An Intro to American Adm. Law

American Administrative Law has been longly developed from common law heritage of England. In broad sense, administrative law might be defined as legal control of government. More specifically, it consitsts of the legal principles that defines the authority and structure of administrative agencies, specifis the procedural formalities that agencies use, detemine the validity of administrative decisions and outline the role of reviewing courts, and other organs of goverment in their relation to administrative agencies.

Those principles include three basic bodies of law: (1) constitutional law; (2) statutory law which includes the Administrative Procedure Act (APA); (3) a form of federal common law, emodied in judicial decisions.

In the democracy system, the citizens elect their representatives to protect their general will, so-called, public interest. They act as legislator who enact the law to govern the citizen's activities in the day-to-day life. However, bereaucracy is the principal mechanic to run the system, so-called administrative agencies. Legislative function will delegate their power to administrative agencies to enact the regulation to control, support, or prevent some people's activities.

There are several arguments if the regulation should be set up. Most lawyers consider that the regulatory system is necessary in the democracy administration although the administrative agencies are not the direct representatives of the citizen. The economists consider the regulations are indispensable but only when the market has completely failed for the citizens to bargain one another. In shourt, when the market defects fall within one of following categories, the admistrative agencies can justify the regulation formation:

(1) The need to control monoply power. Under this situation, regulation is required to achieve the allocation of resource efficiently, that is, the regulation is indispensable to achieve the fairness of income distribution;

(2) The need to compensate for inadequate information. Basically, the people will be considered as the "risk optimists;"they tend to believe that they have below-average susceptibility to risks because they lack the complete information. The regulation will play the role to compensate for inadiquate information, or to lower the costs ot consumers or workes of obtaining adequate information.

For this reason, the govement action may be justified when (1) suppliers mislead consumers whose available legal remedies such as private litigation are expensive; (2) consumers cannot readily evaluate the information availabel such as the potential effectiveness of a drug; (3) the market on the supply side fails to furnish the information needed or demanded;

(3) Collective action problem. The clearest cases involve public or collective goods, which are characterized by two features: (1) nonrivalous consumption (consumption by one person does not create more scarcity for other consumptions); (2) nonexcludability (every can access public goods). The government can set the standard for the public goods.

(4) The need to correct for "externalities" or for the existence of "transactions costs" that make bargain difficulty and costly. If the transactions costs is not high, the government should not intervene such activities.

Government regulaltion might be able to justify some other reasons. The government might need to control the windfall profit of some commodity which the price might increase suddenly. Sometimes, the government might need to control the excessive competition that lead the small rivals of big companies defunct from the business, and finally the price will go up substantially. The regulation to control the "unfair competition" might be easily issued. Another reason, the government might need to alleviate scarcity especially an item in short supply. Finally, the regulation might need to be enacted to control the administrative agency problems because the agencies might distort the market mechanism by themselves.

However, those reasons are not based on the economic basis because those are justified as a means to enhance the efficiency and reduce the social cost. In stead, those are the method to redistribute the resources from one group to another. As a result, the regulation will cause some people better off while making other people worse off.

There still be numerous reasons to justify the administrative regulation. For example, the regulation can be used as the plan to develop the facility, industries, etc. Sometimes, some regulation might be issued to facilitate or assist the poor under the paternalism idea.

History of American Administrative Law

(1) English Antecedents.

The court had developed the writ of mandamus, writ of prohibition, or the writ to certioria as te mean to control the administraive agency decision after the court built up the doctrines of official privilege based on the exercise of discretionary authority. During the sixteenth and seventeenth centuries, in England, the Tudor and Stuart monarchs had developed powerful administrative tribunals that were used to control the subordinate officials in their relation to the citizenry, as the present French Conseil d'Etat. However, it was cut short by the Glorous Revolution of 1688.

(2) The American Experience to 1875.

The writ and the Chancellor's injunctive power were used as the mechanisms for the control of administrive officials around the first 100 years of the states. The main idea to administrate the country shifted from the state rule, which state had responsibility to allocate the resource, to the marketplace mechanism. The state had very limited power to intrude the private's activities.

(3) 1875-1930: The Rise of Administrative Regulation and the Traditional Model of Administrative Law.

The state attempted to set up the regulatory agency such as Interstate Commerce Commission (ICC) to champion the fairness of the small business. In this period, the regulated firms used the court to block the regulation. Then, the state enacted the statutory provision to supplant the court decision and provided for a trial-type hearing before the regulatory agency to develop a factual record that would serve as the besis for agency action. Thereafter, whenever the statury is not clear about the hearing process, court applied the same a trial-type hearing as the due process requirement. Under this traditional model of administrative law, there are four essential elements as following:

(3.1) The legislature must authorize administrative sactions on priviate persons through rules or standards that limit agency discretion;
(3.2) The procedures used by the agency must tend to ensure agency compliance with legislative directives;
(3.3) Judicial review must be available to ensure that agencies use accurate and impartial decisionmsking procedure and comply with legislative directives;
(3.4) Agency processes must facilitate the exercise of judicial review.

