Opinion ID: 1923690
Heading Depth: 2
Heading Rank: 3

Heading: chapter 227 review

Text: I consider first the judicial review statutes applicable to this case. The parties agree that the Buyer's Guide and Policy Summary are part of a rule promulgated by the Commissioner and that the agency action in the instant case is classified as a rule under ch. 227, Stats. 1979-80. Aetna brought this declaratory judgment action in Dane county circuit court seeking judicial review of the rule pursuant to sec. 227.05, Stats. 1979-80. [3] Sec. 227.05(1) provides that, except in instances not applicable here, the exclusive means of judicial review of the validity of a rule shall be an action for declaratory judgment as to the validity of such rule brought in the circuit court for Dane county. Under sec. 227.05 (4), Stats. 1979-80, a court shall declare a rule invalid if the rule: violates constitutional provisions; exceeds the statutory authority of the agency; or was adopted without compliance with rule-making procedures. Sec. 227.05(4) In any proceeding pursuant to this section for judicial review of a rule, the court shall declare the rule invalid if it finds that it violates constitutional provisions or exceeds the statutory authority of the agency or was adopted without compliance with statutory rule-making procedures. Aetna asserts that the rule exceeds the statutory authority of the Commissioner. This challenge rests on two grounds: (1) sec. 628.34(1) (a), Stats., which prohibits an insurance company from making misleading statements similarly prohibits the Commissioner from requiring an insurance company to make misleading statements; and (2) the purposes of the insurance laws [4] administered by the Commissioner are frustrated by the rule which requires an insurance company to make misleading statements. [5] The first question a rule challenge raises is what is the record on which judicial review is to be based. Sec. 227.05, Stats. 1979-80 is silent on this point. There are several alternatives, each of which presents advantages and disadvantages. The nature of the record which will be needed is dependent on the issues raised on the review. And the nature of the record may affect the scope of review. Judicial review might be limited solely to a record consisting of the language of the rule and of the statutes and a description of the procedure followed in adopting the rule. [6] Or another alternative is review based solely on the record made during the administrative rule-making proceedings. Review might also be based on a record made before the circuit court, or on a record made during the rule-making proceedings supplemented as the circuit court deems appropriate, [7] or on a record made by the administrative agency on remand to the administrative agency for further fact finding. [8] The record in this case includes proceedings before both the agency and circuit court. In the instant case transcripts were made of the Commissioner's rule-making hearings, and the Commissioner received written material in connection with the hearings. Sec. 227.02, Stats. 1979-80. [9] These administrative records were presented to the circuit court. Aetna objected to the introduction of the administrative record in the circuit court. The grounds for the objection are not clear. Apparently there was no claim made in the circuit court that the record of the proceedings before the Commissioner were an inadequate basis for judicial review. Nevertheless, in the instant case the trial court heard extensive expert opinion testimony and based its ruling on the record made in that court. Sec. 227.05 neither authorizes the taking of testimony nor prohibits the taking of testimony in a declaratory judgment action for review of a rule. Neither party explains why evidence was presented in the circuit court. Aetna's brief justifies the taking of testimony in circuit court citing sec. 227.05(1), Stats. 1979-80, which refers to supporting evidence, [10] and the order of this court which remanded the matter to the circuit court for a hearing on the merits. But this reference in sec. 227.05(1) to supporting evidence appears to be to supporting evidence for the purpose of determining whether the legal rights of the plaintiff have been impaired so as to justify the declaratory judgment action. The order of this court did not elaborate on the type of hearing to be conducted by the circuit court or prescribe the nature of the record to be reviewed or to be made. The nature of the record upon which judicial review of a rule should be conducted is an important issue. Unfortunately the majority does not consider it and does not provide guidance for future declaratory judgment actions. Whatever the record upon which review is based, a broader question, also unanswered in sec. 227.05, Stats. 1979-80, is the scope of review, that is the principles of judicial review which the court should apply to determine whether the rule exceeds the Commissioner's statutory authority. [11] The parties disagree as to the scope of review. Aetna argues that the issue of whether the rule is misleading is a fact issue for ab initio determination by the circuit court or a question of law for ab initio determination by the courts. The Commissioner asserts that the review is of a quasi-legislative agency determination; that the court cannot substitute its judgment for that of the Commissioner; and that the scope of review is the rational basis test. Principles of judicial review are the means of allocating the decision-making function between agencies and courts and allowing the courts and agencies to work as partners in the furtherance of the public interest. Gardner, Federal Courts and Agencies: An Audit of the Partnership Books, 75 Colum. L. Rev. 800 (1975). The legislature has delegated the policy-making function to the administrative agency and has empowered the court to review the agency rules to