Chapter 5 -- Administrative Law

Court decisions interpreting the Commerce Clause of the Constitution have greatly extended government
control over business and economic activity.  To deal with this authority and responsibility (and for
other reasons relating to efficiency and the need for expertise), Congress has created numerous
administrative agencies to oversee particular economic activities or areas of public interest.  State
and local governments have followed suit. 

Administrative agencies are defined as governmental bodies, other than courts and legislatures, that
have the power to make rules and render decisions that affect the rights of private parties. 
Administrative law is the branch of public law that governs the power and procedures of administrative
agencies, including rulemaking, adjudication, and judicial review of agency actions.  The
Administrative Procedures Act (APA) of 1946 is an important means for controlling federal
administrative agencies.  This chapter focuses on the formation and operational procedures of
administrative agencies. 

Chapter 5 -- Outline
 5.1 Origin and Purpose of Administrative Agencies
      A.  Terminology and Focus
      B.  Reasons for Administrative Agencies
      C.  Formation of an Administrative Agency
      D.  Organization of Administrative Agencies
      E.  Functions of Administrative Agencies

 5.2 Control of Administrative Agencies

      A.  Executive, Legislative, and Judicial Controls
      B.  Separation of Powers
      C.  Ultra Vires
      D.  The Administrative Procedure Act
      E.  The Federal Privacy Act
      F.  The Federal Register Act

 5.3 Rulemaking
      A.  Types and Effect
      B.  Informal Rulemaking
      C.  Formal Rulemaking
      D.  Hybrid Rulemaking

 5.4 Adjudication
      A.  Nature of Adjudication
      B.  Informal Adjudication
      C.  Formal Adjudication
      D.  Settlement

 5.5 Judicial Review

      A.  What, Why, When?
      B.  Judicial Review of Rulemaking
      C.  Judicial Review of Adjudications
      D.  Standing
      E.  Exhaustion of Remedies
      F.  Ripeness
      G.  Proper Court
      H.  Judicial Remedies for Agency Wrongdoing

5.1 ORIGIN AND PURPOSE OF ADMINISTRATIVE AGENCIES A.  Terminology and Focus
B.  Reasons for Administrative Agencies
C.  Formation of an Administrative Agency
D.  Organization of Administrative Agencies
E.  Functions of Administrative Agencies

