rules abandoned in the new scheme. Finally, we take

no position on whether parties whose cases have

reached a final determination under the Penalty Rules

24a

may not raise the procedural invalidity of the Rules

as a ground for seeking review.

III. CONCLUSION

An agency may dispense with the notice and com-

ment requirements of section 553 “only where the

need for public participation is overcome by good

cause to suspend it, or where the need is too small to

warrant it.” Batterton, 648 F.2d at 704 (footnote

omitted). Neither of these conditions obtains in this

case. The FAA did not have good cause to forgo

notice and comment procedures, for nothing in sec-

tion 1475 either excused or mandated noncompliance

with section 553. Nor was this a case in which the

need for public participation was ‘too small to war-

rant it’; civil penalty defendants have a legitimate

interest in influencing agency action affecting their

statutory and constitutional “right to avail [them-

selves] of an administrative adjudication.” National

Motor Freight, 268 F. Supp. at 96. We therefore

grant the petition for review and order the FAA not

to initiate further prosecutions under the Penalty

Rules until the agency has engaged in further rule-

making in accord with section 553. Nonetheless, pur-

suant to our remedial powers, we hold that the FAA

is free to hold pending cases in abeyance and resume

prosecution upon the repromulgation of a scheme for

adjudicating administrative civil penalty actions

under section 1475.

It is so ordered.

25a

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,’ but I disagree with the major-

ity’s answer to the question because I think the rules

fall, by ample measure, within the “procedural” ex-

emption 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 interrela-

tionship 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 “proce-

dural” rules and those that are substantive. See, e.g.,

Chrysler Corp. v. Brown, 441 U.S. 281, 301 (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

1 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.

26a

629, 636-37 (D.C. Cir. 1984); Lamoille Valley R.R.

Co. v. ICC, 711 F.2d 295, 328 (D.C. Cir. 1983) ; Bat-

terton v. Marshall, 648 F.2d 694, 707 (D.C. Cir.

1980). The majority opinion, in effect, abandons the

effort, finding in Reeder, American Hospital Ass’n

and Batterton 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. Therefcre, I dissent.

If we assume a spectrum of rules running from the

most substantive to the most procedural, I would de-

scribe 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 (1967), and

the latter are those furthest away from primary con-

duct. 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 sub-

stantive. 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.” And to say, as does the majority, that the

2 The majority erroneously quotes Chrysler Corp. as refer-

ring to the procedural exemption as a “mere ‘housekeeping’

Oe AL

2 nee PS Tiledma td CSE Rae

27a

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 12 (emphasis in original), is, I respect-

fully submit, circular reasoning. It assumes the con-

clusion by describing petitioner’s interest in the

agency’s adjudicatory procedures as if it were a sub-

stantive right. It also implicitly suggests that peti-

tioner is correct on the merits in claiming the agency’s

adjudicatory procedures are illegal. In determining

whether particular rules must be put out for com-

ment, 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 (peti-

tioner’s primary claim on the merits seems to be that

the rules offend the views of the American Bar Asso-

ciation) 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

measure.” See Maj. Op. at 15. In fact Chrysler Corp. char-

acterized 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 exemp-

tion as a “housekeeping statute.” See Chrysler Corp., 441

U.S. at 309-10. The Court then compared § 301 to the APA

exemption, indicating that the procedural exemption at least

includes day to day internal government business.

28a

analysis is used to distinguish substantive from pro-

cedural rules. Sometimes the Government’s prospec-

tive 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 un-

employment insurance. But typically, benefits are

bestowed in accordance with preexisting qualifica-

tions 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 de-

fining 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 CxTA 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 agency

the nature of their substantive claim. See id. at 707-

08. Similazvly, in Reeder v. FCC, 865 F.2d 1298 (D.C.

Cir. 1989), a radio station objected to the FCC adop-

tion 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 al-

lotments. 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

29a

FCC rules that froze contested applications for

“translators” (devices which amplify and rebroadcast

television signals) and then processed rural applica-

tions before urban ones were procedural because the

rules did not alter the standards by which those ap-

plications 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 rule exempted from the notice and com-

ment 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 sub-

stance, but to pursue that line of analysis results in

the obliteration of the distinction that Congress de-

manded. 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 dis-

sent in many respects redolent of the majority opin-

ion here, that HHS rules that set forth the enforce-

ment priorities for peer review organizations (acting

as agents to ensure medically reasonable and neces-

sary hospital health care), as well as some adjudica-

tory 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 af-

fect hcespital 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.” Jd. at 1047. We recog-

nized that hospital costs would be affected by the en-

forcement scheme, but that was not enough to bring

BEST AVAILABLE COPY

30a

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 Hos-

pital Ass’n, it is not even argued here that primary

behavior—the safety efforts of the airlines—is even

affected by the adjudictory rules.