ensure that they are lawful. A court should not rubber stamp an agency rule; such a review would be a time-consuming, expensive ritual. Judicial review should be a meaningful supervision of the work of the administrative agencies. But in exercising such supervisory powers, the court must exercise judicial restraint. The court is to review the agency rule; the court is not to decide what the rule should be. Recently courts and commentators have suggested that in reviewing a rule the court might deal separately with the component issues of rulemaking, such as the agency rulemaking procedure, the agency's interpretations of law, the agency's factual determinations, and the agency's decisions on policy within the agency's exercise of delegated discretion. Under the component or functional approach to judicial review, the scope of judicial review depends on the issue involved. In 1975, with the enactment of sec. 227.20, Stats. 1979-80, the Wisconsin legislature has adopted this functional approach, albeit in a different context, namely judicial review of administrative decisions. See Judicial Council Explanatory Notes accompanying 1975 AB 163, Ch. 414, Laws of 1975. While not expressly applicable to judicial review of rules, sec. 227.20, Stats. 1979-80, does apply to a wide spectrum of administrative decisions including quasi-legislative decisions which maybe have some similarities with agency rules. [12] I find the legislative approach to the scope of judicial review embodied in sec. 227.20, Stats., useful in determining the approach to be taken in judicial review of the rule before us. Sec. 227.20, Stats. 1979-80, provides that the court's review shall be confined to the record made before the administrative agency [13] and describes the review of agency procedure, interpretations of law, and determinations of fact or policy within the agency's exercise of delegated discretion as follows: 227.20. Scope of review. (1) The review shall be conducted by the court without a jury and shall be confined to the record, except that in cases of alleged irregularities in procedure before the agency, testimony thereon may be taken in the court and, if leave is granted to take such testimony, depositions and written interrogatories may be taken prior to the date set for hearing as provided in ch. 804 if proper cause is shown therefor. . . . (3) The court shall separately treat disputed issues of agency procedure, interpretations of law, determinations of fact or policy within the agency's exercise of delegated discretion. (4) The court shall remand the case to the agency for further action if it finds that either the fairness of the proceedings or the correctness of the action has been impaired by a material error in procedure or a failure to follow prescribed procedure. (5) The court shall set aside or modify the agency action if it finds that the agency has erroneously interpreted a provision of law and a correct interpretation compels a particular action, or it shall remand the case to the agency for further action under a correct interpretation of the provision of law. (6) If the agency's action depends on any fact found by the agency in a contested case proceeding, the court shall not substitute its judgment for that of the agency as to the weight of the evidence on any disputed finding of fact. The court shall, however, set aside agency action or remand the case to the agency if it finds that the agency's action depends on any finding of fact that is not supported by substantial evidence in the record. (7) If the agency's action depends on facts determined without a hearing, the court shall set aside, modify or order agency action if the facts compel a particular action as a matter of law, or it may remand the case to the agency for further examination and action within the agency's responsibility. (8) The court shall reverse or remand the case to the agency if it finds that the agency's exercise of discretion is outside the range of discretion delegated to the agency by law; is inconsistent with an agency rule, an officially stated agency policy or a prior agency practice, if deviation therefrom is not explained to the satisfaction of the court by the agency; or is otherwise in violation of a constitutional or statutory provision; but the court shall not substitute its judgment for that of the agency on an issue of discretion. . . . (10) Upon such review due weight shall be accorded the experience, technical competence, and specialized knowledge of the agency involved, as well as discretionary authority conferred upon it. The right of the appellant to challenge the constitutionality of any act or of its application to the appellant shall not be foreclosed or impaired by the fact that the appellant has applied for or holds a license, permit or privilege under such act. To a large extent sec. 227.20, Stats. 1979-80, codifies the rules of review the courts have traditionally employed. Distinguishing among factual findings (the task of the agency subject to review), issues of law (ordinarily the task of the court), and the agency's exercise of discretion (policy choices, the prerogative of the agency subject to review) is not easy. Often the three converge. Nevertheless using the component approach to judicial review of the rule before us helps clarify the issues and ensures that the court properly performs its judicial review function. In this case I tend to favor using the hard look doctrine espoused by Judge Leventhal. As I understand it, while the focus of the doctrine is on whether the agency took the requisite hard look, the court immerses itself in the record to see if the agency's action is supported by a factual record and reasoned articulation. Estreicher, Pragmatic Justice: The Contributions of Judge Harold Leventhal to Administrative Law, 80 Colum. L. Rev. 894, 906 (1980). If the agency's action is so supported, it will be upheld.