[*PG153]ANOTHER REASON TO REFORM THE FEDERAL REGULATORY SYSTEM: AGENCIES’ TREATING NONLEGISLATIVE RULES AS BINDING LAW
Abstract: This Note analyzes the nonlegislative rule exception to the rulemaking requirements of the Administrative Procedure Act (“APA”). To lend greater accountability to federal agencies, the APA places an obligation on agencies to incorporate public input when creating new rules. Agencies, however, can avoid considering public commentary through a vague exception: section 553(b)(A) of the APA. After analyzing section 553(b)(A), this Note evaluates how one agency, the Food and Drug Administration, has responded to the confusion surrounding the exception. Finally, this Note considers how the Senate has overlooked problems associated with section 553(b)(A) in the Senate’s most recent bill to revise administrative procedures.
Congress creates administrative agencies to execute many of the statutes it enacts. When establishing an agency, Congress grants it several powers, such as the authority to perform investigations, to conduct adjudications and, most pertinent to this Note, to adopt rules. Generally, agencies create two types of rules: legislative rules and nonlegislative rules. Legislative rules, better known as “regulations,” have the force of law. The government and the public must conform to the dictates of legislative rules, as if they were statutes. Conversely, nonlegislative rules lack the force of law. Rather, they represent recommendations and advice. Nonlegislative rules have innumerable synonyms, such as interpretative rules, statements of policy, rules of agency organization and guidelines.
Congress briefly addresses legislative and nonlegislative rules in the Administrative Procedure Act (“APA”).1 In 1946, Congress passed the APA to foster clarity, uniformity and public participation in the [*PG154]administrative state. To further those worthy goals, the APA prescribes procedures that agencies must follow when exercising their powers.
For instance, the APA explains how agencies develop legislative rules. According to the APA, to produce legislative rules, agencies must follow a procedure incorporating public input. On the other hand, to create nonlegislative rules, agencies need not follow any prescribed procedure and need not regard public commentary. Thus, a dichotomy exists: created after a process incorporating public input, legislative rules possess the full force of the law; created without any formal process, nonlegislative rules lack the force of law.
Distinguishing between legislative and nonlegislative rules, however, is not always clear. Courts have described the difference between legislative and nonlegislative rules as “tenuous,” “enshrouded in considerable smog” and “fuzzy.”2 The difference between legislative and nonlegislative rules becomes confused when agencies treat nonlegislative rules as if they bear the force of law—as if they were legislative rules. When an agency views a nonlegislative rule as binding law, several unwanted situations can occur.
For example, an agency creates a prudent safety standard by adopting a nonlegislative rule. Although the standard protects public health, a private party may ignore the standard. If the agency commences legal action against that party for violating the nonlegislative rule, a court may dismiss the action because the rule lacks the force of law. Thus, by employing the improper type of rule—nonlegislative rather than legislative—the agency fails to protect public health. Alternately, private parties may defer to the agency’s nonlegislative rule because they do not realize that nonlegislative rules lack the force of law or because they wish to avoid provoking the agency into investigating them. Thus, while some companies follow the safety standard, others may ignore it without suffering penalties. Also, a misguided court may concur with the agency and uphold the enforcement action. In any event, by treating the nonlegislative rule as binding law, the agency creates inconsistency, unfairness and confusion.
Additionally, an agency will constrain its own discretion by treating a nonlegislative rule as binding law. A private company may closely follow the agency’s safety standard. Other parties, however, fear that the standard is too lenient and that the company is endan[*PG155]gering public health, so they petition the agency to take action against the company. The agency probably would be reluctant to take any action. Even if the agency chose to act, a court may hold that the agency is estopped from initiating enforcement proceedings because the company conformed to the rule. Here, public health suffers because an agency treated a nonlegislative rule as law. Moreover, the above examples illustrate situations in which the public and the government follow rules created without public involvement, thereby negating the democratic nature of the APA.
This Note argues that by treating nonlegislative rules as binding law, agencies undermine the APA’s propitious objectives of clarity, uniformity and public participation.3 Part I of this Note provides background relating to the APA, rulemaking procedures, legislative rules and nonlegislative rules.4 Part II focuses on the different legal effects of legislative versus nonlegislative rules.5 Part III addresses one agency’s current attempt to revise the role of nonlegislative rules and a bill presently in Congress aimed at regulatory reform.6 Specifically, Part III evaluates the Food and Drug Administration’s Good Guidance Practices and the Senate’s proposed Regulatory Improvement Act of 1999.7 Finally, this Note argues that Congress and administrative agencies should clarify the confusion surrounding nonlegislative rules and should ensure that agencies do not treat nonlegislative rules as binding law.8
In 1789, the first Congress of the United States enacted statutes creating the nation’s original administrative agencies, such as the Post Office and the Treasury.9 Subsequently, Congress has created innumerable agencies and granted them several powers, including the [*PG156]authority to make law.10 Congress creates federal agencies through legislative acts, commonly known as “organic” or “enabling” statutes.11 Through an organic statute, Congress grants an agency several powers, such as the authority to conduct adjudications, to investigate private entities, to initiate enforcement actions and to create legislative rules.12 Each organic statute is unique, and over a century and a half, the heterogeneity between the various agencies led to inconsistency and confusion.13 Furthermore, many members of the public lamented that it was undemocratic for administrative agencies to function without regard for public opinion.14
In 1946, Congress passed the Administrative Procedure Act (“APA”) to promote uniformity, fairness and public participation in how agencies operate.15 For all intents and purposes, the APA is the bible of administrative law.16 An agency must abide by both its organic statute and the APA.17 When a court reviews an agency’s actions, the [*PG157]court looks first to the agency’s organic statute and second to the APA as the default statute.18 When Congress drafts organic statutes, it often instructs agencies to follow certain provisions of the APA.19 For instance, many organic statutes defer to the APA’s standardized rules for rulemaking.20
The APA describes the procedure by which agencies may create legislative rules.21 According to the APA, to produce a legislative rule, an agency must follow a procedure incorporating public input.22 Because they require agencies to consider public commentary, rulemaking procedures impose burdens on administrative agencies.23 To allow flexibility, the APA provides exceptions that release agencies from following any rulemaking procedure.24 One exception, the focal point of this Note, is for nonlegislative rules under § 553(b)(A) of the APA.25 [*PG158]The following sections explain in more detail the procedures for rulemaking, and how agencies may avoid those procedures through the § 553(b)(A) exception.
