Controlling Policy by Controlling Process: Judicial Influence on Regulatory Decision Making
| DOI | 10.1093/oxfordjournals.jleo.a023393 |
| Pages | 114-135 |
| Date | 01 April 1998 |
| Year | 1998 |
| Published By | Oxford University Press |
114 JLE0.VHN1
Controlling Policy by Controlling Process: Judicial
Influence on Regulatory Decision Making
Emerson H. Tiller
University
of
Texas
at
Austin
In this article,
the
ability
of a
federal appellate court
to
control agency policy
by
imposing process requirements upon
the
agency
is
analyzed under two admin-
istrative
law
regimes' the deference doctrine, where appellate courts
are
strictly
limited
in
their ability
to
interfere with agency decision making, and
the
nondef-
erence doctrine, where courts have greater reign
in
scrutinizing agency decision
making.
The emphasis on the judiciary's ability
to
affect regulatory process com-
plements earlier scholarship
in
positive political theory that focused mainly
on
Congress' ability
to use
administrative process
to
control agency behavior
A
model
of
judicial control is developed to allow for comparative statics considering
different legal doctrines, shifting agency and judicial preferences, and changing
agency resources. An examination
of
the Federal Energy Regulatory Commission
and the D.C. Circuit Court of Appeals' battle over the deregulation
of
oil pipelines
is undertaken
to
illustrate the insights
of
the model. Further evidence bearing
on
the model
is
also reviewed.
1.
Introduction
Nearly every federal agency has spent considerable resources in promulgat-
ing a new regulatory rule only to have a federal appellate court overturn the
policy and remand the matter
to
the agency for more consideration and decision-
making processes. This has happened, for example, to the Environmental Pro-
tection Agency (EPA) in setting high-level radioactive waste regulations, the
Occupational Safety and Health Administration (OSHA) in setting permissible
exposure levels for toxic substances in the workplace, the Consumer Product
Safety Commission (CPSC) in determining protective standards for foam insu-
lation and the Federal Energy Regulatory Commission (FERC) in establishing
rules deregulating oil pipelines. [Natural Resources Defense Council
v.
EPA,
824 F.2d 1258 (1st Cir. 1987); AFL-CIO v. OSHA, 965 F.2d 962 (1 lth Cir.
I thank Edwin Epstein, John de Hgueiredo, Charles North, Daniel Rodriguez, Martin Shapiro,
Joseph Smith, Pablo Spiller, David Teece, Klaus Toft, Barry Weingast, Oliver Williamson, and two
anonymous referees
for
helpful comments and the John M. Olin Foundation
for
financial support.
© 1998 Oxford University Press
Jucficial Influence on Regulator/ Decision MaMng 115
1992);
Gulf
South
Insulation
v.
United States Consumer Product Safety Com-
mission,
701
F.2d 1137 (5th Cir. 1983); Farmers Union
Central
Exchange,
Inc.,
v. Federal Energy Regulatory Commission, 734 F.2d 1486 (D.C. Circuit 1984),
cert denied sub nom., Williams Pipe Line Company
v.
Farmers Union Central
Exchange, Inc., 105 S.Ct. 507,469 U.S. 1034(1984)]. In these cases, and hun-
dreds of others, a reviewing court concluded that the agency, although having
statutory authority to set the chosen policy, nonetheless failed in its reasoning
processes in coming up with the new policy (that
is,
the agency failed to explain
how it arrived at such a policy, consider other regulatory alternatives offered by
interested parties, consider all the evidence offered to it during the rulemaking
process, or discuss why it changed the policy in the first place). As a result, the
policy was remanded to the agency for more process (that is, more hearings,
more reasoning, more production of scientific support, and the like). Given the
limited time and resources available to agencies, what often resulted from such
judicial intervention was a decision by the agency to engage in less ambitious
policy change or perhaps no change at all from the status quo.1 In short, appel-
late courts have an effective instrument—process demands—to control agency
outcomes.
Process as a means for Congress to control agency policy has been discussed
by positive political theorists (Bawn 1995; McCubbins, Noll, and Weingast
1987,
1989). Those approaches focus on the ability of legislators to strategi-
cally design regulatory process that either enhances or constrains the policy
discretion of regulators, depending on the goals of
Congress.
While this article
similarly works from a positive political theory (PPT) perspective, it focuses
on judicial control of agency policy rather than congressional control.2 More
specifically, a model of judicial control is introduced that shows how a policy
maximizing court, by manipulating precious agency resources through the im-
position of process requirements on regulators (or at least the threat of such)
can gain control over regulatory policy.3 To the extent that established admin-
istrative law doctrines affect the calculus, they are included in the analysis.
A stylized analysis of the regulation, and attempted deregulation, of the oil
pipeline industry is presented to help illustrate the insights of the model. Fur-
ther evidence bearing on the model is also reviewed.
1.
For example, the CPSC did not even attempt a revised foam insulation standard after the court
remanded the policy. In fact, the agency halted attempts to regulate toxic products altogether. See
McGarity(1992).
2.
For a review of the PPT literature and an application to regulatory reform, see Rodriguez
(1994).
3.
Other models suggest that agencies can avoid the scrutiny of courts, as well as Congress,
by choosing modes (or instruments) of decision making that are difficult for these other political
actors to monitor and discipline. Tiller and Spiller (1997), for example, model decision cost as a
strategic choice to be made by an agency wishing to avoid reversals by courts. More specifically,
an agency would choose among several instruments (rulemaking or adjudication, for example) to
deliver policy based upon (l) the agency's cost of using such an instrument and (ii) the level of cost
imposed upon the court in charge of reviewing tuch choice of policy and instrument. The upshot is
that an agency can create for itself greater policy discretion by strategically selecting among policy
instruments—some of which make reversals a costly choice for reviewing courts.
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