A Libertarian Bias in the D.C. Circuit’s Administrative Law

The United States’ court system has a clear hierarchy, and lower courts are obliged to follow the decisions of the Supreme Court. However, those lower courts sometimes step out of line and the Supreme Court must reassert its superior authority.

According to a recent article by Harvard Law School Professors Cass Sunstein and Adrian Vermeule, the U.S. Court of Appeals for the D.C. Circuit is stepping out of line a lot lately, departing from Supreme Court precedent in a series of administrative law cases.

For example, they argue that the D.C. Circuit – often called the country’s second most important court – failed last year to accord with Supreme Court precedent in two key administrative law cases. The D.C. Circuit struck down the Passenger Rail and Improvement Act of 2008 on grounds that Sunstein and Vermeule claim clearly contravene existing Supreme Court precedent. The circuit court also strayed from Supreme Court precedent when it invalidated last year an agency rule intended to offer guidance to the public about the meaning of its regulations.

Although such apparent deviations from Supreme Court precedent could simply arise due to factual differences in the cases at hand or ambiguities in existing legal principles, Sunstein and Vermeule argue that these recent rulings by the D.C. Circuit are part of a larger shift in this lower court’s approach to administrative law. They claim that the D.C. Circuit court has become a breeding ground for “libertarian administrative law” – a shift that not only lacks sufficient legal support but sometimes directly disregards prevailing Supreme Court precedent. A shift in administrative law toward libertarianism is dangerous, Sunstein and Vermeule warn, because administrative law should rise above partisan ideology and should be “organized not by any kind of politicized master principle.”

According to Sunstein and Vermeule, several judges on the D.C. Circuit have clearly embraced libertarianism, as evidenced both from their writings from the bench as well as their extrajudicial commentary. Although Sunstein and Vermeule make clear that no single decision establishes this libertarian movement alone, they contend that a number of opinions manifest a pattern that skews in a decidedly anti-regulatory direction.

They also argue that libertarian administrative law is part of a larger effort in the U.S. system of public law to return to what proponents claim are the original intentions of the Constitution. Such a trend, sometimes dubbed the “Constitution in Exile” movement, purports to place a greater emphasis on protections of personal and economic liberty while curtailing aspects of federal power.

Libertarian administrative law has made an identifiable mark in several legal doctrines, according to Sunstein and Vermeule. Two of these areas, the nondelegation doctrine and procedures for interpretive rules, lay at the heart of two cases the Supreme Court has decided to review in its upcoming term.

In Department of Transportation v. Association of American Railroads, the Court will reconsider the D.C. Circuit’s decision to strike down the Passenger Rail and Improvement Act, which aimed at promoting Amtrak’s interests. The D.C. Circuit held that the statute granted too much discretion and competitive advantage to Amtrak, which it found to be a private corporation. However, Sunstein and Vermeule note that Amtrak is publicly subsidized, subject to strict control by the federal government, and previously determined by the Supreme Court to be a government entity for other purposes.

In Perez v. Mortgage Bankers Association, the Supreme Court will review a case involving an agency’s interpretive rule that the D.C. Circuit invalidated because it held that the agency needed to subject to a notice-and-comment process to change its interpretation. Sunstein and Vermeule point out that the Administrative Procedure Act, the statute that governs rulemaking procedure, does not include any such requirement for interpretive rules. Neither, they say, does the Supreme Court.

Sunstein and Vermeule offer other instances of libertarian ideology driving D.C. Circuit decisions, such as two cases involving Securities and Exchange Commission regulations. One involved a rule mandated by the Dodd-Frank Act that required manufacturers to label products that contain so-called “conflict minerals,” a requirement which the D.C. Circuit held violated commercial speech.   The other involved the agency’s “proxy access” rule requiring publicly traded companies to list shareholders’ nominees on ballots for corporate board positions, a rule which the D.C. Circuit struck down as arbitrary due to a purported lack of an adequate cost-benefit analysis.

Other examples of libertarian administrative law offered by Sunstein and Vermeule include cases involving the doctrines of standing and reviewability, which dictate who can challenge agency actions and when the courts can review such actions.

The D.C. Circuit has been down a similar road before, say Sunstein and Vermeule.   In the 1970s, a D.C. Circuit Court dominated by liberal judges attempted to push administrative law in a progressive direction with decisions that aimed to “counteract what they saw as anti-regulatory pressures within the federal bureaucracy.”

The Supreme Court eventually reigned in the lower court’s ideological tilt with its decision in Vermont Yankee Nuclear Power Corporation v. Natural Resources Defense Council. In Vermont Yankee, the Supreme Court made clear that “administrative law is fundamentally a compromise,” say Sunstein and Vermeule. They assert that D.C. Circuit judges have apparently forgotten or disregarded the lessons of Vermont Yankee, instead allowing partisan ideology slip into their decision-making.

Sunstein and Vermeule call on the Supreme Court once again to put a stop to the D.C. Circuit’s ideologically influenced administrative law decisions.

The two recent D.C. Circuit Court decisions that the Supreme Court has agreed to review – the Amtrak and mortgage bankers cases – provide opportunities for the Supreme Court to remind the lower court that, “in a hierarchical court system, respect for the governing rules is not optional,” write Sunstein and Vermeule. It is time, they argue, for a Vermont Yankee II.