A.  Terminology and Focus. Administrative law is the branch of public law that governs the powers and
procedures of administrative agencies, including judicial review of agency action. 
1.  Administrative agencies, also known as regulatory agencies, are governmental bodies responsible
for the supervision and administration of particular activities or areas of public interest. 
2.  The term administrative agency refers to any public officer, bureau, authority, board, or
commission that has the power to make rules and render decisions. 
a.  The term never refers to legislatures, the judiciary, or nongovernmental activities. 
3.  Administrative agencies are formed by an act of legislation called an enabling statute
(enabling legislation). 
a.  Legislatures authorize agencies to make and enforce rules and regulations to solve one or
more problems. 
b.  The enabling act (or the enabling statute) provides for the agency to be formed and
establishes guidelines for the agency to follow when addressing the problem(s). 
4.  This chapter focuses on the formation and operation of federal administrative agencies.  Each
state and local government is empowered to establish its own administrative agencies, which
theoretically mirror federal agencies. 
a.  Because the emphasis is on the procedural (legal machinery) aspects of administrative
law, this chapter will not discuss the substantive law (conferring rights and duties) of
any specific agency. 
b.  The substantive law applied by an agency is studied under the appropriate chapter; e.g.,
the substantive laws applied by the National Labor Relations Board (NLRB) are studied in
Chapter 37, Employment Regulation; the substantive laws applied by the Federal Trade
Commission (FTC) are studied in Chapter 36, Consumer Protection; and the substantive laws
applied by the Securities and Exchange Commission (SEC) are studied in Chapter 32,
Federal Securities Regulation. 
B.  Reasons for Administrative Agencies. Every administrative agency is formed to address problems. 
1.  The United States experienced unprecedented industrial growth followed by severe economic
 depression in the early part of the twentieth century.  As our industrial society grew and
became more complex, social, environmental, and economic problems also became more complex.  To
address these problems, the U.S.  turned to the administrative process. 
a.  The administrative process relies upon federal and state administrative agencies staffed
by specialists to develop and enforce rules and regulations. 
2.  Administrative agencies address issues not easily resolved by the three formal branches of the
U.S.  government (legislative, executive, judicial). 
a.  The traditional method of enacting laws that are enforceable only in the courts is both
insufficient and inefficient. 
b.  State and federal legislatures found that a delegation of their powers and functions to
administrative agencies resulted in more efficient and effective government. 
1) A delegation of power is the conferring of authority by one party on another to act
for the former's benefit. 
2) EXAMPLE: Workers' compensation boards (administrative agencies) decide a multitude of
claims each year resulting from industrial accidents.  The Federal Communications
Commission (FCC) licenses and regulates radio and television stations.  Daily
oversight of these activities by the legislative, judicial, or executive branch of
the government would not be efficient. 
3.  The reasons for administrative agencies are varied. 
a.  Increasing complexity in a growing number of technical and diverse fields requires
regulation by specialists. 
b.  Legislators seek to free both themselves and the judiciary from administering the myriad
of detailed rules and regulations applicable to business today.  By authorizing
administrative agencies, they are free to concentrate on the formation of fundamental
legal principles and legislative policy. 
c.  Effective regulation requires consistency, supervisory continuity, and flexibility that
could not be achieved through traditional legislative and judicial procedures. 
d.  Regulation of monopolistic industries (e.g., the utilities) must be efficient,
consistent, and vigilant with respect to protection of the public interest. 
e.  Agencies can be cost efficient.  For example, quasi-judicial administrative hearings can
effect dispute resolution at a much lower cost to the parties than if each matter were
fully litigated in court.  Courts, furthermore, are relieved of the burden of a multitude
of cases, which are sometimes straightforward and repetitive. 
C.  Formation of an administrative agency
1.  Administrative agencies are typically formed by one of the following:
a.  Executive order
Statute
b. 
2.  The executive branch of the government can, by executive order, form an administrative agency
to address a problem.  The Environmental Protection Agency (EPA) was formed in this manner. 
3.  More commonly, administrative agencies are formed by an act of the legislature, which passes an
enabling statute. 
a.  The legislative body specifies the purpose of the agency, its name, its composition, and
its powers. 
1) EXAMPLE: A commission is formed and established, to be known as the Federal Trade
Commission (FTC).  It shall be composed of five commissioners, who shall be appointed
by the President, by and with the advice and consent of the Senate.  The purpose of
the FTC is to assure that consumers are treated fairly by business, etc. 
b.  The legislature delegates powers to the administrative agency. 
4.  Typically, the law providing for an administrative agency (enabling statute) specifies the
following:
a.  That no more than three to five members may belong to the same political party. 
b.  Appointments require Senate confirmation. 
c.  Appointees are not permitted to engage in any other employment or business activities
during their term. 
d.  The appointees may be removed from office by the President only for inefficiency, neglect
of duty, or malfeasance. 
5.  Formation of an administrative agency
1.  Society perceives a need.  1.  Congress passes an enabling act, or the
2.  Individuals, business groups, executive branch issues an executive order
professors, political activists, forming an agency (or extending the duties
etc., bring the need to the of an existing agency) to solve the
attention of Congress.  problem. 
3.  Congress studies the need. 
D.  Organization of Administrative Agencies. There are two vantage points from which to view the
organization of an administrative agency: internally and externally. 
1.  Internally, an administrative agency's organization is set forth in the enabling statute or
executive order. 
a.  Most agencies follow the same general format.  Refer to the illustration below. 
 2.  From an external viewpoint, agencies can be grouped into different categories. 
a.  Regulatory agencies make rules, adjudicate disputes, and impose sanctions if necessary. 
These agencies regulate economic activity of both individuals and businesses.  Examples
of regulatory agencies include the Federal Trade Commission (FTC), the Securities and
Exchange Commission (SEC), and the Federal Communications Commission (FCC). 
b.  Nonregulatory agencies conduct investigations or administer benefits such as workers'
compensation, pensions, and government insurance.  Examples of nonregulatory agencies
include the Federal Bureau of Investigation (FBI) and the Social Security
Administration. 
c.  Executive agencies are administrative agencies that fall within the executive office of
the President or within one of the executive departments of the President's cabinet. 
Examples of executive agencies include the Food and Drug Administration (Department of
Health and Human Services), the Internal Revenue Service (Treasury Department), and the
Occupational Safety and Health Administration (Department of Labor). 
3.  The U.S.  government sometimes organizes its agencies into two categories, executive and
independent. 
Executive Departments
1.  Department of Agriculture
2.  Department of Commerce
3.  Department of Defense
        Office of the Secretary of Defense
        Department of the Air Force
        Department of the Army
        Department of the Navy
4.  Department of Education
5.  Department of Energy
6.  Department of Health and Human Services
7.  Department of Housing and Urban Development
8.  Department of the Interior
9.  Department of Justice
10.  Department of Labor
11.  Department of State
12.  Department of Transportation
13.  Department of the Treasury
14.  Department of Veterans' Affairs
Independent Agencies
1.  ACTION
2.  Administrative Conference of the United States
3.  Advisory Commission on Intergovernmental Relations
4.  American Battle Monuments Commission
5.  Appalachian Regional Commission
6.  Board for International Broadcasting
7.  Commission of Fine Arts
8.  Commodity Futures Trading Commission
9.  Consumer Product Safety Commission
10.  Delaware River Basin Commission
11.  Environmental Protection Agency
12.  Equal Employment Opportunity Commission
13.  Export-Import Bank of the United States
14.  Farm Credit Administration
15.  Federal Communications Commission
16.  Federal Deposit Insurance Corporation
17.  Federal Election Commission
18.  Federal Emergency Management Agency
19.  Federal Home Loan Bank Board
20.  Federal Labor Relations Authority
21.  Federal Maritime Commission

