Regulatory Accountability Act to House Floor; White House Threatens Veto

The Regulatory Accountability Act, H.R. 3010, is scheduled to be considered on the floor of the House on Thursday, December 1, 2011.  The controversial bill would make sweeping changes to the APA, particularly with regard to its rulemaking provisions.  Today the White House released a Statement of Administration Policy stating that the President's senior advisors would recommend a veto were the bill to reach his desk.

The Section's extensive comments on the bill can be found here; an executive summary of those comments is contained in this post.

Robert A. Anthony (1931-2011)

The Section of Administrative Law and Regulatory Practice, and the larger administrative law community, lost a great friend when Robert Anthony passed away on November 17. Bob, who was GMU Foundation Professor emeritus at the George Mason University School of Law, was a leading administrative law scholar and former chair of the Administrative Conference of the United States.  He was especially well known for his work on "spurious rules," a term he coined. The law school's news release is here.

The Section Council has approved the following resolution in his memory:

RESOLUTION IN MEMORY OF ROBERT A. ANTHONY

WHEREAS our colleague and friend Robert A. Anthony, GMU Foundation Professor Emeritus at the George Mason University School of Law, passed away on November 17, 2011;

WHEREAS Professor Anthony was a long-time and active member of the Section of Administrative Law and Regulatory Practice -- serving with distinction as Secretary, a Member of the Council, and as Chair and Vice Chair of several Section Committees -- and an enduringly faithful supporter of Section activities;

WHEREAS Professor Anthony was among the nation's most distinguished and prolific Administrative Law scholars of his generation, especially as one of the foremost authorities on agency rulemaking and the use and misuse by agencies of policy statements and guidance documents;

WHEREAS Professor Anthony was a dedicated teacher, beloved by his students at the George Mason University and Cornell University Law Schools;

WHEREAS Professor Anthony served with distinction as Chairman of the Administrative Conference of the United States from 1974 to1979, during ACUS's formative years, then as Senior Fellow from 1982 to 1995, and again as Senior Fellow from 2010 until the time of his passing; and

WHEREAS Professor Anthony, in all his dealings with the Section and its members, was a generous and kind colleague, a willing contributor to all manner of activities, a ready mentor, and a devoted and loyal friend --

NOW, BE IT THEREFORE RESOLVED that the Section expresses its sorrow at Bob Anthony’s passing and honors his memory for his many contributions to the Section, the legal profession, legal education, and legal scholarship and, above all, for the friendship he shared with us all.

Unanimously adopted by the Council of the Section of Administrative Law and Regulatory Practice of the American Bar Association this 28th day of November, 2011.

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."