Congress Moves to Increase Judicial Oversight of Federal Agencies

On January 17, 2017, the United States House of Representatives passed H.R. 5, the “Regulatory Accountability Act of 2017.”  Buried deep within its pages is Title II, the “Separation of Powers Restoration Act.”  That title, although only two sections long, dramatically changes the legal landscape for challenges to the actions of federal regulatory agencies.  Currently, in adjudicating challenges to administrative rulemaking and implementing actions, the federal courts invoke the precedent established in Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 844 (1984).  In that case, the Supreme Court held: “We have long recognized that considerable weight should be accorded to an executive department's construction of a statutory scheme it is entrusted to administer...”  In adopting Chevron, the Supreme Court effectively gives administrative agencies almost complete deference, not only in the interpretation of the regulations they implemented, but also, and more controversially, in the way the agencies carry out the mandates of those regulations.  Thus, challengers seeking to use the judicial system to point out and rectify what are perceived as misapplication of the regulations, butt up against the reluctance of the courts to question or interfere with the agency’s construction of the regulation or the evidence and its application in carrying out the agency’s order.  In Title II, the Congress has stood the current deferential standard on its head. 

In an apparent attempt to reduce the power of federal agencies, Congress has rejected the Supreme Court’s construct in Chevron and replaced the currently awarded deference with a charge to the courts to 

“decide de novo all relevant questions of law, including the interpretation of constitutional and statutory provisions, and rules made by agencies. If the reviewing court determines that a statutory or regulatory provision relevant to its decision contains a gap or ambiguity, the court shall not interpret that gap or ambiguity as an implicit delegation to the agency of legislative rule making authority and shall not rely on such gap or ambiguity as a justification either for interpreting agency authority expansively or for deferring to the agency’s interpretation on the question of law.”
Title II, § 202.
As a consequence, the courts will have to independently explore the meaning and applicability of, as well as the agency’s compliance with, applicable laws and rules, based on the facts adduced in the case.  This change is momentous because it levels the playing field in an arena that has, traditionally, been dramatically tipped in favor of governmental agencies’ interpretation and implementation of regulations.  
In summary, the legislative process has not yet run its course.  It is of course possible that H.R. 5 will be gutted and Title II deleted.  However, given the composition and disposition of the current Congress, it is likely that the Separation of Powers Restoration Act will be the reality in the arena of challenges to governmental rulemaking in the very near future.   

Federal Court Finds that Judicial Deference Does Not Mean "Do Everything Federal Entity Requests"

Challengers to the determinations of Federal agencies do not go to court on a level playing field with their governmental adversaries.  Federal courts have long taken the position that deference is properly accorded to an agency making decisions within its area of technical expertise.  That position may now be changing, at least with respect to two specific sets of legal circumstances. 

The first set of circumstances deals with settlements.  In SEC v. Citigroup Global Markets, Inc., 2011 W.L. 5903733 (S.D.N.Y.), Judge Jed S. Rakoff rejected a $285 million settlement between the Securities and Exchange Commission (“SEC”) and Citigroup which he believe had not been adequately supported.  Specifically, the Judge found the settlement was vague concerning the rationale for a charge of negligence in what was clearly a well thought out scheme of “shorting” dubious investments it had just sold to investors; the total losses suffered by investors; and the penalty amount that would have been imposed. 

In a hearing on those questions, counsel for the SEC took the position that the Judge had no business assessing the “public interest” in the settlement, as it was not part of the applicable standard of review.  The Judge firmly disagreed.  Analogizing the applicability of the public interest standard in settlements to its applicability in injunctive relief, the Court held that it could not be asked to “exercise my power and not my judgment,” particularly where Supreme Court authority held that a court cannot grant injunctive relief without considering the public interest.  Ultimately, refusing to be “a mere handmaiden to a settlement privately negotiated on the basis of unknown facts,” the Court ordered the parties to trial in July, 2012.

The second circumstances under which deference may be attenuated in the future occurs mainly in actions involving the National Environmental Policy Act, 42 U.S.C. § 4321 (“NEPA”).  In typical NEPA cases, courts give almost total deference to the adequacy of a project’s environmental review by a Federal agency that has been delegated by Congress with the authority to promulgate rules implementing Congress’ clearly expressed statutory purpose.  U.S. v. Mead Corp., 533 U.S. 218, 227-228 (2001).  However, in a very recent, untypical case, Tinicum Township, et al. v. U.S. Department of Transportation, et al., still pending in the United States 3rd Circuit Court of Appeals, the Federal agency delegated with that rulemaking and implementation power, the United States Environmental Protection Agency (“EPA”) took strong and unchanging issue with the adequacy of the review by the Federal Aviation Administration (“FAA”) of the Philadelphia International Airport Capacity Enhancement Project (“Project”).  Tinicum Township is the first, if not the only, case in which the challenger has pled that, even though FAA is the agency delegated to perform environmental review, it is EPA that deserves deference in its conclusion that the Project’s review was inadequate. 

