Constitutionality of Regulatory Reform Legislation for Independent Agencies ( 1976 )

Constitutionality of Regulatory Reform
Legislation for Independent Agencies
Although there is no constitutional impediment to the bill’s requirement that independent regulatory
agencies communicate their legislative and budgetary messages directly to the Congress without
first clearing them with OMB, a uniform rule in the opposite extreme—i.e., that no communication
from an independent agency may be sent to OMB unless it is simultaneously sent to the Congress—
would not adequately protect important interests of the Executive Branch. The congressional access
provisions of the bill would not affect the power of the President, or the agency acting on the
President’s behalf, to assert executive privilege, because in the absence of express language in the
bill, it must be assumed that the bill does not constitute an attempted infringement of the constitu-
tionally based privilege, which is available with respect to those functions of independent regulatory
agencies that are of an executive or quasi-executive nature.
September 1, 1976
MEMORANDUM OPINION FOR THE ASSISTANT ATTORNEY GENERAL
OFFICE OF LEGISLATIVE AFFAIRS
This is in response to the request by Tom Boyd for the views of the Office of
Legal Counsel on the Interim Regulatory Reform Act of 1976, S. 3308, 94th
Cong., as it passed the Senate on May 19, 1976. 122 Cong. Rec. 14,528–34
(1976).
Our June 9 memorandum to you discussed the bill as it was introduced, when it
merely would have required agencies to submit proposals for the recodification of
their existing regulations. This proposal is retained in section 4 of the bill,
modified and improved somewhat. However, the bill now also deals with such
additional matters as substantive law revision for the seven independent agencies
involved,1 timely consideration of rulemaking petitions, congressional access to
agency information, conduct of the agencies’ civil litigation, protection of agency
personnel, conflicts of interest, and a limited waiver of sovereign immunity. Each
of these provisions, except that dealing with substantive law revision, is patterned
after a virtually identical section of a law already in effect for one or another of the
agencies. The effect of S. 3308 is therefore to extend these provisions to the seven
agencies involved so that all will be on equal footing. We will discuss the
proposals in order.2
1
As introduced, S. 3308 applied to the Departments of Commerce and Transportation, Civil
Aeronautics Board (“CAB”), Interstate Commerce Commission (“ICC”), Federal Trade Commission
(“FTC”), Federal Communications Commission (“FCC”), Federal Maritime Commission (“FMC”),
and Consumer Product Safety Commission (“CPSC”). Id. § 3 (as introduced Apr. 13, 1976). The two
departments have now been dropped from the bill and the Federal Power Commission (“FPC”) has
been added. Id. (as amended May 19, 1976); 122 Cong. Rec. 14,528.
2
Rules recodification, law revision, and protection of agency personnel are dealt with in sections 4,
5, and 9, respectively. Each of the remaining provisions listed in the text is the subject of a separate
section of the bill. However these sections (6, 7, 8, 10, and 11) apply only to the FTC, FCC, FPC, and
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I. Rules Recodification
This section (§ 4) applies to all seven agencies. It would require the chairman
of each agency, within 360 days after the Act is passed, to prepare and submit to
the Congress and to the Administrative Conference of the United States an initial
proposal setting forth a recodification of all the rules which the agency has issued
and which are in effect or proposed as of the date of submission. S. 3308, § 4(a).
The recodification is to be only “technical”—i.e., a streamlining or simplification
of existing rules to make them more understandable and capable of effective and
fair enforcement. The bill expressly provides that the recodified rules “shall not be
at variance, in any substantive respect, with the text of the rules of the agency
involved which are in effect or proposed as of the date of such submission.” Id.
See also S. Rep. No. 94-838, at 2–3 (1976) (“Senate Report”). After studying the
comments and recommendations of the Administrative Conference and others, the
chairman of each agency must submit to the Congress a final proposal for
recodification of the agency’s rules, which will take effect 90 days after this final
submission. S. 3308, § 4(c). The provisions for judicial review in chapter 7 of
title 5, United States Code, are expressly made applicable to the repromulgated
rules. S. 3308, § 4(e).
Although section 4 as it passed the Senate does not contain several of the de-
fects we identified in the original version of S. 3308, we still have reservations
about it:
The term “rule” is defined in section 4(f) of the bill in language that to some
extent parallels the definition of the term in 5 U.S.C. § 551(4) (Supp. V 1975).
However, the term also includes “any general statement of policy, and any
determination, directive, authorization, requirement, designation, or similar such
action,” but not an “order” as defined in 5 U.S.C. § 551(6) (1970). The express
exclusion of “orders” from the definition is unnecessary, and it is not clear what is
covered by the additional phrase just quoted.
Moreover, the definition of the term “rule” encompasses many agency determi-
nations—such as “the approval or prescription for the future of rates, wages,
corporate or financial structures or reorganizations thereof, prices, facilities,
appliances, services or allowances therefor, or valuation, costs, or accounting”—
which affect a limited number of parties and are not ordinarily codified in the
Code of Federal Regulations. Yet sections 4(a) and 4(c) require the agency to
prepare initial and final proposals “setting forth a recodification of all of the rules
which such agency has issued and which are in effect or proposed” (emphasis
added). Perhaps this means that the agencies must review and repromulgate only
CPSC. Sections 12–14 each deal with one of the three other agencies, so that all remaining matters
affecting the CAB, ICC, or FMC are included in one section. The substance of the proposals as to each
of the three is largely the same as that set forth in the earlier sections. The CAB, ICC, and FMC were
separated out because they are not subject to the jurisdiction of the House Commerce Committee.
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those rules which have already been codified. It would be advisable to make this
qualification explicit, however, or at least to limit the definition of the term “rule”
in section 4(f) to matters of general applicability.3 In our view, the Department
should not endorse any proposal which would require the agencies to reexamine
and codify all previously promulgated rules of particular applicability.