Source: U.S.  Government

22.  Federal Mediation and Conciliation Service

23.  Federal Mine Safety and Health Review Commission
24.  Federal Reserve System (Board of Governors)
25.  Federal Trade Commission
26.  General Services Administration
27.  Inter-American Foundation
28.  International Development Cooperation Agency
29.  Interstate Commerce Commission
30.  Merit Systems Protection Board
31.  National Aeronautics and Space Administration
32.  National Archives and Records Administration
33.  National Capital Planning Commission
34.  National Credit Union Administration
35.  National Foundation on the Arts and Humanities
36.  National Labor Relations Board
37.  National Mediation Board
38.  National Science Foundation
39.  National Transportation Safety Board
40.  Nuclear Regulatory Commission
41.  Occupational Safety and Health Review Commission
42.  Office of Personnel Management
43.  Office of Special Counsel
44.  Overseas Private Investment Corporation
45.  Panama Canal Commission
46.  Peace Corps
47.  Pennsylvania Avenue Development Corporation
48.  Postal Rate Commission
49.  Railroad Retirement Board
50.  Securities and Exchange Commission
51.  Selective Service System
52.  Small Business Administration
53.  Susquehanna River Basin Commission
54.  Tennessee Valley Authority
55.  U.S.  Arms Control and Disarmament Agency
56.  U.S.  Commission on Civil Rights
57.  U.S.  Information Agency
58.  U.S.  International Trade Commission
59.  U.S.  Postal Service
60.  Veterans Administration
E.  Functions of Administrative Agencies. Administrative agencies combine many of the functions of the
three branches of the U.S.  government. 
1.  The functions of agencies include
a.  Rulemaking.  The agency adopts substantive rules for others to follow and procedural
rules for its own operation (as well as for others to follow). 
b.  Investigating.  Agencies such as the FBI investigate individuals and businesses to obtain
evidence necessary to prosecute violations or to gather information helpful to
legislators or the executive branch. 
c.  Supervising.  Agencies may supervise business activities; e.g., the EPA supervises the
cleanup of toxic waste sites. 
d.  Advising.  Agencies may advise the legislature of agency activity and advise individuals
and businesses on how to comply with the agency's rules and regulations. 
e.  Prosecuting.  After an investigation, an agency may prosecute violations. 
f.  Adjudicating.  Agencies determine whether a particular person is entitled to a benefit or
has, in fact, violated an agency rule. 
2.  Whether an agency performs any or all of these functions depends upon the nature and scope of
the specific powers delegated to the agency by the enabling act or the executive order. 
a.  Agencies exercise what is commonly referred to as quasi-legislative power by issuing
rules and regulations that have the force and effect of law. 
1) Agencies often issue guidelines to supplement the rules.  Guidelines are
administrative interpretations of rules that an agency is responsible for enforcing. 
b.  Agencies exercise quasi-executive functions by issuing licenses, inspecting,
investigating, and prosecuting violations. 
c.  Agencies exercise quasi-judicial functions by deciding disputes,
assessing liability, and issuing rulings. 

5.2 CONTROL OF ADMINISTRATIVE AGENCIES A.  Executive, Legislative, and Judicial Controls
B.  Separation of Powers
C.  Ultra Vires
D.  The Administrative Procedure Act
E.  The Federal Privacy Act
F.  The Federal Register Act

A.  Executive, Legislative, and Judicial Controls. Each branch of the political system has some degree
of control over an administrative agency. 
1.  The executive branch may nominate the top official of an agency.  (Senate confirmation may be
required.) The executive branch may also make budgetary recommendations to the legislative
branch. 
2.  The legislative branch controls administrative activity by amending an agency's authority, by
completely abolishing the agency, or through budgetary measures.  Moreover, the legislature can
enact laws that nullify rules and regulations promulgated by an agency. 
a.  The Small Business Regulatory Enforcement Act of 1996 requires agencies to submit their
rules to Congress prior to their effective date.  Congress may then, by joint resolution
passed within 60 days, freeze the enforcement of the rules. 
1) The 1996 act authorizes the courts to enforce the Regulatory Flexibility Act of 1980,
which requires agencies to analyze the effects of new regulations when they have a
significant impact upon a substantial number of small entities.  Thus, agencies must
consider cost and less burdensome alternative measures. 
2) The 1996 act also established the National Enforcement Ombudsman to handle comments
from owners of small businesses.  It also created regional boards to rate the
agencies and publish the resulting findings. 
3.  The judicial branch provides a check on an administrative agency by exercising the power of
judicial review.  Rules and regulations adopted by administrative agencies must not exceed the
authority delegated to them.  They also must satisfy the due process and other requirements of
the federal constitution, or the judiciary will set them aside. 
B.  Separation of Powers. The combination of legislative, judicial, and executive power in one agency
could be viewed as a violation of the separation of powers doctrine. 
1.  The separation of powers doctrine prohibits one branch of government from infringing upon the
powers conferred on another branch. 
 a.  Separation of powers is intended to prevent oppressive concentration of power in any one
branch of government. 
2.  The courts have rarely held that administrative agencies or their activities are an
unconstitutional violation of the separation of powers doctrine. 
a.  An administrative agency does not have actual executive, legislative, or judicial power. 
To have such power would be a violation of the separation of powers. 
b.  Quasi-executive, quasi-judicial, and quasi-legislative powers are conferred upon
administrative agencies. 
3.  The delegation of power