As can be seen from the above situations, the concept of deference may be in transition.  From a specific perspective, this change could most notably affect the level of judicial review of settlements and NEPA compliance.  More generally, the transition could implicate cognizable separation of powers issues between the Executive and Judicial branches of government.

Ninth Circuit Calls FAA to Task on Environmental Impacts of New Runway

In what might be a surprising decision in any other Circuit, the United States Court of Appeals for the Ninth Circuit issued a ruling in Barnes v. U.S. Dept. of Transportation, United States Court of Appeals for the Ninth Circuit, Case No. 10-70718, August 25, 2011, which, while narrow, begins the process of eroding both the Federal Aviation Administration’s (“FAA”) long held position that “aviation activity . . . will increase at the same rate regardless of whether a new runway is built or not,” Barnes, at 16285, and the Federal Court’s traditional deference to it. City of Los Angeles v. FAA, 138 F.3d 806, 807-08, n. 2 (9th Cir. 1998).

In Barnes, petitioners challenge the FAA’s environmental review of the proposed addition of a runway at Hillsboro Airport (“HIO”), a general aviation reliever airport for Portland International Airport (“PDX”), operated by the Port of Portland, and located in the adjacent City of Hillsboro, Oregon (“Project”). Specifically, petitioners challenged, among other things, the FAA’s decision to prepare only an Environmental Assessment (“EA”) and Finding of No Significant Impact (“FONSI”) not a full Environmental Impact Statement (“EIS”), which petitioners claim was necessary due to the potential environmental impacts of increased demand for HIO resulting from the addition of the runway.

First, expressing a view in contradiction with that a number of other Circuits, the court took issue with FAA’s consistent argument that “[T]he project will not have growth inducing effects on aviation activity.” Barnes, at 16285. The court pointed to the absence of any analysis in the EA of the new runway’s growth-inducing impacts. “The agencies are unable to point to anything in the record showing that they in fact considered the possibility that expanding HIO would lead to increased demand and increased airport operations,” Barnes, at 16281. The court, therefore, relied on FAA’s statement in the administrative record that “a new runway is ‘the most effective capacity enhancing feature an airfield can provide.’” Barnes, at 16281. In the absence of hard analysis establishing the lack of growth inducing impact, the court declined to take FAA’s “word for it and not question their conclusory assertion in the EA that a new runway would not increase demand.” Barnes, at 16285.

Second, the court declined to grant the “significant deference that courts give aviation activity forecasts actually performed by the FAA.” Barnes, at 16285-86. While the court agreed that “when it comes to airport runways, it is not necessarily true that ‘if you build it they will come,’” Barnes, at 16286, quoting National Parks and Conservation Association v. United States Department of Transportation, 222 F.3d 677, 680 (9th Cir. 2000), it would not grant deference because FAA “failed to conduct a demand forecast based on three, rather than two, runways.” Barnes, at 16287.

The court, apparently realizing the groundbreaking nature of its decision, then proceeded to narrow the decision’s scope. It reconciled seemingly contradictory opinions in Seattle Community Federation v. FAA, 961 F.2d 829, 835 (9th Cir. 1992) [“[R]emand to the FAA was unnecessary although the FAA did not consider the impacts of an expected increase in air traffic after changes in flight patterns were implemented,” Barnes, at 16288], and Morongo Band of Mission Indians v. FAA, 161 F.3d 569, 580 (9th Cir. 1998), [“[T]he FAA did not have to consider the impacts of an increase in air traffic resulting from a new flight arrival path because ‘the project was implemented in order to deal with existing problems . . .’”, Barnes, at 16288]. The court rationalized that unlike the flight patterns and flight arrival path at issue in Morongo and Seattle Community Council Federation, “this case involves a major ground capacity expansion project.” Barnes, at 16288.

The court then went on to further narrow the definition of “major ground capacity expansion project” and, thus, its ruling, by excluding “terminal improvement project[s],” City of Los Angeles, supra, 138 F.3d at 808; taxiway construction, Town of Winthrop v. FAA, 535 F.3d 1, 5 (1st Cir. 2008); and “improvements to an existing runway,” City of Olmsted Falls, Ohio v. FAA, 292 F.3d 261, 272 (D.C. Cir. 2002).

In summary, the Ninth Circuit has carved out a new, exclusive niche for projects that include construction of additional runways, because “our cases have consistently noted that a new runway has a unique potential to spur demand which sets it apart from other airport improvements like changing flight paths, improving a terminal or adding a taxiway . . .” Barnes, at 16288. Therefore, in the case of a runway addition, “[E]ven if the stated purpose of the project is to increase safety and efficiency, the agencies must analyze the impacts of the increased demand attributable to the additional runway as growth inducing effects . . .” Barnes, at 16289.

While we believe the court may have drawn a bright line demarcation between types of “major ground capacity expansion projects” where none exists in reality, Barnes constitutes a significant step toward recognition of the full complement of airport expansion impacts often ignored in FAA’s environmental analyses.