Amicus Curiae Brief — General Motors Corp. v. Thomas

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Vinee - oUpreme VOUrT, US

FILED

a APR 8 1985

No. 84-1098 ALEXANDER & STEVAS,

IN THE

Supreme Court of the United States

OCTOBER TERM, 1984

GENERAL MoTorS CORPORATION,

Petitioner,

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the District of Columbia Circuit

BRIEF AMICUS CURIAE OF THE CHAMBER OF

COMMERCE OF THE UNITED STATES OF AMERICA

IN SUPPORT OF THE PETITION

Rosin S. Com @aD

Counsel of Record

LYNN M. SMELKINSON

PAULA J. CONNELLY

NATIONAL CHAMBER LITIGATION

CENTER, INC.

1615 H Street, N.W.

Washington, D.C. 20062

(202) 463-5337

Counsel for the Amicus Curiae

Chamber of Commerce of the

United States

ESS. EE SS SSDS MNS

WILeon - Eras Printing Co.. Inc. - 769-0096 - WASHINGTON. D.C. 20001

TABLE OF CONTENTS

PE A MEEEEU ER GO BUC R MBI E sccncccececvansncevsisenscncnstsctsoness

UFR CO DOO vceicneresenincennnecsacnsececonsanenss

PTT ibid ilassalkces sceitihcimeacehdbdenianealeaittmattiniitn

I. THIS COURT SHOULD ESTABLISH A UNI-

II.

FORM TEST FOR DISTINGUISHING BE-

TWEEN INTERPRETATIVE AND LEGISLA-

ee Ne seciepeeeicaiaerilashianaticcnidanianiaranitdenridains

A. Conflicting Standards Divide the Circuits on

the Characterization of Agency Rules ............

I, omadetns

I ella

EERE eee Sana NR

4. Significant Policy Determination .............

B. A Uniform Standard Will Eliminate the Con-

flict in the Circuits and Ensure Compliance

with the Notice and Comment Requirements..

THE LOWER COURT ERRONEOUSLY

CHARACTERIZED THIS RULE, AND THEN

MISTAKENLY ACCORDED IT TOO MUCH

SE EIU ssntensiciasnsrdistesnnibennarensininctsuiemnthnaesiencees

A. The Court Below Wrongly Characterized

This Rule as Interpretative ...............000000.

B. The Court Below Wrongly Applied Chevron’s

Highly Deferential Standard of Review to a

Rule it Characterized as Interpretative.........

SIT oviesacs'scneunaccesesacunssadantssicienepbansnmbemeiccdarcabnienyeion

evan eo

TABLE OF AUTHORITIES

CASES Page

Alcaraz V. Block, 746 F.2d 593 (9th Cir. 1984)... 9,15

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504

OBIE scscccorseneesssitnciatrenstiaimiaduaspsemacanaiams ana 13

American Bancorporation, Inc. vy. Board of Gov-

ernors of the Federal Reserve System, 509 F.2d

, eft ef : Ree ee ee 8

American Friends Service Committee v. Webster,

vy Bp & Fi itchy Se | eos eeeine 16

American Postal Workers Union v. U.S. Postal

Service, 707 F.2d 548 (D.C. Cir. 1983), cert.

denied, 104 8. Ct. 1604 (1984) ............................... 7,9

American Trucking Ass’n vy. United States, 688

F.2d 1337 (11th Cir. 1982), rev’d on other

grounds, 104 S. Ct. 2458 (1984) ................22.0.2.... 9

Anderson V. Butz, 550 F.2d 459 (9th Cir. 1977)... 12

Batterton v. Francis, 432 U.S. 416 (1977) —.......... 15

Bethlehem Steel Corp. v. Gorsuch, 742 F.2d 1028

Se, | a Se NS. 16

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

CBE CBee Cie, RIGO wicccnccteivtttintncciccacnienn 8

Cabais v. Egger, 690 F.2d 234 (D.C. Cir. 1982) _.. 7

Capitano v. Secretary of Health and Human Serv-

ices, 732 F.2d 1066 (2nd Cir. 1984) 0.0... 15

Chamber of Commerce of the United States v.

OSHA, 636 F.2d 464 (D.C. Cir. 1980) i 9

Chemical Manufacturers Ass’n Vv. Natural Re-

sources Defense Council, Inc., Nos. 83-1913, 83-

1878, slip op. (U.S. Feb. 27, 1985) ..................-.... 14

Chevron, U.S.A., Inc. v. Natural Resources De-

fense Council, Inc., 104 8. Ct. 2778 (1984) _...... passim

Chrysler Corp. Vv. Brown, 441 U.S. 281 (1979) -...... 5, 6, 11

Citizens to Save Spencer County v. EPA, 600 F.2d

O66 (D.C. Gir. TOTES ociccaseeeee 8,9

City of Alexandria v. Helms, 728 F.2d 643 (4th Cir.

