Reply Brief — General Motors Corp. v. Thomas

T Office - Supreme Court, U.S. }

FILED

APR 15 1985

No. 84-1098

| sane tL. STEVAS:

Seema

In THE _

Supreme Court of the United States

OctToserR TERM, 1984

GENERAL Motors CoRPORATION,

Petitioner,

v.

Lez M. THomas, Administrator,

United States Environmental Protection Agency,

Respondent.

REPLY BRIEF IN SUPPORT OF

PETITION FOR WRIT OF CERTIORARI

William L. Weber, Jr. Theodore Souris

George F. Ball James A. Smith

Thomas L. Arnett Terrence B. Larkin

GENERAL Motors CorPoraTION Robert M. Spence

3044 West Grand Boulevard Bopman, Lonetey & DaBLING

Detroit, Michigan 48202 34th Floor

(313) 556-4009 100 Renaissance Center

Detroit, Michigan 48243

(313) 259-7777

Edward W. Warren

(Counsel of Record)

David G. Norrell

Krrkuanp & Exuis

Attorneys for Petitioner 655 Fifteenth Street, N.W.

General Motors Corporation Washington, D.C. 20005

April 15, 1985 (202) 879-5018

PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203

TABLE OF CONTENTS

Page

Panties To Tue PROCEEDINGS® .........cccccccccccs i

ee ae IID go ns c'v-c-0scdcodscrendscsdiowscos li

A. Respondent’s Arguments Confirm The Need For

ee Se NG 6s dike ca Wie ks dees evenses 1

B. Under The Tests Applied By Other Courts Of Ap-

peals, EPA’s May 30 Regulation Would Be Con-

ee ID 6 cb bw Kudo han deeeadpecens crore 3

C. The Extension Of Chevron To Interpretative Rules

Is An Issue Only This Court Can Resolve ....... 4

D. Contrary To Respondent’s Rationalization, EPA’s

Regulation Was Upheld Based Upon The Improper

Application Of Chevron’s Highly Deferential Stan-

ee eve es ey een 6

E. Respondent’s Justification For The May 30 Regnu-

lation Further Demonstrates That The Agency

Should Have Proceeded By Legislative Rulemaking 7

EEE ETL Neg ORE RE Ee ee ee rf

Appenpix A: Letter From Professor Kenneth Culp

RR OR er ees Peer rere eer ere A-1

* The parties to the proceedings, and General Motors non-wholly owned

TABLE OF AUTHORITIES

Cases

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

British Caledonian Airways, Ltd. v. CAB, 584 F.2d

Ge CONG GE, Se occ vencsseccvavsseareenees. 5

Capitano v. Secretary of Health & Human Services,

Tae Fe BRS COR Cae, TD ick ce cedeecnctscess 1,2

Chemical Manufacturers Ass’n v. Natural Resources

Defense Council, Inc., 105 S. Ct. 1102 (1985) ... 6

Chevron, U.S.A., Inc. vy. Natural Resources Defense

Counce, Inc., 104 8. Ct. 2778 (1984) .......... passim

Chrysler Corp. v. EPA, 600 F.2d 904 (D.C. Cir. 1979). 5

Motor Vehicle Manufacturers Ass’n v. State Farm

Mutual Automobile Insurance Co., 103 S. Ct. 2856

(ROD Wad nese ecoscdusesuatcouaweceeieuee eens 6

New England Telephone & Telegraph Co. v. Public

Utilities Comm’n, 742 F.2d 1 (1st Cir. 1984) .... 2

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

Se CBR. Cie Te ok ac dc ievcnseckeeseeeceeses 5

Skidmore v. Swift & Co., 323 U.S. 134 (1944) ........ 5, 6

Texas v. United States, No. 84-4086 (5th Cir., April 4,

BD kb cobvcctacsscrcndnesvedeus theese 5, 6,7

Washington v. EPA, 762 F.2d 1465 (9th Cir. 1985) .. 5

Table of Authorities—Continued

Statutes and Regulations

Page

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

a ak oe we ails passim

Clean Air Act, as amended, 42 U.S.C. $§ 7401 e¢ seq.

