Opinion ID: 1895323
Heading Depth: 1
Heading Rank: 2

Heading: applying the reasonableness standard of review

Text: Both sides in this action assert that an ambiguous statute, sec. 227.05, Stats., and two decades of court decisions under that statute, have generated confusion and misunderstanding among the bench and bar concerning how courts will review a constitutional challenge to the factual basis of an administrative rule. See S. Levine, How to Review an Administrative Rule, Wisconsin Bar Bulletin, October 1983 p. 40; Comment, The Standard of Review of Administrative Rules in Wisconsin, 1982 Wis. L. Rev. 691. We reiterate that in constitutional due process challenges to agency rules the standard of review is reasonableness, i.e., is the rule adopted by the agency reasonably related to a legitimate governmental objective. Kachian, 44 Wis. 2d at 6-7, Josam, 26 Wis. 2d at 596-97, 603-05. The court must uphold the rule if there are any facts in the record which support the rule chosen by the agency to effectuate the governmental policy objective sought to be attained. See Daly v. Natural Resources Board, 60 Wis. 2d 208, 220, 208 N.W.2d 839 (1973); Josam, 26 Wis. 2d at 596; Comment, The Standard of Review of Administrative Rules in Wisconsin at 697. Though the standard of review is clear the question of how the court should conduct its review of agency rulemaking is not. A leading commentator notes that the law in this area is dominated by verbalisms which have rarely been helpful and have usually been harmful; almost always they are useless, and they are often uncertain, conflicting, and even confusing. K. Davis, Administrative Law Treatise, sec. 29:1 at 334 (2d. ed. 1984). We agree. Our exhaustive review of the case law on the methodology of implementing standards of review reveals that litigants and courts have fallen prey to unedifying verbal formulas. By focusing on the process of analysis a court should follow we hope to avoid the trap of substituting meaningless verbalisms for specific instructions to the bench, bar, and agencies on how courts will review the factual sufficiency of administrative rules in constitutional due process challenges. We heed the words of Professor Davis when he advised: Everyonelegislators, judges, practitioners, and criticsshould learn from the experience of the past quarter of a century that refining the verbalisms about scope of review is not merely unprofitable but harmful. Davis, sec. 29:7 at 363. (Emphasis omitted.) Instructing a reviewing court to set aside action found to be arbitrary, capricious, or an abuse of discretion . . . merely provides the terms in which the conclusion of invalidity may be pronounced. These terms do nothing to articulate the process of analysis by which the issue of invalidity is to be litigated and decided. D.W. Brodie and H.A. Linde, State Court Review of Administrative Action: Prescribing the Scope of Review, 177, Ariz. St. L.J. 537, 550. The initial question to be decided is whether a reviewing court in conducting its review may presume facts not of record. [12] The court of appeals concluded that if a reviewing court can reasonably conceive that facts exist to justify the rule chosen by an administrative agency, we will presume their existence.... Liberty Homes v. DILHR, No. 82-2437, slip opinion at 11. This presumption of factual support approach appears to have originated from a statement of the United States Supreme Court in Pacific States Co. v. White, 296 U.S. 176 (1935) that where the regulation is within the scope of authority legally delegated, the presumption of the existence of facts justifying its specific exercise attaches alike to statutes, to municipal ordinances, and to orders of administrative bodies. Id. at 186. While this approach has not been adopted by this court in the context of administrative rule review, it was utilized by the court of appeals in Wis. Tel. Ass'n v. Public Service Comm., 105 Wis. 2d 601, 611, 314 N.W.2d 873 (Ct. App. 1981). We reject this approach to judicial review. By allowing the court to presume facts to justify a rule the review function is reduced to mere rubber-stamping of agency decisions. The appellate review process becomes a superflous (although time consuming) ritual. Ethyl Corp. v. Environmental Protection Agcy., 541 F.2d 1, 34 (1976). We are aware that in constitutional challenges of legislation courts do presume facts to sustain such enactments. E.g., Milwaukee Brewers v. DH & SS, 130 Wis. 2d 79, 99, 387 N.W.2d 254 (1986) (insofar as the constitutionality of legislation depends upon facts, the facts are presumed to exist until shown otherwise). While acceptable procedure in that context we believe that this level of deference is inappropriate when administrative agency action