A Brief Overview of Rulemaking and Judicial Review
Released: 2017-03-27T00:00:00

Introduction

The Administrative Procedure Act (APA), which applies to all executive branch and independent agencies, prescribes procedures for agency rulemakings and adjudications, as well as standards for judicial review of final agency actions. This report provides a brief overview of the APA's core rulemaking and judicial review provisions. After addressing the various methods through which agencies may promulgate rules, the report highlights the numerous exceptions to the APA's general procedural requirements, including the "good cause" standard, and the rules regarding agency issuance of policy statements, interpretive rules, and rules of agency procedure. The report then briefly describes two executive orders that place additional rulemaking requirements on executive branch agencies. The report concludes with a discussion of judicial review of agency action, with a focus on the arbitrary and capricious test, and the review of rule repeals and other changes in agency policy.

Types of Rulemaking

The APA describes rulemaking as the "agency process for formulating, amending, or repealing a rule." A "rule," for purposes of the statute, is defined expansively to include any "agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency." Rules that are issued in compliance with certain legal requirements, and that fall within the scope of authority delegated to the agency by Congress, have the force and effect of law.

Federal agencies may promulgate rules through various methods. Although the notice-and-comment rulemaking procedures of § 553 of the APA represent the most commonly followed process for issuing legislative rules, agencies may choose or may be required to use other rulemaking options, including formal, hybrid, direct final, and negotiated rulemaking. The method by which an agency issues a rule may have significant consequences for both the procedures the agency is required to undertake and the deference with which a reviewing court will accord the rule. In addition, the APA contains whole or partial exceptions to the statute's otherwise applicable procedural rulemaking requirements.

Informal/Notice-and-comment/Section 553

Generally, when an agency promulgates legislative rules, or rules made pursuant to congressionally delegated authority, the exercise of that authority is governed by the informal rulemaking procedures outlined in 5 U.S.C. § 553. In an effort to ensure public participation in the informal rulemaking process, agencies are required to provide the public with adequate notice of a proposed rule followed by a meaningful opportunity to comment on the rule's content. Although the APA sets the minimum degree of public participation the agency must permit, the legislative history of the APA suggests that "[matters] of great importance, or those where the public submission of facts will be either useful to the agency or a protection to the public, should naturally be accorded more elaborate public procedures."

The requirement under § 553 to provide the public with adequate notice of a proposed rule is generally achieved through the publication of a notice of proposed rulemaking in the Federal Register . The APA requires that the notice of proposed rulemaking include "(1) the time, place, and nature of public rulemaking proceedings; (2) reference to the legal authority under which the rule is proposed; and (3) either the terms or substance of the proposed rule or a description of the subjects and issues involved." Generally speaking, the notice requirement of § 553 is satisfied when the agency "affords interested persons a reasonable and meaningful opportunity to participate in the rulemaking process."

Once adequate notice is provided, the agency must provide interested persons with a meaningful opportunity to comment on the proposed rule through the submission of written "data, views, or arguments." The comment period may result in a vast rulemaking record as persons are permitted to submit nearly any piece of information for consideration by the agency. While there is no minimum period of time for which the agency is required to accept comments, in reviewing an agency rulemaking, courts have focused on whether the agency provided an "adequate" opportunity to comment—of which the length of the comment period represents only one factor for consideration.

Once the comment period has closed, the APA directs the agency to consider the "relevant matter presented" and incorporate into the adopted rule a "concise general statement" of the "basis and purpose" of the final rule. The general statement of basis and purpose should "enable the public to obtain a general idea of the purpose of, and a statement of the basic justification for, the rules." The agency is not required to include in the final rule a response to every comment received. Instead, the agency is obligated only to respond to what the courts have characterized as "significant" comments. The final rule, along with the general statement must be published in the Federal Register not less than 30 days before the rule's effective date.

Formal

Although rules are typically promulgated through the informal rulemaking process, in limited circumstances, federal agencies must follow formal rulemaking requirements. Under the APA, "when rules are required by statute to be made on the record after opportunity for an agency hearing" the formal rulemaking requirements of § 556 and § 557 apply. The Supreme Court has interpreted this language very narrowly, determining that formal rulemaking requirements are only triggered when Congress explicitly requires that the rulemaking proceed "on the record."

