Some regulatory litigation settled slightly last week as the multitude of district court cases challenging the Waters of the United States (WOTUS) rule will remain where they were filed. Administrative agencies continue to amend regulations in responses to litigation with varying success, including skirting the issues that lead to a prior regulatory vacatur and a proposed response to avoid a future vacatur. In a totally different vein, the Administration released its draft annual analysis of the effects of its regulatory effort – a release that must be taken with a grain of salt.
WOTUS Unconsolidated: The Judicial Panel on Multidistrict Litigation (JPMDL) declined the Department of Justice (DOJ) request to consolidate more than a dozen challenges in different district courts to the Environmental Protection Agency (EPA) and Army Corps of Engineers Clean Water Rule: Definition of “Waters of the United States” (WOTUS) final rule. The panel’s decision turns largely on the nature of the litigation – questions of law based on an established administrative record rather than the multi-district discovery and conflicting trial of facts that is the premise of JMPDL’s statutory consolidation authority. The complexity of the litigation weighed also against consolidation:
Additionally, centralization of these actions would be problematic due to their procedural posture. Several motions for preliminary injunctive relief already have been ruled upon, resulting in different jurisdictional rulings by the involved courts. Two courts have held that only the United States Courts of Appeals have jurisdiction over these regulatory challenges, whereas another reached the opposite conclusion, that jurisdiction over these actions properly resides in the United States District Courts. Centralization thus would require the transferee judge to navigate potentially uncharted waters with respect to law of the case. This procedural complication also weighs against centralization in this instance.
[footnote omitted]. The decision has less impact than expected because, as noted last week, the United States Court of Appeals for the Sixth Circuit has stayed the rule pending its further order.
► JPMDL’s decision does not come as a significant surprise, but a disappointed to the Administration. The jurisdictional issues remain to be resolved and could yet throw the litigation and the rule into turmoil. One further saving grace, however, might be brought to bear – the authority of a court to transfer a case to another court to cure a want of jurisdiction. If the Sixth Circuit, for example, finds that it lacks jurisdiction, it could transfer the petition for review to the Southern District of Ohio where one of the district court cases subject to the consolidation motion was stayed pending JPMDL’s resolution of that consolidation motion. Two things seem unlikely – a jurisdictional gap created by conflicting court decisions and the lifting of the stay before all of the issues are ultimately resolved.
Orphan Drug Misinterpretation: Agencies do need to respond to a court vacatur, not merely reiterate a past position in a new guise, as the Department of Health and Human Services (HHS) found out in the most recent iteration of Pharmaceutical Research and Manufacturers of America v. HHS. In previous litigation, the district court vacated the HHS orphan drug final rule because HHS lacked authority to promulgate a legislative rule or substantive rule setting the circumstances in which an orphan drug must be offered at a discounted price. HHS did not appeal the judgment and decline the court’s offer to brief whether the rule was a valid interpretive rule.
HHS then published in the Federal Register an interpretive rule stating how HHS interpreted and would interpret the relevant Public Health Service Act provisions relating to orphan drugs – identical in substance to the vacated legislative rule. Plaintiffs sued again, and the district court vacated, again, the new interpretive rule.
The court concluded that the interpretive rule conflicted with the plain statutory language – as the substantive rule conflicted. Surprisingly, the court also needed to deal with a shallow argument that the published interpretive rule was not a final agency action subject to review. The court found that even as an interpretive rule, the rule itself made clear that the interpretation was the “consummation” of HHS’s decision-making process and the interpretation set out the terms by which manufacturer’s rights or obligations were determined and from which legal consequences flow. “Most tellingly, however, is the fact that HHS contends that failure to comply with the statutory requirements – as interpreted by its Interpretive Rule – will expose manufacturers to significant penalties in future enforcement proceedings.” Although the court focuses on the nature of judicial review, exposure to liability for violating a rule – its binding nature – is one of the core hallmarks of a substantive rule.
► The fact that the court was required to adjudicate this case is troubling. HHS merely republished the substance of its prior and vacated legislative rule as an “interpretive” rule but apparently continues to take the stance that the rule was, in effect, substantive. The issues are, of course, much more complicated, but the facts suggest that HHS’s response to the prior court ruling was simply intemperate. When a court vacates a substantive rule, the agency must appeal, take another substantive tact, or walk away, it should not merely regurgitate its position under new and equally defective garb.
