Opinion ID: 195836
Heading Depth: 2
Heading Rank: 2

Heading: Regulation Valid Today

Text: 37 Plaintiffs insist that, even if the regulation was valid when promulgated, it must be arbitrary and capricious today given the Secretary's failure to increase the $1,500 cap for inflation. While a refusal to amend a rule, like the promulgation of the rule in the first instance, may be reviewable under the arbitrary and capricious standard, 14 [r]eview under the 'arbitrary and capricious' tag line ... encompasses a range of levels of deference to the agency, and ... an agency's refusal to institute rulemaking proceedings is at the high end of the range. American Horse Protection Ass'n v. Lyng, 812 F.2d 1, 4 (D.C.Cir.1987) (citations omitted). Thus, a refusal to institute rulemaking is to be overturned 'only in the rarest and most compelling of circumstances,' which have primarily involved 'plain errors of law, suggesting that the agency has been blind to the source of its delegated power.'  Id. at 5 (citations omitted). 15 Nothing of the sort appears here.
38 Plaintiffs reiterate their position that, in light of AFDC's general scheme, OBRA evinces an intent that AFDC recipients be able to retain a safe and reliable vehicle. Plaintiffs then argue that, even if the regulation were consistent with this purpose when promulgated, the Secretary's failure to adjust the $1,500 figure for inflation necessarily makes it inconsistent with this broader purpose today. The increase in the consumer price index since 1982 has effectively halved the value of $1,500. Accordingly, that equity level is today consistent only with a car that is eight to nine years old and has 80,000-120,000 miles on it. Because such a car is not likely to be safe or reliable, plaintiffs argue, the regulation today violates OBRA's broader purpose. 39 As with their argument in the previous section, plaintiffs read too much into the broad scheme of the AFDC program and not enough into the cost-cutting purpose of OBRA, the statute that actually authorized the Secretary to set the figure. Nowhere does OBRA or the AFDC statute require the Secretary to set the automobile exemption high enough so as to enable all or most AFDC recipients to acquire and maintain a safe and reliable vehicle. As there was no stated obligation of this sort in the first instance, there can be no obligation to implement such a standard now. 40 The Secretary reasonably defends her continuing adherence to the $1,500 figure without adjustment for inflation on the ground that this is consistent with both the text and purpose of OBRA. There is no language in OBRA obligating the Secretary periodically to adjust the automobile resource exemption for inflation, nor, as earlier discussed, does OBRA tell the Secretary to set the cap at a figure that will furnish a certain quality or level of transportation. Instead, by its terms, OBRA gives the Secretary unqualified discretion to prescribe the figure. 16 Had Congress wanted to require the Secretary to make periodic adjustments for inflation, it could easily have said so in the statute, and indeed has done so in other instances. See, e.g., 42 U.S.C. Sec. 415(i) (social security benefits) (1988); 29 U.S.C. Sec. 720(c) (1988) (vocational rehabilitation grants); 5 U.S.C. Sec. 8340 (1988) (annuities for retired federal employees); Omnibus Budget Reconciliation Act of 1993, Pub.L. No. 103-66, 107 Stat. 312, 675 (1993) (codified at 7 U.S.C. Sec. 2014(g)(2) (Supp. V 1993)) (automobile exemption under food stamp program). Nor--given the total absence of any standards within the statute--can an obligation to adjust for inflation be inferred from a statutory guide to the Secretary's discretion implying the necessity to maintain the exemption at a certain level over time. 17 Compare Maine Ass'n of Interdependent Neighborhoods v. Petit, 659 F.Supp. 1309, 1323 (D.Me.1987). The Secretary, furthermore, plausibly contends that her failure to adjust the cap is consistent with OBRA's original purpose to move towards tightening the AFDC eligibility requirements over time. S.Rep. No. 139 at 503, reprinted in 1981 U.S.C.C.A.N. at 769-70; Dickenson, 692 F.2d at 179. 41 As we have earlier pointed out, it is also highly significant that Congress has twice since 1981 considered revising the $1,500 figure and on both occasions has declined to do so, suggesting its implicit acceptance of the Secretary's failure to adjust the figure upwards. See Rutherford, 442 U.S. at 554 n. 10, 99 S.Ct. at 2476 n. 10. Congress itself, moreover, has never seen fit to adjust for inflation the related overall resource limit of $1,000 which it set in 1981. See Champion, 33 F.3d at 967. The fact that Congress itself has not adjusted so closely-related a provision for inflation suggests that the Secretary's similar refusal to adjust the regulation is not plainly inconsistent with congressional intent. See American Horse Protection, 812 F.2d at 4. 