BODY cccnenticnnicincnsstnssunttanianiioniamiaiaceameaies 8

Columbia Broadcasting System, Inc. vy. United

Bdabes, BUG UE. GET COCR cccsccscsievicctcncmammess 12

Cospito v. Heckler, 742 F.2d 72 (3rd Cir. 1984)... 16

iii

TABLE OF AUTHORITIES—Continued

Daniel Freeman Memorial Hospital v. Schweiker,

See eae are cee Cor, 1961)

EEOC y. Federal Labor Relations Authority, 744

ER a

Fidelity Federal Savings & Loan Ass’n vy. de la

a aoe ao eee Crees

First Bancorporation Vv. Board of Governors, 728

eg RD) ee eee

General Electric Co. v. Gilbert, 429 U.S. 125

SEE RO!

Guardian Federal Savings and Loan Ass’n y. Fed-

eral Savings and Loan Insurance Corp., 589 F.2d

A LS REE

Herweg Vv. Ray, 455 U.S. 265 (1982) ...000000e

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

mooted prior to rehearing en banc, 727 F.2d 957

a saecttpenrns

Levesque VY. Block, 723 F.2d 175 (1st Cir. 1983)...

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

steele

Louisiana-Pacific Corp. Vv. Block, 694 F.2d 1205

a ssuitanoudaseinennns

Morton V. Ruiz, 415 U.S. 199 (1974) ...........0000........

National Wildlife Federation v. Gorsuch, 693 F.2d

a i csdnipensinenntsione

New England Telephone & Telegraph Co. v. Public

Utilities Commission of Maine, 742 F.2d 1 (1st

aE ES Ea a

Noel v. Chapman, 508 F.2d 1023 (2d Cir. 1975),

cert. denied, 423 U.S. 824 (1975) .....000022.000000002..

Office of Communication of the United Church of

Christ v. FCC, 707 F.2d 1413 (D.C. Cir. 1983) __..

Pharmaceutical Manufacturers Ass’n V. Finch, 307

BN Ee ES | | a

Pickus vy. U.S. Board of Parole, 507 F.2d 1107

Planned Parenthood Federation of America V.

Heckler, 712 F.2d 650 (D.C. Cir. 1983)..................

Page

TABLE OF AUTHORITIES—Continued

Page

Rettig v. Pension Benefit Guaranty Corp., 744 F.2d

Be Cs ie I eis cats cc iecosaeeanieice 15

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

cert. denied sub nom. International Union,

United Auto., Aerospace and Agricultural Im-

plement Workers v. Donovan, 104 §S. Ct. 1591

RU csc eee cee eel mee eee ee aL 7

Securities Industry Ass’n Vv. Board of Governors,

og EM , e nen 13

Skidmore v. Swift & Co., 323 U.S. 184 (1944) ....... 15

Southeastern Community College v. Davis, 442 U.S.

BE TI got necaptehes ts atesair ecg onc eg a 13

State of Montana vy. Clark, No. 83-1982, slip op.

Cs Ca re Me ED icdikccece ceeseteandctiasesnece’s 16

Texaco, Inc. vy. FPC, 412 F.2d 740 (3d Cir. 1969) .. 12

United States v. Morton, 104 S. Ct. 2769 (1984)... 14

United States Department of Labor v. Kast Metals

Corp., 744 F.2d 1145 (5th Cir. 1984) _........ 6, 7

Vermont Yankee Nuclear Power Corp. v. Natural

Resources Defense Council, Inc., 434 U.S. 519

RNAS RE ieee AAS tee SBME POR es wh IS GAs II RIE 7

STATUTES

Administrative Procedure Act, 5 U.S.C. §§ 551 et

st Wo casediiaioaianstebeananl passim

Ret lla CR ea a AEs aL aye ek 5

tk © & y's LE) aaa ae eee Gn omni eNee 14

Clean Air Act, 42 U.S.C. §§ 7401 et seq. (1982)... 11

LEGISLATIVE MATERIALS

S. Doc. No. 248, 79th Cong., 2d Sess. (1946) .......... 10, 14

MISCELLANEOUS

Bn is I CED atdccteccsctesseceenvocnevicsscnsimnits 10

roe, RRR emcee meen men 11

2 K. Davis, Administrative Law Treatise § 7.5 (2d

Ie MTN cain Dlras sees teste tiated cacndcea tadeniag lanstda vaaeaandaemaancas 6

IN THE

Supreme Court of the United States

OCTOBER TERM, 1984

No. 84-1098

GENERAL MOTORS CORPORATION,

. Petitioner,

LEE M. THOMAS,

Respondent.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the District of Columbia Circuit

BRIEF AMICUS CURIAE OF THE CHAMBER OF

COMMERCE OF THE UNITED STATES OF AMERICA

IN SUPPORT OF THE PETITION

STATEMENT OF INTEREST’?