Optional Practical Training Proposed Extension-Extension: The Department of Homeland Security (DHS) today published its proposed Improving and Expanding Training Opportunities for F–1 Nonimmigrant Students With STEM Degrees and Cap-Gap Relief for All Eligible F–1 Students rule to respond to the vacatur of its 2008 rules and to propose additional policy changes. In short, the proposed rule would permit certain F–1 nonimmigrant visa students earning degrees in science, technology, engineering, or mathematics (STEM) in the United States who pursue 12 months of optional practical training (OPT) to extend the OPT period by 24 months. The proposed rule would make changes to the STEM OPT program consistent with DHS’ immigration executive actions announced in November 2014. At its heart, the proposed rule reflects a policy decision to balance demand for personnel with STEM degrees between United States citizens / permanent residents and extending temporary foreign student work authorization for 3 years.
Last August, the District Court for the District of Columbia held that DHS violated the Administrative Procedure Act (APA) by adopting a 2008 interim final rule without good cause to forego advance notice and an opportunity for public comment. DHS had attempted to use a “good cause” exception from the APA requirements arguing that delay for notice and comment rulemaking would create an economic crisis. The district court stayed its vacatur of the 2008 rule until February 16, 2016, to permit DHS to rectify its procedural error. The proposed rule goes further by proposing new policy changes, including a further extension of the original OPT 17-month extension to 24-months.
The proposed rule is marginally economically significant, but certainly policy and legally significant, thereby warranting Office of Management and Budget (OMB) review. OMB completed that review in less than two weeks. In another bow to the need for speed, DHS will accept public comments on the proposed rule for 30 days, half the Administration’s normative or default policy of a 60-day public comment period. Comments are due on November 18, 2015.
► The district court’s six-month deadline for a new final rule necessitated both DHS’s and OMB”s rapid response and the minimal public comment period. Completing any rulemaking – start to finish – in six months is daunting to say the least, but it can be accomplished and with quality. Given the litigation history (and even plaintiff’s pending appeal that does not implicate the vacatur order), a new final rule is likely to be challenged next Spring.
OMB Benefit / Cost Report: The Regulatory Right-to-Know Act requires the Office of Management and Budget (OMB) to submit to Congress each year “an accounting statement and associated report” including an estimate of the total annual benefits and costs (including quantifiable and non-quantifiable effects) of promulgated final rules and paperwork burden (e.g. Paperwork Reduction Act (PRA)) requirements. OMB quietly released a 2015 Draft Report to Congress on the Benefits and Costs of Federal Regulations and Agency Compliance with the Unfunded Mandates Reform Act on October 16, 2015, more than a year after the end of the relevant fiscal and reporting year. The draft report claims that major rules provided some $22.8 billion in benefits annually, and cost only $3.0 to $4.4 billion annually. The population of accounted rules however is quite small compared to executive regulatory action during the fiscal year. OMB will now seek public comments on the draft report before finalizing and submitting a report to Congress. OMB’s caveat is worth repeating:
It is important to emphasize that the estimates used here have significant limitations. In some cases, quantification or monetization is not feasible. When agencies have not quantified or monetized the primary benefits or costs of regulations, it is generally because of conceptual and empirical challenges, including an absence of relevant information. Many rules have benefits or costs that cannot be quantified or monetized with existing information, and the aggregate estimates presented here do not capture those non-monetized benefits and costs. In some cases, quantification of various effects is highly speculative.
► The report needs to be reflected more in agency rules. Agencies often calculate quantifiable benefits on theoretical terms, a cumulation of assumptions, estimates, and analysis of both primary and co-benefits. Agencies often calculate costs, on the other hand, limited to those direct monetized costs easily identifiable to the primary affected industry, without relation to any parallel degree of assumptions, estimates, and analysis of both primary and co-costs. OMB recognizes in its own reform proposals that analytical imbalance can skew results. Agency rules and underlying analyses should be read with the large dose of caution that benefits and costs can be manipulated to mean what the agency wishes. Benefit / cost analysis is an important tool for decision-makers, but it remains only one imperfect tool among many. In the worst case, imbalanced analysis can lead to arbitrary and capricious rules.
The post Monday Morning Regulatory Review – 10/19/15: WOTUS Unconsolidated; Orphan Drug Misinterpretation; Optional Practical Training Proposed Extension-Extension; & OMB Benefit / Cost Report appeared first on Federal Regulations Advisor.