Natural Res. Def. Council v. Nat'l Highway Traffic Safety Admin.
894 F.3d 95 (2018)
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Rule of Law:
Federal agencies cannot indefinitely delay the effective date of a rule mandated by Congress, especially when the statute provides a clear, mandatory schedule for implementation, and such delay must adhere to the notice-and-comment requirements of the Administrative Procedure Act (APA) unless a narrowly construed 'good cause' exception is met.
Facts:
- In 1975, Congress passed the Energy Policy and Conservation Act (EPCA) to improve vehicle energy efficiency, establishing Corporate Average Fuel Economy (CAFE) standards and imposing civil penalties for violations, initially set at $5.00 per tenth of a mile per gallon.
- The CAFE penalty remained at $5.00 until 1997, when a 10% adjustment raised it to $5.50, and it stayed at this amount for nearly two decades.
- In 2015, Congress passed the Federal Civil Penalties Inflation Adjustment Act Improvement Act (Improvements Act), requiring all federal agencies to adjust civil monetary penalties for inflation by specific deadlines (July 1, 2016, with an effective date no later than August 1, 2016) through an interim final rule, and to make subsequent annual adjustments.
- On July 5, 2016, NHTSA published an interim final rule, pursuant to the Improvements Act, raising the CAFE penalty from $5.50 to $14 per tenth of an mpg, with an effective date of August 4, 2016.
- Automobile manufacturers petitioned NHTSA for partial reconsideration of the interim final rule, raising concerns about the method used to calculate the new penalty and its retroactive application.
- On December 28, 2016, NHTSA published a final rule modifying the prior interim final rule in response to industry concerns, determining it would not apply the new penalty rates retroactively and would instead delay the implementation of the penalty rate until model year 2019.
- Following a January 20, 2017, memorandum from the White House Chief of Staff directing a 'regulatory freeze pending review,' NHTSA issued a series of final rules temporarily delaying the effective date of the December 28, 2016, final rule.
- On July 12, 2017, NHTSA published a final rule (the 'Suspension Rule') indefinitely delaying the effective date of the $14 CAFE penalty, citing the need to reconsider economic consequences and seeking further public comment on the appropriate penalty level.
Procedural Posture:
- In 1975, Congress enacted the Energy Policy and Conservation Act (EPCA), establishing Corporate Average Fuel Economy (CAFE) standards and associated civil penalties.
- In 2015, Congress enacted the Federal Civil Penalties Inflation Adjustment Act Improvement Act, requiring all federal agencies to adjust civil monetary penalties for inflation by set deadlines.
- On July 5, 2016, the National Highway Traffic Safety Administration (NHTSA) published an interim final rule raising the CAFE penalty to $14 per tenth of an mpg, effective August 4, 2016.
- Automobile manufacturers subsequently petitioned NHTSA for reconsideration of this interim final rule.
- On December 28, 2016, NHTSA published a final rule modifying the interim rule, delaying the effective date of the new $14 penalty rate until model year 2019.
- Following a January 20, 2017, memorandum for a regulatory freeze, NHTSA issued a series of three subsequent final rules, on January 30, March 28, and June 27, 2017, each temporarily delaying the effective date of the December 28, 2016, final rule.
- On July 12, 2017, NHTSA published a final rule (the 'Suspension Rule') in the Federal Register, indefinitely delaying the effective date of the December 28, 2016, final rule.
- On September 7, 2017, environmental petitioners sought judicial review of the Suspension Rule in the United States Court of Appeals for the Second Circuit.
- On September 8, 2017, state petitioners also sought judicial review of the Suspension Rule in the United States Court of Appeals for the Second Circuit.
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Issue:
Does the National Highway Traffic Safety Administration (NHTSA) act unlawfully by indefinitely delaying a civil penalty increase mandated by Congress under the Federal Civil Penalties Inflation Adjustment Act Improvement Act of 2015 without statutory authority or following the notice-and-comment procedures of the Administrative Procedure Act?
Opinions:
Majority - The Court
Yes, the National Highway Traffic Safety Administration acted unlawfully by indefinitely delaying the civil penalty increase. NHTSA exceeded its statutory authority because the clear, mandatory terms and purpose of the Federal Civil Penalties Inflation Adjustment Act Improvement Act of 2015 required agencies to adjust penalties by set deadlines, granting no discretion over timing. The Court reasoned that an agency is a 'creature of statute' and can only act within the authority conferred by Congress, citing Atlantic City Elec. Co. v. FERC. The Improvements Act's text, which states agencies 'shall' adjust penalties by specific dates, and its legislative history, aimed at correcting decades of inaction on inflation adjustments, demonstrate a clear mandate to ensure penalties retain their deterrent effect. The Court rejected NHTSA's justifications for delay, finding that (1) reconsideration does not inherently convey authority to indefinitely delay, citing Clean Air Council v. Pruitt; (2) EPCA does not grant authority to contravene a government-wide mandate from the Improvements Act; and (3) agencies have no inherent authority to act without explicit Congressional conferral, citing Natural Resources Defense Council v. Abraham. Furthermore, NHTSA violated the Administrative Procedure Act (APA) by publishing the indefinite delay rule without adhering to notice-and-comment rulemaking procedures. The Court emphasized that altering a rule's effective date is tantamount to an amendment or rescission requiring notice and comment, citing Clean Air Council and Abraham. The APA's 'good cause' exception is narrowly construed and limited to emergency situations, routine determinations, or circumstances where notice would actually harm the public interest. NHTSA's arguments of 'imminence' were due to its own prior delays, its claim of 'no harm' was insufficient to meet the exception's prongs, and its simultaneous solicitation of comments did not cure the initial failure to provide notice and comment for the delay rule itself. The Court concluded that notice and comment serve the public interest by fostering reasoned decision-making and that no emergency or extraordinary circumstance justified foregoing these fundamental procedures.
Analysis:
This case significantly reinforces the principle that federal agencies must adhere strictly to statutory mandates, particularly when Congress provides clear, mandatory deadlines and methods for rule implementation. It limits agencies' ability to delay or alter rules without explicit statutory authority or without following proper Administrative Procedure Act (APA) procedures, such as notice-and-comment rulemaking, even when facing internal reconsideration or external pressures like regulatory freezes. The decision clarifies that the APA's 'good cause' exception is to be narrowly construed, preventing agencies from manufacturing emergencies or using post-hoc justifications to circumvent public participation. This case will likely serve as precedent for challenging agency delays of congressionally mandated regulations, ensuring accountability and preventing agencies from undermining legislative intent through administrative inaction or procedural shortcuts.