Deviating from our previous and recent emphasis

on primary conduct, the majority asserts that a pro-

posed rule that allegedly infringes on “the right to

avail oneself of an administrative adjudication” is

“substantive.” See Maj. Op. at 13. But the quoted

language comes from an old and now discredited dis-

trict 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 (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 Ander-

son v. Celebrezze, 460 U.S. 780, 785 n.5 (1983) (“A

summary disposition affirms only the judgment of the

court below, and no more may be read into our ac-

tion than was essential to sustain that judgment.’’) ;

Illinois Election Bd. v. Socialist Workers Party, 440

U.S. 173, 782-83 (1979). We have specifically dis-

approved of National Motor Fright’s “substantial im-

pact” analysis, moreover, because of the Supreme

Court’s command in Vermont Yankee Nuclear Power

Corp. v. NRDC, 435 U.S. 519 (1978), to avoid en-

grafting additional procedures on agency action be-

yond those required by the APA. See Cabais v. Eg-

ger, 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 expressly exempt under the APA.’’).*

8’ Even if National Motor Freight were still good law and

binding on us, our case is arguably distinguishable because

3la

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 dramati-

cally by Vermont Yankee to not add more procedure

to the APA than Congress required. I am afraid the

majority opinion by obliterating the distinction be-

tween substance and procedure in section 553 does

just that.

the only issue before us is the specific content of FAA adjudi-

cative procedures and not whether such a remedial avenue

exists at all. In National Motor Freight, freight carriers chal-

lenged 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 signifi-

cant 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 inter-

est afforded to shippers. In contrast, Congress specifically

empowered the FAA to adopt rules to adjudicate civil penal-

ties. See 49 U.S.C. app. § 1475(d) (1). After National Motor

Freight, the courts that adopted the “‘substantial impact” rea-

soning 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).

32a

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 89-1195

AIR TRANSPORT ASSOCIATION OF AMERICA,

PETITIONER

DEPARTMENT OF TRANSPORTATION, RESPONDENT

Before: Mikva, Edwards and Silberman, Circuit

Judges

ORDER

[Filed Jun. 18, 1990]

Upon consideration of respondents’ petition for re-

hearing, filed May 29, 1990, it is

ORDERED, by the Court, that the petition is de-

nied.

Per Curiam

FOR THE CouRT:

CONSTANCE-—~DUPRE

Clerk ey

a A

By: /s/ Robert A. Bonner

ROBERT A. BONNER

Deputy Clerk

Circuit Judge Silberman would grant the Petition

For Rehearing.

33a

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 89-1195

AIR TRANSPORT ASSOCIATION OF AMERICA,

PETITIONER

Vv.

DEPARTMENT OF TRANSPORTATION, RESPONDENT

Before: Wald, Chief Judge; Mikva, Edwards, Ruth

B. Ginsburg, Silberman, Buckley, Williams,

D. H. Ginsburg, Sentelle and Thomas, Cir-

cuit Judges

ORDER

[Filed Jun. 18, 1990]

Respondents’ Suggestion For Rehearing En Banc

has been circulated to the full court. The taking of a

vote was requested. Thereafter, a majority of the

judges of the court in regular active service did not

vote in favor of the suggestion. Upon consideration

of the foregoing it is

ORDERED, by the Court en banc, that the sugges-

tion is denied.

Per Curiam

FOR THE COURT:

CONSTANCE L. DUPRE

Clerk

34a

By: /s/ Robert A. Bonner

ROBERT A. BONNER

Deputy Clerk

Circuit Judges Silberman, Williams, D. H. Gins-

burg, Sentelle and Thomas would grant the sugges-

tion for rehearing en banc.

35a

APPENDIX D

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 13

[ Docket No. 25690; Amdt. No. 13-18]

Rules of Practice for FAA Civil Penalty Actions

AGENCY: Federal Aviation Administration (FAA),

DOT.

ACTION: Final rule; request for comments.

SUMMARY: This final rule sets forth revised initia-

tion procedures and new rules of practice in FAA

civil penalty actions. The rules are needed to pro-

vide detailed procedures for on-the-record hearings

required in civil penalty actions by legislation re-

cently passed by Congress. The rules are intended to

provide an appropriate level of procedural formality

in civil penalty proceedings, focus attention on the

rights of individuals subject to civil penalties, and

ensure that due process is afforded those individuals

during the civil penalty enforcement process.

DATES: The final rule is effective on September 7,

1988. Comments must be received on or before No-

vember 7, 1988.

7 * * * *

SUPPLEMENTARY INFORMATION:

Comments Invited

The new rules contained in this amendment are

purely procedural rules to govern on-the-record hear-

36a

ings required by statute. The amendments to the

current regulations are required so that the regula-

tions will conform to existing and recently enacted

statutory authority. Because both the procedural

rules and revised regulations are required to imple-

ment the recently enacted legislative amendment to

the Federal Aviation Act of 1958, they are being

adopted without notice and prior public comment.

However, the Regulatory Policies and Procedures of

the Department of Transportation (44 FR 11034;

February 26, 1979) provide that to the maximum ex-

tent possible, Department of Transportation (DOT)

operating administrations should provide an oppor-

tunity for public comment on regulations issued

without prior notice.

Accordingly, interested persons are invited to par-

ticipate in the rulemaking by submitting written

data, views, or arguments as they may desire. Com-

ments must include the regulatory docket or amend-

ment number identified in this final rule and be sub-

mitted in duplicate to the address above. All com-

ments received will be available in the Rules Docket

for examination by interested persons. These rules

may be changed in light of the comments received on

this final rule.

Commenters who want the FAA to acknowledge

receipt of comments submitted on this final rule must

submit a preaddressed, stamped postcard with those

comments on which the following statement is made:

“Comments to Docket No. 25690.” The postcard will

be date stamped by the FAA and refunded to the

commenter. A report summarizing each substantive

public contact with FAA personnel concerned with

this rulemaking will be filed in the docket.

* * * * *

37a

Reason for No Notice and Immediate Adoption

These rules are needed immediately to implement

the statutory authority given to the FAA in Pub. L.

