Chapter 43

ADMINISTRATIVE LAW: AN INTRODUCTION

 

·        Administrative Law is the body of rules, orders, and decisions issued by administrative agencies, such as the federal Securities and Exchange Commission or a state's public utilities commission.

 

·        Enabling Legislation: Congressional action which specifies  the name, purpose(s), function(s), and powers of the agency created by the legislation.

 

·        As a general rule, an agency lacks the power to act beyond the scope of its enabling legislation.

 

Types of Agencies:

·        Executive Agencies: Agencies formed to assist the President or, at the state level, Governor in carrying out executive functions (e.g., the Commerce Department).

·        Independent Regulatory Agencies: Agencies neither designed to aid nor directly accountable to the executive branch (e.g. the Securities and Exchange Commission).

                                  

 

 

 

ADMINISTRATIVE RULEMAKING

 

·        Generally speaking, rules promulgated by administrative agencies are as legally binding as laws passed by Congress or a state's legislature.  Rulemaking by federal agencies typically occurs in the following steps:

 

·      Notice of Proposed Rulemaking: A proposed rule and some discussion of its rationale is published by the agency in the Federal Register. The notice invites public comment and notifies the public of the times and places of any hearings on the proposed rule.

 

·        Comment Period: Following publication in the Federal Register, the agency must allow ample time for public comment.  The agency need not respond to all comments, but it must respond to any significant comments that bear directly on the proposed rule by either (i) modifying the proposed rule or (ii) explaining why the modification was not made.

 

Final Rule: Once the final version of the rule is decided upon by the agency, it will be published first in the Federal Register and then compiled annually in the Code of Federa1 Regulations

 

 

AGENCY INVESTIGATIONS

 

·       Both as part of the rulemaking process and as part of the enforcement of the rules, agencies conduct inspections of regulated entities' facilities and/or business records.

 

·        While many businesses voluntarily comply with agency requests for an inspection, those that do not may face:

 

·        A subpoena compelling the entity to produce records (subpoena duces tecum) and/or to provide testimony (subpoena ad testificatum), and/or

 

·        A search warrant compelling the entity to make it facilities available to the agency for inspection.

 

·        To determine if an agency is overstepping its bounds in conducting an investigation, courts may consider:

(1)     Whether the investigation has a legitimate purpose;

(2)     The relevance of the information sought;

(3)     The specificity of the agency's demand for testimony and/or documents; and

(4)     The burden the agency's demand places on the entity.

 

 

AGENCY ADJUDICATION

 

·        If an agency determines that an entity has violated one or more rules, the agency may take administrative action against the entity. When possible, the agency will seek to secure the entity's voluntary compliance, thus avoiding the expense and inconvenience of full-blown judicial or quasi-judicial proceedings.  If negotiation fails, agency adjudication proceeds as follows:

 

·        A formal complaint is filed by the agency, to which the subject entity files an answer.

 

·        Following a period permitted for discovery, the agency and the entity will appear before an administrative law judge (ALJ) who will conduct a quasi-judicial (or "court-like") proceeding, the exact nature of which varies from agency to agency.

 

·        The ALJ issues an initial order, which is subject to appeal to the agency's governing board (e.g., the actual commissioners of the Federal Trade Commission).

 

·        After disposing of any appeal, the agency issues a final order which may be appealed to a designated court (e.g., the U.S. Court of Appeals for the D.C. Circuit).

 

 

LIMITATIONS ON AGENCY POWERS

 

·          Judicial Controls: Most agency decisions are subject to judicial review, provided that the party seeking review

 

(1)     has standing to sue the agency,

(2)     there is an actual controversy between the party and the agency, and

(3)   the party has exhausted all administrative remedies.

 

·        Executive Controls: A president or governor generally has the power to appoint agency officials and to veto enabling legislation as well as appropriations.

 

·        Legislative Controls: Congress or a state legislature must enact and may review and amend enabling legislation, and generally controls appropriations (subject to executive veto) to an agency.   Congress may also "freeze" the implementation of new rules before they take effect.

 

 

PUBLIC ACCOUNTABILITY

 

 

·         Freedom of Information Act (FOIA): Requires the federal government to disclose certain records to any person on request, subject to restrictions as to time and place. Some states have similar legislation.

 

·        "Sunshine" Legislation: Subject to certain specified exceptions, agency meetings must be (i) noticed to the public in advance and (ii) open to public observation, if not participation.

 

·         Small Business Initiatives: Congress has in recent years passed legislation requiring agencies to make special note of the effect of their proposed and actual rules on small businesses and to determine whether special provisions are appropriate to prevent an undue burden on small businesses.