Section 507(d)
Legal Issues Memo ( e-mail exchange)
Greg and Michael:
Sorry for the
delay in responding. I don’t know anything about this issue with regard
to the states. With respect to the feds, I had this to say a few years
ago in an article published in the Pace Environmental Law Review:
E. Is There an Exhaustion
Requirement as a Precondition to Judicial Review of Rulemaking?
Traditionally, courts have not imposed an exhaustion requirement
on actions for judicial review of notice-and-comment rulemaking. This may have been because such rulemakings do not have
"parties," and the notion of requiring exhaustion was usually to
assure that parties to a proceeding utilized the procedures available to them.
Nevertheless, some statutes administered by independent regulatory agencies
have required a form of exhaustion with respect to rules adopted under those
statutes. For example, Section 405(a) of the Communications Act of 1934 [FN106]
provides: "The filing of a petition for reconsideration shall not be a
condition precedent to judicial review of any [FCC decision] except where the
party seeking such review . . . relies on questions of fact or law upon which
the Commission . . . has been afforded no opportunity to pass." This
"issue presentation" requirement, rather than a traditional exhaustion
requirement, does not require a party who was subject to an agency proceeding
to appeal that proceeding so the agency can reconsider a decision it had
already made. Rather, it assures that whoever brings a judicial challenge on a
question of fact or law, new to the Commission, must first present it to the
Commission. As a specific statutory requirement, it is fairly easy to apply,
although it has been interpreted to be subject to equitable exceptions. [FN107]
Unfortunately, some courts have ignored the specific statutory origin for this
requirement and have applied a similar exhaustion requirement in cases totally
unrelated to that statute, while citing cases involving application of that
statute. For example, in National Ass'n of
Manufacturers v. Department of the Interior, [FN108]
the D.C. Circuit foreclosed challengers from arguing that the U.S. Department
of the Interior's Natural Resources Damage Assessment regulations were
arbitrary and capricious because challengers had not raised that argument in
the rulemaking proceeding. [FN109]
The court cited two Communications Act of 1934 cases under Section 405(a) and a
Supreme Court case involving an adjudication for the proposition that "[o]ur cases . . . require complainants, before coming to
court, to give the [agency] a fair opportunity to pass on a legal or factual
argument." *18 [
FN110] Other courts have seen the fallacy in this argument. For example, in
American Forest and Paper Ass'n v. United States
Environmental Protection Agency, [FN111]
the court rejected a similar claim by EPA that persons were required to raise
issues during the notice and comment proceeding, saying:
[W]e have never held that failure to raise an objection during the
public notice and comment period estops a petitioner
from raising it on appeal. EPA presented the same argument to us long ago, but
we rejected it, observing that "EPA has cited no authority for the
proposition that an argument not raised during the comment period may not be
raised on review. [FN112]
Again, the courts are hopelessly confused on the subject. None of
these cases discuss Darby or Section 704 of the APA. Section 704's requirements
by their terms apply equally to judicial review of rulemaking and adjudication.
The term used in Section 704 is "agency action," which is defined to include both. [FN113]
If one applies Section 704 faithfully with the Supreme Court's guidance in
Darby, there could be no exhaustion required as a precondition of judicial
review of rulemaking unless either a statute requires it (as in Section 405(a)
of the Communications Act of 1934) or an agency has required it by rule and
provided that the rule would be inoperative pending its reconsideration - a
situation not present in National Ass'n of
Manufacturers v. Department of the Interior. [FN114]
Bill Funk
From: Asimow, Michael
[mailto:asimow@law.ucla.edu]
Sent: Tuesday, April 03, 2007 11:33 AM
To: Ogden, Gregory
Cc: funk@lclark.edu
Subject: RE: Section 507(d) issue exhaustion in rulemaking
the comment would
probably be sufficient
From: Ogden, Gregory [mailto:Gregory.Ogden@pepperdine.edu]
Sent: Tuesday, April 03, 2007 11:17 AM
To: Asimow, Michael
Cc: funk@lclark.edu
Subject: RE: Section 507(d) issue exhaustion in rulemaking
Mike, thanks very
much for your comment. Bill, thanks for any help that you can provide. Mike, I
agree with you about the respondents ability to challenge the validity of the
rule in an enforcement action even though he or she did not participate in N
& C Procedure. Section 507(c) speaks to that issue.
