Neah Bay Chamber of Commerce v. Department of Fisheries , 119 Wash. 2d 464 ( 1992 )

Durham, J.

In this case, we are asked to determine the appropriate standard of review for agency rules under the new Administrative Procedure Act (APA), RCW 34.05. Neah Bay Chamber of Commerce and three of its members (Neah Bay) appeal directly from a trial court order upholding Department of Fisheries' (Department) regulations regarding salmon sport fishing. Neah Bay claims that certain regulations involving the geographic designation of the area are irrational, and should be overturned. We reverse the trial court and remand for further proceedings.

The Department's regulations divide the coastal waters of Washington, including the Strait of Juan de Fuca and Puget Sound, into 13 "catch record" areas and several sub-areas. See WAC 220-47-307, 220-56-190. Areas 1, 2, and 3 are along the Pacific Coast, extending from the Columbia River to Cape Alava. Area 4 extends north from Cape Alava to Cape Flattery, and then east to the Sekiu River. Areas 5 and 6 extend from the Sekiu River to Port Townsend. See appendix (map). The remaining areas are not relevant here.

Area 4 is further divided into two sub-areas along the Bonilla-Tatoosh line — a line extending from Tatoosh Island off Cape Flattery to a point on Vancouver Island. Area 4A is on the ocean side of the line, and 4B is within the Strait. Neah Bay is within area 4B and is the only launching point for all of area 4.

Until about 1982 the Department applied the same regulations for salmon sport fishing to area 4B as it did to areas 5 and 6. However, since then the Department has treated area 4B the same as the rest of area 4 and the remainder of the ocean areas. That is, area 4B is open for salmon fishing only when ocean waters are open (a relatively short amount of time), even though the rest of the Strait is open the entire year. This change has had a substantial and detrimental influence on the tourist trade of Neah Bay. Areas 5 and 6 have apparently profited from this distinction.

The present action was filed in Thurston County Superior Court in 1987. In essence, Neah Bay sought to have the Department's regulations regarding area 4B overturned. In its complaint, Neah Bay requested money damages, as well as injunctive and declaratory relief. In July 1990, the trial court denied Neah Bay's motion for a preliminary injunction and set a date for a bench trial. The Department moved for summary judgment in October 1990.

Extensive evidence was submitted to the trial court, including deposition testimony and lengthy interrogatories. Conflicting expert testimony was presented concerning the distribution of salmon in the Strait, and the impact of closing area 4B. The trial court granted summary judgment to the Department and dismissed the case. Judge Doran, in his oral opinion, held in part as follows:

One of the bases for reviewing decisions made by a department is under the arbitrary and capricious test. Administrative action is arbitrary and capricious only when it is willful and unreasoning action without consideration and in disregard of the facts and circumstances of the case. Whether the Court looks to the rational decisionmaker test or to the arbitrary and capricious test, the decision of the Court would be the same.

Having reviewed the extensive affidavits and the opinions of several experts, it is acknowledged that the experts are in disagreement. Since there is disagreement between the experts, the Court could hardly find that the action on the part of the Director is arbitrary and capricious or the act of an irrational decisionmaker.

(Italics ours.) Clerk's Papers, at 429.

Neah Bay agrees with the trial court's statement of the standard of review: the arbitrary and capricious or irrational standard. However, Neah Bay argues that the trial court erred when it found that the Department's actions were proper solely because the expert testimony was in conflict. Neah Bay contends that there was no scientific foundation for closing area 4B, and that the Department was biased in favor of other regional groups.¹ To address Neah Bay's complaint, this court must decide if the trial court was correct when it upheld the Department's rules concerning the sport fishing season. Because the only significant regulations before us are those currently in effect, the new APA applies.² RCW 34.05.902.

The APA provides that "[t]his chapter establishes the exclusive means of judicial review of agency action," with limited exceptions, not relevant here. RCW 34.05.510. The standards of review used to decide if an agency action is valid are prescribed by the act. RCW 34.05.570(1)(b). The party asserting invalidity, here Neah Bay, bears the burden of demonstrating that the action was invalid. RCW 34.05.570(1)(a). The statute expressly provides that it is the only method for obtaining review of agency actions. RCW 34.05.510.

Under former RCW 34.04.070(2):

the court shall declare the rule invalid only if it finds that it violates constitutional provisions or exceeds the statutory authority of the agency or was adopted without compliance with statutory rule-making procedures.