100-223, signed by the President on December 30,

1987. The amendments enable the FAA to assess

civil penalties for violations arising under the Fed-

eral Aviation Act, or a rule, regulation, or order is-

sued thereunder, upon written notice and finding of

violation by the Administrator. The legislation re-

quires that civil penalty actions initiated under this

authority be assessed only after notice and an oppor-

tunity for a hearing on the record in accordance with

section 554 of the Administrative Procedure Act.

The authority granted to the FAA by the amended

legislation is effective only until December 30, 1989.

The amendment to the Federal Aviation Act re-

quires the Administrator to set up a “Civil Pena'ty

Assessment Demonstration Program” to study ‘he

effectiveness of the amendment. The legislation also

requires the FAA to report to Congress, no later than

June 30, 1989, on the results of the study required

by the legislation. The FAA reviewed the existing

procedural rules governing enforcement hearings and

determined that these procedures are inadequate to

provide the appropriate level of procedural formality

dictated by Congress in the legislation. For these

reasons, notice and public comment procedures are

impracticable, unnecessary, and contrary to the pub-

lic interest. Moreover, good cause exists to make

these procedural rules effective in less than 30 days.

In accordance with the DOT Regulatory Policies and

procedures, an opportunity for public comment on

the final rule is provided.

* ~ * * ”

38a

The Amendments

Accordingly, the Federal Aviation Administration

amends Part 13 of the Federal Aviation Regulations

(14 CFR Part 13), effective September 7, 1988 as

follows:

PART 13—INVESTIGATIVE AND

ENFORCEMENT PROCEDURES

1. The authority citation for Part 13 is revised to

read as follows:

Authority: 49 U.S.C. 1354(a) and (c), 13874(d),

1401-1406, 1421-1428, 1471, 1475, 1481, 1482 (a),

(b), and (c), and 1484-1489 (Federal Aviation Act of

1958) (as amended, 49 U.S.C. App. 1475, Airport and

Airway Safety and Capacity Expansion Act of 1987) ;

49 U.S.C. App. 1655(c) (Department of Transporta-

tion Act) (Revised, 49 U.S.C. 106(g)); 49 U.S.C.

1808, 1809, and 1810 (Hazardous Materials Trans-

portation Act); 49 U.S.C. 1727 and 1730 (Airport

and Airway Development Act of 1970); 49 U.S.C.

2218 and 2219 (Airport and Airway Improvement

Act of 1982); 49 U.S.C. 2201 (as amended, 49 U.S.C.

App. 2218, Airport and Airway Safety and Capacity

Expansion Act of 1987); 18 U.S.C. 6002 and 6004

(Organized Crime Control Act of 1970) ; 49 CFR 1.47

(f), (k), and (q) Regulations of the Office of the

Secretary of Transportation).

2. Section 13.15 is revised to read as follows:

$13.15 Civil penalties: Federal Aviation Act of

1958 involving an amount in controversy in

excess of $50,000; an in rem action; seizure

of aircraft; or injunctive relief.

(a) The following penalties apply to persons who

violate the Federal Aviation Act of 1958, as amended:

a en ee a eo See wee? SS

39a

(1) Any person who violates any provision of Title

III, V, VI, or XII of the Federai Aviation Act of

1958, as amended, or any rule, regulation, or order

issued thereunder, is subject to a civil penalty of not

more than $1000 for each violation, in accordance

with section 901 of the Federal Aviation Act of 1958,

as amended (49 U.S.C. 1471, et seq.).

(2) Any person who violates section 404(d) of the

Federal Aviation Act of 1958, as amended, or any

rule, regulation, or order issued thereunder, is sub-

ject to a civil penalty of not more than $2,000 for

each violation, in accordance with section 901 of the

Federal Aviation Act of 1958, as amended (49 U.S.C.

1471, et seq.).

(3) Any person who operates aircraft for the car-

riage of persons or property for compensation or hire

(other than an airman serving in the capacity of an

airman) is subject to a civil penalty of not more than

$10,000 for each violation of Title III, VI, or XII of

the Federal Aviation Act of 1958, as amended, or any

rule, regulation, or order issued thereunder, occurring

after December 30, 1987, in accordance with section

901 of the Federal Aviation Act of 1958, as amended

(49 U.S.C. 1471 et seq.).

(b) The authority of the Administrator, under sec-

tion 901 of the Federal Aviation Act of 1958, as

amended, to propose a civil penalty for a violation of

that Act, or a rule, regulation, or order issued there-

under, and the ability to refer cases to the United

States Attorney General, or the delegate of the Attor-

proposed by the Administrator, involving an amount

ney General, for prosecution of civil penalty actions

proposed by the Administrator, involving an amount

in controversy in excess of $50,000, an in rem action,

seizure of aircraft subject to lien, or suit for injunc-

tive relief, or for collection of an assessed civil pen-

40a

alty, is delegated to the Chief Counsel, the Assistant

Chief Counsel for Regulations and Enforcement, and

the Assistant Chief Counsel for a region or center.

penalty, proposed in accordance with section 901 of

the Federal Aviation Act of 1958, as amended, in-

volving an amount in controversy in excess of $50,000,

an in rem action, seizure of aircraft subject to lien,

or suit for injunctive relief, prior to referral of the

civil penalty action to the United States Attorney

General, or the delegate of the Attorney General, for

prosecution.