Congress has three choices when establishing how agencies produce legislative rules:26 (1) to employ the “informal rulemaking” process of § 553 of the APA; (2) to use the “formal rulemaking” process of sections 553, 556 and 557 of the APA; or (3) to employ unique rulemaking procedures described in the organic statute itself.27 The majority of the time, Congress instructs the agency to employ the informal rulemaking process.28
The key elements of informal rulemaking—also known as “notice-and-comment”—are that before issuing a legislative rule, an agency must notify the public of the proposed rule, accept commentary on the proposal and respond to that commentary.29 Because of [*PG159]the provisions for public participation, informal rulemaking generally is time-consuming and arduous for agencies.30
Even more extensive and elaborate than informal rulemaking is formal rulemaking which, resembling a trial, includes live testimony and cross-examination.31 Unique rulemaking procedures vary, but tend to be less formal than formal rulemakings and more formal than informal rulemakings.32 If Congress adopts a statute creating an agency but does not specify whether the agency has the authority to create rules, the presumption is that the agency has the authority to promulgate rules and that it may do so through the informal § 553 process.33 If an organic statute empowers an agency to promulgate rules, but does not clearly describe through which process, the default presumption is to employ the § 553 informal process.34 Whether an organic statute prescribes informal, formal or unique rulemaking procedures, the APA provides for an exception from such procedures.35
Section 553(b)(A) of the APA carves out an important exception to the rulemaking procedures.36 An agency need not follow the prescribed rulemaking process to create “interpretative rules, general statements of policy, or rules of agency organization, procedure, or [*PG160]practice.”37 The APA fails to define these terms, and the courts have had difficulty interpreting the exception.38 In general, courts have held that interpretative rules elucidate statutory law, general statements of policy announce potential agency actions and rules of agency organization pertain to the internal operations of an agency.39 These definitions, however, are vague, and courts often struggle with how to apply these definitions to the rules that agencies create. This lack of clarity has caused considerable confusion over what agency rules fall within the § 553(b)(A) exception, and the consequent legal effects of those rules.40
Attempting to discern the meaning of the § 553(b)(A) exception, the United States Supreme Court has relied on the explanations found in the 1947 Attorney General’s Manual (the “Manual”).41 The Court gives considerable weight to the Manual because the Justice Department was heavily involved in creating the APA.42 The Manual provides that interpretative rules explain statutes and that general statements of policy pronounce future agency actions.43 The Attorney General contrasted interpretative rules and general statements of pol[*PG161]icy with “substantive rules,” another term for legislative rules.44 Legislative rules may be substantive, meaning they may have binding, significant and immediate effects on the rights and obligations of the public. 45 Legislative rules bear the full force of law, and therefore, the public and the government must abide by them as if they were statutes.46 Nonlegislative rules, on the other hand, lack the binding effect of law and may not create obligations, convey rights or cause significant effects.47 Agencies must perform notice-and-comment procedure prior to issuing a legislative rule, but producing a nonlegislative rule requires no such process.48 Congress created this exception to provide agencies with some degree of flexibility.49
Congress created the rulemaking procedures of § 553 to strike a compromise between administrative efficiency and public participation.50 The central restraint of the APA’s rulemaking procedures is to ensure that agencies hear public opinion before acting.51 Thus, the APA makes agencies more accountable to the public and discourages arbitrary agency action.52
Several Supreme Court and Circuit Court of Appeals opinions have expounded upon the purposes behind the APA, the rulemaking procedures and the nonlegislative rule exception.53 The Supreme Court stated in 1974 in Morton v. Ruiz, that by forcing agencies to be well-informed and to incorporate public opinion, Congress strove to prevent agencies from acting arbitrarily or unfairly when it passed the APA.54 In the 1978 case, Guardian Federal Savings and Loan Association v. Federal Savings and Loan Insurance Corporation, the United States Court of Appeals for the District of Columbia Circuit expanded upon the APA’s requirements of public participation.55 Requiring public participation, the court asserted, assures that when an agency creates a legislative rule the agency will have before it the facts and information relevant to a particular problem, as well as suggestions for alternative solutions.56 The court concluded that public rulemaking procedures increase the likelihood of administrative responsiveness to the needs and concerns of those affected by agency rules.57 In addition, the court reasoned that because Congress has provided a procedure for public participation, the public tends to acquiesce to the final agency action even when objections to substance remain.58 Simply by knowing that there are procedures providing people with a fair [*PG163]chance to participate in administrative decision making, the public will be more likely to accept the final outcome without dispute.59
Notice-and-comment requirements serve beneficial purposes, but courts have recognized that it is very useful when agencies avoid notice-and-comment by properly employing the § 553(b)(A) exception.60 Nonlegislative rules are useful because, without burdening agencies with notice-and-comment process, they allow agencies to act more efficiently.61 For instance, agencies are able to quickly produce rules of agency organization to better manage and streamline their operations.62 In addition, the nonlegislative rule exception encourages agencies to disseminate information to the public.63 By publishing information, agencies aid the long-range planning of regulated private entities’ and promote uniformity in areas of national concern.64 When an agency makes suggestions, private parties have an incentive to follow the agency’s advice because the agencies tend to be well-informed in their fields of expertise.65 Moreover, by issuing nonlegislative rules, an agency notifies the public that the agency eventually may develop that nonlegislative rule into an actual legislative rule.66