C.  Ultra Vires.  Although an administrative agency may have broad discretion in promulgating rules and
regulations, there are limits on this discretion. 
1.  A very important limit is the doctrine of ultra vires. 
2.  Pursuant to the doctrine of ultra vires, an administrative agency must not act outside the
scope of power delegated to it by the enabling statute or executive order. 
a.  An agency act outside the scope of the agency's powers and purposes is unconstitutional,
and the act is considered void. 
b.  EXAMPLE: The enabling act for the Securities and Exchange Commission (SEC) prohibits
fraud in the sale of securities.  Hence, if the SEC attempts to prosecute a stockbroker
for negligent (not fraudulent) sale of securities, the SEC arguably is acting outside the
scope of its authority ( ultra vires ). 
D.  The Administrative Procedure Act. In 1946, Congress enacted the Administrative Procedure Act (APA)
to establish a more uniform agency procedure for rulemaking and adjudications.  The APA also sets
forth specific grounds for judicial review of agency action. 
1.  When providing for an agency, Congress may specify, within the enabling statute, the procedures
that the agency must follow in rulemaking and adjudications. 
a.  Congress tailors such procedures to the particular functions of the agency. 
2.  To the extent the enabling statute is silent concerning rulemaking, adjudication, or judicial
review procedures, the provisions of the APA are applicable. 
3.  Administrative agencies make rules.  They decide issues by applying these rules to facts.  The
APA establishes procedures for enacting rules and conducting adjudications (hearings). 
a.  In a very real sense, the APA is a "gap filler" for the enabling statute. 
4.  In 1966 Congress amended the APA to include the Freedom of Information Act (FOIA). 
a.  The FOIA requires that information in the possession of federal agencies be made
available to the public upon request. 
b.  The FOIA demands that federal agencies adopt rules specifying when, where, and how to
request information. 
c.  An FOIA request must contain a reasonable description of the records desired.  Generally,
the request must be specific. 
d.  An agency generally has 10 business days to decide whether it will honor an FOIA
request. 
e.  A party whose request has been denied may appeal the decision by filing a suit in federal
district court. 
f.  Agencies are not required to disclose certain "exempted information." The nine categories
of FOIA exemptions include
1) National defense or policy matters
2) Internal personnel rules
3) Information specifically exempted under other statutes
4) Trade secrets and personal or commercial financial data
5) Interagency or intra-agency memoranda or letters
6) Personnel, medical, and similar files, the disclosure of which would clearly be an
unauthorized invasion of privacy
7) Records gathered by law enforcement agencies
8) Records gathered for regulating or supervising financial institutions
9) Geological and geophysical information, maps, and information with respect to wells
 g.  The FOIA was amended in 1996 to require that agency records be made available
electronically within 1 year of their creation. 
5.  In 1976, Congress again amended the APA by passing the Government in the Sunshine Act, often
called the open meeting law. 
a.  The objective of the open meeting law is to assure that "every portion of every meeting
of an agency shall be open to public observation."
b.  Certain agency meetings are exempt, including those likely to result in the disclosure of
trade secrets, personal information that would constitute an unreasonable invasion of
privacy, or national defense secrets and similarly sensitive information. 
1) Additionally, meetings need not be open when disclosure of such information would
affect the stability of currencies, securities, commodities, or financial
institutions regulated by the agency. 
c.  The rationale for the open meeting law is that increased openness
1) Increases public confidence in government
2) Encourages higher quality work by government officials
3) Promotes interaction between government and its citizens
6.  Each state has its own equivalent of the APA, as amended. 
E.  The Federal Privacy Act. Congress passed the Federal Privacy Act (FPA) in 1974 to reduce the misuse
of private information by federal agencies. 
1.  The FPA prohibits federal agencies from disclosing any record to any agency or person without
the prior written consent of the individual who is the subject of the record. 
a.  The FPA protects all records pertaining to individuals that are in the possession of the
agency, including medical and employment history. 
b.  Moreover, an individual's name and address may not be sold or leased by a federal agency
unless specifically authorized by another law. 
2.  Law enforcement agencies are exempt from the FPA requirements. 
3.  Congress can obtain agency information without consent. 
4.  The FPA permits an individual to gain access to his/her own files. 
F.  The Federal Register Act. The Federal Register Act, enacted in 1935, established the Federal
Register System, which oversees the publication of federal agency information. 
1.  The Federal Register System publishes three important reference sources available in most large
public or university libraries. 
a.  The United States Government Manual (formerly the Government Organization Manual ) lists
the names and addresses of all U.S.  Government agencies. 
1) It is published annually. 
b.  The Federal Register is published daily (Monday through Friday) in newspaper format by
the federal government. 
1) The Federal Register provides information with respect to
a) Presidential proclamations
b) Notice of agency hearings (both formal and informal)
c) Proposed and adopted regulations
d) Amendments to proposed or adopted regulations
2) The purpose of the Federal Register is to provide public notice of the official acts
of all federal agencies. 
3) The APA provides that an agency's substantive regulation is not enforceable unless it
has been published in the Federal Register (constructive notice). 
a) The public is bound by what appears in the Federal Register because it is deemed
to give constructive notice (knowledge imputed as a matter of law). 
b) EXAMPLE: Fred Farmer asked a government employee if his crop was insurable by a
government agency.  The government official stated that it was.  The crop was
destroyed by drought.  The government refused to pay the farmer's crop insurance
claim, citing a regulation that reseeded crops are not insurable and that the
farmer's crop was reseeded.  The farmer claimed that he relied on the government
employee and that he did not know of the regulation.  The court held that all
members of the public are held accountable for government regulations because they
are public and available to everybody. 
4) The Regulatory Flexibility Act of 1980 (RFA) alleviated some of the harshness
resulting from situations such as the above example. 
a) Under the RFA, federal agencies are encouraged to publish proposed rules in trade
journals likely to be read by the business community as well as in the Federal
Register. 
5) Because the public is bound by regulations published in the Federal Register,
individuals and businesses should belong to professional societies and trade
associations that review the Federal Register and publish information about
regulatory matters that affect their members. 
c.  The Code of Federal Regulations (CFR) is a publication of all final rules of all federal
agencies. 
1) Final rules published in the CFR have the force and effect of law. 
2) The CFR is organized so that all the regulations pertaining to a particular agency
appear together in one location. 
d.  State equivalents of the Federal Register Act provide for publication of
state agency regulations. 