18 42 We recognize, as a possible argument, that Congress's action in legislating an express automobile exemption might be interpreted, by implication, to prevent the Secretary from ever setting the amount so low as to eliminate the exemption altogether, i.e. a zero cap or a cap insufficient to allow most applicants to possess a serviceable vehicle. Counter to this argument is evidence strongly suggesting that the automobile exemption--which had for a long time existed as a creature of the Secretary's earlier regulations--was expressly incorporated in the statute in 1981 in order to make clear the Secretary's authority and duty to keep the exemption within bounds. Immediately before OBRA, the automobile exemption had been unlimited, the Secretary's earlier attempt at a $1,200 cap on a vehicle's market value having been overturned by the D.C.Circuit in 1976. National Welfare Rights Organ., 533 F.2d at 647. By expressly delegating to the Secretary unqualified authority to prescribe the equity amount of the exemption, Congress resurrected a cap and unequivocally put the ball in the Secretary's court. Given OBRA's primary cost-cutting aim--and Congress's evident desire to strengthen, not weaken, the Secretary's control over the amount of the exemption--a zero cap or its functional equivalent, designed to avoid even worse offsets in other areas of the program, might well be within the Secretary's power to prescribe. But we need not decide if this is so. Even were we to assume, for purposes of argument, that the Secretary would lack the power to reduce the exemption to zero or its functional equivalent, the present case does not involve an amount so low. One thousand five-hundred dollars may be consistent only with a car that is eight to nine years old, with 80,000-120,000 miles on it--as plaintiffs' expert opined--but, presumably, there are many such cars still on the road. Nothing in the record indicates to the contrary, or that the Secretary's continued use of a $1,500 equity figure is the functional equivalent of eliminating altogether the automobile exemption. 19 43 We conclude that the Secretary's inaction in respect to modifying the $1,500 figure for inflation is supportable both under OBRA's express language and as a reasonable construction of congressional intent. There is, therefore, no compelling circumstance suggesting that the agency has been blind to the source of its delegated power such as to warrant our ordering a rulemaking. American Horse Protection Ass'n, 812 F.2d at 4.
44 Plaintiffs argue that, even if not necessarily contrary to OBRA's language and Congress's intent, the $1,500 figure today runs counter to the Secretary's original rationale for adopting it. In 1982, the Secretary determined on the basis of the then available data that $1,500 would include the vast majority of AFDC recipients. Because of the effects of inflation, that can no longer be assumed to be true, plaintiffs point out. Accordingly, plaintiffs argue, the regulation is today arbitrary and capricious, as the figure is inconsistent with the agency's stated rationale. (This was the argument that prevailed in Hazard v. Sullivan, 827 F.Supp. 1348 (M.D.Tenn.1993), one of the two district court cases that struck down the regulation). 45 The Secretary responds, reasonably we think, that her predecessor's stated rationale for the 1982 regulation need not be interpreted as an ongoing commitment to ensure that the vast majority of AFDC recipients are able to retain an automobile. Rather, the rationale can, and the Secretary argues should, be interpreted as a desire to grandfather those who were receiving AFDC at that time, i.e. to ensure that large numbers of existing recipients not be abruptly terminated. In parsing the language in the federal register, the Secretary places the emphasis on the word current: the Federal maximum limit should be set within the range of the vast majority of current recipients.... 47 Fed.Reg. at 5657-58 (emphasis added). Thus, even assuming that over time the limit has excluded more and more individuals from AFDC, that is not necessarily inconsistent with the original stated rationale. Moreover, nothing in the statute necessarily requires the Secretary to include the vast majority of AFDC recipients in setting the limit. Indeed, even though an earlier Secretary emphasized this factor in 1982, nothing obligates the present Secretary to follow the same policy priorities. See Garnett v. Sullivan, 905 F.2d 778, 782 (4th Cir.1990). 20