The Chamber of Commerce of the United States

(“Chamber”) is the largest federation of business or-

ganizations and individuals in the United States. The

Chamber’s current membership exceeds 184,000, includ-

ing over 180,000 corporations, partnerships and proprie-

torships, as well as several thousand trade associations

and local and state chambers of commerce.

1This brief amicus curiae is filed with the written consent of

the parties to this action pursuant to Supreme Court Rule 36.1.

Statements of consent are on file with the Clerk of this Court.

The Chamber regularly advocates its members’ views

in court? and before administrative agencies on issues

of national concern to the American business community.

This representation constitutes a significant aspect of the

Chamber’s activities, and includes participation in agency

rulemakings on a broad spectrum of business issues. The

Chamber has submitted public comments to, inter alia,

the Environmental Protection Agency, the Occupational

Safety and Health Administration, the Internal Revenue

Service, and the Department of Energy. The Chamber

believes that its comments play an important role in

educating these agencies about the impact of a proposed

rule on the business community. Unfortunately, the

Chamber has been foreclosed in some instances from

this participation when agencies characterize rules as

“interpretative,” and like the petitioner here, has initi-

ated litigation contesting administrative action that was

taken without the benefit of public notice and comment.

Chamber of Commerce of the United States v. OSHA,

636 F.2d 464 (D.C. Cir. 1980).

This case presents this Court with two critical ques-

tions of administrative law that have far-reaching con-

sequences for the entire regulated community. The label

assigned to an administrative rule determines whether it

2 See, e.g., Chemical Manufacturers Ass’n Vv. Natural Resources

Defense Council, Inc., Nos. 83-1018, 83-1373, slip op. (U.S. Feb. 27,

1985); Trans World Airlines v. Thurston, 58 U.S.L.W. 4024 (U.S.

Jan. 8, 1985) ; Natural Resources Defense Council, Inc. v. EPA, 595

F. Supp. 65 (D.D.C. 1984), appeal docketed, Nos. 84-5566-69 (D.C.

Cir. 1984).

3 See, e.g., Comments of the Chamber of Commerce of the United

States on Proposed Regulations Relating to the Limitation on the

Amount of Depreciation and Investment Tax Credit for Automobiles

and the Limitation when Certain Property is Used for Personal

Purposes (December 21, 1984); Advance Notice of Proposed Rule-

making, 40 C.F.R. 765, Formaldehyde: Determination of Signifi-

cant Risk (July 23, 1984).

will be reviewed by the public and how it will be re-

viewed by the courts. Only “interpretative” rules are

exempt from the public notice and comment requirements

of the Administrative Procedure Act. Only “legislative”

rules require the highly deferential standard of judicial

review mandated by this Court in Chevron, U.S.A., Inc.

v. Natural Resources Defense Council, Inc., 104 S. Ct.

2778 (1984).

In the decision below, the U.S. Court of Appeals for

the District of Columbia Circuit upheld as “interpreta-

tive’ an EPA rule that extended motor vehicle recall

and repair liability under the Clean Air Act. In so doing,

the court failed to apply the “substantial impact” test

followed in four circuits for distinguishing between legis-

lative and interpretative rules, and applied Chevron’s

highly deferential standard of judicial review.

The Chamber is concerned that this decision will ad-

versely affect its ability to represent its members in fu-

ture rulemakings. By ignoring the impact of a rule, the

District of Columbia Circuit encourages administrative

agencies to by-pass public review, and thereby avoid the

kind of participation Congress intended to precede policy

determinations that have a substantial impact on the

rights and liabilities of the regulated community. The

number of regulatory statutes with exclusive review in

the District of Columbia Circuit underscores the im-

portance of this issue.

As the principal voice of the American business com-

munity, the Chamber is well-suited to present the broad

interest of the regulated community in this case. With-

out guidance from this Court on how to distinguish be-

tween legislative and interpretative rules, the regulated

community runs the continued risk of being denied the

opportunity to participate in agency decisionmaking be-

cause of wrongly assigned “interpretative” labels upheld

under improper standards of judicial review.

Immediate review by this Court is required to resolve

the conflict in the circuits, and to instruct the lower

courts on the proper interpretation of Chevron. For these

reasons, the Chamber respectfully submits its brief, and

urges this Court to grant General Motors’ Petition.

SUMMARY OF ARGUMENT

The U.S. Court of Appeals for the District of Colum-

bia Circuit upheld as “interpretative” an Environmental

Protection Agency (“EPA”) rule that extended General

Motors’ recall repair liability under the Clean Air Act

beyond the statutory definition of a motor vehicle’s useful

life. The effect of the rule was to increase fourfold the

number of vehicles to be repaired at the company’s ex-

pense under threat of fines up to $10,000 per vehicle.

By characterizing this rule as “interpretative,” EPA

foreclosed any public participation in the agency decision-

making process, even though the rule critically affected

the rights and liabilities of the entire motor vehicle

industry.