5.3 RULEMAKING A.  Types and Effect

B.  Informal Rulemaking
C.  Formal Rulemaking
D.  Hybrid Rulemaking

A.  Types and Effect. An agency's rules are the administrative equivalent of statutes and have the
force and effect of law. 
1.  An agency can only promulgate rules that are within its delegated authority. 
a.  The enabling statute or executive order will provide guidelines for an agency's scope of
authority.  When such legislation or order is silent, the APA "fills in the gaps."
b.  Suggestions for new rules and amendments to existing rules are submitted by members of
Congress, their constituents, professors, business people, trade groups, and politically
active organizations. 
2.  Requirements of the APA apply to legislative rules.  They do not apply to interpretive rules or
procedural rules. 
a.  Legislative rules are substantive.  They fill gaps in a statute enacted by Congress. 
b.  Interpretive rules express the agency's understanding and interpretation of the statutes
it administers. 
c.  Procedural rules govern the agency's internal conduct and procedures. 
 3.  There are three kinds of rulemaking under the APA: informal, formal, and hybrid. 
B.  Informal Rulemaking. Most agencies use "informal" or "notice-and-comment" rulemaking provided for
by the APA.  This procedure involves three steps:
1.  Notice of the proposed rule must be published in the Federal Register. 
2.  Interested persons must be given an opportunity to submit written comments. 
a.  Oral opinions may be expressed at the agency's discretion. 
3.  After at least 30 days and review of public comments, the agency must publish its final rule in
the Federal Register. 
a.  The agency must also publish a concise general statement explaining the "basis and the
purpose" of the rule. 
b.  The 30-day waiting period can be shortened in the event of an emergency. 
c.  Temporary regulations may be issued and become effective without following the "notice-
and-comment" procedure. 
C.  Formal Rulemaking. The APA requires that formal procedures be used "when rules are required by
statute to be made on the record after opportunity for an agency hearing."
1.  The formal procedures under the APA are as follows:
a.  A formal hearing must provide an opportunity for interested persons to testify and cross-
examine witnesses, much like a trial, before a rule is adopted. 
b.  After the hearing, the agency makes public
1) Findings of fact
2) Conclusions of law
3) Its decision concerning adoption of a formal rule
c.  These documents constitute the record.  The formal rule must be supported by substantial
evidence based on the record. 
1) The substantial evidence standard requires that enough evidence be in the record for
a reasonable person reviewing this evidence to reach the same conclusion as the
agency. 
d.  Formal rulemaking is expensive and time-consuming.  Because of the time and expense
involved, Congress rarely mandates its use. 
1) EXAMPLE: The Food and Drug Administration (FDA) spent almost 10 years to produce a
regulation setting the appropriate peanut content of peanut butter.  The formal
rulemaking procedure produced almost 8,000 pages of text to arrive at the decision
that the peanut content of peanut butter should be 90%. 
2.  Informal and formal rulemaking is illustrated by the following diagram:

INFORMAL FORMAL

Step 1 Publish in Federal Register: Publish in Federal Register:

        Notice of Proposed Rule           Notice of Proposed Rule

Step 2 Interested parties may Public Hearing:

submit comments during         Witnesses
30-day minimum period.          Cross-examination
        Formal rules of evidence

Step 3 Publish in Federal Register: Publish in Federal Register:

        Final rule with         Final rule with formal
        a.  Statement of purpose         a.  Findings of fact
        b.  Statement of basis         b.  Conclusions of law

Standard of Review Error of law Substantial evidence:

        A reasonable person could
        reach same conclusion. 

D.  Hybrid Rulemaking. This is a combination of formal and informal

rulemaking. 
1.  The notice and comment aspects of informal rulemaking are combined with opportunity for oral
testimony (as opposed to the mere submission of written comments). 
2.  The substantial evidence standard is applied if judicial review of a hybrid rule is
mandated. 