[*PG164] The problem with the nonlegislative rule exception is that agencies may sometimes take advantage of the confusion surrounding it.67 To avoid the rulemaking process, agencies sometimes create rules and label them as nonlegislative rules.68 Agencies then treat those rules as if they were legislative rules with binding legal force.69 In essence, agencies attempt to create legislative rules disguised as nonlegislative rules.70 Recognizing a misapplication of the exception can be difficult; the courts have found that nonlegislative and legislative rules are not easily distinguishable.71
Agencies often issue rules without following the § 553 process, yet treat those rules as if they bore the full force of the law.72 Courts frequently examine disputed rules and determine whether they are nonlegislative, as the agencies claim, or whether they are legislative and, [*PG165]therefore, subject to the informal rulemaking process.73 If a court finds that an agency created a rule that is substantive in nature without following the rulemaking process, the court will strike it down as invalid.74 The courts have ruled that § 553’s exceptions must be narrowly construed and should not be used as “escape clauses” for agencies trying to avoid notice-and-comment procedures.75 The line between nonlegislative and legislative rules, however, is often unclear.76
To distinguish whether a rule is nonlegislative or legislative, courts consider whether the rule is “substantive” in nature.77 If a rule has substantive effects, it should have been promulgated as a legislative rule, and therefore, the agency should have performed notice-and-comment to create it.78 The courts have examined the following factors:
The United States Court of Appeals for the District of Columbia Circuit considered several of these factors in 1987, in Community Nutrition Institute v. Young, where the court held that certain rules which the FDA had labeled as nonlegislative were actually substantive, and thus should have been adopted as legislative rules.88 The court found the rules to be substantive because they imposed immediate legal obligations on food producers, they constrained agency discretion and the FDA had referred to them as having the force of law.89 The Community Nutrition Institute (“CNI”), a public interest group, and other public interest organizations, brought action against the Commissioner of the FDA for granting “action levels” the force and effect of law, even though the FDA produced them without conducting notice-and-comment process.90 The FDA had been initiating enforcement proceedings against food producers if their goods exhibited levels of aflatoxins—unavoidable contaminants found in foods such as corn—[*PG168]greater than the action levels.91 Concerned that the action levels were too low and failed to adequately protect public health, the CNI contended that the action levels should have been adopted only after following notice-and-comment procedures.92 The FDA argued the action levels fell within the nonlegislative rule exception of § 553(b)(A).93
The court reasoned that the rule establishing the action levels used mandatory language and created immediate and binding effects.94 Specifically, the rules declared that if a food product met an action level, the food “will be deemed” to be contaminated.95 Also, the court found it compelling that the FDA had occasionally intimated that action levels established binding norms.96 The FDA would not initiate enforcement proceedings against food producers that had amounts of contamination less than the action levels.97 Thus, the court held that the action levels constrained agency discretion.98 Also, the court found that the rules were substantive because the FDA required food producers to seek exemptions to the action levels.99 The court found that if private parties must obtain exemptions to circumvent an agency’s rules, then the agency intends for those rules to be substantive.100 Therefore, the court held that the action levels were substantive and should have been produced only after notice-and-comment, and thus were invalid.101
Some courts—including the Fourth and Fifth Circuits—use “substantial impact” as a factor to determine whether a rule should have been promulgated following notice-and-comment procedure.102 If a rule has a substantial impact on private parties, then it is a legislative rule.103 The courts do not provide extensive explanation as to what qualifies as “substantial impact,” but the case law suggests that if a rule imposes upon private parties dramatic economic changes, the rule has a substantial impact.104 Since the Supreme Court’s decision in Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council in 1978, however, the test has fallen into disfavor and most courts ignore it.105
Litigants have argued that public policy should enter into courts’ decision-making, but courts generally rule only on process and do not [*PG170]incorporate the “public good” into their analyses.106 Most courts rule that they have only the authority to review whether agencies followed prescribed procedures and whether agencies violated the law, but not whether agencies have formulated flawed opinions.107 An agency is, ideally, composed of experts in the particular field over which it regulates, and a judge is, ideally, an expert in the field of law.108 In principle, judges do not substitute agency thinking with their own opinions.109 Instead, courts generally review agency process, not agency judgment.110 Hence, courts tend to analyze the agency’s procedure rather than the real world policy effects of agency judgment.111 As a result, the duty to provide for the public good remains with Congress and the agencies.112
Depending on whether a rule is adopted with or without notice-and-comment process, the rule will have different legal effects.113 Legislative rules produced after notice-and-comment procedures constitute substantive law and legally bind both agencies and private parties in future legal and administrative proceedings.114 Conversely, nonlegislative rules generally may not have binding legal effects.115 Nonlegislative rules, however, sometimes have practical legal effects.116