(1) The Administrator, through the Chief Counsel,

the Assistant Chief Counsel for Regulations and En-

forcement, and the Assistant Chief Counsel for a re-

gion or center, sends a civil penalty letter to the per-

son charged with a violation of the Federal Aviation

Act of 1958, as amended, or a rule, regulation, or

order issued thereunder. The civil penalty letter con-

tains a statement of the charges, the applicable law,

rule, regulation, or order, the amount of civil penalty

that the Administrator will accept in full settlement

of the action or an offer to compromise the civil pen-

alty.

(2) Not later than 30 days after receipt of the

civil penalty letter, the person charged with a viola-

tion may present any material or information in

answer to the charges to the agency attorney, either

orally or in writing, that may explain, mitigate, or

deny the violation or that may show extenuating cir-

cumstances. The Administrator will consider any ma-

terial or information submitted in accordance with

this paragraph to determine whether the person is

subject to a civil penalty or to determine the amount

for which the Administrator will compromise the

action.

4la

(3) If the person charged with the violation offers

to compromise for a specific amount, that person shall

send a certified check or money order for that amount,

payable to the Federal Aviation Administration, to

the agency attorney. The Chief Counsel, the Assistant

Chief Counsel for Regulations and Enforcement, or

the Assistant Chief Counsel for a region or center,

may accept the certified check or money order or may

refuse and return the certified check or money order.

(4) If the offer to compromise is accepted by the

Administrator, the agency attorney will send a letter

to the person charged with the violation stating that

the certified check or money order is accepted in full

settlement of the civil penalty action.

(5) If the parties cannot agree to compromise the

civil penalty action or the offer to compromise is re-

jected and the certified check or money order sub-

mitted in compromise is returned, the Administrator

may refer the civil penalty action to the United States

Attorney General, or the delegate of the Attorney Gen-

eral, to begin proceedings in a United States District

Court, pursuant to the authority in section 903 of

the Federal Aviation Act, as amended (49 U.S.C.

1473), to prosecute and collect the civil penalty.

3. Section 13.16 is revised to read as follows:

§ 13.16 Civil Penalties: Federal Aviation Act of

1958, involving an amount in controversy

not exceeding $50,000; Hazardous Materials

Transportation Act.

(a) The following penalties apply to persons who

violate the Federal Aviation Act of 1958, as amended,

and the Hazardous Materials Transportation Act:

(1) Any person who violates any provision of Title

III, V, VI, or XII of the Federal Aviation Act of

42a

1958, as amended, or any rule, regulation, or order

issued thereunder, is subject to a civil penalty of not

more than $1,000 for each violation, in accordance

with section 901 of the Federal Aviation Act of 1958,

as amended (49 U.S.C. 1471, et seq.).

(2) Any person who violates section 404(d) of the

Federal Aviation Act of 1958, as amended, or any

rule, regulation, or order issued thereunder, is sub-

ject to a civil penalty of not more than $2,000 for each

violation, in accordance with section 901 of the Fed-

eral Aviation Act of 1958, as amended, (49 U.S.C.

1471 et seq.).

(3) Any person who operates aircraft for the car-

riage of persons or property for compensation or hire

(other than an airman serving in the capacity of an

airman) is subject to a civil penalty of not more than

$10,000 for each violation of Title III, VI, or XII of

the Federal Aviation Act of 1958, as amended, or any

rule, regulation, or order issued thereunder, occurring

after December 30, 1987, in accordance with section

901 of the Federal Aviation Act of 1958, as amended,

(49 U.S.C. 1471 et seq.).

(4) Any person who knowingly commits an act in

violation of the Hazardous Materials Transportation

Act, or any rule, regulation, or order issued there-

under is subject to a civil penalty of not more than

$10,000 for each violation, in accordance with section

901 of the Federal Aviation Act of 1958, as amended,

and section 110 of the Hazardous Materials Trans-

portation Act (49 U.S.C. 1471 and 1809 et seg.). An

order assessing civil penalty for a violation under the

Hazardous Materials Transportation Act, or a rule,

regulation, or order issued thereunder, will be issued

only after consideration of —

(i) The nature and circumstances of the violation;

(ii) The extent and gravity of the violation;

Olt Lan Nn a

43a

(iii) The person’s degree of culpability;

(iv) The person’s history of prior violations;

(v) The person’s ability to pay the civil penalty;

(vi) The effect on the person’s ability to continue

in business; and

(vii) Such other matters as justice may require.

(b) An order assessing civil penalty may be issued

for a violation described in paragraphs (a) (1), (a)

(2), (a) (8), and (a) (4) of this section after notice

and opportunity for a hearing.

tions 901 and § 905 of the Federal Aviation Act of

1958, as amended, and section 110 of the Hazardous

Materials Transportation Act, to initiate and assess

civil penalties for a violation of those Acts, or a rule,

regulation, or order issued thereunder and the au-

thority under section 901 of the Federal Aviation Act

of 1958, as amended, and the ability to refer cases to

the United States Attorney General, or the delegate of

the Attorney General, for collection of assessed civil

penalties, is delegated to the Chief Counsel, the Assist-

ant Chief Counsel for Regulations and Enforcement,

and the Assistant Chief Counsel for a region or center.

(d) Notice of proposed civil penalty. A civil pen-

alty action is initiated by sending a notice of proposed

civil penalty to the person charged with a violation of

the Federal Aviation Act of 1958, as amended, the

Hazardous Materials Transportation Act, or a rule,

regulation, or order issued thereunder. The notice of

proposed civil penalty contains a statement of the

charges and the amount of the proposed civil pen-

alty.

