Funding Public Participation in Administrative Proceedings: District Court Finds Implicit Agency Authority to Award Costs

[8 ELR 10242]

Whether federal agencies have implicit power to fund the participation of particular groups or parties in their administrative proceedings in the absence of explicit statutory authorization remains one of the most controversial issues in administrative law.¹ The Second Circuit's en banc ruling last year in Greene County Planning Board v. Federal Power Commission² that the Federal Power Commission (FPC) had correctly determined that it had no authority to furnish such assistance created a possibly significant roadblock to the developing movement among federal agencies toward the initiation of such assistance programs.³ In essence, the Second Circuit held that the Supreme Court's disapproval, in Alyeska Pipeline Service Co. v. Wilderness Society,⁴ of judicial awards of attorney fees under the private attorney general rational without express congressional authorization precluded unauthorized fee awards in administrative proceedings as well.

To the criticism of this decision voiced by commentators⁵ has now been added the recent ruling of a district court which flies in the face of the broad Greene County holding. On October 10, Judge Thomas Flannery of the federal district court in Washington, D.C. refused, in Chamber of Commerce v. Department of Agriculture,⁶ to enjoin that agency from funding a consumer group study of the economic impact of proposed regulations. The court determined that several industry groups were unlikely to succeed on the merits of their claim that the agency lacked the power to fund such participation in rule making without explicit statutory authorization. This decision, particularly the court's view of the limited scope of the Greene County ruling, promises to add further impetus to the widespread move toward voluntary initiation of agency programs for assisting public participation in administrative proceedings.

Chamber of Commerce v. Department of Agriculture

In September 1977, the Department of Agriculture received a petition from the State of California requesting the establishment of more stringent federal standards regarding weight variations of meat and poultry products due to moisture loss between packaging and sale. The agency responded by proposing regulations⁷ setting substantially stricter net-weight labelling standards under the Federal Meat Inspection Act⁸ and the Federal Poultry Inspection Act⁹ and provided a 90-day period for the submission of comments. While it denied several requests by industry groups for a six-month extension of the comment period, the agency did extend the comment deadline an additional three months to June 2, 1978.

In February 1978, the agency determined after reviewing the comments on file that insufficient information existed as to the economic impact of the proposed regulations on consumers and announced on March 27 that it would receive bids of less than $10,000 for the completion of a study on this point by the comment deadline. The sole response proposed a study with a price tag of $60,000, however, which was rejected on May 18. In the meantime, the Consumer Federation of America (CFA) submitted an independent proposal to conduct an impact study of the proposed rules. A contract was awarded to CFA under the agency's negotiation authority, rather than by bid, at a price of $23,536 and with a completion deadline of August 31.

Several industry and trade organizations which stood to be affected by the proposed regulations brought suit in federal district court seeking to prevent the agency from funding or using the CFA study on the grounds that the arrangement constituted funding of public participation in rule making for which the agency had no statutory [8 ELR 10243] authorization. They further argued that the study contract was invalid because it arbitrarily gave preference to one participant by effectively extending the comment period for CFA while denying plaintiffs a similar extension. The case came before Judge Flannery on plaintiffs' motion for a prelimiary injunction against disbursement of further funds to CFA and agency consideration of the study in formulating the final netweight labelling rules.

The court first disposed of two jurisdictional defenses, finding both that plaintiffs had standing to maintain the suit and that the legal issues in the case were ripe for review. Judge Flannery ruled that the plaintiffs had alleged sufficient injury in fact in the form of financial harm to their business interests from the promulgation of stricter net-weight regulations based on an illegally funded study.¹⁰ In addition, he concluded, the issues were legal rather than factual, and the facts were fairly clear.

Greene County Distinguished

Turning to the request for a preliminary injunction, Judge Flannery determined, after an examination of the relevant authorities, that plaintiffs were not likely to prevail on the merits of their claim that the Department of Agriculture lacked authority to subsidize CFA's participation in the rule making.¹¹ The court directly confronted and refuted the argument that Greene County forbids all agencies from subsidizing public participation in rule making absent specific legislative authorization. The Greene County decision, the court emphasized, turned on its specific facts. That dispute concerned an attempt by a successful intervenor in an adjudicatory proceeding to compel disbursement of an attorney fees award from an agency which had determined that it lacked power to grant such an award under its governing statutes and that in any event fee reimbursement was unwarranted in that particular case. Those circumstances, Judge Flannery explained, were "fundamentally distinguishable" from the Department of Agriculture's voluntary determination that it has the power to fund consumer participation in rule making and that the input of additional information concerning the consumer perspective was necessary for development of the final net-weight rules.