When formal rulemaking is required, the agency must engage in trial-like procedures. The agency, therefore, must provide a party with the opportunity to present his case through oral or documentary evidence and "conduct such cross-examination as may be required for a full and true disclosure of the facts." Formal rulemaking proceedings must be presided over by an agency official or Administrative Law Judge who traditionally has the authority to administer oaths, issue subpoenas, and exclude "irrelevant, immaterial, or unduly repetitious evidence." Formal rulemaking procedures also prohibit ex parte communications between interested persons outside the agency and agency officials involved in the rulemaking process. The agency or proponent of the rule has the burden of proof, and such rules must be issued "on consideration of the whole record … and supported by … substantial evidence."

Hybrid

In providing rulemaking authority to an agency, Congress may direct the agency to follow specific procedural requirements in addition to those required by the informal rulemaking procedures of the APA. Hybrid rulemaking statutes typically place additional procedural rulemaking requirements on agencies that may be found in the adjudicative context, but fall short of mandating that an agency engage in the APA's formal rulemaking process. These statutes generally create a rulemaking process with more flexibility than the formal rulemaking procedures under § 556 and § 557 and more public participation than informal rulemaking procedures under § 553. Hybrid rulemaking statutes may require that the agency: hold hearings; allow interested persons to submit oral testimony; and grant participants opportunities for cross examination or questioning. Hybrid rulemaking is only required where expressly directed by Congress, and such statutes were frequently enacted in the 1970s.

Direct Final

Federal agencies have developed a process known as direct-final rulemaking in order to quickly and efficiently finalize rules for which the agency does not expect opposition. Under direct-final rulemaking, the agency publishes a proposed rule in the Federal Register . In contrast to informal rulemaking, however, the notice will include language providing that the rule will become effective as a final rule on a specific date unless an adverse comment is received by the agency. If even a single adverse comment is received, the proposed rule is withdrawn, and the agency may issue its proposed rule under the APA's informal notice-and-comment requirements. In this manner, the agency can efficiently finalize unobjectionable rules while avoiding many of the procedural delays of the traditional notice-and-comment rulemaking requirements. Although there is no express statutory authorization for direct-final rulemaking, this type of rulemaking has been justified under the "unnecessary" portion of the APA "good cause" exception, discussed infra , as well as the informal notice-and-comment rulemaking procedures.

Negotiated

Negotiated rulemaking represents a supplement to traditional informal rulemaking procedures that allows agencies to consult with interested persons and interest groups at the developmental stages of the rulemaking process. The goal of the negotiated rulemaking process is to increase administrative efficiency and decrease subsequent opposition to a promulgated rule by engaging the participation of outside groups with significant interest in the subject matter of the rule. In principle, negotiated rulemaking allows the agency and other involved interests to reach consensus in the early rulemaking stages so as to produce a final rule that is more likely to be acceptable to all parties.

Under the Negotiated Rulemaking Act (the Act), the head of an agency is authorized to "establish a negotiated rulemaking committee to negotiate and develop a proposed rule if … the use of the negotiated rulemaking procedure is in the public interest." The Act lays out a number of mandatory considerations for determining whether a negotiated rule would be in the public interest. Once an agency has made the decision to establish a negotiated rulemaking committee, the agency must follow the Federal Advisory Committee Act with regard to the committee and must publish a notice in the Federal Register detailing the duties of the committee and the committee's proposed membership. The negotiated rulemaking committee generally consists of a maximum of 25 members, with at least one agency representative. The public must have an opportunity to comment on the proposal to create the committee and the proposed membership.

If the committee achieves consensus on a proposed rule, the committee issues a report outlining the proposed rule. If the committee does not achieve a consensus, the committee may issue a report with any negotiated positions on which it did reach consensus. The report and the committee's conclusions are not binding on the agency. Indeed, any proposed rule that arises as a result of the deliberations of a negotiated rulemaking committee must subsequently "be finalized through ordinary notice-and-comment procedures.... "

Although agencies are authorized, at their discretion, to engage in negotiated rulemaking pursuant to the Act, in limited instances Congress requires an agency to comply with negotiated rulemaking procedures in issuing specific rules.

Exceptions to the APA's Section 553 Rulemaking Requirements

The APA has carved out a number of exceptions to the default notice-and-comment rulemaking requirements. Depending on the substance or nature of the rule, some, all, or none of the § 553 procedural requirements may apply. The various exceptions are discussed below.