(e) Procedures following receipt of notice of pro-

posed civil penalty. Not later than 30 days after

receipt of the notice of proposed civil penalty, the

44a

person charged with a violation shall do one of the

following:

(1) The person shall submit the amount of the

proposed civil penalty in which case an order assessing

civil penalty shall be issued in that amount.

(2) The person shall participate in the informal

procedures provided in paragraph (f) of this section.

(3) The person shall request a hearing, pursuant

to paragraph (i) of this section, in which case an

order of civil penalty shall be issued and shall be filed

with the hearing docket clerk as the complaint in the

proceedings.

(f) Informal procedures. Not later than 30 days

after receipt of the notice of proposed civil penalty,

the person charged with a violation, who wants to

participate in informal procedures, shall do one of the

following:

(1) The person shall submit any information, in-

cluding documents and witness statements, in writing,

to the agency attorney, demonstrating that a violation

of the regulations did not occur or that the penalty

or the amount of the penalty is not warranted by the

circumstances.

(2) The person shall submit a written request to

the agency attorney to reduce the proposed civil pen-

alty and shall submit, in writing, the reasons and

documents supporting the reduction of the proposed

civil penalty, including records indicating a financiaj

inability to pay or records showing that payment of

the proposed civil penalty would prevent the person

from continuing in business, or

(3) The person shall submit a written request to

the agency attorney for an informal conference to

discuss the matter with the agency attorney and to

45a

submit relevant information or documents to the

i agency attorney.

(g) Procedures following interim reply or infor-

mal conference. Not later than 10 day after the

person charged with a violation receives an interim

reply to any submission made in accordance with

paragraphs (f)(1) or (f)(2) or not later than 10

days after an informal conference, the person charged

with the violation shall do one of the following:

Ae Dae

(1) The person shall submit the amount of the

proposed civil penalty in which case an order assess-

ing civil penalty shall be issued in that amount.

(2) The person shall submit additional written

information to the agency attorney for consideration.

(3) The person shall request a hearing, pursuant

to paragraph (i) of this section, in which case an

order of civil penalty shall be issued and shall be

filed with the hearing docket clerk as the complaint

in the proceedings.

(b) Order of civil penalty. An order of civil pen-

alty shall be issued if the person charged with a

violation requests a hearing in accordance with para-

graph (e) (3) or paragraph (g) (3) of this section.

(1) Request for a hearing. Any person who re-

ceives a notice of proposed civil penalty may request

a hearing, pursuant to paragraph (e)(3) or para-

graph (g)(3) of this section, to be conducted in ac-

cordance with the procedures in Subpart G of this

part. A person requesting a hearing shall file a writ-

ten request for a hearing with the agency attorney.

The request for a hearing may be in the form of a

letter but must be dated and signed by the person

requesting a hearing. The request for a hearing may

be typewritten or may be legibly handwritten. A

Iitceneceeceeneineeuatlll

46a

person requesting a hearing shall include a suggested

location for the hearing in the request for a hearing.

(j) Order assessing civil penalty. An order assess-

ing civil penalty shall be issued if the person charged

with a violation—

(1) Submits the amount of the proposed civil pen-

alty in which case the order assessing civil penalty

shall reflect receipt of the civil penalty;

(2) Does not respond in a timely manner to the

notice of proposed civil penalty;

(3) Does not respond in a timely manner to in-

terim replies from the agency attorney under para-

graph (g) of this section; or

(4) Does not comply with any agreement. reached

between the parties during an informal conference.

(k) Payment. A person charged with a violation

may pay the amount of the civil penalty proposed in

the notice or stated in the order, or an amount agreed

upon, by sending a certified check or money order,

payable to the Federal Aviation Administration, to

the agency attorney.

(1) Hearing. If the person charged with the vio-

lation requests a hearing pursuant to paragraph (e)

(3) or paragraph (g)(3) of this section, the order

of civil penalty shall be issued and shall be filed with

the hearing docket clerk as the complaint in the pro-

ceedings. The procedura! rules in Subpart G of this

part apply to the hearing and any appeal. At the

close of the hearing, the administrative law judge

shall issue, either orally on the record or in writing,

an initial decision, including the reasons for the deci-

sion, that affirms, modifies, or reverses the order of

civil penalty. An order of civil penalty, as affirmed

or modified by the administrative law judge, shall

become an order assessing civil penalty if-a party

47a

does not appeal the administrative law judge’s initial

decision to the FAA decisionmaker.

(m) Appeal. Hither party may appeal the admin-

istrative law judge’s initial decision to the FAA deci-

sionmaker pursuant to the procedures in Subpart G

of this part. If a party files a notice of appeal

pursuant to § 13.233 of Subpart G, the effectiveness

of any order assessing civil penalty is stayed until a

final decision and order of the Administrator has been

entered on the record. The FAA decisionmaker shall

review the record of the hearing and issue a final

decision and order of the Administrator that affirms,

modifies, or reverses the order assessing civil penalty.

The FAA decisionmaker shall not assess a civil pen-

alty in an amount greater than theeamount stated in

the order of civil penalty.

(n) Exhaustion of administrative remedies. A

party may only appeal a final decision and order of

the Administrator to the courts of appeals of the

United States or the United States Court of Appeals

for the District of Columbia pursuant to section 1006

of the Federal Aviation Act of 1958, as amended. An

order or an initial decision of an admgristrative law

judge, that has not been appealed to the FAA deci-

sionmaker, does not constitute a final order of the

Administrator for the purposes of judicial appellate

review under section 1006 of the Federal Aviation

Act of 1958, as amended.

