Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-94-05271/USCOURTS-caDC-94-05271-0/pdf.json

Parties Involved:
Shereen Arent
Appellant
Center for Science in the Public Interest
Appellant
Public Citizen
Appellant
Donna E. Shalala
Appellee

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 27, 1995 Decided November 14, 1995

No. 94-5271

SHEREEN ARENT, THE CENTER FOR SCIENCE

IN THE PUBLIC INTEREST,

AND PUBLIC CITIZEN, INC.,

APPELLANTS

v.

DONNA E. SHALALA,

SECRETARY OF THE UNITED STATES DEPARTMENT OF

HEALTH AND HUMAN SERVICES,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 92cv00148)

Allison M. Zieve argued the cause for appellants, with whom Brian Wolfman and Alan B. Morrison

were on the briefs.

Drake S. Cutini, Attorney, United States Department ofJustice, argued the cause for appellee, with

whom Frank W. Hunger, Assistant Attorney General, and Deborah S. Smolover, Attorney, United

States Department of Justice, were on the brief. Eric H. Holder, Jr., United States Attorney, and

Douglas N. Letter, LitigationCounsel, United States Department ofJustice, entered appearancesfor

appellee.

Before: EDWARDS, Chief Judge, WALD and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Chief Judge EDWARDS.

Concurring opinion filed by Circuit Judge WALD.

EDWARDS, Chief Judge: Appellants Shereen Arent, the Center for Science in the Public

Interest, and Public Citizen, Inc. brought suit in the District Court to challenge final regulations

concerning nutritional labeling of raw produce and fish promulgated by the Food and Drug

Administration ("FDA") pursuant to the Nutrition Labeling and Education Act of 1990, 21 U.S.C.

§§ 321, 337, 343, 343-1, 345, 371 (1994) ("NLEA" or "Act"). The Act establishes voluntary

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1References to the Secretary of Health and Human Services ("Secretary") and the FDA will be

used interchangeably to refer to the appellee in this action. 

guidelines under which retailfood stores provide to consumers nutritional information regarding raw

produce and fish. If the FDA finds that food retail stores overall are not in "substantial compliance"

with the guidelines, the NLEA requires the FDA to issue mandatory food labeling regulations. 21

U.S.C. § 343(q)(4)(D)(i) (1994). Appellants assert that the FDA regulations defining "substantial

compliance" set a standard so low as to be arbitrary and capricious and in violation of the NLEA.

The District Court granted appellee's1 motion to dismiss, finding that the determinations

embodied in the FDA's regulations, although not immune from judicial review under the

Administrative Procedure Act ("APA"), represent reasonable and permissible constructions of the

NLEA. Arent v. Shalala, 866 F. Supp. 6 (D.D.C. 1994). We agree that Congress provided judicially

manageable standards for reviewing the FDA's determination of "substantial compliance" under the

NLEA, and that the FDA's determination warrants no presumption of unreviewability. Further, we

uphold the FDA'sregulations defining "substantial compliance" because the record disclosesthat the

FDA was guided by the proper statutory factors, provided a reasoned explanation demonstrating

reliance upon those factors, and reached a determination in keeping with the statutory intent. We

remand to the District Court, however, for consideration of the parties' discovery motions relating

to the FDA's 1993 finding that food retailers overall were in fact in substantial compliance with the

NLEA's voluntary guidelines.

I. BACKGROUND

A. Statutory Background

The NLEA was enacted, inter alia, to clarify and strengthen the FDA's legal authority to

require nutrition labeling on food. H.R. REP. NO. 538, 101st Cong., 2d Sess. 7 (1990). The Act

requiresthat food manufacturers provide nutritionallabelsthat contain specified information for most

foods sold in retail food stores. The NLEA also requires that the FDA promulgate voluntary

guidelines pursuant to which retail food stores provide nutrition information for certain of the most

frequently purchased varieties of raw fish and produce. 21 U.S.C. § 343(q)(4)(B)(i) (1994). The

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nutrition labeling guidelines for raw produce and fish are to remain voluntary unless the FDA finds

that food retailers are not in "substantial compliance" with the guidelines. Id. § 343(q)(4)(D). The

NLEA requires that the Secretary of Health and Human Services issue a regulation defining the

circumstances that constitute food retailers' "substantial compliance" with the voluntary labeling

guidelines. Id. § 343(q)(4)(B)(ii). In that regard, the Act provides the FDA with the following

guidance:

The regulation shall provide that there is not substantial compliance if a significant

number of retailers have failed to comply with the guidelines. The size of the retailers

and the portion of the market served by retailers in compliance with the guidelines

shall be considered in determining whether the substantial-compliance standard has

been met.

Id. In addition, under the Act, the FDA was given until May 1993 to analyze and publish the results

of a survey of grocery stores determining whether there was substantial compliance with the

voluntary guidelines. Id. § 343(q)(4)(C)(i).