The bill directs the chairman of each independent agency to “develop, prepare,
and submit” the initial and final proposal for the technical recodification of the
agency’s rules. S. 3308, § 4(a), (c). However, because the proposals will contain
revisions of the agency’s governing rules, which must ordinarily be approved by a
vote of all the members of the commission or board, we assume that the chairman
is to submit the agency’s proposals only after they have been approved by the
commission or board.
Section 4(e) provides that the text of the initial and final proposals must be
published in the Federal Register and that written comments are to be invited on
them. Solicitation of comments makes sense with respect to the initial plan, which
is in the nature of a notice of proposed rulemaking, but we see no reason to
provide another opportunity for public comment on the final proposal.
We also question the advisability of the provision for judicial review in section
4(e). Presumably there was an opportunity for judicial review of the substantive
content of the agency’s existing rules when they were first promulgated. Because
the recodification is to be only technical, judicial review of the substance of the
new rules is unnecessary. Furthermore, a court has no particular expertise to
determine whether an agency should have gone further in simplifying and
consolidating its rules. That is essentially a legislative-type determination to be
made by the agency and the Congress. And if there were any question as to
whether a given change was in fact merely technical, a court in a later case would
no doubt construe and apply the new rule in such a way that it would not be at
variance in any substantive respect with its predecessor. Judicial review of the
recodified rules will therefore serve no legitimate purpose, and it could lead to
delay and confusion as to the force of the recodified rules pending review.
Finally, we doubt whether the possible benefits of simplification of agency
rules—assuming they materialize—will outweigh the costs involved in the
recodification process. Agency personnel and those subject to the agency’s
jurisdiction are familiar with the regulations as they are presently written and
codified. The transition period will introduce considerable uncertainty. It is also
possible that the proposed “technical” recodification will divert attention from the
more profound assessment of the agency’s functions contemplated in section 5 of
3
In this connection, we note that section 1 of S. 796, 94th Cong. (as introduced Feb. 22, 1975),
which is based on recommendations of the American Bar Association (“ABA”) and the Administrative
Conference, would exclude matters of particular applicability from the definition of “rule” under the
Administrative Procedure Act, 5 U.S.C. §§ 551–559, and include them in the definition of a new term,
“rate-making and cognate proceedings.”
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S. 3308. In fact, major portions of the recodification could be rendered moot by
the substantive law revision, if it is adopted. However, the ultimate wisdom of
section 4 involves questions of policy on which this office defers to the seven
agencies involved.
II. Law Revision
Each of the seven agencies is directed by section 5(a) of S. 3308 to conduct a
full review of the statutory and case law relating to the agency and to make
recommendations to the Congress for revision and codification of the statutes and
other lawful authorities administered by or applicable to it, including repeals or
amendments “as such agency feels may better serve to enhance commerce and
protect consumers.” The purpose of the study and recommendations is to facilitate
congressional consideration of regulatory reform and to clarify, simplify, and
improve applicable law, both substantively and technically.
The chairman, upon the approval of a majority of the members, would appoint
a director to supervise the agency’s law revision activities and to serve as the
agency’s reporter, S. 3308, § 5(b), and he would also appoint an Advisory
Committee on Law Revision comprised of “individuals who by reason of
knowledge, experience, or training are especially qualified to assist in such law
revision,” id. § 5(c). Section 5(e) requires the chairman to submit a preliminary
report on law revision to the President and Congress within one year after the bill
is passed and an interim and final report within two and three years of passage,
respectively. The latter two reports would include an analysis of the economic and
other consequences of the revision and codification and a discussion of alterna-
tives considered.4
It is somewhat dubious that proposals for regulatory reform will be made in an
objective and thorough manner when they are developed under the control of the
very agencies sought to be reformed. For example, none of the agencies would be
likely to propose that it cede jurisdiction in certain matters to another body, or that
Congress provide for deregulation in a sector of the economy which would result
in a significant diminution of the agency’s role. Also, S. 3308 does not contem-
plate reports from or about other agencies or executive departments whose
functions are related to those of the seven dealt with in the bill and which would
therefore be affected by the substantive law revision. By way of contrast, S. 3428,
94th Cong. (as introduced May 13, 1976), an administration bill, would require the
President to submit regulatory reform proposals to the Congress which cut across
agency and departmental lines and cover entire sectors of the economy, such as
4
A similar but less elaborate law revision requirement is currently applicable to the ICC by virtue
of section 312 of the Railroad Revitalization and Regulatory Reform Act of 1976, Pub. L. No. 94-210,
90 Stat. 31, 60 (“RRRRA”). See Senate Report at 82–83. This provision would be repealed by section
13(a) of S. 3308.
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transportation, agriculture, mining, manufacturing, finance, and communications.
However, whether or not this broad ranging approach is preferable to the more
compartmentalized study called for in S. 3308 involves questions of policy on
which this office takes no position.
We do have one technical suggestion, however. It may be desirable to include
in section 5(c) an authorization for compensation for the members of the Advisory
Committees.
III. Timely Consideration of Petitions
Sections 6, 12(a) and 14(a) of S. 3308 would amend the organic acts of the
FTC, FCC, FPC, CAB, and FMC5 to require these agencies to grant or deny
petitions filed under 5 U.S.C. § 553(e) (1970) within 120 days and to publish the
reasons for each denial in the Federal Register. If the agency denies the petition or
fails to act on it within 120 days, the petitioner would be entitled to bring a civil
action for an order directing the agency to initiate a proceeding to take the action
requested in the petition. To obtain such an order, however, the petitioner would
be required to demonstrate (by a preponderance of the evidence in the record
before the agency, or, if the agency had failed to act, in a “new proceeding” before
the court) that the failure to grant the petition was arbitrary and capricious, that the
action requested in the petition is necessary, and that the failure to take the action
requested in the petition “will result in the continuation of practices which are not
consistent with or in accordance with” the agency’s organic act or any other act
administered by the agency or applicable to it. However, a court would have no
authority to compel the agency to take any action other than the initiation of a
proceeding for the issuance, amendment, or repeal of an order, rule, or regulation.