Wholly Exempt

The APA exempts rules relating to specific subject matter areas from all of the procedural rulemaking requirements of § 553. This exception covers rules pertaining to (1) "a military or foreign affairs function of the United States," (2) "a matter relating to agency management or personnel," or (3) a matter relating to "public property, loans, grants, benefits, or contracts." Although rules pertaining to these areas need not satisfy the APA's informal rulemaking requirements, such rules still have the force and effect of law. The military and foreign affairs exception is not just limited to rules issued by the Department of Defense or Department of State, and applies to qualifying actions of any agency. The agency management exception only applies where the rule in question would not affect parties outside the agency. Finally, the term "property" in the third subject matter exception does not extend to all rules pertaining to public lands; rather the exception has been interpreted as limited to the "distribution of property."

Exceptions to the Notice-and-comment Procedures

The APA provides exceptions to the notice-and-comment rulemaking procedures for both legislative and non-legislative rules, which are discussed in detail below. Non-legislative rules are "interpretative rules, general statements of policy, and rules of agency organization, procedure, or practice." Rules that have been promulgated through the notice-and-comment process have the force and effect of law and are known as legislative rules. The exceptions to the notice-and-comment process for legislative rules depend on whether the agency has "good cause" to dispense with the notice-and comment procedures.

Non-legislative Rules: Rules of Agency Procedure, Interpretative Rules, and General Statements of Policy

Agency procedural rules are exempt from the notice-and-comment requirements of § 553. Much like the "agency management" exception, agency procedural rules must have an intra-agency impact. Courts have defined agency procedural rules as the "technical regulation of the form of agency action and proceedings … which merely prescribes order and formality in the transaction of … business." The exception does not include any action "which is likely to have considerable impact on ultimate agency decisions" or that "substantially affects the rights of those over whom the agency exercises authority." If the proposed procedural rule will have a substantive impact, then the agency must promulgate the rule through notice-and-comment rulemaking. However, even if a rule qualifies as a "procedure or practice," the agency must still satisfy the APA's publication and 30-day delayed effective date requirements.

The APA's notice-and-comment requirements also do not apply to interpretive rules and general statements of policy. These rules are generally referred to as non-legislative rules, in that they do not carry the force and effect of law. The APA created the exception for non-legislative rules principally to allow agencies to efficiently perform routine day-to-day duties, while encouraging agencies to provide the public with timely policy guidance without having to engage in what can be the lengthy and burdensome notice-and-comment process.

An interpretive rule is generally characterized as a rule in which an agency announces its interpretation of a statute in a way that "only reminds affected parties of existing duties." These rules allow agencies "to explain ambiguous terms in legislative enactments without having to undertake cumbersome proceedings." Interpretive rules do not "effect[] a substantive change in the regulations." General statements of policy are "statements issued by an agency to advise the public prospectively of the manner in which the agency proposes to exercise a discretionary power." These statements provide agencies with the opportunity to announce their "tentative intentions for the future" in a non-binding manner.

Determining whether an agency action, such as a guidance document, is properly characterized as a legislative or non-legislative rule may be difficult. However, the determination has significant consequences for both the procedures the agency is required to follow in issuing the rule and the deference with which a reviewing court will accord the rule. In categorizing a rule, an agency must determine whether the action in question simply interprets existing law or results in a substantive change to existing law. As the U.S. Court of Appeals for the District of Columbia (D.C. Circuit) has suggested: "an agency can declare its understanding of what a statute requires without providing notice-and-comment, but an agency cannot go beyond the text of a statute and exercise its delegated powers without first providing adequate notice-and-comment."

Still, even non-legislative rules must comply with certain aspects of the APA's procedural requirements. For example, the agency must comply with the APA's petition requirements as well as publication and public availability provisions. As non-legislative rules are exempt from the APA's notice-and-comment requirements, as well as the delayed effective date requirement, they are effective immediately upon publication in the Federal Register .

Good Cause

Section 553(b)(B) specifically authorizes federal agencies to dispense with the APA's requirements for notice-and-comment under certain circumstances. To qualify for the good cause exception, the agency must find that the use of traditional procedures is "impracticable, unnecessary, or contrary to the public interest." Each of these three terms or phrases has a specific meaning. In addition, the agency must give supporting reasons for invoking the good cause exception. Whether the agency's use of the good cause exception is proper is a fact-specific inquiry that generally includes an evaluation of whether immediate action is necessary, the consequences of inaction, and whether advance notice would defeat the regulatory objective. Courts, however, have traditionally held that these exceptions will be "narrowly construed and reluctantly countenanced." For example, the D.C. Circuit has stated that "[b]ald assertions that the agency does not believe comments would be useful cannot create good cause to forgo notice-and-comment procedures."