A.  Nature of Adjudication

B.  Informal Adjudication
5.4 ADJUDICATION
C.  Formal Adjudication
D.  Settlement

A.  Nature of Adjudication. Every final agency action resulting in an order other than rulemaking is
called an adjudication.  The activities that constitute an adjudication range from issuing licenses
to full-blown hearings that are similar to court trials.  When an agency acts as an adjudicative
body, it is essentially performing judicial functions. 
1.  Most agency decisions are adjudications. 
2.  The adjudication process normally begins either with an application for a permit or license or
with a complaint filed by the agency. 
3.  The party charged in the complaint may be a private person, a business, or even another
agency.  This party is the defendant (called the respondent). 
a.  The respondent files an answer to the complaint. 
4.  Respondents are generally entitled to a hearing before the agency. 
a.  Notice of the hearing must include the time, place, and content of hearing. 
Parties may be represented by legal counsel. 
b.  An agency hearing has no jury. 

c. 
5.  Most agencies have statutory power to take emergency actions in appropriate situations
involving public health or safety. 
a.  EXAMPLE: Acme Corporation is marketing an exploding baseball to children.  The Consumer
Product Safety Commission can remove such a dangerous product from the market without a
formal hearing. 
6.  Hearings can be either informal or formal, as discussed below. 
B.  Informal Adjudication. The vast majority of administrative adjudications involve informal action. 
Generally, agency authorities request that a person voluntarily attend a very informal hearing,
much like an interview. 
1.  Only minimal statutory safeguards protect the rights of individuals in the informal process. 
a.  Because the APA provides little guidance for informal adjudications, agencies do not have
 a consistent procedure for informal proceedings. 
b.  The Freedom of Information Act (FOIA) and the Federal Privacy Act (FPA) do provide some
protection for individuals subject to informal adjudication. 
1) The FOIA requires that information (with limited exceptions) in the possession of
federal agencies be made available to the public upon request. 
a) Some of the information that may prove useful are copies of rules, orders, or
policy statements with respect to the agency's handling of the same or similar
issues. 
2) However, the FPA restricts agencies from disclosing to any person or agency a record
of any individual that is part of a system of records without the individual's prior
written consent. 
a) The term "record" refers to such matters as a person's education; financial
transactions; and medical, criminal, or employment history. 
b) There are exceptions to the FPA for law enforcement purposes. 
2.  The most significant protection for the individual is the constitutional right accorded each
individual under the Fifth Amendment. 
a.  A witness called to testify in an agency investigation (informal adjudication) may assert
the Fifth Amendment privilege against self-incrimination by refusing to answer specific
questions. 
b.  The U.S.  Supreme Court has interpreted the Fifth Amendment (in the context of informal
adjudications) to include the right to procedural fairness. 
1) An individual is entitled to reasonable notice that his/her rights are about to be
affected by agency action. 
2) The individual must then be informed of his/her right to a hearing prior to any
further agency action. 
C.  Formal Adjudication. Formal adjudication is required by the APA only when the enabling or a related
statute requires an adjudication "on the record after opportunity for an agency hearing." Formal
adjudications constitute a small portion of total adjudications. 
1.  Under the APA, the respondent is entitled to timely notice of his/her right to a hearing as
well as a complete list of all agency charges. 
2.  An agency may notify interested (in addition to necessary) parties and provide them with an
opportunity to participate in the hearing. 
a.  If an interested party who has a vital interest in the adjudication can demonstrate good
cause, (s)he may be permitted to join the hearing as a respondent. 
b.  In licensing cases, a comparative hearing must be held if there are two applicants but
only one license is to be granted. 
1) Each applicant must be given the opportunity to demonstrate the strength of his/her
case and the weakness of the opposing case. 
3.  Discovery in formal adjudication is very limited.  To allow complete discovery would undermine
the efficiency of the administrative process. 
a.  In contrast, the litigants in a civil suit have the right to pretrial discovery, which
may take years. 
b.  However, in a formal adjudication, a respondent does have access to all relevant
unprivileged information that is contained in agency files (pursuant to the FOIA). 
4.  The presiding official at a formal adjudication is an administrative law judge (ALJ). 
a.  Theoretically, the ALJ is legally independent from agency prosecutors, investigators, and
rulemakers. 
b.  The ALJ conducts an evidentiary hearing similar to a federal nonjury trial. 
1) Petitioner and respondent may each be represented by attorneys. 
2) Evidence may be introduced, but the rules of evidence are relaxed. 
3) Witnesses may be examined and cross-examined. 
4) There is no jury; the ALJ makes findings of fact and of law. 
5) The ALJ issues a decision in the form of an order. 
a) The order must state reasons supporting the decision. 
6) The order becomes final unless appealed. 
a) Appeal for review by the agency may be a condition of appeal to state or federal
courts. 
c.  Formal adjudications are subject to the constitutional standards of due process, which
include the rights to
1) Notification of charges
2) Notice of hearing
3) Representation by an attorney
4) An impartial ALJ
5 Presentation of evidence
6) Cross-examination of the witnesses of the agency
7) A decision based on the regulation
d.  When authorized by statute, the ALJ may issue subpoenas requiring witnesses to appear and
testify. 
1) Generally, a subpoena is a writ issued under the authority of a court to compel the
appearance of a witness at a judicial proceeding.  The witness may be punished for
nonappearance. 
e.  Under the APA, the ALJ can require that all or part of the evidence be submitted in
written form. 
1) This allows broad discretion to limit cross-examination. 
D.  Settlement. The APA requires an agency to provide opportunity for settlement with respect to both
formal and informal adjudications. 
1.  Agency prosecutors have nearly unlimited discretion to settle cases. 
2.  Most disputes are resolved through settlement.  Generally, the respondent and the agency
enter into a consent order that reflects the terms of the compromise.  The terms of a
consent order generally include a phrase stating that the settlement does not constitute
an admission of guilt. 