As our earlier cases made clear, this was a very limited standard of review. Regulations were afforded a presumption of validity, and were overturned only if they were inconsistent with the legislation implemented by the rules. Omega Nat'l Ins. Co. v. Marquardt, 115 Wn.2d 416, 423, 799 P.2d 235 (1990) (quoting Federated Am. Ins. Co. v. Marquardt, 108 Wn.2d 651, 654-55, 741 P.2d 18 (1987)); see also Multicare Med. Ctr. v. Department of Social & Health Servs., 114 Wn.2d 572, 588-89, 790 P.2d 124 (1990), and cases cited therein.

The APA enacted in 1988 adds a new criterion which significantly expands the review process. The standards for review of agency rules are found in RCW 34.05.570(2)(c):

In a proceeding involving review of a rule, the court shall declare the rule invalid only if it finds that it violates constitutional provisions, exceeds the statutory authority of the agency, was adopted without compliance with statutory rule-making procedures, or could not conceivably have been the product of a rational decision-maker.

In contrast to the former APA, this statute provides for a review of the reasonableness of agency regulations. Under the new APA a court should overturn a regulation that "could not conceivably have been the product of a rational decision-maker." RCW 34.05.570(2)(c). Such a marked change in the language used by the Legislature in enacting a new version of the APA is strong evidence of its intent to enact a different standard of review than contained in the former APA. State v. Roberts, 117 Wn.2d 576, 586, 817 P.2d 855 (1991). Thus, the court's earlier cases providing for a severely limited standard of review of regulations are not controlling. In addition, the Legislature stated its intention that the new APA clarify existing law and "achieve greater consistency with other states and the federal government in administrative procedure". RCW 34.05.001. In conformity with the prevailing practice in other jurisdictions, the added standard of review requires judicial review of the reasonableness of regulations, not just of the consistency of those regulations with the statutes being implemented. See generally Project: State Judicial Review of Administrative Action, 43 Admin. L. Rev. 571 (1991).

We discern three possible levels of intensity of judicial scrutiny: at one end of the spectrum is de novo review, where a court disregards the judgment of the body it reviews, and substitutes its own opinion. At the other end, a court subjects a question to the least intense review when it asks only if the judgment is authorized; that is, the court inquires only into the constitutional and procedural regularity of the lower body's decision. In between, there exists a middle level, in which the court examines the reasonableness of the question, but does not substitute its judgment for that of the initial decision-maker. See Brief of Amicus, at 10-11; see also William R. Andersen, The 1988 Washington Administrative Procedure Act — An Introduction, 64 Wash. L. Rev. 781, 831 (1989). We conclude that the Legislature intended that this middle-tier scrutiny be used in reviewing rule-making.

This approach is wholly consistent with the United States Supreme Court's review of federal agency rule-making under the arbitrary and capricious standard. As noted earlier, the Legislature specifically provided that the APA be interpreted in a manner consistent with other states, model acts, and federal decisions. RCW 34.05.001. In the Supreme Court's leading case in this area, it made clear that agency actions, although entitled to deference, should not be shielded from "thorough, probing, in-depth review." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971). There, in deciding if a rule was arbitrary and capricious, the Court held that a court "must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Overton Park, at 416 (citing cases). It went on to note that "[although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. The court is not empowered to substitute its judgment for that of the agency." Overton Park, at 416.

In a more recent case, the Supreme Court explained the scope of review under the arbitrary and capricious standard:

the agency must examine the relevant data and articulate a satisfactory explanation for its action including a "rational connection between the facts found and the choice made." In reviewing that explanation, we must "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. . . . [W]e may not supply a reasoned basis for the agency's action that the agency itself has not given. We will, however, "uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned."

(Citations omitted.) Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 77 L. Ed. 2d 443, 103 S. Ct. 2856 (1983). This is the proper analysis. It begins with the agency's explanation, determines if the agency relied on the appropriate factors without considering improper issues, and then decides if the agency's reasoning is plausible.

The administrative law section of the American Bar Association has published a restatement of federal law on the scope of review in administrative law which provides additional authority for this reading. A Restatement of Scope-of-Review Doctrine, 38 Admin. L. Rev. 235 (1985-1986) (approved by the Section of Administrative Law, American Bar Association, February 8, 1986); see also Ronald M. Levin, Scope-of-Review Doctrine Restated: An Administrative Law Section Report, 38 Admin. L. Rev. 239 (1985-1986). The restatement notes that agency actions should be overturned if they exceed the legal authority of the agency, or in other circumstances amounting to an abuse of agency discretion. The restatement specifically points out that an agency regulation should be reversed if "[t]he agency has relied on factors that may not be taken into account under, or has ignored factors that must be taken into account under, any of the [relevant] sources of law". 38 Admin. L. Rev. at 235. This "relevant factors" test is derived from Overton Park, discussed above. See Levin, at 252.