A common use of the good cause exception is in the issuance of interim final rules. Interim final rules are used by agencies to promulgate rules without providing the public with notice and an opportunity to comment before publication of the final rule. In issuing the rule, the agency generally reserves the right to modify the rule through a post-promulgation comment period. However, agencies must assert a valid "good cause" exception in issuing any interim final rule. Unlike non-legislative rules, interim final rules are considered final rules that carry the force and effect of law.

Exceptions to the 30-Day Delayed Effective Date

The APA's 30-day waiting period between the publication of the final rule and the rule's effective date was designed principally to "afford persons affected a reasonable time to prepare for the effective date of the rule." In addition to the APA's notice-and-comment exceptions for interpretive rules, policy statements, and legislative rules for which the agency finds "good cause," these rules are also excused from the APA's 30-day delayed effective date requirement. Additionally, the APA also has an exception from the 30-day delayed effective date requirement for "a substantive rule which grants or recognizes an exemption or relieves a restriction." Moreover, as noted below, because the repeal of a rule, either in whole or in part, often amounts to the removal of a "restriction," such an action may be exempt from the delayed effective date requirement. Rules that qualify for any of these established exceptions may be considered effective upon the publication of the final rule.

Procedures for Amending or Repealing Rules

Agencies are generally empowered to amend or repeal existing rules that were issued pursuant to discretionary authority. In order to do so, however, the agency must comply with the default requirements of the APA, which defines "rulemaking" to be the "process for formulating, amending , or repealing a rule." Therefore, in order to amend or repeal an existing legislative rule, an agency generally must comply with the same notice-and-comment rulemaking procedures, outlined in § 553 of the APA, that governed the original promulgation of the rule. In cases where a statute specifically requires alternative procedures for the initial promulgation of a specific legislative rule, the agency may be required to engage in those same procedures to amend or repeal that rule.

Rule repeals, which are often deregulatory in nature, may be excused from the APA's delayed effective date requirement if they are deemed to "relieve a restriction." As previously noted, the APA requires that a rule may not take effect until 30 days after the date of publication of the final rule. That requirement, however, is subject to various exceptions, including when an agency finds that there is "good cause" for the rule to take immediate effect, or where the rule "grants or recognizes an exemption or relieves a restriction." It would therefore appear that although an agency is generally required to comply with the notice-and-comment requirements of § 553 in repealing a rule, to the extent the repeal removes a previously existing requirement on regulated entities, the rule could be given immediate effect upon publication of the final repeal.

Policy statements, interpretive rules, agency rules of procedure, and other informal agency pronouncements that were not subject to notice-and-comment during their initial promulgation and that lack the force and effect of law may be altered immediately and without public participation. Even long-standing agency positions that have been implemented through non-legislative rules may generally be reversed without compliance with notice-and-comment procedures.

Delaying Implementation of Final Rules

An agency generally may not simply suspend the effectiveness of an existing rule. However, agencies have previously implemented temporary delays of new rules that have been published as final rules but, often due to the 30-day delayed effective date requirement, have not yet taken effect. These delays frequently occur during the early days of a new presidential Administration and have generally been implemented without providing the public with notice or an opportunity to comment. For example, the last three Presidents have directed agencies to delay the effective dates of all finalized but not yet effective rules by 60 days in order to provide the new Administration with time to review the rule.

Whether agencies may postpone the effective date of a finalized rule that has not yet taken effect without first engaging in notice-and-comment is a legal question that has not been definitively resolved. Despite the uncertainty associated with agency authority in this area, and perhaps because such delays are typically short in duration, agencies have generally been successful in implementing these delays without notice-and-comment. Nevertheless, some federal courts have suggested that such a delay could amount to a substantive amendment to the rule and thus cannot be implemented without first engaging in the notice-and-comment process. These cases have similarly rejected claims that a delay created as a result of a presidential transition qualifies for the good cause exception. It should be noted that courts have been more willing to permit agencies to delay, without notice-and-comment, the effective date of a rule that is subject to a pending legal challenge. This acceptance is likely due to language in the APA providing that "[w]hen an agency finds that justice so requires, it may postpone the effective date of action taken by it, pending judicial review."

