Administrative Procedure Act: ABA Admin Law Section Comments on H.R. 3010

On October 25, the House Judiciary Committee held a hearing on H.R. 3010, the "Regulatory Accountability Act of 2011." Witnesses scheduled at the hearing included C. Boyden Gray, Boyden Gray & Associates (and former Section Chair), Christopher C. DeMuth of the American Enterprise Institute for Public Policy Research, Arnold Baker, owner of Baker Ready-Mix Building Materials, and Sidney Shapiro, University Distinguished Chair in Law at Wake Forest University School of Law.

The Administrative Law Section submitted extensive comments concerning the bill to the Committee. An executive summary of the Section's comments follows.

"The Regulatory Accountability Act of 2011, H.R. 3010, would be a sweeping and consequential revision to the Administrative Procedure Act, particularly with regard to the process of rulemaking. The bill is unusually ambitious and crammed with details that are impossible to summarize. Among its provisions are many that the Section endorses, many it would modify, and many that it opposes.

"With regard to the first category, we support provisions that would

• require agencies to maintain a rulemaking record,
• require agencies to disclose data, studies, and other information underlying a proposed rule,
• recognize the consultative function of the Office of Information and Regulatory Affairs (OIRA),
• provide for agencies to consult OIRA when issuing major guidance, and
• extend these OIRA functions to the independent agencies.

"With regard to the second category, we are sympathetic toward, but suggest modifications to, the bill’s provisions that would 

• add an Advance Notice of Proposed Rulemaking step to certain rulemakings,
• address the problem of agencies’ issuance of “interim” rules that are never superseded by regularly adopted rules,
• provide some centralized oversight of agency issuance of and reliance on guidance documents.

"On the other hand, the Section has serious concerns about

• the bill’s lengthy list of “rulemaking considerations” that agencies would be required to take into account at each stage of the rulemaking process,
• use of the long-discredited “formal rulemaking” for some rules,
• providing for judicial review of agencies’ compliance with OIRA’s guidelines, and
• effectively rewriting the substantive provisions regarding standard-setting in the enabling legislation of numerous agencies through a cost-focused “supermandate.” (We take no position on the substantive question of the appropriate role of costs in setting standards; we only object to resolving that question in a single, across-the-board statute that would turn the APA into the “Administrative Substance Act.”) 

"In general, we think many of the new steps the bill would require for rulemaking are, in numerous particular cases, valuable and appropriate. However, to impose these requirements automatically and across the board will, we fear, further ossify the rulemaking process with little offsetting benefits in the form of better rules."

Constitutional Law and Separation of Powers/Freedom of Information and Privacy/Rulemaking: D.C. Circuit Requires Notice-and-Comment Rulemaking for TSA Rule

On July 15, in Electronic Privacy Information Center v. DHS, No. 10-1157, the U.S. Court of Appeals for the District of Columbia Circuit held that a decision by the Transportation Security Administration (TSA) to screen airline passengers by using advanced imaging technology (AIT) instead of magnetometers should have been the subject of notice-and-comment rulemaking before being adopted. The Court granted the petition for review insofar as it claimed that the TSA had not justified its failure to initiate notice-and-comment rulemaking before announcing that it would use AIT scanners for primary screening. As the Court stated, "None of the exceptions urged by the TSA justifies its failure to give notice of and receive comment upon such a rule, which is legislative and not merely interpretive, procedural, or a general statement of policy."
The Court also denied the petition with respect to the petitioners’ claims that the use of AIT violated various federal statutes and the Fourth Amendment. Acknowledging "the obvious need for the TSA to continue its airport security operations without interruption," it remanded the rule to the TSA without vacating it, and instructed the agency "promptly to proceed in a manner consistent with this opinion."