is involved. Although agency rules have the full force and effect of legislative enactments, these rules do not receive the active scrutiny by the legislature that bills receive. A rule does not require approval by a majority of both houses of the legislature and the governor. To the contrary the process for legislative review of agency rules provides for final approval of the rule by legislative inaction. See sec. 227.018, Stats. The process of agency rulemaking though admittedly a very public process, e.g., sec. 227.02 (public hearing and notice requirements) is nevertheless a delegated process. For these reasons we believe that the courts should not presume conceivable facts to sustain agency rulemaking. The court must look at the record to determine whether the rule is reasonably related to a legitimate governmental objective. [13] We note that our conclusion is in accord with the general trend in administrative law. Since the 1970's fewer courts invoke a presumption of factual support when reviewing administrative agency action. One commentator notes that one time the Supreme Court presumed facts in support of rules, but in 1981 the case law is overwhelming that when facts are needed in support of rules they must be in the rulemaking record and will not be presumed. . . . Davis, supra p. 14, sec. 29:00-1 at 535 (1982 Supplement). Having determined that courts may rely only on facts in the agency record or compiled at trial to sustain agency action, we turn now to how the court will review those facts to determine whether the rule is reasonably related to a legitimate governmental objective, i.e., sufficient facts of record exist to support the agency's rule choice. To determine whether there is sufficient factual basis to support a rule, the reviewing court must decide whether there is a rational connection between the facts in the record and the rulemaking choice of the agency. In other words, based on the facts of record, could the agency reasonably have concluded that the rule would effectuate the legitimate governmental objective it is directed to implement. In articulating the methodology of review, it is important to note at the outset what the role of the court is not. It is note the role of the court to weigh the evidence, nor is it the role of the court to judge the credibility of witnesses. It is not the role of the court to substitute its judgment for that of the agency. The court does not determine that an agency's regulation reflects the best policy choice or the most preferable, but only that there are reasonable facts which support that choice. As this court stated in Kachian, `[i]n order to set aside a regulation, it must be clearly unreasonable. If reasonable minds may well be divided on the question, the administrator must be upheld.' Kachian, 44 Wis. 2d at 8, quoting 2 Am. Jur. 2d Administrative Law, p. 133, sec. 304. In short, it is not the role of the court to become a super-agency with the power to supplant the agency as the decision maker. What is the role of the court, given that it can be neither a rubber-stamp nor a super-agency? We conclude that it is the proper role of the court to undertake a study of the record which enables the court to penetrate to the reasons underlying agency decisions so that it may satisfy itself that the agency has exercised reasoned discretion by a rule choice that does not deviate from or ignore the ascertainable governmental objective. E.g., Greater Boston Television Corporation v. F.C.C., 444 F.2d 841, 850 (D.C. Cir. 1970). In other words, the court must engage in a review process which allows it to determine whether, in light of the governmental objective, there is a rational connection between the facts in the record and the rule adopted by the agency. This requires, first, that the court determine the governmental objective the agency rule is intended to advance. The court can consult the agency's enabling statute as a guide in determining the public policy objective the legislature has charged the agency with implementing. Next, the court must engage in a substantial inquiry into the facts of record supporting the rule, one that is searching and careful, Ethyl Corp., 541 F.2d at 35. This inquiry is designed to educate the court. As stated in Ethyl, the court, must understand enough about the problem confronting the agency to comprehend the meaning of the evidence relied upon and the evidence discarded; the questions addressed by the agency and those by-passed; the choices open to the agency and those made. The more technical the case, the more intensive must be the court's effort to understand the evidence, for without an appropriate understanding of the case before it the court cannot properly perform its appellate function. Id. at 36. The