Rules created without process—interpretative rules, general statements of policy, rules of agency organization and other nonlegislative rules—generally cannot have legally binding effects.117 In administrative and judicial proceedings, nonlegislative rules are not treated as law, but as influential agency thought that may factor into a proceeding’s outcome.118
According to the courts, nonlegislative rules cannot be the decisive factor in a court proceeding or enforcement action.119 For example, in 1986, in Thomas v. New York, the Court of Appeals for the District of Columbia Circuit held that a letter written by the Administrator of the Environmental Protection Agency could not have binding legal effects because it had not been subjected to notice-and-comment process.120 Several eastern states—including New York, national environmental groups, American citizens owning property in Canada and a Congressman brought suit against Lee Thomas, Administrator of the EPA under President Reagan in the early 1980s, for not revising certain air pollution standards.121 Prior to Thomas taking the helm of the EPA, Douglas Costle had been the EPA’s Administrator under President Carter.122 Days before Reagan took office, Costle wrote a letter to then Secretary of State Edmund Muskie indicating that based on the findings of an official joint American-Canadian commission, he believed pollution emitted by the United States was responsible for causing acid rain in Canada.123 According to the 1977 amendments to the Clean Air Act, if the Administrator of the EPA determines that American air pollution is causing significant harm in Canada, the EPA must order the states causing the acid rain to reduce [*PG172]air pollution.124 Then, those states would be obligated to intensify the regulation of the private parties contributing to air pollution within the states’ jurisdictions.125 The new Administrator, Thomas, chose to ignore the letter.126 Intent on reducing acid rain in Canada, the plaintiffs brought suit, arguing that the letter obliged the EPA to force the generating states to revise their air pollution controls.127
The court found that the letter constituted a rule within the meaning of the APA and that it had not been created as a result of any rulemaking process.128 The court reasoned that the rule did not fall within any of the § 553(b)(A) exceptions because it affected individual rights and obligations by causing the states to heighten their regulations, which would result in the termination or restriction of numerous utilities and manufacturers.129 Because the EPA had not followed the notice-and-comment process to create the rule, the EPA was not required to constrain its discretion by abiding by the letter.130 The holding in Thomas evidences the principle that nonlegislative rules cannot have binding legal effects.131 Reality, however, may differ from this principle.132
When agencies treat a nonlegislative rule as law, those rules will have the practical effect of binding law because people tend to acquiesce to that which the government informs them constitutes the law.133 Most members of the public assume all agency rules constitute legitimate law, so they simply conform to all rules.134 By treating non[*PG173]legislative rules as law, agencies can convince the public into following nonlegislative rules.135
Occasionally, agencies rely upon nonlegislative rules for enforcement actions.136 For example, in 1989 in United States v. Picciotto, the Court of Appeals for the District of Columbia reversed a conviction based upon a nonlegislative rule because, by virtue of prescribing unlawful conduct, the rule imposed binding obligations on the public.137 In 1981, Concepcion Picciotto began a six year, twenty-four-hour-per-day protest against nuclear war across the street from the White House in LaFayette Park.138 In 1988 the Park Service issued an “additional condition” without performing any notice-and-comment procedures.139 The additional condition prohibited the storage of property in LaFayette Park beyond that which is reasonably necessary to stage a twenty-four hour protest.140 A Park Service police officer arrested Picciotto for violating the additional condition.141 The United States District Court for the District of Columbia found her guilty and gave her a ten-day suspended prison sentence and six months unsupervised probation.142 The Court of Appeals reversed the conviction, holding that the additional condition was substantive because it imposed obligations enforceable by criminal penalty, even though the Park Service had created it without notice-and-comment.143 Although Picciotto won her appeal, this case demonstrates how agencies may create rules without notice-and-comment and treat them as binding law.144 Besides initiating or threatening enforcement actions based on nonlegislative rules, agencies often rely on them to grant or deny applications and permits.145 Similarly, fed[*PG174]eral agencies can utilize nonlegislative rules to influence programs administered by the states.146
As the trial court did in Picciotto, courts sometimes agree with the agencies and treat nonlegislative rules as binding law.147 For instance, in 1993, in United States v. American National Red Cross, the District Court for the District of Columbia issued an injunction against the Red Cross, as part of a settlement, ordering the Red Cross to conform with all of the FDA’s nonlegislative rules regarding blood.148 Concerned with the integrity of the blood supply, the FDA passed numerous legislative and nonlegislative rules regarding how blood was to be handled.149 Finding that the Red Cross had failed to meet the standards imposed by the FDA, the court specifically differentiated between the FDA’s legislative rules and nonlegislative rules, and ordered the Red Cross to abide by both.150 Therefore, rules created without notice-and-comment became binding law for the Red Cross.151
The situation in Red Cross must be avoided because it robs the public of the opportunity to offer input on nonlegislative rules.152 Because the Red Cross, the FDA and the court agreed to this settlement, the FDA’s nonlegislative rules regarding blood bind the Red Cross, even though the rules create new law, impose legal obligations, have immediate effects, are not necessarily published in the Federal Register and may have significant effects on the public.153 Moreover, the public lost the opportunity to participate in the creation of laws that will affect many people, including patients in need of blood transfusions.154