5.5 JUDICIAL REVIEW A.  What, Why, When?

B.  Judicial Review of Rulemaking
C.  Judicial Review of Adjudications
D.  Standing
E.  Exhaustion of Remedies
F.  Ripeness
G.  Proper Court
H.  Judicial Remedies for Agency Wrongdoing

A.  What, Why, When? Judicial review is the process by which an agency's action is scrutinized by the
appropriate court. 
 1.  Judicial review operates to ensure that an agency does not exceed its grant of delegated
authority.  A case is heard by the proper court only after
a.  A party has established that (s)he is an aggrieved party (standing). 
The party has no remaining administrative remedies (exhaustion of remedies). 
b.  The court has been satisfied that the dispute is ready to be decided (ripeness). 

c. 
B.  Judicial Review of Rulemaking. Judicial review of an agency's rule requires that certain
fundamental questions be asked:
 Was the delegation of authority valid?
 Did the agency exceed its authority?
 Is the substance of the rule constitutionally valid?

 Was promulgation of the rule procedurally proper?

1.  In order to answer the first two questions, courts review the enabling statute or the executive
order that authorized the agency. 
a.  A delegation of authority must be definite, or it will violate due process. 
1) Definiteness is measured by the clarity of the delegation of authority.  The
reviewing court must be able to determine from the enabling statute or executive
order the scope and extent of the agency's authority. 
b.  The power delegated to the administrative agency to promulgate rules must not be
unlimited. 
1) The delegation of authority (enabling statute or executive order) must contain
standards that a court can use to determine whether the agency has exceeded its
authority. 
2.  Generally, the delegation of authority to make rules may be by very broad language. 
a.  EXAMPLE: The delegation of authority to make such rules as the "public interest,
convenience and necessity may require" has been held to be constitutionally permissible. 
3.  Courts cannot interfere with the discretion delegated to an agency and cannot substitute their
judgment for that of an agency. 
4.  Judicial review of formal rulemaking applies the substantial evidence test. 
a.  The reviewing court will set aside an agency rule only if the rule is unsupported by
substantial evidence from the record as a whole. 
b.  The substantial evidence standard requires that enough evidence be in the record for a
reasonable person reviewing this evidence to reach the same result as the agency. 
5.  Judicial review of informal rulemaking applies the arbitrary and capricious standard.  This
standard requires the agency to have made a clear error in judgment in order to be overruled. 
6.  Judicial review of hybrid rulemaking applies the substantial evidence standard. 
C.  Judicial Review of Adjudications. Judicial review of an agency adjudication is available but
subject to specific rules. 
1.  Generally, a party appealing an agency decision must fulfill the requirements of
a.  Standing
Exhaustion
b.  Ripeness