(1982)

Section 202(d)(1), 42 U.S.C. § 7521(d){i) ... 3,4

Section 207(c)(1), 42 U.S.C. § 7541(c)(1) ... 3,7

40 C.F.R. § 85.1803 Appendix A .................4.. 7

COD, one cencesccesscscseens 3

Miscellaneous

2 K. Davis, Administrative Law Treatise (2d ed.1979). 5

Legislative History of the APA, S. Doc. 248, 79th

Ce COED 0005 ows dvccccdcenccsoeee 2

lil

REPLY BRIEF IN SUPPORT OF

PETITION FOR WRIT OF CERTIORARI

Respondent’s brief in opposition serves in many respects

to confirm the need for this Court to grant certiorari to re-

view the D.C. Circuit’s decision below. Respondent’s brief

acknowledges a substantial conflict among the lower courts

regarding the two major issues of administrative law pre-

sented by GM’s petition. Moreover, respondent’s attempt

to apply the law followed in other circuits to the instant

facts only demonstrates that this case is an appropriate

vehicle for the resolution of these critical issues.

A. Respondent’s Arguments Confirm The Need

For Review By This Court.

Respondent’s brief is most revealing for the points it im-

plicitly concedes or declines to address. First, EPA never

disputes the existence of a conflict among the circuits over

the test for distinguishing between legislative and inter-

pretative rules. Br. Opp. at 6-7. EPA also accepts GM’s

contention, and the conclusion of many commentators and

lower courts, that the absence of definitive guidance on this

issue has created ‘‘considerable confusion’’ in the lower

courts. Br. Opp. at 6; Pet. at 10-11 & n.9.

As for the second issue GM’s petition presents—the con-

flict over the applicable standard of judicial review for

interpretative rules—EPA’s arguments actually magnify

the need for granting certiorari. In particular, respondent

argues that the D.C. Circuit was correct in applying to a

regulation it treated as interpretative the highly deferen-

tial standard of judicial review articulated in Chevron v.

NRDC, 104 S. Ct. 2778 (1984). Rather than demonstrate

the absence of the conflict among the circuits regarding the

applicability of Chevron,’ respondent simply chooses sides

1 EPA’s attempt to distinguish the First and Second Circuit cases is less

than faithful to the decisions of those courts. Br. Opp. at 11 n.5. Capitano

v. Secretary of Health & Human Services, 732 F.2d 1066, 1075-76 (2d

Cir. 1984), did directly involve an interpretative rule, and as an indication

of the issue’s significance, the court specifically explained that Chevron did

[Footnote continued]

2

over how the conflict should be resolved. In so doing, the

government indicates it will seek to extend Chevron’s man-

datory deference standard to interpretative rules nation-

wide, even though the position respondent advocates con-

flicts with decisions by the First and Second Circuits.

Finally, respondent tacitly acknowledges that the com-

bination of the D.C. Circuit’s interrelated holdings on the

legislative-interpretative distinction and the standard of

review issues, contravenes the scheme of the Administra-

tive Procedure Act. The congressional rationale for exempt-

ing interpretative rules from notice and comment safe-

guards has been that, ‘‘as merely interpretations of statu-

tory provisions ... [they] are subject to plenary judicial

review,’’ receiving only so much deference as their persua-

sive power warrants. APA Leg. Hist., S. Doc. 248, 79th

Cong., 2d Sess. 18 (1946); Pet. at 22-25. But the holdings

below, allowing agency regulations addressing legislative

policy issues to be classified as interpretative and then afford-

ing such rules the mandatory level of special deference artic-

ulated in Chevron produces a truly inequitable exclusion:

the public and regulated parties are barred from partici-

pating in and informing agency decisionmaking yet are also

deprived of an independent determination on judicial re-

view. Such a total exclusion of affected parties violates

both fundamental fairness and the purposes of the Admin-

istrative Procedure Act.? See also Reply App. A (letter

of Professor Kenneth Culp Davis).