The Secretary issued regulations stating that the FDA would find industry-wide substantial

compliance with the voluntary guidelines if "at least 60 percent of all stores that are evaluated are in

compliance." 21 C.F.R. § 101.43(c) (1995). In addition, the FDA determined that, for the purpose

of conducting its survey, a retailer would be deemed in compliance with the voluntary guidelines if

the retailer provided nutritional information for "at least 90 percent" of the relevant produce and "at

least 90 percent" of the relevant fish. Id. § 101.43(a). The methodology of the FDA's first survey

included four demographic factors: store sales volume (stores were divided into two categories based

on average annual sales); store type (i.e., independently operated stores vs. chains); geographic

location (all states and the District of Columbia were included in the survey); and county size

(counties were divided into four size categoriesto ensure that retailersfromboth urbanized and rural

areas were represented in the survey sample). In all, roughly 2,000 food retailers were surveyed, and

the FDA determined that the food retail industry as a whole was in substantial compliance with the

voluntary food labeling guidelines because 75.7% of the retailers surveyed had complied with the

guidelines for raw produce, and 73.2% had complied for raw fish. CENTER FOR FOOD SAFETY AND

APPLIED NUTRITION,FDA,REPORT ON VOLUNTARY COMPLIANCEBY FOOD RETAILERS IN PROVIDING

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2Pls.' Mot. to Supplement and Amend Compl. WW 4b, 4c. The District Court ultimately

granted appellants' motion to amend their complaint in the Order accompanying the court's

memorandum decision resolving the case on the merits. Arent, 866 F. Supp. at 16. 

3

See Pls.' Req. That Ct. Forego Ruling on Pending Mots. Until Completion of Disc. and Filing

of Supplemental Brs. at 2-4. 

NUTRITION LABELING INFORMATION FOR RAW FRUIT AND VEGETABLES AND FOR RAW FISH 4, 8

(1993) ("Report"), reprinted in Joint Appendix ("J.A.") 101, 105.

B. The Proceedings in District Court

The FDA issued the 1993 Report of its survey findings during the pendency of the parties'

cross-motionsfor dismissal and summary judgment. Appellants' initial complaint challenged only the

definition of "substantial compliance" contained in the FDA'sregulations; but, in view of the Report,

appellants moved to amend their complaint to add an allegation challenging the Report's finding that

food retailers were in fact in substantial compliance with the voluntaryNLEAguidelines.2 Concerned

about the validity and accuracy of the Report's findings, appellants also sought discovery on specific

information about the survey results and methodology. Appellants then requested that the trial court

not rule on the pending motions for dismissal and summary judgment until the completion of

discovery and the filing of supplemental briefs. Appellants argued that the parties had only briefed

the issue of the FDA's definition of "substantial compliance," and that, even if the District Court

upheld the FDA's sixty-percent definition, discovery would still be necessary to determine whether

retailer compliance was in fact lower than sixty percent.3In response, the Secretary opposed

appellants' motion to amend their complaint, and moved for a protective order or, in the alternative,

a stay of discovery on the ground that the pending dispositive motions rendered the discovery

premature.

In its memorandum decision, the District Court determined that appellants have standing to

challenge the FDA'sregulations and found that the agency action at issue issubject to judicialreview.

On the merits, the trial court characterized its task as "review[ing] an agency's construction of a

statute" and applied the analyticalframework ofChevron, U.S.A., Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837 (1984). Arent, 866 F. Supp. at 13. Finding that Congress did not

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addressspecifically the level of compliance necessary to establish "substantial compliance," the court

moved on to the second prong of the Chevron analysis and found that the challenged regulations

embody a permissible construction ofthe NLEA. Given the demographics of the retail food industry,

in which large chain stores are relatively few in number but serve a majority ofshoppers, the District

Court held that theFDA'sregulationregarding industry-wide compliance "struck a reasonable balance

among extreme scenarios that could develop from the statutory scheme." Id. at 15. The court also

upheld the FDA'sindividual-compliance regulation, accepting as plausible theSecretary's explanation

that a ninety-percent individual-compliance standard was appropriate to account for minor instances

of noncompliance caused by placardsfalling down or pagesfalling out of books or binders. On these

grounds, the District Court granted the Secretary's motion to dismiss and declared moot the parties'

discovery-related motions.

II. ANALYSIS

A. Availability of Judicial Review

As an initial matter, we reject the FDA's contention that there is no law to apply in reviewing

its definition of food retailers' "substantial compliance" with the NLEA's voluntary guidelines. The

APAembodies a generalpresumption ofreviewability,see Abbott Laboratories v. Gardner, 387 U.S.

136, 140 (1967), and the exception established by 5 U.S.C. § 701(a)(2) (1988) for agency action that

is "committed to agency discretion by law" is "a very narrow exception" reserved for "those rare

instances where statutes are drawn in such broad terms that in a given case there is no law to apply."

