Chapter 6 Administrative Law I THE PRACTICAL SIGNIFICANCE OF ADMINISTRATIVE LAW a Administrative Agencies exist at all levels of government i Federal state and local ii Affect all aspects of business including 1 Firm s capital structure financing financial reporting Securities and Exchange Commission 2 Employer Employee Relations Equal Employment Opportunity Commission 3 Relations between a firm and unions National Labor Relations Board 4 Product manufacturing Environmental Protection Agency Occupational Safety and Health Administration 5 Product Marketing Federal Trade Commission b Agencies provide a comprehensive regulatory scheme often working together to create and enforce certain regulations II AGENCY CREATION AND POWERS a Enabling legislation specifies the name purposes functions and powers of an agency state and federal b Federal agencies can only exercise powers Congress has specifically delegated through enabling legislation c Example The Federal Trade Commission has the power to i Create rules and regulations to carry out the FTC Act ii Conduct investigations of business practices iii Obtain reports from interstate corporations concerning their iv v vi vii business practices Investigate possible violations of federal antitrust statutes Publish the findings of its investigations Recommend new legislation Hold trial like hearings to resolve certain kinds of trade disputes that involves FTC regulations or federal antitrust laws d Two basic types of agencies i Executive Agencies subject to the authority of the president who can appoint and remove officers ii Independent Agencies officers serve a fixed term and cannot be removed without just cause e Administrative Agencies powers mirror those of the federal government as a whole rulemaking rule enforcement adjudication i Delegation Doctrine Congress has the power to establish agencies that can create legislative rules to implement laws and interpretive rules to declare policy ii Executive branch controls agencies through veto power and through president s power to appoint federal officers iii Congress exercises authority over agency power through enabling legislation and subsequent legislation 1 Congress can restrict or expand agency power 2 Congress can investigate an agency 3 Administrative Procedure Act APA acts as a check on agency power iv APA provides for judicial review of most agency decisions 1 Exhaustion Doctrine A party must have used all potential administrative remedies before filing suit III THE ADMINISTRATIVE PROCEDURE ACT APA a Imposes procedural requirements that all federal agencies must follow in their rulemaking adjudication and enforcement functions b Arbitrary and Capricious Test APA provides that courts should set aside agency decisions that are arbitrary and capricious an abuse of discretion or otherwise not in accordance with the law including i Failure to provide a rational explanation for a decision ii Change in prior policy without an explanation iii Consideration of legally inappropriate factors iv Failure to consider a relevant factor v Render of a decision plainly contrary to the evidence c Rulemaking Congress confers an agency s power to make rules i Rule an agency statement of general or particular applicability and future effect designed to implement interpret or prescribe law and policy ii Agency rules regulations have a binding legal effect d Rulemaking Process i Notice of the proposed rulemaking an agency publishes a notice of proposed rulemaking in the Federal Register ii Comment period interested parties can express their views on the proposed rule in writing or orally if a hearing is held iii Final Rule final rule is published in the Federal Register and later compiled in the Code of Federal Regulations CFR iv Failure to follow rulemaking procedures means that the final rule can be challenged and is unlikely to be binding e Informal Agency Actions A rule that states an agency s interpretation of its enabling statute s meaning may be issued without formal rulemaking and imposes no direct or binding effect IV JUDICIAL DEFEREANCE TO AGENCY DECISIONS a Courts generally defer to an agency s factual judgment on a subject within the area of its expertise and its interpretation of its legal authority b Chevron v NRDC When reviewing an agency s interpretation of law a court should ask i Whether the enabling statute directly addresses the issue and if not ii Whether the agency s interpretation is reasonable c Courts more likely to give Chevron deference if the agency s decision has resulted from formal rulemaking V ENFORCEMENT AND ADJUDICATION a Investigation during the rulemaking process an investigation obtains information about a certain individual firm or industry to avoid issuing a rule that is arbitrary and capricious and instead is based on a consideration of the relevant factors after final rules are issued agencies conduct investigations to monitor compliance i Inspections agencies will conduct on site inspections to obtain evidence to prove a regulatory violation sometimes in place of a formal hearing If the firm or individual fails to cooperate with an inspection the agency may use a subpoena or search warrant ii Subpoenas Two basic types 1 Ad testificandum ordinary subpoena compelling a witness to appear at a hearing 2 Duces Tecum compels individual or organization to hand over books papers records or documents 3 Agency demands are limited by a Purpose of an investigation b Relevancy of the information sought c Specificity of the demand for testimony or documents d Burden of the demand on the party from whom the information is sought iii Searches during site inspections 1 Search warrant usually required 4th Amendment protects against unreasonable searches and seizures by government officers 2 Some warrantless searches are legal particularly in highly regulated industries or hazardous operations or emergencies b Adjudication Most administrative actions are resolved through negotiated settlements at their initial stages without formal adjudication i Negotiated Settlements appealing to firm because 1 Regulated industries often do not want to appear uncooperative 2 Litigation is expensive ii Formal Complaints complaint is public document and a press release often comes with it if parties cannot settle the case goes before an administrative law judge iii Administrative Law Judge presides over a trial like hearing and has power to make determinations of fact iv Hearing Procedures vary