This decision adds to the confusion among the courts of

appeals on how to distinguish between legislative and

interpretative rules. By rejecting the “substantial im-

pact” test followed by the First, Second, Fifth and Eighth

Circuits, the District of Columbia Circuit encourages

regulatory agencies to engage in closed-door decision-

making without regard to the effect of their actions on

the regulated community.

This decision also misapplies the highly deferential

standard of judicial review reserved for “legislative”

rules by this Court in Chevron, U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 104 S. Ct. 2778 (1984).

The District of Columbia Circuit erred both in uphold-

ing EPA’s “interpretative” label and in applying Chev-

ron’s lenient standard to a rule adopted without the

benefit of public notice and comment.

This Court’s guidance is needed to resolve the conflict

in the circuits, establish a uniform test for distinguish-

ing between legislative and interpretative rules, and in-

struct the lower courts on the proper interpretation of

Chevron.

ARGUMENT

The characterization of a rule as “interpretative” or

“legislative” has far-reaching implications for the regu-

lated community. It determines whether affected parties

may participate in agency decisions that have a substan-

tial impact on their rights and liabilities. It also deter-

mines the amount of deference a court must give the

rule once promulgated.

This distinction, fundamental to administrative law,

is founded on the premise that only legislative rules are

promulgated pursuant to a congressional delegation of

authority. Chrysler Corp. v. Brown, 441 U.S. 281, 301-

302 (1979). In contrast, interpretative rules serve only

to advise the public of agency policy on how it construes

a statute or regulation. Hence, legislative rules are sub-

ject to the public notice and comment procedures of the

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

(b), and bind the rights and obligations of the affected

parties. Interpretative rules, on the other hand, are ex-

empt from these procedural safeguards, 5 U.S.C. § 553

(b) (A), and have no legal force or effect.

Despite the serious consequences attached to the “inter-

pretative” and “legislative” labels, nowhere in the APA

are they defined. Lower courts attempting to define those

terms and make the distinction have adopted a range of

conflicting tests. As a result, efforts to determine whether

a particular rule falls within the APA’s interpretative

rule exemption have left the lower courts “wandering

lost in the Serbonian Bog.” * Courts and commentators

4 Jean V. Nelson, 711 F.2d 1455, 1480 (11th Cir. 1983), mooted

prior to rehearing en banc, 727 F.2d 957 (11th Cir. 1984).

have described this area as “enshrouded in considerable

smog,” *° “not black and white,” * “a morass,”’ “confus-

ing,” * and “difficult.” °

Notwithstanding the confusion and conflicts among the

lower courts, this Court has never articulated a test for

determining whether a rule is interpretative or legisla-

tive. In fact, in Chrysler, this Court noted this absence,

and stated that “authoritative sources essentially offer

definitions [of the APA’s interpretative rule exemption]

by negative inference.” 441 U.S. at 302. The lower

courts bear this out by continuing to develop conflicting

tests for characterizing administrative actions.

I. THIS COURT SHOULD ESTABLISH A UNIFORM

TEST FOR DISTINGUISHING BETWEEN INTER-

PRETATIVE AND LEGISLATIVE RULES.

A. Conflicting Standards Divide the Circuits on the

Characterization of Agency Rules.

Multiple tests for distinguishing between legislative

and interpretative rules have emerged within the cir-

cuits. They focus in varying degrees on a number of

different factors. These factors include “substantial im-

pact,” “binding norm,” “intent of the agency” and

whether the agency has made a “significant policy deter-

mination” in promulgating a rule. Immediate review by

this Court is required to resolve these inconsistencies and

® Noel ¥V. Chapman, 508 F.2d 1023, 1030 (2d Cir. 1975), cert.

denied, 423 U.S. 824 (1975).

* United States Department of Labor vy. Kast Metals Corp., 744

F.2d 1145, 1152 (5th Cir. 1984).

7 Jean ¥V. Nelson, 711 F.2d at 1480.

*2 K. Davis, Administrative Law Treatise §7.5 at p. 32 (2nd

Ed. 1979).

* Guardian Federal Savings and Loan Ass'n Vv. Federal Savings

and Loan Insurance Corp., 589 F.2d 658, 665 (D.C. Cir. 1978).

establish a uniform test to ensure consistent compli-

ance with the public notice and comment requirements of

the APA.

1. Substantial Impact

The primary conflict in the circuits focuses on the ex-

tent to which the impact of a regulation is relevant to

determining its character. The District of Columbia

Circuit, joined by the Ninth and Eleventh Circuits, hold

that the impact of a rule upon the affected parties is not

a factor.’"* These circuits reject this test based on their

interpretation of this Court’s opinion in Vermont Yankee

Nuclear Power Corp. v. Natural Resources Defense Coun-

cil, Inc., 485 U.S. 519 (1978)."