not “change [the court’s] result since we do not have a legislative regula-

tion here.” Jd. at 1076. Presumably the government would not have pre-

ferred the use of the Chevron standard on rehearing in Capitano had the

government not felt Chevron’s mandatory deference standard would change

the result. Similarly, while the context in the second case EPA attempts

to distinguish was broader than the review of an interpretative rule, New

England Telephone ¢ Telegraph Co. v. Public Utilities Comm’n, 742 F.2d

1, 11 (1st Cir. 1984), the First Cireuit there did unambiguously reject the

extension of Chevron to the type of issues addressed in interpretative rules.

2 See Brief for the Motor Vehicle Manufacturers Association as Amicus

Curiae in Support of Petition at 4-9 (April 9, 1985).

ie

3

B. Under The Tests Applied By Other Courts Of Appeals,

FPA’s May 30 Regulation Would Be Considered Legislative.

EPA’s principal response to GM’s first issue is to argue

that the May 30 regulation would be considered ‘‘interpre-

tative’’ and upheld even under the alternative tests followed

by other circuits. This response is not surprising coming

from appellate counsel, but it also does not reflect a fair

application of the factors discussed in GM’s petition.

In particular, respondent asserts that if congressional

intent is the test, the May 30 regulation must be interpre-

tative because the regulation said no more than what Con-

gress expressly intended. Br. Opp. at 6-7. However, the

statutory language certainly does not establish the congres-

sional intent respondent asserts. Section 207(c)(1) must be

read in conjunction with the 5 year/50,000 mile useful life

limitation of § 202(d)(1), and the Court of Appeals opin-

ions identified at least four possible views of the repair

obligation under this statutory language. Pet. at 16-18; see

App. B-43 to B-46 (Wilkey, J., concurring in panel deci-

sion). Respondent’s assertion is also contradicted by EPA’s

concession when it promulgated the May 30 regulation that

‘*[t]he legislative history of the Act offers little guidance’’

regarding the scope of the recall repair remedy. 45 Fed.

Reg. at 36397; App. E-5. See also Pet. at 16-18 & n.21.

In short, accepting arguendo EPA’s and the Court of Ap-

peals’ characterization, there was no actual congressional

intent to guide the choice among the different views of the

§ 207(c) (1) repair obligation articulated by the parties and

the Court of Appeals judges. The very point of the discus-

sion in GM’s petition is that regulations adopted to fill such

gaps where no congressional intent exists must be legisia-

tive, not interpretative. Pet. at 13-14, 17-18; see App. B-35

(Bazelon, J., for panel majority).

Respondent contends second that the May 30 regulation

would not be legislative under the alternative tests because

the only policy determinations reflected in the regulation

were already made by Congress. This contention is difficult

4

to credit given Congress’ silence on the issue. In fact, the

fundamental policy underlying Congress’ 5 year/50,000 mile

useful life limitation runs contrary to EPA’s regulation.

See § 202(d)(1); Pet. at 3-4. In any event, the Court of

Appeals majority upheld the May 30 regulation on the

basis of respect for ‘‘the policy choices of administrative

agencies’’ and ‘‘EPA policy.’’ App. A at 8-11 & n.7, 11-12

& n.8, 13, 17, 20-22 (emphasis added). Evidently the court

below did not share the view that Congress made the policy

choices.

Finally, respondent suggests that the May 30 regulation

does not have the ‘‘substantial impact’’ of a legislative

regulation, as that factor has been applied by other circuits.