Somewhat similar provisions are already in effect for the CPSC, see 15 U.S.C.
§ 2059 (Supp. V 1975), and for the ICC with respect to common carriers by
railroad, see 49 U.S.C. § 13(6) (as added by RRRRA, supra note 4, § 304(b), 90
Stat. at 52). S. 3308 therefore contains no new provision regarding rulemaking
petitions filed with the CPSC, and section 13(b) merely extends to all ICC matters
the provisions for the timely consideration of petitions that are now applicable
only to those involving common carriers by railroad.
The Administrative Procedure Act (“APA”), 5 U.S.C. § 553(e), now provides
that “[e]ach agency shall give an interested person the right to petition for the
issuance, amendment, or repeal of a rule.” By letter dated April 26, 1976, from
Assistant Attorney General Uhlmann to Senator Eastland, the Department opposed
the enactment of S. 3123, 94th Cong. (as introduced Mar. 10, 1976), which would
have amended 5 U.S.C. § 553(e) to provide that an agency must either deny such a
petition or initiate the requested rulemaking proceeding within 60 days of the
5
In the case of the FMC, “organic act” refers to Reorganization Plan 7 of 1961, 75 Stat. 840.
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receipt of the petition. It was pointed out in the letter that 5 U.S.C. § 555(b) and
(e) (1970) already impose an obligation on agencies to act on such petitions in a
reasonable time and that a person aggrieved by an agency’s delay in acting on a
petition would appear to have a right to seek judicial review under 5 U.S.C.
§ 706(1) (1970) to compel the agency to decide whether to deny the petition or
initiate rulemaking. The court cannot now, and could not under S. 3123, address
the merits of the petition or direct the agency to initiate the requested rulemaking
proceeding.
S. 3308 is in certain limited respects an improvement over S. 3123, because it
would allow the agencies 120 rather than 60 days to take action on petitions,
S. 3308 §§ 6, 12(a), 14(a), and because it would not amend 5 U.S.C. § 553(e) and
thereby impose a rigid deadline on all departments and agencies covered by the
APA. Moreover, only the person who files the petition could seek judicial review
of the agency’s denial or failure to act on his petition. The generally applicable
judicial review section of the APA (5 U.S.C. § 702 (1970)), on the other hand,
allows any person suffering legal wrong because of agency action or adversely
affected or aggrieved within the meaning of a relevant statute to seek judicial
review. Nevertheless, there may still be some question as to whether a fixed
deadline is appropriate. The FPC, FCC, CAB and FMC opposed the provision in
their letters to the Senate Commerce Committee regarding S. 3308. See Senate
Report at 65, 67, 71, 78.
Whatever may be the merits of the fixed deadline provided for in S. 3308,
however, we recommend that the Department oppose the bill’s judicial review
provisions. The bill would require a court to determine whether the action
requested in a petition is “necessary” and whether the agency’s failure to take the
action will result in the continuation of practices which are not consistent with the
agency’s responsibilities. Id. §§ 6(a)(1), 6(b), 6(c), 12(a), 14(a). These are
substantive determinations of a kind ordinarily reserved to the agency. Yet, having
made a decision which is tantamount to a decision on the merits of the petition, a
court could do no more than remand the matter to the agency for another explora-
tion of the same issues in rulemaking proceedings. Notwithstanding the statement
in the Senate Report that the bill does not make “administrative expertise subser-
vient to the orders of the judiciary,” id. at 5, it is our opinion that this judicial re-
view procedure would seriously undermine the independence of the agencies
involved. An agency would be most reluctant to refuse to take the action requested
in a petition after a reviewing court has already determined that such action is
“necessary” and that the failure to take the action is not consistent with the agen-
cy’s goals. As a result, judicial review, which would frequently be made on an
incomplete record and without the benefit of the agency’s expertise, would give
the appearance of pre-judging the merits of the petition for the agency and thereby
casting doubt on the integrity of subsequent agency proceedings.
Quite aside from public pressures and problems of appearances resulting from
the timing of judicial review, the bill has the added disadvantage of forcing a court
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to second-guess the agency on the allocation of its scarce resources among various
administrative proceedings and other agency functions. As a practical matter, the
reviewing court might also be forced to consider each petition in isolation, without
giving due regard to related proceedings or the agency’s long-term goals.
The provisions for the timely consideration of petitions in S. 3308 were pat-
terned after 15 U.S.C. § 2059, see Senate Report at 4, which permits a district
court to order the CPSC to initiate rulemaking proceedings if the petitioner can
demonstrate to the court that the consumer product involved “presents an unrea-
sonable risk of injury” and that the failure of the CPSC to initiate rulemaking
proceedings “unreasonably exposes the petitioner or other consumers to a risk of
injury presented by the consumer product,” 15 U.S.C. § 2059(e)(2). It may be
questioned whether a court should second-guess the CPSC on such a matter, but at
least a court’s intervention is limited to situations which pose a significant threat
of injury. In such cases, the interference with the independent judgment of the
CPSC may be thought to be out-weighed by an overriding public interest in safety.
An overriding public interest of this type is not present in most matters coming
before the other agencies covered by S. 3308. Thus, the CPSC provision is not
necessarily a precedent for the present bill.
