Declaratory Orders

  • Recommendation number: 2015-3
  • Adopted on: December 4, 2015
  • Publication Date: December 7, 2015
  • Committees: Adjudication

Providing clarity and certainty is an enduring challenge of administrative governance, particularly in the regulatory context.  Sometimes statutes and regulations fail to provide sufficient clarity with regard to their applicability to a particular project or transaction.  In such instances, businesses and individuals may be unable or unwilling to act, and the consequences for the economy, society, and technological progress can be significant and harmful.  The predominant way agencies address this problem is by providing guidance to regulated parties.[1]  Although the many forms of agency guidance—such as interpretive rules and policy statements—do much to dispel regulatory uncertainty, they cannot eliminate it entirely.  This is because they are generally informal and not legally binding on the agency that issues them.  Regulated parties may usually be able to rely upon them, but if an agency changes its position after a transaction is completed, the consequences for the affected party can be severe.  As the potential costs of misplaced reliance rise, even a small chance that an agency will not adhere to a position offered in guidance can become intolerable.

When it enacted the Administrative Procedure Act (APA) in 1946, Congress included a provision designed to address this difficult problem.  In 5 U.S.C. § 554(e), it provided that an “agency, with like effect as in the case of other orders, and in its sound discretion, may issue a declaratory order to terminate a controversy or remove uncertainty.”[2]  The declaratory order is a type of adjudication that serves an important advice-giving function.  It may be issued in response to a petition filed with the agency[3] (as is usually the case) or on the agency’s own motion.  It is well tailored to provide a level of certainty that may not be achievable using more informal kinds of guidance.  This is because it is non-coercive and yet legally binds the agency and the named party, but only on the facts assumed in the order.  The agency remains free to change its position with adequate explanation in a subsequent proceeding.  It is a device that affords substantial administrative discretion—the agency may decline a request to institute a declaratory proceeding or to issue a declaratory order.  An agency’s decision, be it a denial of a petition or the issuance of a declaratory order, is judicially reviewable.  But the scope of review is limited, and the position an agency takes in a declaratory order is typically afforded deference,[4] both on judicial review and when relevant to matters at issue in subsequent or parallel litigation. 

An agency may properly use a declaratory order for a wide variety of purposes, including to: (1) interpret the agency’s governing statute or own regulations; (2) define terms of art; (3) clarify whether a matter falls within federal regulatory authority; or (4) address questions of preemption.[5]  One occasion for doing so is in response to a court’s request for a ruling when the court has found that the agency has primary jurisdiction over a matter being litigated.  By presenting the agency’s views through a document of easily ascertainable legal effect, declaratory orders may reduce or eliminate litigation.[6]  By using declaratory orders to address narrow questions raised by specific and uncontested facts, an agency can precisely define the legal issues it addresses and reserve related issues for future resolution, thereby facilitating an incremental approach to the provision of guidance.  The resulting body of agency precedent will not only be useful to regulated and other interested parties, but may also prove invaluable to the agency when it later decides to conduct a rulemaking or other proceeding for formulating policy on a broader scale.  Other uses may be possible as well.  For example, an agency that conducts mass adjudication could use the declaratory order to promote uniformity by choosing to give practical and detailed guidance while also making decisional law binding on the parties to the proceeding regarding the proper application of the law to commonly encountered factual circumstances.

There are several benefits to an agency when it uses declaratory orders.  First, declaratory orders promote voluntary compliance, which saves agency resources that would otherwise be spent on enforcement.  Second, declaratory orders promote uniformity and fairness in treatment among the agency’s regulated parties.  Third, declaratory orders facilitate communication between the agency and its regulated parties, which can help highlight issues before they become problems.  Finally, declaratory orders help the agency stay current by allowing regulated parties to communicate how they are doing business so that agency officials can understand and address emerging issues. 