c. 
    NOTE: Each of these concepts is discussed later in subtopics D., E., and F.,
respectively. 
2.  If an agency has exceeded its authority as granted by the enabling statute or executive order,
a party can pursue a remedy directly in the appropriate federal court. 
3.  A court is not empowered to substitute its judgment or procedures for those of an agency. 
a.  The judiciary's reluctance to interfere with an agency's interpretation of facts,
particularly involving areas of the agency's specialization, is referred to as agency
deference. 
b.  Legislatures have specifically delegated authority to an agency because of the agency's
knowledge, experience, and expertise in the particular matter at issue; for a court to
substitute its judgment for an agency's would undermine the administrative process. 
c.  However, the court may freely substitute its own judgment for that of the agency as to
questions of law, e.g., by means of statutory interpretation. 
4.  If a court reviews a formal adjudication, the substantial evidence standard is applied. 
a.  Under the substantial evidence standard, if a reasonable person relying solely on the
record could reach the same decision as the agency, the decision will stand. 
1) The court examines the record to determine whether the agency decision was supported
by substantial evidence, in effect, at least some evidence.  If so, it will not
overturn the agency's findings of fact. 
5.  If a court reviews an informal adjudication, the arbitrary and capricious standard is applied. 
a.  The arbitrary and capricious standard requires an agency to have made a clear error in
judgment in order to be overruled. 
b.  Questions of law may be reviewed de novo (as from the beginning).  That is, no deference
need be given to agency findings of law.  They might be considered to the extent they are
helpful in the reasoning. 
6.  The Administrative Procedure Act also provides for de novo review if the agency's fact-finding
procedure was inadequate or if new issues arise on appeal. 
D.  Standing. The doctrine of standing maintains that only the injured party may sue. 
1.  Under the APA, only a party "adversely affected or aggrieved by agency action" has standing. 
2.  The Supreme Court has held that, in order to have standing, a person must demonstrate that
a.  The person has suffered direct, not remote, injury as the result of the agency action. 
b.  The interest that the injured party seeks to protect is within the range of interests
arguably protected by
1) The Constitution
2) Statute
3) Regulation
3.  EXAMPLE: The U.S.  Forest Service entered into a contract with Walt Disney Enterprises, whereby
Disney was to construct a ski resort in Sequoia National Forest.  A third party, the Sierra
Club, an environmental protection organization, sought to halt construction of the resort.  The
Supreme Court held that the Sierra Club did not have standing to sue because it had merely a
"special interest in conservation." It had failed to show a direct injury because none of the
Sierra Club members actually used the Sequoia area.  Thus, a plaintiff must have an actual
stake in the controversy.  Generally, courts have been rather liberal in finding a personal
stake with respect to bringing an action involving threats to either civil rights or the
 environment. 
E.  Exhaustion of Remedies. Even if a party has standing, (s)he must exhaust all available
administrative remedies before instituting suit. 
1.  Most agencies have internal procedures to appeal an adverse decision. 
2.  Many enabling statutes specifically require exhaustion. 
a.  In exceptional cases, courts may not require the party to have exhausted all
administrative remedies if (s)he can show that irreparable damage would be caused by
delaying judicial review. 
3.  The exhaustion doctrine recognizes that, in reviewing administrative decisions, courts must not
make decisions prior to a hearing held by the agency. 
a.  Generally, judicial review is available only for final actions by an agency. 
b.  Exhaustion permits an agency to discover and correct its own errors, thus minimizing the
need for judicial review. 
c.  Some enabling statutes preclude judicial review, e.g., of veterans' claims. 
4.  The doctrine of exhaustion avoids premature interruption of the administrative process. 
a.  Exhaustion is required in those cases involving an area of the agency's expertise or
specialization. 
b.  Exhaustion is required when the administrative remedy will provide relief equal to that
of a judicial remedy. 
F.  Ripeness. Courts will not review an agency's action unless it is ripe. 
1.  Until an agency has acted officially and made a final decision, the case is not ripe for
judicial review. 
a.  EXAMPLE: The Food and Drug Administration (FDA) proposes a regulation that all
supermarket managers must possess a Ph.D.  in nutrition.  The National Association of
Supermarket Managers immediately sues the FDA to invalidate the proposed regulation.  The
FDA would argue that the issue was not yet ripe because the regulation is only a
proposed, not a final, regulation.  The FDA should win based on the ripeness doctrine
because the FDA has not taken any definite, concrete final action but has merely proposed
a regulation. 
2.  Ripeness is often an argument made by the agency itself because it does not want its action
challenged. 
3.  By avoiding premature judicial review, courts do not become entangled in abstract disagreements
over internal administrative policy. 
G.  Proper Court. Once a federal agency does take final action, unless contrary to statute, the action
may be appealed to a federal court. 
1.  Some statutes specifically provide for appeal only to a particular federal court. 
a.  EXAMPLE: Both Securities and Exchange Commission and Federal Trade Commission
adjudications are appealable only to a U.S.  court of appeals.  Some appeals from
agencies may be made to federal district courts. 
H.  Judicial Remedies for Agency Wrongdoing. After proper judicial review, a court may declare agency
action illegal and may order it either to act or to refrain from acting. 
1.  Judicial intervention occurs when an agency has
a.  Acted ultra vires
Abused its discretion
b.  Acted in a manner deemed to be arbitrary or capricious
Acted without substantial evidence to support it
c. 

d. 
2.  Courts have held agency action to be unacceptable if
a.  The temporary suspension of a driver's license was a threat to a property interest.  The
court required a hearing prior to suspension of the license. 
b.  A high school student did not receive at least an informal hearing prior to suspension. 
3.  It is not uncommon for agencies or administrators to be sued for monetary damages by those
subject to their administrative rules, regulations, and decisions. 
a.  Both agencies and officials generally assert a defense known as sovereign or governmental
immunity. 
b.  At common law, governmental bodies at both state and federal levels used this defense to
shield themselves from liability for their mistakes. 
c.  Today, Congress and most state legislatures have laws limiting sovereign immunity as a
defense in most tort cases; e.g., the Federal Tort Claims Act allows a citizen to sue the
U.S.  government or its agencies. 
d.  However, there is no liability for "any claim .  .  .  based upon the exercise or
performance or the failure to exercise or perform a discretionary function or duty on the
part of a federal agency or an employee of the government, whether or not the discretion
involved be abused."
1) This is commonly referred to as the discretionary function defense. 
2) The leading case involving the discretionary function exception involved tort suits
against the Federal Aviation Administration (FAA).  These suits claimed that the FAA
negligently certified airplanes for operation without actually inspecting them. 
a) The FAA stated that the decision not to spot-check each airplane was a
discretionary decision reflecting agency policy due to budget limitations.  The
court held that the FAA had no liability for discretionary decisions involving
which airplanes to inspect. 
e.  As a general rule, hearing examiners and ALJs have been granted absolute immunity

5.6 INTERNET SITES

The U.S.  Government Printing Office maintains a site permitting access to the CFR and the Federal
Register, among other things, at:
http://www.access.gpo.gov/su_docs/