Section 507 (c) A petitioner for judicial review of a rule
need not have participated in the rulemaking proceeding upon which that rule is
based.
I do not think
that the Section 507(d) requirement should preclude a respondent in an
enforcement action from being able to raise a new issue in an enforcement
proceeding that was not raised in the N & C proceeding. I do not think the the respondent should have to petition the agency to raise
this new issue when it is probably just as easy (and surely less cumbersome)
for the issue to be adjudicated in the enforcement action. There may be a way to indicate this either in
the text of Section 507(d), or in the comments. Thanks for pointing this out.
Greg
From: Asimow, Michael
[mailto:asimow@law.ucla.edu]
Sent: Tuesday, April 03, 2007 11:04 AM
To: Ogden, Gregory
Cc: funk@lclark.edu
Subject: RE: Section 507(d) issue exhaustion in rulemaking
Hi Greg,
Off hand, I don't
know of any authority. As I recall, this was a creative compromise reached
within the committee to allow people who weren't parties to the notice and
comment procedure to seek JR of a rule; but if they raise a new issue, they
have to give the agency notice of the issue by filing a petition for
rulemaking. I am forwarding this to Bill Funk who I know has done a
lot of work on the issue of exhaustion of remedies in RM and who can tell us
whether there is any authority on how to deal with the problem of a new issue
being raised by someone who wasn't a party to the original RM.
Incidentally,
here's something else that troubles me: what if the issue about validity of a
rule comes up in an agency enforcement action against a private party (as
opposed to being raised in a petition for JR of a rule). Can the
respondent in the enforcement action challenge the rule if he didn't
participate in N&C procedure? I assume the answer is yes. However, if
he wants to raise a new issue that wasn't raised during N&C, does he also
have to first petition the agency?
Bill, here is the
material that Greg is asking about:
Section 507(d)
issue exhaustion in rulemaking
(d) If the issue
that a petitioner for judicial review of a rule under this section was not
raised and considered in a rulemaking proceeding, before bringing a petition
for judicial review, the petitioner must petition the agency to initiate
rulemaking under Section 317 to take action to resolve or cure the issue
or issues that the petitioner is challenging; and in the petition for
judicial review the petitioner must disclose the petition for rulemaking and
the agency action on that petition to the court.
Comment
This section creates a
default requirement of exhaustion, which is generally followed in the
states. However, the section creates several exceptions to the default
rule. Subsection (b) requires issue exhaustion in appeals from rulemaking
for persons who did not participate in the challenged rulemaking. It
excuses persons seeking judicial review of a rule who were not parties before
the agency from the exhaustion requirement; but, if the issue that they seek to
raise was not raised and considered in the rulemaking proceeding that they
challenge, then they must first petition the agency to conduct another
rulemaking to consider the issue. If the agency refuses to do so or if the
agency conducts a second rulemaking that is adverse to the petitioner on the
issue or issues raised in his petition for rulemaking, then the petitioner may
seek judicial review.
From: Ogden, Gregory [mailto:Gregory.Ogden@pepperdine.edu]
Sent: Tuesday, April 03, 2007 9:58 AM
To: Asimow, Michael
Subject: Section 507(d) issue exhaustion in rulemaking
Hi Mike, we are going to be
discussing the issue exhaustion in rulemaking requirement from Section 507(d)
in the draft of the Revised MSAPA at the April 2007 meeting. I did some
research on this, but was not able to find a lot of authority for this
requirement. Some members of the committee raised questions about this
subsection at the November meeting. If it is not too much trouble, can you give
me some references supporting this requirement, as I think that it makes sense
from an administrative law standpoint. Those could be statutes, cases,
law review articles, or other academic studies. If you do not have time for
this, could you just point me in the right direction, and I will have my
research assistant track things down. thanks, Greg
Gregory L. Ogden
Professor of
T(310) 506-4671
F(310) 506-4063
E:gregory.ogden@pepperdine.edu