Citizensto Preserve Overton Park v. Volpe, 401 U.S. 402, 410 (1971) (internal quotations omitted).

In the NLEA, Congress provided meaningfulstandards against which to judge the FDA's exercise of

discretion in requiring that the FDA's definition of "substantial compliance" exclude the situation

where a "significant number of retailers" fail to comply with the voluntary guidelines, and requiring

that the FDA consider the size and market share of the retailers complying with the guidelines in

determining whetherthe substantial-compliance standard has been met. 21 U.S.C. § 343(q)(4)(B)(ii)

(1994). Congress clearly intended to restrict the FDA to a storewide, retailer-based, numerical

standard of "substantial compliance," and Congress further specified that the evaluation of overall

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retailer compliance was to take account of market penetration, rather than focus purely on the gross

numbers ofretailersin compliance. These statutorycommands are no less definite than the provisions

at issue in many cases in which this court has found judicially manageable standards against which

to evaluate whether an agency action constituted an abuse of discretion. See, e.g., Marshall County

Health Care Auth. v. Shalala, 988 F.2d 1221, 1223-25 (D.C. Cir. 1993) (A statute directing the

Secretary of Health and Human Services to provide "exceptions" to the prospective amounts of

Medicare payments to hospitals "as the Secretary deems appropriate" did not commit to agency

discretion by law the decision whether to provide exceptions.); National Treasury Employees Union

v. Horner, 854 F.2d 490, 495 (D.C. Cir. 1988) (A statutory scheme allowing the Office of Personnel

Management to depart from competitive civilservice only when "necessary" for "conditions of good

administration" provided manageable standards for reviewing agency action.). As it often does, in

enacting the NLEA, Congress provided "a meaningfulnot a rigorous, but neither a

meaninglessstandard against which to judge" the exercise of agency discretion. Id.

We also reject the Secretary's suggestion that the FDA's determination of substantial

compliance warrants a presumption of unreviewability under the rationale of Heckler v. Chaney, 470

U.S. 821 (1985), where the Supreme Court ruled that agency refusals to take "enforcement action"

should be afforded a presumption of unreviewability under section 701(a)(2). Chaney, 470 U.S. at

831. Chaney is of no assistance to the FDA in this case because the FDA's promulgation of a

standard for "substantial compliance" under the NLEA does not represent an enforcement action.

In light of our conclusion that this court has jurisdiction to review the FDA's determination

regarding the standards for measuring retailer compliance with the NLEA's voluntary food labeling

guidelines, we turn to the merits of appellants' challenges to the FDA's industry-wide and individual

compliance standards.

B. The Industry-Wide "Substantial Compliance" Standard

Although the parties argue this case in terms of both Chevron analysis and arbitrary and

capricious review, they interpret the case as one involving review of an agency's construction of a

statute and look primarily to Chevron for the appropriate analytical framework. We, however, do

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4We disagree with the suggestion made in the concurring opinion that the parties never raised

the issue of State Farm arbitrary and capricious review, and that therefore we ought not address

it. Although it is true that the majority of the argument in appellants' brief focuses on Chevron,

which we find to be inapplicable, appellants assert in the heading of their principal argument to the

court that "THE FDA'S DEFINITION OF SUBSTANTIAL COMPLIANCE IS ARBITRARY

AND CAPRICIOUS AND IN VIOLATION OF THE NLEA." Brief for Appellants at 20; see

also id. at 41 (Appellants argue that "the decision of the district court should be reversed on the

ground that the FDA's substantial compliance regulations are arbitrary and capricious and in

violation of the NLEA."). Likewise, the FDA asserts in one of its argument headings that "The

FDA Regulations Defining the Circumstances Constituting Substantial Compliance ... Are Not

Arbitrary, Capricious or Contrary to the NLEA," and the FDA characterizes the relevant inquiry

as "whether an agency's action is "arbitrary and capricious' and must be set aside under 5 U.S.C. §

706(2)(A)." Brief for Appellee at 26.

Moreover, appellants alleged in their complaint that the FDA's regulation establishing a

sixty-percent standard for substantial compliance "is arbitrary and capricious, and contravenes the

NLEA," and that the FDA's regulation establishing a ninety-percent standard for individual retailer

compliance "is arbitrary and capricious, and is unauthorized by the NLEA," arguing that both

regulations should be declared invalid under 5 U.S.C. § 706(2) of the APA. Pls.' First

Supplemental and Am. Compl. WW 21, 23, reprinted in J.A. 38-39. And the District Court

clearly interpreted appellants' arguments as implicating arbitrary and capricious review. Arent,

866 F. Supp. at 9 ("The Plaintiffs argue that [the FDA's regulation defining overall substantial

compliance] is arbitrary and capricious and violates ... the NLEA. The Plaintiffs also claim that

[the FDA's regulation defining individual retailer compliance] is arbitrary and capricious and

violates ... the NLEA."). The District Court itself prefaced the section of its opinion resolving the

merits of the parties' dispute with the heading, "Review of the Regulations Under the "Arbitrary

and Capricious' Standard of the Administrative Procedure Act, 5 U.S.C. § 706(2)(A)." Id. at 13. 