(o) If a person subject to an order assessing civil

penalty does not pay the assessed civil penalty within

60 days after service of the order assessing civil pen-

alty, the Administrator may refer the order to the

United States Attorney General, or the delegate of

the Attorney General, to begin proceedings in a

United States District Court, pursuant to the author-

48a

ity in section 903 of the Federal Aviation Act of 1958,

as amended (49 U.S.C. 1473), or section 110 of the

Hazardous Materials Transportation Act (49 U.S.C.

1809), to collect the civil penalty.

(p) Compromise. The Administrator may com-

promise any civil penalty, assessed in accordance with

sections 901 and 905 of the Federal Aviation Act of

1958, as amended, involving an amount in contro-

versy not exceeding $50,000, or any civil penalty

assessed in accordance with section 901 of the Fed-

eral Aviation Act of 1958, as amended, and section

110 of the Hazardous Materials Transportation Act,

at any time prior to referring the order assessing

civil penalty to the United States attorney for col-

lection.

4. Section 13.31 is revised to read as follows:

$13.31 Applicability

This subpart applies to proceedings in which a

hearing has been requested in accordance with

$§ 13.19(c) (5), 13.20(c), 13.20(d), 13.75(a) (2),

13.75(b), or 13.81(e).

PART 13—INVESTIGATIVE AND

ENFORCEMENT PROCEDURES

5. Part 13 is amended by adding a new Subpart

G to read as follows:

Subpart G—Rules of Practice in FAA Civil

Penalty Actions

Sec.

13.201 Applicability.

13.202 Definitions.

13.203 Separation of functions.

49a

13.204 Appearances and rights of parties.

13.205 Administrative law judges.

13.206 Intervention.

13.207 Certification of documents.

13.208 Complaint. :

13.209 Answer.

13.210 Filing of documents.

13.211 Service of documents.

13.212 Computation of time.

13.213 Extension of time.

13.214 Amendment of pleadings.

13.215 Withdrawal of a complaint or request for a

hearing.

13.216 Waivers.

13.217 Joint procedural or discovery schedule.

13.218 Motions.

13.219 Interlocutory appeals.

13.220 Discovery.

13.221 Notice of hearing.

13.222 Evidence.

13.223 Standard of proof.

13.224 Burden of proof.

13.225 Offer of proof.

13.226 Public disclosure of evidence.

13.227 Testimony by agency employees.

13.228 Subpoenas.

13.229 Witness fees.

13.230 Record.

13.231 Argument before the administrative law

judge.

13.232 Initial decision.

13.233 Appeals from initial decisions.

13.234 Petitions to reconsider or modify a final

decision and order of the FAA decisionmaker

on appeal.

13.235 Judicial review of final decision and order.

50a

Subpart G—Rules of Practice in FAA Civil

Penalty Actions

§ 13.201 Applicability.

(a) This subpart applies to the following actions:

(1) A civil penalty action, initiated after Septem-

ber 7, 1988, in which an order of civil penalty has

been issued not exceeding $50,000 for a violation

arising under the Federal Aviation Act of 1958, as

amended, (49 U.S.C. 1301 et seq.), or a rule, regula-

tion, or order issued thereunder.

(2) A civil penalty action initiated after Sep-

tember 7, 1988, in which an order of civil penalty

has been issued for a violation arising under the Fed-

eral Aviation Act of 1958, as amended (49 U.S.C.

1471 et seg.) and the Hazardous Materials Transpor-

tation Act (49 U.S.C. 1801 et seq.), or a rule, regu-

lation, or order issued thereunder.

(b) This subpart applies only to proceedings ini-

tiated after September 7, 1988. All other cases, hear-

ings, or other proceedings pending or in progress at

the time this subpart is effective are not affected by

the rules in this subpart.

(a) of this section, the United States district courts

shall have exclusive jurisdiction of any civil penalty

action initiated by the Administrator—

(1) Which involves an amount in controversy in

excess of $50,000;

(2) Which is an in rem action or in which an

in rem action based on the same violation has been

brought;

Oe ee od OO es EO eee ee ee en ee ee

Bice see...

5la

(3) Regarding which an aircraft subject to lien

has been seized by the United States; and

(4) In which a suit for injunctive relief based on

the violation giving rise to the civil penalty has also

been brought.

§ 13.202 Definitions.

“Administrative law judge” means an administra-

tive law judge appointed pursuant to the provisions

of 5 U.S.C. 3105.

“Agency attorney” means the Assistant Chief

Counsel for Regulations and Enforcement, the As-

sistant Chief Counsel for a region or center, or an

attorney designated to prosecute a case. An agency

attorney shall not include any attorney who advises

the FAA decisionmaker regarding an initial decision

or any appeal to the FAA decisionmaker or who is

supervised by a person who provides advice to the

FAA decisionmaker in a case.

“Attorney” means a person licensed by a state,

the District of Columbia, or a territory of the United

States to practice law or appear before the courts of

that state or territory.

“Complaint” means an order of civil penalty is-

sued pursuant to the Federal Aviation Act of 1958,

as amended, or a rule, regulation, or order issued

thereunder, or the Hazardous Materials Transpor-

tation Act, or a rule, regulation, or order issued

thereunder, which has been filed with the Hearing

Docket after a hearing has been requested.

“FAA decisionmaker” means the Administrator of

the Federal Aviation Administration, acting in the

capacity of the decisionmaker on appeal, or any per-

son to whom the Administrator has delegated the

Administrator’s decisionmaking authority in a civil

52a

penalty action. As used in this subpart, the FAA

decisionmaker is the official authorized to issue a final

decision and order of the Administrator in a civil

penalty action.