This implicit suggestion that reimbursement may be viewed as more appropriate in rule-making proceedings than in the context of adjudication is apparently based on the traditionally greater concern for widespread public participation in the former.The court also concluded that the Second Circuit's reliance upon Alyeska and Turner v. Federal Communications Commission¹² was misplaced because those cases dealt with mandatory "fee shifting" from the prevailing to the losing litigant rather than with voluntary agency reimbursement of the costs and fees incurred by a participant in its proceedings.

Implicit Reimbursement Authority

The court had no quarrel with Greene County's broad assertion that an agency's authority to disburse funds must come from Congress. Judge Flannery concluded, however, that federal agencies in generl, and the Department of Agriculture in particular, have implied power to fund the presentation of otherwise unrepresented views in their proceedings. The court recited numerous cases upholding the implicit authority of federal agencies to expend funds to meet their statutory responsibilities and pointed to language in the meat and poultry inspection acts empowering the Department to expend "such sums as are necessary to carry out the provisions"¹³ of these statutes, which include the establishment of rules concerning net-weight labelling.

As an additional factor supporting the Department's conclusion that these provisions implicitly authorize the reimbursement of public participation in agency rule making to obtain information not otherwise available, Judge Flannery cited an opinion by the Comptroller General determining that certain agencies may provide financial assistance to indigent participants where they deem such participation necessary to full and fair proceedings.¹⁴ He also noted that the Department of Justice has taken the position that Greene County does not preclude federal agencies from concluding that they have implicit authority to reimburse fees and expenses of participants in agency proceedings.¹⁵

Because plaintiffs were unlikely to succeed on the merits of their claim that the Department lacked the authority to fund CFA's participation in the net-weight labelling rule making, the court held that issuance of a preliminary injunction would be inappropriate. The court ruled that plaintiffs also had little chance of succeeding on their claim that the agency had granted CFA a discriminatory extension of the comment deadline in view of the Department's promise to reopen the comment record if the CFA study included substantially different or new information. As final considerations weighing against injunctive relief, the court put forwrd the general public interest in allowing all relevant views to be placed before the agency and the absence of any irreparable injury to the plaintiffs.¹⁶

[8 ELR 10244]

Recent Administrative Developments

Perhaps because its reasoning was somewhat unsatisfactory or because of the widespread appeal of such funding, Green County failed to stem the tide now running toward the establishment of programs for providing financial assistance to indigent participants in agency proceedings. Even before Judge Flannery's ruling in Chamber of Commerce, several agencies, including the Civil Aeronautics Board (CAB), the Consumer Product Safety Commission (CPSC), and the National Oceanic and Atmospheric Administration (NOAA), had explicitly rejected the view that Greene County constitutes a legal prohibition against the institution of assistance programs under their govening statutes and had taken steps toward the establishment of compensation schemes.¹⁷ NOAA has proven to be the most vociferous critic of the Second Circuit's decision, going so far as to assail the ruling as a "poorly reasoned and incorrect" interpretation of the relevant authorities.¹⁸ That decision also received a blow from closer to home when the FPC itself, which had just been reconstituted as the Federal Energy Regulatory Commission (FERC), reversed its earlier determination and took the position that the petition for certiorari then pending before the Supreme Court in Greene County should be granted and the case remanded for reconsideration in light of the agency's revised view that it did indeed have implicit assistance authority.¹⁹

Some of the agencies that have initiated assistance programs have limited reimbursement to the costs of participation in rule making.²⁰ Others, however, have not distinguished between rule making and adjudication in shaping such programs to assist public participation. NOAA's final regulations for the financial compensation of participants in administrative proceedings apply to any agency proceeding involving a hearing.²¹ The CAB's final assistance rules likewise apply to both rule makings and adjudications.²² The Board determined that there is nothing inherently "inadvisable" about compensating participants in proceedings other than rule makings, and that such a broad reimbursement program was appropriate in its own proceedings because unlike other agencies, a smaller fraction of the important issues that come before the CAB are resolved through rule making. The CPSC regulations apply to all the agency's informal notice and comment rule-making proceedings and to any hearings "related to" such rule making.²³

Administrative developments regarding assistance programs have thus already outrun the demarcation line between rule making and adjudication. To the extent that they apply to the latter, these agency assistance regulations may be more vulnerable to attack under Greene County than was the Department of Agriculture's disbursement to CFA in Chamber of Commerce. However, the apparently conflicting judicial conclusions in these two cases may mask an important similarity in the reasoning of the two courts which serves to harmonize the results. In each case, the court upheld the agency's interpretation of its statutory authority and eventually sided with its subjective view as to the wisdom of awarding compensation under the circumstances. If this is an indication of presumptive judicial deference to such determinations, it shows that the dispositive factors in litigation regarding assistance awards may simply be whether the agency in question has concluded that it possesses the requisite authority and that an award is warranted in that particular case.