It might be argued, of course, that the independence of the agencies is pre-
served in S. 3308 by the added requirement that a court may not direct an agency
to commence rulemaking proceedings unless it concludes that the agency acted
arbitrarily and capriciously in denying the petition or failing to act on it. We doubt
that this will be the effect. If the court determines that the action requested in the
petition is necessary and that the failure to take the action would not be consistent
with the act administered by the agency, the court would be hard-pressed to
conclude that the agency’s denial or failure to act was nevertheless not arbitrary
and capricious.
Finally, we have some questions about the evidence on which the reviewing
court must base its decision. The relevant sections of the bill provide that the
decision is to be based on “a preponderance of the evidence in the record before
the [agency] or, in an action based on a petition on which the [agency] failed to
act, in a new proceeding before such court.” S. 3308, §§ 6, 12(a), 14(a). There is
now no requirement in the APA that a decision whether to grant or deny a petition
be made on the basis of a record developed before the agency and that an agency’s
denial be substantiated by such a record. This makes sense, because the agency’s
determination as to whether to initiate rulemaking proceedings depends not merely
on the “facts” pertinent to the petition, but also on broader policy, budgetary, and
related considerations which it would often be unnecessarily wasteful to reduce to
writing in each case. The effect of S. 3308, then, would be to force the agency to
go to the added expense of preparing an administrative record in a kind of mini-
rulemaking proceeding so that its denial of a petition will be supported by the
preponderance of the evidence in the record. Again, while this result might be
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acceptable for the CPSC because of public safety considerations, there is far less
justification for it with respect to the other agencies covered by the bill.
For these reasons, we believe that the provisions for judicial review raise far
more problems than they would solve. In our view, judicial review of the type now
available to compel an agency to make a decision whether to grant or deny a
petition is as far as the bill should go in this area.
IV. Congressional Access to Information
A.
Sections 7, 12(a) and 14(a) of S. 3308 would have the effect of establishing a
uniform requirement that the agencies transmit to the Congress copies of budget
information, legislative recommendations, testimony for congressional hearings,
and comments on legislation at the same time that such materials are submitted to
the President or to the Office of Management and Budget (“OMB”). The sections
further provide that no officer and no other agency of the United States shall have
authority to require the agency to submit its legislative recommendations,
testimony, or comments for approval, comments, or review prior to their submis-
sion to Congress. Provisions of this type are already applicable to the CPSC under
15 U.S.C. § 2076(k) (Supp. V 1975), enacted in 1972, and to the ICC by virtue of
section 201(j) of the Budget and Accounting Act of 1921, 31 U.S.C. § 11(j) (as
added by RRRRA, supra note 4, § 311, 90 Stat. at 60). A similar provision appli-
cable to the FTC was also included in section 4 of S. 2935, as it passed the Senate
on March 18, 1976. See 122 Cong. Rec. 7203 (1976); Senate Report at 5–6, 86.
Under existing law, the Secretary of the Treasury, the Director of OMB, and
the heads of “executive agencies” (which in this context presumably includes
independent regulatory agencies) must, upon request, furnish a committee of either
House of Congress, the Comptroller General, or the Director of the Congressional
Budget Office information as to the “location and nature of available fiscal,
budgetary, and program-related data and information.” 31 U.S.C. § 1153(a)(1)
(Supp. V 1975). This provision would appear to require the head of a department
or agency to furnish Congress with the budgetary proposal that the department or
agency has transmitted to OMB, although this Department’s administrative
counsel has construed the provision to compel the furnishing of the Department’s
budgetary data to Congress only after OMB has completed the overall budget
process. This is apparently OMB’s position as well. See OMB Circular No. A-10,
§§ 3–4. OMB Circular A-19 requires independent agencies to clear their legisla-
tive proposals through OMB, although section 7(g)(2) of the Circular permits such
reports to be submitted without approval where time limits require.
Thus, the effect of S. 3308 would be to alter the time at which Congress could
obtain copies of budget and legislative materials prepared by the seven independ-
ent agencies and to make them available to Congress without OMB clearance or a
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formal request from the Congress. The bill would not lift the present requirement
that agencies’ budgetary and other materials be submitted to OMB as well. Thus,
the Executive Branch will be informed of all agency transmissions to Congress
and will be able to counter them through its own recommendations, testimony, and
comments.
In general, we see no constitutional impediment to the requirement that inde-
pendent regulatory agencies communicate their legislative and budgetary messag-
es directly to the Congress without first clearing them with OMB. In Humphrey’s
Executor v. United States, 295 U.S. 602, 629–31 (1935), the Supreme Court held
that Congress could establish a regulatory agency, in that case the FTC, and insure
its independence from Executive Branch control by establishing a fixed term for
its members and providing that such members could be removed only for ineffi-
ciency, neglect of duty, or malfeasance in office. In our view, Congress may
legitimately conclude that a uniform practice of clearing all communications with
Congress through OMB might undermine the agencies’ intended independence
from the Executive Branch. See Senate Report at 5–6.
On the other hand, a uniform rule in the opposite extreme—i.e., that no com-
munication from an independent agency may be sent to OMB unless it is simulta-
neously sent to the Congress—would not adequately protect important interests of
the Executive Branch. For example, we do not believe that independent agencies
should be permitted to transmit to Congress copies of comments they have
prepared on legislation or reports drafted by executive departments before the
legislation or reports have themselves been transmitted to Congress. The depart-
ments’ draft legislation and reports are subject to review by OMB prior to
submission to Congress. This measure of Executive Branch control—which has
constitutional underpinnings in the duty of the President to “from time to time give
to the Congress Information of the State of the Union, and recommend to their
Consideration such Measures as he shall judge necessary and expedient,” U.S.