Rulemaking Procedures and Requirements Imposed by Executive Order

Recent Presidents, through executive order, have also imposed a number of non-statutory requirements on the executive branch rulemaking process. Two such orders include those relating to centralized rulemaking review and a new executive order issued by President Trump requiring agencies to offset costs of new rules by repealing existing rules. Both executive orders apply only to executive branch agencies and do not cover independent agencies.

A series of executive orders, beginning with those issued by President Reagan, have established a process by which the White House has an opportunity to review and clear proposed regulatory actions of federal agencies. Under these orders, the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget (OMB) reviews "significant" regulatory actions at both the proposed and final rule stage. An agency is prohibited, "except to the extent required by law," from issuing a rule while OIRA review is pending. In addition, these orders direct agencies to perform a cost-benefit analysis for certain regulatory actions and "adopt a regulation only upon a reasoned determination that the benefits" of the rule "justify its costs."

Executive Order 13771 (Order), recently issued by President Trump, requires agencies to offset the costs of any new rule issued during fiscal year 2017 by repealing existing rules. The Order generally directs that "the total incremental cost of all new regulations, including repealed regulations ... shall be no greater than zero." This regulatory cost cap is implemented by requiring that any costs resulting from new rules "shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations."

The Order, and the guidance issued by the OMB implementing the Order, establishes a number of general exceptions to the offset requirement. First, the Order applies only during fiscal year 2017. Second, the Order applies to "significant" regulatory actions, a term defined generally as those that have an economic impact of $100 million or more, interfere with actions of other agencies, materially alter entitlements, or raise novel legal or policy issues. Third, the Order explicitly exempts rules related to military, national security, or foreign affairs functions of the United States, rules of agency organization, and "any other category of regulations exempted by the Director." Fourth, because the Order requires a regulatory offset "unless otherwise required by law," an agency may proceed with mandated rules "that need to be finalized in order to comply with an imminent statutory or judicial deadline even if they are not able to identify offsetting regulatory actions by the time of issuance."

It should be noted that Executive Order 13771 does not, and cannot, permit an agency to dispense with statutorily imposed procedural requirements when repealing or amending rules in order to implement the Order's cost-offset requirement. Any such alterations to agency rules must be made in compliance with the APA.

Judicial Review of Agency Rulemaking

As a general matter, there is a "strong presumption that Congress intends judicial review of administrative action." This presumption is embodied in the APA, which provides that "final agency action for which there is no other adequate remedy in a court [is] subject to judicial review." The APA excludes judicial review in two situations—instances where (1) other "statutes preclude judicial review" or where (2) "agency action is committed to agency discretion by law."

The APA provides that courts may hold unlawful and set aside agency actions under a number of circumstances. Specifically, the APA states:

The reviewing court shall ... hold unlawful and set aside agency action, findings, and conclusions found to be –

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

(B) contrary to constitutional right, power, privilege, or immunity;

(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;

(D) without observance of procedure required by law;

(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title

or otherwise reviewed on the record of an agency hearing provided by statute; or

(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.

In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error.

This provision indicates that the type of judicial review may differ depending on whether the court is reviewing formal or informal rulemakings. Specifically, cases subject to § 556 and § 557 are subject to "substantial evidence" review, whereas other agency actions are subject to "arbitrary and capricious" review. Congress has sometimes, however, required informal, notice-and-comment rulemakings to be reviewed under the substantial evidence test. However, some have argued that the two standards are the same, and commentators have stated that "the substantial evidence and arbitrary and capricious tests have tended to converge" in judicial review of informal rulemaking.

Arbitrary and Capricious Review Explained

The most common standard of review that courts apply in challenges to agency action is the "arbitrary and capricious" standard. This "catch-all" review standard of the APA applies to factual determinations made during informal rulemaking proceedings such as notice-and-comment rulemaking and most other discretionary determinations an agency makes. Given the broad scope of federal agency actions that are subject to this type of review, whether an agency decision is arbitrary and capricious is largely a fact-based and situation-specific question.

The contours of "arbitrary and capricious" review were perhaps most clearly articulated in the Supreme Court's decision of Motor Vehicle Manufacturers Association v. State Farm Auto Mutual Insurance Co . In State Farm , the Court explained that in applying this "narrow" standard of review, "a court is not to substitute its judgment for that of the agency. " Rather, a court should only invalidate agency determinations that fail to "examine the relevant data and articulate a satisfactory explanation for [the] action including a 'rational connection between the facts found and the choice made. '" When reviewing that determination, courts must "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. " In general, the Court noted that an agency decision is 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.

