ACUS Adopts Recommendations For Best Practices in Informal Adjudication

A new recommendation aims to improve fairness of federal administrative adjudication.

Federal administrative adjudication can be classified into three types: A, B, and C.

Type A adjudication is covered by the familiar adjudication provisions of the Administrative Procedure Act (APA)—Sections 554, 556 and 557.

In Type B adjudication, a statute requires the agency to conduct an evidentiary hearing but the APA adjudication sections do not apply. Type B adjudication is governed by agency procedural regulations that closely track Type A except that Administrative Law Judges do not preside. Type B adjudication is just as formal as, and often more formal than, Type A. It should not be referred to as “informal adjudication.”

In Type C adjudication, however, an agency renders a decision that legally binds private individuals or entities, but the agency does not conduct an evidentiary hearing at any point in the administrative process. This type is true “informal adjudication.”

Types A and B adjudication have been thoroughly studied. In Recommendation 2016-4, the Administrative Conference of the United States (ACUS) spelled out a set of best practice recommendations for Type B.

But Type C adjudication has been largely ignored—and for good reason. There are many schemes of federal Type C adjudication and each one is different from the others. Most Type C schemes require the exercise of substantial discretion by agency decisionmakers, but there is no uniformity between them. Their decision-making methodology includes consultation between private party and staff, inspections, tests, document exchanges, and mediation.

Type C adjudication ranges from disputes with very high stakes to disputes involving only trivial stakes. For example, the decision whether to grant a bank charter or grant marketing authorization for a new drug is informal. So is the decision to issue a visa or to consider issuance or renewal of a license to construct a hydro-electric project such as a dam. The decision whether to grant an application for scientific research, as well as to terminate such a grant, is informal.

Numerous agencies rely on inspections rather than hearings. In the area of national security, decisions on foreign investment in the United States by the U.S. Committee on Foreign Investments and economic sanctions by the U.S. Office of Foreign Assets Control are Type C. The Internal Revenue Service uses informal adjudication to decide whether to seize a taxpayer’s assets for an unpaid tax deficiency. Permissions to use national forest land for grazing or mining are informal. Even decisions about whether to disclose documents requested under the Freedom of Information Act or whether to grant a waiver from a regulation fall within the definition of Type C adjudication. At the trivial end of the spectrum, decisions to deny someone an overnight campsite in a national forest campground or reject an improperly wrapped package at the post office are also Type C adjudication.

Type C adjudication differs from Types A and B in fundamental ways. In Types A and B, there is a sharp separation between the staff’s “frontline decision” to deny an application or prosecute a violation, and the “primary” hearing stage. As in criminal law, the decisionmaker at the hearing stage is neutral and played no part in the investigation or the frontline decision. In Type C, however, there is often no such separation. The same person or team that investigated the dispute and made the frontline decision often makes the agency’s primary decision—the stage when the private party can offer evidence and argument.

Type C adjudication resists any kind of uniform statutory treatment. There can be no one-size-fits-all solution to the problem of Type C procedure. Nevertheless, the design of each Type C scheme should provide some level of appropriate procedure for private disputants that can substitute, at least in part, for the protections furnished by an evidentiary hearing in Types A and B.

While we often think of Type C adjudication as a procedure-free black hole, this view is not entirely accurate. In fact, significant constitutional and statutory and case law-based protections often come into play, including “consultative” due process, APA Sections 555 and 558, government ethics statutes and regulations, the Administrative Practice Act (which guarantees the right to legal representation), pro-active disclosure under FOIA, ombuds provisions, and constraints imposed on agency decision-making by the judicial review process. And, of course, Type C adjudication is nearly always constrained by agency-specific procedural regulations.

In ACUS Recommendation 2023-5, ACUS adopted a set of nine best practice proposals for Type C adjudication drawn in part from the existing set of procedural protections.

The proposals in Recommendation 2023-5 include provisions for: appropriate notice, opportunity to submit evidence and argument, representation, decisionmaker neutrality, statement of reasons, administrative review of primary decision, access to ombuds, adoption of procedural regulations, and quality assurance.

The proposals in Recommendation 2023-5 are intended to serve as the raw material from which each agency can tailor Type C procedures appropriate to its own specific circumstances. Agencies designing Type C procedure must balance: the stakes involved in the decision, accurate fact-finding and wise exercise of discretion, available decision-making resources, minimizing cost, and achieving stakeholder satisfaction with the perceived fairness of the procedure.

Regardless of the stakes, every Type C dispute is important to private stakeholders and often to agency programmatic concerns and budgetary resources. For many in the private sector, informal adjudication procedure is the face of justice. The private party to the dispute should perceive the adjudication process to be fair and reasonable. The party should have an opportunity to introduce evidence and argument and learn the reasons for a negative decision. The process should be designed to reduce the risk of error and to minimize expense and delay. Administrative lawyers and administrative agencies should focus on designing informal adjudication procedures that wisely balance these conflicting demands.