When courts allow nonlegislative rules to have substantive effects on the public, they undermine the foundation underlying the APA and the notice-and-comment procedures therein.155 Nonlegislative rules should not impose obligations or immediate effects on the public, and courts and agencies should strive to avoid using them in such a manner. Too often, nonlegislative rules have a practical binding legal effect because people do not realize those rules are not binding. The parties affected by the rules choose to acquiesce to the rules rather than attract agency attention, they lack the resources to challenge the rules, or they have already fought the rule in court and have given up on the appeals process.156
Agency personnel and the public should be able to use nonlegislative rules for guidance, but not as binding law.157 This would allow agency personnel to deviate freely from nonlegislative rules, therefore producing the downside of diminished uniformity between agency actions.158 Accordingly, for matters on which an agency wishes to act [*PG176]consistently, it would not be able to rely on nonlegislative rules. Rather, the agency should follow the APA procedures for creating binding, uniform rules: legislative rules created after notice-and-comment process.159
Either Congress, the courts or the agencies themselves should create law clarifying that nonlegislative rules cannot have binding effects.160 For example, the FDA recently promulgated a set of rules to better exercise the § 553(b)(A) exception.161 On their surface, the FDA’s new rules attempt to elucidate how the agency will create nonlegislative rules and to pronounce that nonlegislative rules lack binding legal effect.162 The next Part analyzes the FDA’s new rules, as well as an act proposed by the Senate to reform agency regulation in general.163
Many members of Congress have argued that federal agencies create too many regulations and cost the American public and the United States government too much money.164 Many have clamored for a reform of agencies that would dramatically restrain agency authority to create legislative rules.165 Possibly as a response to Congress’s plans for broad reforms and the confusion surrounding nonlegislative rules, the FDA has taken steps to clarify how it creates and applies its nonlegislative rules.166
In February of 1997, the FDA published a set of guidelines entitled Good Guidance Practices (“GGPs”) in the Federal Register.167 The GGPs set forth the Agency’s policies and procedures for the development, issuance and use of “guidance documents”—the FDA’s term for nonlegislative rules.168 The FDA has asserted that the purposes of guidance documents are to clarify statutes or substantive rules and to implement the Agency’s congressional mandate in an “effective, fair, and consistent manner.”169
Among the revisions listed in the GGPs, the FDA provided for clearer nomenclature and greater public input.170 The GGPs revised the appropriate terminology for guidance documents by requiring all of them to include the label “guidance.”171 The term “guidance documents” includes and excludes numerous categories of documents.172 As well, guidance documents must identify to whom they apply.173 According to the GGPs, the FDA will publish a list of all of its guidance documents in the Federal Register.174 Furthermore, the FDA [*PG178]will update existing guidance documents to include these standards as the Agency revises them.175
In addition, the GGPs establish a mechanism to include public participation in the development of guidance documents.176 The GGPs rank guidance documents into two levels—level 1 and level 2—and establish procedures for public input for both.177 Prior to promulgating level 1 guidance documents, the FDA will solicit public input by posting a draft of the document on the FDA’s World Wide Web home page.178 Then, the FDA will review all comments before promulgating the final guidance document.179 For level 2 guidance documents, the FDA will provide an opportunity for the public to comment after the FDA issues and implements them.180
Furthermore, the GGPs stipulate that guidance documents are not binding on the public or the FDA.181 The proposed GGPs instruct FDA personnel that “[b]ecause guidance documents are not binding, mandatory words such as ‘shall,’ ‘must,’ ‘require’ and ‘requirement’ are inappropriate . . . .”182 Correspondingly, the GGPs declare that [*PG179]“[g]uidance documents do not themselves establish legally enforceable rights or responsibilities and are not legally binding on the public or the agency.”183 FDA guidance documents will state:
This guidance document represents the agency’s current thinking on * * *. It does not create or confer any rights for or on any person and does not operate to bind FDA or the public. An alternative approach may be used if such approach satisfies the requirements of the applicable statute, regulation, or both.184
Another part of the GGPs reads, in pertinent part: “decisionmakers will take steps to ensure that their staff do not deviate from the guidance document without appropriate justification and appropriate supervisory concurrence.”185
The FDA’s proposed GGPs represent a worthy first step because they attempt to abrogate some of the confusion surrounding nonlegislative rules.186 The GGPs ultimately fail, however, because they include contradictory notions and they do not address all nonlegislative rules.187 Nevertheless, some of the GGPs’ provisions serve prudent public policy.188
The GGPs provide some improvements to how the FDA approaches nonlegislative rules. For example, requiring all guidelines to specify to whom they apply can only enhance understanding among the public and the Agency.189 Additionally, printing a list of all nonlegislative rules in the Federal Register contributes to better awareness of the FDA’s rules.190
The provisions providing for public participation in the creation of guidance documents serve the purposes behind the APA.191 The process for creating level 1 guidance documents resembles informal rulemaking because the FDA will accept commentary and respond to it.192 This procedure seems beneficial because it fosters public participation, which makes the Agency better aware and the public better represented.193 This arrangement raises the question, however, if the agency is going to accept commentary prior to implementing a rule, why not simply employ informal notice-and-comment rulemaking as defined in the APA?194 Perhaps the FDA wishes to have more information when it promulgates guidelines lacking the binding force of law, thereby reserving agency discretion.195 Regardless, the two-tier system is not completely successful. Like the rest of the GGPs, it presents potential problems.