reviewing court must understand the nature of the issues confronting the agency and the evidence presented so as to assure itself that the agency rule is based, not on emotion or intuition, but rather on reasonable and reliable evidence. Such understanding will enable the court to determine whether the facts rationally support the rule chosen by the agency to effectuate the public policy it must implement. The question is not whether the agency could have chosen a different action, albeit reasonable; nor is the question whether the facts of record would lead the court to conclude that a different course had greater support in the record; nor is the question whether the court concludes that a different course would be wiser. E.g., Kachian, 44 Wis. 2d at 8. The sole question is, given the legitimate governmental objective the agency is charged with implementing, whether there is a rational connection between the facts in the record and the rulemaking choices of the agency. If the agency rule is based on reasonable and relevant facts, the reviewing court must affirm. Under this approach to judicial review the agency's action must be upheld if there are any facts in the record from which a reasonable person could reach the conclusion the agency reached. See Daly v. Natural Resources Board, 60 Wis. 2d 208, 220, 208 N.W.2d 839 (1973); Comment, The Standard of Review of Administrative Rules in Wisconsin at 697; 1981 Model State Administrative Procedure Act sec. 5-116 Comment. It is the agency decision which the court must review; the court should not make the same decision itself. In reaching its conclusion, the court must give due deference to the agency's expertise. Cf. Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 568 (1980) (court should defer to agency's judgment and expertise in highly technical field of consumer credit); Brodie and Linde supra p. 14, at 538. The approach to judicial review of agency rules just described is consistent with the type of review conducted by this court in prior cases. Kachian, 44 Wis. 2d at 6-9 (court reviewed whether the facts established that optometry rule adopted by the optometry board was reasonably related to protecting public health); Josam, 26 Wis. 2d at 601-05 (court reviewed whether Board of Health rule concerning installation of plumbing fixtures was reasonably related to promoting public health). While this opinion is intended to clarify the method of review the court actually used in those cases it is also intended to resolve questions those cases left unanswered, e.g., whether courts will presume facts to sustain agency action and the source of the factual record to be reviewed. We also note that the approach to judicial review we set forth today conforms to the legislature's approach, reflected in ch. 227, Stats., of carefully monitoring and controlling agency rulemaking. The legislature no doubt imposed requirements of record fact finding and an articulated rationale for agency rules, see secs. 227.018(3)(a), (e), 227.021(3)(b)-(c), 227.022(1) and (2), because of the expanded policy making functions of administrative agencies, see Davis supra p. 14 sec. 1:7-1:9 at 15-35, and the rising criticism of this expanded policy role for non-elected officials. See Joint Committee for Review of Administrative Rules Reports, PART I, pp. 10-12, (1977); Joint Committee for Review of Administrative Rules Reports, PART II, pp. 36-41 (1977). J. Freedman, Crisis and Legitimacy in the Administrative Process, 27 Stan. L. Rev. 1041, 1042-43 (1975). The imposition of these requirements manifests the intent of the legislature to increase agency accountability. This intent is in accord with this court's own conclusion that [a]n administrative agency is subject to more rigid control [than other branches] by the legislature and judicial review of its legislative authority and the manner in which that authority is exercised. Schmidt v. Local Affairs & Development Dept., 39 Wis. 2d 46, 57, 158 N.W.2d 306 (1968). We believe the approach to judicial review, described above, strikes the proper balance between legislative, agency and judicial power. It allows proper deference to the agency to whom the legislature has delegated authority for policymaking, thereby preserving the role of the agency as decisionmaker in policy areas where it possesses comparatively more technical and scientific expertise than the courts. But this approach also guarantees a meaningful check on agency officials whose activities are often shielded from public scrutiny. Such a check is necessary to assure that the constitutional due process rights of those regulated by agency rules are not compromised. Having explained the appropriate scope of judicial review, we will now apply it to the facts in this case.