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Curing the Blind Spot in Administrative Law: A Federal Common Law Framework for State Agencies Implementing Cooperative Federalism Statutes
Posted By Josh Bendor On December 24, 2012 @ 1:01 am In Yale Law Journal | No Comments
Administrative law scholarship focuses almost exclusively on federal agencies implementing federal laws. Yet state agency implementation of federal statutes—cooperative federalism—is an integral part of our administrative state in fields ranging from environmental law to health care to education. When state agencies are sued for violating cooperative federalism statutes they administer, courts must decide what doctrines of administrative law should apply. Does federal or state law control?
Surprisingly, courts and scholars alike have given scant attention to this fundamental question. Courts have acted reflexively, applying the law that is most familiar to them. Federal courts generally apply federal law while giving little if any consideration to state law. State courts generally apply state law while giving inadequate consideration to federal law. This does violence to two of Erie’s goals, “discouragement of forum-shopping and avoidance of inequitable administration of the laws.”1 And it means that both court systems are giving oversimplified answers that fail to recognize the complexity of the issues presented and ignore the often persuasive reasons for applying the other sovereign’s law.
In fact, there is a readymade doctrine of federal common law that courts should use to determine what law should apply. United States v. Kimbell Foods and its related line of cases call for courts to apply state law, unless this presents a significant conflict with federal policy.2 We first sketch out the problem and then the solution.
The courts have been left on their own to figure out the answer to this question because Congress has been silent. The Administrative Procedure Act (APA) does not apply to state agencies. In fact, throughout the entire legislative history of the APA, there is no debate about whether to include state agencies within the scope of the statute, nor even a mention of the fact that state agencies would not be covered. Thus, federal requirements can only be applied to state agencies as a matter of federal common law or through the requirements of substantive federal statutes. We focus on the common law question, because it is quite rare for substantive federal statutes to address the administrative law doctrine that will govern state agencies.
There are two main contexts in which courts face the question of whether to apply state or federal administrative law: the standard of review for agency action and the deference due agency interpretation of statutes. We discuss these in turn.
Federal courts usually engage in a “hard look” review of agency action, while state courts are more deferential. Despite these differences, federal courts often apply federal standards to state agency actions without acknowledging state doctrine or discussing why the standard applies. Similarly, state courts usually apply state standards of review. For example, in Sierra Club v. Department of Natural Resources, a Wisconsin appeals court looked to the state’s “substantial evidence” standard when evaluating the state agency’s findings of fact under the Clean Air Act without considering whether a federal standard of review might govern.3
When a federal agency interprets a statute that it is entrusted with implementing in an authoritative manner, federal courts will defer to that interpretation if the statute is ambiguous and the agency’s interpretation is reasonable. State courts are less deferential to the statutory interpretations of their agencies, usually granting some form of weak deference. In addition, a number of states explicitly take into account agency expertise and other contextual factors in determining the appropriate level of deference. What deference, then, should courts give to state agencies interpreting cooperative federalism statutes?
Federal courts usually decline to give any deference to state agencies interpreting federal law, arguing that such deference would lead to fifty interpretations of the same federal statute and that state agencies have no expertise in interpreting federal law anyways. One notable exception is the Fourth Circuit, which grants state agencies Skidmore deference. While this does give state agencies some respect, it does so by giving them the benefits of federal deference, not the deference their state law accords. This could produce particularly incongruous results where a state grants its own agencies less deference than Skidmore. Utah, for example, grants “little or no deference” to its agencies.4 In contrast to federal courts, state courts usually grant state agencies that are interpreting cooperative federalism statutes the same deference they would grant them if they were interpreting state law. In doing so, state courts entirely omit any discussion of federal case law.
This pattern of federal courts reflexively applying federal law to state agencies implementing cooperative federalism statutes recurs in other areas of administrative law, including reviewability, ripeness, and the federal common law rule that agencies should have discretion over whether to announce a policy through rulemaking or adjudication.
The first, easy step is to say that federal and state courts should take the same approach and that this approach should be a product of deliberation, not reflex. The second step is to choose that approach. Fortunately, the teachings of federal common law and the principles of practical governance they embody point the way forward: toward a presumption that state law applies, but that this presumption should yield if the state rule would create a significant conflict with federal policy.