The two-tier system may contribute to the fog already engulfing nonlegislative rules.196 Now, rather than legislative rules versus nonlegislative rules, people must contend with legislative rules, level 1 guidance and level 2 guidance. Also, the provision for level 2 guidance offers no improvement to the status quo. Because the agency will not consider public comment prior to issuing a level 2 guidance, level 2 guidance is the same as a nonlegislative rule. Essentially, level 2 [*PG181]guidance documents are everyday nonlegislative rules, while level 1 documents purport to be pseudo-legislative rules.197
One problem that could arise from this arrangement is that the FDA could publish notice of a proposed level 1 guidance document, accept commentary and publish the rule.198 Later, the FDA may treat the document as if it were binding law by arguing the Agency conducted notice-and-comment while creating the document, so it has met the requirements of § 553.199 The FDA should not take this path, because a private party potentially could overlook or disregard a proposed level 1 guidance document, while that same party would have taken more seriously a proposal for an actual legislative rule.200 Still, by encouraging public participation, the procedure for creating level 1 guidances will probably accomplish more good than ill.201
Furthermore, the two-level system could confuse the process by which the FDA repeals rules. To repeal a legislative rule, an agency must create a second legislative rule.202 To repeal a nonlegislative rule, an agency need only issue another nonlegislative rule.203 Because both level 1 and level 2 guidance documents are nonlegislative rules, the FDA could use either level to amend or repeal a guidance within another level. For example, the FDA could create a level 1 guidance document after the public has an opportunity to participate, then later amend or repeal that document with a level 2 guidance document without engaging in notice-and-comment.204 Such a situation would mislead the public and negate the accountability inherent in the process to create level 1 guidance. The FDA should not have bothered to introduce the two-tier system because it adds to the complexity of nonlegislative rules.
The main problem with the GGPs, however, is that they create contradictory presumptions.205 The GGPs state that the FDA must [*PG182]avoid including words such as “shall” and “must” in guidance documents and that the FDA’s guidelines will not “operate to bind FDA or the public.”206 Elsewhere, the GGPs contradict these provisions by declaring that FDA personnel must follow guidance documents unless there is “appropriate justification and appropriate supervisory concurrence.”207 The no-mandatory-language and do-not-operate-to-bind provisions establish a presumption that FDA personnel are not bound by guidance documents, but the appropriate-justification-and-concurrence provision establishes a presumption that agency personnel are bound by guidance documents.208 This inconsistency will only prove to exacerbate the schizophrenia already surrounding the § 553(b)(A) exception. Agency personnel will be unsure how to act and private entities will be uncertain whether nonlegislative rules may bind agency personnel and whether the rules may have indirect obligatory effects on them.209
Aimed at improving administrative consistency, the appropriate-justification-and-concurrence provision initially may appear prudent.210 The provision puts the public on notice that the FDA usually will do as it says. The appropriate-justification-and-concurrence provision establishes a presumption that the FDA must follow its guidelines. It also provides two vague exceptions, allowing staff members to deviate from them if they have “appropriate justification” or “appropriate supervisory concurrence.”211 The GGPs, however, fail to define either exception.212
The meaning of “appropriate justification” is completely unclear.213 The other half of the exception, that employees can only deviate from guidelines with “appropriate supervisory concurrence,” is also vague, but probably more useful.214 While the phrase “appropriate supervisory concurrence” is horribly imprecise, it seems to create a procedural step.215 The GGPs suggest that before an FDA employee may abridge a guidance document, the employee must obtain permission from a superior. The GGPs, unfortunately, do not explain further [*PG183]the exception.216 Should a low-level FDA employee simply ask his supervisor for permission? Should an employee write a formal petition to the Administrator? Should supervisors obtain permission from higher-ranking managers before authorizing subordinates to deviate from guidance documents? The language creates the possibility for an FDA employee with subordinates to circumvent the spirit of the GGPs. For example, if a supervisor orders a subordinate to deviate from guidance documents and simultaneously grants that subordinate the authority to perform the action—which could arguably amount to “supervisory concurrence”—the supervisor can ignore nonlegislative rules.217
The no-mandatory-language and do-not-operate-to-bind provisions, however, help resolve the complexity surrounding nonlegislative rules.218 As numerous courts have held, nonlegislative rules should not include compulsory language and may not create legally binding standards.219 By emphasizing this point for agency personnel, the FDA is wisely serving itself and the public. If both agency employees and members of the public understand that nonlegislative rules use tentative language and are not legally binding, less confusion will exist. All parties concerned will understand that nonlegislative rules are only tentative guidelines, and that only legislative rules carry the force of law.
To remedy the contradiction in the GGPs, the FDA should excise the appropriate-justification-and-concurrence provision and maintain both the no-mandatory-language and do-not-operate-to-bind provisions.220 Including the appropriate-justification-and-concurrence pro[*PG184]vision will only cause more confusion. The purpose behind the provision seems to be to assure the public that agency personnel will follow guidance documents.221 Because the appropriate-justification-and-concurrence provision is so ambiguous, however, FDA personnel could easily sidestep agency guidelines.222 Moreover, informing the public that there is a presumption that agency personnel follow guidance documents would mislead the public, because courts of law will hold otherwise.223
The FDA should retain the do-not-operate-to-bind provision, but it should expand on it.224 The FDA should provide further information and explain the ramifications of the provisions. The GGPs should specify that FDA personnel may not rely on nonlegislative rules to establish obligations on private parties, initiate enforcement actions or affect applications.225 Nonlegislative rules are a confusing subject matter, and the FDA would do well to thoroughly describe to its personnel and constituents how to approach them.