“Mail” includes U.S. certified mail, U.S. registered

mail, or use of an overnight express courier service.

“Order assessing civil penalty” means an order that

contains a finding or determination of violation aris-

ing under the Federal Aviation Act, as amended, or a

rule, regulation, or order issued thereunder, or a vio-

lation of the Hazardous Materials Transportation

Act, or a rule, regulation, or order issued thereunder,

and directs a person to pay a civil penalty for the

violation.

“Order of civil penalty” means an order issued

after a person requests a hearing pursuant to § 13.16

(e) (3) or 13.16(g) (3) of this part and which is filed

with the docket clerk as the complaint in the pro-

ceedings.

“Party” means the agency attorney or the respond-

ent named in an order of civil penalty.

“Personal delivery” includes hand-delivery or use

of a contract or express messenger service. ‘Per-

sonal delivery” does not include use of government

interoffice mail service.

“Pleading” means a complaint, an answer, and any

amendment of these documents permitted under this

subpart.

“Properly addressed” means a document that

shows an address contained in FAA records, a resi-

dential, business, or other address submitted by a per-

son on any document provided by this subpart, or

any other address shown by other reasonable and

available means.

ee ee ee ee eC eed

On TIN

EN A Re wR FE Cate

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“Respondent” means a person to whom a civil

penalty is directed and who has received an order of

civil penalty.

§ 13.203 Separation of functions.

(a) Civil penalty proceedings, including hearings,

shall be prosecuted by an agency attorney.

(b) Any agency attorney engaged in the perform-

ance of prosecutorial functions in a case shall not, in

that case or a factually related case, participate in,

or advise the FAA decisionmaker regarding, an ini-

tial decision or any appeal to the FAA decisionmaker

under this subpart, except as a witness or counsel in

public proceedings. The prohibition described in this

paragraph shall begin at the time that a notice of

proposed civil penalty is issued.

torial functions in a case and shall not supervise the

agency attorney in the performance of prosecutorial

functions in.a case. The prohibitions described in

this paragraph shall begin at the time that the notice

of proposed civil penalty is issued.

(d) The Chief Counsel or the delegate of the Chief

Counsel, other than individuals described in para-

graph (a) of this section, shall advise the FAA deci-

sionmaker regarding an initial decision or any ap-

peal to the FAA decisionmaker under this subpart.

§ 13.204 Appearances and rights of parties.

(a) Any party may appear and be heard in person.

(b) Any party may be accompanied, represented,

or advised by an attorney or representative desig-

nated by the party and may be examined by that at-

torney or representative in any proceeding governed

by this subpart. An attorney or representative who

54a

represents a party may file a notice of appearance in

the action, in the manner provided in § 13.210 of this

subpart, and shall serve a copy of the notice of ap-

pearance on each party, in the manner provided in

§ 13.211 of this subpart, before participating in any

proceeding governed by this subpart. The attorney or

representative shall include the name, address, and

telephone number of the.attorney or renresentative in

the notice of appearance.

upon payment of reasonable costs. A person may

keep an original document, data, or evidence, with

the consent of the administrative law judge, by sub-

stituting a legible copy of the document for the rec-

ord.

§ 13.205 Administrative law judges.

(a) Powers of an administrative law judge. In

accordance with the rules of this subpart, an ad-

ministrative law judge may—

(1) Give notice of, and hold, prehearing confer-

ences and hearings;

(2) Administer oaths and affirmations;

(3) Issue subpoenas authorized by law and issue

notices of deposition requested by the parties;

(4) Rule on offers of proof;

(5) Receive relevant and material evidence;

(6) Regulate the course of the hearing in accord-

ance with the rules of this subpart;

(7) Hold conferences to settle or to simplify the

issues by consent of the parties;

(8) Dispose of procedural motions and requests;

and

(9) Make findings of fact and conclusions of law,

and issue an initial decision.

Pitino dB ww! Soni lt

55a

(b) Limitations on the power of the administra-

tive law judge. The administrative law judge shall

not issue an order of contempt, award costs to any

party, or impose any sanction not specified in this

subpart. If the administrative law judge imposes

any sanction not specified in this subpart, a party

may file an interlocutory appeal of right with the

FAA decisionmaker pursuant to § 13.219(c) (4) of

this subpart. This section does not preclude an ad-

ministrative law judge from issuing an order that

bars a person from a specific proceeding based on a

finding of obstreperous or disruptive behavior in that

specific proceeding.

may disqualify himself or herself at any time. A

party may file a motion, pursuant to § 13.218(f) (6),

requesting that an administrative law judge be dis-

qualified from the proceedings.

§ 13.206 Intervention.

(a) Any person who has a statutory right to par-

ticipate in the proceedings shall be allowed to inter-

vene in the proceedings by the administrative law

judge. ,

(b) In all other cases, the administrative law

judge shall not allow any person to intervene in any

proceeding governed by this subpart.

§ 13.207 Certification of documents.

(a) Signature required. The attorney of record,

the party, or the party’s representative shall sign

each document tendered for filing with the hearing

docket clerk, the administrative law judge, the FAA

decisionmaker on appeal, or served on each party.