(4) The New Deal and Beyond: 1932-1945.

Franklin D. Roosevelt's New Deal was a watershed for the development of American administrative law. During the condition of the Great Depression, the common law was considered both too much and too little in different situations. It was too much because it protected the property and liberty from governmental revision; it is too little because it did not included basic rights to individual "security." The New Deal sought the broad range of social and economi gaurantees. During this period, two movement occured that is: (1) president posessed the broad power of lawmaking and adjudication; (2) the size and independent regulatory commissions had been founded substantially. However, most of New Deal Plans relating to the economic area were struck down as unconstitutional by the supreme court. Court-packing plan to expand the number of supreme court had been proposed by the president; this fact caused the swing vote and acept the deal as constitutional.

(5) 1945-1962: The Administrative Procedure Act (APA) and the Maturation of the Traditional Model of Administrative Law.

In 1940, the congress proposed the Walter-Logan bill, which would have imposed imposed standardized procedural requirements on federal agencies and mandated a broad availability and scope of judicial review of agency decisions. The president voted against this bill, but he actually in 1939 set up the Committed on Administrative Procedure, which finally in 1946 the Federal Administrative Procedure Act had been adopted in U.S.C. section 551 et seq. Some outlines about APA can be deliniated as following:

Section 551 definitions;

Section 552 requirements for publication of certain rules and regulations, and requires agencies to make other important decision and documents available to the public on request;

Section 553-558 the procedural formalities that agencies must observe in decisionmaking;

for example, section 553 will deal with the rule-making process which requires the involved interest persons can participate in the process and everything must be concluded in the record;

section 556-557 is the modifying of trial-type hearing procedures in rulemaking. In addition, the independent administrative judge and the procecutorial official must be separated under section 554, and 556-557.

Section 701-706 deal with the timing, form, and scope of judicial review.

(6) 1962-1980: The Rights Revolution, Critique of Administrative Process and Administrative Substance, and "Public Interest" Administrative Law.

Many scholars considered that the APA was too stiff or rigid. Under the civil right movent in 1960s, there were requirment of fairness for some group of American increased. Many independent regulatory commissions such as Equal Employment Opportunity Commission (EEOC), have been set up. Congress enacted the statutory deadline or hammer that required the administrative to do in timely limit. The court deal with "welfare" which basically was not the property rights as the new property right and required the trial-type hearing or other procedural formalitie and thorough judicial review.

(7) 1980 to now: Presidential Administration and the Cost-Benefit State?

Since the Reagan administration, the economic analysis about the unit cost for the regulatory formation was applied. Administrative agency must prove that the regulation was complete enought to pass the requirement of cost-benefit balancing test and the agency selected the least-cost solutions from several choices. Since 1980, three developments have been of special importance that is the government has shown an increasing interest in engaging in "Quantitative analysis;"in assessing "Tradeoffs;" and in "Smarter tools." Particularly, the government replaced the command and control regulation with the information disclosure and economic incentives or deregulations.

The United States Supreme Court also plays the role to develop the Administrative Law. For example, the Court ruled that the agencies have the conderable freedom from judicial review when they decide not to take certain kinds of action; limit the extent to which the courts can impose new procedural requirements on agencies; (3) require the courts to pay particular attention to agency interpretations of statutes.

January 24, 2006

Today I have studied about the doctrine of separation of powers and delegation of the power doctrine.

Montesquieu proposed theory of separation of powers: the legislature, execution, and the judiciary should not be combined in the same organization. In other word, we can call this system as the check and balance system.

In the U.S., the system might be considered into two combination both check and balance and cooperation between the president and congress such an approval of the high level of agency. The president has been vested the power to vote against the bill of the Congress; simulataniously, the congress can impeach the president if the serious violation of any crime has been committed by the president.

At the beginning of the American society, the idea of lais·sez faire was the dominant doctrine; the court struct down almost of all statutes that was intrusive into the freedom of contract in private sector. The idea of non-delegation of legislative function was also extremely important; the congress could not delegate their power to enact the law to Executive or Judicial branch.

The idea of non-delegation had been gradually supplaced by the rule of necessity to fulfill the executive function. The stiff rule of absolute non-delegation doctrine would block the executive agencies to achieve their tasks; the delegation of power thereby was permissible under the "intelligible principle" prescribed by the Congress in the statute.

The Congress must set up the standard of guidance for the administrative agency in exercising the discretion to achieve the goal of the statute. As long as the statute defines the guidance standard for the administrative agency to exercise its discretion, such statute is constitutional.

The example cases law about the delegation doctrine are given in Administrative Law Book, written by Breyer, et al.