One other potential problem is that the GGPs state that guidance documents include only certain types of agency statements.226 The GGPs never actually mention interpretative rules, general statements of policy, nonlegislative rules or § 553(b)(A).227 The language of the GGPs suggests that interpretative rules and policy statements would fall under the definition of guidance documents, but that is not explicitly stated.228 Therefore, it is possible that the FDA could create a rule without notice-and-comment process and label it as an “interpretative rule,” even though that rule creates rights and obligations and is actually a legislative rule in disguise.229 If a private party challenges the validity of the rule and tries to classify it as a guidance document, which by the FDA’s own GGPs cannot operate to bind the public, the FDA could argue that the rule is an interpretative rule and not a guidance document. Thus, the GGPs should state that “guidance documents” also include all agency statements promulgated under [*PG185]§ 553(b)(A) of the APA.230 That would help reduce the confusion surrounding the exception and guidance documents.231
Finally, the GGPs fail because by describing the numerous types of agency statements that do not fall within the term “guidance documents”—such as internal FDA procedures, agency reports, journal articles, press releases and speeches—the FDA suggests that such statements could operate to bind the Agency and the public.232 The GGPs state that guidance documents may not operate to bind and may not include mandatory language, so by excluding these other categories of statements, the GGPs imply that FDA personnel may treat them as legally binding.233 The FDA could circumvent the purposes of the APA by issuing an “agency report”—a document specifically excluded from the definition of guidance documents—without taking into account public input, and then treat that report as binding law.234 Again, the FDA has an opportunity to issue a rule in nonlegislative trappings that could have significant effects on the public.235
Thus, the GGPs fail to curtail the abuses and misunderstandings surrounding the § 553(b)(A) exception.236 The GGPs, however, succeed in introducing some worthwhile measures that may help assuage the nonlegislative rule dilemma. Specifically, explaining that guidance documents do not operate to bind, specifying to whom guidance documents apply, requiring the FDA to publish all of its guidance documents, and providing for more public input in the creation of level 1 guidance are pragmatic provisions. The GGPs, however, apply to only one agency. To establish greater efficiency and consistency in the use of nonlegislative rules throughout the federal government, Congress ought to revise nonlegislative rules for all agencies.
Senator Carl Levin (D-MI), with Fred Thompson (R-TN) and numerous other co-sponsors, introduced the Regulatory Improve[*PG186]ment Act of 1999 (“Act”) to the Senate.237 In July 1999, the Senate Committee on Governmental Affairs (“Committee”) published a Report on the proposed Act.238 In the Report, the Committee noted that the annual cost of agency regulations is nearly $300 billion and that there are about sixty federal agencies issuing regulations at a rate of approximately 4000 per year.239 The Committee contended that federal agencies overly regulate and interfere with individuals, businesses and local governments.240 The proposed Act provides that federal agencies should follow complex procedural requirements before adopting “major” legislative rules—those that would impose costs of more than $100 million.241 According to the Act, when agencies attempt to adopt major legislative, rules they would have to conduct thorough cost-benefit analyses at both the proposed and final rulemaking stages.242 If an agency attempts to create rules affecting health, safety or the environment, the agency also would have to conduct a thorough risk assessment.243 Moreover, the Act provides the [*PG187]Office of Management and Budget (“OMB”)—an agency mandated to improve the efficiency of other administrative agencies—with the authority to conduct oversight review of major rules.244
The Regulatory Improvement Act states that it does not apply to rules falling within § 553’s exceptions.245 The Senate Report, however, states that if a nonlegislative rule “alters or creates rights or obligations of persons outside the agency,” then it must be considered a legislative rule within the meaning of the proposed Act.246 Furthermore, the Report reads:
the Committee cautions the agencies that any statement of general applicability that actually alters or creates rights or obligations of persons outside the agency is included in this definition. While informal agency guidance is encouraged, agencies should not attempt to evade the requirements of this legislation through mischaracterizations of such materials.247
Although the proposed statute itself does not address interpretative rules, the accompanying Senate Report addresses the potential misuse of the § 553(b)(A) exception.248
The proposed Regulatory Improvement Act says little about nonlegislative rules and the Act’s potential effect on them is unclear.249 The language of the Senate Report attempts to restrain agencies that may misuse nonlegislative rules by requiring burdensome and time-consuming cost-benefit analyses and risk assessments for substantive rules dressed in the trappings of nonlegislative rules.250 It appears that [*PG188]some members of Congress are well aware that agencies sometimes use the nonlegislative rule exception to avoid proper rulemaking procedures.251 The Senate Committee’s command to agencies that they should properly label their rules may discourage agencies from mislabeling their legislative rules as nonlegislative.252
If Congress passes the Act, however, it is just as likely that agencies may attempt to abuse the nonlegislative rule exception more often than before.253 If all major legislative rules must follow more process than the already burdensome § 553 procedure, agencies may attempt to avoid the procedures more often by disguising legislative rules as nonlegislative.254 An agency could issue a rule creating costs of more than $100 million, yet identify it as an interpretative rule or a general statement of policy.255 Considerable time could pass before the OMB or an aggrieved private party challenges the rule and demands the agency conduct a cost-benefit analysis.256 The agency would be taking a risk by mislabeling its rules, in effect daring the OMB or the public to act.257 That risk, however, may be worthwhile for agencies.258 The proposed Act imposes such huge burdens on agencies that they will adopt fewer legislative rules than they do now.259 Accordingly, to continue meeting the demands of their congressional mandates, agencies may have no choice but to rely more heavily on the nonlegislative rule exception.260
The Act specifically states that nonlegislative rules are excluded from the cost-benefit analysis requirements, but does not specifically address those major substantive rules mislabeled as nonlegislative.261 [*PG189]Rather, only in the Report does the Senate assert that nonlegislative rules with major effects must be subjected to cost-benefit analysis.262 Were this issue ever to come up in litigation, the court would probably consider the Senate Report, but it would not be dispositive.263 A court could hold that the language of the proposed Act is sacrosanct and that nonlegislative rules simply cannot be major rules.264 Of course, if a rule costs more than $100 million, it probably also has significant effects or creates legal obligations, and a judge would probably hold that it must be a legislative rule.265 One way or the other, the small discrepancy can only contribute to the confusion surrounding § 553(b)(A).266 The Committee would be wise to rewrite § 621(10)(A) of the Act to reflect that substantive rules disguised as nonlegislative must go through the cost-benefit analysis.267 Such a revision of the Act would be more consistent with the original intentions behind the APA.