The District Court proceeded to quote at length from State Farm in laying out the applicable

standard of review. Id. at 14.

In view of these indications that the parties contemplated the application of arbitrary and

capricious review in this case, we disagree that, by deciding this case under State Farm, we are in

any way "second-guessing the parties" or "reframing" the issues so as to decide this case on

grounds not raised or argued by the parties. Concurring op. at 4-5. 

not find Chevron controlling. In challenging the FDA's regulation defining "substantial compliance,"

appellantsseek traditionalarbitraryand capriciousreview governed byMotorVehicleManufacturers

Ass'n v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983).4 We recognize that, in

some respects, Chevron review and arbitrary and capriciousreview overlap at the margins. See note

6 infra. But it would be a mistake to view this case as one involving typical Chevron review.

Chevron is principally concerned with whether an agency has authority to act under a statute.

See Chevron, 467 U.S. at 842-45. Thus, a reviewing court's inquiry under Chevron is rooted in

statutory analysis and is focused on discerning the boundaries of Congress' delegation of authority

to the agency; and as long as the agency stays within that delegation, it is free to make policy choices

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5Section 706(2)(A) provides that the reviewing court shall "hold unlawful and set aside agency

action, findings, and conclusions found to be ... arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law." 5 U.S.C. § 706(2)(A) (1988). The Supreme Court

elucidated the arbitrary and capricious standard of review in Motor Vehicle Manufacturers Ass'n

v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983). 

6The Chevron analysis and the "arbitrary, capricious" inquiry set forth in State Farm overlap in

some circumstances, because whether an agency action is "manifestly contrary to the statute" is

important both under Chevron and under State Farm. See 5 U.S.C. § 706(2)(A) (1988) (The

APA directs a reviewing court to set aside agency action that is "arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law.") (emphasis added); see, e.g., National Ass'n

of Regulatory Util. Comm'rs v. ICC, 41 F.3d 721, 728 (D.C. Cir. 1994) ("The Commission has,

in our view, acted unreasonably whether one considers the case as one involving a question of

Chevron Step II statutory interpretation or a garden variety arbitrary and capricious review or, as

we do, a case that overlaps both administrative law concepts.").

in interpreting the statute, and such interpretations are entitled to deference. Id. at 843-45, 865-66.

The paradigmatic Chevron case concerns " "[t]he power of an administrative agency to administer

a congressionally created ... program.' " Id. at 843 (quoting Morton v. Ruiz, 415 U.S. 199, 231

(1974)) (emphasis added); see, e.g., Railway Labor Executives' Ass'n v. National Mediation Bd.,

29 F.3d 655, 670-71 (D.C. Cir. 1994) (as amended July 20, 1994) (en banc) (The issue before the

court was not whether the agency's regulations were reasonablewhich is a hallmark of traditional

arbitrary and capricious reviewbut rather, whether the agency had any authority to promulgate

regulations in the area in which it sought to act.), cert. denied, 115 S. Ct. 1392 (1995). In such a

case, the question for the reviewing court is whether the agency's construction ofthe statute isfaithful

to its plain meaning, or, if the statute has no plain meaning, whether the agency's interpretation "is

based on a permissible construction of the statute." Chevron, 467 U.S. at 843.

In the present case, however, there is no question that the FDA had authority to define the

circumstances constituting food retailers'substantial compliance with the NLEA's voluntary labeling

guidelines. The only issue here is whether the FDA's discharge of that authority was reasonable.

Such a question falls within the province oftraditional arbitrary and capriciousreview under 5 U.S.C.

§ 706(2)(A) (1988).5See Chevron, 467 U.S. at 843-44 (The Court notes that where there has been

"an express delegation of authority to the agency to elucidate a specific provision of the statute by

regulation," and the delegation of authority has been exercised, the agency's "regulations are given

controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.").6

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In addition, the Supreme Court's decision in Rust v. Sullivan, 500 U.S. 173 (1991), further

demonstrates that there are occasions when Chevron "step two" review and State Farm review

overlap. In reviewing regulations of the Department of Health and Human Services that

evidenced a change in the agency's position on the interpretation of a statute, the Court in Rust

found that the terms of the statute and its legislative history militated in favor of judicial deference

to the agency's interpretation of the statute under Chevron, and that the agency's changed position

was supported by reasoned decisionmaking required by State Farm. 500 U.S. at 186-87. In such

situations, what is "permissible" under Chevron is also reasonable under State Farm.