But respondent does not dispute GM’s estimate that the

May 30 regulation would increase fourfold the number of

vehicles to be repaired in this recall. Pet. at 28; Br. Opp.

at 8-9 & n.3. This impact reflects the axiomatic consequence,

in this and future recalls, of the agency’s decision to over-

ride the 5 year/50,000 mile useful life limitation Congress

enacted in § 202(d)(1). Thus, this substantial increase in

manufacturers’ obligations is attributable directly to EPA,

and not to Congress.

In sum, GM submits that the conflict over the tests for

distinguishing between legislative and interpretative rules

is squarely presented by the facts of this case, and that the

tests applied in other circuits would have required invali-

dating EPA’s May 30 regulation for failure to allow notice

and comment.

C. The Extension Of Chevron To Interpretative Rules Is An

Issue Only This Court Can Resolve.

Respondent’s initial response to the second issue pre-

sented—whether the standard of judicial review articulated

in Chevron v. NRDC extends to ‘‘interpretative’’ rules—

is to argue that the Chevron standard must apply to all

rules. The consequences of giving Chevron such sweeping

effect are so far-reaching for the review of agency action,

4)

that GM submits the government’s position here is an addi-

tional reason to grant the petition for certiorari.

Interpretative rules traditionally have been accorded

varying degrees of deference upon judicial review, based

on a series of factors explained in Skidmore v. Swift é Co.,

323 U.S. 134, 140 (1944). Pet. at 22-23. A court must ‘‘sub-

stitute’’ its own independent judgment if the agency’s

view expressed in an interpretative rule is not persuasive.

Batterton v. Francis, 432 U.S. 416, 425 & n.9 (1977); 2 K.

Davis, Administrative Law Treatise §§ 7:10, 7:13 (2d ed.

1979). By contrast, legislative regulations have been en-

titled to a consistently high level of deference, in recogni-

tion that agencies are the delegated decisionmakers with

respect to legislative regulations. 2 K. Davis, supra, § 7:8

(‘‘the law [is] deeply established that the scope of re-

view of interpretative rules is greater than for legislative

rules’’) ; see id. §§ 7:10, 7:13; Pet. at 10, 22-23. GM does not

contend, as respondent suggests, that Chevron ‘‘established

new law”’ for the review of legislative regulations. Br. Opp.

at 10.° But Chevron would represent a dramatic change in

administrative law if its mandatory high level of deference

extends to interpretative rules, as respondent contends and

the court below held.

Prior to Chevron and the decision below, for example, the

D.C. Circuit had distinguished between legislative and in-

terpretative rules in determining the applicable standard

of review.* At least the First and Second Circuits have

adhered to that view and rejected the extension of Chevron

to interpretative rules. Pet. at 25-26; see page 1 & nl,

3 Chevron’s standard of review has been invoked or implicated in ap-

proximately forty Court of Appeals decisions alone during the past year.

Many of those decisions do appear to reflect the view that Chevron re-

quired an especially deferential standard of judicial review. See, e.g.,

Texas v. United States, No. 84-4086 (5th Cir., April 4, 1985); Washing-

ton v. EPA, 752 F.2d 1465, 1469 (9th Cir. 1985); Rettig v. Pension

Benefit Guaranty Corp., 744 F.2d 133, 140-41, 150-52 (D.C. Cir. 1984).

* See, e.g., Chrysler Corp. v. EPA, 600 F.2d 904, 916 (D.C. Cir. 1979) ;

British Caledonian Airways, Ltd. v. CAB, 584 F.2d 982, 995 (D.C. Cir.

1978).

|

6

supra. In addition, contrary to the government’s position

here, the rationale of the Court in Chevron does not carry

over to the review of interpretative rules. Pet. at 24-25.

Moreover, while a majority of the Court did not need to

address this question in CMA v. NRDC, 105 S. Ct. 1102

(Feb. 27, 1985), Justices Marshall, Blackmun, Stevens and

O’Connor concluded there that ‘‘Chevron’s deference re-

quirement ... was explicitly limited to cases in which con-

gressional intent cannot be discerned.’’ Jd. at 1121 (dissent-

ing opinion). This understanding would exclude interpre-

tative rules by definition.