The purpose of the APA is to bolster clarity, consistency and public participation in federal agencies.268 If Congress adopts the Act as is, it would undermine these beneficial aims to the extent that it fails to ameliorate the confusion surrounding nonlegislative rules.269 Congress should not adopt the Regulatory Improvement Act in its current form.270 If Congress seeks to implement meaningful regulatory reform, Congress ought to revise § 553(b)(A) of the APA now.271
Nonlegislative rules continue to confuse the government and public alike, and agencies still are able to misuse them to bind the public.272 Whether Congress or agencies attempt to remedy the nonlegislative rule problem, they should affect law that would require federal agencies to: (1) correctly and uniformly label nonlegislative rules; (2) publish a list of all of their nonlegislative rules in the Federal Register; (3) avoid using mandatory language in nonlegislative rules; (4) specify that nonlegislative rules do not legally bind either agencies or individuals; (5) specify that neither the public nor the government should rely on nonlegislative rules; and (6) remember to use the full informal § 553 process when creating rules with substantive effects.273
The best solution would be for Congress to amend the APA to better explain the § 553(b)(A) exception.274 Courts repeatedly have lamented that Congress has never defined or revised nonlegislative rules.275 According to the Senate Committee on Governmental Affairs, Congress is aware that there is the potential for abuse of § 553(b)(A).276 The confusion over nonlegislative rules has existed for more than half a century and calls for a legislative response.277 Because Congress is currently considering reforming how administrative [*PG191]agencies regulate in general, now is the ideal time to address nonlegislative rules.278
Congress should create a “Nonlegislative Rule Act,” which would amend and clarify the law surrounding the § 553(b)(A) exception.279 The courts have held that nonlegislative rules should not employ mandatory language and that they cannot have binding effects.280 Agencies, however, are able to manipulate the § 553(b)(A) exception to impose substantive effects on the public.281 The best solution to halt this potential for abuse is for Congress to legislate that all rules created without notice-and-comment cannot have binding legal effects on agencies or the public, unless they fall under another of § 553’s categorical exceptions.282 Learning from the FDA’s GGPs, Congress should require agencies to publish lists of their nonlegislative rules in the Federal Register and to refer to those rules with a uniform nomenclature.283 Furthermore, the hypothetical Nonlegislative Rule Act should require agencies to avoid using compulsory language in their nonlegislative rules, to specify that nonlegislative rules do not legally bind either agencies or individuals and to assert that neither the public nor the government should rely on nonlegislative rules.284 In addition, Congress statutorily should compel agencies to use full notice-and-comment process when creating rules with substantive effects.285 The courts have ruled that only legislative rules may create rights or obligations, so agencies should rely only on notice-and-comment to create binding and consistent rules of law.286
[*PG192] If Congress fails to take this opportunity to amend the Regulatory Improvement Act’s bill, then the agencies should revise how they create and apply nonlegislative rules. Although each agency may treat nonlegislative rules differently, as long as the agencies strive to improve their use of nonlegislative rules, it will benefit the public. Like the FDA, other agencies should develop their own versions of the GGPs.287 The FDA’s GGPs are not the best model, however, and other agencies should attempt to formulate better policies regarding nonlegislative rules.288 Other agencies would be wise to borrow from the GGPs the provisions requiring the FDA to publish a list of all of its guidance documents and to refer to nonlegislative rules with a standardized nomenclature.289 The public is always better served when the government keeps it informed in a lucid and comprehensive manner.290 As argued in Section B of this Part, a better set of GGPs would not feature contradictory principles, would clarify that nonlegislative rules do not operate to bind and would not further complicate the issue by devising a two-tier system.291 Moreover, agencies should include in their definitions of nonlegislative rules all rules falling within the § 553(b)(A) exception.292 Other agencies should learn from the GGPs’ mistakes and develop their own more clear and more efficient policies for nonlegislative rules.293
The federal government is cognizant that agencies sometimes misuse the § 553(b)(A) exception because of its inherent complexity. The Food and Drug Administration deserves recognition for attempting to ameliorate the problem by developing the Good Guidance Practices. The GGPs, however, fail because they contradict themselves and leave open avenues for potential agency abuse. While one administrative agency is confronting the issue, Congress is ignoring it. The Regulatory Improvement Act of 1999 only briefly touches on the role of nonlegislative rules. The proposed statute fails to engage the complications surrounding the § 553(b)(A) exception. Moreover, because [*PG193]of the burdens the Act would impose on administrative agencies, it could encourage agencies to promulgate nonlegislative rules.
If Congress truly wishes to overhaul the administrative system with this legislation, Congress should take the opportunity now to clarify the creation and use of nonlegislative rules. Likewise, the FDA should act soon to revise its GGPs before the agency becomes too entrenched with the GGPs’ inadequate standards.294 Specifically, Congress and the agencies should adopt statutes or legislative rules, respectively, ensuring that agencies: correctly label nonlegislative rules; publish a list of all rules in the Federal Register; avoid using compulsory language in nonlegislative rules; explain that nonlegislative rules do not legally bind either agency employees or individuals; specify that agencies, courts and the public should not rely on nonlegislative rules; and remember to use full informal rulemaking process when creating rules affecting individual rights or obligations. By formally establishing these principles, Congress and federal agencies will accomplish more successfully the APA’s auspicious objectives of uniformity, fairness and public participation.