(1) Page 40 : The Railroad Case

State Railroad & Warehouse Commission v. Chicago, 38 Minn. 281, 37 N.W. 782 (1888)

The issue in this case is whether the state can delegate the legislative power to the Commission. Does it violate the doctrine of any legal concept, specifially, a non-delegation doctrine? The court concluded that the grant power of state was permissible under the reason of necessity. The railroad service even if is provided by the private sector, it is considered as the public goods; as a result, the commission can regulate the private companies, including the fee rate of railroad service based on reasonable and equal doctrine. In this case, the commission could impose the price rate in the same rate even though the distance was different.

The court emphasized that some activities the court must rely on the expertise of the commission, and the duties of the commission was fundamentally the executive function which detail the directives or practice of railroad system to carry out thier executive function.

If the act of the commission is not fundamentally legislative function, it is permissible to grant the power to fulfill the detail of statute. Conclusion, as long as the policy comes from the legislature, the delegation of power is permissible.


(2) Page 47: Intelligible Principle or Standard of Guidance

The policy in Roosevelt administration, the New Deal Plan, is trying to create the stability of the economic system. Roosevelt believed he and executive agency should have the broad discretion. As a result the terms in the policy and the statutes in his administration are somewhat vague. The method to enforce his policy is based on the criminal penalty saction; if policy has been violated, the criminal sanction will be imposed.

The court concerns about the delegation of power the legislative function to the executive function; the court court finally conclude that the delegation of power is not prohibited under the U.S. Constitution. The legislature must provide, however, the standard guideline for the delegated organization such as the executive or administrative agency, not too broad and vague terms in statute. Whenever the statute terms are vague, the court has to deal with how to interpret the magic words. For example the terms of "unfair competition," if the difinition has not been defined, the court court might look into the Congress intention and other backgroung to interpret such terms. However, if the terms are too broad and too vague, the court must determine how broad discretion that the administrative agency possesses. If the discretion is virtually unfetterred, the statute is likely to be hold unconstitutional because it is not satisfied the intelligible principle which the court cannot evaluate if the adminitrative agency has comform to the Congress intention to delegate such power.

In reality, Congress might consider that the delegation of power is necessary because it is impossible for the Congress to define every detail of the regulation in the statute. In addition, the congress sometimes would like to avoid being blamed if the legislation is not good or ineffective. As a result, the Congress might delegate the power to bureaucracy in fairly vague terms including some guidelines for the agency to implement such policy. In contrast, the Congress can obtain credit if the law becomes good or effective.

The second case, A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935), the court has to deal with issue whether the statute is unconstitutional because the vague terms in the statute under the intelligible principle.

This case deals with the problem of standard of guidance provided in the statute to detail or direct the discretion of the President or Administrative agency. The “Live Poultry Code,” under the package of economic development policy of Roosevelt, did not contain and definition of “fair competition,” and did not provided any guideline for the President to exercise his authority or discretion; even thought the court tried to look into the Declaration of Policy in the “code of fair competition,” the court cannot find any standard or guidance to direct the President’s discretion. When the terms in statute are unclear, the court enjoys the right to interpret such terms the same as in this situation.

In this statute, even though there are some terms to constraint the president’s discretion to approve any law or regulation; for example, the president is required to find that the trade or industrial associations or groups which propose a code, “impose no inequitable restriction on admission to membership” or “the code is not designed to operate to discriminate or to eliminate or oppress small enterprises and will not operate to discriminate against them,” such terms are too vague.

As a result, the code provided the virtually unfettered discretion to the president; the code-making authority thus conferred is an unconstitutional delegation of legislative power.

(3) Page 51

The third case, Amalgamated Meat Cutter v. Connally, 337 F. Supp. 737 (D.D.C. 1971), it sounds that the court approves the broad discretion of president or administrative agency if the statute provides some guidelines for the agency in exercising its discretion.

The fact in this case is that the president vests the power to freeze the wage price confroming to the Economic Stabilization Act. The labor union challenged this Act on grounds of the excessive delegation. In other words, the basic claims are that the statute violated the doctrine of non-delegation power, and the separation of powers doctrine.

The court concluded that “There is no forbidden delegation of legislative power if congress shall lay down by legislative act an intelligible principle to which the official or agency must conform.” Then, the requirements are the congress must lay down the sufficient demarcation of the field to permit a judgment whether the agency has kept within the legislative will conforming to the congress guideline in the statute.

The court looked into not only in the literature of code provision, but the history background or the context of the code as well. The court concluded that the directives or the intelligible principle is not violated but those can be considered from the background of the legislation process; all things happened all the time in the past.

The term of “unfair and inequitable” is inherent in a stabilization program of economic development policy. The court concluded that “There is fairly implicit in the Act the duty to take whatever action is required in the interest of broad fairness and avoidance of gross inequity.” As a result, this statute, which entitles the president to exercise his discretion to freeze the wage price, is not unconstitutional as an excessive delegation of power by the legislature.