(b) Effect of signing a document. By signing a

document, the attorney of record, the party, or the

56a

party’s representative certifies that the attorney or

party has read the document and, based on reason-

able inquiry and to the best of the attorney or party’s

knowledge, information, and belief, the document is—

(1) Consistent with these rules;

(2) Warranted by existing law or that a good

faith argument exists for extension, modification, or

reversal of existing law; and

(3) Not unreasonable or unduly burdensome or

expensive, not made to harass any person, not made

te cause unnecessary delay, not made te cause need-

less increase in the cost of the proceedings, or for any

other improper purpose.

or the party’s representative signs a document in vio-

lation of this section, the administrative law judge

or the FAA decisionmaker shall—

(1) Strike the pleading signed in violation of this

section ;

(2) Strike the request for discovery or the dis-

covery response signed in violation of this section and

preclude further discovery by the party;

(3) Deny the motion or request signed in violation

of this section;

(4) Exclude the document signed in violation of

this section from the record;

(5) Dismiss the interlocutory appeal and preclude

further appeal on that issue by the- party who filed

the appeal until an initial decision has been entered

on the record; or

(6) Dismiss the appeal of the administrative law

judge’s initial decision to the FAA decisionmaker.

§ 13.208 Complaint.

(a) In accordance with §§ 13.16(e) (3) and 13.16

(g) (3), an order of civil penalty shall serve as the

complaint. The agency attorney shall serve the origi-

Pe ee ae ee er)

iliac Ltd His Mn

57a

nal order of civil penalty on the person requesting

the hearing.

(b) The agency attorney shall file the complaint,

attaching a copy of the request for a hearing and

shall suggest a location for the hearing, with the

hearing docket clerk not later than 20 days after re-

ceipt of a person’s request for hearing.

ing the hearing do not agree on the location for the

hearing, the hearing docket clerk shall assign a hear-

ing location near the place where the incident oc-

curred.

§ 13.209 Answer.

(a) Writing required. A person who receives an

order of civil penalty shall file a written answer to

the order, or a motion pursuant to § 13.218(f) (1-4)

of this subpart, not later than 30 days after,service

of the order of civil penalty. The answer may be in

the form of a letter but must be dated and signed

by the person responding to the order of civil penalty.

An answer may be typewritten or may be legibly

handwritten.

(b) Filing and address. A person filing an answer

shall personally deliver or mail the answer for filing

with the hearing docket clerk to the Hearing Docket,

Federal Aviation Administration, 800 Independence

Avenue SW., Room 914E, Washington, DC 20591,

Attn: Hearing Docket Clerk.

clude a brief statement of the relief requested by the

person in the answer. The person shal! include spe-

cifically any affirmative defense in the answer that

the person intends to assert at the hearing.

(d) Specific denial of allegations required. A per-

son filing an answer shall admit, deny, or state that

58a

the person is without sufficient knowledge or informa-

tion to admit or deny each allegation in each num-

bered paragraph of the order of civil penalty. A gen-

eral denial of the order of civil penalty is deemed a

failure to file an answer. Any statement or allega-

tion contained in the order of civil penalty that is not

specifically denied in the answer is deemed an ad-

mission of the truth of that allegation.

(e) Service. A person filing an answer shall com-

ply with the service requirements of § 13.211 of this

subpart.

(f) Failure to file answer. A person’s failure to

file an answer without good cause is deemed an ad-

mission of the truth of each allegation contained in

the order of civil penalty and an order assessing civil

penalty shall be issued.

§ 13.210 Filing of documents.

(a) Address and method of filing. A person ten-

dering a document for filing shall personally deliver

or mail the signed original and one copy of each docu-

ment to the Hearing Docket, Federal Aviation Ad-

ministration, 800 Independence Avenue SW., Room

914E, Washington, DC 20591, Attn: Hearing Docket

Clerk. After an administrative law judge has been

assigned to the proceedings, a person shall personally

deliver or mail the signed original of each document

to the hearing docket clerk and shall serve a copy of

each document on each party and the administrative

law judge.

(b) Date of filing. A document shall be consid-

ered to be filed on the date of personal delivery; or

if mailed, the mailing date shown on the certificate

of service, the date shown on the postmark if there is

no certificate of service, or other mailing date shown

teste! oka Cee ite IRL OM ~ hs

59a

by other evidence if there is no certificate of service

or postmark.

legibly handwritten.

(d) Contents. Unless otherwise specified, in this

subpart, each document must contain a short, plain

statement of the facts on which the person’s case

rests and a brief statement of the action requested

in the document.

§$ 13.211 Service of documents.

(a) General. A person shall serve a copy of any

document filed with the Hearing Docket on the ad-

ministrative law judge and on each party at the time

of filing.

(b) Type of service. A person may serve docu-

ments by personal delivery or by mail.

certificate of service to a document tendered for filing

with the hearing docket clerk. A certificate of service

shall consist of a statement, dated and signed by the

person filing the document, that the document was

personally delivered or mailed to each party on a spe-

cific date.

(d) Date of service. The date of service shall be

the date of personal delivery; or if mailed, the mail-

ing date shown on the certificate of service, the date

shown on the postmark if there is no certificate of

service, or other mailing date shown by other evi-

dence if there is no certificate of service or post-

mark. ‘

(e) Additional time after service by mail. When-

ever a party has a right or a duty to act or to make

any response within a prescribed period after service

by mail, or on a date certain after service by mail,

5 days shall be added to the prescribed period.

60a

(f) Service by the administrative law judge. The

administrative law judge shall serve a copy of each

document including, but not limited to, notices of pre-

hearing conferences and hearings, rulings on mo-

tions, decisions, and orders, upon each party to the

proceedings by personal delivery or by mail.

(g) Valid .-rvice. A document t

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