Fundamentally, the arbitrary and capricious standard requires only that an agency demonstrate that it engaged in reasoned decisionmaking by providing an adequate explanation for its decision. The agency must be able to provide the "essential facts upon which the administrative decision was based " and explain what justifies the determination with actual evidence beyond a "conclusory statement. " An agency decision that is the product of "illogical " or inconsistent reasoning ; that fails to consider an important factor relevant to its action, such as the policy effects of its decision or vital aspects of the problem in the issue before it; or that fails to consider "less restrictive, yet easily administered" regulatory alternatives, will similarly fail the arbitrary and capricious test.

Judicial Review of Rule Repeals or Other Changes in Agency Policy

Agencies are generally accorded the flexibility to depart from previously established positions by altering or repealing rules or other agency pronouncements. Administrative decisions are not "carved in stone," but rather vary on a nearly "continuing basis ... in response to changed factual circumstances, or a change in administrations." Yet in executing a significant policy change or other reversal, the agency is required to comply with applicable APA procedural requirements. Thus, in regard to amending or repealing rules, the agency generally may implement such a change only through notice-and-comment rulemaking.

In addition to these procedural requirements, an agency rule that implements a policy change by amending or repealing an existing rule is also subject to arbitrary and capricious review. Although the precise application of that review to an agency change in position is subject to some debate, the Supreme Court has stated that judicial review is not heightened or more stringent simply because an agency's action alters its prior policy. Specifically, the Court has held that there is "no basis in the [APA] or in our opinions for a requirement that all agency change be subjected to more searching review" or that "every agency action representing a policy change must be justified by reasons more substantial than those required to adopt a policy in the first instance." Instead, arbitrary and capricious review requires only that the agency provide a "reasoned analysis for the change."

The Supreme Court's 2009 decision of FCC v. Fox Television Stations established a series of more detailed, but not overly demanding, principles that elucidate the standard for judicial review of agency change. First, an agency must "display awareness" that it is changing its position. An agency action that departs from a prior policy without acknowledging the change, or that creates an "unexplained inconsistency" with prior policy is generally viewed as arbitrary and capricious. Second, an agency "need not demonstrate ... that the reasons for the new policy are better than the reasons for the old one ..." It is enough for the agency to show that there are "good reasons" for the change and that the "new policy is permissible under the statute." Third, the court identified two scenarios in which an agency may be required to provide a "more detailed justification" for a change in policy: when the "new policy rests upon factual findings that contradict those which underlay its prior policy"; or where the previous policy has "engendered serious reliance interests that must be taken into account." In each instance, the Court noted that it would be arbitrary and capricious to "ignore" or "disregard" such matters.

The Court revisited the question of judicial review of agency change, and the principle of "serious reliance interests" specifically, in Encino Motorcars , LLC v. Navarro . In that case, the Court held that a rule reflecting the agency's altered statutory interpretation was arbitrary and capricious because the agency failed to provide the required "reasoned explanation" for the change. The Court stated that while a "summary discussion " of an agency's reasons for changing its position "may suffice in other circumstances," when there has been "decades" of "industry reliance" on a prior policy, an agency must present a "more reasoned explanation" for "why it deemed it necessary to overrule its previous position." That requirement, the Court concluded, could not be met—especially when "serious reliance interests are at stake"—when an agency offers "almost no reasons at all" or only "conclusory statements" for its decision to change course.

Deference to Agency Statutory Interpretations

The standard of H.R. 1 judicial review that concerns congressional delegations of legislative authority to administrative agencies addresses whether an agency action is "in excess of statutory jurisdiction, authority, or limitations, or short of statutory right." The Supreme Court has stated that "an administrative agency's power to regulate in the public interest must always be grounded in a valid grant of authority from Congress." Courts grant varying levels of deference to agency interpretations of statutes when examining questions such as whether an agency's action exceeds its congressionally delegated st atutory authority. A detailed discussion of the types of deference that a court may accord to an agency's interpretation of a statutory provision is available in CRS Report R43203, Chevron Deference: Court Treatment of Agency Interpretations of Ambiguous Statutes , by [author name scrubbed] and [author name scrubbed].