In contrast, the Department argues that the use of the word "conceivably" in the new standard of review means that "[i]f the court is able to conceive of any set of facts that would justify the rule, those facts are presumed to exist." Respondent's Answer to Amicus Brief, at 2. This view, originally expressed in 1935 in Pacific States Box & Basket Co. v. White, 296 U.S. 176, 185-86, 80 L. Ed. 138, 56 S. Ct. 159, 101 A.L.R. 853 (1935), has long since been discredited. See Overton Park, 401 U.S. at 415-16; State Farm, 463 U.S. at 43; William Funk, Rationality Review of State Administrative Rulemaking, 43 Admin. L. Rev. 147, 149-50 (1991). Although the Department argues that the new standard is somehow less searching than the arbitrary and capricious standard, its argument is not convincing. The Legislature clearly intended to allow inquiry into the rationality of regulations, and we do not perceive any principled way to distinguish between the two phrasings, which both pertain to the middle-tier scrutiny. Moreover, such a standard would be insufficient; it would allow an agency to escape scrutiny so long as it could come up with some possible facts (not necessarily the actual facts in existence) after the regulation had been enacted. Finally, this statement of the standard of review fails to account for the language that was added to the APA, which was clearly meant as a change to the existing standard.

The Department further invokes the rational basis test employed in reviewing statutes, and claims that the same standard applies to regulations. Agency rules, however, are readily distinguished from legislative enactments. First, the Supreme Court has expressed such a distinction: "We do not view as equivalent the presumption of constitutionality afforded legislation drafted by Congress and the presumption of regularity afforded an agency in fulfilling its statutory mandate." State Farm, 463 U.S. at 43 n.9. Second, agencies act differently than legislatures, and serve a different function. See Funk, at 161-63. Agency decision-making is not the product of political bargaining, nor is it responsive to the scrutiny of constituents. Moreover, agencies are not a co-equal branch of government, as is the Legislature, entitled to the greatest deference. The function of an agency is to utilize its particular expertise to fashion sensible regulations in a narrow area. It was never intended that agencies were empowered to act without regard to the particular facts within that expertise. The somewhat more probing review we adopt here for review of regulations than that used in analyzing statutes is justified.

In sum, the "product of a rational decision-maker" standard adopted by the Legislature at RCW 34.05.570(2)(c) involves an inquiry into the reasonableness of regulations analogous to the application of the arbitrary and capricious standard, lb decide if a regulation should be overturned because it could not conceivably be the product of a rational decision-maker, we hold that the proper analysis is the 3-part test suggested by amicus, Professor Andersen, and utilized by the federal courts. See Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 77 L. Ed. 2d 443, 103 S. Ct. 2856 (1983). The court's task is to determine if a given regulation is reasonable without substituting this court's judgment for that of the agency. First, the court inquires if the agency's explanation of its own rule is clear. Second, the court must ask if the agency utilized the appropriate statutory framework, whether it used correct factors in deciding the rule, and if it avoided improper factors. Third, the court must decide if a decision-maker could have reached the conclusion reached by the agency (taking the foregoing into account) by some reasonable process.

This analysis requires the court to review the administrative record to determine the factors employed by the agency and the quality of its reasoning. The court must scrutinize the record to determine if the result was reached through a process of reason, not whether the result was itself reasonable in the judgment of the court.

The APA contains additional pertinent provisions which enable such a review. Indeed, the extent of the record required by the APA is farther indication of an intent by the Legislature to provide for meaningful review of agency rule-making action. See William Funk, Rationality Review of State Administrative Rulemaking, 43 Admin. L. Rev. 147, 156-59 (1991). Under the APA, an agency is required to maintain a rule-making file for each regulation proposed or adopted. RCW 34.05.370(1). This file serves as the record of review, although the file "need not be the exclusive basis for agency action on that rule." RCW 34.05.370(4). In addition to the materials relied on in enacting the regulation, the rule-making file must contain a concise explanatory statement about the rule which identifies the agency's reasons for adopting the rule. RCW 34.05.355(1). The agency must also respond to any interested party who requests the reasons for overruling considerations urged against the adoption of a specific regulation. RCW 34.05.355(2).

Moreover, although under some limited circumstances a court may take new evidence, the validity of agency action is to be determined as of the time it was taken. RCW 34.05.562(1); RCW 34.05.570(1)(b). Thus, while additional evidence of an agency's reasoning and the background materials relied upon may be presented on review, such evidence is only admissible to explain the agency's decision at the time. Funk, at 158. We do not foresee the need for additional testimony in the majority of cases.