Thus, in the present case, State Farm is controlling regarding the standard of review.

In State Farm, the Court held:

The scope of review under the "arbitrary and capricious" standard is narrow and a

court is not to substitute itsjudgment for that ofthe agency. Nevertheless, the agency

must examine the relevant data and articulate a satisfactory explanation for its action

including a rational connection between the facts found and the choice made. In

reviewing that explanation, we must consider whether the decision was based on a

consideration of the relevant factors and whether there has been a clear error of

judgment. Normally, an agency rule would be arbitrary and capricious if the agency

has relied on factors which Congress has not intended it to consider, entirely failed to

consider an important aspect of the problem, offered an explanation for its decision

that runs counter to the evidence before the agency, or is so implausible that it could

not be ascribed to a difference in view or the product of agency expertise. The

reviewing court should not attempt itself to make up for such deficiencies; we may

not supply a reasoned basisfor the agency's action that the agency itself has not given.

State Farm, 463 U.S. at 43 (citations and internal quotations omitted). Under this standard of

review, it is clear that the FDA's regulations must be upheld.

The FDA certainly took account of the relevant factors in devising its sixty-percent,

industry-wide standard for food retailers' "substantial compliance" under the NLEA. In the context

of the NLEA, Congress intended that the determination of "substantial compliance" would be

informed by the number, size, and market share ofthe food retailersin compliance with the voluntary

guidelines. 21 U.S.C. § 343(q)(4)(B)(ii) (1994). The FDA specifically considered these factors in

its rulemaking. 56 Fed. Reg. 30468, 30477 (1991) (to be codified at 21 C.F.R. pt. 101) (proposed

July 2, 1991). Moreover, as the District Court observed, "[b]y focusing attention on market share,

Congress implied that the success of this legislation would be judged by how many people received

nutrition information not strictly by how many stores posted the information." Arent, 866 F. Supp.

at 14. In furtherance of the statutory intent to focus on market penetration in assessing compliance

with the voluntary guidelines, the FDA identified and considered additional relevant factors, such as

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the categories of retail stores to include in its survey evaluationsuch as chains, independents, or

stores with high volume salesand the correlation between the distribution of grocery sales among

categories of stores and the distribution of the population served by those categories of stores. 56

Fed. Reg. at 30477.

The FDA also has articulated an explanation for its decision that demonstrates its reliance on

a variety of relevant factors and represents a reasonable accommodation in light of the facts before

the agency. The FDA observed that chain and independent grocery stores with annual sales of two

million dollars or more represent only 18% of allU.S. food stores but account for 81.5% oftotalU.S.

grocery sales, while independents with annual sales of $300,000 or less represent 42.6% of all food

stores but only 2.7% of all grocery sales. Id. at 30477, 30481. The FDA also observed that the

distribution of grocery sales among categories of stores closely approximates the distribution of the

population served by those categories ofstores. Id. at 30477. In view of these observations and the

breakdown of retail stores included in its 2,000-store survey, the FDA determined that setting a

sixty-percent cutoff value for "substantial compliance" would ensure that

substantial compliance will not be achieved unlessthere issignificant participation by

the chains. Thus, substantial compliance based on the 60 percent standard will mean

that a significant number of large retailers that serve a large part of the retail food

market will be in compliance with the guidelines.

Id. at 30478. Thus, the FDA reasonably concluded that its numerical standard would ensure that,

"while not all covered retailers are providing nutrition labeling, the most significant segment of the

food retailing industry is." Id.

Given the record before the agency, the FDA's sixty-percent figure is not unreasonable and

it certainly does not reveal "a clear error of judgment." Overton Park, 401 U.S. at 416. Moreover,

the statutory intent was not to assure one-hundred-percent compliance, but rather "substantial"

compliance, and the FDA's sixty-percent standard does ensure that a major portion of the retail food

market will receive nutritional information. Thus, we find no basis for setting aside the FDA's

sixty-percent standard for "substantial compliance" under the NLEA.

C. The Individual-Compliance Standard

We also find that the FDA reasonably accommodated the possibility of minor, inadvertent

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instances of noncompliance with the NLEA's voluntary guidelines when the agency established a

ninety-percent standard for individual retailer compliance for purposes of the survey required by the

NLEA. The FDA certainly should be allowed leeway to establish a de minimisrule in the regulations

detailing its survey methodology. See, e.g., Ohio v. EPA, 997 F.2d 1520, 1534-35 (D.C. Cir. 1993)

(per curiam) (The court upheld an EPA regulation that imposed a de minimis gloss on a statutory

provision that required the agency to conduct periodic reviews of remedial actionstaken in response

to hazardous waste threats.). Thus, the issue becomes whether a ten-percent cushion is a fair proxy

for a de minimisstandard. Although we recognize that the proper scope of de minimistolerance will

vary from context to context, appellants provide no significant challenge to the notion that

ten-percent latitude is comparable to a de minimis standard in the context of the FDA's survey.

