900 F.2d 369 (D.C. Cir. 1990)
Congress passed a law authorizing the FAA to prosecute and adjudicate administrative actions where the penalty fell below 50,000 dollars. The FAA produced a rule which provided a formal adjudicatory and penalty scheme/schedule. FAA did away with notice and comment requirements, arguing they had “good cause” when promulgating their agency rule and that the rule was procedural. Generally, an agency does not have an exception to notice and comment rule when the action “substantially alters the rights or interests of regulated parties.”
“Whether governmental agencies were obliged to engage in notice and comment procedures before promulgating a body of regulations governing the adjudication of administrative civil penalty actions.”
Yes, the agency was obliged to follow notice and comment because the rule substantially impacted civil penalty defendants. The court held that because an action can be labeled procedural does not ensure it falls outside the scope of the APA notice and comment rule. The purpose of the procedural exception is to ensure that agencies can attend to their “housekeeping” matters, which would fall outside rules that impact outside substantive rights. The decisions relating to civil penalties “encode a substantive value judgment” on a defendant’s adjudicatory procedures. Because the Penalty Rules substantially affect civil penalty defendants’ rights to avail themselves of an administrative adjudication, members of the aviation community had a legitimate interest in participating in the rulemaking process.”
Additionally, “the time constraints of the enabling statute did not impose an insurmountable obstacle to complying with the applicable notice and comment requirements of the APA” – therefore, the court held there was no good cause for not holding notice and comment. The good cause requirement for the exception is to be narrowly construed. The statute didn’t even set a formal deadline for the implementation of civil penalties. Additionally, there are procedure for an expedited notice and comment available that were not considered by the FAA. Finally, the agency waited 9 months to promulgate the rule within the 2 year deadline.
While the rule could be described as “practice” the rule falls closer a “practice” than “substantive” on the continuum. “… if a given regulation purports to direct, control, or condition the behavior of these institutions or individuals subject to regulation by the authorizing statute it is not procedural, it is substantive. At the other end of the spectrum are those rules, such as the ones before us in this case, which deal with enforcement or adjudication of claims of violations of the substantive norm but which do not purport to affect the substantive norm. These kinds of rules are, in my view, clearly procedural.”