Const. art. II, § 3—would be lost if copies of independent agency comments made
available to Congress disclosed the substance of the Executive Branch proposals
while the proposals were still in their formative stage. In our view, the same
principle applies when draft legislation, reports, or comments prepared by an
independent agency relate to other important interests of the Executive Branch, as
might be the case, for example, with a proposal to take jurisdiction in a certain
area away from an executive department or to alter the application of civil service
laws to the agency’s personnel.
B.
The other feature of sections 7, 12, 13 and 14 of S. 3308 having to do with
congressional access to agency information directs each agency, whenever a duly
authorized committee having responsibility for authorizations or appropriations for
the agency makes a written request for documents in the possession or subject to
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the control of the agency, to submit such documents (or copies thereof) to the
committee within 10 days of the request. The bill prescribes no sanctions for an
agency’s failure to comply, nor does it contain any other means of enforcement,
although the bill does expressly provide that it “shall not be deemed to restrict any
other authority of either House of Congress, or any committee or subcommittee
thereof, to obtain documents,” id. §§ 7(a), 7(b), 7(c), 7(d), 12(a), 14(a)—
apparently referring to the subpoena power. A similar congressional access
provision was recently made applicable to the ICC in a new paragraph 15 of
section 17 of the Interstate Commerce Act, 49 U.S.C. § 17(15) (as added by
RRRRA, supra note 4, § 301, 90 Stat. at 47). In our opinion, the Department of
Justice should oppose the adoption of this aspect of S. 3308, because it does not
adequately preserve the confidentiality of trade secrets and similar information
obtained from persons subject to the agencies’ regulation and because it could lead
to inappropriate involvement by the Congress in the ongoing operation of the
agencies, especially in pending cases and investigations.
Confidential information in the hands of an independent regulatory commission
should be protected from casual disclosure in the course of compliance with a
sweeping, undifferentiated, and perhaps passing congressional request for
materials. Cf. Authority of Federal Communications Commission to Disclose
Confidential Information to Senate Committee on Interstate and Foreign Com-
merce, 41 Op. Att’y Gen. 221, 228 (1955) (Brownell, A.G.). The provision
applicable to the ICC recently enacted as section 17(15) of the Interstate Com-
merce Act contains a key limiting provision designed to enable agencies to afford
just such protection, while at the same time preserving the right of a congressional
committee to obtain the material by means of subpoena if it concludes that
circumstances warrant disclosure. The limiting provision reads:
This paragraph shall not apply to documents which have been ob-
tained by the Commission from persons subject to regulation by the
Commission, and which contain trade secrets or commercial or fi-
nancial information of a privileged or confidential nature.
90 Stat. at 47. Similar qualifying language was apparently contained in the
relevant paragraphs of S. 3308 when the bill was circulated to the seven agencies
in working paper form, see Senate Report at 68, but it has since been deleted.
Section 13(c)(5) of S. 3308 would delete the passage from the Interstate Com-
merce Act as well. At a minimum, this protection for confidential information
should be restored to the bill.
Even with this modification, however, we have serious doubts about the disclo-
sure provision. The Department of Justice has taken the position that executive
privilege is available with respect to those functions of independent regulatory
agencies that are of an executive or quasi-executive nature. The privilege must be
assertible by the President or in a manner suitable to him. In our view, S. 3308
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would not affect the power of the President, or the agency acting on the Presi-
dent’s behalf, to assert executive privilege, because in the absence of express
language in the bill, it must be assumed that the bill does not constitute an
attempted infringement of the constitutionally based privilege. Nevertheless, the
passage of these congressional access sections of S. 3308 could introduce added
confusion into an already unsettled area.
Aside from the question of executive privilege as such, it should also be noted
that within its own area of operations, an independent regulatory agency has a
strong interest in the free flow of communications to and from the heads of the
agency—i.e., the members of the commission or board—which is analogous to
that giving rise to the privilege of the President as head of the Executive Branch.
See United States v. Nixon, 418 U.S. 683, 705, 708 (1974). An independent
regulatory agency also has a strong interest in the integrity of ongoing cases and
investigations which could be seriously prejudiced if the facts and legal arguments
are freely reported to the Congress. Similar interests have been asserted to support
the withholding of investigation-related evidence compiled by the FBI, an agency
of the Executive Branch. Position of the Executive Department Regarding
Investigative Reports, 40 Op. Att’y Gen. 45 (1941) (Jackson, A.G.). In our view,
S. 3308 does not give adequate weight to these important interests.
It is true that the bill contains no sanctions for violations and that an agency
might therefore be thought to be free to decline to comply with a request for
information on either of the above-mentioned grounds or for any other reason. But
an agency should not be placed in the position of defying mandatory language in a
statute in order to protect the confidentiality of certain of its internal communica-
tions and operations. For these reasons, we recommend that the Department
oppose passage of those portions of sections 7, 12(a), 13(c), and 14(a) which
purport to require agencies to furnish information to Congress within 10 days of a
request.
V. Representation in Litigation
Section 8, 12(a), 13(d) and 14(a) of S. 3308 contain provisions which would in
essence permit the FCC, FPC, CAB, ICC, and FMC, through their own attorneys,
to commence, defend, or intervene in any action (including any appeal of such
action) having to do with matters under their jurisdiction if the Department of
Justice fails to assume the case on behalf of the agency within 45 days of the
receipt of written notification from the agency. The right of an agency to handle its
own appeals in cases in which the Department of Justice has declined to represent
the agency apparently would include appeals and petitions for certiorari to the
Supreme Court, thereby undercutting the Solicitor General’s control over such
matters. The agencies would also be authorized to seek temporary and preliminary
injunctive relief without first giving the Department of Justice an opportunity to
take responsibility for the case.