Despite the apparent usefulness of the declaratory order as a tool of administrative governance, agencies have demonstrated a persistent reluctance to use it.  Several developments may encourage agencies to overcome this traditional reluctance to use declaratory orders.  First, it is now reasonably clear that agencies may issue declaratory orders in informal adjudication.[7]  This development expands the availability of the device and also reduces the cost and procedural burden of using declaratory orders.[8]  Second, courts today are often willing to review guidance documents and to question an agency’s characterization of its action as non-binding.  Agencies may be able to enhance their chances of prevailing in court by using declaratory orders—a binding, but targeted form of instruction—in lieu of non-binding, legislative guidance.  Agencies may also be able to use declaratory orders to provide requisite notice to regulated parties of the agency’s intention to enforce in the future a rule or principle that has previously been communicated only via non-binding guidance.  Finally, new programs and new challenges facing old programs may create opportunities to beneficially expand the use of declaratory orders.

The Administrative Conference recognizes the declaratory order as a useful device to be used in appropriate circumstances.  To that end, this recommendation provides guidance and best practices to agencies as they consider implementing or improving their use of declaratory orders.

RECOMMENDATION

1. Agencies should consider issuing declaratory orders as authorized by 5 U.S.C. § 554(e), either sua sponte or by petition.  A declaratory order can provide a legally binding decision to the parties to the proceeding, without imposing a penalty, sanction, or other liability, in order to terminate an actual or emerging controversy or to remove uncertainty in the application of existing legal requirements.  With respect to entities other than the parties to the proceeding, it can provide non-binding guidance.

2. Any filing fees for issuing declaratory orders should be reasonable within the fee structure of the agency and contain appropriate exemptions and waivers.

Potential Uses of Declaratory Orders

3. An agency should consider issuing declaratory orders in several ways, including, but not limited, to:

(a) Communicating the agency’s considered views regarding the meaning of its governing statute, regulations, or other legal documents (such as permits, licenses, certificates, or other authorizations the agency has issued);

(b) Explaining how existing legal requirements apply to proposed or contemplated transactions or other activities;

(c) Defining terms of art that are used within the agency’s regulatory scheme;

(d) Clarifying whether a matter falls within the agency’s regulatory authority;

(e) Clarifying a division of jurisdiction between or among federal agencies that operate in a shared regulatory space; and

(f) Addressing questions of preemption.

4. Agencies should look for opportunities to experiment with innovative uses of declaratory orders to improve regulatory programs.

Determining Minimal Procedural Requirements for Declaratory Orders

5. Each agency that uses declaratory orders should have written and publicly available procedures explaining how the agency initiates, conducts, and terminates declaratory proceedings.  An agency should also communicate in a written and publicly available way its preferred uses of declaratory orders.

6. When designing the procedures for its declaratory proceedings, an agency should begin by determining whether or not the matter is one that must be adjudicated according to the formal adjudication provisions of the APA.  If the matter is not required by statute to be conducted under the APA’s formal adjudication provisions, an agency has substantial procedural discretion, but at a minimum should provide a basic form of notice and opportunity for comment, although it need not be equivalent to the notice-and-comment process used in rulemaking.

7. Agency procedures should provide guidance regarding the information that petitioners should include in a petition for declaratory order.

Giving Notice and Collecting Information

8. Each agency should provide a way for petitioners and other interested parties to learn when the agency has received a petition for declaratory order or intends to issue a declaratory order on its own motion.  The agency should tailor this communication according to the nature of the proceeding and the needs of potential commenters.

9. Each agency should provide a way for interested parties to participate in declaratory order proceedings.

(a) If the matter is one of broad interest or general policy, the agency should allow broad public participation.

(b) If the declaratory proceeding involves a narrow question of how existing regulations would apply to an individual party’s proposed actions, the agency may choose to manage the submission of comments via an intervention process.

Timeliness and Availability of Declaratory Orders

10. Agencies that receive a petition for declaratory order should respond to that petition within a reasonable period of time.  If an agency declines to act on the petition, it should give prompt notice of its decision, accompanied by a brief explanation of its reasons.

11. Agencies should make their declaratory orders and other dispositions on petitions available to the public in a centralized and easy-to-find location on their websites.