Moreover, a ten-percent standard has the advantage of providing clear guidance to surveyors,

whereas a regulation that simply stated a de minimis rule would allow surveyors to fluctuate in their

leniency from store to store, perhaps providing more than ten-percent leeway is some instances.

D. Pending Discovery Motions

Althoughwe affirmthe District Court'srulings onthe merits, we reverse its determination that

the parties' pending discovery motions are mooted by the merits resolution. The District Court

granted appellants' motion to amend their complaint to include an allegation that "the finding of

substantial compliance in the FDA's Report contravene[s] the NLEA and should, therefore, be

declared invalid." Pls.' First Supplemental and Am. Compl. ¶ 2, reprinted in J.A. 32. The amendment

to the complaint does not specifically set forth the basis for appellants' dispute with the Report's

substantial- compliance finding. The amendment could be read as merely alleging that the survey

results, although accurate, do not establish "substantial compliance" within the meaning ofthe NLEA

because the NLEA requires something greater than the roughly three-fourths compliance indicated

by the survey results. If the amendment is read in this way, the discovery motions are indeed moot

because appellants have no claim that would survive our decision to uphold the FDA's sixty-percent

standard for substantial compliance. However, as appellants argue on appeal, the amendment may

represent an assertion that the FDA's survey methodology was flawed, and that the survey results

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7

See Pls.' Req. That Ct. Forego Ruling on Pending Mots. Until Completion of Disc. and Filing

of Supplemental Brs. at 4 (Appellants stated that they "have obtained informally from defendant

limited material that gives them concern about the validity and accuracy of the Report."); id. at 3

("[B]ecause defendant believes that the level of compliance reflected in the Report constitutes

"substantial compliance' ... plaintiffs have served [discovery requests] to determine whether the

underlying data collected by the FDA in its survey of retail food stores are consistent with the

Report's findings and were collected in an appropriate fashion."); Pls.' Reply Mem. in Supp. of

Mot. to Supplement and Amend Compl. at 4 (Appellants state that they "are concerned that the

survey was indeed faulty, and will file discovery in that regard."); Pls.' Opp'n to Def.'s Mot. for

Protective Order at 2-3 ("The discovery [filed by appellants after reviewing the FDA's Report] is

necessary principally because it appears that the Secretary's survey may have been flawed, and

may have overstated the actual level of compliance by retailers."). 

8

See Pls.' Req. That Ct. Forego Ruling on Pending Mots. Until Completion of Disc. and Filing

of Supplemental Brs. at 4 ("[T]he discovery propounded by plaintiffs may well show that

compliance was actually less than the Report indicates.... [I]f compliance was actually less than

60%, there will be no "substantial compliance' with the guidelines, even as defendant defines that

term, and defendant will be required to issue regulations mandating the provision of nutritional

information for [raw] produce and fish."). 

9

See Def.'s Opp'n to Pls.' Mot. to Amend Compl. at 5 n.3 (The FDA acknowledged that

appellants' amended complaint could be interpreted to include "an allegation that the Secretary's

finding may rest on a faulty survey; i.e., the level of compliance may not be 60 percent."). Even

therefore are inaccurate and do not support a finding ofsubstantial compliance even under the FDA's

sixty-percentstandard. Under this latter interpretation, further discovery may be appropriate to allow

appellants to pursue their claim that the Report's finding of substantial compliance is invalid.

Although the amended complaint is ambiguous on its face, and the record is not entirely

consistent in demonstrating whether appellants intended for their amendment to challenge the

accuracy of the Report's findings, under the notice pleading regime of the Federal Rules of Civil

Procedure, a lack of specificity is not fatal so long as the defendant is given "fair notice" of the

plaintiff's claim. Conley v. Gibson, 355 U.S. 41, 47 (1957); see also FED. R. CIV. P. 8(a)(2)

(Pleadings must contain "a short and plain statement of the claim" for relief.). The record establishes

that the FDA had ample notice of appellants' concerns about the validity of the survey,7and of

appellants' position that their concerns cast doubt on whether a finding of "substantial compliance"

was warranted even under the FDA's own definition of the term.