Accordingly, GM submits that the D.C. Cireuit’s decision

and respondent’s position extending Chevron to interpre-

tative rules do represent ‘‘new law,’’ which conflicts with

the decision of this Court and other circuits, and necessi-

tates plenary review.

D. Contrary To Respondent’s Rationalization, EPA’s Regula-

lation Was Upheld Based Upon The Improper Application

Of Chevron’s Highly Deferential Standard Of Review.

Respondent contends secondarily that the D.C. Circuit’s

extension of Chevron may not have affected the outcome of

this case. This contention is nothing more than the ‘‘ post

hoc rationalizations’’ of appellate counsel, who is charged

with defending agency action and preserving the highest

level of deference possible. MVMA v. State Farm Mutual

Automobile Insurance Co., 103 S. Ct. 2856, 2870 (1983).

As respondent appropriately concedes, the majority be-

low upheld EPA’s May 30 ‘‘interpretative’’ rule based on

Chevron’s mandatory and highly deferential standard of

review. Nowhere did the majority apply the Skidmore fac-

tors or the lower level of deference they entail. By compari-

son, the dissenting judges did apply the Skidmore analysis

and found that EPA’s regulation could not be sustained

under Skidmore as an interpretative rule. Pet. at 23-24.

The importance of the Chevron issue to the result here

could scarcely be demonstrated more clearly. For just as

the Court found in Chevron, the degree of deference ac-

corded determined the result on review. See also Tezas v.

———

a

7

United States, No. 84-4086 (5th Cir., April 4, 1985) (up-

holding ICC interpretation based on Chevron standard

‘‘even though—absent such requisite deference to the Com-

mission’s construction—this panel may well have decided’’

otherwise).

E. Respondent’s Justification For The May 30 Regulation

Further Demonstrates That The Agency Should Have Pro-

ceeded By Legislative Rulemaking.

Respondent concludes its brief by defending the merits of

the May 30 regulation. This argument bears little response

at this point, except to the extent it supports the need for

review by this Court.

Respondent’s discussion of the merits ironically accuses

GM of wanting to rewrite the statute, but it was EPA that

took it upon itself to insert the phrase ‘‘regardless of their

age or mileage at the time of repair,’’ which nowhere ap-

pears in the statutory text. Compare § 207(c)(1) with 40

C.F.R. § 85.1803 Appendix A (emphasis added). Similarly,

the term ‘‘class-based’’ that respondent uses in explaining

a manufacturer’s repair obligation can not be found in the

§ 207(c)(1) description of the vehicles to be remedied.

Respondent’s discussion of the policy considerations EPA

invoked when the agency hastily adopted the regulation to

resolve the dispute during the Cadillac recall, Br. Opp. at

14, moreover, simply emphasizes EPA’s initial mistake of

ignoring the APA’s procedural requirement that regula-

tions predicated on an agency’s balancing of significant

policy considerations be adopted only through legislative

rulemaking. Procedural fairness and reasoned decisionmak-

ing require that when an agency makes a regulation whih

imposes onerous new requirements, the affected parties

should have the opportunity to comment on that rule, its

implications and the underlying rationale. See Reply App.

A (letter of Professor Kenneth Culp Davis).

CONCLUSION

A writ of certiorari should be granted to review the

judgment and decision of the Court of Appeals for the D.C.

Circuit.

Respectfully submitted,

William L. Weber, Jr.