10 American Postal Workers Union v. U.S. Postal Service, 707

F.2d 548, 560 (D.C. Cir. 1983), cert. denied, 104 8. Ct. 1594 (1984)

(“our decision that ... [the rule] was a legislative rule was based

not on the rule’s impact but rather on the fact that it was promul-

gated pursuant to a specific delegation of legislative power in the

governing statute”); Rivera v. Becerra, 714 F.2d 887, 891 (9th Cir.

1983), cert. denied sub nom. International Union, United Auto.,

Aerospace and Agricultural Implement Workers v. Donovan, 104

S. Ct. 1591 (1984) (rejecting the substantial impact test); Jean v.

Nelson, 711 F.2d at 1480 (“We here conclude that the substantial

impact test is insufficient to determine whether a rule is a general

statement of policy”).

11 Vermont Yankee held that the APA established the maximum

procedural requirements which Congress was willing to have the

courts impose upon agency rulemakings. /d. at 524. Both the

District of Columbia and Ninth Circuits hold that the language

of Vermont Yankee proscribes courts from considering the substan-

tial impact of a regulation, because such thoughts engraft judicial

notions of proper procedures upon agencies beyond the requirements

of the APA. Cabais v. Egger, 690 F.2d 234, 237 (D.C. Cir. 1982);

Rivera Vv. Becerra, 714 F.2d at 890-91. In contrast, the Fifth Cir-

cuit interprets Vermont Yankee to apply to the court’s role once

it has determined that a rule is legislative and thus subject to notice

and comment procedures, and not to whether the APA mandates

use of the statutory notice and comment procedures in the first

place. U.S. Department of Labor v. Kast Metals Corp., 744 F.2d at

1154 n 19.

Four other circuits do consider the impact of a regu-

lation in determining its character. However, the weight

they accord to it varies. The Second, Fifth and Eighth

Circuits prescribe that when a proposed rule has a sub-

stantial impact, the parties affected are automatically

entitled to notice and opportunity to comment.”* The

substantial impact test is the primary means by which

these courts look beyond the agency’s label to determine

whether a rule is the type Congress thought appropriate

for public participation. By contrast, the First Circuit

holds that the fact that a rule has a substantial impact

does not necessarily make the rule legislative, but is only

one factor in determining whether notice and comment

is required. Levesque v. Block, 723 F.2d 175, 182 (1st

Cir. 1983).

2. Binding Norm

A second conflict has developed over the role of a rule’s

effect in determining its character. Frequently referred

to as the “binding norm” test, the central inquiry is

- whether the rule binds the rights and obligations of the

regulated parties. If the rule has no legal effect and

imposes no new duties, it is interpretative. Citizens to

Save Spencer County v. EPA, 600 F.2d 844, 876 (D.C.

Cir. 1979).

The District of Columbia and the Fourth Circuit fol-

low this approach. City of Alexandria y. Helms, 728

F.2d 643, 647 (4th Cir. 1984) ; Citizens to Save Spencer

12 Brown Express, Inc. v. United States, 607 F.2d 695, 702 (5th

Cir. 1979) (“Our inquiry, therefore, is not whether the rule is ‘sub-

stantive’ or ‘procedural,’ but rather whether the rule will have a

‘substantial impact’ on those regulated.” ) ; American Bancorporation,

Inc. V. Board of Governors of the Federal Reserve System, 509 F.2d

29, 33 (8th Cir. 1974) (“To determine whether the amendment was

substantive or interpretative, we must focus upon its impact on the

banking industry regulated by the Board.”); Lewis-Mota v. Secre-

tary of Labor, 469 F.2d 478, 482 (2d Cir. 1972) (“By virtue of this

substantial impact ..., notice and opportunity for comment by

the public should first be provided.”).

County v. EPA, 600 F.2d at 876. Two other circuits

reject it. According to the First Circuit, the binding

norm test is unhelpful because all rules are binding on

the regulated parties. Levesque v. Block, 723 F.2d at 182.

The Ninth Circuit states that the extent to which regu-

lations are binding is only an effect of the distinction

between legislative and interpretative rules, not a crite-

rion of distinction. Alcaraz v. Block, 746 F.2d 593, 614

(9th Cir. 1984).

3. Agency Intent

The District of Columbia Circuit, along with the First,

Ninth and Eleventh Circuits, focus on the intent of the

agency in promulgating a rule.’* These courts hold that

where an agency has the power to promulgate both leg-

islative and interpretative rules, the intent of the agency

to promulgate one type of rule over the other determines

in part its character.

4. Significant Policy Determination

Another factor considered by at least one circuit is

whether the rule involves a significant policy deter-

mination. First Bancorporation v. Board of Governors,

728 F.2d 434 (10th Cir. 1984). Where an agency makes

a significant policy determination, the resulting rule is

legislative. Id. at 438.