Conclusion

Although the Greene County decision initially threatened all federal agency action aimed at the reimbursement of public interest representation at the administrative level, that threat has failed to materialize. [8 ELR 10245] The agencies have generally interpreted the Second Circuit's ruling narrowly, and several have expressly characterized it as analytically flawed. Judge Flannery's decision in Chamber of Commerce endorses this trend with a stamp of judicial approval but suggests that assistance awards may be more appropriate in rule making than in adjudication. The significance of this distinction to indigent environmental groups varies according to the agency in question and the procedures by which it reaches particular decisions. Generally, however, issues with broad environmental ramifications will be considered in rule makings, and specific permits, licensing decisions, and enforcement actions will present significant exceptions on occasion. But it is precisely these occasions that serve to illustrate the shortcomings of this artificial distinction.

To the extent that it makes the availability of reimbursement hinge on the form of the proceeding, the differentiation between rule making and adjudication muddles the essential point that the importance of paid participation depends on the importance of the substantive issues involved. Where competent advocates of the public interest would otherwise be unable to present important information to the agency because their financial resources are inadequate, an assistance award is a boon to both the agency and the public, regardless of the procedural rules of the forum. Morever, several agencies have already stepped across this line to allow compensation awards in virtually all proceedings involving public participation. In the absence of generic legislation clearly defining the power of federal agencies to assist public participation in their proceedings and setting uniform standards for the granting of reimbursement awards, the prospect is for continued controversy over the establishment, scope, and implementation of agency programs to assist participants in administrative proceedings.

1. See, e.g., Note, Federal Agency Assistance to Impecunious Intervenors, 88 HARV. L. REV. 1815 (1976); Comment, Agency Funding of Indigent Public Interest Intervenors in Administrative Proceedings, 6 ELR 10052 (1976).

2. 559 F.2d 1227, 7 ELR 20552 (2d Cir. 1977) (en banc), cert. denied, 98 S. Ct. 1280 (1978).

3. See Comment, NOAA Finds Implicit Authority to Assist Intervenors Despite Second Circuit's Reversal of Greene County, 7 ELR 10210 (1977). The lengthening list of agencies that are considering or have already undertaken programs for compensating indigent participants in their proceedings now includes the Food and Drug Administration, 41 Fed. Reg. 35855 (Aug. 25, 1976) (advance notice of proposed rule making); the Environmental Protection Agency, 42 Fed. Reg. 1492 (Jan. 7, 1977) (advance notice of proposed rule making); the National Highway Traffic Safety Administration, 42 Fed. Reg. 28641 (Jan. 13, 1977) (final regulations establishing demonstration assistance program); 43 Fed. Reg. 10918 (Mar. 16, 1978) (demonstration program extended indefinitely); the Department of Energy, 43 Fed. Reg. 2917, 2921 (Jan. 20, 1978) (guidelines for funding public participation in home heating oil monitoring system); the National Oceanic and Atmospheric Administration, 43 Fed. Reg. 17806 (Apr. 26, 1978) (final regulations); the Consumer Product Safety Commission, 43 Fed. Reg. 23560 (May 31, 1978) (interim regulations); the Federal Communications Commission, 43 Fed. Reg. 30834 (July 18, 1978) (notice of inquiry soliciting comments); and the Civil Aeronautics Board, 43 Fed. Reg. 56878 (Dec. 5, 1978) (final regulations).

4. 421 U.S. 240, 5 ELR 20286 (1975); see Comment, The Supreme Court Limits Attorneys' Fees Awards, 5 ELR 10095 (1975).

5. See, e.g., Comment, NOAA Finds Implicit Authority to Assist Intervenors Despite Second Circuit's Reversal of Greene County, 7 ELR 10210 (1977); Recent Development, Administrative Law — Fee Reimbursement of Public Interest Intervenors Costs Requires Express Statutory Authorization, (Greene County Planning Board v. FPC), 66 GEO. L.J. 931, 950 (1978).

6. __ F. Supp. __, 8 ELR 20754 (D.D.C. Oct. 10, 1978).

7. 42 Fed. Reg. 55227 (Dec. 2, 1977).

8. 21 U.S.C. § 601(n)(5).

9. 21 U.S.C. § 453(h)(5).