George F. Ball

Thomas L. Arnett

General Morors CopporaTiIon

3044 West Grand Boulevard

Detroit, Michigan 48202

(313) 556-4009

Attorneys for Petitioner

General Motors Corporation

April 15, 1985

Theodore Souris

James A. Smith

Terrence B. Larkin

Robert M. Spence

Bopman, Loneoiey & Daniine

34th Floor

100 Renaissance Center

Detroit, Michigan 48243

(313) 259-7777

Edward W. Warren

(Counsel of Record)

David G. Norrell

KimkLAND & Euuis

655 Fifteenth Street, N.W.

Washington, D.C. 20005

(202) 879-5018

A-l

APPENDIX A

KENNETH CULP DAVIS

School of Law

University of San Diego

San Diego, CA 92110

April 12, 1985

William L. Weber, Jr., Esq.

General Motors Corp.

General Motors Bldg.

Detroit, Mich. 48202

Dear Mr. Weber:

I have reviewed the petition for certiorari you sent me

in No. 84-1098, General Motors Corp. v. Thomas, the gov-

ernment’s brief in opposition, and the Court of Appeals’

opinions below. The main idea in the government’s brief

is easy to answer. The brief rests on the main idea, stated

at page 7, that ‘‘the May 30 rule did not create any new

rights or duties’’ and that ‘‘EPA’s May 30 rule did not,

and did not purport to involve any significant policy deter-

mination not already made by Congress.’’

The very facts of this case—even the facts in the form

stated at pages 3 and 4 of the government’s brief—rebut

that main idea, for the facts clearly show that neither the

petitioner nor the EPA knew what the statute required

before the May 30 rule was issued. Initially, according to

page 3 of the brief, petitioner in 1975 submitted a plan for

voluntary recall of 1975 Cadillacs. For two years, EPA and

petitioner negotiated, and EPA did not approve the plan.

Then in 1979 EPA did at last approve the plan. Thereupon

petitioner raised the question about vehicles beyond their

five-vear/50,000 mile useful lives, and EPA in 1980 issued

the May 30 rule, the effect of which was partially to dis-

approve the plan that EPA had previously approved.

A-2

EPA, by fluctuating during the 1975-80 period from ap-

proval to disapproval to partial approval of petitioner’s

plan, clearly demonstrated that the question of what plan

should or should not be approved could not be answered

by merely looking at the statute.

On the more specific question of whether vehicles beyond

their useful life should be included in the plan, the statute

was completely silent. Such vehicles could be either included

or excluded without violating the silent statute. For all that

appears, neither Congress nor anyone in Congress had any

intent of any kind on the question whether vehicles beyond

their useful life must be expensively repaired even if the

vehicles have little or no value. For all that appears, no one

in the EPA had an answer to that question before the EPA

issued its rule on May 30, 1980. Even the specialist agency

that had the responsibility fluctuated in trying to answer the

question.

When the EPA issued its May 30 rule, it was for the first

time creating law on the question of what to do about ve-

hicles beyond their useful life. The May 30 rule was clearly

in the nature of new law.

The new law embodied in the May 30 rule imposed an

onerous requirement, and compliance with the requirement

would be very expensive to the petitioner.

A rule imposing such an onerous requirement is precisely

the kind of rule for which § 553 of the Administrative Pro-

cedure Act requires notice and comment procedure. Yet the

EPA issued the rule without using notice and comment

procedure. “

The fundamental principle of administrative law is that

procedural fairness requires that when an agency makes a

rule that imposes an onerous new requirement, those on

whom the requirement is imposed should ordinarily have

opportunity to comment on a proposed rule, in order that

the agency may be aware of the impact of the requirement,

rman se

A-3

and in order that the agency may take into account the

reasons against the onerous new requirement.

Although interpretative rules are a necessary adminis-

trative tool, and although interpretative rules usually may

be properly used without notice and comment procedure,

interpretative rules without notice and comment procedure

are the wrong tool for imposing an onerous new require-

ment.

The Supreme Court should adhere to the requirement

imposed by § 553 of the Administrative Procedure Act. It

should hold that an agency which imposes an onerous new

requirement through a rule must use notice and comment

procedure. The statute so requires and fairness so requires.

Sincerely yours,

/s/ Kennetu Coutp Davis

ec: Edward W. Warren, Esq.