Banking and Financial Services/Criminal Process: FinCEN Issues Final Rule on Bank Secrecy Act Reg Amendments

On July 29, the Financial Crimes Enforcement Network (FinCEN) published in the Federal Register a final rule that amends the Bank Secrecy Act (“BSA”) regulations applicable to Money Services Businesses with regard to stored value. The FinCEN notice states that the final rule "amends the regulations by: renaming 'stored value' as 'prepaid access' and defining that term; deleting the terms 'issuer' and 'redeemer' of stored value; imposing suspicious activity reporting, customer information and transaction information recordkeeping requirements on both providers and sellers of prepaid access, and, additionally, a registration requirement on providers only; and exempting certain categories of prepaid access products and services posing lower risks of money laundering and terrorist financing from certain requirements." The notice also states that the changes "address regulatory gaps that have resulted from the proliferation of prepaid innovations and their increasing use as an accepted payment method."

Criminal Process/Insurance: Second Circuit Vacates GenRe Convictions, Remands for New Trial

On August 2, the U.S. Court of Appeals for the Second Circuit vacated the convictions of four executives of General Reinsurance Corporation (“Gen Re”) and one of American International Group, Inc. (“AIG”) on charges of of conspiracy, mail fraud, securities fraud, and making false statements to the
Securities and Exchange Commission, and remanded the case for a new trial. The Court found that the convictions had to be vacated because at trial in the U.S. District Court for the District of Connecticut, the district court abused its discretion by admitting certain prejudicial stock-price data to show the material effect of a particular transaction, known as the Loss Portfolio Transfer (LPT), on investors. The Court also held that the district court had issued a jury instruction that did not include either side's causation instruction, but directed the verdict on causation.

Banking and Financial Services: Consumer Financial Protection Bureau Issues Interim Rule on Investigations

On July 22, the Consumer Financial Protection Bureau (CFPB)) issued an interim rule, with request for public comment, setting forth its rules relating to investigations. These rules are to govern investigations undertaken pursuant to section 1052 of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5562), which authorizes the CFPB to investigate whether persons have engaged in conduct that violates any provision of Federal consumer financial law. In the notice, the CFPB stated that "[i]n light of the similarities between section 1052 of the Act and section 20 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. 41 et seq., the Bureau drew most heavily from the FTC’s nonadjudicative procedures in constructing the Rules."
As the notice explains, "The Rules describe a number of Bureau policies and procedures that apply in a nonadjudicative setting. Among other things, these Rules set forth (1) the Bureau’s authority to conduct investigations, and (2) the rights of persons from whom the Bureau seeks to compel information in investigations. In particular, the Rules lay out the Bureau’s authority to conduct investigations before instituting judicial or administrative adjudicatory proceedings under Federal consumer financial law," as well as "the rights of persons from whom the Bureau seeks to compel information in an investigation."

Energy: President Obama Announces 54.5 MPG Fuel Efficiency Standard

On July 29, President Obama announced an agreement with 13 major automakers to increase fuel economy to 54.5 miles per gallon for cars and light-duty trucks by model year 2025. The announcement noted that the President "was joined by Ford, GM, Chrysler, BMW, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo – which together account for over 90% of all vehicles sold in the United States – as well as the United Auto Workers (UAW), and the State of California, who were integral to developing this agreement." In the announcement, the President characterized the agreement as "the single most important step we’ve ever taken as a nation to reduce our dependence on foreign oil."
In connection with that statement, the Administration also issued a report titled "Driving Efficiency: Cutting Costs for Families at the Pump and Slashing Dependence on Oil."

Environmental and Natural Resources Regulation/Homeland Security: NIOSH Issues Report on Link Between September 11 World Trade Center Attacks and Cancer

On July 26, the National Institute of Occupational Safety and Health (NIOSH), a component of the Centers for Disease Control and Prevention, issued its first periodic report examining the scientific and technical literature with respect to a possible link between the September 11 World Trade Center (WTC) attacks and the incidence of cancer. NIOSH concluded (as page 40) that "[b]ased on the scientific and medical findings in the peer-reviewed literature reported in this first periodic review of cancer for the WTC Health Program, insufficient evidence exists at this time to propose a rule to add cancer, or a certain type of cancer, to the List of WTC-Related Health Conditions." The report also noted that "[i]t is expected that the second periodic review of cancer for the WTC Health Program will be conducted in early to mid-2012 to capture any emerging findings about exposures and cancer in responders and survivors affected by the . . . attacks."