This approach comes from United States v. Kimbell Foods, Inc.5 The question presented was “whether contractual liens arising from certain federal loan programs take precedence over private liens . . . .”6 The statute did not specify what the priority should be, so the Court had to use its federal common law powers to fill the statutory gap. To do so, it could either devise a uniform federal rule or apply state law. The Court concluded that “a national rule is unnecessary to protect the federal interests underlying the [federal] loan programs.”7 Instead, “absent a congressional directive to the contrary,” the lien priorities would be “determined under nondiscriminatory state laws.”8 In subsequent cases, the Court has made clear that there is a “presumption that state law should be incorporated into federal common law”9 as the federal rule of decision and the ultimate question is “whether the relevant federal interest warrants displacement of state law.”10 Only in limited instances should courts “fill the interstices of federal remedial schemes with uniform federal rules.”11
Similarly, the question here—what law to apply to state agencies carrying out cooperative federalism statutes—presents an interstitial issue of federal statutory law where Congress has been silent. Justice Breyer recognized this in his dissent in Schaffer ex rel. Schaffer v. Weast.12 The question there was what the burden of proof should be in a hearing before a state administrative law judge under the Individuals with Disabilities Education Act (IDEA). Since the statute was silent on the issue, the Court decided “that the burden of persuasion lies where it usually falls, upon the party seeking relief.”[Id. at 57-58] Justice Breyer, however, agreed with the school district and several State amici that state law should fill the statutory gap. He explained:
Nothing in the [IDEA] suggests a need to fill every interstice of the Act’s remedial scheme with a uniform federal rule. . . . Most importantly, Congress has made clear that the Act itself represents an exercise in “cooperative federalism.” Respecting the States’ right to decide this procedural matter here, where education is at issue, where expertise matters, and where costs are shared, is consistent with that cooperative approach. 13
There is one noteworthy difference between the Kimbell Foods line of cases and the cooperative federalism context. Kimbell Foods and its progeny involved private law and called for a presumption in favor of state law in part because application of a federal rule might “disrupt commercial relationships predicated on state law.”14 In the cooperative federalism context, bargaining reliance is rarely an issue. Nonetheless, we suggest four reasons why Kimbell Foods is readily applicable here.
First, state agencies, just like business entities, expect to operate under a uniform and predictable set of rules. For example, if a state agency has structured its quasijudicial processes (e.g., how it gathers evidence) to meet a state “soft look” review rather than federal “hard look” review, the agency would either have to change its processes when federal issues were at stake, or it would see its federally inflected decisions struck down at a higher rate.
Second, it is reasonable to assume that state courts and legislatures, in developing administrative law doctrines to oversee their agencies, have taken the characteristics of their agencies into account in a way that uniform federal rules could not. For example, in a state with a notoriously corrupt or incompetent public utilities commission, or just a poor civil service generally, the state legislature or courts may have developed a stricter standard of review, whereas a state whose appointment rules lead to a well-respected commission may be more deferential. In a number of states, deference doctrine explicitly takes into account contextual factors such as the role of agency expertise and senior agency officials in the decision. This flexible deference standard may be a wise adaptation to the varying quality of agency action that those state courts have seen over the years. Another good reason for state deference doctrine to differ from federal deference doctrine is that the heads of state agencies are often directly elected by the people, and therefore directly accountable to them, while the heads of federal agencies are never elected. As a result, the courts may need to play less of a role in checking potentially arbitrary administrative action. In the face of carefully considered state adaptations, the federal government would be wise not to impose federal rules—which are adapted for a different set of institutions—unless there is a strong case for such interference.
Third, the Constitution places a value on the independence of state institutions. State interests are at their height when the governance of state institutions is concerned: “even where Congress has the authority under the Constitution to pass laws requiring or prohibiting certain acts, it lacks the power directly to compel the States to require or prohibit those acts.”15 This does not challenge the constitutionality of cooperative federalism programs, which are usually passed pursuant to the spending power, but it does counsel respect for the rules that state courts and legislatures have created to govern their executive branch.