8 Moreover, there is evidence that

the FDA itself interpreted appellants' amended complaint as a challenge to the survey's accuracy and

an allegation that the true level of retailer compliance may not have satisfied the FDA's sixty-percent

standard.9 The record satisfies us that the FDA had fair notice of the interpretation of appellants'

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when appellants appeared to argue that the amendment to their complaint did not address the

validity of the survey, see Pls.' Reply Mem. in Supp. of Mot. to Supplement and Amend Compl. at

3-4, the FDA continued to assert that appellants did "attempt to raise in their amended complaint"

the allegation that the Secretary's actual finding of substantial compliance is erroneous, and the

FDA continued to interpret that allegation as it had in footnote 3 of its Opposition to Plaintiffs'

Motion to Amend Complaint, where the FDA acknowledged that the allegation called into

question whether the actual level of retailer compliance was below sixty percent. Secretary's

Reply in Supp. of Mot. for Protective Order at 2. 

amended complaint for which appellants now argue on appeal. Thus, appellants' challenge to the

FDA Report's specific finding of substantial compliance survives our rulings regarding the FDA's

definition of the "substantial compliance" standard.

III. CONCLUSION

For the reasons set forth above, we find that the FDA regulations defining "substantial

compliance" under the NLEA are not arbitrary and capricious. Nevertheless, we remand to the

District Court for consideration of the parties' pending discovery motions.

So ordered.

WALD, Circuit Judge, concurring in the judgment: While I agree with the panel's conclusion

that the Food and Drug Administration's ("FDA") rule is justifiable, I would resolve the case under

the Chevron step two challenge which was presented by the parties and addressed by the trial court,

rather than grounding our decision on a different facet of Administrative Procedure Act ("APA")

review.

To beginwith, I do not believe that theChevron challenge was "mistake[n]," Majorityopinion

("Maj. op.") at 9, and deserves to be ignored. The panel opinion says that because the statute

explicitlyauthorizesthe agencyto promulgate regulations defining substantialcompliance, "[t]he only

issue here is whether the FDA's discharge of that authority was reasonable." Maj. op. at 10. The

majority then maintains that the reasonableness inquiry "falls within the province of traditional

arbitrary and capricious review," thereby rendering Chevron inapplicable. Id. I do not think that

reasoning holds true in all cases, and specifically not in this case.

Chevron allocates power to interpret statutes among the branches of government by creating

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1Although the majority contends that "Chevron is principally concerned with whether an

agency has authority to act under a statute," Maj. op. at 9, I think Chevron requires a reviewing

court to ask a somewhat different question: whether an agency's specific course of action is

permitted by statute. It is possible that a statute might grant an agency authority to act in some

fashion, but not in the particular manner it has chosen. Petitioners argue that the case before us

presents just this problem. They do not question the FDA's authority to promulgate regulations

defining substantial compliance, but argue that the specific compliance standard selected by the

agency (60% of retailers satisfying a 90% individual compliance standard) was not permitted by

the Nutrition Labeling and Education Act's ("NLEA") requirement that "a significant number of

retailers" comply with the labeling guidelines. 

a presumption that agencies, rather than the courts, are the preferred institution for filling in statutory

gaps.1 Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The

first step of Chevron is straightforward; if the statutory language is clear, it controls. The second

step, where inmyview the majoritygoes astray, entrusts agencies with authorityto interpretstatutory

ambiguities, provided they do so in a manner that is reasonable and consistent with the language and

purposes of the statute. See, e.g., Rettig v. Pension Benefit Guar. Corp., 744 F.2d 133, 151 (D.C.

Cir. 1984). By contrast, garden-variety APA review under § 706 focuses more heavily on the

agency's decisionmaking process; to survive arbitrary and capricious review, "the agency must

examine the relevant data and articulate a satisfactory explanation for its action, including a rational

connection between the factsfound and the choice made." Motor Vehicle Mfrs. Ass'n v. State Farm

Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (explaining scope ofreview under 5 U.S.C. § 706(2)(A))

(citation and internal quotation omitted).

Given these differencesin the central concerns behind the two analytic frameworks, there are

certainly situations where a challenge to an agency's regulation will fall squarely within one rubric,

rather than the other. See Continental Air Lines v. Dep't of Transp., 843 F.2d 1444, 1452 (D.C. Cir.

1988)(discussing differences between arbitrary/capricious review and review of agency interpretation

of statutory ambiguity). For example, we might invalidate an agency's decision under Chevron as

inconsistent with its statutory mandate, even though we do not believe the decision reflects an

arbitrary policy choice. Such a result might occur when we believe the agency's course of action to

be the most appropriate and effective means of achieving a goal, but determine that Congress has

selected a differentalbeit, in our eyes, less propitiouspath. Conversely, we might determine that

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2

In several cases, this court has analyzed challenges based on Chevron and State Farm in

separate and distinct inquiries. See, e.g., National Recycling Coalition, Inc. v. Browner, 984 F.2d

1243, 1250-52 (D.C. Cir. 1993); Solite Corp. v. United States EPA, 952 F.2d 473, 482-88 (D.C.

Cir. 1991); City of Kansas City, Mo. v. HUD, 923 F.2d 188, 191-94 (D.C. Cir. 1991). 