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Congress recently enacted somewhat similar legislation for the FTC, see 15
U.S.C. § 56(a) (Supp. V 1975), and the CPSC, see Consumer Product Safety
Commission Improvements Act of 1976, Pub. L. No. 94-284, § 11, 90 Stat. 503,
507–08.6 S. 3308 therefore contains no section dealing with the litigating authority
of these two agencies.
The Department of Justice vigorously opposed the expansion of the FTC’s
litigating authority on the traditional ground that the government’s litigation
should be centrally controlled and under the supervision of experienced trial
attorneys, see H.R. Rep. No. 93-1107, at 51–52, 67–68 (1974), and the Chief
Justice informed the Congress that the justices unanimously recommended against
dilution of the Solicitor General’s control over government litigation in the
Supreme Court, see S. Rep. No. 93-1408, at 39 (1974). Both objections were to no
avail. The Department also unsuccessfully opposed the expansion of the CPSC’s
litigating authority. See Consumer Product Safety Act Amendments: Hearings
Before the Subcomm. on Consumer Protection and Finance of the H. Comm. on
Interstate and Foreign Commerce, 94th Cong. 158–67 (1975) (statement of Joe
Sims, Special Assistant to the Assistant Attorney General, Antitrust Division).
We assume that the Department will also oppose S. 3308 to the extent that it
would result in a loss of litigating authority to the other five agencies,7 although
6
The FTC provision is actually considerably broader than the litigating authorizations in S. 3308
for the FCC, FPC, CAB, and FMC, because it grants the FTC exclusive litigating authority in such
areas as injunctive relief, consumer redress, judicial review of rules and cease and desist orders, and
enforcement of subpoenas. 15 U.S.C. § 56(a)(2). Section 13(d) of S. 3308 would grant the ICC
exclusive litigating authority in essentially the same areas as those in which the FTC has been granted
such authority. This ICC provision is virtually identical to one passed by the Senate as part of the
RRRRA but dropped from the bill (S. 2718) because of a jurisdictional objection by a House
Committee. See S. Rep. No. 94-595, at 158–59 (1976) (Conf. Rep.). The Department of Justice appa-
rently did not formally communicate with the Congress on this feature of the Senate version of S. 2718.
The CPSC provision enacted in May gives the CPSC exclusive litigating authority only in injunc-
tion and forfeiture actions, and it expressly denies the CPSC the authority to handle its own cases in the
Supreme Court. It does, however, permit the CPSC, with the concurrence of the Attorney General, to
prosecute and appeal any criminal action. S. 3308 does not propose to give the other six agencies any
authority with respect to criminal cases.
7
The existing litigating authority of the five agencies varies considerably. For example, the FPC
currently has authority to be represented by its own attorneys in actions to review FPC orders or to
enjoin violations of the Federal Power Act and Natural Gas Act. See 15 U.S.C. §§ 717r, 717s; 16
U.S.C. §§ 825l, 825m (1970). Section 8(b) of S. 3308 therefore appears to enhance the authority of the
Department of Justice by giving the Attorney General 45 days in which to assume responsibility for
such actions. See Senate Report at 65–66. Similarly, the FCC’s right under 47 U.S.C. § 401(e) (as
added by S. 3308, § 8(a)) to be represented by its own attorneys in appeals of FCC orders and decisions
under 47 U.S.C. § 402(b) (1970), see Senate Report at 68–69, may be undercut by the Attorney
General’s right of first refusal under 47 U.S.C. § 402(e)(1)(B) (as added by S. 3308, § 8(a)). See also
49 U.S.C. § 1486(a) (1970) (CAB); 46 U.S.C. § 828 (1970) (FMC); Senate Report at 72–73 (CAB), 79
(FMC). In other respects, however, the litigating authority of these agencies would be enhanced insofar
as actions the Attorney General has refused to bring are concerned. The somewhat different provisions
in section 13(d) would apparently have little substantive effect on the ICC’s present authority. Senate
Report at 54–55.
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Constitutionality of Regulatory Reform Legislation for Independent Agencies
that is a question of policy on which this office defers to the Solicitor General, the
Civil Division, and other interested litigating divisions.
VI. Protection of Officers
Section 9 of S. 3308 would amend 18 U.S.C. § 1114 (Supp. V 1975) to make it
unlawful to kill an officer or employee of the ICC, FTC, FPC, FCC, CAB or FMC
who is “assigned to perform investigative, inspection, or law enforcement
functions, while engaged in the performance of his official duties, or on account of
the performance of his official duties.” Section 1114 now prohibits the killing of
officers and employees of various executive departments and agencies and of the
CPSC, which was brought under the section’s coverage as a result of an amend-
ment contained in section 18 of the Consumer Product Safety Commission
Improvements Act, 90 Stat. at 514. Also, 18 U.S.C. § 111 (1970) makes it a
federal crime forcibly to assault, resist, oppose, impede, intimidate or interfere
with a person designated in 18 U.S.C. § 1114 while he is engaged in, or on
account of, the performance of his official duties.
We do not disagree with the statement in the Senate Report (at page 8) that
there should be no distinction, for purposes of federal criminal jurisdiction,
between officers and employees of the Executive Branch and those of independent
agencies, but we question whether piecemeal amendment to 18 U.S.C. §§ 111 and
1114 is the proper approach. This Department has previously sought more general
amendment to those provisions bringing within federal jurisdictions all assaults on
federal officers occasioned by their status or their performance of duties. This is
the approach taken in S. 1, 94th Cong. (as introduced Jan. 15, 1975).
VII. Avoidance of Conflict of Interest
The organic acts of each of the seven agencies would be amended by sections
10, 12(d), 13(f), and 14(b) of S. 3308 to provide that no commissioner or member
shall, for a period of two years following the termination of his service as a
commissioner or member, “represent any person before the [Commission or
Board] in a professional capacity.”8 The prohibition is intended to prevent a
conflict of interest or the appearance of a conflict of interest, Senate Report at 8,
presumably resulting from the possibility that a former commissioner or member
might have lingering influence with the agency by virtue of his former position.