Fourth, congressional silence may itself indicate intent for state law to apply. Since state agency actions are ordinarily governed by state law, the absence of any language governing state agencies in the APA and Congress’s continued silence can be interpreted as another example of this form of acquiescence.
At the same time, we should not always adopt state administrative law as the rule of decision. In certain instances, using the state rule would create a significant conflict with a federal policy, including the need for uniformity, the policy goals of the substantive statute at issue, or policies expressed in another federal statute, such as the APA. The courts should not use their common law powers to adopt state administrative law as the rule of decision when doing so would undermine a statute duly enacted by Congress.
The determination of whether state law causes a significant conflict with federal policy will depend on the interaction between the administrative law doctrine and the substantive statute at issue. For example, sometimes deferring to state agency interpretations of federal statutes will yield unacceptable differences in the meaning of a law that requires nationwide uniformity, such as environmental statutes meant to create uniform rules across a national marketplace. But other statutes may easily accommodate varying interpretations. Since states and localities play the dominant role in setting education policy, rarely will application of state administrative law doctrines cause a significant conflict with federal policy. If the IDEA were interpreted somewhat differently in different states, that would probably be fine—there is already a tremendous difference in the education disabled children receive, so it is difficult to justify a hard stand for uniformity in interpretation.
Some commentators have argued for giving state agencies deference under a federal standard. But the application of a federally imposed standard of deference does not evince the respect for state institutions that Kimbell Foods teaches. Rather, Kimbell Foods teaches that such respect, where it does not conflict with a federal policy, entails the adoption of state law to determine the deference due state agencies. In some cases, this might mean little deference is granted. In general, state law grants state agencies weak deference, not the strong Chevron deference that federal law grants federal agencies. Utah gives its agencies no deference whatsoever. A uniform federal deference standard would, in at least some cases, grant state agencies more deference than that to which they would be entitled under state law. This would run against the state’s ability to set standards for its own agencies, incentivize the agency to act pursuant to federal rather than state law, and perversely imply that the state agency is a more authoritative interpreter of federal law than of state law.
Moreover, it is hard to imagine a need for uniformity sufficient to displace state law that would simultaneously allow the creation of a federally sourced rule granting deference to state agencies. After all, where uniformity is needed, what is needed is not uniformity in deference standards per se, but rather uniformity in the interpretation of substantive law. Thus, the appropriate choice is between invoking federal law to grant no deference, invoking federal law to limit state-law based deference, or applying state deference law in all its variegated ways.
By contrast, it should rarely be necessary to displace state law regarding the standard of review of a state agency action involving the application of law to fact. When federal law provides for adjudication by state agencies in the first instance, it accepts that they will have different compositions, expertise, policy goals, institutional cultures, staffing resources, and procedures. If Congress accepted these differences by setting up a cooperative federalism scheme, it is hard for courts to claim that different standards of review are a bridge too far. In fact, given the differences between state agencies, it may well be wise for federal courts to use the standards that state courts have adopted to oversee their administrative agencies.
There is great diversity in cooperative federalism regimes and administrative law doctrines. In some cases, it will be wise to follow the distinctive rules that states have created to govern their own institutions. In other cases, it will be wise to ensure uniform policy across the nation. While each statute and doctrine presents distinct concerns, Kimbell Foods provides a framework to analyze these issues in an orderly manner that is consistent with the ethos of cooperative federalism. Courts and commentators can also develop this area of law by further exploring how Kimbell Foods should apply to the different doctrines of administrative law and types of cooperative federalism statutes. When both state and federal courts start approaching this issue in the same manner, we should expect greater consistency in the law, greater respect for state and federal policy needs, and perhaps even a more fruitful dialogue between state and federal courts on administrative law.
Copyright © 2012 The Yale Law Journal Company, Inc.
This Legal Workshop article is based on Josh Bendor & Miles Farmer, Curing the Blind Spot in Administrative Law: A Federal Common Law Framework for State Agencies Implementing Cooperative Federalism Statutes, 122 YALE L.J. (forthcoming 2013).
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