B. A Uniform Standard Will Eliminate the Conflict

in the Circuits and Ensure Compliance with the

Notice and Comment Requirements.

Congress recognized that an agency’s knowledge is

rarely complete, and enacted the APA’s notice and com-

ment requirements to ensure that agencies are provided

13 Levesque V. Block, 723 F.2d at 182; American Postal Workers

Union v. U.S. Postal Service, 707 F.2d at 558; Louisiana-Pacific

Corp. ¥. Block, 694 F.2d 1205, 1209-10 (9th Cir. 1982); American

Trucking Ass'n VY. United States, 688 F.2d 1337, 1344 (11th Cir.

1982), rev'd on other grounds, 104 8. Ct. 2458 (1984) ; Chamber of

Commerce of the United States v. OSHA, 636 F.2d 464, 468 (D.C.

Cir. 1980).

with relevant facts and information before they imple-

ment rules of general applicability. S. Doc. No. 248, 79th

Cong., 2d Sess. 19-20 (1946). The lack of specific lan-

guage in the APA regarding which rules are subject to

these requirements has given rise to a body of case law

articulating different criteria for characterizing agency

actions. These criteria have been inconsistently applied,

creating great conflict in the decisions of the circuits.

Moreover, agency actions have been allowed to proceed

without the public input contemplated by the APA. A

single standard enunciated by this Court is needed to

eliminate this confusion, and ensure that the procedures

mandated by Congress are followed.

Il. THE LOWER COURT ERRONEOUSLY CHARAC-

TERIZED THIS RULE, AND THEN MISTAKENLY

ACCORDED IT TOO MUCH DEFERENCE.

A. The Court Below Wrongly Characterized This Rule

as Interpretative.

Without notice and comment, EPA adopted a “nation-

ally applicable regulation” * which extended recall and

repair liability under the Clean Air Act beyond the stat-

utory definition of a motor vehicle’s useful life. EPA’s

action increased by fourfold the number of vehicles to be

repaired at General Motors’ expense under threat of fines

of up to $10,000 per vehicle. EPA characterized this rule

as “interpretative,” and thereby foreclosed any public

participation in its decisionmaking process, even though

the rule critically affected the rights and liabilities of

the entire motor vehicle industry. This characterization

was clearly erroneous.

EPA’s recall and repair rule reflected significant

policy determinations that Congress left for the agency

to make, and created a substantial impact on the motor

vehicle industry, imposing new rights and duties. The

14 45 Fed. Reg. 36,396 (1980).

lower court failed to give adequate weight to these fac-

tors, but concentrated instead on the agency’s label and

justification for the rule. Accordingly, the court erred in

upholding EPA’s characterization.

This rule reflected important policy determinations

made by the agency on the question of whether a vehicle

subject to recall notification must be repaired if it has

passed its useful life. The Clean Air Act is silent on this

issue, and as EPA stated, “(t]he legislative history of

the Act offers little guidance.” 45 Fed. Reg. 36,397

(1980). Thus, the rule was neither a restatement nor an

explanation of Congress’ intent.’* With no actual con-

gressional intent to draw on, the agency made policy-

based determinations within gaps in the statute left by

Congress. By choosing among alternative enforcement

programs, EPA exercised legislative rulemaking au-

thority. See, Chevron, 104 S. Ct. at 2782-83; Chrysler

Corp. Vv. Brown, 441 U.S. at 316.

As noted by the petitioner, EPA’s initial regulations

implementing the recall and repair provisions were

adopted by legislative rulemaking in 1974 after extensive

public comment on their impact. Pet. at 20. The instant

rule should have undergone the same public scrutiny and

input, and the lower court should have accorded more

weight to the fact that this rule embodied significant pol-

icy choices.

The lower court also failed to take into account the

rule’s substantial impact on the regulated community, an

important factor in distinguishing between legislative and

interpretative rules.° Rules of general applicability

1 This was an area, like that in Chevron, in which Congress “did

not actually have an intent.” 104 S. Ct. at 2783.

6 See, Chrysler Corp. v. Brown, 441 U.S. at 302 (effect on in-

dividual rights is “an important touchstone” for distinguishing

legislative rules); Morton v. Ruiz, 415 U.S. 199, 232 (1974) (de-

scribing a legislative rule as one “affecting individual rights and

obligations” ).

which have a substantial impact on the regulated indus-

try can only be promulgated after notice and opportunity

for comment."’

The rule involved in this case will have a formidable

effect on the obligations of manufacturers. The number

of vehicles eligible for repair in each recall will increase

substantially. Manufacturers may even be required to

repair vehicles that conformed with all requirements

throughout their useful lives, under threat of fines of up

to $10,000 per vehicle. This burden will be particularly

onerous in the event of recalls issued late in the life of

a class. The impact of such a rule should be considered

before the label “interpretative” is allowed to stand.