8
Section 14(b) would add a new section 102(e) to Reorganization Plan 7 of 1961 to prohibit a
commissioner of the Federal Maritime Commission from engaging in any other business, vocation,
profession, or employment. A similar prohibition is already in effect for members of the other six
agencies, although only FCC commissioners are expressly precluded from engaging in any other
“profession.” 47 U.S.C. § 154(b) (1970). For the sake of uniformity, S. 3308 would add the word
“profession” to the provisions applicable to the CPSC (§ 10(d)), FTC (§ 10(a)), CAB (§ 12(d)), ICC
(§ 13(f)), and FPC (§ 10(c)). We have no objection to these changes.
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Supplemental Opinions of the Office of Legal Counsel in Volume 1
Under existing law, a specific prohibition similar to this is in effect only for
former FCC commissioners, although the FCC provision is applicable only for one
year and only if the former commissioner did not serve the full term for which he
was appointed. However, members and employees of all seven agencies covered
by S. 3308 are subject to the criminal conflict of interest laws, including 18 U.S.C.
§ 207 (1970). Subsection (a) of section 207 bars a former officer or employee of
an independent agency from knowingly acting as agent or attorney for anyone
other than the United States, either before the agency or in court, in connection
with any case or other particular matter in which he participated personally and
substantially as such an officer or employee. In addition, subsection (b) prohibits a
former officer or employee of an independent agency, for a period of one year
following the termination of his service, from knowingly acting as agent or
attorney for anyone other than the United States in connection with any particular
matter which was under his “official responsibility” within one year prior to the
termination of such responsibility. All matters pending within an independent
agency are under the “official responsibility” of the commissioners or members.
See 18 U.S.C. § 202(b) (1970). Thus, the effect of 18 U.S.C. § 207(b) is to
prohibit, for a period of one year, a former commissioner or member of any of the
agencies involved here from representing a private party in connection with any
particular matter that was pending within the agency during the year prior to the
time he left office, even if he had not participated in it or had no knowledge of it
while he was in office.
The conflict of interest section of S. 3308 would supplement the existing ban
on representational activity contained in 18 U.S.C. § 207. We recommend that the
Department support this proposal. Former commissioners or members are free
under 18 U.S.C. § 207 to represent private parties before the agency in which they
previously served in new matters that arise in the agency after they leave. Yet the
potential for a former commissioner or member to exert undue influence in an
agency proceeding because of his prior position is just as great in new matters as
in matters that were pending in the agency at the time he was there. S. 3308 would
prevent the use of such influence.
S. 3308 would impose a two-year ban on representational activities rather than
the one-year ban found in 18 U.S.C § 207. This longer period was chosen to make
the conflict of interest section in S. 3308 consistent with 18 U.S.C. § 283,* which
prohibits a retired officer of the Armed Forces of the United States, during the two
years following his retirement, from acting as agent or attorney or otherwise
*
Editor’s Note: By the time of this opinion, 18 U.S.C. § 283 was listed in the U.S. Code as having
been repealed. See 18 U.S.C. §§ 281–284, at 4185–86 (1970). As explained in the reporter’s note to the
1970 edition of the U.S. Code, however, section 283 was only partially repealed by section 2 of Public
Law 87-849, 76 Stat. 1119, 1126, and remained applicable to “retired officers of the armed forces of
the United States.” Id.
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Constitutionality of Regulatory Reform Legislation for Independent Agencies
assisting in the prosecution of a claim against the United States involving the
department in which he holds retired status.
Unlike 18 U.S.C. §§ 207 and 283, the conflict of interest provisions of S. 3308
would prevent representational activities only before the agency itself, not those
rendered in court in connection with matters under the agency’s jurisdiction, such
as in judicial review of an agency order. We have no objection to this more limited
scope of S. 3308. There is obviously a much greater potential for a former
commissioner or member to use undue influence in administrative proceedings in
which he is dealing directly with his former colleagues and subordinates than there
is once the matter reaches court, where the case is subject to independent supervi-
sion by the court.
Also, we note the S. 3308 does not provide for criminal sanctions for former
commissioners and members who violate its conflict of interest provisions.
Presumably each agency will enforce the ban on representational activities by
disqualifying the individual involved, either on its own motion or on the motion of
a party to the administrative proceeding in which the former commissioner or
member is appearing. This method of enforcement should be adequate. Because
the ban extends only to services rendered before the agency, agency officials will
be in a position to detect most if not all violations. For this reason, and because
attorneys—the group at which this aspect of S. 3308 apparently is aimed 9—would
be required as a matter of professional ethics to comply with the ban, see ABA,
Model Code of Professional Responsibility, DR Rule 2-110(B) (1976), the added
deterrent effect of criminal sanctions does not appear to be necessary in order to
accomplish the purposes of the statute.
VIII. Accountability
Sections 11, 12(a), 13(g), and 14(a) of S. 3308 would amend the organic act of
six of the agencies to provide that the Federal Tort Claims Act, 28 U.S.C.
§ 2680(a), (h) (1970 & Supp. V 1975), does not prohibit the bringing of a civil
action against the United States based upon misrepresentation or deceit on the part
of the agency or any of its employees or based upon any exercise or performance,
or failure to exercise or perform, a discretionary function on the part of the agency
or its employees which was grossly negligent.10 Judgments would be paid out of
general funds rather than out of funds appropriated for the operation of the
respective agencies. Senate Report at 9.