10. This conclusion seems somewhat at odds, however, with the court's later determination that plaintiffs would not necessarily suffer irreparable harm as a direct result of the study. See note 16, infra.

11. Judge Flannery rejected the notion that CFA was simply conducting a "technical study" for the agency rather than participating in the rule making, noting that his experience with the advocacy process had convinced him that any given set of facts or statistics can be presented in numerous and, by implication, not wholly neutral ways. __ F. Supp. at __ n.8, 8 ELR at 20755 n.8. The court thereby declined to take an easier route to the result it ultimately reached. Agency power to fund "technical" studies on important issues in ongoing rule makings is widely accepted. See examples cited in Energy Policy Task Force, Funding Public Participation in Department of Energy Proceedings at 11-12 (Sept. 1978).

12. 514 F.2d 1354 (D.C. Cir. 1975).

13. 21 U.S.C. §§ 469, 680.

14. Comptroller General, In re Costs of Intervention, Nuclear Regulatory Commission, No. B-92288 (Feb. 19, 1976).

15. Letter from John A. Harmon, Ass't Attorney General, Department of Justice, to Linda Heller Kamm, General Counsel, Department of Transportation (Mar. 1, 1978).

16. Plaintiffs had not demonstrated that they would suffer irreparable harm in the absence of injunctive relief against agency funding and consideration of the CFA study, the court explained, because the agency had advanced a stricter netweight position in the proposed regulations long before the study was submitted. It thus simply could not be said that the study itself would directly cause the adoption of final rules harmful to plaintiffs' economic interests. The difficulty in identifying such a causal nexus is endemic to litigation concerning any legislative-type proceedings, whether before agencies or Congress, in which the decision maker has discretion to weigh various pieces of evidence differently and to incorporate policy judgments into the final decision. In cases arising under the National Environmental Policy Act (NEPA) challenging the submission of information to Congress, however, the courts have generally found that this lack of a causal nexus defeats the plaintiffs' standing to sue, not the irreparability of their injuries. These cases thus raise doubts as to the validity of Judge Flannery's earlier finding that plaintiffs had demonstrated sufficient injury in fact for purposes of standing. See, e.g., Chamber of Commerce v. Department of the Interior, 439 F. Supp. 762, 766-67, 8 ELR 20054, 20056 (D.D.C. 1977) (business group lacks standing to challenge agency's submission of proposals to Congress on NEPA grounds because the effect of these recommendations on any legislation ultimately enacted is too speculative to establish the required causal connection); Wingfield v. Office of Management and Budget, 7 ELR 20362, 20363 (D.D.C. 1977) (mine owner lacks standing to challenge agency submission of legislative proposals on strip mining to Congress on NEPA grounds because the alleged injury depends upon the speculative assumption that the proposals will be enacted).

17. See 43 Fed. Reg. 14044, 14047 (Apr. 4, 1978) (CAB proposed regulations for compensating participants in board proceedings); 43 Fed. Reg. 23560, 23561 (May 31, 1978) (CPSC interim regulations for financial compensation of participants in informal rule making proceedings); 43 Fed. Reg. 17806, 17807-08 (Apr. 26, 1978) (NOAA final regulations for financial compensation of participants in administrative proceedings).

18. 43 Fed. Reg. at 17807.

19. Brief for Federal Energy Regulatory Commission at 17, Greene County Planning Board v. Federal Power Commission, No. 77-481, cert. denied, 98 S. Ct. 1280 (1978).

20. See, e.g., 42 Fed. Reg. 2864, 2866 (Jan. 13, 1977) (National Highway Traffic Safety Administration final rule on financial assistance to participants in certain rule makings). The two statutory provisions which explicitly authorize agency reimbursement of participants' expenses both apply only to rule-making proceedings. See Federal Trade Commission Improvement Act, 15 U.S.C. § 57(a)(h)(1) and implementing regulations, 16 C.F.R. §§ 1.11-1.20, 40 Fed. Reg. 33966 (Aug. 13, 1975), and Toxic Substances Control Act, 15 U.S.C. § 2605(c)(4)(A), ELR STAT. & REG. 41342, and temporary implementing regulations, 42Fed. Reg. 60911 (Nov. 30, 1977).

21. 43. Fed. Reg. at 17809, 17811 (Apr. 26, 1978).

22. 43 Fed. Reg. at 56882. The CAB rules explicitly disclaim any intent to enlarge intervention rights or create new rights in the public to participate.

23. 43 Fed. Reg. at 23561. The Commission voiced its intent to extend its compensation program to formal rule making and adjudicatory proceedings at a later date and to consider assistance requests from participants in those types of proceedings in the meantime on an ad hoc basis.