In holding that the agency’s rule was interpretative,

the lower court relied on its assertion that EPA’s

“justification for the rule is comprised of reasoned statu-

tory interpretation, with reference to the language, pur-

pose and legislative history of section 207(c).” Pet. App.

at A-8 (emphasis added). Given the agency’s descrip-

tion of the legislative history and its reliance on major

policy determinations, this characterization of the agen-

cy’s justification is highly suspect. In any event, agency

justification for promulgating a rule should not be deter-

minative of the nature of the rule produced.

Tke lower court also placed too much reliance on the

label the agency attached to the rule. While this is a

factor to be considered, an agency’s own label is not dis-

positive. Columbia Broadcasting System, Inc. v. United

States, 316 U.S. 407, 416 (1942). Rather, “it is the sub-

stance of what the [agency] has purported to do and

17 Pharmaceutical Manvfacturers Ass'n ¥. Finch, 307 F. Supp.

858, 863 (D. Del. 1970). Accord, Daniel Freeman Memorial Hos-

pital Vv. Schweiker, 656 F.2d 473, 476-77 (9th Cir. 1981) ; Anderson

v. Butz, 550 F.2d 459, 463 (9th Cir. 1977); Pickus v. U.S. Board of

Parole, 507 F.2d 1107, 1112 (D.C. Cir. 1974); Lewis-Mota v.

Secretary of Labor, 469 F.2d at 482; Tezaco, Inc. v. FPC, 412 F.2d

740, 744 (3d Cir. 1969).

has done which is decisive.” Jd. The lower court recited

this principle, »ut went on to accord undue weight to the

agency’s label. See, Pet. App. at A-7, A-8. By promul-

gating this rule, EPA exercised legislative power, and

was required to undergo the appropriate procedural

prerequisites.

B. The Court Below Wrongly Applied Chevron’s

Highly Deferential Standard of Review to a Rule it

Characterized as Interpretative.

The lower court relied on this Court’s decision in

Chevron, 104 §.Ct. 2778, for the standard of judicial re-

view it applied to this administrative rule. This reliance

was misplaced, and resulted in the lower court applying

the highly deferential standard of review reserved for

legislative rules to a rule it characterized as interpreta-

tive. This Court’s guidance is needed to prevent further

misconstruction and misapplication of the principles an-

nounced in Chevron.

Over the past two decades, the standard of review ap-

plied by this Court when examining administrative rules

has varied substantially, depending upon the nature of

the rule, its statutory basis, and its administrative his-

tory. Among other standards, this Court has accorded

“substantial deference,” * “due deference,’® and “some

deference,” * to agency interpretations.

By comparison, this Court has repeatedly stated that

a highly deferential standard of review is to be applied

18 Securities Industry Ass’n V. Board of Governors, 104 S. Ct.

2979, 2992 (1984).

19 Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 517 n.13

(1981).

20 Southeastern Community College v. Davis, 442 U.S. 397, 411

(1979).

to “legislative” agency rule».*! Just this Term, the Court

enplied this standard in Chemical Manufacturers Ass’n

v. Natural Resources Defense Council, Inc., Nos. 83-1013

and 83-1373, slip op. (U.S. Feb. 27, 1985), when review-

ing an EPA variance procedure promulgated pursuant

to the public notice and comment requirements of the

APA.

In Chevron, the Court once again set forth this highly

deferential standard, stating that “legislative regula-

tions are given controlling weight unless they are arbi-

trary, capricious, or manifestly contrary to the statute.”

104 S. Ct. at 2782.22 They are upheld if they reflect “a

reasonable choice within a gap left open by Congress.”

Id. at 2793.

Legislative rules are given such great deference be-

cause Congress delegated to the agency the task of ac-

commodating conflicting policies and prescribing regula-

tions that have the force of law. Chevron, 104 §S. Ct. at

2783. Moreover, they are adopted after public participa-

tion through notice and comment.”* Interpretative rules,

21 See, e.g., United States v. Morton, 104 S. Ct. 2769, 2776 (1984)

(controlling weight unless they are arbitrary, capricious, or plainly

contrary to the statute); Fidelity Federal Savings & Loan Ass’n

y. de la Cuesta, 458 U.S. 141, 153-54 (1982) (subject to judicial re-

view only to determine whether the administrator has exceeded

his statutory authority or acted arbitrarily); Herweg v. Ray, 455

U.S. 265, 274 (1982) (entitled to more than mere deference or

weight).

22 This is akin to the standard enunciated in the Administrative

Procedure Act for rules promulgated after notice and comment

procedures. 5 U.S.C. § 706(2) (A).

23 The importance of public input into the administrative process

was recognized early on. See, S. Doc. 248 at 20 (Congress recog-

nized that an agency’s “knowledge is rarely complete, and it must

learn the . . . viewpoints of those whom the regulation will affect

... [Public] participation ... in the rule-making process is essential

in order to permit administrative agencies to inform themselves

coe pe

adopted without this basis or input, are given less defer-

ence, and are subject to rigorous judicial scrutiny.”