 

[1] The Administrative Conference has adopted a number of recommendations on agency guidance.  See Recommendation 2014-3, Guidance in the Rulemaking Process, 79 Fed. Reg. 35,992 (June 25, 2014), available at https://www.acus.gov/recommendation/guidance-rulemaking-process; Recommendation 92-2, Agency Policy Statements, 57 Fed. Reg. 30,103 (July 8, 1992), available at https://www.acus.gov/recommendation/agency-policy-statements; Recommendation 76-5, Interpretive Rules of General Applicability and Statements of General Policy, 41 Fed. Reg. 56,769 (Dec. 30, 1976), available at https://www.acus.gov/recommendation/interpretive-rules-general-applicabi... Recommendation 75-9, Internal Revenue Service Procedures: Taxpayer Services and Complaints, 41 Fed. Reg. 3986 (Jan. 27, 1976), available at https://www.acus.gov/recommendation/ internal-revenue-service-procedures-taxpayer-services-and-complaints; Recommendation 71-3, Articulation of Agency Policies, 38 Fed. Reg. 19,788 (July 23, 1973), available at https://www.acus.gov/recommendation/ articulation-agency-policies.

[2] 5 U.S.C. § 554(e) (2012); see generally Administrative Procedure in Government Agencies, Final Report of the Attorney General’s Committee on Administrative Procedure, S. Doc. No. 77-8, at 30-34 (1941) (urging Congress to include the declaratory order provision in the APA).

[3] An agency so authorized may assess a filing fee to help defray the cost of issuing declaratory orders in response to petitions.

[4] The level of deference may depend on the formality of the procedure used, see United States v. Mead Corp., 553 U.S. 218 (2001), though “[c]ourts have afforded Chevron deference to declaratory orders issued through both formal and informal adjudication.”  Emily S. Bremer, Declaratory Orders 25 (Oct. 30, 2015) available at https://www.acus.gov/report/declaratory-orders-final-report [hereinafter Bremer] (citing City of Arlington v. FCC, 133 S. Ct. 1863 (2013) (giving Chevron deference to a declaratory ruling issued by the FCC through informal adjudication)).

[5] See generally Ill. Terminal R.R. v. ICC, 671 F.2d 1214 (8th Cir. 1992); N.Y.  State Comm’n on Cable Television v. FCC, 669 F.2d 58 (2d Cir. 1982); N.C. Utils. Comm’n, 537 F.2d 787 (4th Cir. 1976); Ashland Oil & Ref. Co. v. FPC, 421 F.2d 17 (6th Cir. 1970).

[6] Cf. Mitchell Rogovin & Donald L. Korb, The Four R’s Revisited: Regulations, Rulings, Reliance, and Retroactivity in the 21st Century: A View from Within, 46 Duq. L. Rev. 323, 331 (2008).

[7] See Am. Airlines, Inc. v. DOT, 202 F.3d 788, 796-97 (5th Cir. 2000); Wilson v. A.H. Belo Corp., 87 F.3d 393, 397 (9th Cir. 1996); Texas v. United States, 866 F.2d 1546, 1555-56 (5th Cir. 1989); Bremer, supra note 4 at 12-13, 32-33, 36-37.  For example, courts have affirmed the sufficiency of basic notice-and-comment procedures when agencies issue a declaratory order in informal adjudication.  See City of Arlington v. FCC, 668 F.3d 229, 243-45 (5th Cir. 2012), aff’d 133 S. Ct. 1863 (2013).

[8] Even if the matter is one subject by statute to formal adjudication under the APA, an agency may be able to streamline the process of issuing a declaratory order.  Cf. Administrative Conference of the United States, Recommendation 70-3, Summary Decision in Agency Adjudication, 38 Fed. Reg. 19,785 (July 23, 1973).  See generally Weinberger v. Hynson, Westcott & Dunning, 412 U.S. 625 (1973).

 

Citation:

Admin. Conf. of the U.S., Recommendation 2015-3, Declaratory Orders, 80 Fed. Reg. 78161 (Dec. 16, 2015).