46 Having concluded that the Secretary's inaction in failing to adjust the $1,500 automobile resource exemption for inflation was not violative of the enabling statute or other law, we wish briefly to comment on a procedural matter not raised by either party: namely, plaintiffs' bringing of the inflation claim without first petitioning the Secretary for an amendment to the $1,500 exemption. Under the Administrative Procedure Act, [e]ach agency shall give an interested person the right to petition for issuance, amendment, or repeal of a rule. 5 U.S.C. Sec. 553(e) (1988) (emphasis added). Thus, prior to challenging an agency's failure to revise a rule in light of changed circumstances, a party can seek redress directly from the agency through a petition for amendment under Sec. 553(e). 47 Where, as here, plaintiffs seek to raise a host of factual and policy issues (such as the impact of inflation) in a matter over which Congress has vested the Secretary with primary discretion, it was patently appropriate and, in many instances could be essential, for plaintiffs to have petitioned the agency before seeking judicial redress. Cf. Myers v. Bethlehem Shipbuilding, 303 U.S. 41, 50-51, 58 S.Ct. 459, 463, 82 L.Ed. 638 (1938) (It is the long settled rule of judicial administration that no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted.). By presenting the arguments for amendment directly to the agency, plaintiffs would have placed before the agency their evidence regarding the effects of inflation on the ability of AFDC applicants to obtain transportation, 21 and would have enabled the agency to take whatever corrective action it thought necessary. If the agency had granted the petition, there would have been no need for judicial review. If, as is more likely given the prior litigation on this issue, the agency had denied the petition, then judicial review might have been greatly facilitated by the existence of a more developed agency record 22 or, at least, of an agency decision clarifying its particular policy reasons for the denial. 23 Thus requiring a petition under these circumstances serves the purposes of the exhaustion doctrine (and the related doctrine of primary jurisdiction). See, e.g., Midwater Trawlers Coop. v. Mosbacher, 727 F.Supp. 12, 15 (D.D.C.1989) (dismissing claim for failure to exhaust administrative remedies where plaintiff failed to petition for rulemaking under 5 U.S.C. Sec. 553(e)); Hoffmann-LaRoche v. Harris, 484 F.Supp. 58, 60 (D.D.C.1979) (same); cf. Kappelmann v. Delta Air Lines, Inc., 539 F.2d 165, 169, 171 (D.C.Cir.1976) (invoking doctrine of primary jurisdiction where plaintiff failed to petition for rulemaking under 5 U.S.C. Sec. 553(e)); William V. Luneburg, Petitioning Federal Agencies for Rulemaking, 1988 Wis.L.Rev. 1, 55 (1988). 24 48 Nevertheless, while petitioning the agency would have been the better course, we have considered the merits of the claim on appeal without having demanded strict adherence to the doctrine of administrative exhaustion. The doctrines of administrative exhaustion and primary jurisdiction are judge-made rules to be applied on a case-by-case basis, taking into account the purposes of the doctrines. See McGee v. United States, 402 U.S. 479, 483, 91 S.Ct. 1565, 1568, 29 L.Ed.2d 47 (1971); Pihl v. Massachusetts Dep't of Educ., 9 F.3d 184, 190 (1st Cir.1993); 2 Davis, supra, Sec. 15.2 at 307. In this case, justice would not be served by remanding with directions to dismiss for nonexhaustion, nor is a remand to the agency for clarification of its reasons essential. The claim turns primarily on issues of law concerning the scope of the Secretary's powers; such issues of law we are equipped to settle (and have settled) now. Moreover, the Secretary has not objected to the lack of a petition, and such a petition would likely be futile anyway as the Secretary appears to have taken a firm stand, litigating this issue in several fora. Thus, the exact same issue would likely arise in the same posture after a petition was denied; resolving it now would in fact conserve judicial resources. See, e.g., Weinberger v. Salfi, 422 U.S. 749, 765-66, 95 S.Ct. 2457, 2467, 45 L.Ed.2d 522 (1975) (considering claim despite failure to exhaust where petition would clearly be futile). 49 While we have, therefore, decided the merits without requiring exhaustion, the exhaustion point should not go unnoticed. Had the case turned, as might have occurred under a different statute or in different circumstances, on review of the agency's precise policy reasons for inaction, only a record from within the agency could have yielded a satisfactory basis for judicial review. A trial in the district court would not be a viable alternative. See Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 654, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990); Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 420-21, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971) (holding that if an agency provides reasons insufficient to permit a court to review its rationale, the proper remedy is to remand to the agency for additional investigation or explanation); see also American Horse Protection Ass'n, 812 F.2d at 7-8 (remanding to agency after finding that agency had not provided sufficient reasons for its denial of a petition for rulemaking); 1 Davis, supra, Sec. 8.5 at 394.