The shortened holiday week generated few regulatory events and no real highlights, creating an opportunity to survey the major regulatory litigation as this Administration enters its final six months. This post highlights major litigation over the Administration’s priorities – particularly those stayed or preliminarily enjoined, and those at risk. The extent of this litigation risk is extraordinary – a level not seen previously – and may suggest patterns of lax regu
latory practice or heightened judicial skepticism. Each challenged regulations could be an element for choices by the American people about their new government and will present choices for the new Administration.
Waters of the United States: The Environmental Protection Agency (EPA) and the Army Corps of Engineers redefined Waters of the United States (WOTUS) in light of prior United States Supreme Court (SCOTUS) decisions. States, industry, environmental advocates and others criticized the rule in a host of district courts and courts of appeal. The Judicial Panel on Multidistrict Litigation (JPMDL) (1) rejected motions by the Department of Justice (DOJ) to consolidate the district court cases, and (2) randomly selected (ministerial act) the United States Court of Appeals for the Sixth Circuit to hear all consolidated petitions for review that had been filed in various courts of appeal in In re: United States Department of Defense and United States Environmental Protection Agency Final Rule: Clean Water Rule: Definition of “waters of the United States,” 80 Fed. Reg. 37,054 (June 29, 2015). The litigation now focuses on the lead case of Murray Energy Corporation v. EPA, 6th Cir. No. 15-3751.
A panel of the Sixth Circuit stayed the rule nationwide pending the outcome of the litigation, and (deeply fragmented) held that the Sixth Circuit has jurisdiction (a point JPMDL does not decide). The preliminary issues are not entirely completed, however, as motions to complete or supplement the administrative record were filed last Friday pursuant to the court’s deadline. Responses to those motions are due July 22, and replies are due July 29. The panel’s order averred that it will endeavor to rule on the motions by the end of August. Granting some aspects of the motions would have little effect on the schedule – recertifying the record to include Army Corps of Engineers memoranda that arguably cast doubt on some aspects of the rule and that have become public record would require little effort – but recertifying an administrative record index to include a privilege index or including documents spanning a decade before the agencies’ presumptive beginning date in 2014 could serious slow the courts ability to reach the merits.
Petitioners’ initial substantive briefs on the merits are due September 30, 2016, respondent agencies’ brief is due November 30, 2016, and replies are due January 20, 2017 (Inauguration Day). The court has ordered the parties to submit a joint appendix of documents from the administrative record for the court’s consideration by February 3, 2017. The Sixth Circuit will then schedule oral argument. The extended schedule reflects the complexity of the litigation and while the current Administration will file the respondents’ brief, the next Administration will argue the cause.
Moreover, application of any WOTUS definition was recently complicated by the SCOTUS decision in Army Corps of Engineers v. Hawkes Co. Inc. that affirmative jurisdictional determinations – that specific parcels fall within the definition and require pollution permits – are final agency actions subject to judicial review. Because the currently litigated WOTUS definition includes multi-layered determinations and permits can be extremely costly, judicial review is likely. Any remand might result in wholesale changes to simplify the rule to avoid significant parcel-by-parcel litigation.
Clean Power Plan: The second massive environmental regulation litigation focuses on EPA’s Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units – better known as the Clean Power Plan (CPP) – published a year ago and immediate brought before the United States Court of Appeals for the District of Columbia Circuit in West Virginia v. Environmental Protection Agency, D.C. Cir. No. 15-1363. The D.C. Circuit declined to stay the CPP, but the SCOTUS took the highly unusual step to stay the rule until the D.C. Circuit has resolved the case and SCOTUS has resolved any petition for certiorari from the judgment of the D.C. Circuit.
The D.C. Circuit originally scheduled panel oral argument of the consolidated cases on June 2. The court, however, on its own, ordered that the en banc nine-judge court (two recusals) will hear oral argument on September 27, 2016. That order set off logistical ramifications, and the court ordered the parties produce only 14 (rather than 25) paper copies of the 13-volume joint appendix reduction from the administrative record and 10 text-searchable compact disks of the 13-volume joint appendix.
Electric Effluent Limitations: Before leaving power plants and pollution, the consolidated MCP No. 136: In Re: United States Environmental Protection Agency, “Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category; Final Rule,” 80 Fed. Reg. 67,838 (Nov. 3, 2015), also known as Southwestern Elec Power Co. v. EPA, 5th Cir. No. 15-60821 (docketed Nov. 20, 2018), deserves a note. The rule generated four petitions for review in four different circuits, and JPMDL randomly assigned the consolidated cases to the United States Court of Appeals for the Fifth Circuit last December. EPA filed a certified list of documents in the administrative record on June 8, 2016, after the proceedings were stayed to permit EPA to prepare that certification. Now, however, at least one party has challenged the completeness of the administrative record on the ground that EPA improperly excluded confidential business information that it is required to provide for judicial review.
Interior Hydraulic Fracturing: The United States District Court for the District of Wyoming in State of Wyoming v. Department of the Interior (DOI) initially stayed the effective date of the Bureau of Land Management (BLM) Oil and Gas; Hydraulic Fracturing on Federal and Indian Lands final rule pending the filing of the administrative record, then preliminarily enjoined the rule, and finally set aside the rule. The district court ultimately concluded that Congress did not delegate to DOI authority to regulate hydraulic fracturing on federal and Indian lands. Both the preliminary injunction and the district court’s final judgment to the United States Court of Appeals for the Tenth Circuit.
