Air Transport Association of America v. Department of Transportation
900 F.2d 369 (1990)
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Rule of Law:
An agency must engage in notice and comment rulemaking for rules that substantially alter the rights or interests of regulated parties. Rules that define the procedures for administrative adjudication are not exempt from notice and comment under the APA's exception for "rules of agency organization, procedure, or practice" if they substantially affect a party's right to that adjudication.
Facts:
- In December 1987, Congress enacted legislation creating a two-year 'demonstration program' that authorized the Federal Aviation Administration (FAA) to prosecute and adjudicate aviation safety violations administratively.
- The legislation increased the maximum civil penalty for a single violation to $10,000 and gave the FAA its own enforcement authority for cases involving less than $50,000.
- Previously, the FAA could only propose a $1,000 penalty and was required to refer disputed cases to the U.S. Attorney's office for prosecution in federal district court.
- The new law was intended to strengthen the FAA's enforcement power, as U.S. Attorneys often lacked the resources to prosecute these smaller cases.
- The enabling statute specified that the FAA could assess a penalty 'only after notice and opportunity for a hearing on the record in accordance with section 554 of [the APA].'
- Approximately nine months after the law was passed, the FAA issued a comprehensive set of regulations, the 'Penalty Rules,' establishing the entire adjudicatory scheme for these new administrative actions.
- The FAA made these Penalty Rules effective immediately upon issuance, without providing any prior public notice or opportunity for comment.
Procedural Posture:
- The Federal Aviation Administration (FAA) promulgated the Penalty Rules, making them effective immediately without a prior notice and comment period.
- Air Transport Association of America (Air Transport), the petitioner, filed a petition for review directly in the United States Court of Appeals for the District of Columbia Circuit.
- Air Transport challenged the rules on both procedural grounds (failure to use notice and comment) and substantive grounds (inconsistency with the APA).
- The FAA, the respondent, filed a motion to dismiss the petition on ripeness grounds.
- The Court of Appeals deferred consideration of the ripeness motion and ordered the parties to brief the issue along with the merits of the case.
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Issue:
Does the Federal Aviation Administration's promulgation of a comprehensive system of rules for adjudicating civil penalty actions, without prior public notice and comment, violate the Administrative Procedure Act?
Opinions:
Majority - Judge Harry T. Edwards
Yes. The promulgation of the Penalty Rules without prior notice and comment violates the Administrative Procedure Act because the rules substantially alter the rights of regulated parties and therefore do not qualify for the APA's procedural rule exception. The court reasoned that the exemption for 'rules of agency organization, procedure, or practice' under § 553(b)(A) is narrow and does not apply to agency actions that 'substantially alter the rights or interests of regulated' parties. These rules are not mere 'housekeeping' measures; they substantially affect a defendant's right to an administrative adjudication by making discretionary and contentious choices about the process defendants are due. Relying on National Motor Freight Traffic Ass'n v. United States, the court held that rules affecting the 'right to avail oneself of an administrative adjudication' must be subject to public participation. The FAA's 'good cause' justification also fails because the statutory time constraints were not an insurmountable obstacle, and the agency's own nine-month delay contributed to any time pressure. Finally, accepting post-promulgation comments did not cure the defect, as an agency is presumed to be close-minded after issuing a 'final' rule.
Dissenting - Judge Silberman
No. The Penalty Rules fall squarely within the APA's exemption for 'rules of agency organization, procedure, or practice' and therefore did not require notice and comment. The majority obliterates the critical distinction between substantive and procedural rules. These rules are purely procedural because they govern the enforcement and adjudication process; they do not regulate the 'primary conduct' of the airlines (i.e., the underlying safety standards). A rule does not become substantive simply because it is important or affects outcomes. The majority's reliance on the 'substantial impact' test from National Motor Freight is misguided, as that reasoning was discredited by the Supreme Court's decision in Vermont Yankee Nuclear Power Corp. v. NRDC, which admonished courts not to impose procedural requirements on agencies beyond those mandated by the APA.
Analysis:
This decision significantly narrows the scope of the APA's 'procedural rule' exception to notice and comment rulemaking by applying a functional, impact-based analysis rather than a formalistic one. It establishes that rules governing an agency's adjudicatory processes are not automatically exempt if they substantially affect the rights of regulated parties to a fair hearing. The ruling compels agencies to consider the impact on adjudicatory rights, not just primary conduct, when determining if notice and comment can be bypassed. This precedent strengthens public participation in the creation of agency enforcement schemes and limits an agency's ability to shield adjudicatory rules from public scrutiny by labeling them as purely 'internal' or 'procedural.'