9
S. 3308 prohibits a former commissioner or member from representing a person before the agency
“in a professional capacity.” See also Senate Report at 8. The phrase “acts as agent or attorney,” which
appears in 18 U.S.C. §§ 207 and 283, is somewhat broader, covering informal contacts on behalf of
others by the former employee in addition to those made in a professional capacity.
10
The waiver of sovereign immunity in S. 3308 would apply only with respect to acts committed by
the agencies or their employees prior to January 1, 1979, so that Congress may assess the impact of the
waiver for discretionary acts before making it permanent. Senate Report at 9.
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Supplemental Opinions of the Office of Legal Counsel in Volume 1
The sovereign immunity sections of S. 3308 are drawn almost verbatim from a
provision that is already applicable to the CPSC. 15 U.S.C. § 2053(i) (as added by
section 5 of the Consumer Product Safety Commission Improvements Act, 90
Stat. at 504). The Department of Justice apparently did not formally relay its views
to Congress on that aspect of the CPSC legislation, but Assistant Attorney General
Uhlmann did advise OMB by letter dated May 5 that the Department would
support a veto of the bill (S. 644) because of the waiver of sovereign immunity
and the expansion of the CPSC’s litigating authority. The President approved the
CPSC legislation without mentioning the Department’s reservations. We assume
that the Department will oppose an identical waiver of sovereign immunity for the
other six agencies covered by S. 3308.
However, it should be noted that both the CPSC statute and the pertinent sec-
tions of S. 3308 contain two features which might serve to limit the scope of the
waiver of sovereign immunity to some extent. First, there can be no recovery on a
claim against the United States which is based on “agency action” as defined in
5 U.S.C. § 551(13) (1970)—i.e., “the whole or a part of an agency rule, order,
license, sanction, relief, or the equivalent or denial thereof, or failure to act.” The
purpose of the exception in the CPSC legislation was to eliminate the possibility
that an action to recover damages under the Federal Tort Claims Act based on the
performance of or failure to perform a discretionary act would be used as an
alternative to seeking judicial review of the agency action under the Administra-
tive Procedure Act. 121 Cong. Rec. 23,577–78 (July 18, 1975). We assume that
the corresponding exceptions in S. 3308 have the same purpose. The effect of the
qualification, however, will be to preclude liability for most major policy determi-
nations which the discretionary act exception in the Federal Tort Claims Act, 28
U.S.C. § 2680(a), was designed to insulate from liability for damages. Presuma-
bly, this exception for agency action in S. 3308 will also apply to discretionary
decisions and acts in the course of the administrative process which precede a final
agency determination, not merely the formal agency action itself.
Second, the CPSC provision (15 U.S.C. § 2053(i) (as added by section 5 of the
Consumer Product Safety Commission Improvements Act, 90 Stat. at 504)) and
S. 3308 (§§ 11(a)(1), 11(b), 11(c)) both provide that a judgment may not be
entered against the United States on a claim based upon the performance of or
failure to perform a discretionary function “unless the court in which such action
was brought determines (based upon consideration of all the relevant circumstanc-
es, including the statutory responsibility of the [agency] and the public interest in
encouraging rather than inhibiting the exercise of discretion) that such exercise,
performance, or failure to exercise or perform was unreasonable.” As Assistant
Attorney General Uhlmann pointed out in his May 5 letter to OMB on S. 644, this
“reasonableness” test appears on its face to impose a standard of conduct on the
agency and its personnel that is more lenient than and therefore inconsistent with
the requirement, also contained in the CPSC legislation and S. 3308, that a
claimant may not recover damages unless the discretionary conduct at issue was
412
Constitutionality of Regulatory Reform Legislation for Independent Agencies
“grossly negligent.” However, the conference report on the CPSC legislation states
that the court must find that the discretionary conduct was unreasonable “as a
matter of law.” H.R. Rep. No. 94-1022, at 18 (1976) (Conf. Rep.). This is the
standard under tort law generally for taking an issue away from the jury, and it is
ordinarily thought to be satisfied only when no reasonable person could reach a
contrary conclusion. William L. Prosser, Handbook of the Law of Torts § 37, at
207 (4th ed. 1971). If Congress actually intends to impose such a stringent
limitation on recoveries in addition to the separate requirement that the conduct be
“grossly negligent,” the waivers of sovereign immunity in S. 3308 may not result
in many recoveries. But passage of this feature of the bill could nevertheless result
in the filing of numerous and often frivolous damage claims by disgruntled
persons or companies who have been only incidentally injured by a low level
administrative decision or oversight. It is by no means clear that the cost and effort
entailed in processing and defending all such claims is warranted in order to
permit recovery in a few meritorious cases.
The CPSC provision which serves as a prototype for the sovereign immunity
sections of S. 3308 was passed largely in response to a single incident involving
the Marlin Toy Company that arose when the CPSC mistakenly included one of
the company’s products on a list of banned products. When Marlin requested that
the list be corrected, the CPSC admitted its error but did not issue a retraction until
it published a new list some eight months later. The company sustained a substan-
tial financial loss as a result, but it could not recover until the Congress enacted
special legislation enabling it to do so. See 121 Cong. Rec. 23,578 (July 18, 1975);
121 Cong. Rec. 33,686 (Oct. 22, 1975). We agree with the observation of
Assistant Attorney General Uhlmann in his letter to OMB on S. 644 that the
genuine hardship cases that have given rise to the sentiment in support of the
CPSC provision, and presumably those in S. 3308 as well, are best dealt with by
private relief legislation, as was in fact done in the Marlin Toy Company case.
For the foregoing reasons, we recommend that the Department oppose the
adoption of the sovereign immunity sections of S. 3308. This could be justified on
the ground that it is necessary to assess the impact of the special CPSC provision
before extending the concept to other agencies.
MARY C. LAWTON
Deputy Assistant Attorney General
Office of Legal Counsel
413