EPA characterized the recall and repair rule as inter-

pretative, EPA Brief at 41, and the Circuit Court agreed.

Opinion and Order of D.C. Circuit En Bane dated Sep-

tember 7, 1984, Pet. App. at A-8. But despite its deter-

mination that the rule was interpretative, the court erro-

neously applied the lenient standard of review Chevron

mandated for legislative rules. While holding that the

rule was akin to a simple agency statement of what the

statute means, the court went on to exercise “special

deference” in light of its assessment that Congress had

delegated to the agency “discretion in administering and

designing an enforcement scheme.” Pet. App. at A-23

n.16. This was plain error.

A rule cannot be characterized as interpretative, thus

exempt from notice and comment requirements, and yet

reviewed under the lenient standard reserved for legisla-

tive rules. Such characterization and subsequent lack of

judicial review permits unconstrained agency action in

areas of great public concern without public input. The

Chamber and others who choose to comment on proposed

agency actions should not be foreclosed from such oppor-

tunity without meaningful recourse.

The circuit courts have cited Chevron in support of a

variety of standards and principles. While it is agreed

that Chevron applies to legislative rules, it has been held

both applicable *° and inapr'icable ** to interpretative rules.

24 See Batterton v. Francis, 432 U.S. 416, 425 n.9 (1977) (“Legis-

lative, or substantive, regulations are ‘issued by an agency pursuant

to statutory authority and . . . implement the statute . . . Such

rules have the force and effect of law.’ . .. By way of contrast, a

court is not required to give effect to an interpretative regulation.”)

(citations omitted) ; General Electric Co. v. Gilbert, 429 U.S. 125,

141-42 (1976) ; Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).

25 Alcaraz V. Block, 746 F.2d at 606.

26 Capitano Vv. Secretary of Health and Human Services, 732 F.2d

1066, 1076 (2d Cir. 1984).

Chevron also has been cited, inter alia, for the proposi-

tion that reviewing courts must give “broad deference”

to agencies’ application of statutory criteria,” that re-

viewing courts are limited to “the narrow inquiry of

whether [the] regulations are a ‘reasonable’ interpreta-

tion or explanation of the statute,” ** that reviewing

courts are required to determine whether the agency

considered the matter in a detailed and reasoned fash-

ion,” and that reviewing courts are forbidden to “simply

defer” to an agency’s view of the law.*

Moreover, while it applied Chevron to this interpreta-

tive rule, the District of Columbia Circuit has varied in

the amount of deference it has accorded other administra-

tive actions, and the reasons for such deference.*! The

decision below adds further confusion to the issue. This

is particularly troublesome in view of the number of

27 Bethlehem Steel Corp. v. Gorsuch, 742 F.2d 1028, 1036 (7th

Cir. 1984).

28 Cospito v. Heckler, 742 F.2d 72, 85 n.21 (8d Cir. 1984).

29 Rettig v. Pension Benefit Guaranty Corp., 744 F.2d 1338, 151

(D.C. Cir. 1984).

30 New England Telephone & Telegraph Co. v. Public Utilities

Commission of Maine, 742 F.2d 1, 11 (1st Cir. 1984).

31 See, e.g., State of Montana Vv. Clark, No. 83-1982, slip op. at 13

(D.C. Cir. Nov. 20, 1984); EEOC v. Federal Labor Relations Au-

thority, 744 F.2d 842, 847 (D.C. Cir. 1984) (according ‘“‘consider-

able deference’ to agency interpretation); American Friends

Service Committee v. Webster, 720 F.2d 29, 60 (D.C. Cir. 1983)

(according “‘some deference” to the agency interpretation) ; Planned

Parenthood Federation of America V. Heckler, 712 F.2d 650, 655

(D.C. Cir. 1983) (“the deference accorded does vary from case to

case, and under certain circumstances can dissipate altogether’) ;

Office of Communication of the United Church of Christ v. FCC,

707 F.2d 1413, 1422-23 (D.C. Cir. 1983) (courts accord “only

limited deference” to an agency’s interpretation of its own gov-

erning statute) ; National Wildlife Federation v. Gorsuch, 693 F.2d

156, 166 (D.C. Cir. 1982) (according “great deference” to the

agency interpretation).

—————————

statutes providing for exclusive review in the District of

Columbia Circuit. The Chamber asks this Court to ad-

dress this issue and clarify that the highly deferential

standard of review it articulated in Chevron applies only

to legislative rules, and that interpretative rules are to

be accorded more rigorous judicial scrutiny.

. CONCLUSION

For the reasons stated above, the Chamber respect-

fully urges this Court to grant the General Motors’ Peti-

tion for a Writ of Certiorari.

Respectfully submitted,

ROBIN S. CONRAD )