3This type of case is rare, though; this court has found that phrases as broad as "public

interest" constrain agency authority enough to permit Chevron step two review. See, e.g.,

American Postal Workers Union v. United States Postal Serv., 891 F.2d 304, 313 (D.C. Cir.

1989) ("In our view, Chevron reasonableness review of an agency's interpretation of a "public

interest' standard is not empty rhetoric; it is intended to have a limiting effect on the range of

agency discretion."), rev'd on other grounds sub nom. Air Courier Conference v. American

Postal Workers Union, 498 U.S. 517 (1991). 

although not barred by statute, an agency's action is arbitrary and capricious because the agency has

not considered certain relevant factors or articulated any rationale for its choice.2 Or, along similar

lines, we might find a regulation arbitrary and capricious, while deciding that Chevron isinapplicable

because Congress' delegation to the agency is so broad as to be virtually unreviewable.3

But I agree with the panel that despite these distinctions, the Chevron and State Farm

frameworks often do overlap. Compare Chevron, 467 U.S. at 844 (where congressional delegation

is express, court must defer to agency's regulations "unless they are arbitrary, capricious, or

manifestly contrary to the statute") with APA, 5 U.S.C. § 706(2)(A) (1988) (reviewing court must

set aside agency action that is "arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law"). Because both standards require the reviewing court to ask whether the

agency has considered all of the factors made relevant by the statute, this court has often found the

State Farm line of cases relevant to a Chevron step two analysis. See, e.g., American Fed. of Labor

& Cong. of Indus. Org. v. Brock, 835 F.2d 912, 917 (D.C. Cir. 1987).

The case before us arguably falls within this area of overlap. In reviewing the FDA's

regulations, our task was to determine whether the agency rationally considered the factorsset forth

in the NLEA when it defined "substantial compliance." Accordingly, I would not argue that State

Farm is altogether irrelevant to our analysis, but given the scope and function of Chevron step two

analysis, neither would I find State Farm applicable to the exclusion ofChevron, asthe majority does.

Petitioners' appeal ultimately does stand or fall on whether the FDA heeded Congress' admonitions

that it may not find "substantial compliance" if "a significant number of retailers" have failed to

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4The majority contends that it is appropriate to resolve this case under State Farm arbitrary

and capricious review because the parties raised this issue in their briefs and in the proceedings

below. Maj. op. at 8 n.4. I am inclined to disagree with this characterization. Although the

majority correctly asserts that the parties and the trial court occasionally used the words "arbitrary

and capricious" and cited to State Farm, I read these references as made in the context of a

Chevron step two analysis. See, e.g., Brief for Appellants at 20-39 (arguing that FDA regulation

violates statutory directive, but contending that typical Chevron deference is unwarranted because

FDA did not rely on agency expertise in promulgating regulation); Brief for Appellees at 23

(arguing that trial court's ruling should be upheld because "court below properly employed a

"Chevron II' analysis"), 26 (FDA regulations "are not arbitrary, capricious, or contrary to the

NLEA"), 29 (60% compliance is "rational [and] consistent with the NLEA"), 39 (90% individual

compliance standard is "rational [and] consistent with the NLEA"); Arent v. Shalala, 866 F.

Supp. 6, 13-14 (D.D.C. 1994) ("Chevron ... provides the analytical framework which the Court

must use to review an agency's construction of a statute.... The Court ... will uphold [the

regulations] unless those regulations are arbitrary, capricious or manifestly contrary to the

NLEA."). Certainly at no point was the suggestion made by either party that this court abandon

the Chevron framework for State Farm arbitrary and capricious review. 

comply, and that it must consider "[t]he size of the retailers and the portion of the market served by

retailers in compliance with the guidelines" when making this determination. 21 U.S.C. §

343(q)(4)(B)(ii) (1988). This language is sufficiently concrete to permit review of whether the

agency's interpretation is reasonable and consistent with Congress' purpose in enacting the NLEA.

In fact, I believe it well within the bounds of typical Chevron step two analysis, which is why the

majority's opinion troubles me somewhat. If this case falls totally outside Chevron, many other cases

marching under its banner must be similarly exiled. The majority's unequivocal rejection of the

Chevron analytic framework utilized by the parties and the trial court in this case provides no clues

as to the boundary lines for Chevron and APA review.

Finally, I worry that second-guessing the parties and counsel on the primary analytic mode

for their challenges4causes unnecessary confusion and uncertainty among administrative law

practitioners. I think a court should refrain from reframing or abandoning the issues raised by the

parties unless their formulations are frivolous or misconceived. Otherwise we are posing the

questions, and then answering them ourselves without help from counsel. Generally, courts ought

to stick closely to the issues raised and the arguments made by counsel, and I would have done so

here by resolving this case under the Chevron mode of analysis. Had I done so, I would have arrived

at the same result as the majority on basically the same grounds as the district court, and for that

reason, I concur in the judgment.

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