Taming to the application of these principles, the trial court ruled that, "[s]ince there is disagreement between the experts, the Court could hardly find that the action on the part of the Director is arbitrary and capricious or the act of an irrational decisionmaker." Although this reasoning may be pertinent to a summary judgment motion, a disagreement among experts is irrelevant to the standards set forth in the APA and discussed above. The court must examine the actions of the agency to ensure that they were only undertaken after proper consideration of appropriate facts. It need not substitute its judgment, but it must make certain that judgment was in fact exercised properly and fairly. Because there was no record presented of what actually went into the Department's regulations pertaining to area 4B, it is impossible to say whether they were rational or irrational. The mere existence of a disagreement is not sufficient to uphold an agency's regulations.

In addition, the remainder of the procedure set out above was not followed.³ No rule-making file is on the record; indeed, the record does not contain any reference to agency files or any other sort of administrative record. The trial cotut relied solely on deposition and other testimony of experts which was not contemporaneous with the rule-making process. Such evidence is rarely relevant, and should supplement, not replace, the administrative record.

None of the other bases presented in the APA for overturning the Department's regulations appear to be present here. In addition to the standard discussed above, under RCW 34.05.570, a rule may be declared invalid if it is unconstitutional, exceeds the statutory authority of the agency, or was not adopted in compliance with the procedural requirements of the APA. Neah Bay argues that the regulations are unconstitutional, because they violate either equal protection or due process. Regulations pertaining to fishing and hunting are a classification of territory only, not people. In regard to the areas defined, "all [people] are restricted exactly alike." McMillan v. Sims, 132 Wash. 265, 271, 231 P. 943 (1925). Thus, equal protection is not violated. Furthermore, there is no protected property right for individuals to take fish in public waters. Marincovich v. Tarabochia, 114 Wn.2d 271, 276, 787 P.2d 562 (1990). The indirect impact the Department's regulations have on the economic interests here are not sufficient to give rise to due process protection.

The regulations are clearly within the authority delegated by the Fisheries Code of the State of Washington, RCW 75.08. The Department is empowered to "promote orderly fisheries and shall enhance and improve recreational and commercial fishing in this state." RCW 75.08.012. This authority may be exercised in all of the waters at issue here. RCW 75.08.070. The Director is authorized to adopt rules consistent with federal regulations and agreements made in concert with other jurisdictions, including the Pacific Marine Fisheries Commission. RCW 75.08.070. Specifically, the Director may adopt rules pertaining to the types of fish that may be taken, and when and where those fish may be taken. RCW 75.08.080. Thus, the regulations were clearly within the authority delegated to the Department.

Although it is impossible to tell without the administrative record whether or not the procedures of the APA were followed in this case, neither party suggests that they were not, and the trial court did not consider the issue. We note, however, that lack of a rule-making file may itself constitute a sufficient reason to invalidate a regulation. RCW 34.05.375.

In accordance with the foregoing, we reverse the trial court and remand for reconsideration.

Dore, C.J., and Brachtenbach, Guy, and Johnson, JJ., concur.

Appendix

[[Image here]]

1 Although Neah Bay claims to be contesting an underlying policy of the Department, and not any particular rule, we consider this to be outside the scope of our appellate review in this case. Neah Bay did not properly raise a claim relating to the policies of the Department, nor did it frame the sort of arguments that would present the issue squarely. Rather, we perceive the sole issue in the case as relating to the application of the new APA to the Department's rule-making.

2 The challenged regulations are those which classify the coastal areas and the Strait, together with those which govern the various fishing seasons in each area. The rules involved are revised regularly, and have a limited duration. Neah Bay correctly points out that the rules change constantly. Nonetheless, we may review their propriety, given the need for future guidance and the likelihood of recurrence present here. See Hartman v. State Game Comm'n, 85 Wn.2d 176, 177-78, 532 P.2d 614 (1975).

3 Furthermore, the action was not properly brought. To initiate an action under the APA, a party is supposed to file a petition for review. RCW 34.05.514. Here, Neah Bay did not conform precisely with the provisions of the APA. The supplemental complaint did not cite the APA, nor did it identify the specific agency action at issue or include a copy of any rule or order, as required by RCW 34.05.546. Moreover, a declaratory judgment action under RCW 34.05.570 does not seem appropriate, given the precise conditions of that section. Because the problem was not considered by the trial court, nor raised by either party on appeal, we will not address it here.