Persuader Rule: Changing substantive area but not process, the Department of Labor (DOL)’s Interpretation of the “Advice” Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act (LMRDA) final rule, as noted last week, was enjoined by the United States District Court for the Northern District of Texas in National Federation of Independent Businesses v. Perez. That lengthy decision specifically found that plaintiffs were likely to succeed on the merits of a number of statutory and APA claims. The decision conflicted with, but trumped, another district court decision a week earlier in which the court was unpersuaded that injunctive relief was warranted.
The nationwide injunction entered here was based on findings that plaintiffs would likely succeed in establishing that the rule violated employers’ rights and exceeded DOL’s statutory authority. A key issue lies in whether the rule requires an attorney to violate a client’s privilege and whether DOL has authority to impose such a requirement, when an attorney is advising a client both as to law and tactical application of the law. While numerous cases will percolate through the system, at some point some of these issues will likely reach SCOTUS.
Retirement Fiduciary Rule: DOL’s Definition of the Term “Fiduciary”; Conflict of Interest Rule—Retirement Investment Advice, as noted previously, came under fire in several district courts and that litigation will likely require years to resolve. The fiduciary rule, however, has an extended compliance date and, because of that extended “real effect” date, the litigation requires less judicial expedition. In addition to the cases previously noted, Market Synergy Group, Inc. v. United States Department of Labor, D. Kan. No. 5:16-cv-04083 (filed June 8, 2016), may be the first case to be heard. The court in Market Synergy Group granted the parties proposal that DOL file an index to the administrative record and provide the administrative record to plaintiffs by August 1, 2016, and the parties submit a joint appendix in advance of a preliminary injunction hearing on August 24, 2016.
A hearing in National Association for Fixed Annuities v. Department of Labor, D.D.C. No. 16-cv-1035, is scheduled for the next day. Three cases consolidated in the district court for the Northern District of Texas will not receive much attention until at least mid-November.
DOL may have muddied the waters with new issues. The Office of Management and Budget (OMB) rapidly (6 days) completed review of an economically significant Proposed New and Amended Class Exemptions in connection with the Department of Labor’s proposed Conflict of Interest Rule – Investment Advice last Wednesday. DOL’s Employee Benefit Security Administration (EBSA) published Best Interest Contract Exemption; Correction and Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs; Correction in today’s Federal Register. DOL argues for a “good cause” exception from the Administrative Procedure Act (APA) requirement of advance notice and an opportunity for public comment on a proposed rule before making the changes in the Best Interest final.
Respirable Crystalline Silica: In yet another consolidation of petitions for review from six different circuits, JPMDL randomly selected the D.C. Circuit to decide MCP No. 139 – In Re: Occupational Safety and Health Administration, Final Rule: Occupational Exposure to Respirable Crystalline Silica, 81 Fed. Reg. 16285 (March 25, 2016), under the case name North America Building Trades v. OSHA, D.C. Cir. No. 16-1105. The litigation is not yet well developed, but initial statements from petitioners the consolidated cases raise dozens of issues. Briefing will be protracted and detailed, but the court has not set a briefing schedule.
Lesser Issues: Rules of lesser import are also likely to be litigated. Litigation over the Food and Drug Administration (FDA)’s “deeming” of e-cigarettes as tobacco products has already commenced in several courts, and litigation is likely over the Federal Aviation Administration (FAA)’s ban on transporting e-cigarettes in checked luggage and use of such devices on board commercial aircraft. The list could drone on and on.
Guidance, Policy, Memoranda, Avoidance, Evasion: Even this is not the end and does not begin to touch upon agency use of less-than-regulatory devices to avoid or evade the APA’s requirements. Chronicled in the past are numerous attempts to avoid the rigors of the regulatory process, most notably the immigration benefits classification in Texas v. United States, or the lesser Equal Employment Opportunity Commission (EEOC) guidance on the use of criminal background checks in employment decisions in Texas v. EEOC. The most significant current issue may be Texas v. United States, N.D. TX. No. 16-cv-00054 (filed May 25, 2016), seeking to set aside the DOJ and Department of Education (ED) Dear Colleague Letter on accommodating transgender students in bathrooms consistent with the student’s perceived “gender identity.” The Dear Colleague Letter interprets Title IX of the Civil Rights Act to require schools to treat a student’s “gender identity” as the student’s “sex,” with the exception of sports, and explains that “gender identity” refers to a person’s “internal sense of gender,” without regard for biological sex and without medical diagnosis. An additional suit has been filed as Nebraska v. United States, D. Neb. No. 4:16-cv-03117 (filed July 8, 2016) in which eleven other States allege that the letter is an unlawful revision of the term “sex.”
► No matter whether one views this menu of regulatory discord from inside or outside government, this current and incomplete snapshot of adverse litigation, and particularly the amount of even temporarily successful adverse litigation, illustrates a substantial failure of the Administration to implement and abide by the statutorily created regulatory process. Agencies enjoy a presumption of regularity, but this record challenges whether that presumption should continue. If the chronicles of this blog are any indication, judicial skepticism is justified.
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